Opinion
Civil No. 04-3820 ADM/AJB.
December 9, 2004
Paula Weseman Theisen, Esq., Meagher Geer, PLLP, Minneapolis, MN, argued for and on behalf of Plaintiff Bradley J. Hillstrom, M.D.
Michael R. Cunningham, Esq., Gray, Plant, Mooty, Mooty Bennett, P.A., Minneapolis, MN, argued for and on behalf of Defendant John R. Kenefick.
William L. Davidson, Esq., Lind, Jensen, Sullivan Peterson, P.A., Minneapolis, MN, argued for and on behalf of Defendant GE Group Life Assurance Company.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On November 22, 2004, oral argument before the undersigned United States District Judge was heard on Defendant GE Group Life Assurance Company's ("GEGLAC") Motion to Dismiss All Claims Against GEGLAC [Docket No. 10]. In his Second Amended Complaint [Docket No. 24, Ex. No. 2], Bradley J. Hillstrom, M.D. ("Plaintiff" or "Hillstrom") alleges Defendants John R. Kenefick and Briggs Morgan, P.A. (collectively "Briggs") committed legal malpractice by failing to advise Plaintiff of the applicable statute of limitations or commence an action before the expiration of the limitations period on his disability claim. Plaintiff also seeks declaratory relief against all defendants to determine his legal rights regarding the applicable statute of limitations and his right to benefits. In the alternative, Hillstrom claims GEGLAC wrongfully denied his claim for long-term disability benefits and seeks to recover pursuant to ERISA, 29 U.S.C. § 1132(a)(1)(B). Briggs has counterclaimed and cross-claimed for a declaratory judgment that 1) Hillstrom's claim for disability benefits under GEGLAC's policy is not barred by the statute of limitations and 2) Hillstrom is not entitled to benefits under GEGLAC's policy, or if he is entitled to benefits, those benefits are limited by the policy terms [Docket No. 24, Ex. 5]. GEGLAC argues it should be released from the action because any claim by Plaintiff for benefits is barred by the statute of limitations. For the reasons set forth below, the Motion to Dismiss All Claims Against GEGLAC is granted.
Plaintiff's Second Amended Complaint was not filed on the Docket but appears as Exhibit No. 2 to the Declaration of Jeffrey Thompson in Opposition to Motion to Dismiss All Claims Against GEGLAC [Docket No. 24].
II. BACKGROUND
For purposes of the instant Motion, the facts are viewed in the light most favorable to the nonmoving party. See Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
Effective January 1, 1994, Rehab One obtained a group long-term disability insurance policy (the "Policy") from Phoenix American Life Assurance Company. Phoenix Am. Life Ins. Co. Group Ins. Policy (Cunningham Aff. [Docket No. 28] Ex. 1). The Policy covered employees and officers of Rehab One. Id. Although whether Hillstrom qualifies as an employee or officer of Rehab One is a separate dispute, for purposes of the present motion only, the Court will assume that Hillstrom is covered by the Policy. All parties agree the Policy is an "employee welfare benefit plan" as defined by ERISA, 29 U.S.C. § 1001(1).
GEGLAC is the successor in interest to Phoenix American Life Assurance Company.
On January 16, 1995, Hillstrom sustained a head injury which he claims left him totally and permanently disabled. Application for Disability Benefits (Cunningham Aff. II [Docket No. 30] Ex. 9). In or around June 1996, Hillstrom retained the Briggs law firm to represent him in making a claim for group long-term disability benefits under the Policy. Second Amended Claim ¶ 7; Briggs Answer and Counterclaim to Second Amended Complaint ¶ 7. Briggs submitted Plaintiff's claim to GEGLAC on October 17, 1996 and the claim was subsequently denied. Second Amended Claim ¶ 7; Briggs Answer and Counterclaim to Second Amended Complaint ¶ 7. Plaintiff, through Briggs, filed a timely appeal of the denial to GEGLAC. Feb. 23, 1999 letter (Cunningham Aff. Attach. 4 Ex. 27). In a letter dated May 17, 1999, GEGLAC denied Hillstrom's claim on appeal. May 17, 1999 letter (Cunningham Aff. II Ex. 14).
Briggs Answer and Counterclaim to Second Amended Complaint was not filed on the Docket but appears as Exhibit No. 5 to the Declaration of Jeffrey Thompson in Opposition to Motion to Dismiss All Claims Against GEGLAC.
