U.S. Supreme Court Holds That ERISA Plan Can Enforce Contractual Limitations Provision To Bar Benefit Claim Lawsuit

The U.S. Supreme Court in Heimeshoff v. Hartford Life & Accident Insurance Co. et al. resolved a split among the circuits when it held that a contractual limitations clause in an ERISA-governed long-term disability benefits plan is enforceable even where it causes the limitations period on a claim for benefits to commence before the participant's cause of action accrues. In this case, the plan-based limitations period in which to file a disability claim lawsuit under ERISA Section 502(a)(1)(B) started to run when "proof of loss" was due under the plan, even though the participant's cause of action did not accrue, and a lawsuit could not be filed, until the plan's internal claim review process had been exhausted. Citing ERISA's important policy of enforcing plan terms as written, the Court held that the clause was enforceable.

The Legal Framework

ERISA Section 502(a)(1)(B) allows a participant or beneficiary to commence an action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."1 As the statute suggests, and the Heimeshoff Court recognized,2 claims for benefits are "bound up" with the terms of the governing plan document, which must be enforced as written.

ERISA does not codify a statute of limitations for actions to recover benefits. Courts have, therefore, looked to analogous state law for the length of the applicable limitations period. When determining the point at which the limitations period commences, courts have applied the federal discovery rule, and held that the limitations period starts "when there has been a repudiation by the fiduciary that is clear and made known to the beneficiary."3 Typically, this is triggered when appeals of denial of benefits are completed. Under the "clear repudiation" rule, however, the limitations period may begin to run earlier, even before the plaintiff has applied for benefits.

Prior to Heimeshoff, federal courts enforced "reasonable" contractual provisions in plan documents shortening the limitations period for benefit claims from what the most analogous state law would have provided. The key issue raised by Heimeshoff was whether such a contractual provision could also cause the limitations period to start before the claimant had exhausted the plan's internal claim review procedure. Because plaintiffs must exhaust a plan's administrative remedies before filing a...