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Denied Disability Insurance: The Devil in the Fine Print

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Sacramento, CAA denied disability insurance case provides some insight into the legal rules of conduct when it comes to contractual language and content. To that end, a recent denied claim serves as an example of the significance of what’s spelled out in the contract.

According to a press release issued through Mondaq (12/18/13), the plaintiff in Heimeshoff v. Hartford Life Accident Insurance Co. et al ceased her work activities following, according to her claim, a diagnosis of lupus and fibromyalgia, symptoms of extreme fatigue, pain and lack of concentration. The plaintiff worked her last day June 8, 2005.

A little more than two months later, August 22, 2005, plaintiff Heimeshoff filed her disability claim with Hartford. The latter issued its first denied ERISA disability decision after the plaintiff’s treating physician failed to provide, according to the report, additional information requested by Hartford.

The plaintiff subsequently furnished additional documents supporting her diagnosis in July, as well as October 2006, including specific medical evidence. Hartford again issued a long-term disability denied claim, ultimately finding that in its view Heimeshoff was capable of performing sedentary job functions in spite of her alleged symptoms.

The plaintiff appealed - in so doing requesting, in May 2007, an extension of the appeal deadline, with an appeal of Hartford’s denial ultimately filed with the insurer September 26, 2007. Hartford, it was reported, denied the appeal November 26, 2007.

This is when the process of interpreting the time-barring parameters comes into play. According to the release, the plaintiff filed a long-term disability denied lawsuit against Hartford November 18, 2010, seeking a review of her denied LTD benefits under ERISA Section 502(a)(1)(B).

In response, Hartford moved to dismiss the claim on grounds that the lawsuit was time-barred under the plan’s various clauses of limitation.

Looking at the time lines, the plaintiff filed her lawsuit within three years of the final denial, upon appealed review, by the defendant. However, Hartford’s position - according to language contained in the policy - is that the clock starts to run when written proof of a disability is first required and requested. According to the contract, “Legal action cannot be taken against Hartford…[more than] 3 years after the time written proof of loss is required to be furnished according to the terms of the policy.”

According to the release, the district court granted the defendant’s motion to dismiss, based on the limitations period as stated in the contract. The US Court of Appeals for the Second Circuit affirmed the lower court’s decision, finding that “it did not offend ERISA for the limitations period to commence before the plaintiff could file suit under Section 502(a)(1)(B).”

However that wasn’t the end of it, with the long-term disability denied case going all the way to the US Supreme Court in order to resolve a circuit split on the question of the time at which a statute of limitations should accrue for judicial review of an ERISA disability adverse benefit determination.

The US Supreme Court found, in a unanimous opinion delivered by Justice Clarence Thomas on December 16, the provision as spelled out in the LTD contract to be fully enforceable. As such, the limitations period can begin before the plaintiff has fully exhausted her administrative remedies and received a final claim denial.

ERISA Section 502(a)(1)(B) allows a participant or beneficiary to commence an action “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.” As the statute suggests, and the Court in the Heimeshoff case recognized, claims for benefits are “bound up” with the terms of the governing plan document, which must be enforced as written.

To that end, in this denied disability insurance case, the clock started to run when Hartford first requested proof of disability, with the clock running for more than two years from the time, in the summer of 2005, that Hartford had first requested supporting documentation, through to November 2007, when Hartford issued its final denial of the plaintiff’s claim.

According to the terms of the contract, enforceable according to the US Supreme Court, the plaintiff had less than a year to file her lawsuit - not three years, as she so thought. At the time of her claim, Julie Heimeshoff was an employee of Wal-Mart. ERISA is the Employee Retirement Income Security Act, amended in 1975, and is a federal law that sets minimum standards for pension plans in private industry.

Meanwhile, in a separate California Insurance Law decision, plaintiff William Barnett brought a California ERISA-denied claim lawsuit against Southern California Edison Company Long Term Disability Plan (Edison, the Plan), seeking reinstatement of his LTD benefits. According to a release by US Official News (12/3/13), the plaintiff was employed by Southern California Edison as a Program Manager/Project Manager. Following lower back surgery in 1999, Barnett stopped working in June 2000, and applied for LTD benefits according to the provisions of the disability plan to which he belonged at Edison.

According to the release, the Plan administrator for Edison approved the plaintiff for LTD benefits, and Barnett began collecting benefits under California Insurance Law December 20, 2000. However, the Plan subsequently terminated the plaintiff’s benefits August 26, 2009, because in the Plan’s view, Barnett no longer satisfied the Plan’s definitions of disability. Barnett appealed the Plan’s decision to terminate benefits, and his appeal was stamped California insurance claim denied.

On January 27, 2012, Barnett filed a complaint against Edison in US District Court with the assistance of a California denied disability insurance lawyer, seeking a reinstatement of his benefits. Both sides agreed to forgo a formal trial, as The Court saw the only remaining issue in the plaintiff’s California ERISA-denied claim whether or not the Plan abused its discretion by terminating the plaintiff’s benefits.

In August, the Court found that the defendant had not. The case was William Barnett v. Southern California Edison Company Long term Disability Plan, Case No. 1:12-CV-00130-LJO-SAB, in the US District Court for the Eastern District of California.


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