Specifics of Claims and Lawsuits. ERISA requires plans to establish specific procedures for participants and beneficiaries to pursue claims and lawsuits. Plans may also impose (i) limits on the time period in which claims must be filed with the plan administrator, (ii) deadlines for filing lawsuits after administrative denials, and (iii) locations in which lawsuits must be filed. If properly designed and communicated to participants, these limits and procedures can provide significant protection to plans and the parties that administer them.
Important Factors. Here are some important factors to consider when establishing a plan’s claim procedures:
- How can a claim be submitted?
- When does a claim need to be brought or a lawsuit need to be filed?
- Where can a participant or beneficiary file suit?
Importance of Clear Language. Without clear language in the plan document and SPD addressing these issues, a plan and its fiduciaries run the risk of (i) being forced to respond to claims and lawsuits that otherwise could have been avoided and (ii) defending lawsuits in distant and unfavorable locations. Some important considerations are:
How Can a Claim Be Submitted? Department of Labor regulations allow plan sponsors to require that administrative claims and appeals be filed according to set procedures, such as requiring all claims to be submitted in writing to a designated person or committee. They also allow plans to maintain separate claims processes for different issues. For example, a fully insured medical plan might have one process for determining eligibility claims (such as requiring that these claims be submitted to a committee of the plan sponsor) and a separate process for determining other claims (such as requiring that these claims be submitted to the insurance company).
When Does a Claim Need To Be Brought or a Lawsuit Need To Be Filed? In addition to setting out how a claim may be filed, plans may also establish specific time periods during which claims may be brought. Likewise, plans may establish time periods following the completion of the administrative claim and appeal process for a participant or beneficiary to file suit. For example, if the plan document and SPD clearly state a reasonable time period for submitting a claim or filing a lawsuit, a court is likely to enforce the limitation as part of a contract between the plan sponsor and the participant or beneficiary.
Where Can Suit Be Filed? In addition to specifying how and when claims and lawsuits may be brought, a plan may also require that lawsuits involving benefit claims be filed in a specific geographic location, such as in a court located near the plan sponsor’s offices where the plan is administered. If not limited by the plan document and SPD, a participant or beneficiary may file suit in any court permitted under ERISA. As a result, a plan could be forced to defend a suit in a remote location or be subject to conflicting legal positions taken by courts in different locations. To minimize this risk, a plan document and SPD may require a potential plaintiff to file suit in a specific jurisdiction.
Example: Last year, the Sixth Circuit Court of Appeals enforced a pension plan’s forum selection clause requiring claimants to file suits against the plan in a specific federal district court. The court reasoned that ERISA only specifies locations in which a plaintiff may file suit, but it does not prevent a plan from selecting one of those locations as the venue to resolve disputes. The Court noted that if ERISA forum selection clauses were not enforced, plans could be subject to conflicting standards of conduct from different courts.
Communicating Limits to Participants. It is critical that any limits a plan places on administrative claims or lawsuits be clearly communicated to participants and beneficiaries. They should be prominently and appropriately described in the SPD and included in any administrative claim or appeal denial letter.
Example: In a recent case, the Ninth Circuit Court of Appeals refused to apply a health plan’s limitations period because that information was not in the proper place in the SPD. Even though the SPD contained the plan’s limitations period, the court concluded that the provision, which was located in a section of the SPD containing general legal provisions, should have been located more closely to the description of benefits. The court reasoned that participants should not be required to read the entire SPD in order to determine the time limits for filing suit.
Avoiding Unnecessary Lawsuits and Minimizing Problems. In order to avoid unnecessary claims or defending lawsuits in untenable locations, plan sponsors should review the claims procedures contained in their plan documents and SPDs to ensure that they accurately reflect the intended claims rules and are included in an appropriate location within the SPD. If the claims provisions of the plan documents and SPDs are not as robust as desired, the documents should be revised to increase the likelihood that they will be enforced by a court.
Contact Information. For more information, please contact Don Mazursky (404.888.8840), David Putnal (404.888.8836), Toby Walls (404.888.8870), Teri King (404.888.8847) or Emily Friedman (404.888.8871).