When is a suit for benefits under ERISA treated as being timely filed? This issue was discussed in Withrow v. Bache Halsey Stuart Shield, Inc. Salary Protection Plan (LTD), No. 09-55024 (9th Cir. 2011). In this case, the plaintiff, Valerie Withrow (“Withrow”), was appealing the district court’s dismissal of her ERISA suit against the defendant, Bache Halsey Stuart Shield, Inc. Salary Protection Plan (“the Plan”), as not timely filed. The Ninth Circuit Court of Appeals (the “Court”) held that the district court erred in dismissing the suit and reversed the district court’s decision.
Withrow was a participant in the Plan. The Plan provided her with coverage for long-term disability (“LTD”) benefits, and was administered and insured by Reliance Standard Life Insurance Company (“Reliance”). Withrow became totally disabled on December 6, 1986. Around January 15, 1987, she applied for LTD benefits under the Plan. Reliance granted the benefits. However, based on a conversation with Reliance, Withrow thought that the benefits were not high enough (she was receiving $3,950/month, but thought she was entitled to $5,000/month). Around 1990 and during periods thereafter, Withrow asked Reliance to increase her LTD benefits, but Reliance never did. Finally, on July 21, 2003, Withrow filed an appeal with Reliance, requesting a benefit increase. On January 14, 2004, Reliance left a message for her attorney, indicating that Reliance was denying her request. Reliance never issued a written decision for the request. On February 16, 2006, Withrow filed this suit, requesting the LTD benefit increase. The question for the Court: was the suit timely filed?
The Court noted that the Plan may contain its own period of limitations for filing suit. However, the Court ruled that, in this case, the Plan did not have an applicable period of limitations. Therefore, the issue becomes whether the suit is time-barred under ERISA.
Withrow’s suit was filed under section 502(a)(1)(B) of ERISA, as a claim to recover benefits. The Court noted that ERISA does not provide its own statute of limitations for suits filed under this section. Therefore, a district court must apply the state statute of limitations that is most analogous to an ERISA benefits-recovery program. In this case, California’s four-year statute of limitations for contract disputes applies. Further, the Court said that federal law governs the issue of when an ERISA cause of action accrues and thereby triggers the start of the limitation period. An ERISA cause of action accrues either: (1) at the time benefits are actually denied, or (2) when the participant has reason to know that the claim for benefits has been denied. As to prong (2), a participant has a “reason to know” when the plan communicates a clear and continuing repudiation the participant’s rights under the plan, so that the participant could not have reasonably believed anything other than that his or her claim for benefits had been finally denied. The Court ruled that, in this case, the Plan never provided Withrow with any such communication, so that Withrow had no reason to know that her claim had been denied. Therefore, prong (2) does not apply. As to prong (1), the Court said that Withrow’s benefits were “actually denied” on January 14, 2004, when her attorney was informed by phone that her appeal had been denied. As Withrow’s claim accrued on that date, the Court ruled that her suit, which was filed on February 16, 2006, was timely under the applicable ERISA four-year statute of limitations.