In petitioning for certiorari, Heimeshoff asked the Supreme Court to consider three questions:
1. When should a statute of limitations accrue for judicial review of an ERISA disability adverse benefit determination?
2. What notice regarding time limits for judicial review of an adverse benefit determination should an ERISA plan or its fiduciary give the claimant with a disability claim?
3. When an ERISA plan or its fiduciary fails to give proper notice of the time limits for filing a judicial action to review denial of disability benefits, what is the remedy?
The Supreme Court granted certiorari, but only as to the first issue, as to which there was a conflict among the Circuits.
There are several axioms and rules underlying this case that are not in dispute.
First, ERISA does not specify a statute of limitations for benefit claims. Standard federal practice in that situation is to borrow the most analogous limitation period from the state in which the action is commenced.
Second, just like ERISA does not have a statute of limitations, it does not state when a benefit claim accrues. The statute does not explicitly require exhaustion of administrative remedies. This is a court-created rule, with various court-created exceptions. A failure to exhaust is not generally considered to be a jurisdictional defect, and it can be waived by the plan.
Third, Courts presented with an ERISA benefit claim are obligated to enforce the terms of the plan.
Heimeshoff’s primary argument is that a federal claim accrues only when the plaintiff is able to file suit, and that the limitation period on a federal claim cannot begin to run before the claim accrues, unless Congress provides otherwise. Thus, an ERISA plan, or a state statute that requires particular language in an insurance policy that is part of an ERISA plan, cannot start the limitation clock running before the plaintiff has exhausted her administrative remedies.
Heimeshoff also argued that, if the limitations period could begin to run before administrative remedies were exhausted, the Court should impose what she described as the rule “in virtually every state” that a limitations period is tolled while plaintiff is exhausting a mandatory pre-suit administrative process. Of course, there is no “mandatory” pre-suit administrative process in ERISA. As noted above, the administrative process was imposed by the courts, not Congress, and it is filled with exceptions.
Heimeshoff argued that enforcing the contractual limitation provision as written “thwarts ERISA’s remedial scheme” by discouraging claimants from fully pursuing administrative remedies. She argued that courts would have to consider, on a case-by-case basis, whether a claimant had a reasonable amount of time to sue after administrative remedies were exhausted, and that this would prevent anyone from being able to ascertain the deadline for litigation in advance. It is hard to see how the litigation deadline is more knowable if the express language of the plan becomes unenforceable, and a claimant is left to ascertain the most-analogous limitation period in the state in which he or she might file suit.
Hartford’s primary argument was that the contractual limitation period in the plan is reasonable (allowing three years from the date proof of loss is due), and that a reasonable limitation provision in an ERISA plan should be enforced as written. The Supreme Court has emphasized repeatedly that courts must enforce ERISA plans as written (unless the plan term violates ERISA), and the limitation provision does not violate ERISA.
Hartford also argued that any concern about thwarting ERISA’s “remedial scheme” is not a sufficient reason to refuse to enforce an otherwise proper and reasonable plan term. Moreover, the limitation provision did not thwart ERISA’s remedial scheme because it would virtually never preclude an otherwise diligent claimant from challenging a benefit denial in court. Because of the strict time limits placed on ERISA claim fiduciaries, a claimant ordinarily would have a year or more after exhaustion of administrative remedies to sue. If, despite the claimant’s diligence, the limitation period expired before she had a reasonable opportunity to sue, there were well-established remedies, like equitable tolling, that could be applied on a case-by-case basis. In a nutshell, a concern that some indefinite number of claimants might be prejudiced is not a sufficient reason to refuse to enforce a plan provision that is reasonable in the vast majority of cases.
Finally, Hartford argued that Heimeshoff had waived any argument that state law automatically tolled the limitation period while she was exhausting administrative remedies. Moreover, Hartford asserted that there was no such automatic tolling rule in state law, but that the tolling at issue is determined on a case-by-case basis (exactly how Heimeshoff’s tolling argument was considered and rejected in this case).
The United States’ Arguments
The government filed an amicus brief supporting Heimeshoff, and essentially echoed Heimeshoff’s arguments. The United States argued that the limitation provision at issue would frustrate ERISA’s remedial scheme, and that the clock must begin running when administrative remedies are exhausted. The United States also argued that a plan provision that is inconsistent with ERISA’s remedial scheme (though not inconsistent with any specific ERISA provision) is unenforceable.