In Heimeshoff v. Hartford Life & Accident Insurance Company, last year the Supreme Court unanimously concluded that a plan’s limitation period, which required a claimant to bring an action within three years of when proof of claim was due, was enforceable, even though the contract’s limitation period was shorter than the applicable statute of limitations. The Court said that a plan limitations period should be enforced so long as it is reasonable.
Following Heimeshoff, the Southern District of California recently provided guidance as to what may constitute an unreasonable limitations period. In Nelson v. Standard Insurance Company, the Southern District of California concluded that application of a limitations provision that provided the claimant with 100 days within which to file a complaint in federal court was not reasonable and thus not enforceable. The plan’s provision required a legal action to be brought 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. First, the Court stated that it could not determine with certainty the date upon which the date the contractual limitations period began to run. As such, it was possible that the time period ran before the administrator finished its administrative analysis of the claim. Alternatively, the Court stated that even if it used Defendant’s suggested date, it only provided Plaintiff with, in effect, 100 days to file his suit. The Court found that both potential time frames were unreasonably short.
This case makes clear that to be reasonable, at least in certain jurisdictions, the time period allotted by a plan should be long enough to encompass the administrative review process. If the plan’s period calls for a lawsuit to be filed prior to the completion of the administrative review, a Heimeshoff argument becomes more difficult to win. But, if the plan’s term expired after the administrative review process, chances of success on a statute of limitations argument increase. The Supreme Court did not set a base line limitations period, and it will take further case law to establish the minimum that courts generally will accept. What we know now is that, at least in the circumstances presented in Nelson and in the Southern District of California, 100 days was not reasonable.