UNANIMOUS U.S. SUPREME COURT UPHOLDS ERISA POLICY’S PROVISION TRIGGERING LIMITATIONS PERIOD BEFORE CAUSE OF ACTION ACCRUES

The Supreme Court last Monday, in a unanimous opinion authored by Justice Thomas, held enforceable an ERISA plan provision which the insured and the U.S. government had argued was an impermissible shortening of the statute of limitations.  In Heimeshoff v. Hartford Life & Accident Insurance Co., — U.S. —, 134 S.Ct. 604 (2013), an appeal out of the Second Circuit, the Supreme Court granted certiorari to resolve a split among the Courts of Appeals concerning a “common contractual limitations provision” that a judicial review of a denied claim must be initiated within three years after proof of loss is due.  The insured contended the provision should be disallowed because of the general rule that statutes of limitations begin to run when a cause of action accrues, and because the provision was contrary to the two-step process envisioned by the statute. 

The ERISA statute itself does not specify a statute of limitations.  The Supreme Court, while recognizing the general rule that accrual of a cause of action triggers most statutes of limitations, held the general rule did not necessarily apply where the parties to a contract have agreed to a different rule.  Because the plan language purported to set a limitations period, the only question was whether the period was reasonable, or whether a controlling statute precluded the application of the contractual provision. 

The insured’s appeal focused on the latter question of whether the provision was trumped by a controlling statute.  Specifically, the insured argued the ERISA statute itself, despite not including a specific limitations provision, implicitly precluded the contractual limitations language.  The insured and the government initially argued the internal review process set forth by the statute would be undermined by insureds rushing through to get to their judicial review, and, second, the judicial review process would be undermined by plan administrators delaying resolution of claims in order to unfairly limit insureds’ access to the courts.  The Supreme Court held both of these outcomes were dubiously speculative and contrary to the clear incentives of insureds and administrators.  Concluding the limitations period described by the contract was neither unreasonable nor proscribed by a controlling statute, the Supreme Court upheld the lower courts’ dismissal of the insured’s action, which had been brought outside the applicable contractual period.