Accrual of Limitations Periods for ERISA Benefit Claims: Why the Circuit Split Should Be Resolved in Favor of Insurers and State Insurance Laws

Life, health and disability benefit plans governed by the Employee Retirement Income Security Act are frequently funded by insurance. ¹See, e.g.,
29 U.S.C. §1002(1) (defining an employee welfare benefit plan as being funded “through the purchase of insurance or otherwise”). Insurance laws in multiple states require life, health and disability insurance policies to include, among other provisions, a limitations period that accrues at the time a proof of claim is due under the policy. Nothing in ERISA forbids a proof of claim accrual clause. In fact, ERISA doesn’t even specify a limitations period applicable to suits for denied benefits, leaving these and other plan provisions to the discretion of plan drafters. ²See generally Black & Decker Disability Plan v. Nord,
538 U.S. 822, 833, 30 EBC 1577 (2003) (101 PBD, 5/28/03; 30 BPR 1190, 6/3/03) (“employers have large leeway to design … plans as they see fit”).

Prior to 2007, published decisions by the U.S. courts of Appeals for the Fifth, Seventh and Eighth circuits, and unpublished decisions by the U.S. courts of Appeals for the Sixth and Tenth circuits, enforced insurance policy proof of claim accrual clauses in ERISA benefit suits. In 2009, the Second Circuit joined the majority.

Prior to 2007, only the Ninth Circuit refused to enforce proof of claim accrual clauses. However, in 2007, the Third and Fourth circuits joined the minority view. The three circuits that ignore universal, mandatory and unambiguous language that exists in hundreds of insurance policies that fund ERISA plans across the U.S., do so, not because of any prohibition in the ERISA statute, but based upon perceived public policies of ERISA.

Further exacerbating the split and making the entire issue more confusing is the fact that the three circuits that refuse to apply proof of claim accrual provisions use differing “federal” accrual formulas.

The issue is now up for review by the U.S. Supreme Court in Heimeshoff v. Hartford Life, 496 Fed.Appx. 129, 54 EBC 1084 (2d Cir. 2012) (179 PBD, 9/17/12; 39 BPR 1777, 9/18/12), cert. granted, No. 12-729 (April 15, 2013).

National ERISA plans, which are supposed to be subject to uniform federal regulation, will now at least be subject to a uniform rule. The unanswered question is: What rule will apply?

The reasoning of the courts that refuse to apply proof of claim accrual provisions is suspect, because it is based on the vague notion that plan terms are somehow in “tension” with perceived public policies of ERISA, even though the written plan terms are clear and unambiguous and there is no federal statutory provision governing the terms. These courts essentially ignore the decision in Order of Commercial Travelers v. Wolfe,
331 U.S. 586 (1947), which gave effect to parties’ freedom of contract by holding that a contractual limitations period is enforceable where it provides a reasonable time to file suit. Apparently, ERISA plan drafters don’t share the same contractual freedom.

ERISA plans and their insurers are caught in the middle—on the one hand, many state insurance laws forbid insurers from issuing insurance policies that exclude state mandated language and, on the other hand, insurers are per se prohibited from enforcing the very same language. The question of when a contractual limitations period begins has a broad impact on ERISA life, health and disability plans, their administrators and insurers, as well as non-ERISA entities such as state insurance regulators.

I. Enforcement of Proof of Claim Accrual

Background.

Limitations periods are an integral part of any commercial transaction. Likewise with employee benefit plans. While many limitations periods are statutory, Congress didn’t include a specific limitations period applicable to ERISA suits for denied benefits under 28 U.S.C. §1132(a)(1)(B).

As a result of this legislative void, lower courts have resorted to the “most analogous” state statutory period except where the ERISA plan itself contains a limitations period. In that case, courts have enforced the contractual time period where it is reasonable, in accordance with Wolfe, supra. Application of contractual limitations periods is consistent with the principle that where ERISA doesn’t specifically address an issue, “employers have large leeway to design … plans as they see fit.” ³Black & Decker v. Nord, 538 U.S. at 833.

