Smith v. Prudential Insurance Company of America

88 F.4th 40

• Court: Court of Appeals for the First Circuit
• Decided: December 6, 2023
• Docket: 23-1168
• Status: Published

Opinion

United States Court of Appeals For the First Circuit

No. 23-1168

BRIAN SMITH,

Plaintiff, Appellant,

v.

PRUDENTIAL INSURANCE COMPANY OF AMERICA,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

[Hon. Mary S. McElroy, U.S. District Judge]

Before

Rikelman, Lipez, and Thompson, Circuit Judges.

George E. Lieberman, with whom Gianfrancesco & Friedemann was on brief, for appellant. Ian H. Morrison, with whom Seyfarth Shaw LLP was on brief, for appellee.

December 6, 2023 RIKELMAN, Circuit Judge. Brian Smith sued Prudential

for breach of fiduciary duty after it terminated his long-term

disability benefits under an insurance policy it issued. Although

the policy specified a three-year limitations period to file a

lawsuit, it also, inexplicably, started the limitations clock on

the date Smith was required to submit proof that he was disabled,

not on the date Prudential allegedly breached the policy by

stopping payment. As a result, the clock had already run out by

the time Smith sued.

Smith now appeals from the entry of summary judgment

against him on the ground that his lawsuit was filed too late. He

asks us to reverse based on three arguments litigated by the

parties below but not addressed by the district court, including

a potentially winning argument that enforcing the limitations

scheme in this case would violate Rhode Island public policy.

There are compelling reasons for concluding that the limitations

scheme here may indeed run contrary to Rhode Island public policy,

and holding so would mean a ruling in Smith's favor. But because

we believe that reversing and remanding on that ground arguably

would amount to an expansion of Rhode Island law, we certify the

public policy question to the Rhode Island Supreme Court.

- 2 - I. BACKGROUND

A. Relevant Facts1

Brian Smith, a Rhode Islander, was an accountant and

vice president for tax operations of Comverse Technology when he

began experiencing symptoms of cognitive decline in 2015. After

a neuropsychologist diagnosed Smith with mild cognitive

impairment, Smith sought the care of an occupational physician,

who determined that Smith could no longer work as a tax

professional. Smith left his job on October 31, 2015.

Shortly thereafter, Smith filed a timely claim for

benefits under his long-term disability policy with Prudential.

Prudential approved his claim and began paying Smith on January

30, 2016. Smith received a monthly benefit of $3,000 for nearly

two and a half years until Prudential notified him on May 3, 2018,

that his benefits had been terminated effective the next day.

After exhausting his right to internal appeals with Prudential,

Smith received his final denial notice on August 28, 2019.

Smith's insurance policy does not include a single,

stand-alone provision specifying a date by which Smith had to sue

Prudential after a denial or termination of benefits. Instead, it

includes a mystifying six-step calculation ("the limitations

Because Smith appeals from a grant of summary judgment to 1

Prudential, we construe the facts in the light most favorable to him as the non-moving party. Minturn v. Monrad, 64 F.4th 9, 14 (1st Cir. 2023).

- 3 - scheme") requiring Smith and other beneficiaries to piece together

disparate provisions and information from four documents.2 We have

previously characterized limitations schemes nearly identical to

the one in this case as "labyrinthine" and "designed to confuse."

Santana-Díaz v. Metro. Life Ins. Co., 816 F.3d 172, 176 n.3,

181 n.10 (1st Cir. 2016).

The puzzle here begins with this clause in the policy:

You can start legal action regarding your claim 60 days after proof of claim has been given and up to 3 years from the time proof of claim is required, unless otherwise provided under federal law.

(Emphasis added.) On a separate page, the policy states that proof

of claim must be submitted "no later than 90 days after your

elimination period ends." Still another section of the policy

states that an elimination period is a fixed duration during which

a beneficiary must show "continuous disability." Under the policy,

the elimination period may be 13 weeks or 26 weeks depending on

whether the beneficiary is enrolled in an "Option 1" or "Option 2"

plan. The fact that Smith was part of an Option 1 plan is specified

2 The four documents are: a Certificate of Coverage, a Claims and Appeals addendum (which, by its terms, is "not part of the . . . Certificate"), the letter initially approving Smith's long-term disability claim, and a Group Contract between J.P. Morgan Chase and the American Institute of Certified Public Accountants (AICPA) Trust, of which Smith is a beneficiary. Under the Group Contract, Prudential provides long-term disability insurance to beneficiaries of the trust, including Smith, and Smith's individual insurance policy incorporates the Group Contract. The Group Contract includes a provision stating that it is governed by New York law.

- 4 - in yet another, separate document: the letter approving his

benefits. So, to sum up the first four steps of the calculation:

For Option 1 plan participants like Smith, legal action must be

brought within three years of the expiration of the 13-week

elimination period, plus 90 days. In total, that is roughly three-

and-a-half years from the date the beneficiary ceases working.

The math continues: Two more steps are necessary to

calculate the ultimate deadline for filing a lawsuit. When

Prudential denies benefits -- or, as for Smith, approves benefits

but later terminates them -- the policy affords a beneficiary two

opportunities for internal administrative review, described in a

separate addendum. First, a beneficiary has 180 days from the

date of a denial or termination notice to file an internal appeal,

to which Prudential must respond within 45 days. If Prudential

denies the initial appeal, then a beneficiary may file a second

appeal, again within 180 days, to which Prudential must also

respond within 45 days. While Prudential reviews the second appeal

(although not the first) the company agrees to toll the limitations

period. Hidden within the policy is the fact that although the

second appeal is voluntary, the first appeal is mandatory and must

- 5 - be exhausted before a beneficiary can sue.3 Even an accountant

could find it challenging to piece this formula together.

