ERISA Archives - Page 34 of 54 - McKennon Law Group

Attorneys’ Fee Awards in ERISA Cases: McKennon Law Group PC Gets A Large One

Most employee benefits are governed by a federal law called the Employee Retirement Income Security Act of 1974 (“ERISA”), including life insurance, health insurance, disability insurance, pensions and other benefits offered by employers to their employees through their employee benefit plans. Sometimes the plan, or an insurance company if the plan’s benefits are funded by an insurance policy, wrongfully refuses to pay benefits that are due to an employee. If an employee files a successful ERISA lawsuit to collect his plan benefits, he is entitled to recover his attorneys’ fees incurred in the lawsuit. The applicable ERISA statute, 29 U.S.C. section 1132(g)(1), states: “In any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” In Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010), the Supreme Court interpreted that statute and concluded a plan participant is entitled to recover his “reasonable attorneys’ fees” if he achieves some degree of success on the merits of the case.

That begs the question. What are reasonable attorneys’ fees in an ERISA case? The hourly rates charged by ERISA lawyers and the amount of time spent on a case can vary greatly, depending on the experience, skill and reputation of the attorney involved and the complexity of the matter. Hourly rates of up to $700 for highly experienced attorneys have been approved for ERISA cases by California federal district courts, including fee awards in the multiple hundreds of thousands of dollars.

The McKennon Law Group PC recently obtained such an award in Reddick v. Metro. Life Ins. Co., No. 3:15-CV-02326-L-WVG, 2018 WL 637938 (S.D. Cal. Jan. 31, 2018), where the Court approved its hourly rates of up to $700 and awarded it 100% of its fees, almost $300,000. We prevailed in that ERISA lawsuit filed against Metropolitan Life Insurance Company (“MetLife”), our client’s group long-term disability insurer, after MetLife terminated his benefits. Our client was a financial advisor that could no longer perform his job duties because of debilitating, post-surgical low back pain and impaired concentration caused by his pain medication. On the eve of trial, after the McKennon Law Group PC prevailed on two critical evidentiary motions, the disability insurer capitulated and agreed to pay our client all his benefits. The insurer, however, offered to pay just a small fraction of the firm’s attorneys’ fees and costs, contending they were unreasonable in amount. We promptly filed a motion to recover our attorney’s fees, which MetLife vigorously opposed.

On January 31, 2018, in a detailed 11-page opinion, the Honorable Judge M. James Lorenz of the United States District Court for the Southern District of California granted our motion. The Court ordered MetLife to pay 100% of our attorneys’ fees (and some costs), together totaling $294,391. Judge Lorenz concluded that the firm’s hourly rates of $700, $600 and $290 for Robert McKennon, Joseph McMillen and Stephanie Talavera, respectively, are reasonable for ERISA work given their strong experience and outstanding abilities, including decades handling insurance coverage, ERISA and bad faith insurance lawsuits. Judge Lorenz concluded that every minute of the firm’s time spent on the case was reasonable and recoverable from the disability insurer, MetLife:

[C]onsidering the quality of the work produced by [McKennon Law Group PC] and the successful result obtained, the Court finds reasonable the 515.1 hours counsel spent on this case.

Key Take Away
You should hire an experienced ERISA lawyer to represent you if your claim for life, health, disability or pension benefits is denied, even if they are more expensive than a less qualified lawyer. The law permits you to recoup your reasonable attorneys’ fees from the insurer or plan that wrongfully denied your benefits. Thus, it is the insurer that will end up paying for your better-quality representation, not you. In the Reddick v. MetLife case, our client was able to keep 100% of his long-term disability insurance benefits.

If your claim for short-term disability, long-term disability, life, retirement or health benefits has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling both ERISA insurance claims and non-ERISA California insurance bad faith claims.

Department of Labor Announces April 1, 2018 as Final Date For ERISA Claims Procedures Related to New ERISA Disability Insurance Regulations

Long-term and Short-Term Disability insurance cases dominate ERISA benefits litigation. According to the U.S. Department of Labor (“DOL”), the administrative agency given the authority to regulate employee benefits under, and to enforce the statutory provisions of, the Employee Retirement Income Security Act of 1974 (“ERISA”), disability insurance benefits claims account for almost two thirds of all benefits-related ERISA lawsuits and, based on rough estimates, these disability benefits claims are often denied. We wrote articles about these Regulations, which you can read here. Importantly, the Regulations give teeth to existing protections, enhancing requirements for independent claims administration, information disclosure and consequences for administrators who fail to comply.