Where ERISA plans are funded by insurance policies, the policies are required to comply with state insurance laws. ⁴See
29 U.S.C. §1144(b)(2)(A) (exempting from preemption state laws that regulate insurance). For decades, many states have required group life, health and disability insurance policies to include limitations periods that accrue at the time a proof of claim is due. That means in those states, an insurer must include the language in its policy forms to obtain approval to sell its policies. In some states, failure to obtain approval of insurance policy forms may even constitute an unfair trade practice. ⁵See, e.g., Richardson v. Bank of America,
643 S.E.2d 410, 425-26 (N.C. App. 2007).

Published and unpublished decisions in the Second, Fifth, Sixth, Seventh, Eighth and Tenth circuits have all enforced accrual dates that run from events other than the denial of benefits, so long as the period that remains after benefits are denied provides the claimant with a reasonable time to file suit. ⁶See, e.g.,
Burke v. PriceWaterhouseCoopers LLP Long Term Dis. Plan,
572 F.3d 76, 47 EBC 1257 (2d Cir. 2009) (enforcing three-year limitations period that began to run from the date written proof of loss was due); Harris Methodist Fort Worth v. Sales Support Servs. Inc. Emp. Health Care Plan, 426 F.3d 330, 337-38, 35 EBC 2391 (5th Cir. 2005) (183 PBD, 9/22/05; 32 BPR 2083, 9/27/05)(enforcing three-year limitations period that began to run from date proof of loss was due); Doe v. Blue Cross Blue Shield United of Wis., 112 F.3d 869, 875, 20 EBC 2889 (7th Cir. 1997) (enforcing 39-month limitations period that began to run from the date of the services for which benefits were sought); Blaske v. Unum Life Ins. Co. of America,
131 F.3d 763, 764 (8th Cir. 1997) (enforcing policy limitations provision that began the period at the time that proof of claim was required); Clark v. NBD Bank, N.A., 3 Fed. Appx. 500, 26 EBC 1029 (6th Cir. 2001) (enforcing plan limitations period providing that “no action … shall be brought after the expiration of three years after the time written proof of loss is required to be furnished”); Moore v. Berg Enters., 1999 U.S. App. LEXIS 30481 (10th Cir. 1999) (enforcing three-year statute of limitations running from the date proof of loss was required).

Circuits That Enforce ERISA Plan Provisions.

The Second Circuit is the most recent circuit to enforce a proof of loss accrual provision in the context of ERISA. An ERISA disability plan was funded by a policy of group insurance that provided that any suit over benefits must be filed within three years after written proof of loss was due. The Second Circuit noted that the contractual period was actually longer than required by state insurance law, which mandated a period that was “two years following the time such proof of loss is required by the policy.” ⁷ 572 F.3d at 78, n. 1. The court held that the proof of loss accrual was enforceable under ERISA where it was stated in the plan and where a reasonable period of time remained after the plaintiff’s claim was denied. ⁸Id. at 81. The court rejected the argument that ERISA’s exhaustion requirement should require a limitations period to accrue when the claim is denied, noting that, under applicable Department of Labor claim regulations, there would be more than ample time for a claimant to file suit once the administrative appeal process was exhausted. ⁹Id. The court also found that the clear plan language provided advance notice to both the participant and the plan administrator of the outside period when suit must be filed. ¹⁰Id.

The Fifth Circuit enforced an ERISA plan limitations period that required an action to recover benefits to be filed within “three (3) years from the time written proof of loss is required to be given.” ¹¹Id. The Fifth Circuit acknowledged that generally under ERISA, a cause of action accrues after a claim for benefits has been formally denied. However, in applying a contractual limitations period that began to run from the date proof of loss was due, the Fifth Circuit reasoned: “Because ERISA provides no specific limitations period, we apply state law principles of limitation . . . Where a plan designates a reasonable shorter time period, however, that lesser limitations schedule governs.” ¹²Harris, 426 F.3d at 337 (emphasis added). Although the Fifth Circuit ultimately found the action to be timely, it was only after a lengthy discussion of how the term “loss” should be interpreted so that the court could determine the accrual date as specified by the plan.

