Disability Insurers Cannot Hide The Deadline For Filing Suit From Its Insureds

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In  a groundbreaking decision that coincides with the ruling from our Third Circuit Court of Appeals in Mirza v. Insurance Administrator of America, Inc., 800 F.3d 129 (3d Cir.2015) the First Circuit Court of Appeals decided that ERISA regulations require a plan administrator in its denial of benefits letter to inform a claimant of the deadline for filing a lawsuit.

ERISA itself does not contain a statute of limitations for bringing a civil action. 29 U.S.C. § 1132(a)(1)(B), so federal courts usually “borrow the most closely analogous statute of limitations in the forum state.” The Supreme Court has already held enforceable a contractual limitations period that commenced when the proof of disability was due, instead of the date of the final denial letter. Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604, 610 (2013).

Insurers have been allowed to establish oppressive deadlines for lawsuits that are almost impossible to meet.  Short deadlines even six months has been enforced by the court. However, when the plan fails to inform clients of impending deadlines for litigation, the claimant may mistakenly think that they have plenty of time to find counsel to file suit on their behalf if their benefits are denied.

The disability benefits plans typically provide that “no legal action may be filed more than three years after proof of disability must be filed,” but this is not conveyed to the claimant in the denial letter. Hence an uninformed claimant may mistakenly overlook the deadline for initiating litigation to challenge the denial of their claim.   The insurers do not freely inform the claimant of the start date of this deadline in correspondence either.

In Santana-Diaz v. Metro. Life Ins.Co., 2016 WL 963830 (1st Cir. March 14, 2016) the claimant filed his lawsuit and MetLife argued that it was late.  Santana argued that MetLife’s failure to provide notice of the time limit for filing suit in its final denial letter entitled him to “equitable tolling.”  In its final denial letter, MetLife did not advise Santana that he had three-years to file suit. While the District Court granted MetLife’s motion for dismissal, The 1st Circuit Court of Appeals decided that MetLife’s failure to mention this time limit in its final detail letter did not comply with 29 C.F.R. § 2560.503-1(g)(1)(iv).  This rendered the limitations period altogether inapplicable. Hence, his lawsuit was not time-barred.

This is in keeping with 20 U.S.C. § 1133’s purpose of ensuring a fair opportunity of judicial review.  The Court explained, “claimants are obviously more likely to read information stated in the final denial letter, as opposed to included (or possibly buried) somewhere in the plan documents, particularly since, as was the case here, plan documents could have been given to a claimant years before his claim for benefits is denied.  The Department of Labor, recognizing this, has required that the denial letters themselves include certain information that the Department of has deemed critical to ensuring afar opportunity for review.”

The case balances the needs of disabled claimants with the plan’s right to have control over the predictability of lawsuits [and] ERISA’s purpose of ensuring that claimants have a fair chance to present their cases which remains “the lodestar in determining whether there has been substantial compliance with the notice provisions.”  Niebauer v. Crane & Co., Inc., 783 F. 3d 914 at 927 ( 1st Cir. 2015 )

As our firm handles dozens of long term disability administrative appeals per year, we regularly track deadlines for litigation to ensure our clients’ litigation rights are protected. We are beginning to see the tides turning as the insurers are notifying us of the deadlines for litigation in the final denial letter.  This is a welcome change for our clients.  Once the insurer denies their disability claim, their financial protection is removed and they must have a reasonable opportunity for access to judicial redress.