Eleventh Circuit Upholds Three Year Limitations Period in ERISA Disability Policy

The U.S. Court of Appeals for the Eleventh Circuit has upheld a district court’s decision in favor of a disability insurance carrier, finding that a lawsuit seeking long term disability benefits had been filed after the policy’s three year limitations period.

The Case

Harriet Wilson sued Standard Insurance Company under the Employee Retirement Income Security Act of 1974 (“ERISA”), seeking to recover long term disability benefits to which she claimed she was entitled.

The U.S. District Court for the Northern District of Alabama granted summary judgment in favor of Standard Insurance based on Wilson’s failure to file her lawsuit within the three year period prescribed in the disability policy – she had filed her action 34 months after that period had expired.

Wilson appealed to the Eleventh Circuit. She contended that the running of the three year contractual limitations period should be equitably tolled for the 34 months that her lawsuit was late because Standard’s letter denying her claim had not given her notice that the policy imposed a three year limitations period instead of the six year period for contract actions that would otherwise have been borrowed from state law. Wilson argued that an ERISA regulation required that Standard provide notice of the time limit for filing a lawsuit in the claim denial letter it had sent to her.

The Eleventh Circuit Court’s Decision

The Eleventh Circuit affirmed.

In its decision, the circuit court observed that ERISA does not provide a statute of limitations for suits brought to recover benefits. Thus, it noted, courts borrow the most closely analogous state limitations period, unless the parties have contractually agreed to a different one in the ERISA plan. If they have, the circuit court added, it would be given effect, unless it was unreasonably short or unless a “controlling statute” prevented the limitations provision from taking effect.

The circuit court then found that neither of those two exceptions applied to the contractual limitations period in Wilson’s disability policy. The circuit court pointed out that the three year limitations provision in Wilson’s policy was virtually identical to the one the U.S. Supreme Court has described as a “common contractual limitations provision” and that the Supreme Court has upheld as reasonable and enforceable. There also was no controlling statute to the contrary, the circuit court said.

It also was not persuaded by Wilson’s equitable tolling argument. It acknowledged that an ERISA regulation requires that a claims denial letter include notice about administrative review procedures and time limits for filing that apply to those procedures as well as the fact that the claimant has a right to bring a civil action under Section 502(a) of ERISA. However, the appellate court continued, it was “anything but clear” whether the regulation also required a claims denial letter to include notice about the time limits applicable to filing a civil action.

The circuit court then said that, even assuming that the regulation required that a claim denial letter notify the claimant of the time limit for filing a lawsuit under ERISA Section 502(a), it did not follow that Standard’s failure to interpret the ambiguous regulation that way rendered the policy’s contractual limitations period unenforceable. Rather, the circuit court ruled, the contractual limitations period was enforceable unless Wilson could establish that she was entitled to the “extraordinary relief” known as equitable tolling.

The circuit court found that Wilson was not entitled to rely on equitable tolling because she had not been diligent in pursuing her claim. As the circuit court stated, Wilson “waited until four years after the administrative review process of her denied claim was complete before requesting [a copy of her policy]” and she filed her lawsuit “nearly three years too late.” Her lawsuit “easily could have been timely filed if she had exercised even minimal diligence in discovering the terms of the policy,” the circuit court concluded.

The case is Wilson v. Standard Ins. Co., No. 14-10825 (11th Cir. June 3, 2015).