Every RISA-covered employee benefit plan must establish a process for internal appeals of adverse benefit determinations. Whenever a plan administrator rejects a participant's claim for benefits due under an ERISA plan, Congress requires the plan to provide the participant with adequate written notice of the denial, setting forth the specific reasons for such denial and written in a manner calculated to be understood by the participant. The participant must be afforded a "reasonable opportunity" following notice of denial to seek a "full and fair review" of the denied claim in accordance with the procedures for administrative appeals spelled out in the plan document. This statutory mandate allegedly promotes a non-adversarial form of dispute resolution that allows both plans and participants to avoid the time and costs otherwise associated with litigating the issue in federal court.
As a corollary to this requisite processas applied in Fallick v. Nationwide Mut. Ins. Co.virtually all courts impose an additional requirement of exhaustion on plan participants. Participants are required to exhaust the administrative remedies provided under an ERISA plan before suing for benefits wrongfully denied. Courts generally view the required process for internal review of denied claims as the statutory basis justifying the requirement of exhaustion. The judicially-created exhaustion requirement has reduced the number of benefit claims filed in the federal courts each year. A principal advantage of exhaustion is to allow the parties to develop a factual record to submit in court should internal resolution of the dispute prove impossible.
The US Supreme Court is currently faced with a statute of limitations issue that could undermine the purpose and benefits of exhaustion if the justices decide to rule in favor of the respondent. In Heimeshoff v. Hartford Life Insurance, the court must decide when a contractual statute of limitations period for judicial review of an adverse disability benefit determination begins to run. The case concerns an accrual provision contained in an ERISA plan that sets the beginning of the limitations period near the start of the internal appeals process. When Julie Heimeshoff received her final denial letter, she had approximately one year to seek judicial review before the statute of limitations under her plan expired. The limitations period set by the plan began to run on an accrual date that had passed while Heimeshoff was in the midst of an administrative appeal. Unfortunately, she failed to file her lawsuit within the allotted time period. However, had the plan calculated the statute of limitations using an accrual date that was set at the date of the final denial letter, her lawsuit would have been timely filed.
At oral argument on October 15, 2013, the petitioner and the government argued for a bright-line rule that the clock should begin to run when a participant receives a final notice of denial after exhausting the remedial procedures available under the plan. The respondent disagreed, arguing that the ourt should eschew any bright-line rule in favor of a case-by-case approach. According to the respondent, an implied "reasonableness" term should be read into ERISA plan documents. In contrast to the petitioner, the respondent urged the justices to find that the time between the accrual date and the expiration of the limitations period need only be "reasonable" as based on the facts and circumstances underlying the case.
Both of these positions require a court to rewrite the plan document. Under the petitioner's argument, the court must change the accrual date; under the respondent's argument, the court must infer a reasonableness provision. We believe that there are fundamental problems with the respondent's argument and that the petitioner's position is more consistent with ERISA's policies. An important objective of ERISA is to facilitate consistent and predictable administration of plan benefits. A fundamental problem with the respondent's approach is that it contradicts this statutory goal.
A reasonableness rule is unfaithful to the statutory goal of ERISA because it lacks a fixed date of accrual, leaving participants in the dark as to how long they have to file suit. Even where a plan provides for an accrual date as well as a limitations period, a participant is unable to know whether the provision will actually control since its enforceability will depend on the length of the administrative process and whether the period of time between the end of that process and the last day to file a lawsuit is adjudged as reasonable. As a result, a participant will be unable to resort to the plan document to determine exactly how long remains to file suit because a "reasonable" period of time will vary from person to person and from court to court. Participants who are aware that they have missed the contractual deadline will also be discouraged from filing suit, despite the possibility that a judge may decide to extend the limitations period to a more "reasonable" expiration date. Others will presumably decide to gamble their money on a lawsuit, crossing their fingers that the judge will agree that the complaint was filed within a "reasonable" time.
An implied reasonableness term is furthermore at odds with ERISA's remedial structure and the exhaustion requirement. On the one hand, the requirement of exhaustion is designed to avoid litigation. A reasonableness term may lead to more legal fees and more litigation in the federal courts as plan administrators and participants argue over what should be deemed "reasonable" under a particular set of facts. As counsel for petitioner correctly noted, asking courts to police the enforceability of a limitations period before reaching the question of whether the benefits were properly denied will undermine the intended nature of benefits administration as a private, straightforward and streamlined process.
