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Time limit is void under ERISA plan

thompson-o-rogerieeA complaint for long-term disability benefits under an employee welfare benefit plan should not have been dismissed under the plan’s three-year limitations period, as the time limit was not mentioned in the letter informing the claimant that his request was denied, the 1st U.S. Circuit Court of Appeals has held.

The claimant argued that the denial letter did not comply with a federal regulation, 29 C.F.R. §2560.503-1(g)(1)(iv), because it failed to provide notice of the plan-imposed time limit for filing suit.

“[W]e hold that, as a consequence of [the plan administrator]’s failure to include the time limit for filing suit in its final denial letter, the limitations period in this case was rendered inapplicable,” Judge O. Rogeriee Thompson wrote for the unanimous three-judge panel.

The 27-page decision is Santana-Díaz v. Metropolitan Life Insurance Company.

Request for extension of benefits

Plaintiff-appellant Dionisio Santana-Díaz was a financial analyst at Shell Chemical Yabucoa. He participated in Shell Chemical’s employee welfare benefit plan, which the employer provided through a group insurance policy issued by defendant-appellee Metropolitan Life Insurance Co.

Beginning in November 2007, the plaintiff, who suffered from major depression, high blood pressure, asthma, and various other physical and mental ailments, claimed and received sick leave and then short-term disability leave.

The plaintiff submitted a claim for long-term disability benefits in 2008, which were granted.

On April 5, 2010, the defendant sent the plaintiff a letter informing him that, although he was currently receiving long-term disability benefits, the maximum duration period for his particular disability was 24 months and that his benefits would therefore expire on Nov. 22, 2010.

After receiving the letter, the plaintiff submitted various medical files and additional information, but the defendant denied his claim for an extension in a letter dated Nov. 24, 2010.

The plaintiff filed an administrative appeal, which the defendant likewise denied in an Aug. 19, 2011 letter.

Both the initial denial of benefits letter and the final denial letter informed the plaintiff that he could bring a civil action, but neither letter included a time limit for doing so or even mentioned that the right to bring suit was subject to a limitations period.

The plan, a copy of which had been provided to the plaintiff when Shell Chemical first became his employer at least 10 years earlier, did contain a three-year limitations period providing, in relevant part, that “[n]o legal action of any kind may be filed … more than three years after proof of Disability must be filed.”

The plaintiff did not file suit until Aug. 18, 2013, asserting a 29 U.S.C. §1132(a) claim for improper denial of benefits. The defendant was awarded summary judgment based on a U.S. District Court judge’s finding that the complaint was time-barred.

Regulatory duty

“[W]e begin and end our review with the issue of MetLife’s failure to note the time period for filing suit in its final denial letter,” Thompson said. “[W]e conclude that, in failing to provide such notice, MetLife was not in substantial compliance with the ERISA regulations, and that this rendered the limitations period altogether inapplicable.”

Thompson said the federal regulation required a plan administrator to provide “written or electronic notification of any adverse benefit determination” that includes 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.”

The parties differed in their interpretation of which “time limits” must be included in a denial letter. The plaintiff argued that the regulation required plan administrators to include notice of not only the right to bring a civil action, but also the time limit for filing the action.

The defendant suggested that the regulation required only those time limits applicable to internal administrative review procedures.

“In other words, MetLife seems to argue that the two phrases in section 2560.503-1(g)(1)(iv) could be read separately, such that a plan administrator is, first, required to include in its denial letter a ‘description of the plan’s review procedures and the time limits applicable to such procedures,’ and second, required to include ‘a statement of the claimant’s right to bring a civil action,’ though not necessarily the time period for filing the action,” Thompson noted.

Based on the plain language of the regulation, Thompson said the court determined that the correct interpretation of the section was that a denial of benefits letter must include notice of the plan-imposed time limit for filing a civil action.

“Our reading of the regulation is furthermore in keeping with 29 U.S.C. §1133’s purpose of ensuring a fair opportunity for judicial review, and with ERISA’s overall purpose as a remedial statute,” Thompson said. “Thus, we hold that MetLife had a regulatory obligation to provide notice of the time limit for filing suit in its denial of benefits letter, and it failed to do so.”

Having found that the defendant violated section 2560.503-1(g)(1)(iv), the 1st Circuit considered whether the plaintiff was prejudiced by the violation.

“[W]e conclude that a defective denial letter that fails to include the limitations period for filing suit is per se prejudicial,” Thompson stated. “Thus, we hold that, where a plan administrator fails, as MetLife did here, to include the time limit for filing suit in its denial of benefits letter, and it has not otherwise cured the defect by, for example, informing the claimant of the limitations period in a subsequent letter that still leaves the claimant sufficient time to file suit, the plan administrator can never be in substantial compliance with the ERISA regulations, and the violation is per se prejudicial to the claimant.”

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