The Supreme Court heard arguments yesterday in this case, which involved the question whether a contractual limitations period in an ERISA benefit plan could begin to run before administrative remedies were exhausted.

The plan in question has a provision, which is standard in plans providing disability insurance, stating that a claimant must sue within three years from the date proof of loss is due. Though the limitation provision gave Heimeshoff more than a year after she had exhausted her administrative remedies, she waited almost 3 years to sue. The District of Connecticut and the Second Circuit had enforced the provision, and dismissed Heimeshoff’s claim as untimely. Heimeshoff’s primary contention in the Supreme Court was that a limitation provision in an ERISA benefit plan had to start running when administrative remedies were exhausted, and not before.

None of the Justices appeared concerned about the idea of a contractual limitation provision starting the clock running before exhaustion of administrative remedies. The primary concern was that, whenever the clock started running, a claimant should have enough time after her claim accrued to sue. And there was no question that Heimeshoff, who had more than a year to sue, had enough time. The transcript is available here.

Justice Ginsburg started the ball rolling, asking Heimeshoff’s lawyer right off the bat how much time Heimeshoff had to sue after she had exhausted her administrative remedies. He conceded that she had a year, and also conceded that a provision giving her a year after exhaustion of administrative remedies would be enforceable. Justice Ginsburg followed by asking why Heimeshoff had delayed her suit, but her lawyer never answered the question (in fact, Heimeshoff has never offered any explanation why she waited so long to sue).

When Heimeshoff’s lawyer argued that it was unclear when the clock actually started to run because the deadline for filing proof of loss could vary, Justice Sotomayor observed that  even if the latest possible starting date was picked, the lawsuit was still late. Justice Sotomayor also commented that there could be disputes about when administrative remedies were exhausted, meaning that a limitation period running from that event might not be certain either. She noted that the advantage of Hartford’s language was that a claimant knows she has at three years “from … the beginning of the process,” and that any extension of the time to file proof of loss “can only help” the claimant. Justice Scalia commented that the mere fact that there is a dispute about what the provision means in a particular case “doesn’t make the provision invalid. … [T]hat’s not different from any contract.”

Hartford’s lawyer also observed that there were sound actuarial reasons why insurance companies want the limitation provision to run from the beginning of the claim. Specifically, insurers must reserve for claims when they are made, and the standard limitation provision allows them to determine, with certainty at the outset of a claim, the period the reserve should stay in place.

Justice Alito’s primary concern appeared to be the subject of preemption. Particularly, state laws regulating insurance required a particular limitation provision. Justice Alito presumed those laws were saved from ERISA preemption, but commented that a ruling that the laws were not enforceable in ERISA plans would be a ruling that ERISA preempted the state laws. If the Court did that, “we would be creating an incredible mess that Congress would not have intended.”

There was discussion about whether the Department of Labor, which has not regulated contractual limitation provisions, could or should issue a regulation on that issue. Justice Sotomayor observed that, if the Court accepted Heimeshoff’s argument on appeal, it would prevent the DOL from issuing a regulation that differed with the Court’s decision. Justice Scalia said he was unaware of any instance in which an agency specified the limitations period for a suit in federal court, and he said “I think it goes well beyond what … the Executive is authorized to prescribe.” Hartford’s lawyer observed that there could be a problem with the DOL adopting a regulation that preempted state law, and also said that the DOL would have to “compile a factual record that would provide a non-arbitrary basis for” imposing a regulation on limitation of actions.

There was quite a bit of discussion, by several Justices, about whether there was any empirical evidence that this type of limitation provision had prejudiced anyone. Heimeshoff’s lawyer said he had not identified any case in which a claimant lost the right to sue.  Justices Kagan and Ginsburg expressed skepticism that the limitation provision would adversely affect the administrative process, because administrative proceedings typically take only about a year under the DOL regulations.

Justice Breyer said that his clerks had found five cases in which it took more than three years for a claimant to exhaust administrative remedies, and four other cases in which it took almost three years. He asked whether the Court should do anything about people in that situation. Hartford’s lawyer observed that there were a number of well-established equitable remedies that could apply in specific situations, including equitable tolling and equitable estoppel. She also noted, however, that it was significant that the issue only arose in nine cases over the forty-year period ERISA has been effective. Justice Scalia observed that these “nine people … over 40 years, they probably had a way out[.]” Chief Justice Roberts remarked that there were probably more than nine in total, if there were nine in reported decisions.

Justice Breyer later came back to the same point, asking why it wouldn’t be better to run the limitation period from exhaustion of administrative remedies, so as to avoid having to determine whether a claimant had a reasonable amount of time to sue after the claim accrued. Hartford’s lawyer gave an excellent response.

Justice Breyer, the question before the Court is not what would be the best idea or the best, most simple model if we were writing on a blank slate. The question is, is this term in an ERISA plan, in a suit from which the Petitioner’s rights flow from that plan and her cause of action seeks to enforce the terms of that plan — may that provision be excised from every plan in which it appears in all cases on a categorical basis, because we can imagine the possibility of five or nine cases in which its operation had to be addressed through the application of traditional equitable doctrines.

As he was hearing this response, Justice Breyer leaned back, smiled, nodded, and generally looked like the answer satisfied his concern.

It is dangerous to try to predict the outcome of a case from oral argument. What I think can reasonably be said is that Heimeshoff’s situation did not engender any sympathy from the Court; there appeared to be a general consensus that three years from the beginning of a claim would be sufficient for most claims; and there was a concern about the ramifications of the Court imposing a limitation provision (or a required start date) that would apply to all ERISA benefit plans. An open question is whether the Court will see a need to adopt a rule that might address, in advance, the few cases in which a claimant’s time to sue might be used up during the administrative process, through no fault of her own. Given that there are standard remedies to address that kind of situation, and given the possibility that the DOL could regulate the matter, it would seem unlikely that the Court will want to go there. All in all, I like Hartford’s chances in this case.