ERISA - Statute of Limitations Archives

Los Angeles Daily Journal Publishes Article on March 6, 2020 by Robert McKennon Entitled “Victory for Plan Beneficiaries in US Supreme Court Ruling”

In the March 6, 2020 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the Supreme Court of the United States, Intel Corporation Investment Policy Committee v. Sulyma, which upheld the Ninth Circuit’s holding that generic disclosures by plan administrators do not trigger the three year statute of limitations for breach of fiduciary duty claims under ERISA. Given the Supreme Court’s emphasis on what the individual plan beneficiary consciously knows and the increasing importance of breach of fiduciary duty claims under ERISA, this will likely help a variety of plan beneficiaries by guaranteeing that their otherwise meritorious claims are not barred by a statute of limitations triggered by stray statements in the volumes of documents ERISA plans send to their beneficiaries every year.

Victory for Plan Beneficiaries in US Supreme Court Ruling

The Supreme Court’s decision in a case last week will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated.

By Robert J. McKennon

Just a decade ago, breach-of-fiduciary-duty claims under the Employee Retirement Income Security Act were not common. That changed in 2011 when the U.S. Supreme Court broadened the scope of equitable relief available under ERISA utilizing breach of fiduciary claims in its landmark decision in Cigna Corp. v. Amara, 563 U.S. 421, 441 (2011). The Supreme Court recognized that equitable relief under ERISA could take a variety of forms, including, equitable estoppel, waiver and monetary damages in the form of equitable surcharge. Before, even if there had been a breach, the available remedies were often meaningless. Now, courts have the power to order the offending administrator to provide meaningful redress. A claim may arise from a plan’s refusal to honor a life insurance policy after it has received numerous premiums and made repeated statements that someone was covered under the policy. And, a plan may be held liable for making misstatements about the value of someone’s pension benefits. In a post-Amara world, breach of fiduciary duty claims under ERISA have become increasingly important.

Breach of fiduciary duty claims under ERISA are subject to a somewhat complicated statute of limitations. Under 29 U.S.C. Section 1113, there are three different potential deadlines by which a suit must be brought. First, “under §1113(1), suit must be filed within six years of the date of the last action which constituted a part of the breach or violation or, in cases of breach by omission, the latest date on which the fiduciary could have cured the breach or violation.” Second, “suit must be filed within three years of the earliest date on which the plaintiff had actual knowledge of the breach or violation.” Id. (emphasis added). Finally, in cases of fraud or concealment, suit must be brought within six years of the date of discovery. See id.

Given the importance of these claims in a post-Amara world, the significance of the Supreme Court’s recent decision in Intel Corporation Investment Policy Committee v. Sulyma, 2020 DJDAR (Feb. 26, 2020), becomes clear. In Sulyma, the Supreme Court handed down a commonsense opinion that will help employees secure their pension and employee benefits. In Sulyma, the court clarified that disclosure of information by a plan administrator in a generic mailing does not necessarily mean that a beneficiary possesses the “actual knowledge” required to trigger the three-year statute of limitations on a breach of fiduciary duty claim arising under ERISA.

Like many employees, Christopher Sulyma did not pay much attention to the lengthy disclosures and prospectuses associated with his employer’s 401(k) plan. Sulyma worked for Intel Corporation between 2010 and 2012, during which time he was automatically enrolled in Intel’s Target Date 2045 Fund. The fund was managed by an investment committee appointed by Intel’s board of directors. Intel provided Sulyma with various disclosures about the fund’s investments, which were also available on two websites. These documents revealed that the fund had made allocations to alternative investments such as hedge funds and private equity funds, which charged higher-than-average fees and underperformed in the market. Although Sulyma accessed some of the disclosures during his employment, he testified that he did not know that Intel had allocated the fund’s portfolio in alternative investments, or that this was the reason for the fund’s poor performance.

In 2015, Sulyma eventually learned of the fund’s poor performance and brought claims against Intel’s oversight committees under section 1104 of ERISA on the basis that Intel had made imprudent investments, failed to disclose those investments, failed to monitor the performance of those investments and failed to remedy other defendants’ ERISA violations despite knowing about them. What followed was a battle over whether Sulyma’s claims were barred by ERISA’s three-year statute of limitations.