We now turn our focus to how the limitations math added

up for Smith. Smith ceased work because of his disability on

October 31, 2015, starting the clock on his 13-week elimination

period, which ended January 30, 2016. His proof of claim was due

90 days later, or by April 29, 2016. So under the policy, not

taking into account any internal appeals, Smith's window to sue

would have expired three years later, on April 29, 2019.

After initially paying benefits for over two years,

Prudential terminated Smith's disability payments effective May 4,

2018. Smith's mandatory first appeal was due 180 days later, on

October 31, 2018. He timely filed that appeal on July 2, 2018,

and Prudential notified him that it stood by its termination on

November 13, 2018. Smith then had another 180 days to file a

second, voluntary internal appeal, making that request due May 12,

2019.4 He timely sought that review on March 1, 2019, and on

3 The policy provides that if a beneficiary "elect[s] to initiate a lawsuit without submitting to a second level of appeal, the plan waives any right to assert that you failed to exhaust administrative remedies," but contains no such waiver for the first appeal. 4 Had Smith taken the full 180 days allowed under the policy to submit his second appeal, the limitations period would have already run by the time he submitted it, underscoring the "Alice in Wonderland effect," see infra, of running a limitations period before a claim accrues.

- 6 - August 28, 2019, Prudential reaffirmed its termination.5 Note that

Prudential's ultimate denial of benefits in August was roughly

four months after the deadline to sue indicated by the first four

steps of the limitations scheme.

Prudential suggests that after it rejected the second

appeal, Smith still had six months to bring suit under the tolling

provision that applies to the second, voluntary appeal. The plain

language of the policy, however, indicates that Smith only had

about eight weeks to sue after Prudential completed its second

review.6 But although the shorter period available to Smith

5 The policy specifies that an appeal is "deemed denied" if Prudential doesn't respond to an appeal request within 45 days. Prudential exceeded the 45-day deadline in deciding both of Smith's internal appeals, so the tolling during Smith's second appeal may have expired not 180 days after Smith requested the second appeal, but only 45 days after. The parties do not raise this point. 6 Prudential's suggestion that Smith still had six months to sue is at odds with the ordinary operation of a tolling agreement. The tolling clause states that, "[i]f you elect to submit the dispute to the second level of appeal, the plan agrees that any statute of limitations or other defense based on timeliness is tolled during the time that the appeal is pending." (Emphasis added.) Tolling "stop[s] the running of" a limitations period, which restarts when the tolling period ends. Toll, Black's Law Dictionary (10th ed. 2014). By our math, the tolling provision paused the limitations period on March 1, 2019, when Smith filed his second appeal. This was about eight weeks before the limitations period was otherwise scheduled to end on April 29, 2019. When his second appeal was denied and the clock restarted on August 28, 2019, Smith had, at best, only eight weeks to sue. Prudential suggests that this calculation would "mak[e] Smith's lawsuit even more untimely," but we see it as underscoring the concerns presented by a limitations scheme that runs from a date other than when a cause of action accrues.

- 7 - highlights the unfairness of barring Smith's breach of fiduciary

duty claim, the legal arguments he presents on appeal do not turn

on the difference.

No provision of the policy addresses the basic fact that

a beneficiary does not have a cause of action against their insurer

until the insurer denies or terminates benefits. As Smith lays

out in his brief, the rub of the limitations scheme is that

Prudential can initially approve benefits after the limitations

period has already begun to run, then terminate them six months,

six weeks, or six days before the confusing limitations scheme

expires -- or any time thereafter.

B. Legal Proceedings

Smith sued Prudential for breach of fiduciary duty on

March 12, 2021, within three years of when Prudential stopped

paying his disability benefits. After Prudential moved to dismiss

the case as time-barred, the district court permitted limited

discovery on one of Smith's counterarguments: that the Employee

Retirement Income Security Act of 1974 (ERISA) governed the policy,

making the lawsuit timely. Once discovery concluded, the parties

cross-moved for summary judgment on the timeliness of Smith's

complaint.

In his motion, Smith argued that ERISA applied to the

policy, but he also pursued several state law arguments for why,

even if it did not, his breach of fiduciary duty claim was not

- 8 - time-barred. Prudential responded to the substance of each of

Smith's arguments, and the district court ultimately granted

summary judgment to Prudential on its timeliness defense. But

although Smith had opposed Prudential's motion for summary

judgment on five separate legal grounds, the district court

evaluated only two of them, both related to ERISA, and concluded

that Smith had produced no evidence that his policy was governed

by ERISA. It did not address Smith's separate state law defenses

as to timeliness or his argument that the contract by its express

terms is limited by federal law principles.

Smith timely appealed. We have appellate jurisdiction

under 28 U.S.C. § 1291 to consider all of Smith's arguments

opposing Prudential's motion for summary judgment, including his

state law arguments. The district court had diversity jurisdiction

to consider those arguments even after finding that Smith's plan

was not governed by ERISA. 28 U.S.C. § 1332(a)(1).

Before this court, Smith expressly waives each of the

two ERISA-related arguments ruled on by the district court. But

he presses the three other preserved arguments that the district

court, without explanation, did not reach.7 Among these is Smith's

7 We note that Smith's almost exclusive focus on his ERISA argument at the motion to dismiss stage, which led to discovery on his ERISA claim, may have contributed to the district court overlooking his state law arguments on his cross-motion for summary judgment.

- 9 - argument that enforcing the limitations scheme here to bar him

from bringing suit would violate Rhode Island public policy.

II. STANDARD OF REVIEW

We review a district court's grant of summary judgment

de novo. Minturn v. Monrad, 64 F.4th 9, 13 (1st Cir. 2023). In

doing so, we consider all facts and draw all reasonable inferences

from those facts in the light most favorable to the non-moving

party, here Smith. Id. at 14.

