One hundred days is not a reasonable amount of time to give a plan participant to file a lawsuit under the Employee Retirement Income Security Act of 1974 (“ERISA”).  This was the conclusion reached by the United States District Court Southern District of California in its recent decision in Nelson v. Standard Insurance Company, 2014 U.S. Dist. LEXIS 119179 (S.D. Cal. Aug. 26, 2014), which held that a contractual limitation contained in an ERISA-governed group long-term disability policy’s limitation period is unreasonable and unenforceable because the time period may have ran prior to the end of the administrative review process and because it provided the plan participant only one hundred days to file an action in federal court.  The holding in Nelson was one of the first in the Ninth Circuit to determine, in the wake of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), that a plan’s contractual limitation on filing a lawsuit is unreasonably short.  While numerous questions still remain as to what constitutes an unreasonable plan limitations period, the Nelson decision makes it clear that, at the very least, providing a plan participant only one hundred days within which to file a complaint in federal court is not reasonable.

Last year, in its highly anticipated decision in Heimeshoff, the Supreme Court unanimously held that an ERISA governed plan’s limitation period, requiring a claimant to bring an action within three years of when proof of claim was due, was enforceable.  The Court found that this contractual time limitation on filing a claim in federal court was valid despite the fact that it was shorter than the applicable statute of limitations.  Although the Court held that a plan’s contractual limitation periods should ordinarily be enforced, it also stated that such provisions may not be enforced where the period provided is “unreasonably short.”  The Heimeshoff Court explained that a limitations provision is unreasonably short if it “leav[es] [a] claimant[] with little chance of bringing a claim not barred.” The Heimeshoff decision left open the issue of just how short a plan’s contractual limitation must be in order to be considered unreasonable.  The Southern District’s decision in Nelson now provides some guidance on this question.

In Nelson, the Plaintiff, a plan participant, brought an ERISA action against her Group Long-Term Disability Plan (“Defendant”) and the plan administrator, Standard Insurance Company (“Standard”).  After initially accepting and paying the Plaintiff’s disability benefits in July 2008, Standard terminated her benefits in January 2010 based on a finding that she was no longer disabled.  In June 2010, Plaintiff appealed the decision and a final denial was issued in October 2011.  In January 2013, Plaintiff filed her action against Standard and Defendant in the Southern District.  The plan contained a provision entitled, “Time Limits on Legal Actions”, which states that a plan participant must bring a legal action within three years after the earlier of either (1) the date the administrator received proof of loss or (2) the time within which Proof of Loss was due to the administrator.  On the basis of this contractual limitations provision, Defendant filed a motion for judgment on the pleadings under the Federal Rules of Civil Procedure 12(c), arguing that because the Plaintiff provided her Proof of Loss in May 2008 and the contractual time limit had already expired in May 2011, she was barred from suit.

The court in Nelson first stated that it could not determine the date upon which the contractual limitations period began to run because the term, “proof of loss” was never used in Plaintiff’s first amended complaint and she had submitted documentation supporting her disability status on several different dates.  Plaintiff argued that her cause of action did not accrue as of the May 30, 2011 date that Defendant contended the limitation period expired.  However, Defendant asserted that Plaintiff’s cause of action accrued on February 16, 2011, one hundred days before the contractual time limit expired.  The court held that, even accepting Defendant’s argument that the limitation period concluded on May 30, 2011 and that the Plaintiff’s cause of action accrued one hundred days earlier on February 16, Defendant cited to no legal authority finding that a period of one hundred days is a reasonable period for a Plaintiff to file a lawsuit.  The court found that this time limitation was especially unreasonable in the Plaintiff’s situation because a final decision had not even been reached on the claim prior to the expiration of the contractual limitation period.  Indeed, the court concluded that a contractual limitation period may be rendered unreasonable as a result of undue delay in reviewing a claim.  Based on these findings, the court denied Defendant’s motion for judgment on the pleadings because the contractual limitations period in the plan was unreasonably short.

The decision in Nelson demonstrates that, even after Heimeshoff, a plan’s contractual limitation period that may run prior to the completion of administrative review process is a good candidate to be found to be unreasonable and unenforceable.  Moreover, at least in the situation presented in Nelson, providing a plan participant with only one hundred days to file an action is patently unreasonable.  It is important to note that the Nelson court also specifically stated that, even where a limitation period is found to be reasonable, the doctrine of equitable estoppel may still prevent enforcement of the contractual limitations provision.  The decision in Nelson should remind plan participants to be mindful of both statutory and contractual time limitations on their ability to file a lawsuit to protect their benefits.