EBIA Weekly Newsletter

First Circuit: Benefit Denial Notice That Does Not Disclose Plan-Imposed Limitations Period Violates Claims Procedure Regulations

   March 24, 2016

Santana-Diaz v. Metropolitan Life Ins. Co., 2016 WL 963830 (1st Cir. 2016)

Available at http://media.ca1.uscourts.gov/pdf.opinions/15-1273P-01A.pdf

The First Circuit has refused to enforce a plan-imposed deadline for filing a lawsuit because the deadline was not set forth in the plan’s benefit denial notices. (ERISA does not specify a limitations period for filing benefit lawsuits, so the deadline is determined by the plan’s terms or, if the plan is silent, by analogous state law.) The trial court had dismissed the participant’s suit contesting the termination of his long-term disability benefits, agreeing with the plan administrator that the suit was time-barred because it was filed after the plan’s three-year limitations period. On appeal, the participant argued that the limitations period should be tolled (suspended) because it was not mentioned in the denial notice. The plan administrator countered that disclosure in the group policy was sufficient.

In reversing the trial court’s decision, the First Circuit expanded on its reasoning in an earlier case, in which it had held that a plan-imposed limitations period could be equitably tolled if not disclosed in a denial notice (see our Checkpoint article). The court concluded that tolling was unnecessary because the faulty notice violated DOL claims procedure regulations, rendering the plan’s limitations period inapplicable. The court analyzed the regulations’ requirement that benefit denial notices describe “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 . . . following an adverse benefit determination on review.” Reasoning that the use of the word “including” indicates that lawsuits are among the review procedures for which time limits must be specified, the court rejected the argument that notice of time limits is required only with respect to a plan’s internal review process. The court further noted that this result aligns with ERISA’s goal of providing claimants a fair opportunity for judicial review of benefit decisions, and that claimants are more likely to read information in a benefit denial notice than in plan documentation (where it may be buried). Because the lawsuit was timely under the state statute of limitations, it was sent back for the trial court to review the benefit denial.

EBIA Comment: The First, Third, and Sixth Circuits have concluded that, to comply with DOL claims procedure regulations, benefit denial notices must set forth any plan-imposed limitations period for filing suit (see our Checkpoint article). Regardless of the case law, including this information in denial notices is easy to do, clearly notifies claimants of the deadline, and increases the likelihood that the plan’s limitations period, if reasonable, will be enforced. For more information, see EBIA’s ERISA Compliance manual at Sections XXXVI.E (“Time Limits for Filing Benefit Claims: Statute of Limitations”) and XXXIV.E.7 (“Notification of Adverse Benefit Determination (for All Types of Claims)”). See also EBIA’s Self-Insured Health Plans manual at Section XXVI (“Claims and Appeals”) and EBIA’s 401(k) Plans manual at Section XXXVII.B (“Claims for Benefits”).

Contributing Editors: EBIA Staff.