The good news is that they are now finalized and will go into effect on April 1, 2018 without further delay. They will apply to disability benefits claims filed after April 1, 2018. As previously advised, the DOL published “final” regulations on December 19, 2016 revising the existing claims and appeals procedures regulations under ERISA for employee benefit plans providing disability benefits (“Final Regulations”). According to the DOL, the intent of the Final Regulations is to strengthen the current procedures by adopting some of the additional procedural safeguards and protections for disability plan claims that are already in place for group health plan benefits pursuant to the Patient Protection and Affordable Care Act.

The DOL’s January 2018 news release confirms that the substantive provisions of the Final Regulations will be retained:

The Department received approximately 200 comment letters from the insurance industry, employer groups, consumer advocates, and lawyers representing disability benefit claimants, all of which are posted on the Department’s website. Only a few comments responded substantively to the Department’s request for quantitative data to support assertions that the final rule would drive up disability benefit plan costs by more than the Department had predicted, cause an increase in litigation, and consequently reduce workers’ access to disability insurance protections. The information provided in the comments did not establish that the final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.” Accordingly, the substantive provisions of the Final Regulations will apply to disability benefits for claims filed “after April 1, 2018.

With these Regulations, the DOL has attempted to protect disability insurance claimants from wrongful denials of long-term and short-term disability claims by attempting to minimize conflicts of interest, promote an open and robust discussion of the claim and ensure that administrators strictly comply with procedural protections for disability insurance claimants.

The Final Rule Delaying the Applicability Date (published 11/29/17) can be found at: https://www.federalregister.gov/documents/2017/11/29/2017-25729/claims-procedure-for-plans-providing-disability-benefits-90-day-delay-of-applicability-date
The Final Rule for Claims Procedures for Plans Providing Disability Benefits (published 12/19/16) can be found at: https://www.federalregister.gov/documents/2016/12/19/2016-30070/claims-procedure-for-plans-providing-disability-benefits

Exceptions to the Exhaustion Requirement: When is an Appeal Futile Under ERISA?

If an insurer recently denied your claim, do not ignore the appeal requirements stated in the denial letter or you may lose the right to pursue your benefits. The Employee Retirement Income Security Act of 1974, or ERISA, protects most employee benefits, such as life insurance benefits, long-term disability income insurance benefits, accidental death and dismemberment insurance benefits and other such benefits offered through employer-sponsored plans. ERISA does so by establishing certain internal claims handling procedures, often referred to as “administrative remedies.” These administrative remedies govern the claims handling process when an administrator determines a plan participant’s eligibility for benefits. Although each employer-sponsored plan has different requirements, most contain provisions that require a plan participant to exhaust at least one level of internal appeal before he or she can file a lawsuit. Typically, where a plan participant fails to do so, he or she will also lose the ability to further pursue wrongfully denied life insurance, long-term disability insurance, accidental death and dismemberment insurance benefits.

In this blog article, we briefly cover the basics of the exhaustion doctrine under ERISA. We discuss a few well-recognized exceptions to the requirement, where the internal procedures are inadequate or pursuing an appeal would be futile because it is “doomed to fail.” Although these exceptions apply in limited circumstances, it is important to remember that a plan participant/insured bears the difficult burden of establishing that he meets these requirements. Ultimately, the safest route is to do everything you can to comply with the appeal procedures, even if you think doing so would be futile.

A Brief Discussion of the Exhaustion Requirement
ERISA does not expressly mandate exhaustion of administrative remedies before filing suit. The requirement that a plan participant first exhaust his or her administrative remedies is a court-established doctrine. However, the requirement for exhaustion does find its origins in the text of ERISA, which contemplates a “full and fair review” of adverse benefit determinations made in the administration of an ERISA-governed plan for life, health, disability, accidental and other employer-sponsored benefits. If the plan documents expressly require exhaustion, the individual plan participant is required to complete the internal appeal as stated in the plan.

