The Erisa Litigation Newsletter (March 2015)

EDITOR'S OVERVIEW

This month's newsletter discusses how to avoid liability under ERISA through plan design, including statute of limitations provisions, venue provisions, and anti-assignment provisions. Courts have generally enforced these provisions as long as they are reasonable, and written and administered properly. This article discusses the provisions in general, what is considered reasonable, and how they can be properly administered.

As always, be sure to review the section on Rulings, Filings, and Settlements of Interest including, IRS guidance on premium reimbursement arrangements, recent case law on COBRA-notice for Same-Sex spouses, White House recommendations on in-Plan Roth rollovers, and recent case law from the Ninth Circuit on spousal consent under top-hat plans.

AVOIDING LIABILITY THROUGH ERISA PLAN DESIGN: STATUTE-OF-LIMITATIONS PERIODS, VENUE PROVISIONS AND ANTI-ASSIGNMENT CLAUSES*

By: Stacey Cerrone

When designing ERISA plans, limiting liability is an important priority. Fortunately, plan sponsors have certain tools at their disposal that can potentially reduce the risk of being sued, or being liable if a suit is brought. These tools include contractual limitations periods, venue provisions and anti-assignment clauses. Courts have generally enforced these provisions as long as they are reasonable, and written and administered properly.

Contractual Limitation Periods:

The statute of limitations for benefit claims is ordinarily governed by analogous state law. However, plan sponsors may seek to shorten the limitations period by prescribing one in the plan document. Recent case law developments indicate that these plan contractual limitations periods should be enforced if they provide participants with a reasonable opportunity to commence a lawsuit.

In Heimeshoff v. Hartford Life & Accident Insurance Company 134 S. Ct. 604 (2013), the Supreme Court unanimously concluded that a plan's limitation period was enforceable, even though the contract's limitation period was shorter than the applicable statute of limitations. The Court said that a plan limitations period should be enforced so long as it is reasonable. There have been some rulings since Heimeshoff that provide some guidance as to what is "reasonable."

In Munro-Kienstra v. Carpenters' Health & Welfare Trust Fund, 2014 U.S. Dist. LEXIS 18156 (E.D. Mo. Feb. 13, 2014), the court, relying on Heimeshoff, found that a claim for welfare benefits was barred by a plan limitations provision that required a participant to file a lawsuit within two years of being notified of the benefit denial. The plaintiff's claims were initially denied in December 2008 and January 2009. After appealing, plaintiff was informed in July 2009 that her appeals were also denied. Plaintiff did not commence her lawsuit until January 2012, two and one half years after the final denial. In granting the motion to dismiss, defendant rejected plaintiff's contention that the court must use the Missouri 10 year limitations period. The court held that, under Heimeshoff, the limitations period in the policy overrode state law and thus the two-year contractual limitations period applied. In addition, because plaintiff was informed of the limitation period in the letter denying her claim, the court found that it could not ignore the plan's "clear mandate" that suits be filed within two years of the denial of the appeal, and dismissed the lawsuit.

Contrasting Munro is the ruling in Nelson v. Standard Insurance Company No. 13CV188-WQH-MDD, 2014 WL 4244048, at *3 (S.D. Cal. Aug. 26, 2014), where the court declined to enforce, on motion to dismiss, a plan limitations provision because of concerns that, in light of delays in administering the claim, the plaintiff may not have had an adequate opportunity to commence a lawsuit. The limitations provision in question ran from the earlier of either (1) the date the administrator received proof of loss or (2) the time within which proof of loss was due to the administrator. The defendant sought to dismiss the complaint because suit was not commenced until more than three years from the date the proof of loss was filed. The parties disagreed both as to when the limitations period started and when the participant's claim accrued: defendant contended that the claim accrued 100 days before the three year limitations period expired; while plaintiff contended that there was still no final denial of the claim when the defendant's alleged limitations period expired.

The court concluded that it could not evaluate, based on the complaint alone, when the contractual limitations period began to run or when plaintiff's claim had accrued. It also concluded that there were factual questions as to whether the limitations period should be equitably tolled. But the court also stated that, even if defendant's version of the facts was correct, it was unclear whether 100 days was a...