By Kelline R. Linton,
Hot off the Press! According to the U.S. Supreme Court ruling in Heimeshoff v. Hartford Life & Accident Insurance on December 16, 2013, a contractual limitations clause in an ERISA-governed long-term disability benefits plan is enforceable even if it causes the limitations period on a claim for benefits to commence before the participant’s cause of action accrues. This means that an employer does not need to toll a limitations period during an internal review as a matter of course.
In the Supreme Court case, the employer’s disability benefits plan had a requirement that any suit to recover benefits be filed within three years after “proof of loss,” although the participant’s cause of action did not accrue, and a lawsuit could not be filed, until the plan’s internal claim review process had been exhausted. The Court found the three-year period was not unreasonably short where it left the participant with approximately one year to file suit following completion of the administrative review. The Court then held that a contractual limitations provision is enforceable so long as the limitations period is of reasonable length, and there is no controlling statute to the contrary.
In light of Heimeshoff, employers should consider including or re-examining contractual limitations provisions in all their plan documents, as the Heimeshoff decision does not appear limited to disability plans. By specifying when a limitations period commences, you may be able to shorten a period even further through the selection of dates or events preceding claim exhaustion. However, we recommend you choose a trigger date carefully, as any period must still be reasonable.
Full text for Heimeshoff v. Hartford Life & Accident Insurance Co.: http://www.metnews.com/sos.cgi?1213//12-729_q8l1