Similarly, in the Seventh Circuit decision in Doe v. Blue Cross & Blue Shield United of Wis., supra, the plan required that any legal action be commenced within 39 months after the date of the services for which benefits were sought (a health plan was at issue in Doe). The plaintiff and the plan in Doe were involved in a protracted claim process which spanned nearly a year and a half of the limitations period. Even so, when the final decision was announced, the plaintiff still had another 17 months to bring suit, but he waited another year and a half. ¹³Doe, 112 F.3d at 872-873, 875. The Seventh Circuit had no difficulty concluding that the limitations period and accrual date in the employee benefit plan were reasonable “in general and in [that] case.” ¹⁴Id. at 875. The court noted that the employee had been represented by counsel throughout the administrative appeal process and that the plan provided the plaintiff substantially more than the 30 to 60 days a litigant would ordinarily have to appeal an administrative decision. ¹⁵ Id. Noting that the plan participant was required to exhaust administrative remedies before filing suit under ERISA, the Seventh Circuit expressed concern that the contractual limitations period might be unreasonable if the internal appeals process took longer than the contractual limitations period thereby preventing the claimant from suing even though the plan forbade him from suing earlier. ¹⁶ Id. at 873. However, the court held that the applicable deadline was enforceable in that case, because the plaintiff had more than a year after the claim was denied in which to commence suit, a period the court deemed reasonable. ¹⁷ Id.

The Seventh Circuit reaffirmed its holding in Doe in Abena v. Metro. Life Ins. Co.,
544 F.3d 880, 44 EBC 2578 (7th Cir. 2008) (180 PBD, 9/17/08; 35 BPR 2177, 9/23/08), enforcing an insurance policy proof of claim accrual provision even where benefits were paid for a time and later terminated.

The Seventh Circuit noted that such a provision “is better suited to the initial claim decision than it is to claims that are initially granted and subsequently terminated” but held that “that fact is not controlling.” ¹⁸ Id. at *10. Applying the provision to the facts of that case, the court held that the lawsuit was untimely:

“We can certainly imagine circumstances in which application of this provision would not be reasonable. For example, if the employer paid the claim for three or more years and then terminated payments, it would be unreasonable to enforce a limitations period that ended before the claim could have even accrued. Or if the appeals process was so protracted that the claimant was unable to file suit within the contractual period, the application of this provision would not be reasonable. But that is not what happened here. Even though the claim initially was granted and then terminated two years later, Abena still had seven months following the conclusion of the internal appeals process in which to file his suit in the district court. By his own admission at oral argument, there was no reason he could not file his suit during that time. Indeed, he was represented by counsel during that time. In these circumstances, application of the contractual limitations period is reasonable.” ¹⁹ Id. at *10-11.

In Blaske v. Unum, supra, a disability insurance policy provided that any legal action “cannot be maintained after three years from the date that proof of claim is required.” ²⁰ 131 F.3d at 763. The plaintiff filed suit after her disability claim was denied. The disability insurer moved for summary judgment on the ground that suit was not filed within the time period specified in the policy. Finding that the policy period was more liberal than the otherwise applicable state statutory limitations period, the Eighth Circuit enforced the policy period and affirmed summary judgment in favor of the insurer.

In Clark v. NBD Bank, supra, the Sixth Circuit enforced a plan’s limitations provision providing that no action could be brought after the expiration of three years from the time written proof of loss was required. Like Doe, the Sixth Circuit relied on Wolfe, supra, and held that contractual limitations periods are enforceable so long as they are reasonable:

“Courts have adhered to the rule that, `in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than prescribed in the general statute of limitations, provided that the shorter period itself shall be reasonable.’ … `Congress’ silence on a limitation period … shows its willingness to accept reasonable limitations periods rather than a strong policy in favor of some particular limitations period.’ . . . Many courts have specifically applied this general rule of law to claims brought under ERISA.” ²¹Clark, 3 Fed. Appx. 500, 503-04 (6th Cir. 2001).

