The U.S. Court of Appeals for the 9th Circuit ruled March 23 that insurance companies are not required to notify beneficiaries of long-term disability insurance plans how long they have to appeal benefit denials.
The Employee Retirement Security Act of 1974, which governs most private pension and long-term disability benefits plans, does not set a statute of limitations for such claims. Rather, the limitations period is set by contract, provided that the time period is reasonable, as recently articulated in a 2013 Supreme Court case.
The plaintiff in the case, Vandana Upadhyay, is covered by Aetna Life Insurance Plan. Under the company’s policy, “No legal action can be brought to recover under any benefit after three years from the deadline for filing claims.”
After being denied for a claim in 2007, Upadhyay waited until 2013 to sue Aetna in federal court.
Multiple other federal appellate courts have ruled that insurance companies waive contractual limitations defenses where they fail to notify claimants of the appropriate limitations periods in their denial letters.
The U.S. District Court for the Northern District of California, however, ruled that this step was not required. The 9th Circuit, in affirming the decision, agreed.
The 9th Circuit’s full decision can be read here [PDF].