:: Regulatory Defect Renders Plan’s Contractual Limitation Period Void

Based on the plain language of the regulation, we hold that the correct interpretation of section 2560.503-1(g)(1)(iv) is that a denial of benefits letter must include notice of the plan-imposed time limit for filing a civil action. . . .

[T] the Department of Labor requires plan administrators to give notice of the limitations period in the denial of benefits letter — even when the information is also contained elsewhere in the plan documents . . . This leaves us with but one conclusion to draw, which is that the regulation itself contemplates that failure to include this information in the denial of benefits letter is per se prejudicial to the plaintiff.

Santana- Díaz v. Metropolitan Life Insurance Co., No. 15-1273, 1st Cir. (March 14, 2016)

This long term disability case illustrates the importance of including notice of contractual limitation periods on filing suit.

Contractual Limitations Periods

ERISA itself does not contain a statute of limitations for bringing a civil action, see 29 U.S.C. § 1132(a)(1)(B), so federal courts usually “borrow the most closely analogous statute of limitations in the forum state.”  On the other hand, plans may impose a contractual limitations period and in such cases, courts will enforce the provision so long as it is reasonable.

Equitable Tolling

In the case at bar, the plaintiff argued that the plan failed to advise him of the limitations period in the plan and therefore the plan should not be allowed to enforce the three year period set forth in the document.  In other words, the plaintiff asked to court to “toll” or suspend the running of the limitations period.

A limitations period may be equitably tolled where a plaintiff establishes that “extraordinary circumstances” beyond his control prevented a timely filing, such as where the plaintiff was “materially misled into missing the deadline.” BarretoBarreto v. United States, 551 F.3d 95, 101 (1st Cir. 2008) (citations omitted).  The Court chose a different solution.

Regulatory Compliance Defect

Rather than resolving the issue in terms of equitable remedies, the Court concluded MetLife’s regulatory violation rendered the contractual limitations period altogether inapplicable.

Department of Labor regulations require that a plan administrator to provide “written or electronic notification of any adverse benefit determination” that includes 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.” 29 C.F.R. § 2560.503-1(g)(1)(iv).

The Court held that this language required inclusion of the time limits in the denial letter, stating:

Based on the plain language of the regulation, we hold that the correct interpretation of section 2560.503-1(g)(1)(iv) is that a denial of benefits letter must include notice of the plan-imposed time limit for filing a civil action. To repeat, the regulation states that the letter must contain 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.” 29 C.F.R. § 2560.503-1(g)(1)(iv) (emphasis added).

Substantial Compliance Defense

Courts only require “substantial compliance” with the regulations such that a plaintiff must demonstrate that the violation prejudiced him by affecting review of his claim. In other words, a plaintiff must make some “showing that a precisely correct form of notice would have made a difference.” Recupero v. New England Tel. & Tel. Co., 118 F.3d 820, 840 (1st Cir. 1997).  In the case at bar, however, the violation failed to meet even this general compliance standard.

The Court stated that:

 . . . we hold that, where a plan administrator fails, as MetLife did here, to include the time limit for filing suit in its denial of benefits letter, and it has not otherwise cured the defect by, for example, informing the claimant of the limitations period in a subsequent letter that still leaves the claimant sufficient time to file suit, the plan administrator can never be in substantial compliance with the ERISA regulations, and the violation is per se prejudicial to the claimant.

Remedy

By holding the contractual limitations period inapplicable, the Court placed the issue back in the realm of the most analogous state statute.  In this case, that was the 15 year contractual limitations period – which left the plaintiff’s suit well within the allowable time period to be timely.

Note:  The First Circuit noted that both the Third and Sixth Circuits have interpreted section 2560.503-1(g)(1)(iv) as it did, and have held that the regulation requires a plan administrator to provide in its final denial letter not only notice of the right to bring a civil action, but also of the time limit for filing the action.  See, Mirza v. Insurance Administrator of America, Inc., 800 F.3d 129 (3d Cir. 2015); Moyer v. Metropolitan Life Insurance Co., 762 F.3d 503 (6th Cir. 2014); but cf., Wilson v. Standard Insurance Co., 613 F. App’x 841 (11th Cir. 2015) (per curiam) (unpublished).