Intel moved to dismiss Sulyma’s complaint, arguing in the district court that ERISA’s three-year statute of limitations barred Sulyma’s claims. Sulyma filed his action against Intel on October 29, 2015, and Intel claimed Sulyma had actual knowledge of the alleged breach before October 2012 because he had access to the fund documents as early as 2010. The district court sided with Intel and imputed the knowledge of the fund’s portfolio allocation to Sulyma.

On appeal, the 9th U.S. Circuit Court of Appeals reversed the district court’s granting of summary judgment. Neither “knowledge” nor “actual knowledge” is defined in ERISA. The 9th Circuit emphasized the plain meaning of the phrase. It concluded that actual knowledge refers to what the person consciously knows. The 9th Circuit found that the district court had erred when it inferred that Sulyma had actual knowledge merely because he had received fund documents that disclosed Intel’s investment strategy.

The Supreme Court affirmed the 9th Circuit’s ruling. The Supreme Court explained that “Although ERISA does not define the phrase ‘actual knowledge,’ its meaning is plain.” “[T]o have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” The court examined a variety of sources to confirm this meaning, but, as the court explained, “Dictionaries are hardly necessary to confirm the point, but they do.” Of note, the term “actual” separates the type of knowledge required by Section 1113 from the legal concept of constructive knowledge. Constructive knowledge is the kind in which the law imputes knowledge “to a person who fails to learn something that a reasonably diligent person would have learned.” By contrast, actual knowledge means that the person, at some point, consciously knew the fact in question. Here, Congress clearly intended to make clear that the person must be aware of the fact in question in order for the three-year statute of limitations to begin. Mere inclusion of the fact amid the text in volumes of documents regularly sent to plan participants is insufficient to impart actual knowledge.

The Supreme Court’s decision was not entirely bad for Intel or employers. The court explained that the “usual ways” of proving actual knowledge remain available to plan administrators. “Inferences from circumstantial evidence” can still be used by plan administrators to establish when the statute of limitations should begin to run. Furthermore, a participant cannot engage in “willful blindness,” the act of refusing to inform oneself of a piece of information. However, constructive knowledge cannot trigger the three-year statute of limitations.

The Supreme Court’s decision in Sulyma will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated. Given the significant increase in ERISA breach of fiduciary duty claims and litigation, employees who seek to recover promised employee benefits will greatly benefit from this ruling.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at mslawllp.com/news-blog/.

Ten Things to Consider and Look For in Your ERISA Life and/or Accidental Death and Dismemberment (AD&D) Insurance Plans When You Select Benefits or File a Claim

1. Obtain a full copy of your plan. The full plan will not typically be a benefit summary or a print-out from a website. It will be fairly long and many definitions and it will recite your ERISA plan terms, policies and procedures for filing a life insurance or AD&D claim and handling the claim, claim denials, appeals of claim denials, etc. The claims administrator will likely not have a copy of the full plan. You can request a copy of the full plan from your Employer’s Human Resources department or often from the claims administrator (the insurer or third-party administrator).

2. Read the plan. Your plan document controls the rights and obligations of the parties, including all plan participants and beneficiaries. Thus, if you have an ERISA claim for life insurance benefits or AD&D benefits, you should read the plan carefully. A human resources representative, a customer service representative for the insurance company that administers your life and/or AD&D benefits, or your claims administrator may tell you what your benefits are over the telephone or in an e-mail. You cannot necessarily rely on what a representative tells you over the phone. The plan document controls the benefits available, not what someone tells you over the telephone or via e-mail. If there is any confusion, ask the representative to tell you what specific plan provision they are referencing and ask them to send you a letter documenting what they are telling you.

3. Read the definitions, provisions, and exclusions. Be aware that life and AD&D insurance policies may exclude certain types of losses, such as suicide within the first two years of life insurance coverage. Pre-existing conditions or sicknesses may exclude an insured’s death or dismemberment from coverage under an AD&D policy as well. “Dismemberment” is often defined by an AD&D policy provision. Terms like “pre-existing condition,” “sickness,” “intoxication,” and other words may have special definitions under your policy. Under an AD&D policy, you will have to prove that the claimed loss resulted from an accident or accidental bodily injury. This can be complicated, especially where the accidental bodily injury may have been caused in part by a preexisting medical condition. If this is the case, you will need to consult an attorney immediately as there are complex and technical rules that are only found in applicable case law. McKennon Law Group PC is highly experienced in this area. Make sure you know what is required under your plan’s specific definitions in order to successfully claim life and/or AD&D benefits.