On appeal, Smith urges us to consider three legal

arguments never addressed by the district court, including two

based on Rhode Island state law. When sitting in diversity

jurisdiction, we look to state law for the substantive rules of

decision governing state law arguments. Fithian v. Reed, 204 F.3d

306, 308 (1st Cir. 2000) (citing Erie R.R. Co. v. Tompkins, 304

U.S. 64, 78 (1938)). Our goal is to predict how the state's

highest court would rule on the legal questions before us, "even

if our independent judgment on the question may differ." Aubee v.

Selene Fin. LP, 56 F.4th 1, 4 (1st Cir. 2022) (quoting Blinzler v.

Marriott Int'l, Inc., 81 F.3d 1148, 1151 (1st Cir. 1996)). "[W]e

seek guidance in analogous state court decisions, persuasive

adjudications by courts of sister states, learned treatises, and

public policy considerations identified in state decisional law."

Id.

- 10 - III. DISCUSSION

Prudential asks us to evaluate each of Smith's three

arguments on appeal and affirm the district court's summary

judgment ruling on other grounds. After careful review, we find

no merit in two of Smith's arguments. But because Smith has raised

a non-frivolous claim that enforcing the limitations scheme here

would violate Rhode Island public policy, and because we conclude

that so holding arguably would expand Rhode Island law, we certify

the last issue to the Rhode Island Supreme Court. See In re

Hundley, 603 F.3d 95, 98 (1st Cir. 2010) (acknowledging that we

may certify "on our own motion when neither party has requested

certification"). We consider each of Smith's arguments on appeal

below, leaving the most complicated for last.

A. Smith's continued attempts to apply ERISA to the policy are

waived and, in any case, unpersuasive.

Despite Smith's express waiver of his claims based on

ERISA, he continues to insist on appeal that his policy's

limitations scheme is invalid under federal law and supports that

argument solely by invoking ERISA.8 In particular, he points to

the provision stating that the policy's specified limitations

8 As Smith's opening brief states, he "does not challenge in his appeal the District Court's rulings that ERISA does not control the Policy or that Prudential was not bound to follow its internal policy of applying the ERISA claims procedures to both its ERISA and non-ERISA policies."

- 11 - period applies "unless otherwise provided under federal law." To

avoid treating this phrase as surplusage, Smith invites us to hold

that "unless otherwise provided under federal law" imports ERISA

requirements into his policy. Smith further contends that the

limitations scheme would be invalid under those requirements, as

interpreted by our precedents, because his denial letter omitted

the precise deadline by which Smith had to sue. See Santana-Díaz,

816 F.3d at 179-82 (interpreting 29 C.F.R. § 2560.503-1(g)(1)(iv)

to require denial notices to include the time limit for bringing

a civil action).

In staking out this position, Smith ignores that he

expressly waived his argument that ERISA covers his policy or that

Prudential was otherwise required to apply ERISA procedures to his

claim. And during oral argument, Smith could not point to any

federal law other than ERISA that could be the subject of this

clause, and instead reiterated his waived arguments that the policy

is governed by ERISA or its regulatory requirements. Even if this

precise argument were not waived, the fact that the policy includes

the phrase "unless otherwise provided under federal law" does not

require us to import ERISA protections into Smith's concededly

non-ERISA policy. See Alston v. International Association of

Firefighters, Local 950, 998 F.3d 11, 25 n.3 (1st Cir. 2021)

(addressing waived argument for "sake of completeness"). The

record reflects that Prudential issues policies that are subject

- 12 - to ERISA, as well as policies that are not. As the district court

recognized and Smith concedes, ERISA covers benefit plans

"established or maintained by an employer or by an employee

organization." 29 U.S.C. § 1002(1). The language "unless

otherwise provided" in Smith's long-term disability policy

indicates that federal law may require departure from the

limitations clause for some of Prudential's policies -- those

sponsored by an employer or employee organization. Concluding

that Smith's is not such a policy does not deprive the limitations

clause of its due meaning.

B. Smith cannot read the limitations scheme out of the policy.

Next, relying on a single case, Smith turns to state law

and contends that Rhode Island's ten-year statute of limitations

for breach of contract claims, not the policy's limitations scheme,

should apply here, making his claim timely. In Smith's view, the

Rhode Island Supreme Court has held that when a contract "does not

clearly specify either the choice of forum or the statute of

limitations that would apply to the case," then the courts must

use an interest-weighing approach to determine the applicable

statute of limitations. Webster Bank v. Rosenbaum, 268 A.3d 556,

562 (R.I. 2022).

Smith's argument likely overreads Webster Bank. See id.

at 561-62 (indicating that the absence of a clause selecting a

preferred forum or statute of limitations is not dispositive in

- 13 - deciding whether to proceed to an interest-weighing analysis).

But even on Smith's reading, the policy here is unlike the mortgage

agreement at issue in that case. As Prudential's brief argues,

that agreement called for an interest-weighing analysis to

identify the applicable limitations window because the agreement

"d[id] not clearly specify . . . the statute of limitations that

would apply to the case" or contain any contractual limitations

period. See id. at 562. Smith's policy, although in a very

confusing fashion, does contain a contractual limitations period.

C. Rhode Island law likely governs, and we certify Smith's

remaining argument to the Rhode Island Supreme Court because

enforcing the limitations scheme to bar Smith's lawsuit may

violate Rhode Island public policy.

Finally, Smith argues that Rhode Island law should apply

to his long-term disability policy with Prudential and that if it

does, enforcing the limitations scheme to bar this lawsuit would

violate Rhode Island public policy. In particular, he contends

that several Rhode Island Supreme Court decisions, and a provision

in the Rhode Island Constitution cited in some of those decisions,

indicate that running the contractual limitations period before

Smith's claim against Prudential even accrued would violate public

policy. Applying that principle here, Smith argues that Prudential

should have been denied summary judgment on its timeliness defense.

