Disclosing Limitations in SPDs: Location, Location, Location
We don’t often stray out to the Ninth Circuit in this blog, but I recently read a case addressing a contractual limitations period that piqued my interest. In Spinedex Physical Therapy USA, Inc. v. United Healthcare of Arizona, Inc., the Ninth Circuit held that a contractual provision imposing a 2-year limitation period on filing lawsuits was unenforceable based on the location of the limitations clause in the summary plan description (“SPD”).
As a limitation on the benefits available under the plan, the Ninth Circuit applied the Department of Labor’s SPD content regulations to require disclosure of the 2-year limitations period “in close conjunction” to the benefits it purports to limit. If not in close proximity, then the SPD must at least reference the page number for the limitation period with the benefits. As with many SPDs, the defendant’s summary of benefits were found in Section 1, while the limitations period provision appeared 30 pages later, near the end of the general legal provisions in Section 9. The Ninth Circuit determined that a reasonable participant would have to read the entire SPD to find the limitation provision, and the regulatory language sought to prevent a participant from having to read a 70-page SPD to understand any single provision.
If you have operations in the Ninth Circuit, you should check your SPD to make sure any limitations period (or any other limiting or disqualifying provision) is described near the summary of benefits, or that the page number for the limitation is referenced in the summary of benefits. Even if you are not within the Ninth Circuit, you may want to check your SPD’s disclosure of any limiting provisions. If you can’t easily locate limiting provisions when reading a summary of benefits, you may consider relocating the limiting provisions as an easy preemptive measure to avoid future legal challenges.