Court Declines to Enforce Plan-Imposed Limitations Periods Not Disclosed in Benefit Denial Notices

In two nearly identical rulings, a federal trial court has concluded that plan-imposed deadlines for filing lawsuits did not apply because they were not set forth in final denial letters to the participants. While the cases involved separate ERISA plans (one fully insured and one self-insured) sponsored by different employers, both plans involved denials by the same entity (as insurer for the insured plan and claims administrator for the self-insured plan). Both participants were represented by the same law firm, and the judge was the same for both cases. The insurer/claims administrator asked the court to dismiss each lawsuit because it was not filed within the time limit specified by the plan.

The court noted that, in general, plan provisions setting a deadline for bringing a lawsuit will apply provided they are reasonable (see our Checkpoint article). The participants argued that the respective plans’ deadlines should not apply because they were not disclosed in the benefit denial notices, which, under ERISA’s claims procedure regulations, must 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.” Applying the analysis of several circuit courts (see, for example, our Checkpoint article), the court reasoned that the use of the word “including” in that provision indicates that lawsuits are among the review procedures for which denial notices must specify time limits. The insurer/claims administrator argued that this line of reasoning was no longer sound in light of subsequent changes to the claims procedure regulations adding an express requirement that plans providing disability benefits must include any plan-imposed deadline for filing a lawsuit in their final denial notices. But according to the court, those changes simply added a separate requirement for disability claims without disturbing the existing notice requirements for all benefit denials. Finding that the plan-imposed deadlines did not apply, the court turned to the most closely analogous state-law statute of limitations, which was six years. Because the lawsuits had been filed within that time frame, both were allowed to proceed.

EBIA Comment: Without a plan-specific deadline for filing lawsuits, a plan may be subject to varied and lengthy state statutes of limitation. But establishing the deadline may not be enough if it is not adequately communicated to plan participants. To maximize the likelihood of enforcement by courts, the plan’s deadline should be set forth in benefit denial notices and in the SPD. For more information, see EBIA’s ERISA Compliance manual at Sections XXXIV.E.7 (“Notification of Adverse Benefit Determination (All Types of Health Claims)”) and XXXVI.E (“Time Limits for Filing Benefit Claims: Statute of Limitations”). See also EBIA’s Self-Insured Health Plans manual at Sections XXVI.D (“Documentation for Group Health Plan Claims Procedures”) and XXVI.J (“Litigation Issues”).

Contributing Editors: EBIA Staff.