- 14 - We agree that Rhode Island law likely governs the policy.

Applying Rhode Island law, we also conclude that Smith has raised

a non-frivolous argument that enforcing the limitations scheme to

bar him from even filing suit would violate Rhode Island public

policy. But because there is no controlling precedent directly on

point, the public policy question is dispositive of this appeal,

and reversal on this ground arguably would expand Rhode Island

law, we certify the question to the Rhode Island Supreme Court.

1. Rhode Island law governs this policy.

To begin, we must evaluate whether Rhode Island law

applies at all, as Smith contends, given that the policy expressly

subjects itself to New York law. It is true that we may "avoid

[a] 'conflicts' question" if there is "no reason to believe [the

contending states' laws] differ[] in any relevant respect," as

Prudential suggested at oral argument. In re Pioneer Ford Sales,

Inc., 729 F.2d 27, 31 (1st Cir. 1984). But because Smith has

pointed to several unique aspects of Rhode Island law, including

an open-courts provision in the Rhode Island Constitution that New

York's constitution lacks, see infra, we have good reason to

believe this case may turn on the conflict between the two states'

laws, and so this issue requires our attention. We conclude that

Rhode Island law likely applies, as we explain momentarily.

Nevertheless, we defer to the ultimate view of the Rhode Island

Supreme Court should it decide to seek additional briefing on the

- 15 - enforceability of the choice-of-law clause under Rhode Island's

conflict of law principles.

When analyzing choice-of-law issues, federal courts

sitting in diversity apply the substantive law of the forum state,

here Rhode Island, including its conflict of laws rules. See

Fithian, 204 F.3d at 308 (citing Erie R.R. Co., 304 U.S. at 78).

Rhode Island law generally permits parties "to agree that the law

of a particular jurisdiction will govern their transaction."

Terrace Grp. v. Vt. Castings, Inc., 753 A.2d 350, 353 (R.I. 2000)

(quoting Sheer Asset Mgmt. Partners v. Lauro Thin Films, Inc., 731

A.2d 708, 710 (R.I. 1999) (per curiam)); see also Owens v.

Hagenback-Wallace Shows Co., 192 A. 158, 164 (R.I. 1937). But

that presumption is not ironclad.9 See Com. Park Realty, LLC v.

HR2-A Corp., 253 A.3d 1258, 1270 (R.I. 2021) (endorsing exceptions

provided under Restatement (Second) of Conflict of Laws § 187(2)

At oral argument, Prudential suggested that Restatement 9

(Second) Conflict of Laws § 187(1), which enforces choice-of-law clauses "if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue," requires application of New York law. Restatement (Second) of Conflict of L. § 187(1) (Am. L. Inst. 1971). We disagree that section 187(1) would apply to the question Smith presents here: whether the limitations scheme is valid under Rhode Island public policy. The parties could not have "resolved" whether the limitations scheme is invalid on public policy grounds "by an explicit provision in their agreement." Id. § 187(1) & cmt. d. Instead, whether we should apply New York law to the "validity" of a contract is governed by section 187(2) and its exceptions. Id. § 187(1) cmt. d; see also Com. Park Realty, LLC v. HR2-A Corp., 253 A.3d 1258, 1270-72 (R.I. 2021).

- 16 - (Am. L. Inst. 1971)); Owens, 192 A. at 164. Rhode Island does not

enforce choice-of-law clauses if "the chosen state has no

substantial relationship to the parties or the transaction and

there is no other reasonable basis for the parties' choice."10

Com. Park, 253 A.3d at 1270 (quoting Restatement (Second) of

Conflict of L. § 187(2)(a) (Am. L. Inst. 1971)). In the absence

of an effective choice by the parties, Rhode Island enforces the

law of the state with the "most significant relationship" to the

contract under section 188 of the Restatement. Id. at 1271

(quoting Restatement (Second) of Conflict of L. § 188(1) (Am. L.

Inst. 1971)).

Here, New York bears "no substantial relationship to the

parties or the transaction," and Prudential has not offered any

"other reasonable basis for the parties' choice." Id. at 1270

(quoting Restatement (Second) of Conflict of L. § 187(2)(a) (Am.

10Rhode Island also declines to enforce choice-of-law clauses if "application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which . . . would be the state of the applicable law in the absence of an effective choice of law by the parties." Com. Park, 253 A.3d at 1270 (quoting Restatement (Second) of Conflict of L. § 187(2)(b) (Am. L. Inst. 1971)). If Smith is correct that enforcing the limitations clause violates Rhode Island public policy, then New York law would likely be inapplicable under section 187(2)(b) as well. Id. at 1271. But we do not reach section 187(2)(b) because we are satisfied that the clause is unenforceable under section 187(2)(a) and because doing so would require assuming the conclusion of the public policy question on which we certify.

- 17 - L. Inst. 1971)). Rhode Island law recognizes a substantial

relationship to the chosen state if the state is (1) "the place of

performance of one of the parties," (2) "the domicile of one of

the parties," or (3) "the principal place of business of a party."

Sheer Asset, 731 A.2d at 710.

Prudential's sole argument for New York's relationship

to the parties and the contract is that the Group Contract states

that it was "delivered in" New York, suggesting New York is the

place of contracting. Prudential argues that it "did not issue an

individual insurance policy to Smith in Rhode Island; rather, [it]

entered into a group contract of insurance with the AICPA trust,

which was delivered in the state of New York." But it cites no

law for its assertion that the group policyholder (the AICPA

trust), rather than the individual policyholder (Smith), is the

insured to whom delivery establishes the place of contracting.