Finally, in Moore v. Berg Enter, Inc.
, supra, the Tenth Circuit enforced an ERISA plan’s limitations period that precluded actions to recover benefits filed more than three years after the time proof of claim was required. The Tenth Circuit held that the contractual limitations period and accrual date were reasonable and enforceable:

“ERISA contains no statute of limitations which governs claims under section 1132(a)(1)(B) or section 1132(c). Courts therefore look to the “most analogous” state statute of limitations … or if the plan itself contains a limitations period, to the plan if the contractual limitations period is reasonable.” ²²Moore, 1999 U.S. App. LEXIS 30481 at *6-7.

II. Some Circuits Refuse to Enforce
Mandated Proof of Claim Accrual Clauses

While the clear weight of authority among the circuits has been to enforce ERISA-governed insurance policy accrual dates that begin to run when a proof of claim is due, an older Ninth Circuit case, joined by more recent decisions in the Third and Fourth circuits, are to the contrary. ²³See
Price v. Provident Life & Accident Ins. Co., 2 F.3d 98617 EBC 1097, (9th Cir. 1993); Miller v. Fortis Benefits Ins. Co., 475 F.3d 516, 520-21, 39 EBC 2431(3d Cir. 2007); White v. Sun Life Assurance Co. of Canada,
488 F.3d 240, 40 EBC 2099 (4th Cir. 2007).

Circuits that Refuse to Enforce ERISA Plan Provisions.

In Price v. Provident, the plaintiff submitted several claims to her medical insurer. The claims were incurred in 1983, but the plaintiff didn’t file suit until 1991. The health insurance policy required that suits be filed “within three years of the date on which the proof of loss was required to be furnished.” The plaintiff argued that, despite the clear language of the policy, the period for filing suit shouldn’t begin until he was notified that his claims were denied. The Ninth Circuit agreed and held that the policy accrual provision was per se unenforceable and that the limitations period wouldn’t begin until the plaintiff had reason to know about the denial. ²⁴2 F.3d at 989. The Ninth Circuit remanded the matter to the district court to determine the date on which the plaintiff became aware of his claim.

In Miller v. Fortis, supra, the Third Circuit also refused to enforce language in an ERISA-governed policy that stated that an action must be brought no later than “6 years after the time required for submitting the proof has expired.” ²⁵475 F.3d at 518. The Third Circuit declined to adopt a blanket rule that ERISA limitations periods begin at the time a claim for benefits is denied. Instead, the Third Circuit adopted another formula, i.e., that a limitations period in an ERISA benefit suit begins to run when there is a “clear repudiation” of a benefit claim, even if “clear repudiation” occurs before the claim is formally denied. ²⁶Id. at 522-23.

The insurance policy in White v. Sun Life, supra, like most policies of its kind, included a limitations period as follows:

“No legal action may start … more than 3 years after the time Proof of Claim is required.”

The limitations period language, including the accrual clause, was mandated for inclusion in the policy by North Carolina insurance statutes. The policy limitations period expired on Aug. 9, 2003.

Margaret T. White filed her claim for disability benefits with the insurer. Following review and an administrative appeal, the final notice of denial was sent on March 28, 2001. Respondent had more than 28 months—until Aug. 9, 2003—to file a lawsuit. She didn’t do so until March 26, 2004. Nevertheless, the Fourth Circuit refused to dismiss the complaint as untimely. In a 2-1 decision, the majority conceded that the ERISA statute contains no limitations period applicable to benefit suits and agreed that ERISA plans, like other contracts, may incorporate a limitations period that is reasonable. The majority also agreed that the limitations clause in the policy was unambiguous and that the time remaining for the plaintiff to file suit after her claim was denied (more than 28 months) was reasonable.

However, the majority held that unambiguous ERISA plan language requiring the contractual limitations period to begin on the date a claimant’s proof of claim was due was per se unenforceable.

The majority concluded that an ERISA plan may not alter the federal default rule that a limitations period accrues when the claim is denied and that a proof of claim accrual clause provided an unacceptable level of uncertainty. According to the majority, starting a limitations period before a claim is denied would allow unscrupulous ERISA claim administrators to delay claim decisions to compress the limitations period and would require courts to determine in each case whether the remaining period was reasonable.