On the other hand, a decision to adopt the respondent's approach will give employers incentives that are perverse to the spirit of exhaustion. At argument, counsel for the respondent noted that the process of internal appeal takes approximately 12 months to complete in most cases. If the court chooses to adopt a threshold test of reasonableness, there will unfortunately be those plans (not at issue here) that take advantage of this implied reasonableness by delaying resolution of benefit claims past the usual twelve months time frame in attempt to deprive a participant of his or her day in court. The plan administrator under these circumstances may be encouraged to delay a decision until the last possible day, or to make a series of superfluous requests for information to extend the administrative process as long as possible. If the plan sets the proof of loss to the initial denial of claim benefits and the mandates a one year period to file suit, then a participant may have only a period of six months or less to decide to sue, hire a lawyer and file his or her complaint.
We first note that ERISA is silent on a statute of limitations for benefit claims denial in contrast to a specific limitations and accrual period for fiduciary breach claims. At the recent "ERISA at 40: An Oral History of ERISA" symposium at the Earle Mack School of Law at Drexel University, Robert Nagle, who was the general counsel to the Senate Committee on Labor and Public Welfare when ERISA was enacted, was asked the reason why Congress did not include a statute of limitations for benefit claims. His simple answer: we forgot. He explained that after President Richard Nixon's resignation in August 1974, President Gerald Ford wanted to sign a "labor" bill on Labor Day; the only bill far enough along in the process was ERISA. He said that the committees had three weeks to finish the bill and did not have sufficient time to polish its provisions.
As a reminder that the facts of a case always matter, some of the justices were not sympathetic to Heimsehoff inasmuch as she had one year to timely file her lawsuit. However, other justices, particularly Chief Justice John Roberts, seemed concerned that the respondent's resolution would task courts with making determinations of reasonableness. It appeared that his preference at least would be a clean bright line test. Roberts and Justice Stephen Breyer were also hesitant to agree with the respondent that in lieu of a bright-line rule, the doctrines of equitable estoppel or equitable tolling could be invoked as a remedy by participants who miss contractual deadlines for filing suit. Breyer implied that we made up exhaustion, we can make this up too.
An interesting line of questions concerned the authority of the Department of Labor (DOL) to issue a regulation specifically designating an accrual date or for that matter a statute of limitations period. Although all the parties responded in the affirmative, it would be unusual for an agency to proscribe an accrual rule which is generally a judge made rule. However, the DOL has other options. As a part of its authority to regulate full and fair claim procedures under ERISA Section 503, it might state that any limitations period is tolled during the time it takes a participant or beneficiary to exhaust the claim procedure. Alternatively, it could also amend the claim procedure regulations to require plan administrators to unambiguously disclose in the final denial letter the specific date by which the participant must file an action in federal court. The DOL could also state that disclosure is required only if the accrual date is other than the date of the final denial letter. More generically, but less helpful to participants, DOL could amend the summary plan description regulations to direct plan administrators to specifically and understandably disclose when causes of action accrue and the limitations period for bringing an action in federal court.
Unlike most oral arguments, where the lines seem starkly drawn, this was not one of those cases. Regardless of the outcome, we predict that this issue is now on the list of issues the Department of Labor may include in a revised claims regulation. Watch that space.
Mary Ellen Signorille is a Senior attorney at AARP Foundation Litigation. She has acted as counsel of record for AARP in more than 20 amicus curiae briefs before the Supreme Court including most recently Heimeshoff. She is the immediate Past President of the American College of Employee Benefit Counsel and has just finished her term on the DOL 's ERISA Advisory Council.
Kate Robinson is pursuing a Tax L.L.M. with a Certificate in Employee Benefits Law at Georgetown University. Kate graduated cum laude from the University of Maryland School of Law in 2013. She currently works as a law clerk for AARP and hopes to practice Employee Benefits Litigation after graduating from Georgetown.
Suggested citation: Mary Ellen Signorille and Kate T. Robinson, Heimeshoff v. Hartford Life Insurance: A View From The Plaintiff's Bar, JURIST - Hotline, November 18, 2013, http://jurist.org/hotline/2013/11/signorille-robinson-aarp-heimeshoff.php.
This article was prepared for publication by Stephanie Kogut, Section Head of JURIST's professional commentary service. Please direct any questions or comments to her at email@example.com