This case is about determining when the clock runs out on an employee's deadline for suing his employer over employee benefits. The dispute involves the relationship between the contractual language in the employee's benefit plan and state law which provides the statute of limitations for filing suit. The Supreme Court agreed to hear the appeal on April 15, 2013.
In the case, an employee was prevented from filing a legal challenge to an adverse long-term disability benefits determination by the ERISA plan administrator, since the parties agreed to a contractual provision limiting the time period when such a challenge could be made. ERISA does not contain a statute of limitations and federal courts normally borrow provisions from analogous state laws. In addition, plan administrators, like the one in this case, often include contractual provisions that limit the time to file a legal action to challenge an adverse benefits determination.
Here, the employee applied for long-term disability benefits and was required to provide written proof of loss. The administrator found that the proof that the employee submitted was insufficient, the employee submitted additional documentation, an administrative appeal ensued, and finally the claim was denied about 2 years later. The contract provided that legal action could not be taken 3 years after the time written proof of loss was required to be furnished. The employee filed a claim before 3 years after the final determination, but about 5 years after the original benefits claim. Here, the 3-year period for filing a legal challenge under the contract began to run well before the time specified by state law, and the lower court rejected the suit. Essentially, the employee was still pursuing an administration appeal while the time period was running from the time the written proof was required, but this was envisioned by the agreed upon contract.
The Supreme Court unanimously enforced the plan's limits. An employee benefit plan and its participants can contractually agree to use a shorter time period for litigation, as long as that period is reasonable and there is no conflicting statute. The effect of this decision may reach beyond ERISA plans to other federal statutes, particularly where the federal statute does not provide a statute of limitations and where the parties contract for shorter periods.