By Ron E. Peck, Esq.

All eyes in the insurance industry should be turned towards the ongoing case of MetLife (Metropolitan Life Insurance Company), et al. v. Wanda Glenn, 128 S.Ct. 1117.  The United States Supreme Court granted cert in this matter on January 18, 2008, and oral arguments were heard on April 23, 2008.  This case comes before the Supreme Court on appeal from the Sixth Circuit decision in Glenn v. MetLife (Metro. Life Ins. Co.), 461 F.3d 660 (6th Cir. 2006).

At issue in this case is how courts should review a denial of plan benefits, made by a self funded employee benefit plan administrator coming within the purview of ERISA.  To date, self funded employee benefit plans that explicitly reserve in writing discretionary authority to interpret and administer their benefit plan may deny claims, and that decision will only be overturned by a Federal Court if it is arbitrary or capricious;  Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S. Ct. 948 (1989).  Any evidence supporting the decision to deny is adequate to avoid said arbitrariness, even if the majority of evidence available weighs against the denial.  There have been many cases where the denial would have been reversed by the court had it reviewed the decision de novo (from scratch), but thanks to the policy just mentioned, the denial was upheld.  In other words, while a court may determine that the evidence before the plan may not compel the conclusion the plan administrator has come to, if it is of such a nature as to render the conclusion a permissible exercise of the plan’s discretion, the decision will not be overturned.  The issue is not which side the court believes is right, but whether the plan has evidentiary grounds for its decision.

The question now is whether the administrator of an employee benefit plan suffers from a conflict of interest if the plan gives that administrator the authority both to pay benefits and to rule on eligibility for benefits.  Furthermore, if there is a conflict of interest, how will it be taken into account by a court reviewing the benefit decision? 

In the MetLife v. Glenn case, Ms. Glenn was a member of an employer/employee funded benefit plan, administered by MetLife.  She was forced to leave her job by a heart condition, for which she began receiving disability benefits from the aforementioned plan.  MetLife later revoked her right to payments, claiming that her condition had improved enough that she no longer came within the definition of disabled.  The plan document reserved discretionary rights to the administrator, and as such, the District Court found in favor of the Plan’s decision to deny.  On appeal, however, the Sixth Circuit held that MetLife was not an objective administrator of the Plan, and had a financial interest in the denial of claims.  The court felt that as payer and administrator, MetLife suffered from an unavoidable conflict of interest, and thus, decisions to deny would have to be reviewed by the court, de novo.  Reviewing all evidence available, the Court held that Ms. Glenn was still disabled, and entitled to benefits.  MetLife then appealed to the Supreme Court.

This case has already revealed the importance of objectivity on the part of plan administrators.  There is a balancing of interests each administrator must do; balancing the rights of individual plan participants to benefits versus the right of all other plan members to the preservation of their funds.  In a nutshell, a plan administrators’ primary duty is to enforce the terms of the plan(s) they administer.  If an administrator responsible for the processing of claims is also responsible for the payment of claims, a conflict of interest may arise.  If the goal of the administrator ceases to be the strict application of the plan terms, and becomes the minimization of payable claims, a conflict of interest becomes evident.  Abusing the deference of the courts may result in that deference being taken away.

According to the amicus curiae brief written by Jonathan Feigenbaum and Scott Riemer, Article III of the Constitution grants individuals the right to have certain contractual conflicts resolved by the Federal Courts, reviewing said conflict de novo.  The deference shown to administrators, they say, contradicts said right to review.  Yet, case precedent has until now protected plan administrators so long as they had no financial interest in the handling of claims; their priority was merely the strict application of the plan terms.  A conflict of interest, as defined by the Sixth Circuit in Glenn v. MetLife, would eliminate the deference shown to administrators and leave them open to such attack as the one just described.

Thus far, it appears that while the Supreme Court can see how a conflict may be created by the situation described above, it is not yet ready to disregard explicit discretionary language set forth in an insurance policy; policy language the insured has access to prior to filing a claim.  We will continue to follow this case and update you with the case status.

References:

http://lawprofessors.typepad.com/laborprof_blog/2008/01/supreme-court-c.html

Paul M. Secunda

http://healthplanlaw.com/?p=525 

Roy F Harmon III

http://www.erisa-claims.com/

Brian S. King

Supreme Court Oral Argument:

http://www.supremecourtus.gov/oral_arguments/argument_transcripts/06-923.pdf

6th Circuit Decision:

http://www.ca6.uscourts.gov/opinions.pdf/06a0336p-06.pdf

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This entry was posted by Adam V. Russo on Wednesday, April 30th, 2008 at 4:05 pm and is filed under 6th, Summary Plan Description, Supreme Court. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.