4. Select the appropriate coverage amount. Some employers will provide you with a base amount of life or accidental death and dismemberment (AD&D) insurance coverage, and some may not. Be sure to select the level of coverage that you want, and make sure you fill out any forms, like a Statement of Health, to ensure that you receive the coverage you select. You may also be able to select a level of life or AD&D insurance coverage for your spouse as well. Read the plan and policy documents carefully; your policy may state that, if selected, your spouse coverage will only be a percentage of your coverage, but your policy may also provide for spouse coverage in an amount independent of your coverage.

5. Confirm your coverage. Get a confirmation of coverage in writing, either a print-out of the premiums that you are paying for each insurance coverage you have chosen through your employer or a certificate that states the exact coverage you receive. Make sure you always have a current document showing your benefits coverage, which will usually be once a year after coverage selection or two to four months after you begin new employment. Review your premiums statements to ensure that you are paying the correct amounts for the coverages that you selected. Put all communications with your employer or insurer in writing and insist on the same in return.

6. Understand the conversion period to individual coverage. Many insurance companies permit you to continue your life and AD&D insurance coverage with them if you leave your employer. Usually, you need to contact the insurance company for your life and AD&D benefits within 30 days of your last day of work to convert your policy. Read through your plan documents and policy to understand the time period you must convert your group policy to an individual one and to know who you need to call or write to in order to continue your insurance coverage through an individual policy. If you decide to convert your policy, keep detailed records on when you called or wrote to the insurance company, what number you called, and who you spoke to regarding conversion of your policy or policies. You may be limited to a 30- or 31-day period, so make sure you follow up every couple of days until you receive confirmation that your policy has been converted. However, by law, if the insurance company does not convert your policy in a timely manner despite your requests to do so, you may be able to extend the time period in which you may convert your policy. You should contact an attorney for advice if you encounter this problem.

7. Time to appeal a claims decision. Read the appeals or grievance section to determine your appeal rights and deadlines. The first appeal must be submitted within 60 days of the date you receive the initial denial, pursuant to ERISA’s regulations. However, there may be a second appeal, which may be mandatory or voluntary. Whether there is a second appeal and whether it is mandatory or voluntary is critical to pursuing your life and/or AD&D benefits claim in court if it is denied. Additionally, although ERISA requires that you have 60 days to file your first appeal, the insurance company may dictate that a second appeal be filed in shorter amount of time. Be aware that you can and should contact an attorney as soon as you receive any notice, oral or written, from your insurance company that your claim will be or has been denied. An attorney can help you with your first and second appeals of the denial of your life and/or AD&D benefits, which will also help if you need to go to court to force the insurance company to pay you your benefits because the attorney will ensure that your life and/or AD&D claim record during the administrative appeals is complete and will help a judge understand that the insured’s death or dismemberment qualifies for payment of benefits.

8. Obtain a full copy of the claim file or administrative record. If your claim for benefits has been denied once, make sure you obtain a full copy of the claim file and/or Administrative Record so you can see what the insurance company considered in denying your claim. You can request a copy of the administrative record from the claims administrator, which is often an insurance company such as MetLife, Unum, and Liberty Mutual. If your claim for benefits has been denied after one (or two) appeals, make sure you obtain another copy of the claim file, which is also called the “administrative record” in insurance litigation, because it will contain updated records of what the insurance company considered in denying your appeal(s).

9. Find the statute of limitations and contractual limitations period as stated in your plan. The statute of limitations and contractual limitations period will be the period of time by which you must file a lawsuit to obtain disputed benefits. To file a lawsuit for benefits pursuant to an ERISA plan, you must first submit appeals (at least one, but no more than two). The contractual limitations period may appear in a section titled, “Legal Action.”

10. Find out who the plan administrator is and seek necessary information from it. Look for a name and address of the plan administrator in the plan. If your claim has been denied, send a written request to the plan administrator for all plan documents. The plan administrator is required to provide the plan documents to you within 30 days. 29 U.S.C. § 1024. Federal regulations allow you to file a lawsuit to seek penalties from the plan administrator in the amount of $110 per day for each day the plan documents are not provided beyond the 30-day period. 20 U.S.C. § 1132(c)(3); 29 C.F.R. § 2575.502c-1.

If your ERISA claim has been denied, knowing when to sue may be integral to the success of your claim. It is important to have experienced and highly qualified disability, health, life and accidental death or dismemberment 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.

