The U.S. Supreme Court has handed down a unanimous ruling in favor of benefits plans and their sponsors in Heimeshoff vs. Hartford Life and Wal-Mart Stores Inc. (Case Number 12-729), a case involving a group long-term disability (LTD) insurance plan.
The court held that a group LTD plan governed by the Employee Retirement Income Security Act (ERISA) can impose a “statute of limitations,” or time limit on the filing of lawsuits, that starts while a worker who is seeking benefits is still going through the plan’s own appeals process.
Justice Clarence Thomas notes in an opinion explaining the ruling that ERISA says nothing about times on challenges of plan decisions.
In the Heimeshoff vs. Hartford Life case, the plan participant, the employer and the plan administrator agreed to a three-year limitations period in the plan contract, Thomas writes.
“The contract specifies that this period begins to run at the time proof of loss is due,” Thomas says.
The contract required the plan participant to establish proof of loss before the plan’s internal claim review process was completed. The plan participant said the provision violated the rule that statutes of limitations should start “upon accrual of the cause of action.”
“We reject that argument,” Thomas says. “Absent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”
The majority of states require at least some insurance policies to have three-year limitations periods that run from the date proof of loss is due, and there is no evidence that those requirements keep courts from reviewing claim appeals, Thomas says.
Julie Heimeshoff, the plan participant in the Heimeshoff case, worked in public relations at Wal-Mart. In August 2005, she filed a group long-term disability (LTD) insurance claim, saying that lupus and pain from fibromyalgia kept her from working.
Hartford denied the claim in November 2006. Heimeshoff appealed in September 2007. She said Hartford denied the claim again in November 2007.
Heimeshoff filed a suit against her employer and the insurer in November 2010 in the U.S. District Court in Connecticut.
Hartford Life, a unit of Hartford Financial Services Group Inc. (NYSE:HIG), said an insurer should be able to set a reasonable statute of limitations rules in the plan policy.
Hartford Life said the LTD policy required Heimeshoff to file her suit under a Connecticut statute of limitations. In Connecticut, claimants must start any legal actions within three years after the date when they are supposed to give the company proof of loss, rather than three after the date when the claim accrued.
The district court granted Hartford Life’s motion for the court to dismiss the case, and the 2nd U.S. Circuit Court of Appeals later affirmed the district court’s ruling.
Thomas says the Supreme Court agreed to take up the case to resolve a split among the courts of appeals on the enforceability of ERISA plan statutes of limitations provisions that require the plan participants to file any suits within a specified number of years after the plan proof-of-loss deadline.
Hartford welcomed the ruling.
The decision “confirms the terms of an employee benefit plan covered by the Employee Retirement Income Security Act of 1974 must be enforced as written,” the company said in a statement.
Representatives for Heimeshoff were not immediate available to comment on the ruling.
Nicole Eichberger, a New Orleans-based ERISA plan lawyer at Proskauer who has been following the case, said the ruling should increase employers’ confidence that they can draft plans that can be enforced without court interference.
The new decision builds on earlier Supreme Court rulings in which the court held that sponsors and plan administrators can put reasonable contractual limitations periods in the plan documents.