The Supreme Court To Opine On The Use Of Contractual Limitation Periods In ERISA Plans

Last year, we reported on how the federal discovery rule - pursuant to which claims for benefits do not accrue until the participant could reasonably have discovered the claim - can require plans to defend the merits of dated claims.1 In that article, we noted that efforts to protect plans had taken the form of contractual provisions that not only narrow the limitations period, but also prescribe when the claim accrues for statute of limitations purposes. We noted then that although most circuit courts had enforced such contractual provisions, some had not, and we had hoped that the courts that have declined to enforce contractual accrual provisions would soon "see the light" and reverse course. Now, with the Supreme Court's granting of certiorari in Heimeshoff v. Hartford Life & Accident Insurance Co.2 , it is likely that that the high court will provide guidance and uniformity on this issue.

ERISA's Rules on Statutes of Limitations and Contractual Limitations Periods

ERISA does not contain a statute of limitations period for suits challenging the denial of benefits by a plan administrator. Rather, courts borrow the limitations period from the most analogous state statute. Although state law determines the relevant statute of limitations period for benefit claims, federal common law determines when a claim for relief accrues. Courts utilize the federal "discovery rule" to determine the accrual date for an ERISA benefits claim. The rule generally provides that a statute of limitations begins to run when a plaintiff discovers or should have discovered the injury that forms the basis for the claim. In the ERISA context, the discovery rule has evolved to the so-called "clear repudiation rule," pursuant to which a benefit claim will accrue when a fiduciary repudiates a claim for benefits and that repudiation is clear and made known to the beneficiary. Some courts applying this standard have concluded that the limitations period runs from when the participant was on reasonable notice of the claim.3 Regardless, a formal denial of the claim is not required.

The fact that courts borrow from state law to determine the limitations period does not prevent parties from contracting for a shorter limitations period. Federal courts have generally enforced contractual limitation periods for benefit claims as long as they are made known to participants and beneficiaries and are not "manifestly unreasonable." The courts are less consistent in enforcing...