Even assuming that the delivery of the Group Contract, rather than

Smith's individual insurance certificate, were the relevant point

of analysis under section 187(2)(a), Rhode Island has not

recognized the location of delivery of a contract as suggesting a

substantial relationship to the chosen state. See Com. Park, 253

A.3d at 1271 (relying on lender's domicile and principal place of

business to conclude that Massachusetts had a substantial

relationship to the loan at issue); Sheer Asset, 731 A.2d at 710

(relying on lender's domicile and principal place of business to

- 18 - establish that Connecticut had a substantial relationship to the

loan agreement at issue).

Nor does New York bear any other relationship to the

parties or the policy recognized by Rhode Island law. The record

does not show that either party performed any obligations under

the contract in New York, nor has Prudential argued otherwise;

neither party is domiciled in New York (Prudential is domiciled in

New Jersey); and Prudential's principal place of business is

Newark, New Jersey.

Having determined that New York bears no substantial

relationship to the case under section 187(2)(a), Rhode Island law

requires that we next probe which state has the "most significant

relationship" to the contract under section 188. Com. Park, 253

A.3d at 1271 (quoting Restatement (Second) of Conflict of L.

§ 188(1) (Am. L. Inst. 1971)). Rhode Island's applicable test

balances five factors: (1) "the place of contracting"; (2) "the

place of negotiation of the contract"; (3) "the place of

performance"; (4) "the location of the subject matter of the

contract"; and (5) "the domicile, residence, nationality, place of

incorporation and place of business of the parties." Id. (citing

Restatement (Second) of Conflict of L. § 188(2) (Am. L. Inst.

1971)).

We think the balance of these factors indicates that a

Rhode Island court would apply domestic law in this case. First,

- 19 - the record contains little evidence of the place of contracting

between Smith and Prudential. The second factor is also

indeterminate here, as contracts of adhesion involve little

negotiation. But the remaining three factors point toward Rhode

Island. Prudential performed under the contract in Rhode Island

by paying benefits to Smith there for more than two years. Smith

also experienced his disability in Rhode Island and Massachusetts,

where he worked, not New York. And Smith is domiciled in Rhode

Island and resides there.

Other record evidence also suggests Prudential

understood Rhode Island's relationship to the contract. For

example, both of Prudential's denial letters advised Smith that he

could request administrative review by the Rhode Island Department

of Business Regulation and provided contact information for the

department's insurance division.

Prudential contends that the state bearing the "most

substantial relationship with the underlying contract" is "New

York, where the Group Contract was delivered," citing Baker v.

Hanover Insurance Company, 568 A.2d 1023, 1025 (R.I. 1990).

Prudential argues in its brief that Hanover "appl[ied]

Massachusetts law . . . where [an] insurance policy was executed

and delivered in Massachusetts to a Massachusetts corporation

whose principal place of business was in Massachusetts, although

the insured was a Rhode Island resident." But Prudential misreads

- 20 - Hanover. First, Hanover involved a contract that did not include

a choice-of-law clause at all, and in such cases, Rhode Island

applies a different test than the balancing under Commerce Park

that we apply here. See Webster Bank, 268 A.3d at 560 ("[I]n the

absence of a contractual stipulation about which law controls,

Rhode Island's conflict-of-law doctrine provides that the law of

the state where the contract was executed governs." (quoting

DeCesare v. Lincoln Benefit Life Co., 852 A.2d 474, 483-84 (R.I.

2004))). Second, Hanover involved a car accident between an

uninsured motorist and an employee driving a company vehicle owned

and insured by a Massachusetts corporation. 568 A.2d at 1024.

Although the employee, a Rhode Island resident, was the plaintiff,

the insured was the Massachusetts corporation, not (as Prudential

says) the employee. See id.; Hartford Cas. Ins. Co. v. A & M.

Assocs., Ltd., 200 F. Supp. 2d. 84, 87 (D.R.I. 2002) (citing

Hanover, 568 A.2d at 1025))). Smith, the insured here, is a Rhode

Island resident, and Hanover does not otherwise alter our

conclusion that the remaining factors under Commerce Park weigh in

favor of Rhode Island law. See supra.

- 21 - 2. Smith raises non-frivolous and dispositive questions under

Rhode Island law about the validity of the policy's

limitations scheme.

Having determined that Rhode Island law likely governs

the policy, we now address Smith's substantive state law argument.

Smith contends that enforcing the limitations scheme to bar his

suit would violate Rhode Island public policy. Specifically, he

argues that it would contravene fundamental principles of Rhode

Island law to permit the limitations scheme to run from a time

other than the date that Smith's cause of action against Prudential

accrued.11 In support, Smith relies on a number of Rhode Island

Supreme Court cases and Article I, Section 5 of the Rhode Island

Constitution. See Kennedy v. Cumberland Eng'g Co., Inc., 471 A.2d

195, 198 (R.I. 1984); Am. States Ins. Co. v. LaFlam, 69 A.3d 831,

845 (R.I. 2013); Com. Park, 253 A.3d at 1271-72 (voiding a choice-

of-law clause setting an interest rate above limits permitted by

Rhode Island law as against public policy).

In our view, Smith's public policy argument could have

merit for four reasons. First, the Rhode Island state courts have

often voided or refused to enforce contractual provisions on public

11Smith's styling of this argument varies at times between directly challenging the limitations scheme as unconstitutional and arguing that its enforcement here would violate public policy, including as reflected in Article I, Section 5 of the Rhode Island Constitution. We treat his argument as one based on the state's fundamental public policy.

