Equity Can Be Fickle in ERISA

The Employee’s Retirement Income Security Act was enacted by Congress purportedly to make it simpler for employees to obtain disability and retirement benefits.  So, why does the U.S. Supreme Court keep making it harder for average citizens to get the benefits they’ve worked for and to which they are entitled?

The latest dagger to the heart of ERISA claimants was sharpened by the Court in Heimeshoff v. Hartford Life, 134 S. Ct. 604 (2013), where the Court gave employers and insurance companies a new way in which to harass employees and make benefits claims more difficult for the average claimant.

To understand the Heimeshoff downside, one must know that trying to establish a disability claim can take years, most of them spent on the employer’s “court”.  Employers make the rules for how such claims can be made when they write an administrative plan and then support that plan with an insurance policy.

Time limits are set by the plan terms formulated by the employer who gets an additional assist from the insurer who has years and years of experience fighting claims.  If there is a way to make successful claim prosecution more difficult, you can bet that is the path the employer and insurance company will choose.

A statute of limitations limits the time period within which a lawsuit may be filed.  Ordinarily, it does not begin run until the claim’s cause of action has accrued.  This makes the statute’s effect universal.  Each claimant is subject to the same rules.

In Heimeshoff, it was different.  The plan itself limited the time within which a claim had to be filed to 3 years from the date upon which proof of loss had to be filed . 

However, as anyone in the ERISA area is aware, the time limit in the law on when a denial of claim must be issued has not been rigorously enforced.  It can take far more than 90 days for a final denial of a claim to be issued.  Only when such a final denial issues has the claimant exhausted his administrative remedies so that a lawsuit may be filed. 

A statute of limitations usually runs from the date upon which a cause of action arises.  For example:

• The date of an accident.
• The date of a contract.
• The date of an alleged breach of duty.
• The date of a purchase.

Under Heimeshoff, the statute of limitations could very well run before the right to file a suit on the claim accrues!  The time limit within which you could file a suit could expire before a final denial is communicated by a plan administrator, leaving a claimant with no time in which to file a suit.

The Supreme Court felt it had covered this eventuality by citing equitable doctrines which would permit relief from such a result.  But, the ERISA plaintiffs’ bar, remember U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013) and other such cases where the Supreme Court found no difficulty in ignoring a well-settled equitable rule, resulting in a harsh result for the claimant. 

If the Court can ignore established equitable principles in one type of case, why not in another?  How much can plaintiffs rely on equitable principles to prevent injustice in cases where the insurance company controls the pace of proceedings until final denial?

A fixed period of time for filing an action on an ERISA claim should be the rule.  That time should not begin to run until either there is a final denial of an administrative appeal or until the time to file such an administrative appeal expires.  A defendant’s artful ability to delay a final denial of claim should not be able to restrict those rights .

The Heimeshoff decision puts real teeth into the maxim:

“Justice delayed is justice denied.”


 

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