Salcedo v. John Hancock Mut. Life Ins. Co., Civil Action 96-11567-MEL.

• Decision Date: 20 February 1998
• Docket Number: Civil Action 96-11567-MEL.
• Citation: 38 F.Supp.2d 37
• Parties: Fanny SALCEDO, Plaintiff, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

38 F.Supp.2d 37

Fanny SALCEDO, Plaintiff, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant.

Civil Action 96-11567-MEL.

United States District Court, D. Massachusetts.

February 20, 1998.

Ronald Beauregard, Fiorentini Law Office, Haverhill, MA, for plaintiff.

Edward S. Rooney, Jr., Lyne, Woodworth & Evarts, Boston, MA, for defendant.

LASKER, District Judge.

This is an action to recover disability benefits under a group insurance policy. Fanny Salcedo sues under section 502 of the Employee Retirement Income Security Act, 29 U.S.C. § 1132, to contest the defendant's determination that she is not entitled to benefits. Defendant John Hancock Mutual Life Insurance Company moves for summary judgment on the grounds that the suit is time-barred both by the applicable statute of limitations under ERISA, and by the contractual limitations period provided in the policy.

The facts are undisputed. On September 9, 1989, Ms. Salcedo suffered a disabling injury while working at Wang Laboratories, Inc. As part of its benefit plan, Wang provided its employees disability benefits through a group insurance policy issued by John Hancock.¹ The policy defines "total disability" for the first two years following an injury as an impairment "which keeps you from doing every duty of your occupation," and thereafter as an impairment "which keeps you from doing every duty of any occupation or employment for which you are qualified" (emphasis supplied).

Ms. Salcedo submitted a claim for benefits, and John Hancock determined that she was totally disabled and began paying her benefits. On May 13, 1991, John Hancock wrote to Ms. Salcedo explaining that the second definition of "total disability" would become applicable in September 1991, since two years would have then passed since her injury, and advising her that it would notify her when it determined whether she would remain eligible for benefits. John Hancock informed Ms. Salcedo's attorney of the newly applicable definition by letter of October 29, 1991, and on September 8, 1992, wrote Ms. Salcedo a letter concluding that she was not entitled to benefits after August 23, 1992 because she did not satisfy the second, and now applicable, definition of disability. The letter indicated that Ms. Salcedo could respond with questions or submit additional medical information for review. Three weeks later, Ms. Salcedo's attorney submitted additional materials and appealed the denial of benefits. On June 15, 1994, the defendant upheld its denial in a four-page letter that reviewed the available medical evidence. Plaintiff filed this action on June 19, 1996.

John Hancock argues that plaintiff's claim is barred because both the contractual limitation period and the applicable statute of limitations under ERISA require her to have filed suit within three years of the September 8, 1992 denial of benefits. Ms. Salcedo replies that, under both ERISA and the policy, the limitations period is established by reference to state law, and the applicable period under Massachusetts law is the six-year statute of limitations for contract actions. She maintains further that her action was timely instituted even if the applicable limitations period is three years, because the appropriate accrual date is not the initial denial of benefits but the denial of her appeal on June 15, 1994.

Two distinct questions must be answered. First, what is the appropriate limitations period within which Ms. Salcedo was required to file suit? Second, what is the accrual date from which the limitations period should be measured?

The Limitations Period

Applicable Limitations Period under ERISA

John Hancock argues first that plaintiff's claim is barred under ERISA by the limitations period set forth in 29 U.S.C. § 1113(2). That section provides

[n]o action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty or obligation under this part, or with respect to a violation of this part, after ... three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.

Defendant maintains that this statute of limitations applies to Ms. Salcedo's cause of action under 29 U.S.C. § 1132 to recover benefits. Plaintiff challenges John Hancock's reliance on this section on the grounds that § 1132 does not fall within the "part" of ERISA governed by the § 1113 limitations period.

Section 1113 is found in Part 4 of ERISA, entitled "Fiduciary Responsibility," and by its terms applies only to actions "with respect to a fiduciary's breach of any responsibility, duty or obligation under this part, or with respect to a violation of this part" (emphasis supplied). Section 1132 is found in a different part of ERISA — Part 5, entitled "Administration and Enforcement." Ms. Salcedo does not allege a breach of fiduciary duties. Instead, she sues under § 1132(a)(1)(B) to recover benefits allegedly due under the terms of the plan. See Wright v. Southwestern Bell Tel. Co., 925 F.2d 1288, 1290 (10th Cir.1991) (reversing a district court decision applying the § 1113 limitations period to a § 1132 claim because such claims do "not involve fiduciary responsibilities regarding financial solvency or accountability as contemplated by § 1113"); see also Drinkwater v. Metropolitan Life Ins. Co., 846 F.2d 821, 826 (1st Cir.) (claim for past due benefits is "a simple contract claim" rather than a claim based on "violation of ... statutory rights under ERISA"), cert. denied 488 U.S. 909, 109 S.Ct. 261, 102 L.Ed.2d 249 (1988).