- 22 - policy grounds. See, e.g., Mendez v. Brites, 849 A.2d 329, 338

(R.I. 2004) ("[T]his Court may deem contractual provisions that

violate public policy to be unenforceable."). Smith has cited

several of those cases in his brief, see supra, but there are many

others. See, e.g., NV One, LLC v. Potomac Realty Cap., LLC, 84

A.3d 800, 810 (R.I. 2014) (holding that usury savings clauses

violate Rhode Island public policy); Ryan v. Knoller, 695 A.2d

990, 992 (R.I. 1997) (invalidating intoxication exclusions in

rental car insurance agreements as a matter of public policy). A

number of those cases have voided limitations periods, including

in contracts. See LaFlam, 69 A.3d at 845; Kennedy, 471 A.2d at

198; cf. W. Rsrv. Life Ins. Co. v. ADM Assocs., LLC, 116 A.3d 794,

806 (R.I. 2015) (upholding incontestability clause in annuity

agreement as consistent with public policy).

Second, the Rhode Island Supreme Court has condemned the

"Alice in Wonderland effect" of allowing a limitations period to

begin to run before a cause of action even exists and has held

that doing so would be "palpably unjust." Kennedy, 471 A.2d at

201 (quoting Wilkinson v. Harrington, 243 A.2d 745, 753 (R.I.

1968)); see also id. ("Except in topsy-turvy land, you can't die

before you are conceived, or be divorced before ever you marry, or

harvest a crop never planted, or burn down a house never built, or

miss a train running on a non-existent railroad. For substantially

similar reasons, it has always heretofore been accepted, as a sort

- 23 - of logical 'axiom,' that a statute of limitations does not begin

to run against a cause of action before that cause of action

exists, i.e., before a judicial remedy is available to a

plaintiff." (quoting Heath v. Sears, Roebuck & Co., 464 A.2d 288,

295-96 (N.H. 1983))).

Rhode Island also has held that, as a "general

rule . . . a contract action accrues at the time the contract is

breached." LaFlam, 69 A.3d at 841 (quoting Berkshire Mut. Ins.

Co. v. Burbank, 664 N.E.2d 1188, 1189 (Mass. 1996)). As the Rhode

Island Supreme Court quoted from Burbank: "Prior to the time when

the contract is violated there is no justiciable controversy, and

it would be illogical to let the statute of limitations for

bringing an action begin to run before the action can be brought."

Id. (quoting Burbank, 665 N.E.2d at 1189).

In fact, Rhode Island has taken particular umbrage with

contractual limitations schemes like the one at issue here, which

start the clock "before a justiciable cause of action [against the

insurer] may even exist." Id. at 845. Addressing a certified

question from this court, LaFlam voided a clause limiting the time

to bring a lawsuit for payment under uninsured/underinsured

motorist (UM/UIM) coverage that ran from the date of the victim's

car accident rather than the date her cause of action against the

insurer accrued. Id. at 838. The clause "may have [had] the . . .

effect . . . of barring recovery before the insured knows or has

- 24 - reason to know that she has a UM/UIM claim against her insurer."12

Id. (quoting Am. States Ins. Co. v. LaFlam, 672 F.3d 38, 43 (1st

Cir. 2012)). The court explained:

[An] insured is not injured by his or her UM/UIM carrier and, therefore, has no right to seek judicial relief against the insurer unless and until the insurer breaches the insurance contract. "That breach does not occur until the insurer refuses payment (or arbitration if applicable)."

Id. at 841 (quoting Palmero v. Aetna Cas. & Sur. Co., 606 A.2d

797, 799 (Me. 1992)). The court concluded that this arrangement

"frustrat[ed] the public policy concerns embodied in the state's

UM/UIM statute," namely, "indemnification for an insured's loss

rather than defeat of his or her claim." Id. at 845 (quoting

DiTata v. Aetna Cas. & Sur. Co., 542 A.2d 245, 247 (R.I. 1988)).

12 The Rhode Island Supreme Court agreed with our characterization of this risk as "unique" and "present in the UM/UIM context but not in other insurance contexts." LaFlam, 69 A.3d at 838 (quoting Am. States Ins. Co. v. LaFlam, 672 F.3d 38, 43 (1st Cir. 2012)). But in our view, the limitations scheme here creates a remarkably similar dynamic to the scheme at issue in LaFlam. Further, what the Rhode Island Supreme Court saw as unique in UM/UIM motorist coverage is that "it [may] not become clear that the insured has such a claim until after the insured has attempted to obtain compensation from the tortfeasor" and discovered she is underinsured relative to the insured's injury or loss. Id. (alteration in original) (quoting LaFlam, 672 F.3d at 43). As the facts of the present case make clear, Smith could not have known he had a claim against Prudential under the policy until it terminated his benefits. Indeed, in the UM/UIM context, the motorist arguably would be on notice that the status of the responsible party's insurance coverage needed to be determined, whereas Smith had no inkling he would have a "loss" until Prudential terminated his benefits more than two years after approving them.

- 25 - Substituting just a few terms in the LaFlam analysis --

"a long-term disability" claim for "an uninsured motorist" claim

and the date "proof of claim was required" for the date "of the

accident" -- gives a succinct statement of the problem with the

limitations scheme here:

If the limitations period for [a long-term disability] claim commenced on the date [proof of claim was required], the insurer could potentially deny an insured's claim or refuse payment shortly before the limitations period ends, leaving the insured with insufficient time to file suit. Similarly, the insurer could deny the insured's claim shortly after the limitations period ends, thereby barring the insured from filing suit at all.

Id. at 844-45 (quoting McDonnell v. State Farm Mut. Auto. Ins.

Co., 299 P.3d 715, 733 (Alaska 2013)). The result is that the

limitations scheme may extinguish claims before they ever mature

into a viable cause of action through no fault of the insured.

Here, Prudential's alleged breach did not occur until either August

28, 2019, the date of Prudential's final benefit denial, or

November 2018, when Prudential rejected Smith's first mandatory

appeal and Smith had therefore satisfied his exhaustion

obligations, or at the very earliest in May 2018, when Prudential

stopped its benefits payments to Smith. Smith's lawsuit, filed

March 12, 2021, was initiated within three years of all of these

dates. Yet the limitations scheme drags Smith's claim into

untimeliness.