The courts strongly support the “sound policy” of requiring a plan participant to exhaust administrative remedies for several reasons. First, Congress specifically authorized the courts to establish a “common law” for issues under ERISA, and like the closely related Labor Management Relations Act, ERISA common law also requires exhaustion. Second, exhaustion is consistent with the Legislature’s aims and goals in its enactment of ERISA, which protects employees from abuse of their benefit or pension plans by establishing internal review requirements. Third, allowing levels of internal review gives the ERISA plan or claims fiduciary the ability to fully consider its determination of benefits. For example, if the claims administrator denies disability benefits based on missing or incomplete medical records, the appeal allows the participant an opportunity to point out the missing information and ensure that the information appears before the claims administrator. That way, if the administrator decides to uphold its denial of benefits, it is at least based on a full set of facts in support of the individual’s claim. Finally, the doctrine also helps to achieve sound judicial policy by promoting the efficient use of judicial resources. Requiring internal review ensures that, by the time the denial of benefits reaches the federal court, the primary dispute revolves around the adequacy of the decision, not whether a decision was made at all.

Exceptions to Exhaustion: When are Appeals Futile or Inadequate Internal Procedures under ERISA?
Most courts promote strict adherence to the exhaustion requirement. Accordingly, the courts recognize exceptions to it in only a few circumstances. As a general matter, there are two well-established situations where the exhaustion requirement does not apply: if procedures are inadequate or the appeal is futile. The plan participant bears the burden of proving these exceptions apply.

Inadequate Internal Procedures
The first exception, inadequacy, is aptly named because it simply refers to a situation where the plan’s internal claims handling procedures provide an inadequate remedy. For internal review procedures to be inadequate, the claimant must show that the procedures followed by the claims administrator failed to comply with the terms of ERISA or its implementing regulations. To do so, the plan participant must specifically allege how the plan’s terms or the administrator’s actual conduct violated the statute or regulations. Further, a minor error, alone, does not establish inadequacy. Typically, if the administrator can demonstrate substantial compliance, the court will find the claims procedures adequate.

Futility
In contrast, futility applies where a resort to the plan’s internal, administrative remedies would be futile, pointless and “doomed to fail.” In one relatively recent unpublished Ninth Circuit opinion, the Court reversed and remanded the District Court’s opinion granting summary judgment in favor of the insurer based on a failure to exhaust administrative remedies in connection with a denied long-term disability claim. See Carey v. United of Omaha Life Ins. Co., 633 Fed.Appx. 478 (9th Cir. 2016). In finding the appeal “futile” and excused from further exhaustion, the Ninth Circuit looked to the claimant’s conduct following the denial and the language of the communications between the insurer and the claimant. Following the denial, the claimant filed a complaint with the California Department of Insurance, which in turn requested that the insurer reevaluate its decision. Following this request, the insurer wrote to the claimant, stating that it had “reviewed all of the documentation” and was “unable to approve” his long-term disability claim.

Relying on ERISA principles that the terms in an ERISA plan should be interpreted in an ordinary and popular sense, the Court determined that the insurer’s imprecise communications indicated to the claimant that pursuit of further review would have been futile as follows:

Because of the imprecision in United’s communications, however, a person in Carey’s position would have thought that United had reviewed the substance of his case and decided anew that he was not entitled to benefits. The plain language of the communications indicated to Carey that pursuing a further request for review—thinking that one had already occurred—would have been futile. C.f. Vaught, 546 F.3d at 628 (explaining this court’s “principle that terms in an ERISA plan should be interpreted in an ordinary and popular sense as would a [person] of average intelligence and experience” (internal quotation marks omitted)); Booton v. Lockheed Med. Benefit Plan, 110 F.3d 1461, 1463 (9th Cir.1997) (when communicating to claimants that benefits are denied, “the reason for the denial must be stated in reasonably clear language”). Id., at 479.

The Court found futility expressed in the communication quoted above, even though the same communication also reiterated the appeal procedures to the claimant.

In most cases, it will not be easy to prove an exception to the exhaustion requirement. Accordingly, the safest way to protect your benefits is to ensure that you understand and comply with the strict deadlines and requirements for an internal appeal, even if you think doing so would be futile or the procedures are inadequate.

Exhaustion of Administrative Remedies in ERISA: The Potential Death Knell of a Disability, Life or Health Insurance Claim

The Employee Retirement Income Security Act of 1974, or ERISA, establishes protections for most employee benefits offered through employer-sponsored benefit plans. ERISA requires that the plan and claims administrators adhere to certain internal procedures, often referred to as “administrative remedies,” when determining a plan participant’s eligibility for benefits. Typically, these administrative remedies include internal appeals directly to the insurer or claims administrator. Although each individual plan is different, most plans require at least one level of internal appeal, which you would have to “exhaust” before you can file a lawsuit. However, some plans require that an employee exhaust two levels of internal appeals before he or she can file suit.