Ten Things to Consider and Look For in Your ERISA Short-Term and Long-Term Disability Plans When Selecting Benefits or You Want to File a Claim

1. Obtain a full copy of your plan and administrative record. The full plan will not typically be a benefit summary or a print-out from a website. It will be fairly long and many definitions and it will recite your ERISA plan terms, policies and procedures for filing a claim and handling the claim, claim denials, appeals of claim denials, etc. The claims administrator will likely not have a copy of the full plan. You can request a copy of the full plan from your Employer’s Human Resources department or often from the claims administrator (the insurer or third-party administrator). You can request a copy of the administrative record from the claims administrator, which is often an insurance company such as MetLife, Unum, and Liberty Mutual.

2. Read the Plan. Your Plan document controls the rights and obligations of the parties, including all plan participants and beneficiaries. Thus, if you have an ERISA claim for Short-Term and Long-Term Disability benefits, you should read the plan carefully. A human resources representative, a customer service representative for the insurance company that administers your disability benefits, or your claims administrator may tell you what your benefits are over the telephone or in an e-mail. You cannot rely on what a representative tells you over the phone. The Plan document controls the benefits available, not what someone tells you over the telephone or via e-mail. If there is any confusion, ask the representative to tell you what specific Plan provision they are referencing and ask them to send you a letter documenting what they are telling you.

3. Understand the difference and transition between Short-Term Disability (STD) and Long-Term Disability (LTD). Be aware that getting STD insurance does not automatically mean that you have LTD insurance. If you want to ensure financial stability if you suffer a long-term disability in the future, you will want to ensure that you select the appropriate amount of LTD coverage because STD benefits will only last you about three to six months. LTD coverage will often last until your 65th birthday. Additionally, some plans provide for an automatic transition between STD and LTD benefits, but others have a gap of time between STD and LTD benefits or require two, separate applications for the STD and then the LTD benefits.

4. Select the appropriate coverage amount. Employers often provide an automatic base STD amount and allow you to opt into higher coverage for STD. LTD insurance coverage is often optional and offers several coverage levels for the amount of benefits you would like to receive if you become disabled. Be sure to select the coverage that you want, and make sure you fill out any forms, like a Statement of Health, to ensure that you receive the coverage you select.

6. Time to appeal a claims decision. Read the appeals or grievance section to determine your appeal rights and deadlines. The first appeal must be submitted within 180 days of the date you receive the initial denial, pursuant to ERISA. However, there may be a second appeal, which is sometimes mandatory and sometimes voluntary. Whether there is a second appeal and whether it is mandatory or voluntary is critical to pursuing your disability claim in court if it is denied. Additionally, although ERISA requires that you have 180 days to file your first appeal, you may have only 30 or 60 days to file your second appeal. Be aware that you can and should contact an attorney as soon as you receive any notice, oral or written, from your insurance company that your claim will be or has been denied. An attorney can help you with your first and second appeals of the denial of your STD and/or LTD benefits, which will also help if you need to go to court to force the insurance company to pay you your benefits because the attorney will ensure that your disability claim record during the administrative appeals is complete and will help a judge understand that you are disabled.

7. Read the definitions. Terms like “disability,” “your occupation,” “physician’s care,” and other words may have special definitions under your policy. Make sure you know what is required under your plan’s specific definitions in order to successfully claim disability benefits. You should also look for the “Elimination Period” in your STD and LTD plans. The Elimination Period is the time period you are unable to receive benefits under that plan, a type of “waiting period.” For STD benefits, it is often no more than a week. For LTD benefits, it is often the duration for which STD benefits are paid, so the LTD Elimination Period generally lasts approximately three to six months from the date of your disability.

8. Statute of Limitations and Contractual Limitations Period. These will be the period of time by which you must file a lawsuit to obtain disputed benefits. To file a lawsuit for benefits pursuant to an ERISA plan, you must first submit appeals (at least one, but no more than two). The contractual limitations period may appear in a section titled, “Legal Action.”

9. Who is the Plan Administrator? Look for a name and address of the Plan Administrator in the Plan. If your claim has been denied, send a written request to the Plan Administrator for all plan documents. The Plan Administrator is required to provide the plan documents to you within 30 days. 29 U.S.C. § 1024. Federal regulations allow you to file a lawsuit to seek penalties from the Plan Administrator in the amount of $110 per day for each day the plan documents are not provided beyond the 30-day period. 20 U.S.C. § 1132(c)(3); 29 C.F.R. § 2575.502c-1.

