Time to Sue for Disability Claims Clarified in ERISA

Ben Glass

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The Fourth Circuit Court of Appeals has answered a very important question for long-term disability claimants: When does the statute of limitations expire when you have been denied benefits.

Sun Life Assurance Company of Canada contended that a claimant had failed to file her claim within the time limits set out in the contract. Sun Life's disability insurance policy, like most contained the following language: "No legal action may start ... more than three years after the time Proof of Claim is required."

In all cases a planned participant applies for benefits by filing a "Proof of Claim." In group disability plans covered by ERISA a claimant may not file a lawsuit until the plan has reached a final decision denying benefits. Thus the question was whether the three year time period begins to run at the time the claimant first filed her Proof of Claim or when the final decision denying benefits was made.

The Fourth Circuit of Appeals, in a case which governs ERISA claims in Virginia, ruled basically that Sun Life's claim that the three years started running at the time Proof of Claim was required was absurd because if that was the rule a claimant may have completely run out of time to file the claim before a final decision denying benefits was made.

The Fourth Court said an ERISA cause of action does not accrue until a claim of benefits has been made and formally denied. The court pointed out that other circuits have adopted this same rule for ERISA actions. This means, the court said, that the "statute of limitations begins to run at the moment when the plaintiff may seek judicial review, because ERISA plaintiffs must generally exhaust administrative remedies before seeking judicial relief. The court rejected Sun Life's request to disregard all the usual rules of accrual and to hold that ERISA plans may specify different accrual dates in their governing documents.