Whether it is one or two levels of appeal, exhausting administrative remedies is incredibly important to your benefits claim because, if you do not, you may lose your ability to file a lawsuit to recover your benefits. In this article, we discuss the consequences of failing to meet the exhaustion requirement and explain the Ninth Circuit’s application of the exhaustion requirement to “disguised” benefits claims, such as the alleged statutory violation in Diaz v. United Agr. Employee Welfare Ben. Plan & Tr., 50 F.3d 1478 (9th Cir. 1995).

Why Exhaustion?
The text of ERISA does not, itself, require that the plan participant or beneficiary exhaust their internal administrative remedies before filing suit. However, a beneficiary seeking determination of rights or benefits under an ERISA plan must first exhaust administrative remedies, unless doing so is futile. See Amato v. Bernard, 618 F.2d 559 (9th Cir. 1980). The Ninth Circuit has held that the failure to exhaust acts as a bar only if the plan documents expressly mandate exhaustion prior to seeking judicial review. See Spinedex Physical Therapy USA, Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1298 (9th Cir. 2014). But, most plans do contain such a requirement.

Simply “Disguising” an ERISA Benefits Claim as a Statutory Violation Won’t Work
Where the claim is not a “repackaged” benefit claim and seeks equitable relief, exhaustion of administrative remedies may not be required. For example, it is well-settled Ninth Circuit precedent that breach of fiduciary duty claims, as opposed to benefits claims, are not subject to the exhaustion doctrine. But, a claimant may not dress a benefit claim as a statutory violation or breach of fiduciary duty where he or she failed to meet the exhaustion requirements. Some have tried, and the courts were not so easily fooled. In Diaz, supra, the Ninth Circuit directly addressed the importance of exhaustion by rejecting a claimant’s attempt to disguise his failure to appeal and “repackaging” a benefit claim as a statutory violation.

In Diaz, plaintiff sought relief for his medical plan’s failure to cover his daughter’s treatment for leukemia, based on an alleged statutory violation of the Consolidated Omnibus Budget Reconciliation Act, or COBRA, amendments to ERISA. Generally, the COBRA amendments to ERISA establish requirements regarding continued coverage for certain employees that experience a qualifying event, which would otherwise result in a termination of coverage. Because of the plaintiff’s seasonal work schedule, he experienced such “qualifying events” on a somewhat regular basis and, as a result, periods of intermittent coverage under the plan that triggered COBRA requirements.

These periods of intermittent coverage left plaintiff and his family without health insurance for the months of August and September 1990. Sadly, in September 1990, plaintiff’s daughter was diagnosed with leukemia and the plan denied her claims based on the policy’s pre-existing condition exclusion. Although the initial denial letters plaintiff received from the plan administrator contained a notice of appeal rights in both English and Spanish, plaintiff did not pursue the internal appeal to the insurer. Instead, he filed a lawsuit.

The District Court found in favor of the insurer because it determined that plaintiff failed to exhaust his administrative remedies, as he did not appeal the insurer’s initial denial as required under the plan. Plaintiff challenged the District Court’s decision, bringing it to the Ninth Circuit on alternative theories that 1) exhaustion principles do not apply to the claims as they are based on statutory violations and 2) even if exhaustion requirements did apply, exceptions for inadequacy and futility prevent his case from being barred.

Generally, the Ninth Circuit rejected both arguments as attempts to disguise an individual benefit claim that simply failed to take part in the internal appeals process. In assessing these arguments, the court found the case distinguishable from others that did successfully allege statutory violations or the futility or inadequacy of administrative review. The court determined plaintiff’s claim for relief based on a statutory violation was not at the heart of the claim. Instead, it was “an individual’s claim for plan benefits under a particularized set of facts,” which is just the type of case that led the courts to establish the exhaustion requirement in the first place.

To the courts, exhaustion of the ERISA-mandated internal remedies is necessary to ensure judicial review remains available in a benefits matter. The courts consider the doctrine “sound policy,” and consistent with the goals and aims of ERISA, as well as the efficient use of judicial resources. The alignment of these various competing policies in favor of exhaustion strengthens it, and if your benefits are important to you, taking an active role in ensuring that you comply with the review mandated under the plan should be, too; a failure to complete the latter may prevent you from pursuing the former, your benefits.

Note: If your ERISA claim has been denied, following the internal review procedures is integral to the success of your claim. It is also important to have experienced disability, health and life insurance attorneys, like those at the McKennon Law Group PC. Fill out our free consultation form today to set a time to discuss your claim with one of our attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

Cohorst v. Anthem: When Does Waiver Apply under ERISA?

