Fourth Circuit Affirms that Courts Cannot Extend Life Insurance Conversion Deadlines

On February 23, 2023, in Hayes v. Prudential Insurance Company of America, the US Court of Appeals for the Fourth Circuit found that courts cannot extend plan deadlines for converting group life insurance coverage to individual coverage, even where extraordinary circumstances prevented an individual from meeting the deadline. The court’s conclusion was grounded in ERISA’s cornerstone principle to adhere to the plan terms.

The plaintiff in this case, Kathy Hayes, sued Prudential Insurance Company of America (Prudential) following Prudential’s denial of life insurance benefits due to lapsed coverage for her late husband, Anthony Hayes. Mr. Hayes worked as an environmental engineer for DSM North America, Inc. (DSM) and was insured under a group life plan with Prudential. In May 2015, Mr. Hayes had to stop working due to late-stage liver disease. He was unable to return to work, and when his employment was terminated in November 2015, his employer-provided group life insurance coverage also ended. The terms of the group plan allowed converting employer-provided coverage to an individual policy. To do so, terminating group participants were required to apply for individual conversion and pay the first premium by the later of 31 days after employer-provided coverage ended or 15 days after receiving written notice of the conversion privilege. Mr. Hayes’ employer provided written notice of the conversion privilege in December 2015. Unfortunately, Mr. Hayes did not contact Prudential about converting his life insurance coverage until 26 days after the conversion deadline. During this time, Mr. Hayes was incapacitated due to late-stage liver disease. He passed away six months later, in June 2016.

Prudential’s denial explained that even if Mr. Hayes was incapacitated weeks prior to his conversion deadline, Prudential was required to decide claims in strict adherence to the plan terms, which did not allow for an extension of the conversion period. Ms. Hayes sued Prudential, asking the court to apply the doctrine of equitable tolling in order to allow an exception to the conversion deadline in light of her husband’s incapacitation and award her benefits.

In reviewing Ms. Hayes’ arguments, the Fourth Circuit acknowledged that courts have previously allowed equitable tolling of statutes of limitations (i.e., extending the deadline to file a lawsuit) where a plaintiff has been prevented from timely filing a lawsuit due to extraordinary circumstances. However, the Fourth Circuit found that because the plan’s life insurance conversion deadline is not tied to the plan’s statute of limitations, it should not be modified by equitable tolling, even where extraordinary circumstances hindered a participant’s ability to meet the deadline. The Fourth Circuit emphasized that ERISA protects “contractually defined” benefits in group benefit plans by requiring plan administrators to follow plan terms, calling the focus on a plan’s written terms “the linchpin of [the] system.” Prudential’s denial of benefits was based on strict adherence to unambiguous plan terms and therefore upheld under ERISA.

The Hayes case underscores the unyielding nature of unambiguous ERISA plan terms like deadlines. The case also illustrates the importance of communicating life insurance conversion deadlines to departing employees. Employers sponsoring group life insurance should carefully review the plan terms in order to understand what is required of them, which could include sending written notice of conversion rights when group coverage terminates. Not only may clear notice of conversion rights be required to satisfy an employer’s ERISA fiduciary duty (when the plan requires such notice by the employer), but it is also the necessary catalyst for employees to meet strict conversion deadlines.

Hayes v. Prudential »