:: Court Holds Contractual Language Does Not Bar Plaintiff’s Disability Claims

In the case at bar, the plain language of the policy stated that “[i]f the time limits that We allow for giving notice of claim or for submitting proof of loss is less than the law permits in the state where the claimant lives, We extend Our time limit to agree with the minimum period specified by law. The law must exist at the time this Policy is issued.” Doc. No. 19 at 8.

The court concurs with plaintiff’s reading of Bargaintown, and finds that its policy language, and the Court of Appeals’ decision is not applicable to the case at bar.

McBride v. Unum Provident, 2008 U.S. Dist. LEXIS 50323, 3-4 (N.D.N.Y July 1, 2008)

ERISA does not contain a specific statute of limitations for benefits claims. (This is rather odd given the frequent conception of the statute by the federal judiciary as a “comprehensive and reticulated” regulatory scheme.)

In any event, 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. An example:

Thus, in the absence of an applicable ERISA limitation, the courts thus apply the statute of limitations for the state claim most analogous to the ERISA claim pursued. The statutory limitation period most applicable to a claim for benefits due under a plan is that for a breach of contract claim.

Koert v. GE Group Life Assur. Co, 2007 WL 595028 C.A.3 (Pa.) (February 27, 2007)

Moreover, the federal courts have been quite receptive to contractual limitation periods – and some of these periods have been quite short indeed.

For example, in Dye v. Associates First Capital Corp. Cafeteria Plan, 2006 WL 2612743 (E.D.Tex.), the plaintiff challenged the termination of her short term disability benefits and the denial of long term disability benefits. The plan provided that “no legal action may be commenced against an ERISA covered plan more than 120 days after your receipt of the decision on appeal.” In holding for the plan, the court determined that the plaintiff’s claims were barred by this 120-day limitations period.

The Fourth Circuit may have defined a perimeter for contractual limitations periods in holding that they may not begin to run before the cause of action accrues. See, White v. Sun Life Assur. Co. of Canada — F.3d —-, 2007 WL 1218209 (C.A.4 (N.C.)). Nonetheless, there was a dissent even on that point, so one can never be too sure how far the federal courts are willing to go in upholding contractual limitation periods.

In a recent district case out of New York, therefore, the holding that a contractual limitation period specified in the policy did not apply must be regarded as significant. The reported decision denies a motion to reconsider an earlier ruling to that effect.

The language in the policy read as follows:

“[i]f the time limits that We allow for giving notice of claim or for submitting proof of loss is less than the law permits in the state where the claimant lives, We extend Our time limit to agree with the minimum period specified by law. The law must exist at the time this Policy is issued.”

Note: The defendants relied upon a New York Court of Appeals case, Bargaintown, D.C., Inc., v. Bellefonte Ins. Co., 54 N.Y.2d 700, 426 N.E.2d 469, 442 N.Y.S.2d 975 (1981).

The Court disposed of the defendants argument as follows:

Defendants argue that in Bargaintown, the property loss insurance policy at issue contractually shortened the statute of limitations to one year, unless a longer period of time was provided by applicable statute. In Bargaintown, the Court of Appeals found that the policy language did not extend the time to the six years provided for commencing a breach of contract action pursuant to CPLR § 213, and the Court of Appeals held that the one-year contractual limitation applied, affirming the dismissal of the complaint as untimely. Bargaintown, 54 N.Y.2d at 702.

Plaintiff argues, however, that the Court of Appeals further stated that the core issue of the case, and the policy behind the holding, was to resolve the issue of whether different limitations periods applied under the insurance policy for different risks (fire, theft, water damage, etc.) by making all risks subject to the one-year period. Doc. No. 22.

The court reviewed and considered Bargaintown, as well as the other cases cited by defendants, in making its determination, despite not mentioning each individual case in its memorandum of decision. The court found that the wording of the property loss insurance policy in Bargaintown, which stated that actions for property loss must be commenced within twelve months “unless a longer period of time is provided by applicable statute” is considerably different than the language in the case before the court. In the case at bar, the plain language of the policy stated that “[i]f the time limits that We allow for giving notice of claim or for submitting proof of loss is less than the law permits in the state where the claimant lives, We extend Our time limit to agree with the minimum period specified by law. The law must exist at the time this Policy is issued.” Doc. No. 19 at 8. The court concurs with plaintiff’s reading of Bargaintown, and finds that its policy language, and the Court of Appeals’ decision is not applicable to the case at bar.

Question of Federal Law – While the federal courts borrow from analagous state statutes in this context, the accrual and limitation periods for ERISA claims remain a question of federal law. See, Romero v. Allstate Corp., 404 F.3d 212, 221 (3d Cir.2005).