The Employee Retirement Income Security Act of 1974, or ERISA, governs most employer-sponsored benefit plans. ERISA establishes protections for employees in the administration of their employer-sponsored benefits, requiring that the administrator adhere to certain requirements when determining a plan participant’s eligibility for benefits. In ERISA cases, typically the plan’s terms govern. However, ERISA does recognize certain “equitable” doctrines for situations not necessarily covered by the terms of the employer-sponsored plan. One of those equitable doctrines is “waiver,” which the courts have established as the intentional relinquishment of a right under the plan. In this article, we address Cohorst v. Anthem, No. CV 16-7925-JFW (SKX), 2017 WL 6343592 (C.D. Cal. Dec. 12, 2017), a recent decision from the Central District of California, which rejected a health plan administrator’s decision to approve, and then later deny, an employee’s benefits based on a theory of waiver.

What are the equitable doctrines under ERISA?

ERISA section 502(a)(3), 29 U.S.C. section 1132(a)(3)(B), permits a plan participant or beneficiary to bring a civil action against fiduciaries to obtain “other appropriate equitable relief,” including the equitable remedies of reformation, waiver and estoppel, and surcharge, i.e., make whole relief. Unlike a benefit claim, requesting equitable relief relies on the fiduciary relationship between the plan or claims administrator and the participant. Under ERISA, a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, . . . or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

Waiver under ERISA?

A court will find waiver where a party intentionally relinquishes a right or acts so inconsistently with an intent to enforce the right that it induces a reasonable belief that the right has been extinguished. For example, in Salyers v. Metro. Life Ins. Co., 871 F.3d 934, 938 (9th Cir. 2017), the court found waiver where the administrator accepted premium payments, but later denied a death benefit because participant failed to provide “Statement of Health” as required for eligibility. Furthermore, the insurer or plan administrator may not argue ignorance of a lack of coverage where its agent had such knowledge, as the court found in Salyers.

Cohorst v. Anthem

In Cohorst, supra, Plaintiff Aubrey Cohorst sued Anthem Health Plans of Kentucky, Inc., (Anthem) for its denial of a benefits claim under an employer-sponsored health plan governed by ERISA. The underlying dispute involved Anthem’s denial of coverage for Cohorst’s artificial disc replacement surgery, which required the use of a “Mobi-C” device. Cohorst’s doctor determined the surgery medically necessary, and consequently sought Anthem’s prior approval. In this initial approval process, Anthem confirmed its approval of the surgery, but did not specify the medical device that would be used. Anthem’s internal documents mirrored its initial approval, describing the surgery as “medical necessary” and meeting “criteria guidelines.”

When Cohorst’s physician contacted Anthem to confirm which medical device had been approved for surgery, Anthem told the doctor it approved the “Pro Disc-C” and not the “Mobi-C.” Shortly after this conversation, Anthem created a new reference number allegedly based on the request to use the “Mobi-C” device and overturned its original approval, finding the procedure to be “Experimental” or “Investigative” and thus not medically necessary under the terms of the plan. Ultimately, Cohorst underwent the surgery and Anthem refused to cover the costs associated with the surgery, a total of $140,434.25, of which, $130,000 was attributed to the cost of the surgery and $5,434.25 to the cost of the Mobi-C device.

Under a de novo standard of review, the court first evaluated the plan and the relevant exclusionary language, determining that the procedure did fall within the exclusion. Despite this, the District Court still found for Cohorst based on a theory of waiver. Emphasizing Anthem’s inconsistent behavior, the court held that Anthem waived its right to assert the exclusion when it first approved the surgery as medically necessary. That the “Mobi-C” device was not specifically approved was irrelevant, when a party intentionally relinquishes a right, as Anthem did in Cohorst, the doctrine of waiver applies.

If your ERISA claim has been denied, having an experienced disability, health and life insurance attorney matters to the success of your claim. Fill out our free consultation form today to set a time to discuss your claim with the McKennon Law Group’s attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

When the Clock is Ticking: The Interplay of the Contractual Limitations Period and the Statute of Limitations in a Disability Insurance Case

The Employee Retirement Income Security Act of 1974, otherwise known as ERISA, governs most employer-sponsored benefit plans, including short and long-term disability benefits, life benefits, accidental death and dismemberment benefits and others. ERISA was enacted to protect employer-sponsored benefits provided to employees. As such, ERISA requires that the plan administrator, typically the insurer or employer, adhere to strict standards and deadlines. However, while ERISA does set strict internal deadlines for the appeals process, it does not specify a time limit to bring a lawsuit for wrongfully denied benefits. In this article, we discuss the statute of limitations and the contractual limitations periods in ERISA benefits cases and a relatively recent and plaintiff-friendly case decided by District Court judge Michael Fitzgerald out of the Central District of California.