10. Calculate your STD and LTD weekly or monthly benefits. STD and LTD benefits may be paid as a percentage (e.g., 50%, 60%, 70%) or multiplier amount (e.g., 1x, 2x, 3x) of your regular earnings. Your STD and LTD benefits amount may be different depending on what level of coverage you chose in your most recent benefits selection. For example, you may receive only 50% of your base earnings in STD benefits but 65% of your base earnings as LTD benefits. Additionally, almost all STD and LTD policies will “offset” your benefits with any other disability-related income you may receive, including SSDI, SSI, and state disability insurance income. If you apply for LTD benefits, many policies will require that you apply for SSDI, which is disability insurance offered by the federal government. If and when you are approved for SSDI, that amount will be subtracted from your future benefits payments of your LTD benefits.

If your ERISA claim has been denied, knowing when to sue may be integral to the success of your claim. It is important to have experienced and highly qualified 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.

Breach of Fiduciary Duty under ERISA: Ninth Circuit Clarifies That Mere Disclosure of Plan Documents Is Insufficient “Actual Knowledge” to Trigger Statute of Limitations

In pension and savings plan cases, it can often take several years before an employee realizes that there has been a breach of fiduciary duty. Typically, an employee’s financial loss triggers an investigation that later reveals the facts of the breach. But how long does an employee have to bring a claim in court? The answer depends on the employee’s “actual knowledge” of the facts of the breach or violation. There is a conflict among federal circuit courts of appeal on whether an employee should be deemed to have knowledge of 401(k) prospectuses and fund information simply because the employer makes this information available to the employee. In a recent decision by the Ninth Circuit, Sulyma v. Intel Corp. Investment Policy Comm., 909 F.3d 1069 (9th Cir. 2018), the court clarified that mere disclosure does not equate to actual knowledge of the employee sufficient to begin the statute of limitations. The employee must actually be aware of the facts constituting the breach more than three years before filing suit.

The Employee Retirement Income Security Act of 1974 (“ERISA”) governs pension plans, including employer sponsored 401(k) retirement plans. ERISA imposes duties of loyalty and care upon fiduciaries as well as liability for breach of those duties. See 29 U.S.C §§ 1104 (duties) and 1109 (liability of breach). Fiduciaries must act “solely in the interest of the participants and beneficiaries” and exercise “the care, skill, prudence, and diligence … that a prudent man acting in a like capacity and familiar with such matters would use.” Id. § 1104(a)(1). Employees bringing a claim for breach of fiduciary duty must do so within three years of the “earliest date on which the employee has actual knowledge of the breach or violation,” and no more than six years after the last action which constituted a part of the breach or violation. Id. § 1113.

In Sulyma, the Ninth Circuit clarified that an employee must be actually aware of the facts of the breach and not merely in possession of materials from which the employee could have discovered the breach. Sylyma, 909 F.3d at 1076. Like many employees, Plaintiff Christopher Sulyma did not pay too much attention to the lengthy disclosures and prospectuses associated with his employer’s 401(k) plan. Sulyma worked for Intel between 2010 and 2012, during which time he was automatically enrolled in Intel’s Target Date 2045 Fund (“the Fund”). The Fund was managed by an investment committee appointed by Intel’s Board of Directors. Intel provided Sulyma with various disclosures about the Fund’s investments, which were also available on two websites. These documents revealed that the Fund made allocations to alternative investments such as hedge funds and private equity funds, which charged higher than average fees and underperformed the market. Although Sulyma accessed some of the disclosures during his employment, Sulyma testified that he did not know Intel had allocated the Fund’s portfolio in alternative investments, or that this was the reason for the Fund’s poor performance.

In 2015, Sulyma eventually learned of the Fund’s poor performance and brought claims against Intel’s oversight committees under § 1104 of ERISA on the basis that Intel made imprudent investments, failed to disclose those investments, failed to monitor the performance of those investments, and failed to remedy other defendants’ ERISA violations despite knowing about them. What followed was a battle over whether Sulyma’s claims were barred by ERISA’s three-year statute of limitations.

