By Paul Hamburger, Esq.
A recent U.S. Supreme Court decision held that a plan’s contractual limitations provision is enforceable. It just has to be of reasonable length and not conflict with a “controlling” statute. The case is Heimeshoff v. Hartford Life & Accident Insurance Co. et al., No. 12-729 (S. Ct. Dec. 16, 2013).
A number of potential “statutes of limitations” periods could apply when considering COBRA claims. If a claim is brought as a fiduciary breach claim under ERISA, then the ERISA statutory provisions apply and claims, in a very general sense, have to be brought no later than six years after the act or three years after the plaintiff had knowledge of the breach. For these claims the Heimeshoff case has no specific application.
Next are claims for plan benefits could be brought due to a COBRA failure. These claims could be governed by a plan-based statute of limitations that is now more easily and clearly enforceable in light of Heimeshoff.
Perhaps a more interesting question from a COBRA perspective is which statute of limitations should apply for claims seeking to impose COBRA late notice penalties. The COBRA cases that have considered this question have applied state-law statutes of limitations of various sorts, including those for unfair insurance-related practices, breach-of-contract cases, state-law penalty statutes, etc. The open question after Heimeshoff is whether a plan could define its own “statute of limitations” for bringing COBRA notice penalties.
One answer might be that a plan could not impose its own limitations period. The COBRA notice penalties are statutory-based claims for penalties to be awarded in a court’s discretion. A court might be more inclined to follow the comparable penalty-based statute of limitations under state law.
On the other hand, based on Heimeshoff, a court might decide that when Congress does not impose a statute of limitations period, then parties are free to contract for their own rule. According to Heimeshoff, a contractual limitations provision is enforceable as long as the limitations period is of reasonable length and there is no controlling statute to the contrary. COBRA does not have a contrary limitations period (as COBRA cases have routinely pointed out). Therefore, the logic of Heimeshoff suggests that plans could fill that void with “reasonable” limitations periods within which plaintiffs could bring claims for COBRA notice penalties.
It remains to be seen whether plans will add such limitations periods and, if so, whether courts will enforce them. For more information visit ¶1932 of Mandated Health Benefits — The COBRA Guide.
Paul M. Hamburger is a Proskauer Rose LLP partner who is co-chair of the law firm’s Employee Benefits, Executive Compensation and ERISA Litigation Practice Center and head of the Washington, D.C., Employee Benefits, Executive Compensation and ERISA Litigation Practice Center. He also is co-author of the Pension Plan Fix-It Handbook as well as contributing editor of Mandated Health Benefits — The COBRA Guide.