Modified Statutes in Issuing a ERISA Benefit Denial Letter

The Third Circuit Court of Appeals recently held that any benefit denial letter sent by ERISA plan administrators must expressly state contractual time limits for bringing suit. The ruling in Mirza v. Insurance Administrator of America is in line with prior decisions by the First and Sixth Circuits.

The Third Circuit Court of Appeals recently held that any benefit denial letter sent by ERISA plan administrators must expressly state contractual time limits for bringing suit. The ruling in Mirza v. Insurance Administrator of America is in line with prior decisions by the First and Sixth Circuits.

The Legal Background

The Employee Retirement Income Security Act of 1974 (ERISA) provides that a participant or beneficiary may bring a civil action “to recover benefits due to him under the terms of his plan.” upon their receipt of a denial letter. However, since ERISA does not set forth a specific statute of limitations, courts normally will apply the statute of limitations from the most analogous state-law claim, e.g. breach of contract. Of course, in normal contract circumstances, the parties are permitted to contractually agree to a shorter limitations period so long as it is not unreasonable.

The Department of Labor regulations implementing ERISA apply as they define fiduciary responsibility in the context of claim resolution such as when a plan administrator denies a request for benefits. In such case, the denial must set forth a “description of the plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action.” 29 C.F.R. § 2560.503–1(g)(1)(iv).

The Facts of the Case

The ERISA plan at issue stated that “no legal action may be commenced or maintained to recover benefits under the Plan more than 12 months after the final review/appeal decision by the Plan Administrator has been rendered.” In the world of health insurance, such shortened periods to resolve claims have become a common way of limiting benefits. Dr. Neville Mirza received his final denial letter on August 12, 2010, but did not file suit until March 8, 2012. The denial letter advised him of his right to judicial review, but it did not mention the short time limit for doing so. The district court dismissed the suit, finding that Mirza’s claim was time-barred.

The Court’s Decision

The Third Circuit held that plan administrators must affirmatively inform claimants of plan-imposed deadlines for judicial review in their benefit denial letter. Accordingly, it concluded that the defendants’ violated their fiduciary obligations by failing to include the plan-imposed one-year time limit in the letter denying Mirza’s request for benefits.

The Third Circuit noted that the two other federal courts of appeal considering the issue reached the same conclusion. In light of its decision, the court further held that the appropriate remedy was to set aside the plan’s contractual time limit and apply New Jersey’s six-year deadline for breach of contract.