Supreme Court Ruling Eases Deadline on Filing Claims

The U.S. Supreme Court on Tuesday made it easier for states to relax some deadlines imposed by insurance companies for filing disability claims.

The court ruled unanimously that a California man’s insurance claim may go forward even though he filed for benefits after the deadline. Specifically, the court concluded that federal law does not override a California rule that requires insurance companies to pay some claims even though they are filed late.

The case involves a much-litigated federal law that protects pensions and other employment benefits--the Employee Retirement Income Security Act, or ERISA.

Lower courts had split on how ERISA affects states’ efforts to let employees collect benefits even when they miss an insurance company’s filing deadline. ERISA generally overrides state laws relating to employee benefit plans, but it does not override state laws that regulate insurance.

The decision will not have a broad effect because most people make disability claims on time, according to Brad Wenger, president of the Assn. of California Life and Health Insurance Companies. “We don’t think it’s going to have a widespread impact or tear big holes in ERISA,” he said.

Tuesday’s ruling upholds the main part of a federal appeals court decision that revived a lawsuit filed by a California man who unsuccessfully sought long-term disability benefits from Unum Life Insurance Co.

John E. Ward was president and chief executive of Management Analysis Corp. until he resigned in May 1992. At the time, he suffered from an illness diagnosed later that year as diabetic neuropathy.

He informed the company in mid-1993 that he had been approved for Social Security disability benefits, but he was not told about the company’s long-term disability plan through Unum.

In April 1994, Ward found documents that indicated he was eligible for long-term disability payments from Unum. He applied, but his claim was rejected on grounds he missed the deadline to file within one year and 180 days after the onset of his disability.

Ward sued, but a federal judge ruled against him.

However, the U.S. 9th Circuit Court of Appeals reinstated Ward’s case based on a California rule that says insurers can’t refuse to pay late-filed claims unless the delay in filing the claim actually harmed the insurer.

The appeals court also cited a California rule that says an employer acts as an insurance company’s agent in administering group policies. The court said the notice Ward gave to the company in 1993 might count as on-time notice to the insurance company.

The appeals court said ERISA did not override either rule.

Tuesday, the Supreme Court decided the 9th Circuit court was correct in saying the California rule on late-filed claims is not overridden by ERISA.

However, the justices said ERISA does override the California rule that says an employer acts as an insurance company’s agent. That rule “would have a marked effect on plan administration,” Ginsburg wrote, adding that it would force employers to take on a role they had not bargained for.

Tuesday’s ruling allows the case to return to the lower court to determine whether Unum can avoid paying benefits to Ward by showing that his late notice caused harm to Unum.