District Court Finds State Law Restricting Contractual Limitations Clause in MetLife’s Disability and Life Insurance Plans Is Not Preempted By ERISA

In Marshall v. Metropolitan Life Insurance Company, No. 22-CV-12218, 2023 WL 6388630 (E.D. Mich. Sept. 22, 2023), Michigan Eastern District Judge Shalina D. Kumar denied MetLife’s motion to dismiss Plaintiff’s lawsuit stemming from MetLife’s denial of disability and waiver of premium benefits finding that while the action was governed by ERISA, a Michigan state law requiring a six-year limitations period for breach of contract actions was not preempted by ERISA, and precluded application of a three-year contractual limitations clause in the Plans.

In 2017, while employed, Plaintiff was involved in a car accident and suffered both physical and cognitive impairments from which he was no longer able to perform his material job duties. He stopped working and initially received short-term disability benefits from MetLife. Thereafter, he applied for both long term disability (“LTD”) and continuation of life insurance (“LWOP”) benefits under both an LTD plan and a life insurance plan sponsored by Plaintiff’s employer (the “Plans”). In 2018, MetLife denied both the LTD and LWOP claims and upheld their decisions on appeal. In the final denial letters, MetLife informed Plaintiff that the last dates to file his LTD and LWOP actions pursuant to the contractual limitations provisions in the Plans were July 6 and July 10, 2022, respectively. Plaintiff filed suit for breach of contract on July 11, 2022. MetLife removed the action to federal court and filed the instant motion to dismiss.

MetLife argued that under ERISA, the Plans’ three-year limitations periods should be enforced to bar Plaintiff’s action, explaining that the Plans required Plaintiff to bring suit three years after he was required to submit proofs of disability, which was August 25, 2021, for his LTD benefit claim and November 28, 2021, for his LWOP benefit claim. Because Plaintiff did not do so, MetLife contended that the suit was time-barred. Plaintiff argued that Michigan’s six-year limitations period for breach of contract actions applied, and that his suit was therefore timely. The parties did not dispute that ERISA governed the Plans. The Court agreed with Plaintiff and denied MetLife’s motion to dismiss. Analyzing Plaintiff’s arguments, the court concluded that Michigan Administrative Code Rule 500.2212 rendered the Plans’ limitations periods unenforceable. Under the Michigan Rule, an insurer “shall not” issue or deliver to any person in Michigan an insurance contract that “contains a shortened limitation of action clause”—if an insurer does so, the shortened limitation of action clause in the insurance contract “is void and of no effect.”

The Court noted that MetLife’s preemption argument implied that the Michigan Rule is not saved by ERISA’s savings clause, which was incorrect. Citing the Sixth Circuit opinion in Am. Council of Life Insurers v. Ross, 558 F.3d 600, 604 (6th Cir. 2009), the Court reasoned that a state law regulates insurance under the ERISA savings clause if: (1) the state law is “specifically directed toward entities engaged in insurance” and (2) the state law “substantially affect[s] the risk-pooling arrangement between the insurer and the insured[s].” The Court found that ERISA does not preempt the Michigan Rule’s application to Plaintiff’s suit because, (a) the Rule is specifically directed toward insurance-engaged entities and bars insurers from issuing or delivering contracts with shortened limitation of action clauses; (b) the Rule substantially affects insurer-insured risk-pooling arrangements because it directly controls the terms of insurance contracts by prohibiting their inclusion of shortened limitations clauses; and (c) ERISA does not otherwise impliedly preempt the Rule.

Moreover, the Court distinguished MetLife’s citation to Brown v. Walgreens Income Protection Plan, No. 10-CV-14442, 2013 WL 1040530 (E.D. Mich. Mar. 29, 2012), finding that the Brown court did not face the preemption issues the Court faced here, and explaining that no court had analyzed whether ERISA preempts this specific Michigan Rule. The Court further pointed out that the Sixth Circuit has held ERISA does not preempt similar Michigan rules.

If MetLife or your insurer has denied or terminated your disability insurance claim, contact us for assistance.