Enforcing Contractual Statutes Of Limitations In ERISA Plans

Last term's Supreme Court decision upholding time limitations to sue in ERISA employee welfare benefit plans, as well as the cases decided since by lower courts, provides important guidance to drafters of ERISA plan provisions. Those charged with drafting such plans would be well served to include contractual limitations on the time to sue in order to provide nationwide unanimity in enforcement, avoid the litigation of stale claims, and set expectations of plan participants.

In Heimeshoff v. Hartford Life & Accident, Ins. Co, 134 S.Ct. 604, 187 L.Ed. 2d 529 (2013), the United States Supreme Court unanimously held under the Employee Retirement Income Security Act of 1974 ("ERISA") that a contractual limitation on the time to file suit (sometimes referred to as a contractual statute of limitations) is enforceable unless that period is "unreasonably short" or contrary to a controlling statute. Resolving a circuit split, the Supreme Court further held that the limitations period can begin to run before the participant's cause of action accrues.

Although ERISA Section 413 sets forth a three-year statute of limitations for breach of fiduciary duty claims that extends to six years in the case of fraud or concealment, 29 U.S.C. Section 1113, ERISA does not contain a statute of limitations for denial of benefits claims. Heimeshoff, 134 S.Ct. at 610. As a result, courts typically borrow the most analogous state statute of limitations, which is typically the state statute of limitations for breach of contract cases, as in Hahnemann Univ. Hosp. v. All Shore, Inc., 514 F.3d 300, 305-06 (3d Cir. 2008).

Many ERISA Plans contain provisions that limit when a plan participant may file suit alleging denial of benefits. In Heimeshoff, the Court held that such provisions are generally enforceable. Heimeshoff, 134 S.Ct. at 611-12. The ERISA plan at issue in Heimeshoff provided that "Legal action cannot be taken . . . [more than] three years after the time written proof of loss is required to be furnished according to the terms of the policy." Id. at 609. The Supreme Court found the limitations provision to be enforceable, explaining that "employers have large leeway to design disability and other welfare plans as they fit."

The Court did not hold, however, that such leeway is without limits. Instead, the Supreme Court set forth several grounds for declining to enforce limitations provisions in ERISA plans. First, the Court explained that a limitations provision...