Having exhausted his administrative remedies, Plaintiff was entitled to bring an action under ERISA, pursuant to 29 U.S.C. § 1132(a)(1)(B), seeking long-term disability benefits as of May 17, 1999. Plaintiff failed to file any legal action related to this incident until he filed the present suit in Minnesota state court on July 19, 2004. The present suit was subsequently removed to the United States District Court for the District of Minnesota on August 17, 2004.
III. DISCUSSION
A. Standard of Review
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994); Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving party. Ossman, 825 F. Supp. at 880. "A motion to dismiss should be granted as a practical matter . . . only in the unusual case in which the plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995).
B. Statute of Limitations
1. Minnesota Statutes
It is well established that ERISA does not have its own statute of limitations governing claims for plan benefits under 29 U.S.C. § 1332(a)(1)(B). See Adamson v. Armco, Inc., 44 F.3d 650, 652 (8th Cir. 1995). As a result, courts must "borrow" the statute of limitations from the most analogous state law. See id. GEGLAC argues that Minn. Stat. § 541.07(5) applies to ERISA claims under Minnesota law. Section 541.07(5) places a two-year statute of limitations on contract actions for unpaid benefits. On the other hand, Briggs contends ERISA claims are limited by Minn. Stat. § 541.05, which mandates that, in the absence of a more specific statute of limitations, all actions for breach of contract must be brought within six years. In the alternative, Briggs claims the most analogous state statute in ERISA actions for disability benefits is Minn. Stat. § 62A.04(11). Section 62A.04(11), a provision included in Minnesota's state insurance laws to dictate what terms must be included in group health policies, states in relevant part:
No action at law or in equity shall be brought to recover on this policy prior to the expiration of 60 days after written proof of loss has been furnished in accordance with the requirements of this policy. No such action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.
Under Eighth Circuit law, a "claim for ERISA benefits is characterized as a contract action for statute of limitations purposes." Adamson, 44 F.3d at 652. The most analogous Minnesota law in ERISA actions for disability benefits is § 541.07(5), which provides for a two-year statute of limitations in contract actions for unpaid benefits. See id. at 653;Cavegn v. Twin Cities Pipe Trades Pension Plan, 223 F.3d 827, 830 (8th Cir, 2000).
Briggs argues that a claim for ERISA benefits is governed by the six-year statute of limitations set forth in § 541.05. This argument was considered and rejected by the Eighth Circuit inAdamson, finding Minnesota's statute of limitations regarding wage collection was more analogous than the limitations period for general contract actions. See also Arkin v. MedCenters Health Care, Inc. 1990 U.S.Dist. LEXIS 20100, at *14-21 (D. Minn. April 17, 1990); Kiefer v. Ceridian Corp., 976 F. Supp. 829, 841 (D. Minn. 1997).
Briggs alternatively argues that the three-year statute of limitations period provided for in § 62A.04(11) should control ERISA benefit claims. Although more than three years elapsed between the time Hillstrom was denied benefits and filed this claim, the Minnesota Supreme Court has held the statute of limitation in § 62A.04(11) does not begin to run until termination of the period for which the insurer is liable. Laidlaw v. Commmerical Ins. Co. of Newark, 255 N.W.2d 807, 811-12 (Minn. 1977); Ryan v. ITT Life Ins. Corp., 450 N.W.2d 126, 129 (Minn. 1990). As a result, depending on the terms of the policy, § 62A.04(11)'s three-year statute of limitation may not begin to run until the death of a permanently disabled individual. Laidlaw, 255 N.W.2d at 811-12; Ryan, 450 N.W.2d at 129.
Although § 62A.04(11) was in existence when Adamson and its progeny were decided, the Eighth Circuit nevertheless held that § 541.07(5)'s two-year statute of limitation was the most analogous state law. See, e.g., Adamson, 44 F.3d at 653; Cavegn 223 F.3d at 830. Furthermore, the Eighth Circuit recently considered a similar argument under Missouri law. Harris v. Barnes-Jewish Christian Hospitals, 357 F.3d 822, 825-27 (8th Cir. 2004). InHarris, the defendant argued that Mo. Rev. Stat. § 376.426(14), which is nearly identical to Minn. Stat. § 62A.04(11), was more analogous for ERISA purposes than Missouri's ten-year statute of limitations for breach of contract. Id. The Court of Appeals rejected defendant's argument, noting it was bound by the Eighth Circuit's en banc decision that the ten-year statute of limitations was the most analogous Missouri law. Id.; see Johnson v. State Mut. Life Assurance Co. of Am., 942 F.2d 1260, 1266 (8th Cir. 1991). The court went on to state that "[s]ection 376.426(14) is not a statute of limitations in the traditional sense, but a part of the state's insurance laws dictating what terms must be included in group health policies." Id. at 827. Finally, the Eighth Circuit noted that the issue "raised the more general concern about whether provisions in state insurance codes . . . should even be considered `analogous' statutes of limitations for ERISA purposes" and cited to Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643, 647-48 (9th Cir. 2000) for the proposition they should not. Id. As a result, this Court rejects Briggs' argument that Minn. Stat. § 62A.04(11), an insurance code provision, is the most analogous Minnesota law for ERISA benefit actions.