A lengthy dissent concluded that the limitations period was “eminently reasonable,” because it provided the plaintiff in White more than sufficient time to file her lawsuit, that the policy language was “the very one that North Carolina and the vast majority of other states require be included in insurance policies like the one at issue here,” and that no controlling law prohibits adoption of the limitations period specified in the policy.

The dissent observed that absent a law preventing a limitations period shorter than the default period, Supreme Court precedent requires that the contractual periods be enforced so long as they are reasonable, citing Wolfe. The dissent noted that tying the limitations period to the date that proof of claim was due has the perfectly rational purpose of ensuring that no suit is too remote in time from the events giving rise to the claim.

The dissent also rejected the majority’s conclusion that federal common law can override the unambiguous terms of an ERISA plan. The dissent explained that the three-year period was well designed to leave a claimant with ample time to decide whether to file suit. ERISA claim regulations allow a claim administrator no more than 195 days to decide a claim, including any administrative appeal, thereby eliminating “any significant possibility that a devious plan administrator could believe he could run out the three-year clock on a claimant before the claimant could sue.” ²⁷ 488 F.3d at 261. The dissent also stated that, regardless of whether the majority might identify policy reasons why the default period would be preferable, it is for the plan drafter to determine plan terms, not the courts. The dissent concluded that it was the majority’s refusal to enforce the clear plan language that created uncertainty in the administration of ERISA plans:

“it is the majority that pulls the rug out from under the parties at this late stage of the litigation by refusing to enforce the plan as written.” ²⁸Id. at 262.

The dissent also expressed concern that the majority’s reliance on federal common law to nullify unambiguous ERISA plan terms “will also leave future claimants and plan administrators under a variety of plans wondering which plan provisions this court will refuse to apply next.” ²⁹Id.

Ironically, the approaches taken by the circuits that have refused to enforce prohibited proof of claim accrual provisions are not only inconsistent with decisions in the majority of circuits and with express plan terms, but they are also inconsistent with one another. The Third, Fourth and Ninth circuits have rejected a uniform insurance policy provision that has existed for years in favor of a supposedly more uniform “default rule,” and yet these circuits do not even agree on the default rule. The Fourth Circuit “default” rule is that a limitations period accrues when the claim is denied, which the majority characterized as “the familiar federal accrual standard.” ³⁰White. The Third Circuit default rule is based on “clear repudiation” of a claim, which it acknowledged may occur before the claim is formally denied. ³¹Miller, 475 F.3d at 521. The Ninth Circuit applies an accrual rule based on when the claimant has reason to know about the denial, which may or may not overlap with the “clear repudiation” rule. ³²Price, 2 F.3d at 988. Not only do these standards require factual inquiries in each case, something the Fourth Circuit purported to avoid by rejecting proof of claim accrual provisions, but the Third Circuit recognized that the circuits are not in harmony regarding a supposed default accrual rule, stating “we recognize that our application of the clear repudiation rule diverges from that of other courts confronting the same issue.” ³³Id. at 523. In summary, the circuits that reject a virtually universal proof of claim accrual provision, in part on the ground that it creates inconsistency, have themselves created even more inconsistency by adopting varying “default” accrual rules.

III. The Second Circuit Continued to Follow
The Majority Rule in Heimeshoff

Like other group life, health and disability policies, the group disability policy in Heimeshoff required that a suit for benefits be filed no more than “3 years after the time written proof of loss is required to be furnished … .” Both the district court and the Second Circuit found the language unambiguous and determined that the deadline for plaintiff to file suit under that provision was Sept. 30, 2010.

The plaintiff stopped working on June 8, 2005, and filed her claim for benefits under the policy on Aug. 22, 2005. After review, denial and appeal, the insurer issued its final denial letter on Nov. 26, 2007. That left the plaintiff with just short of three years to file suit. She didn’t file suit until Nov. 18, 2010. The district court dismissed the action as untimely, citing Burke, supra. The Second Circuit affirmed. The Supreme Court granted the plaintiff’s petition for writ of certiorari to determine whether a limitations period can begin to run under an ERISA plan before the final denial of a benefit claim.

