Assuming that your company’s medical plan is governed by ERISA, your company’s employees in New Jersey have six years to sue the medical plan for wrongful denial of benefits. However, your company’s medical plan may, by its terms, shorten this six-year period within which your employees may sue the plan.
Most companies’ group health plans provide medical coverage to the companies’ employees through a health maintenance organization (an “HMO”). Most companies’ medical plans which provide coverage through an HMO are governed by a federal statute, the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1461 (“ERISA”).
Under section 502(a)(1)B) of ERISA, 29 U.S.C. 1132(a)(1)(B), a participant in or a beneficiary of a medical plan (that is, an employee of your company or your employee’s dependent) may bring a lawsuit to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. For purposes of simplicity, this discussion sometimes refers to a claim under section 502(a)(1)(B) of ERISA as a claim “to recover (unpaid) benefits,” “for recovery of (unpaid) benefits,” or “for wrongful denial of benefits,” even though that statutory provision encompasses certain forms of relief other than recovery of benefits.
ERISA does not include a specific statute of limitations for claims brought under 29 U.S.C. § 1132(a)(1)(B). However, the U.S. Court of Appeals for the Third Circuit (the federal appellate court covering NJ, PA, and DE) has stated that, as a general rule, when Congress omits a statute of limitations for a federal cause of action, courts “borrow” the local time limitation most analogous to the case at hand.
Judges of the U.S. District Court for the District of New Jersey have held, with apparent unanimity, that, in an action to which New Jersey has the most significant connection, a claim under section 502(a)(1)(B) of ERISA is governed by New Jersey’s six-year statute of limitation for claims for breach of contract, N.J.S.A. § 2A:14-1. The District of New Jersey reasons that — in the Third Circuit’s words — “The statutory limitation most applicable to a claim for benefits under Section 1132(a)(1)(B) is a breach of contract claim.”
As a result, assuming that your company’s medical plan is regulated by ERISA, your employee has six years to sue the medical plan for wrongful denial of benefits.
However, it is highly likely that a District Court sitting within this Circuit would hold that a medical plan governed by ERISA may shorten this six-year statute of limitation, as long as the medical plan’s limitation period is not so short as to violate public policy. Further, it is likely that a District Court sitting within the Third Circuit would hold not violative of public policy, and thus would enforce, an ERISA-governed medical plan’s limitation period of 90 days or more for bringing a claim to recover benefits.
It follows that, if your company’s medical plan is governed by ERISA, then, as a practical matter, a District Court sitting within this Circuit will enforce any limitation period which your company’s medical plan contains for bringing a cause of action for wrongful denial of benefits. As a result, if your company wishes to limit the period of time within which your company’s employees may sue the company’s medical plan to recover benefits, your company should cause the plan and the plan’s summary plan description to be amended to include such a time limitation.
Readers should not act in reliance on the limitation period discussed in this blog post without consulting a lawyer. The above discussion of the limitation period for suing a medical plan in New Jersey for unpaid benefits is not legal advice and creates no attorney-client relationship.
If your company needs assistance or guidance on an issue relating to its medical plan, health insurance plan, or group health plan, call Attorney David S. Rich at (212) 209-3972.