Intel moved to dismiss Sulyma’s complaint, arguing before the U.S. District Court for the Northern District of California that ERISA’s three-year statute of limitations barred Sulyma’s claims. Sulyma filed his action against Intel on October 29, 2015, and Intel claimed Sulyma had actual knowledge of the alleged breach before October 2012 since he had access to the Fund documents as early as 2010. The district court sided with Intel and imputed the knowledge of the Fund’s portfolio allocation to Sulyma, reasoning that had Sulyma read the Fund literature more than three years prior to filing his complaint, he would have known about the allegedly imprudent investments. Construing Intel’s motion to dismiss as a motion for summary judgment, the district court granted summary judgment in favor of Intel holding that Sulyma’s claim was barred by ERISA’s three-year statute of limitations under 29 U.S.C. § 1113(2).

On appeal, the Ninth Circuit reviewed the district court’s grant of summary judgment de novo and employed a two-step process to determine whether Sulyma’s claim was barred by section 1113(2). First, the court isolated and defined the underlying violation on which plaintiff’s claim is founded. Second, the court inquired into whether plaintiff had “actual knowledge” of the alleged breach or violation. Sulyma, 909 F.3d at 1072-73. With respect to the first prong, the record showed that although the Fund did not always invest in alternative investments, the imprudent actions alleged by Sulyma occurred during his employment, as early as 2010. Id. at 1071. The primary issue on appeal was whether the district court correctly interpreted section 1113(2)’s requirement of “actual knowledge” sufficient to begin the three-year statute of limitations prior to October 2012.

First, looking to the statute itself, the Ninth Circuit acknowledged that neither “knowledge” nor “actual knowledge” is defined in ERISA. Sulyma, 909 F.3d at 1073. Examining the history of section 1104 and 1106 cases, the court noted that in 1987, Congress amended section 1113(2) to remove constructive knowledge from triggering the limitations period. Id. The Ninth Circuit found that the district court erred when it inferred that Sulyma had actual knowledge merely because he received Fund documents that disclosed its investment strategy. Id. Such an inference is akin to constructive not actual knowledge. Id. The court explained, “the statutory phrase ‘actual knowledge’ means what it says: knowledge that is actual, not merely a possible inference from ambiguous circumstances.” Id. at 1076 (quoting Ventura Content, Ltd. v. Motherless, Inc., 885 F.3d 597, 609 (9th Cir. 2018), cert. denied.). “Actual knowledge,” the court reasoned, “must mean something more than simply knowledge of the underlying transaction, which does not necessarily disclose the nature of the breach.” Id. at 1076. Therefore, Sulyma’s knowledge regarding the Fund’s allocations could not be inferred from Intel’s disclosures.

The court noted its split with the Sixth Circuit’s holding in Brown v. Owens Corning Investment Review Committee, 622 F.3d 564, 571 (6th Cir. 2010). In Brown, the Sixth Circuit held that “when a plan participant is given specific instructions on how to access plan documents, their failure to read the documents will not shield them from having actual knowledge of the documents’ terms.” Id. The Ninth Circuit disagreed with this reasoning, stating that plan participants under Brown are charged with constructive knowledge, not actual knowledge. Sulyma, 909 F.3d at 1076. Constructive knowledge is insufficient to trigger the statute of limitations because Congress specifically amended ERISA to repeal it from section 1113(2). Id.

Finally, the court rejected Intel’s argument that there are “strong policy reasons” to concluding that the actual knowledge standard has a broader meaning. Id. The court disagreed, positing that Sulyma could just as easily argue policy reasons favoring a narrow interpretation of the actual knowledge standard to “promote fiduciary accountability.” Id. The court declined to insert itself in the policy debate, instead leaving it to Congress to decide. Therefore, the Ninth Circuit held that for a defendant to prevail on a statute of limitations defense on a section 1104 claim, “[it]must show that there is no dispute of material fact that the plaintiff was actually aware that the defendant acted imprudently.” Id.

The Sulyma decision is significant because it prevents fiduciaries from prematurely starting the statute of limitations by inundating an employee with lengthy plan disclosures and later arguing that the employee was on notice of potential ERISA violations. While it is important to review documents impacting major financial decisions, employees may not know that a fiduciary has breached its duty of care until the consequences materialize. This decision provides further clarity to ERISA litigants and levels the playing field for employees who discover a breach of fiduciary duty years after receiving plan documentation.

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.

Top 5 Issues to Keep in Mind When Litigating ERISA Claims

The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog and Disability Insurance News that deal with frequently asked questions in the insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of the law. To speak to a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at mslawllp.com and complete the free consultation form.

