The Employee Retirement Income Security Act of 1974 (“ERISA”) governs most of the American public’s employee benefit plans, insurance, and pension benefits.  It applies to most medical insurance, disability insurance, life insurance, and pension benefits held by Americans.  Unfortunately, disputes over entitlement to benefits arise frequently.  Even after engaging in lengthy administrative appeals, the disputes are often left unresolved.  The claimant’s only recourse is to file a lawsuit.  But, a plan participant must be cautious because, if they wait too long, they may lose the right to sue and be forever barred from obtaining their benefits.  The most important deadline to sue over a denied claim is called the statute of limitations.  Understanding the applicable statute of limitations for an ERISA claim is thus important.

When seeking benefits under a plan governed by ERISA, the two most important types of claims are claims under 29 U.S.C. Section 1132(a)(1)(B) to obtain improperly denied benefits and claims under 29 U.S.C. Section 1132(a)(3)(B) for breach of fiduciary duty and equitable relief.  These two kinds of claims are very different.  One seeks to have the court rule that the claim for benefits was improperly denied under the terms of the ERISA plan at issue.  The other seeks to establish that the claimant was harmed because the defendant breached its legal duties in some other manner and is therefore entitled to equitable relief.  Both types of claims have been addressed elsewhere in related blogs on our website.  This article will instead focus on how the two claims have distinctly different statute of limitation .

ERISA does not provide a statute of limitations for claims under Section 1132(a)(1)(B).  Instead, courts apply the limitations period provided by the most analogous state statute: a breach of contract claim.  See Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643 (9th Cir. 2000) (en banc).  In California, that is four years.  Other states may differ.

The statute of limitations is to be contrasted with the ERISA plan’s stated contractual limitations provision that also must be complied with.  Most employee benefit plans contain a provision that differs from a traditional statute of limitations.  In California, California Insurance Code section 10350.7 sets the time as “90 days after the termination of the period for which the insurer is liable” in disability plans.  In Heimeshoff v. Hartford Life and Accident Insurance Co., 571 U.S. 99 (2013), the Supreme Court upheld such provisions.  The Supreme Court determined that a contractual limitations provision is enforceable unless there is “a controlling statute to the contrary” or the period is unreasonable.  Heimeshoff, 571 U.S. at 102, 105-06.  Contractual limitations periods of a mere 180 days after the claim denial have been held to be reasonable.  See Sargent v. S. Cal. Edison 401(k) Savings Plan, 2020 WL 6060411, at *6 (S.D. Cal. 2020)

Importantly, when denying an appeal for benefits under an ERISA plan, the claims administrator is required to provide notice of the relevant contractual limitations period.  See Santana-Diaz v. Metropolitan Life Ins. Co., 816 F.3d 172, 182-83 (1st Cir. 2016).  In Santana-Diaz, the First Circuit Court of Appeals ruled that the failure to provide notice of a contractual limitations period in a denial letter rendered it unenforceable to that particular claimant.  See id.

Statute of limitations for breach of fiduciary duty claims under 29 U.S.C. Section 1132(a)(3)(B) are more complicated than those for breach of plan benefits.  They are controlled by a federal statute: 29 U.S.C. Section 1113.  It provides as follows:

No action may be commenced under this subchapter with respect to a fiduciary’s breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of—

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;

except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

Section 1113 states that a plan participant or beneficiary cannot bring a claim for breach of fiduciary duty later than either six years after the last action that constituted part of the breach of fiduciary duty, or three years after the claimant had actual knowledge of the breach, whichever is earlier.  This can produce complicated and unjust situations.  What if the breach occurred a decade before the harmed person learned of it?  Section 1113 contains a fraud or concealment exception that stops the statute of limitations from beginning to run under certain circumstances.  If the defendant actively tried to conceal their breach, then the statute of limitations is tolled until the date of discovery of the breach or violation.  However, the exception’s application under other circumstances is less clear.  In Barker v. American Mobile Power Corp., 64 F.3d 1397, 1402 (9th Cir. 1995), the Ninth Circuit addressed this issue.  The court considered the fraud or concealment exception and found that the plaintiffs in that case had failed to invoke the exception because they failed to allege that defendants “committed specific acts of fraud or concealment.”  Id.  However, the court also acknowledged that:

Substantial authority indicates, however, that the exception applies only when the defendant himself has taken steps to hide his breach of fiduciary duty. Other circuits have held that the “fraud or concealment” exception in the statute incorporates the common law doctrine of “fraudulent concealment.” See Larson v. Northrop Corp., 21 F.3d 1164, 1172-3 (D.C.Cir.1994); Radiology Ctr., 919 F.2d at 1220; Schaefer v. Arkansas Medical Soc’y, 853 F.2d 1487, 1491 (8th Cir.1988). Under that doctrine, a statute of limitations may be tolled only if the plaintiff “establishes ‘affirmative conduct upon the part of the defendant which would, under the circumstances of the case, lead a reasonable person to believe that he did not have a claim for relief.’” Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1415 (9th Cir. 1987) (emphasis added) (quoting Gibson v. United States, 781 F.2d 1334, 1345 (9th Cir. 1986), cert. denied, 479 U.S. 1054, 107 S.Ct. 928, 93 L.Ed.2d 979 (1987)); see Greenwald v. Manko, 840 F.Supp. 198, 203 (E.D.N.Y. 1993)

Id. at 1402.  In short, the courts of appeal are inconsistent when determining whether a defendant must commit affirmative acts to conceal the improper conduct or whether conduct that simply prevents the claimant from knowing that they have a claim is sufficient.  The need to isolate the underlying conduct that constitutes the violation further complicates these circumstances and is particularly problematic for the average plan participant.

This raises an additional question: Do contractual limitations periods affect claims for breach of fiduciary duty?  The courts have yet to reach a consensus on this issue.  Heimeshoff addressed improper denial of benefits claims.  Its application to breach of fiduciary duty claims is the issue debated by the courts.  Some courts have held that a contractual provision applies to a breach of fiduciary duty claim.  Others have rejected that position.  As of 2020, “In the seven plus years since Heimeshoff was decided, four of the eight courts that have considered this narrow issue have held that § 1113 controls.”  Falberg v. Goldman Sachs Group, Inc., 2020 WL 7695711, at *4 (S.D.N.Y. 2020).  Of note, however, other cases have simply ruled in a manner that implicitly holds that the contractual limitations period does not apply.  See, e.g., Clark v. Provident Life, 2016 WL 11744945 (C.D. Cal. 2016); Zelhofer v. Metropolitan Life Ins. Co., 2017 WL 1166134 (E.D. Cal. 2017).  The majority position is that statute of limitations provisions in a plan document do not control breach of fiduciary duty claims.

Statute of limitations and contractual limitations periods can be very complicated in their application.  Whereas a claimant is supposed to be informed of the applicable deadline, claims administrators never inform claimants about the applicable statute of limitations for breach of fiduciary duty claims.  At times, they also fail to address the applicable statute of limitations for an improper denial of benefits claim.  The wisest course of action is to seek the assistance of experienced ERISA lawyers like McKennon Law Group PC as soon as the claim has been denied, if not beforehand.  Key deadlines can be missed, and, once missed, there is little that even a skilled attorney can do to help.