Opinion ID: 3065091
Heading Depth: 2
Heading Rank: 1

Heading: Disclosure of the One-Year Deadline

Text: Plaintiff first argues that we should adopt the reasonable expectations doctrine to analyze the SPD and that we should hold that the placement and display of the deadline in this case violated participants’ reasonable expectations. Defendants argue, in response, that the doctrine of reasonable expectations does not apply to self-funded welfare benefit plans. For the reasons explained below, we need not decide whether the reasonable expectations doctrine applies to selffunded welfare benefit plans. [1] ERISA’s central policy goal is to protect benefit plan participants “by requiring the disclosure and reporting to participants and beneficiaries of financial and other information . . . and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b); Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1035 (9th Cir. 2006). To further that goal, employee benefit plans must provide plan participants with an SPD, which is the “statutorily established means of informing participants of the terms of the plan and its benefits,” and which serves as “the employee’s primary source of information regarding employment benefits.” Bergt v. Ret. Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139, 1143 (9th Cir. 2002) (internal quotation marks omitted); 29 U.S.C. § 1022(a). [2] Section 1022(a) provides in pertinent part: The [SPD] shall include the information described in subsection (b) of this section, shall be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. 12816 SCHARFF v. RAYTHEON COMPANY Section 1022(b) lists the specific information that the SPD is required to contain. One of the required pieces of information is any “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.” 29 U.S.C. § 1022(b). Accordingly, the SPD must explain the “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits” in a manner “calculated to be understood by the average plan participant,” and that information must be “sufficiently accurate and comprehensive to reasonably apprise” plan participants of their rights and obligations under the plan. Id. § 1022(a) & (b). The Federal Regulations further provide: Any description of exception, limitations, reductions, and other restrictions of plan benefits shall not be minimized, rendered obscure or otherwise made to appear unimportant. Such exceptions, limitations, reductions, or restrictions of plan benefits shall be described or summarized in a manner not less prominent than the style, captions, printing type, and prominence used to describe or summarize plan benefits. 29 C.F.R. § 2520.102-2(b). The SPD must also disclose limitations in close conjunction to benefits provisions, or refer the participant to the page numbers on which the relevant restrictions appear. Id. Those are the relevant statutory and regulatory disclosure provisions relating to the SPD. In addition to those requirements, the federal courts have developed a body of ERISA federal common law. See Menhorn v. Firestone Tire & Rubber Co., 738 F.2d 1496, 1500 (9th Cir. 1984) (“The courts are directed to formulate a nationally uniform federal common law to supplement the explicit provisions and general policies set out in ERISA, referring to and guided by principles of SCHARFF v. RAYTHEON COMPANY 12817 state law when appropriate, but governed by the federal policies at issue.”). [3] It is one of those common law principles, the doctrine of reasonable expectations, that Plaintiff asks us to use to analyze the display and placement of the one-year deadline in this case. The doctrine can be summarized as follows: Under the so-called “doctrine of reasonable expectations,” which is often applied in interpreting or construing policies of insurance, the meaning of an insurance policy is determined in accordance with the reasonable expectations of the insured. In other words, the meaning of the terms in an insurance policy is to be determined by considering it in light of whether a reasonable person in the position of the insured would expect coverage. The term “insured’s reasonable expectations” refers to what a hypothetical reasonable insured would glean from the wording of the particular policy and kind of insurance at issue, rather than how a particular insured who happened to buy the policy might understand it. 16 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 49:20, at 111-12 (4th ed. 2000) (footnotes omitted). Plaintiff argues that the placement and display of the deadline failed to meet plan participants’ reasonable expectations because (1) the deadline should have been placed in the Administrative chapter rather than the Disability chapter, and (2) the deadline should have been displayed more conspicuously in the text of the SPD. Plaintiff is correct in asserting that we have incorporated the reasonable expectations doctrine into ERISA federal common law when we have interpreted insured plans. In Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 387 (9th Cir. 1994), we “adopt[ed] the doctrine of reasonable expectations as a principle of the uniform federal common law informing 12818 SCHARFF v. RAYTHEON COMPANY interpretation of ERISA-governed insurance contracts.” At issue in Saltarelli was a pre-existing conditions exclusion that appeared in the SPD. Id. at 385. We noted that the plan administrator “chose to bury one of the plan’s most significant provisions amidst definitions, rather than forthrightly stating the pre-existing conditions exclusion in the operative clauses of the plan description.” Id. We therefore held that the exclusion for pre-existing conditions “was not clear, plain, and conspicuous enough to negate layman Saltarelli’s objectively reasonable expectations of coverage.” Id. at 387. We noted that the application of the reasonable expectations doctrine to ERISA insurance contract law was, at the time, an issue of first impression for our circuit. Id. at 386. We gave two reasons for adopting the doctrine into the federal common law: (1) “protecting the reasonable expectations of insureds appropriately serves the federal policies underlying ERISA,” and (2) “at least thirty states ha[d] explicitly incorporated . . . the reasonable expectations doctrine into their own law, . . . demonstrat[ing] its widespread acceptance and vitality.” Id. at 386-87. After Saltarelli, we assumed, in dictum, that the reasonable expectations doctrine applied to a self-funded benefit plan. In Winters v. Costco Wholesale Corp., 49 F.3d 550 (9th Cir. 1995), the plaintiff sought reimbursement from a self-funded