The Employee Retirement Income Security Act of 1974, otherwise known as ERISA, governs most employer-sponsored benefit plans, including plans that provide health insurance, disability insurance and life insurance to employees. ERISA protects employees and requires that plan and claim administrators adhere to strict standards and deadlines when resolving disputes. As such, litigation under ERISA is very different from other forms of litigation, even other insurance litigation. In this blog article, we briefly outline the top five issues to keep in mind when litigating an ERISA claim, including whether ERISA applies; ERISA’s 180-day mandatory appeal deadline; the standard of review; the administrative record; and calculating recovery.

1) Does ERISA Apply?

Determining which law governs your health, life or disability insurance claim is the first step in pursuing life, health or disability benefits that have been wrongfully denied. Keeping that in mind, the issue to keep an eye on (at first) is whether ERISA applies. As a general matter, ERISA does not apply to all employer-sponsored benefit plans and ERISA carves out specific exceptions for certain types of employers. For example, ERISA does not apply to plans that are established or maintained by a government or church entity. Absent these exclusions, ERISA most likely applies to an employer-sponsored plan. Again, determining whether ERISA applies to your claim is important because, as discussed below, ERISA claims are different from “regular” insurance litigation because ERISA imposes different requirements on claimants and administrators.

2) ERISA’s 180-day Mandatory Appeal Deadline

ERISA imposes strict time limits and deadlines on ERISA claimants, including an obligation to appeal an initial denial within 180 days. Once the insurer has denied a disability, life, or health insurance claim governed by ERISA, the insured must appeal the denial within a specific time frame. Depending on the type of coverage at issue, i.e., disability or life insurance, that deadline may vary. For health insurance and disability claims, the time limit to appeal is 180 days. Failure to timely appeal may foreclose any further recovery, as claims under ERISA are required to “exhaust administrative remedies” before bringing a lawsuit. The insured must also keep in mind the varying deadlines to bring a lawsuit after an unsuccessful appeal. These deadlines are different from plan to plan and the insured is best served by contacting an attorney as soon as possible following a denial to ensure that the statute of limitations does not run before litigation is started.

3) What Is the Standard of Review?

Generally, ERISA cases may be governed by one of two standards of review: (1) de novo or (2) abuse of discretion. Under a de novo standard of review, the court looks at the terms of the policy and the evidence on the record and evaluates whether the insured satisfied the terms, without deference to the insurer’s decision. As such, de novo review is a more beneficial standard of review for the insured because the court gives no weight to an insurer’s initial denial decision. Under the abuse of discretion standard, the question the court asks is different: whether the insurer’s decision is supported by evidence on the record and is not otherwise arbitrary and capricious. The abuse of discretion standard of review is less beneficial to plan participants because the court gives more deference to the insurer’s decision. Whether the insurer’s decision was ultimately correct is essentially irrelevant; it only matters whether the decision was so incorrect as to be deemed arbitrary and capricious. Under ERISA, the de novo standard of review applies unless the plan contains a discretionary provision. However, in some states, like California, the de novo standard of review may still apply to disability and life insurance claims, even if there is a discretionary policy provision.

4) The Administrative Record

ERISA cases are decided based on an administrative record, typically limited to the facts, records and other evidence before the insurance claims administrator when it made the claim decision. Given that the court decides based on a limited record, traditional discovery is not usually available. However, some limited discovery may be warranted in special circumstances. For example, in some ERISA cases, the court may allow discovery to determine whether there is evidence of bias. Evidence of bias may include situations where the insurer denied a long-term disability claim based on the report of a physician beholden to the insurer.

5) Calculating Benefits

Calculating benefits in ERISA cases can be complex, particularly with long-term disability claims. For example, disability plans provide coverage in the unfortunate event that a disability prevents you from earning a living through your chosen occupation. Most disability plans do not cover your entire monthly salary, but instead cover only a portion, i.e., 60% of pre-disability income, pretax. However, this amount is also offset by any state or federal disability benefits the insured may be receiving, including Social Security Disability Insurance benefits, State Disability benefits or Workers’ Compensation benefits.

Overall ERISA cases are complex and the above are just a few things to keep in mind when making and litigating an ERISA claim. Having an experienced ERISA disability, health and life insurance attorney matters. If your claim for health, life, short-term disability or long-term disability insurance 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 ERISA claims.

1) Does ERISA Apply?

2) ERISA’s 180-day Mandatory Appeal Deadline

3) What Is the Standard of Review?

4) The Administrative Record

5) Calculating Benefits

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