Because of the limited applicability of § 1113, it is appropriate to apply the most analogous state limitations period to actions filed under § 1132. Although the First Circuit has not addressed the question, this conclusion has been accepted nearly universally by courts that have. See, e.g., Williams v. UNUM Life Ins. Co. of Am., 113 F.3d 1108, 1111 (9th Cir.1997) (analogous state limitations period controls suit for benefits under § 1132); Daill v. Sheet Metal Workers' Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir.1996) (same); Dameron v. Sinai Hosp. of Baltimore, 815 F.2d 975, 981 (4th Cir.1987) (same); Meade v. Pension Appeals and Review Comm., 966 F.2d 190, 194-95 (6th Cir.1992) (same); Miles v. New York State Teamsters Conference Pension & Retirement Fund Employee Pension Benefit Plan, 698 F.2d 593, 598 (2d Cir.) (same), cert. denied, 464 U.S. 829, 104 S.Ct. 105, 78 L.Ed.2d 108 (1983).

Ms. Salcedo contends that the most analogous state limitations period is the six-year statute of limitations applicable to contract actions, M.G.L. ch. 260, § 2. John Hancock counters that a closer parallel is found in M.G.L. ch. 175, § 108 ¶ 3(a)(11), which requires certain health insurance policies to include a provision stating that no action may be brought more than three years after proof of loss is due under the policy. Plaintiff replies that this section is inapplicable because it explicitly provides that group policies, like the one at issue here, fall outside its coverage. M.G .L. ch. 175, § 108 ¶ 8 ("Nothing in this section shall apply to or affect ... any blanket or group policy of insurance.")

Because Massachusetts law reflects a judgment that different standards are appropriate for different types of insurance contract, and a determination not to shorten the limitations period applicable to group policies, John Hancock's reliance on M.G.L. ch. 175, § 108 is not persuasive. The limitations period for contract actions provides a closer analogy. Ms. Salcedo's claim is essentially a breach of contract claim — she alleges she was not paid the benefits due her under the terms of the insurance policy. Accordingly, it is appropriate to borrow the six-year statute of limitations from M.G.L. ch. 260, § 2 for claims to recover benefits under ERISA. Judge Zobel applied the same statute of limitations to a claim for interference with pension rights brought under § 1132. Greene v. K-Mart Corp. Employee's Retirement Pension Plan, 1986 WL 15473 (D.Mass. Dec.24, 1986). Many other courts have analogized to state statutes of limitations for contract claims to determine the limitations period for ERISA actions. E.g., Meade, 966 F.2d at 195; Wright, 925 F.2d at 1291; Daill, 100 F.3d at 65; Miles, 698 F.2d at 598.

Effect of Contractual Limitations Period

However, while the limitations period for a claim to recover ERISA benefits is ordinarily drawn from the most analogous state statute of limitations, in this case the policy contains its own contractual limitations period. The policy provides that

[n]o legal action or suit to recover on the Policy ... may be brought more than 3 years after the time [written proof of loss] must be furnished. But, if [this] time limit is less than permitted by state law where you reside when the loss occurs, that limit is extended to agree with the smallest limit the law of that state allows.

Defendant reads this provision as establishing a three-year limitations period, which would be lengthened in suits filed by residents of states that forbid contractually establishing a period this short. Because Massachusetts law allows contracting parties to agree upon a limitations period, so long as it is reasonable, defendant maintains that the policy's three-year period governs plaintiff's claim. Plaintiff interprets the policy differently, arguing that the three-year period must be extended if it is shorter than the limitations period established by state law. Plaintiff contends that since the six-year limitations period provided by Massachusetts law is longer than the policy period, the six-year period governs her claim.

In determining which interpretation is correct — or whether the provision is ambiguous — it should be remembered that the "terms of an ERISA policy are to be interpreted under principles of federal substantive law." Vickers v. Boston Mutual Life Ins. Co., 135 F.3d 179, 180-81 (1st Cir.1998). The Vickers court...