- 26 - Third, Rhode Island courts view it as a matter of

"fundamental [in]justice" to totally "bar adjudication of a claim

even before it arises." Kennedy, 471 A.2d at 198-99 (quoting

Wilkinson, 243 A.2d at 753). Article I, Section 5 of the Rhode

Island Constitution, upon which Smith explicitly relies, has been

interpreted to prohibit such a result, at least as applied to a

state statute of repose.13 Id. at 198-201. In response, Prudential

has not cited a Rhode Island case suggesting that a public policy

argument cannot be based on common law principles or a state

constitutional provision, as Smith argues here. See Com. Park,

253 A.3d at 1273 (Robinson, J., dissenting in part) (suggesting

that fundamental public policy resides more forcefully in the state

constitution than in statutes).

In Kennedy, the Rhode Island Supreme Court held

unconstitutional a statute of repose that barred product liability

claims filed more than ten years after the date the product "was

first purchased for use or consumption," regardless of the date of

13 Article I, Section 5 gives any person within the state access to a judicial remedy: Every person within this state ought to find a certain remedy, by having recourse to the laws, for all injuries or wrongs which may be received in one's person, property, or character. Every person ought to obtain right and justice freely, and without purchase, completely and without denial; promptly and without delay; conformably to the laws. R.I. Const. art. I, § 5.

- 27 - an individual's injury. 471 A.2d at 197 (quoting R.I. Gen. Laws

§ 9-1-13(b)). The court objected to the running of a limitations

period before the plaintiff "at least discovered, or should have

discovered, his or her injury." Id. at 199. Although Kennedy

theoretically still had one year left to sue under the statute of

repose at the time of his injury, the court was particularly

concerned that in future cases, "[p]laintiffs may be absolutely

barred from court through no carelessness or fault of their own

because they were injured by products that did not manifest their

defects until after they were ten years old."14 Id. at 200. The

court invalidated the statute of repose under Article 1, Section

5, finding Kennedy's claim timely because to hold otherwise would

be "palpably unjust." Id. at 199 (quoting Wilkinson, 243 A.2d at

753); see also id. (remarking that such limitations periods also

waste litigants' and courts' resources by encouraging the filing

of premature claims to preserve any chance of recovery).

Fourth, the Rhode Island Supreme Court has made clear

that "the determination of whether a particular contract provision

violates public policy is case-specific," LaFlam, 69 A.2d at 835,

and the facts of this case are troubling. As discussed above,

Prudential argues that the three-year limitations period here

14Kennedy was unable to determine when the statute of repose began to run until the defendant's responses to interrogatories revealed the date the product was first purchased. Kennedy, 471 A.2d at 199.

- 28 - began to run in April 2016, more than two years before Smith could

possibly know Prudential would deny his benefits. Indeed,

Prudential suggests that the limitations period began to run in

2016 even though it was paying benefits to Smith at the time and

would continue to do so monthly until May 2018. Adopting

Prudential's arguments also would mean that Smith would have been

left with only about eight weeks to sue after Prudential's final

denial. Prudential has not pointed us to any Rhode Island law

permitting such a shortened limitations period.

To be sure, Rhode Island has upheld limitations on the

time to bring claims as serving the "salutary purpose[]" of

encouraging lawsuits "when events and circumstances are still

fresh in the minds of the parties and witnesses." Wilkinson, 243

A.2d at 752 (citation omitted); Renaud v. Sigma-Aldrich Corp., 662

A.2d 711, 717 (R.I. 1995) (upholding three-year limit on injury

claims measured from accrual as constitutional). But limits on

timeliness are still subject to Rhode Island's public policy and

its constitutional bar on "total[ly] den[ying] access to the courts

for adjudication of a claim even before it arises." Zab v. R.I.

Dep't of Corr., 269 A.3d 741, 748 (R.I. 2022) (first alteration in

original) (quoting Kennedy, 471 A.2d at 198).

Prudential also invites us to distinguish Zab and

Kennedy on the ground that those plaintiffs' right to sue was

"extinguished entirely," unlike here, where Smith had a brief

- 29 - window of time left to bring suit. We think the facts here are

closer to Zab and Kennedy than Prudential does. See supra note 6.

Nevertheless, we agree that neither decision squarely

controls this case. Kennedy involved a direct challenge to a state

statute of repose under Article 1, Section 5, whereas here, Smith

has not challenged the underlying Rhode Island statute on long-

term disability claims on which the limitations period is loosely

based. And unlike the plaintiff in Kennedy, Smith had six months

to bring a timely lawsuit once Prudential decided his first appeal,

and eight weeks to sue after it decided his second appeal.

Further, despite the similarities between the impact of

the limitations structure in LaFlam and the facts of this case,

LaFlam does not control this case either. We agree with Prudential

that Smith's insurance policy contains language required under a

Rhode Island statute, see R.I. Gen. Laws § 27-18-3(a)(11)

(specifying "Required Provisions" for "Accident and Sickness

Insurance Policies"), unlike the limitations clause in LaFlam,

which was contrary to the Rhode Island statutes providing for

UM/UIM coverage, see LaFlam, 69 A.3d at 845. The Rhode Island

Supreme Court has not yet weighed in on section 27-18-3(a)(11), so

we lack the benefit of its view on the statute's choice of when to

start the limitations clock. But whereas the parties in LaFlam

only cited statutory and common law principles in their favor,

here, Smith invokes Article I, Section 5 as an additional source

- 30 - of state public policy. Because the public policy Smith identifies

resides, in part, in the Rhode Island Constitution, we disagree

with Prudential that section 27-18-3(a)(11) necessarily disposes

of Smith's argument.

Prudential mounts two final counterarguments against the

timeliness of Smith's claim in support of its request that we

affirm on other grounds. First, Prudential argues that the U.S.

