Many Chicago area employees participate in a long term disability plan through work and may not even know it. Your employer often buys long term disability insurance for your benefit in the event you become disabled. Courts and lawyers have been grappling for decades with the issue of what exactly the statute of limitations is to file a lawsuit under ERISA § 502(a) seeking long term disability insurance. The Supreme Court recently decided that issue, but the plain language of the statute indicates the Supreme Court may have gotten the answer wrong, in large part because lawyers simply did not raise the right arguments.
In Heimeshoff v. Hartford Life & Accident Insurance Co., the Supreme Court considered when the statute of limitations begins to run and ends in a claim for long term disability benefits under ERISA § 502(a)(1)(B). The insurance policy provided that a suit must be filed within 3 years of when “proof of loss” is due, and that proof of loss is due within 60 days of when the employee becomes disabled. The employee argued that because the cause of action does not accrue until there is a final administrative denial, the limitations period under the policy began to run before the employee was even allowed to file a lawsuit. The Supreme Court held such a limitation in a disability insurance policy will be upheld unless it is contrary to a limitation period in ERISA, and it provides a reasonable amount of time in which to file a lawsuit.
Without any suggestion from either party, the Supreme Court concluded ERISA provides no statute of limitations for benefit claims, only for breaches of fiduciary duty. Next it held that the employee still had over one year to file the lawsuit after her administrative review was exhausted, so it left her a reasonable period of time in which to file a lawsuit. The problem is ERISA does not appear to really be silent on the limitation for benefit claims. ERISA § 413 provides “No action may be commenced under this subchapter with respect to a fiduciary’s breach of any responsibility, duty, or obligation under this part, after the earlier of . . . . ERISA § 404(a)(1)(D) provides that a fiduciary must “discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and . . . in accordance with the documents and instruments governing the plan . . . .”
This section places an obligation on a fiduciary reviewing a benefit claim to render a decision “in accordance with the documents and instruments governing the plan”, and a claim for benefits challenges precisely that. It is an action to recover benefits due under the terms of the plan that were denied. To this author, it is therefore perplexing why appellate courts and now the Supreme Court have baldly stated there is no limitation period for a benefit claim. However, until the Supreme Court revisits this issue, the law currently is that the statute of limitations will be that of the most analogous state law (typically breach of a written contract), or a limitation period placed in the plan.
If you are a current or former employee claiming long term disability benefits under an employer-sponsored disability insurance policy, contact a knowledgeable ERISA lawyer to determine your deadlines for taking action.