Life Insurance Lawsuit Filed Too Late – Time Limit was One Year
A recent Georgia life insurance case shows how important it is to read the time deadlines for filing lawsuits in employer-sponsored group life insurance plans. The case involves a life insurance claim filed by Melinda Webb, the spouse of a former employee of Adobe Systems Incorporated. Ms. Webb’s husband participated in Adobe’s group life insurance plans which were funded through a life insurance policy issued by Liberty Life Assurance Company of Boston (Liberty Life). Adobe’s optional life benefit plan involved had a policy exclusion for suicide. Liberty Life denied the optional life claim on the basis of the suicide exclusion.
The death occurred in December 2013, and Ms. Webb filed a claim for the Liberty optional life benefit of $1 million. Liberty Life denied the optional life benefit insurance claim on January 27, 2014. Ms. Webb was required to go through a mandatory pre-lawsuit appeal process required by ERISA, the federal law that regulates employer sponsored group insurance, and she appealed on March 26, 2014. Liberty Life denied her appeal on June 23, 2014.
The law that applied to the case allowed employer group plans to shorten statutes of limitations (deadlines for filing lawsuits) by including the shorter deadlines in the ERISA plan documents. The court quoted an appeals court decision which held, “contractual limitations periods on ERISA actions are enforceable, regardless of state law, provided they are reasonable.”
Two policy provisions were key to the court’s analysis. First, the Liberty Life insurance policy which funded Adobe’s plan states that a legal action may not be commenced “more than one year after the time Proof of claim is required.” Second, the Liberty Life policy states that “[s]atisfactory Proof of loss must be given to Liberty no later than 30 days after the date of loss.” The policy creates an exception to that rule where it is not reasonably possible to furnish proof within 30 days. If 30 days is not reasonable time, proof of loss must be furnished as soon as reasonably possible, but “in no event, except in the absence of legal capacity of the claimant, later than one year from the time Proof is otherwise required.”
In this case, the death occurred on December 27, 2013. Ms. Webb submitted the claim form provided by Liberty and death certificate (i.e., proof of loss) on January 24, 2013. This was within the 30 day proof of loss period, so there was no question that 30 days was a reasonable time to furnish proof of loss.
The court found that the one year time period for filing suit was calculated by adding the 30 day proof period to the date of death, then adding one year. That meant that the lawsuit had to be filed on or before January 27, 2015. Ms. Webb filed her lawsuit on June 12, 2015, outside of this time deadline.
There is no question that Ms. Webb had to go through the mandatory appeal process which lasted until June 2014. The law actually prevented her from filing suit until Liberty Life decided her claim appeal. However, the court made no mention of that. It just looked at the contractual limitations language in the plan and gave it a literal interpretation, calculating the one year contractual period on the shortest schedule possible.
Takeaway: Beware of group plan language that shortens state statutes of limitations, and follow the contractual language to the letter.
CASE: Webb v. Liberty Life Assurance Company of Boston, Civil Action File No. 1:15-cv-2508-TWT, 2016 WL 3087455 (N.D. Ga. 6/1/2016).