IV. Supreme Court Precedent
And the ERISA Statute Supports Enforcement
Of Proof of Claim Accrual Clauses

In establishing default rules for ERISA benefit suits, courts have looked to state law regarding the length of limitations periods, ³⁴see Wilson v. Garcia
471 U.S. 261, 266-67 (1985).while holding that federal law governs the date when the limitations period commences, ³⁵see Rawlings v. Ray, 312 U.S. 96, 98 (1941). Notwithstanding the existence of these default rules, it is well established that, in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period shall be a reasonable period. ³⁶Wolfe, 331 U.S. at 608.

The Wolfe rule clearly applies to an ERISA plan which “is nothing more than a contract, in which parties as a general rule are free to include whatever limitations they desire.” ³⁷488 F.3d at 258; Northlake Reg’l Med. Ctr. v. Waffle House Sys. Emp. Benefit Plan, 160 F.3d 1301, 1303 (11th Cir. 1998). Under Wolfe, the limitations period in a plan must be enforced unless controlling law prohibits modification of the default rule or the period provided in the plan is unreasonable.

Circuit court decisions that decline to enforce mandated proof of claim accrual provisions are contrary to Wolfe. The Fourth Circuit refused to follow Wolfe in White v. Sun Life on the ground that the plan’s limitations period would require case-by-case review to decide whether the period of time left after a claim was denied was “reasonable.” However, this logic ignores the fact that, under Wolfe, federal courts are already required to determine if a period is reasonable whenever a contract alters the otherwise applicable statutory limitations period. The question of reasonableness that the Fourth Circuit sought to avoid is no different than myriad other questions such as tolling and estoppel that also require analysis of underlying facts and that routinely arise whenever a limitations period is in question. The fact that the same questions might arise in the context of an ERISA plan’s limitations period is certainly no reason to ignore it.

Circuit court decisions that refuse to enforce proof of claim accrual provisions create an intolerable burden for ERISA plans and their administrators and fiduciaries because they rely on vague public policy principles to vitiate the unambiguous terms of an ERISA plan. ERISA plan terms are paramount. ³⁸See, e.g.,
U.S. Airways Inc. v. McCutchen,
133 S.Ct. 1537, 55 EBC 1845 (2013) (74 PBD, 4/17/13; 40 BPR 1004, 4/23/13) (equitable defenses can be disclaimed by clear terms in an ERISA plan). The statute requires ERISA plans to be “established and maintained pursuant to a written instrument.” ³⁹29 U.S.C. §1102(a)(1). Informal amendment of ERISA plans is prohibited and ERISA plan terms can only be amended where the plan “provide[s] a procedure for amending such plan, and for identifying the persons who have authority to amend the plan.” ⁴⁰29 U.S.C. §1102(b)(3).

ERISA plan fiduciaries are required to discharge their duties “in accordance with the documents and instruments governing the plan.” ⁴¹29 U.S.C. §1104(a). ERISA even provides specific causes of action for participants, beneficiaries and fiduciaries to enforce written plan terms. ⁴²29 U.S.C. §1132(a)(1)(B) (permitting participants and beneficiaries to recover benefits due “under the terms of [the] plan” and to enforce their rights “under the terms of the plan”); §1132(a)(3) (permitting participants, beneficiaries, and fiduciaries to obtain injunctive and other appropriate equitable relief “to enforce … the terms of the plan” or to redress violations of “the terms of the plan”). ERISA’s requirement that benefit plans be in writing is a “core functional requirement” of the statutory scheme and “ `[a] written plan is to be required in order that every employee may, on examining the plan documents, determine exactly what his rights and obligations are under the plan.’ ” ⁴³Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83, 18 EBC 2841 (1995) (emphasis by Supreme Court) (quoting H.R. Rep. No. 93-1280, p. 297 (1974)). Where an ERISA plan includes a proof of claim accrual provision, on examining the plan documents, a plan participant knows the deadline for filing suit from the moment the participant files a claim. Application of a federal common law default accrual rule that is nowhere in ERISA and that directly contradicts clear plan terms, can only create confusion, the very thing that Congress intended to avoid when it mandated that benefit plans be in writing. This confusion is further exacerbated by the fact that the circuit court decisions that refuse to enforce clear plan terms adopt different “default” accrual rules.