benefit plan for a procedure similar to in vitro fertilization. The district court held that the plan administrator should not have denied benefits. Id. at 552. The administrator argued that the district court (1) applied the wrong standard of review to its decision and (2) improperly applied the doctrine of contra proferentem, under which ambiguities in a contract are construed against the contract’s drafter. Id. at 553. After addressing those two issues, we discussed the holding of Saltarelli. Id. at 554-55. We then concluded—even though the plaintiff had not argued that the reasonable expectations doctrine applied to her case—that she had “no objectively reasonable SCHARFF v. RAYTHEON COMPANY 12819 expectation of coverage” for her procedure because the SPD conspicuously exempted those types of procedures. Id. at 555. We hemmed in the doctrine just two years after Winters. In Estate of Shockley v. Alyeska Pipeline Service Co., 130 F.3d 403, 407 (9th Cir. 1997), we declined to extend Saltarelli’s rule to an ERISA pension plan. We held that the doctrine of reasonable expectations applies only to “insurance contracts, including ERISA insurance contracts.” Id. We noted that the doctrine “ ‘grew out of the law of adhesion contracts and construction of ambiguities in insurance policies,’ ” id. (quoting Saltarelli, 35 F.3d at 386), so it made sense to apply the “body of law dealing generally with insurance policy interpretation” to “insurance policies that happened to be ERISA insurance policies.” Id. In our view, there was “no reason to extend the doctrine beyond insurance contracts” because “[the doctrine] was developed for and applies directly to insurance policies.” Id. Self-funded benefit plans like Raytheon’s are not insurance policies. As a result, Estate of Shockley would appear to bar application of the doctrine of reasonable expectations to the plan at issue here. But, at the same time, Winters could be read to have extended the doctrine implicitly to apply to selffunded ERISA welfare benefit plans. Estate of Shockley mistakenly cites Winters as an example of an ERISA insurance contract. Estate of Shockley, 130 F.3d at 407 (citing Winters, 49 F.3d at 554-55). What we have, then, are two opinions that are seemingly in tension with one another: Winters, which applied the reasonable expectations doctrine to a self-funded plan, at least in dictum, and Estate of Shockley, which prohibits us from expanding the doctrine beyond insured plans. As a threejudge panel, we cannot overrule either decision. Ross Island Sand & Gravel Co. v. Matson (In re Complaint of Ross Island Sand & Gravel), 226 F.3d 1015, 1018 (9th Cir. 2000) (per curiam). 12820 SCHARFF v. RAYTHEON COMPANY [4] But we need not call for en banc consideration, nor try to harmonize the apparent conflict in our precedents. Assuming, without deciding, that the reasonable expectations doctrine applies, the SPD here met plan participants’ reasonable expectations, in addition to fulfilling the statutory and regulatory requirements. See Estate of Shockley, 130 F.3d at 407 (treating the statutory disclosure requirements and the common law reasonable expectations doctrine as different inquiries). It is the statutory and regulatory requirements to which we turn next. Our task is to determine whether the deadline was “written in a manner calculated to be understood by the average plan participant” and whether it was “sufficiently accurate and comprehensive to reasonably apprise” participants of their rights and obligations under the plan. 29 U.S.C. § 1022(a). We must also ensure that the deadline was not minimized or otherwise obscured and that the limitations provision was placed near the benefits provisions. 29 C.F.R. § 2520.102-2(b). [5] Preliminarily, we note that a statute of limitations for bringing suit qualifies as a circumstance “which may result in disqualification, ineligibility, or denial or loss of benefits.” 29 U.S.C. § 1022(b); see Dodson v. Woodmen of World Life Ins. Soc’y, 109 F.3d 436, 439 (8th Cir. 1997) (noting that the omission from the SPD of a time limit for filing suit violated § 1022(b) because the time limit was a circumstance that might result in loss of benefits). Therefore, the placement and display of the deadline must meet the statutory and regulatory standards. [6] We hold that the manner of disclosure in this case met those standards. First, placement of the deadline in the Disability chapter, rather than in the Administrative chapter (where Plaintiff argues it should have appeared) was reasonable. See Abena v. Metro. Life Ins. Co., 544 F.3d 880, 884 (7th Cir. 2008) (holding that placement of a contractual limitations period in a section entitled “Claims” was reasonable). The correspondence that MetLife sent to Plaintiff informed SCHARFF v. RAYTHEON COMPANY 12821 her that she had a right to sue and that she could find more information about her rights in the SPD. A reasonable plan participant applying for disability benefits would be expected to read, in its entirety, the Disability chapter of the SPD, as it explains the rules relating to the benefits for which she is applying. The one-year deadline for filing suit regarding disability claims was, logically, placed at the end of the disability chapter, satisfying the nearness requirement of 29 C.F.R. § 2520.102-2(b). [7] Second, within the Disability chapter, the deadline was written in a manner calculated to be understood by the average plan participant and was not minimized. 29 U.S.C. § 1022(a); 29 C.F.R. § 2520.102-2(b). A reasonable plan participant whose disability claim had been denied would proceed, naturally, to examine the information that appears under the large-typeface, bolded, and italicized heading, “Claims Appeal Procedure.” There, the participant would find out that, if she wishes to bring a lawsuit, she must do so within one year of MetLife’s denial of the appeal of her claim. The deadline was not obscured by being placed in the middle of other terms relating to claims appeal procedure; nor was it relegated to “fine print.” We believe that the average plan participant in Plaintiff ’s position would have located and understood the one-year deadline in the SPD. [8] For these reasons, we hold that the placement and display of the one-year statute of limitations met the statutory and regulatory requirements. Turning, then, to the final issue concerning the wording of the SPD, we hold that the placement and display of the one-year statute of limitations sufficed to meet plan participants’ reasonable expectations, assuming that the doctrine applies.