Plans Can’t Enforce Time Limits They Don’t Mention

What Dall-E gives you if you ask for “Van Gogh painting of confused man holding insurance company letter”

• The Facts:

  • Adam Zink was injured riding a motorcycle on his property. His wife’s benefits administrator SelectHealth denied his claim to cover for emergency medical care because Zink’s blood alcohol level was over the legal limit at the time of the crash.

  • Zink’s plan included a two-year limitation on post-appeal lawsuits. Both the initial and appeal denials contained statements about his post-appeal ERISA rights, but neither mentioned the two-year limitation.

  • Zink sued in the District of Idaho more than two years after final denial and SelectHealth moved to enforce the limitation and dismiss.

• The Rules:

  • ERISA contains no statute of limitations, so courts apply the “most nearly analogous state statute” of limitation unless the “parties have agreed by contract” to a “reasonable” limitations period. Plans can define a shorter time to sue than state statutes of limitation would otherwise provide. But they have to communicate them to participants!

  • When a plan initially denies benefits, ERISA regulation 29 C.F.R. § 2560.503-1 requires the notice to the participant include “[a] description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefits determination on review.”

  • Several circuit courts have held this rule requires advising a claimant of a plan-defined limitations period and that failing to do so voids its application.

• The Result:

  • The court held that SelectHealth violated ERISA regulations by failing to include the limitation in its initial denial.

  • Acknowledging prior contrary district court decisions in the Ninth Circuit, the court stated that “those cases preceded the First, Third, and Sixth Circuits' decisions to the contrary” and “[f]ollowing these district court decisions, instead of those of the Ninth Circuit's sister circuits, would hinder uniformity among the circuits in interpreting ERISA law and is contrary to Congress' expectation of uniformity.”

  • Because Zink’s claim could advance either way, the court did not resolve the debated sub-issue of whether Idaho’s “analogous” 5-year limitation governed or whether the plan’s limitation applied but was “not triggered.”  

• The Takeaways:

  • Any assertion of a plan-based limitation on rights to sue should be run to ground.

  • The case opens the question of whether an administrator that fails to mention the limitation in its initial denial but does include it in the denial on appeal cures the regulatory problem.