Statute of Limitations Provision In Disability Policy Enforceable under ERISA
Author: Attorney Stephen Jessup
What is a Statute of Limitations?
The Statute of Limitations is the amount of time allowed under the law in which a plaintiff can bring a lawsuit. ERISA does not specify a statute of limitations for filing a lawsuit within the language of the statute. As such, insurance companies often write a statute of limitations provision into the policy, the most common being a three year statute of limitations. The statute of limitation provision usually indicates that the insured has three years from the date “proof of loss is required” in order to bring suit. Until recently there was a split amongst various courts as to when the “Proof of Loss” requirement is triggered.
ERISA’s Take on the Statute of Limitations
As a general matter, the statute of limitations begins to run when the action “accrues” or when the plaintiff can file a lawsuit to obtain relief. However, under ERISA the insured must undergo and exhaust all administrative remedies (appeals) prior to filing a disability lawsuit. In the case of Heimeshoff v. Hartford Life & Accident Insurance Company, the Supreme Court determined that ERISA governed group disability policies can contain a Statute of Limitations provision that begins prior to the right to bring lawsuit. This is in contrast to the above stated general rule of a statute of limitations and serves as yet another example of how ERISA has a set of rules unlike any other area of the law.
In the Heimeshoff case, the statute of limitations enumerated in the policy was three years from the date proof of loss was required. In the underlying Court case, Hartford argued that Heimeshoff’s right to bring lawsuit was barred as she brought suit more than three years after proof of loss was required. Hartford argued that under the policy the statute of limitations began to run as of the date that Heimeshoff’s claim was initially denied by Hartford. Heimeshoff disagreed and argued that the statute of limitations to bring suit did not begin until the date of the final denial of benefits by Hartford. In deciding the case the District Court presiding over the matter and the Second Circuit Court of Appeals both sided with Hartford’s position, barring Heimeshoff’s right to bring a lawsuit of a denial of benefits under ERISA. In reviewing the lower court decisions the Supreme Court affirmed.
When “Proof of Loss” Begins
As discussed in the above case, your “deadline” with which to file a lawsuit under an ERISA disability insurance policy begins as of the date of the initial denial of benefits by the insurance company. This means that while you are going through the administrative appeal process with the insurance company your right to bring a lawsuit has already begun. Using the standard three year statute of limitations, if the administrative appeal process takes one year from the date of the initial denial of benefits this means that you would have 2 years to file your lawsuit. Many people wait to contact an attorney about filing a lawsuit under ERISA a year or two after exhausting all administrative remedies. This in turn could result in them being barred from ever bringing lawsuit.
Each disability insurance policy contains unique policy language. As such it is important to be aware of the provisions that may affect your legal rights to bring suit. If your claim has been denied and your only remaining option is to file a lawsuit under ERISA please feel free to contact our office to determine how we may be able to assist you.
Attorneys Dell and Schaefer did not represent or have any role in the Heimeshoff case.