Heimeshoff v. Hartford Life & Accident Ins. Co

Yesterday, the United States Supreme Court decided a very important case in the context of ERISA long term disability.  The plaintiff filed a claim for long term disability benefits, which was denied by the Hartford.  Almost three years after the denial, but more than three years after the date proof of loss was due under the Policy, the Plaintiff filed suit.  The Policy contained a contractual statute of limitation providing that suit must be filed within three years of the date proof of loss is required. The case made it up to the U.S. Supreme Court, which held The Plan’s limitation provision is enforceable.  Heimeshoff v. Hartford Life & Accident Ins. Co., ____ U.S. _____, No. 12- 729 (Dec. 16, 2013).  
The Court ruled that unless the contractual limitation period is unreasonably short or there is a “controlling statute to the contrary”, the limitation will be given effect.  In this case, the Court held the 3 year contractual statute of limitation was reasonable. The Court did not preclude the application of equitable tolling, waiver or estoppel.
What remains to be seen is whether LTD insurers will seek to impose a contractual limitation in a scenario where the Plaintiff is approved for two years, and subsequently denied, but unable to file suit within the applicable period of time.  It is difficult to imagine a Court enforcing a contractual limitation in a situation where the claimant is initially approved for a period of time. Nevertheless, the Heimeshoff case opens the door to such arguments. 
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ERISA Time deadlines and Standard of Review

Under the ERISA regulations, a plan must issue a benefits determination no later than 45 days after receiving a claim.  The regulations provide for an extension of that deadline, but what happens if the plan doesn’t comply with the 45 day deadline?  It appears the answer depends upon the jurisdiction.

One consequence of the failure to comply with the 45 day deadline is “exhaustion.”  In other words, a claimant is not permitted to file suit in federal court until such time as administrative remedies have been exhausted.  Thus, if a decision is not made by the plan within 45 days, there is authority for the proposition that such a situation constitutes a constructive denial of the claim.  As a result, the plaintiff can bring a lawsuit in federal court. See 29 CFR 2560.503-1.

Once the Plaintiff brings the claim in federal court, what happens?  Normally, disability determinations under ERISA are reviewed by the court under the arbitrary and capricious standard of review.  Interestingly, there is some authority for the proposition that a plan’s failure to comply with the 45 day benefit determination deadline results in de novo review instead of the deferential arbitrary and capricious standard.   Stefansson v. The Equitable Life Assurance Society of the United States, 2005 U.S.Dist. Lexis 21723 (M.D. Ga. 2005) (“because DMS failed to render a benefits determination in accordance with the regulatory requirements, application of the de novo standard of review is appropriate”).  See also: Gilbertson v. Allied Signal, Inc., 328 F.3d 625 (10th Cir. 2003); Jebian v. Hewlett Packard Co., 349 F.3d 1098 (9th Cir. 2003); Kinstler v. First Reliance Standard Ins. Co., 181 F.3d 243 (2nd Cir. 1999); Buck v. Kraft Food Global, Inc., (M.D.Tenn. 2007); Kosiba, 384 F.3d 58 (3rd Cir. 2004). But see: Southern Farm Bureau Life Ins. Co. v. Moore, 933 F.2d 98 (5th Cir. 1993); Hackney v. The Lincoln National Life Ins. Co., 2012 U.S.Dist. Lexis 694 (W.D.Ky. 2012) (de novo determination appropriate in some situations, but Court remanded to insurer for benefit determination).

If you have a long term disability claim governed by ERISA, and the insurer has not rendered a timely decision, it is important that you contact an attorney to discuss your rights.