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Denial Letters Must Disclose Plan-Imposed Statutes of Limitation

Publications - Client Alert | April 18, 2016

In 2013, the United States Supreme Court ruled that employee benefit plans governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) may reasonably limit the time in which a participant must bring a claim against the plan. As a result of this ruling, many employers updated their plan documents to include contractual “statutes of limitations.” Click here to see our summary of that case. On March 14, 2016, the United States Court of Appeals for the First Circuit declined to enforce a plan’s statute of limitations because the plan administrator failed to disclose in its denial letter how much time the participant had to file suit. This case teaches employers an important lesson if they wish to rely on contractual statutes of limitations in an ERISA plan.

Santana Diaz v. Metropolitan Life Insurance Co.

Dionisio Santana Díaz (“Santana Díaz”) participated in his company’s long term disability plan (the “Plan”). Metropolitan Life Insurance Company (“MetLife”) administered the Plan. The Plan contained a statute of limitations which prohibited ERISA claims against the Plan that were filed three years “after proof of Disability.”

In 2008, Santana Díaz applied for and began receiving long term disability benefits. In a letter dated November 24, 2010, MetLife informed Santana Díaz that his long term disability benefits would soon end. Santana Díaz filed an appeal, and, in a letter dated August 11, 2011, MetLife denied the appeal. In neither letter did MetLife mention the time frame in which Santana Díaz was required to file a civil suit. Santana Diaz filed his complaint four and one half years after he filed proof of his disability. The district court dismissed Santana Díaz’s complaint pursuant to the Plan’s statute of limitations.

On appeal, the First Circuit found that Santana Díaz’s claim was not time barred. The court found that Department of Labor regulations generally require plan administrators to disclose plan imposed time limits for filing suit. As a result, the court determined MetLife did not comply with ERISA when it failed to include the time period for filing suit in the final denial letter. The court was not persuaded by arguments that Santana Díaz received notice of the three year limit in other Plan documents (such as the summary plan description). The First Circuit ruled that the Plan’s contractual statute of limitations was unenforceable and allowed the case to proceed in district court.

Next Steps

Employers should review their plan documents for any contractual statute of limitations. We generally recommend employers include a reasonable statute of limitation in their plans. However, in light of Santana Díaz, employers should also review their form denial letters. If the form denial letters do not describe the statute of limitations, the letters should be updated. Additionally, employers should ensure their service providers are aware of plan specific statutes of limitations and that the service provider appropriately communicates the limitations to participants and beneficiaries.

Additional Information

If you have any questions regarding Santana Díaz, your plan’s statute of limitations, or your plan’s form denial letter, please contact your Kutak Rock attorney or a member of the Kutak Rock employee benefits practice group listed below.