What is a Statute of Limitations?

A statute of limitations refers to the amount of time a party has to initiate a lawsuit based on a certain harm or injury. The statute of limitations that governs a claim varies depending on the type of relief a party seeks, as well as where the relief is sought. For example, California Code of Civil Procedure Section 339 sets the relevant statute of limitations for filing an insurance bad faith action at two years. Other states provide for a different statute of limitations.

What is the Statute of Limitations for an ERISA Benefits Claim under Section 502?

A participant in an employer-sponsored benefit plan covered by ERISA may bring a civil action under section 502(a)(1)(B) to recover benefits due under the terms of the plan. While courts have generally required that a participant exhaust the plan’s administrative remedies before filing a lawsuit to recover benefits, ERISA does not specify a statute of limitations for filing suit under section 502(a)(1)(B). Because ERISA does not establish a time limit for such claims, the courts typically fill the gap by applying the “most analogous” state statute of limitations. In the Ninth Circuit, the “most analogous” statute of limitations is the state’s contract limitations period. In California, that is the four-year statute of limitations for written contracts established by California Code of Civil Procedure Section 337.

Heimeshoff v. Hartford Life & Accident Insurance Co.

In Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S.Ct. 604, 611(2013), the United States Supreme Court found that a contractual statute of limitations period will be enforceable so long as it is (1) reasonable or not “unreasonably short” and (2) it is not contrary to controlling state statute. To determine whether a given plan’s statute of limitations is reasonable depends on the specific factual circumstances of the action. In Heimeshoff, the Court found the time limit reasonable because it gave the participant a year to file suit from the date the insurer denied the claim on appeal. However, because ERISA requires that a claimant exhaust her administrative remedies before she files a lawsuit, in some cases, the time it takes to complete that internal review process may prevent a participant from bringing a Section 502(a)(1)(B) action within the contractual limitations period. But, in that event, a court may consider an equitable doctrine that would otherwise allow the participant to proceed.

As to the second question, regarding a controlling statute to the contrary, a United States District Court for the Central District of California recently discussed this issue and the application of California statutes in Gray v. United of Omaha Life Ins. Co., 251 F.Supp.3d 1317 (C.D. Cal. 2017). In an opinion very favorable to ERISA disability plaintiffs, the court discussed the proper analysis of the statute of limitations and the contractual limitations period in detail. In determining whether an ERISA claim is timely, one must first look to whether it violates the controlling statute of limitations and second, whether it violates the contractual limitations period.

In its analysis of the applicable statute of limitations, the court found the four-year statute of limitations controlled and begins to accrue at the date of denial on appeal. In other words, a plaintiff would have four years from the date of the denial on appeal to file a lawsuit under ERISA.

In its analysis of the contractual limitations period applicable, the court first looked to Hemeshoff, finding that it must give effect to the plan’s contractual limitation provision unless unreasonable or prevented by a controlling statute. The Group Policy at issue contained the following contractual limitations provision: “No legal action can be brought until at least 60 days after [United has] been given written proof of loss. No legal action can be brought more than two years after the date written proof of loss is required.” Both parties agreed that California Insurance Code section 10350.11 must be read into the contract to extend the limitations term to three years after the date written proof of loss is required. Next, the court compared the Group Policy’s applicable limitations period to provisions of the California Insurance Code to determine which was more favorable (the more favorable provision would control). The applicable Group Policy terms set the time to file suit as, at most, four years and 180 days from the first date of disability. In comparison, the California Insurance Code section 10350.7 set the time as “90 days after the termination of the period for which the insurer is liable.” Siding with the majority of jurisdictions that had interpreted the model language after which section 10350.7 was taken, it interpreted “the insurer is liable” to include an entire, ongoing period of disability, because the court found the latter provision more favorable, and thus read it into the Group Policy.

In sum, the application of the contractual limitations period and the statute of limitations period can be complicated and understanding the interplay of these important limitations periods is critical when an insurer challenges the timing of the filing of an action against it.

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