On July 9, 2009, the United States Court of Appeals for the Second Circuit (encompassing New York, Connecticut and Vermont) held in Burke v. PricewaterhouseCoopers LLP Long Term Disability Plan that the written time period for bringing suit under an employer's health and welfare plan was valid even though the time period began to run prior to the time the plaintiff had the right to bring suit under ERISA. This ruling validates that properly drafted plan documents and adherence to US Department of Labor claims procedures can effectively limit an employer's exposure to lawsuits involving claims for employee benefits.

Specifically, in Burke the plaintiff was receiving benefits under her employer's Long Term Disability Plan (the “Plan”). The plan administrator requested information, referred to as Proof of Loss, to verify plaintiff's disability, and after following the claims procedures under the Plan ultimately denied her benefits. In its final determination the plan administrator informed the plaintiff she could bring suit. Under ERISA, lawsuits involving claims for benefits generally cannot be brought until the employee has exhausted the claims procedures under the plan.

The plaintiff sued nearly 3 years after her claim was ultimately denied. However, the Plan document provided that legal action could not be brought more than 3 years after the written Proof of Loss was required to be furnished. Thus, the question before the court was whether the 3 year limitations period could begin to run before the plaintiff had the right to bring suit.

In holding that the limitations period could begin to run before the plaintiff could bring suit, the Court noted that ERISA does not prescribe a limitations period for actions involving claims for benefits. Therefore, the Court referred to the “most nearly analogous state limitations statute,” which was New York 's limitations statute for contract claims. Although New York's general statute provides for a 6-year limitations period, it expressly provides that the limitations period can be shortened if memorialized in writing and may begin to run prior to the time the right to sue occurs. Additionally, the Court noted that the shortening of the limitations period did not effectively limit a plaintiff's rights because the claims procedures enacted by the US Department of Labor prescribed deadlines by which plan administrators must conclude their review of claims, leaving a plaintiff adequate time to sue if the dispute remains.

Consequently, employers may wish to review their plan documents and claims procedures to determine if they can effectively limit exposure to lawsuits involving claims for employee benefits. Please contact Liza Hecht at lhecht@nfclegal.com or the NFC attorney with whom you normally work if you have any questions regarding this development.