When is an ERISA claim timely?
You need to look at: the state statute of limitations, the limitations provisions in the plan, and… when the claim “accrues.”
BUT… Is there a difference when the claim involves just the calculation of the benefit, rather than whether the claimant is entitled to a benefit at all? Yes.
A new case worth reading is Withrow v. Bache Halsey Stuart Shield (PDF), __ F.3d __ (9th Cir. August 23, 2011).
FACTS: Withrow had ERISA long term disability coverage, insured by Reliance Standard. Withrow became totally disabled in 1986, and applied for benefits in January 1987.
1987 and 1990: Withrow tells Reliance that she should receive $5000 per month, rather than $3950. Reliance disagrees and explains how the benefit was calculated.
2002: Twelve (12) years later Withrow raises the benefit calculation issue again. Reliance explains its decision and denies the claim.
July 21, 2003: Withrow appeals the denial.
January 14, 2004. Reliance upholds the claim determination.
February 16, 2006. Withrow (finally) files suit.
ISSUE: Whether this ERISA claim was timely?
DISTRICT COURT: GRANTS Defendant’s Motion to Dismiss the Claim, as Untimely.
NINTH CIRCUIT COURT OF APPEALS: REVERSES–Claim Timely, with the Following Rationale:
1. There are two parts to the determination of a timely ERISA claim:
(a) whether the action is barred by the statute of limitations, and
(b) whether the action is contractually barred by the limitations provision. Op. at 4.
2. Statute of Limitations Analysis: Reliance did not clearly communicate repudiate 1990 claim; claim does not “accrue” until 2004.
A. Under Ninth Circuit precedent, the court must apply the state statute of limitations most analogous to the ERISA benefit recovery.
B. When the action “accrues” is governed by federal law. Op. at 4. An ERISA cause of action “accrues ‘either at the time benefits are actually denied, or when the insured has reason to know that the claim has been denied.’”
C. Reliance “actually denied” the appeal on January 14, 2004, and that’s when the claim accrued.
D. A claimant has “reason to know” of a claim denial “when the plan communicates a ‘clear and continuing repudiation’ of the claim ‘such that the claimant could not have reasonably believed but that his or her benefits had been finally denied.’” Op. at 4.
E. The substance of Reliance’s response to Withrow’s issues raised in the 1990s is unclear. The only evidence regarding the denial is a handwritten note in the file. This is insufficient to constitute “clear and continuing repudiation.” Consequently, Withrow’s 1990 claim did not accrue with regard to the statute of limitations, until January 14, 2004.
3. Limitations Provision Analysis–Does Not Apply to Calculation Issues.
A. The plan provides that no legal action may be brought after “the expiration of three years…after the time written proof of loss is required….” Op. at 6
B. “[C]ontract limitations provisions in benefit policies still have force independent of ERISA in long term disability benefit cases.” Id.
C. Under California law, the limitations provisions are “meaningless as applied to disputes over the proper calculation of the amount of monthly disability benefits, as opposed to disputes over whether an applicant is entitled to benefits at all.” Op. at 7.
Have a great Labor Day.