Circuit Courts Disagree on Whether Claim Denial Letters Must Provide Notice of Limitations Periods | Practical Law

Circuit Courts Disagree on Whether Claim Denial Letters Must Provide Notice of Limitations Periods | Practical Law

In Wilson v. Standard Ins. Co., the US Court of Appeals for the Eleventh Circuit rejected a claimant's argument that a plan's three-year contractual limitations period for filing suit under ERISA should not be enforced against her in the context of a benefits dispute because the claimant was not informed of the deadline in a claim denial letter. The Sixth Circuit, in contrast, held that a claim denial letter must include notice of a plan limitations periods if the plan wishes to enforce the time limit as a ground for denying review by a court.

Circuit Courts Disagree on Whether Claim Denial Letters Must Provide Notice of Limitations Periods

by Practical Law Employee Benefits & Executive Compensation
Published on 05 Jun 2015 • USA (National/Federal)
In Wilson v. Standard Ins. Co., the US Court of Appeals for the Eleventh Circuit rejected a claimant's argument that a plan's three-year contractual limitations period for filing suit under ERISA should not be enforced against her in the context of a benefits dispute because the claimant was not informed of the deadline in a claim denial letter. The Sixth Circuit, in contrast, held that a claim denial letter must include notice of a plan limitations periods if the plan wishes to enforce the time limit as a ground for denying review by a court.
The Eleventh Circuit has upheld a district court's decision to enforce a plan's three-year limitations period against a claimant who failed to file suit against the plan in a benefits dispute until 34 months after the limitations period expired (Wilson v. Standard Ins. Co., (11th Cir. 2015)). The claimant argued that the running of the limitations period should be suspended because she was not informed of the limitations period in a benefits denial letter.

Background

The claimant in this case was denied benefits under her employer's group long-term disability (LTD) plan. A district court rejected her claim and ruled in favor of the plan's insurer, on the grounds that her lawsuit was filed 34 months after expiration of the plan's three-year contractual limitations period. As background, ERISA does not impose a statute of limitations for benefits claims, so the courts generally apply the most closely analogous limitations period under state law unless the parties agree to a different one under the plan terms (assuming that period is not unreasonably short). In this case, but for the plan's three-year limitations period, a six-year period for contract actions would have applied under state law.
On appeal, the claimant argued that the running of the limitations period should be equitably tolled (that is, suspended) until the date she filed her lawsuit because:

Outcome

The Eleventh Circuit affirmed the district court's ruling in the insurer's favor. The Eleventh Circuit concluded that the plan's three-year limitations provision was reasonable, citing the Supreme Court's Heimeshoff decision, which involved a "virtually identical" provision (see Legal Update, Supreme Court Upholds Limitations Period in ERISA Disability Plan). Addressing the claimant's arguments under the claims procedures, the Eleventh Circuit noted that ERISA's claims procedure provision applies only to administrative review by a named fiduciary, but not to courts or judicial review.
The court next addressed a rule from the DOL's claims procedures under which claims denial notices must contain a "description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action [under ERISA]" (29 C.F.R. § 2560.503-1(g)(1)(iv)). According to the Eleventh Circuit, even assuming that this regulation requires a claims denial letter to inform claimants that they have a right to bring suit under ERISA (an assumption the court was willing to make in this case), the court could not simply assume that the contractual limitations period was unenforceable. Rather, the court viewed the contractual limitations period as enforceable unless the claimant could demonstrate that she was entitled to equitably toll the limitations period.
In Heimeshoff, the Supreme Court indicated that equitable tolling may apply if a claimant:
  • Diligently pursued both a plan's internal administrative review procedures and judicial review.
  • Was unable to file suit due to "extraordinary circumstances."
According to the Eleventh Circuit, the claimant was not reasonably diligent because she failed to investigate basic issues relevant to her claim. For example, she could have requested a copy of the governing policy, through which she would have learned of the contractual limitations period. The court therefore agreed with the district court that there was no adequate basis for equitable tolling of the limitations period.

The Sixth Circuit Requires Claim Denial Letters to Notify Claimants of Limitations Periods

In a footnote, the Eleventh Circuit acknowledged that the Sixth Circuit recently reached a different conclusion on this issue. In Moyer v. Metro. Life Ins. Co., the Sixth Circuit held that the DOL's claims regulations require a claim denial letter to contain notice of a contractual limitations period for bringing suit under ERISA (762 F.3d 503 (6th Cir. 2014)). Addressing the same DOL claims procedure provision as was reviewed by the Eleventh Circuit, the Sixth Circuit concluded that under this provision a claimant's right to bring suit was expressly included as part of the procedures for which applicable time limits must be provided.
More recently, in Russell v. Catholic Healthcare Partners Employee Long Term Disability Plan, the Sixth Circuit built on its Moyer decision in the context of an LTD dispute ( (6th Cir. June 8, 2015)). Overruling a district court, the Sixth Circuit held that a claim denial letter that failed to inform a participant of the time limit for judicial review did not substantially comply with ERISA's claims procedure requirement (ERISA § 503 (29 U.S.C. § 1133)). Under the substantial compliance doctrine, a court may excuse a claim denial letter's technical noncompliance with the claims procedures if the purpose of the claims procedure requirement is satisfied. According to some courts, the purpose of the claims procedures is to provide an explanation of a benefits denial that is sufficient to ensure meaningful review of the denial.
In Russell, the plan's insurer failed to include notice in its claim denial letter of the time limit for the participant to seek judicial review. As a result, the Sixth Circuit held that the plan's time limit could not bar judicial review of the participant's claim.

Practical Impact

Issued within a few days of one another, these Eleventh Circuit and Sixth Circuit decisions highlight the courts' divergent views on whether claimants must be notified in claims denial letters of any time limits for filing suit under ERISA. A plan that wishes to avoid this kind of litigation about the enforceability of a plan-imposed limitations period for filing suit should consider updating its claim denial letters to reflect the deadline, if any, for filing suit. This is especially the case in the Sixth Circuit, given that court's linking of the substantial compliance doctrine and providing notice of limitations periods.
Relatedly, the DOL has indicated that it intends to issue updated claims procedure regulations in the future, and it is possible that those regulations will take a position on plan-imposed limitations periods.