Supreme Court has upheld the enforceability of a similar

limitations clause in a long-term disability policy. See

Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99, 107-

08 (2013). Heimeshoff involved an enforceability challenge to a

limitations clause in an ERISA policy that, as here, ran for three

years from the date proof of loss was due.15 Id. at 105. The

Court unanimously held that the limitations clause was enforceable

on the ground that it was "reasonable" and was not supplanted by

"a controlling statute to the contrary." Id. at 104 (quoting Order

of United Com. Travelers of Am. v. Wolfe, 331 U.S. 586, 608

(1947)).

15 Prudential also cites non-ERISA cases in which courts, including ours, enforced similar limitations clauses. But these cases do not help Prudential, as none included objections based on Rhode Island public policy. See LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 509-10 (1st Cir. 1998) (denying estoppel claim under Maine law); Kuber v. Prudential Ins. Co. of Am., 819 F. App'x 754, 756 (11th Cir. 2020) (enforcing limitations clause under Delaware contract law).

- 31 - Heimeshoff does not control this case because Smith's

policy is not governed by ERISA. ERISA includes procedural

guardrails, including that an insurer explicitly state when a

limitations period expires in its denial letter to an insured. 29

C.F.R. § 2560.503–1(g)(1)(iv) (2020). Those protections may

render enforcement of the same provision fair when ERISA applies

but unfair when it does not. See Santana-Díaz, 816 F.3d at 178-

80. Further, absent preemption, "a state constitution" may provide

"greater protection" than that available under federal law.

Pimental v. Dep't of Transp., 561 A.2d 1348, 1350 (R.I. 1989).

Lacking the benefits of ERISA's regulatory safeguards in this case,

Smith seeks to avail himself of the protection Rhode Island law

may afford him.

Second, Prudential proposes that courts can heed

Heimeshoff's instruction to apply "traditional doctrines" like

estoppel, waiver, or equitable tolling to reach untimely claims in

cases where an "administrator's conduct causes a participant to

miss the deadline for judicial review." 571 U.S. at 114. As

Prudential acknowledges, however, Smith does not ask for relief

under these doctrines. And in any event, the cases Prudential

presents involved policies covered by ERISA, under which state

public policy arguments would have been unavailable. They do not

change our view that Smith may have a meritorious public policy

argument under Rhode Island law that he did not sue too late.

- 32 - 3. We certify Smith's public policy argument to the Rhode

Island Supreme Court.

Although we determine that Rhode Island public policy

may provide grounds for voiding the limitations scheme here, no

state precedent commands that conclusion, and a ruling for Smith

arguably would "extend . . . [Rhode Island] law." Hatch v. Trail

King Indus., Inc., 656 F.3d 59, 70 (1st Cir. 2011) (quoting Andrade

v. Jamestown Hous. Auth., 82 F.3d 1179, 1186-87 (1st Cir. 1996)).

As we have recognized before, "[c]oncerns both of prudence and of

comity argue convincingly that a federal court sitting in diversity

must hesitate to chart a new and different course in state law."

John Hancock Life Ins. Co. v. Abbott Lab'ys, 863 F.3d 23, 36–37

(1st Cir. 2017) (alteration in original) (quoting Rared Manchester

NH, LLC v. Rite Aid of N.H., Inc., 693 F.3d 48, 54 (1st Cir.

2012)). These principles are paramount "when [a] federal action

raises difficult questions of state law bearing on important

matters of state policy." Growe v. Emison, 507 U.S. 25, 32 (1993)

(citing Colo. River Water Conservation Dist. v. United States, 424

U.S. 800, 814-17 (1976)).

The case before us "involves major state policy issues

that will certainly impact future cases." LaFlam, 672 F.3d at 44

(internal quotation marks omitted) (quoting Real Estate Bar Ass'n

for Mass. v. Nat'l Real Estate Info. Servs., 608 F.3d 110, 119

(1st Cir. 2010)). Further clarity on the scope of Rhode Island's

- 33 - public policy against limitations provisions that run before a

cause of action accrues may, at a minimum, have broad implications

for the resolution of benefit disputes governed by Rhode Island

law. Accordingly, we chart the "prudent course" and seek the

guidance of the Rhode Island Supreme Court on whether Rhode Island

public policy embraces Smith's argument in this case. Págan-Colón

v. Walgreens of San Patricio, Inc., 697 F.3d 1, 18 (1st Cir. 2012)

(quoting Ropes & Gray LLP, v. Jalbert (In re Engage, Inc.), 544

F.3d 50, 57 (1st Cir. 2008)); see also In re Hundley, 603 F.3d at

98 (acknowledging that we may certify sua sponte). Rhode Island

may consider certified questions from federal courts of appeals if

we find "no controlling precedent" on an issue that is

"determinative of the pending cause of action," as we find here.

R.I. Sup. Ct. R., Art. I, R. 6(a); LaFlam, 672 F.3d at 39.

For these reasons, we certify the following question to

the Rhode Island Supreme Court:

In light of Rhode Island General Laws § 27-18-3(a)(11) and Rhode Island public policy (including Rhode Island Constitution article I, section 5), would Rhode Island enforce the limitations scheme in this case to bar Smith's lawsuit against Prudential?

We welcome the guidance of the Rhode Island Supreme Court on any

other relevant aspect of Rhode Island law that it concludes would

aid in the proper resolution of this case, including the choice-

of-law issue.

- 34 - The clerk of this court is directed to forward to the

Rhode Island Supreme Court, under the official seal of this court,

a copy of the certified question and our decision in this case,

along with copies of the briefs and appendices filed by the parties

in this appeal, which provide all facts relevant to the issue

certified. We retain jurisdiction pending the Rhode Island Supreme

Court's determination. The case shall be stayed until further

order of the court.

- 35 -