Typically, a statute of limitations-or the state mandated time period within which a claimant must file a lawsuit-begins to run once a cause of action arises. In ERISA disability claims, the cause of action arises and claimants are not permitted to file a lawsuit until they have exhausted all administrative remedies, i.e., filed any and all mandatory appeals following a denial of benefits. Thus, it seems logical that a disability claimant’s time limit would not begin to run until after the insurance company issues a final denial of benefits and the claimant is left with no other recourse but judicial review.
The Supreme Court, however, recently determined that ERISA disability insurance providers are allowed to mandate the length of this time limit and can even start “the countdown” before a claimant actually has the right to bring a lawsuit. In Heimeshoff v. Hartford life & Accident Insurance Co., Hartford’s disability plan included a limitations period of three years from the “time written proof of loss is required to be furnished according to the terms of the policy”, thereby creating a three year statute of limitations. The claimant, Ms. Heimeshoff, filed her lawsuit within the three year period following the final denial of her benefits (as ERISA prevents the filing of a lawsuit until after the final denial is issued), but more than three years after the time “written proof of loss” was required to be submitted. Hartford moved to dismiss the lawsuit on the basis that she filed her Complaint more than 3 years after the policy required her to submit proof of loss. The district court upheld the time limit set by Hartford and determined that Ms. Heimeshoff filed her complaint too late. After losing on Appeal, the US Supreme Court agreed to hear Ms. Heimeshoff’s case. To summarize, Ms. Heimeshoff argued that a statute of limitations cannot begin to run until the Plaintiff has a valid cause of action-in this case after all mandatory appeals had been filed and the insurance company issued its final denial. Hartford maintained that the limitation period, as clearly set forth in the policy, began to run at the time proof of loss was due. The Supreme Court found in favor of Hartford holding that an insurance plan’s contractual limitations period, where reasonable, will be upheld. Thus, Ms. Heimeshoff was barred from bringing her claim to court. It should be noted that this is in contrast to most other legal scenarios where the statute of limitations starts to run only once the claimant or plaintiff has the right to file a lawsuit.
The implication of this decision greatly affects disability claimants, as it substantially impacts their right to file a lawsuit and seek judicial review of a claim denial. Specifically, a claimant’s failure to properly calculate the date by which their lawsuit must be filed should their claim for disability benefits be denied will forever bar them from suing the insurance company for a wrongful denial of benefits. Theoretically, an insurer could set a one or two year limitation period that begins 90 days after the claim is filed and then “drag its feet” and delay the claim. As many claimants know, the claim review process can be lengthy and carriers are notorious for “slow walking” claims. Initially the claimant submits claim forms and proof of loss; the insurer evaluates the application for benefits and over a period of months asks for additional information and documents; finally the claim is denied. The claimant is then provided with 180 days to submit an Appeal. Upon receipt of the Appeal, the insurer has 45 to 90 days (or more in some cases) to review the appeal and issue a final denial, finally putting the claimant in a position to legally file a lawsuit. Because the time limit is allowed to run during the claim review process and prior to a final denial of benefits, a claimant might be left with only weeks or even days to file an action. If a claimant misses this insurer-mandated deadline, he or she gives up any right to bring a lawsuit, and will be stuck with an unjust denial of benefits.
Disability claimants are advised to carefully read and understand their plan documents, and to pay special attention to policy terms limiting the time in which a lawsuit may be filed. Overlooking important information regarding these time limits can very well be fatal to a disability claim. If your disability claim has been denied or your insurance carrier continues to delay making a decision on your claim and you believe your time to file a lawsuit is limited, please contact our firm, Disability Insurance Law Group, at [email protected] or (866) 363-3628 for a free consultation.