Mo. Rev. Stat. § 376.426(14) requires group health insurance policies to include a provision stating "that no action at law or in equity shall be brought to recover on the policy . . . unless brought within three years from the expiration of the time within which proof of loss is required by the policy."
2. Contractual provision
As noted above, the Eighth Circuit has held that § 541.07(5)'s two-year statute of limitations governs actions for ERISA benefits where a contractual period is inapplicable or nonexistent. Cavegn, 223 F.3d at 830. In the instant case, however, the Policy does include a contractual statute of limitations. On page 23 of the Policy, entitled "Part 15: Long Term Disability Claim Provisions," is the subheading Legal Actions, which states:
For 60 days after the written Proof of claim as required by us has been filed, no legal or equitable action may be brought against us for that claim. No action at all may be brought against us after 3 years from the date on which written Proof of claim is required.
Phoenix Am. Life Ins. Co. Group Ins. Policy.
Hillstrom argues that a reasonable contractual limitations period supersedes Minnesota's two-year statute of limitations and should control. However, Hillstrom disputes the record contains the true and correct copy of the Policy in effect when Plaintiff filed his claim, noting that three different versions of the contract have been produced. As a result, Hillstrom argues, until the Court determines which version of the Policy should control, summary judgment is premature. Although the Court understands multiple versions of the Policy have surfaced in discovery, the terms of the contractual limitations provision are identical in each of them. As a result, the issue will be decided.
"The federal courts apply federal common law rules of contract interpretation to discern the meaning of the terms in an ERISA plan." Harris, 357 F.3d at 825. In the absence of a controlling statute to the contrary, parties are free to adopt a contractual limitations period that differs from the relevant statute of limitations, provided the limitations period is reasonable. See id.; Wilkins v. Hartford Life and Accident Ins. Co., 299 F.3d 945 (8th Cir. 2002); Smith v. United HealthCare Services, Inc., 2003 U.S. Dist LEXIS 15102, at * 40-41 (D. Minn. August 28, 2003); see also Stephan v. Goldinger, 325 F.3d 874, 876 (7th Cir. 2003) (stating that parties may extend state law statutes of limitation by agreement). The Minnesota Supreme Court has said whether a contractual limitations period is reasonable depends upon the particular facts presented and requires a case-by-case determination. See, e.g., Rose Revocable Trust v. Eppich, 640 N.W.2d 601, 606 (Minn. 2002).
The three-year contractual limitation period at issue in the instant matter is reasonable. See Smith, 2003 U.S. Dist LEXIS 15102 at *41-42 (finding a three-year contractual limitations period reasonable under Minnesota law). The Policy's limitation period exceeds the two-year minimum required by § 541.07(5) and matches the period prescribed by § 62A.04(11). As a result, the Policy's three-year limitation term supersedes § 541.07(5) as the controlling limitations period in the present action for ERISA benefits.
C. Claim Accrual
Although state law controls which limitation period applies, the question of claim accrual is controlled by federal law.Bennett v. Federated Mut. Ins. Co., 141 F.3d 837, 838 (8th Cir. 1998). In a federal question case, absent a contrary directive from Congress, the "discovery rule" determines when the statute of limitations begins to run. Id. Therefore, in an ERISA action, "the general rule . . . is that a cause of action accrues after a claim for benefits has been made and has been formally denied." Id. at 839 (quoting Union Pacific R.R. Co. v. Beckham, 138 F.3d 325, 330 (8th Cir. 1998)).
In the present case, it is undisputed that GEGLAC denied Hillstrom's appeal for long-term disability benefits on or about May 17, 1999. As a result, the three-year contractual limitations period specified in the Policy began to run on that date. Consequently, the relevant limitations period expired well before Hillstrom filed the instant action on July 19, 2004. Therefore, Hillstrom's suit against GEGLAC is untimely and the Motion to Dismiss All Claims Against GEGLAC must be granted.
IV. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that Defendant's Motion to Dismiss All Claims Against GEGLAC [Docket No. 10] is GRANTED.