Circuit court decisions that refuse to enforce proof of claim accrual provisions create an intolerable burden for ERISA plans and their administrators and fiduciaries, because they open up other plan terms to possible prohibition based on perceptions that they are in “tension” with general policies of ERISA. ERISA contains very little regulation of the substantive terms of ERISA welfare plans. This absence of specific regulation is generally viewed as leaving plan administrators broad discretion to tailor plans to their needs. ⁴⁴Black & Decker v. Nord, supra. Indeed, creation of and changes to plan language are not even considered fiduciary functions under ERISA and remain virtually unregulated. ⁴⁵See, e.g., Hughes Aircraft Co. v. Jacobson,
525 U.S. 432, 443, 22 EBC 2265 (1999) (the creation and amendment of plan terms is not a fiduciary function under ERISA and isn’t regulated by ERISA); Lockheed Corp. v. Spink,
517 U.S. 882, 890, 20 EBC 1257 (1996) (employers who alter terms of ERISA plans do not act as fiduciaries); Curtiss-Wright v. Schoonejongen, 514 U.S. at 100 (“Employers and other plan sponsors are generally free under ERISA, for any reason at any time, to adopt, modify, or terminate welfare plans.”). Plan sponsor discretion may be somewhat limited when a plan is funded by insurance, because insurance policies are subject to state insurance laws. But these decisions demonstrate that even state insurance laws are susceptible to prohibition at the hands of general default rules that are solely the creatures of federal common law.

Circuit court decisions that refuse to enforce proof of claim accrual provisions create an intolerable burden for ERISA plans and their administrators and fiduciaries because they evidence a patent inconsistency in the enforcement of ERISA plan limitations periods. Federal courts have routinely found contractual limitations periods in ERISA-governed employee benefit plans as short as 45 days, 90 days and one year to be reasonable. ⁴⁶Davidson v. Wal-Mart Assoc. Health and Welfare Plan, 305 F. Supp.2d 1059, 32 EBC 2376 (S.D. Iowa 2004) (45-day limitations period enforced as bar to plaintiff’s claim); Northlake Reg’l Med. Ctr. v. Waffle House Sys. Employee Benefit Plan, 160 F.3d 1301, 22 EBC 1970 (11th Cir. 1998) (enforcing 90-day limitations period); Koonan v. Blue Cross & Blue Shield of Va., 802 F. Supp. 1424 (E.D. Va. 1992) (enforcing a plan’s one-year limitations period). These short limitations periods are almost presumed reasonable due to the nature of an ERISA claim for benefits:

“A suit under ERISA, following as it does upon the completion of an ERISA-required internal appeals process, is the equivalent of a suit to set aside an administrative decision, and ordinarily no more than 30 or 60 days is allowed within which to file such a suit … Like a suit to challenge an administrative decision, a suit under ERISA is a review proceeding, not an evidentiary proceeding. It is like an appeal, which in the federal courts must be filed within 10, 30 or 60 days of the judgment appealed from … depending on the nature of the litigation, rather than like an original lawsuit.” ⁴⁷Doe v. Blue Cross, 112 F.3d at 875.

Yet, according to the minority circuit court view, where a participant is left with a much longer amount of time to file suit after a claim is denied (in Heimeshoff, that period was nearly three years), the limitations period should be deemed unenforceable solely because it began when a proof of claim was due and because the accrual clause created the hypothetical possibility that a shorter time period might result. Certainly unambiguous plan terms shouldn’t be deemed inapplicable based solely on hypothetical facts that have no relation to the case at hand. At the end of the day, the only relevant question in Heimeshoff should be whether the plaintiff in that case had a reasonable time to file suit once her claim was denied. Indisputably, she did. That should be the end of the inquiry and clear plan provisions should be enforced as written.