Sixth Circuit Finds ERISA Life Insurance Claim Time-Barred Under Clear Repudiation Rule

In D.S.S. v. Prudential Insurance Company of America, et al., No. 21-5315, 2022 WL 95165 (6th Cir. Jan. 10, 2022), a dispute over the payment of life insurance benefits, the Sixth Circuit considered the question of when an ERISA cause of action starts to accrue for purposes of a contractual limitations period in an employee benefit plan. Here, Plaintiff-Appellants D.S.S. (a minor) and Javey Brown claimed entitlement to $147,000 in employer-provided life insurance benefits from Defendant-Appellee Prudential Insurance Company of America for their mom who passed away in March 2014. The executor of the mom’s estate contacted Prudential and Time Warner (the mom’s employer) in December 2014 to inquire about the life insurance benefits. Prudential sent the executor a Form 712 which showed that the life insurance benefits were paid to another relative who the mom had designated primary beneficiary the month before she died tragically. Neither the executor nor the children filed a formal claim for the benefits. The life insurance plan has a one-year contractual limitations period to file suit. After taking no action for several years, in February 2020, the children sued Prudential in Kentucky state court alleging various state law claims to recover the life insurance benefits. Prudential removed the case to federal court and moved to dismiss the claims. The district court converted the motion to dismiss to a motion for summary judgment and granted Prudential summary judgment.

On appeal, Plaintiffs contest when the cause of action accrued, whether the limitations period expired, and whether it was tolled. “They contend that the court erred because: (1) Prudential and Time Warner were required to employ the administrative process pursuant to the Plan, and by failing to do so, the cause of action did not accrue and the one-year limitations period did not begin to run; (2) repudiation does not apply because they did not exhaust their administrative remedies; (3) assuming repudiation does apply, the district court erred in determining that Form 712 constituted knowledge of injury that commenced the limitations period; and finally, (4) the ERISA cause of action was tolled under state law.”

The court rejected each of these arguments. First, the court found that Plaintiffs never initiated a claim and failed to exhaust their administrative remedies prior to filing suit in federal court. The evidence shows that they only sought information from Prudential and Time Warner but never formally contested, or even attempted to contest, the payment of benefits to the other relative. Even if the court assumed that the failure to receive a final adverse determination precludes the ERISA claim from accruing, Plaintiffs still have not attempted to file or exhaust a claim under the plan’s procedures. On this basis alone, the district court properly granted summary judgment.

Second, even if Plaintiffs could bring this suit despite their failure to exhaust administrative remedies, their claim still fails under the clear repudiation rule. The clear repudiation rule “provides that when a fiduciary gives a claimant clear and unequivocal repudiation of benefits that alone is adequate to commence accrual, regardless of whether the repudiation is formal or not.” Morrison v. Marsh & McLennan Cos., 439 F.3d 295, 302 (6th Cir. 2006) (citing Bennett v. Federated Mut. Ins. Co., 141 F.3d 837, 839 (8th Cir. 1998)). The rule operates in concert with any administrative exhaustion requirements. Here, Prudential informed the executor in December 2014 that the benefits had already been paid. When the executor received the Form 712 form, it was confirmation that the benefits would not be paid to the children and constituted a clear and unequivocal repudiation of benefits. The one-year contractual limitations period began to run from this date.

Third, the court held that the limitations period is not tolled because Plaintiffs did not receive written notice of the one-year period. The Sixth Circuit’s decision in Moyer v. Metropolitan Life Insurance Co., 762 F.3d 503 (6th Cir. 2014) does not apply because Plaintiffs never filed a claim nor received an adverse benefit determination letter. Thus, Prudential had no obligation to provide notice of the one-year limitations period to bring suit under ERISA.

Lastly, the court found that the statute of limitations period was not tolled by KRS § 413.170, which provides that a person under the age of majority when a specified cause of action accrued may bring that action “within the same number of years” as the original limitations period after the person reaches the age of majority. If KRS § 413.170 could apply to toll the plan’s one-year statute of limitations, the limitations period would still have already lapsed as to Brown—the only son with a viable claim—because he reached the age of majority in 2016. The court affirmed the judgment of the district court in favor of Prudential.