:: Tenth Circuit Notes Circuit Split On Contractual Limitations Periods
ERISA does not contain a limitations provision for private enforcement actions under 29 U.S.C. § 1132. Thus, we generally “apply the most closely analogous statute of limitations under state law.” “Choosing which state statute to borrow is unnecessary, however, where the parties have contractually agreed upon a limitations period.”
Salisbury v. Hartford Life & Accident Ins. Co. (1oth Cir.) (9/30/2009) (internal citations omitted)
The Tenth Circuit has rendered a decision resoundingly affirming the validity of an ERISA plan’s contractual limitations period in an opinion that highlights a circuit split on the issue.
In Salisbury, a disability case, the provision in issue read as follows:
“Legal action cannot be taken against us: 1. sooner than 60 days after due Proof of Loss has been furnished; or 2. three years after the time written Proof of Loss is required to be furnished according to the terms of the Policy.” Aplt. App. at 152. In turn, the section regarding Proof of Loss provides: “Written Proof of Loss must be sent to us within 90 days after the start of the period for which we owe payment.”
Citing Northlake Regional Med. Ctr. v. Waffle House Sys. Employee Benefit Plan, 160 F.3d 1301, 1303 (11th Cir. 1998), the Court stated that:
“An ERISA plan is nothing more than a contract, in which parties as a general rule are free to include whatever limitations they desire.”
The Tenth Circuit sustained the limitations period as against a challenge that it permitted the limitations period to commence before the claimant could bring suit.
The Plaintiff objected that the limitations period was:
“triggered by the Proof of Loss due-date, not by the date of exhaustion of the process for administrative review by Hartford.
Noting that “exhaustion of administrative . . . remedies is an implicit prerequisite to seeking judicial relief” under ERISA, the Court nonetheless rejected the plaintiff’s arguments.
A Rule Of Reason
The Court viewed the issue as one of reasonableness, finding support in several circuit court opinions on this issue.
. . . several circuit courts have held that reasonable ERISA-plan limitations periods are enforceable. See id.; Morrison v. Marsh & McLennan Cos., 439 F.3d 295, 302 (6th Cir. 2006); Harris Methodist Fort Worth v. Sales Support Servs. Inc. Employee Health Care Plan, 426 F.3d 330, 337 (5th Cir. 2005); Wilkins v. Hartford Life & Accident Ins. Co., 299 F.3d 945, 948 (8th Cir. 2002); Doe v. Blue Cross & Blue Shield United of Wis., 112 F.3d 869, 875 (7th Cir. 1997).
We agree with these decisions, and accordingly we must determine whether the Plan’s limitations period is reasonable.
Given the length of time between denial of benefits and filing of suit (3 years), the Court found that the plaintiff’s claims were appropriately barred by the limitations period.
4th Circuit Authority Rejected
The Fourth Circuit remains isolated in its view on this issue. As noted by the Court,
A divided panel of the Fourth Circuit refused to uphold an ERISA-plan limitations provision because under that plan, the cause of action accrued before the plan administrator made a final decision on the claim. See White v. Sun Life Assur. Co. of Can., 488 F.3d 240, 247 (4th Cir. 2007) (“Th[e] interlocking remedial structure [of administrative review and the court system] does not permit an ERISA plan to start the clock ticking on civil claims while the plan is still considering internal appeals.”).
The Tenth Circuit rejected this categorical approach. “ We are not persuaded, however, by White’s reasons for refusing to enforce the contractual limitations provision simply because the plan allowed the claimant’s cause of action to accrue before the end of the administrative process.”
On the contrary, the Court stated that:
“[l]ess drastic remedies that would take account of both the Plan’s right to set a limitations period and the claimant’s need to exhaust administrative remedies would be to allow a claimant at least a reasonable time after exhaustion of administrative remedies or to apply equitable tolling during the pendency of the administrative review process. See Wilkins, 299 F.3d at 949; see also Doe, 112 F.3d at 876 (“[I]f the defendant through representations or otherwise prevents the plaintiff from suing within the limitations period, the plaintiff may add to the remaining limitations period the entire period during which the defendant’s action was effective in delaying the suit.”).
Note: Additional comment on opinions the Court deemed opposed to the Fourth Circuit opinion is reflected in this excerpt:
In contrast, the Seventh Circuit enforced a contractual limitations period commencing when proof of disability had to be submitted, because the claimant still had a reasonable period of time to file suit after exhausting his administrative remedies. See Abena v. Metro. Life Ins. Co., 544 F.3d 880, 884 (7th Cir. 2008) (“[I]f the appeals process was so protracted that the claimant was unable to file suit within the contractual period, the application of this provision would not be reasonable. But that is not what happened here.”); see also Burke v.PriceWaterHouseCoopers LLP, 572 F.3d 76, 81 & n.5 (2d Cir. 2009) (rejecting White and collecting cases “upholding written plan terms including limitations periods which may begin to run before a claimant can bring legal action”); cf. Doe, 112 F.3d at 877 (“[W]here parties by contract shorten the period of limitations that the government had deemed the appropriate outer bounds for suit, and then one of the parties does something that makes it inequitable to hold the other party to the shortened period, there is no social interest in preventing the period from being enlarged . . . .”).
Contract Law? As noted in Firestone v. Bruch, contractual law principles were frequently employed prior to the enactment of ERISA:
Actions challenging an employer’s denial of benefits before the enactment of ERISA were governed by principles of contract law.
Is that the proper standard now, however, given Firestone and its progeny? Since Firestone applied trust law analogies to import the appropriate standard of review, it is difficult to see why courts should not analogize to trust law in resolving limitation period issues. ( Whether this would make a difference on the facts in this case I cannot say without additional review.)
See also - :: Fourth Circuit Holds Contractual Accrual Provision Unenforceable; :: Court Holds Contractual Language Does Not Bar Plaintiff’s Disability Claims
