:: Equitable Defenses Inadequate To Avert ERISA Plan’s Contractual Limitations Bar

ERISA denial of benefit claims are ordinarily subject to the statute of limitations of the most analogous state law claim of the forum state. Klimowicz v. Unum Life Ins. Co. of Am., 296 F. App’x 248, 250 (3d Cir. 2008). In this case, that would be New Jersey’s six-year statute of limitations for breach of contract claims. Id. Parties to an ERISA plan are free, however, to contract for  a shorter statute of limitations, so long as that period is not manifestly unreasonable. Id.

Mirza v. Ins. Adm’r of Am., Inc., 2013 U.S. Dist. LEXIS 101184 (D.N.J. July 19, 2013)

One of the significant ironies in ERISA’s “comprehensive and reticulated” regulatory scheme is that  ERISA supplies no statute of limitations for claims for benefits.  Mirza v. Ins. Adm’r of America provides an opportunity for a succinct review of the limitations period issues in a benefit claims case.

General Rule

ERISA denial of benefit claims are ordinarily subject to the statute of limitations of the most analogous state law claim of the forum state.  The court cited Klimowicz v. Unum Life Ins. Co. of Am., 296 F. App’x 248, 250 (3d Cir. 2008) in support of this principle.

Application of Contractual Limitations Period

New Jersey law provides a six-year statute of limitations for breach of contract claims.   Absent an internal plan limitation, this would be the applicable limitations period.

Corollary To General Rule

The court observed however that parties to an ERISA plan” are free to contract for a shorter statute of limitations, so long as that period is not manifestly unreasonable.”

Plan Provision Stipulating Shorter Limitations Period

And in the case, the plan did so provide.

Plan provides for a one-year statute of limitations.   Since this limitations period posed a bar to the claim, the plaintiff had two options.  First, plaintiff can argue the period is unreasonable and second, the plaintiff can argue for an equitable tolling of the limitations period.

Option #1

So the plaintiff argued that the Plan’s time limit is unreasonable “because the Plan’s language that ‘no legal action may be . . . maintained more than 12 months’  after final administrative review.”

The plaintiff argued that would mean that any lawsuit must be completed within one year.

Defendants countered that Plaintiff’s interpretation of “maintained” is not the natural way to read “maintained” in this specific context.  Further, they “specifically disclaimed and do not rely upon this interpretation of the provision.”  The court sided with the defendants.

 Because Defendants have disclaimed interpreting the provision in this manner and because a one year time limit is not manifestly unreasonable, the Plan’s time-limitation is enforceable. Stallings v. IBM Corp., 08-3121, 2009 U.S. Dist. LEXIS 81963, 2009 WL 2905471, at *4 (D.N.J. Sep. 8, 2009)(recognizing that even periods as short as 90 days have been found to be reasonable and upholding two year statute of limitations); Grosso v. Fed. Exp. Corp., 467 F. Supp. 2d 449, 456-57 (E.D. Pa. 2006)(“It is well-established that a one-year statute of limitations is not manifestly  unreasonable.”) (quotation omitted).

Option #2

Option #2 has two parts.

First, the court rejected application of equitable estoppel, stating:

In ERISA actions, a party may be equitably stopped from asserting the statute of limitations as a defense where they show three elements: (1) a material representation; (2) reasonable and detrimental reliance upon the representation; and (3) extraordinary circumstances. Kapp v. Trucking Employees of N. Jersey Welfare Funds, Inc., 426 F. App’x 126, 129-30 (3d Cir. 2011)(citing Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226, 235 (3d Cir. 1994)(providing standard listed above) as basis for equitable estoppel in ERISA statute of limitations context).

Here, however, Plaintiff has failed to show any of the three required elements and, therefore, equitable estoppel is unwarranted.

Second, the plaintiff argued for equitable tolling of the Plan’s time limitation based an an alleged failure to abide by notice requirements detailed in 29 C.F.R. § 2560.503-1(g)(iv).

[Under 29 C.F.R. § 2560.503-1(g)(iv), following an adverse benefit determination, plan administrators are required to provide “[a] description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of the Act[.]” 29 C.F.R. § 2560.503-1(g)(iv).]

Though courts have found that equitable tolling may be warranted based on a failure to follow this notice requirement, the court rejected this defense here, stating:

. . . equitable tolling is not warranted where the Plaintiff is on notice of the contractual time limitation. Heimeshoff v. Hartford Life & Accident Ins. Co., 496 F. App’x 129, 130-31 (2d Cir. 2012). And, here, Plaintiff, through his counsel, was on notice of the time limit well in advance of the August 12, 2011 statute of limitations end date. Plaintiff’s counsel was notified of the time limit orally on November 23, 2010 and received a copy of the plan on April 11, 2011 in connection with the Spine appeal, which dealt with  the same patient  N.G.  and same plan. Under these circumstances, no equitable tolling is warranted.

Note:  On the other end of the limitations period is the other sometimes controversial issue of when a claim accrues.   On this point, the court found that:

Plaintiff’s claim accrued when his claim for benefits was denied on June 2, 2010. Koert v. GE Group Life Assurance Co., 231 F. App’x 117, 121 (3d Cir. 2011)(holding that a claim for benefits accrues when there has been a repudiation of the benefits that was made clear and known to the beneficiary); Raymond v. Berry Callebaut, U.S.A., LLC, 510 F. App’x 97, 99 (3d Cir. 2013)(holding that “a non-fiduciary cause of action accrues . . . when a beneficiary knows or should know he has a cause of action.”). The contractual statute of limitations began to run on August 12, 2010 when the final appeal decision was rendered, but this action was not initiated until March 8, 2012, over one year later.

Required Notices & Tolling –  The court noted the plaintiff’s argument that Defendants’ failure to advise Plaintiff of the Plan’s one-year statute of limitations in its final denial letter warrants an equitable delay in the trigger of the Plan’s time bar.  The court rejected this argument:

In Epright, [81 F.3d 335 (3d Cir. 1996)], the Third Circuit found that a plan’s time bar for administrative review was not triggered where the participant was not advised of a plan’s internal administrative review procedure. Id. at 342. Epright does not apply to a failure to timely initiate a civil action after administrative review was properly exhausted. See Koert v. GE Group Life Assurance Co., 231 F. App’x 117, 120 (3d Cir. 2007); Stafford v. EI Dupont De Nemours, 27 F. App’x 137, 140-41 (3d Cir. 2002); Bayer v. Fluor Corp., 682 F. Supp. 2d 484, 492 (E.D. Pa. 2010). And, here Plaintiff was properly advised of (and completed) the internal administrative review process and was even advised of his ability to assert a civil action.

Split of Authority – Although not relevant on the facts here (according to the court), a split of authority exists whether the notification requirements include a requirement that the administrator provide detail on a Plan’s civil action statute of limitations, or just the time limits for the administrative review process. Compare Novick v. Metropolitan Life Ins. Co., 764 F. Supp. 2d 653, 660 (S.D.N.Y. 2011) and Ortega, 661 F.3d at 680 with Heimeshoff v. Hartford Life & Accident Ins. Co., No. 10-1813, 2012 U.S. Dist. LEXIS 6882, 2012 WL 171325, at *6-7 (D. Conn. Jan. 20, 2012).

See also – :: Fourth Circuit Holds Contractual Accrual Provision Unenforceable