Articles

New Supreme Court Case Tips the Scale Slightly for Plaintiffs

By Denise Yegge Tataryn

On June 19, 2008, the Supreme Court issued a long-awaited opinion, Metropolitan Life Insurance Company v. Glenn, affecting how the courts are to review employee benefit cases. The case is governed by ERISA (Employee Retirement Income Security Act of 1974), a federal law that governs most private employee benefit plans. The Supreme Court ruling will impact the vast majority of cases governed by ERISA.

Over the years, the courts have interpreted ERISA to give insurers and other plan administrators an edge. In any case in which a plan guarantees the administrator discretionary authority to determine eligibility for benefits, the courts would defer to the administrator's decision, rather than looking at the case fresh. The court would uphold the benefit decision if there was evidence that supported the administrator's decision, even if it was not the correct decision.

The Glenn case involved a claim for long-term disability benefits against the insurer, Met Life. The benefit determination was made by MetLife, who was also the payer of benefits. The Supreme Court held that a plan administrator's dual role of both evaluating and paying benefit claims creates a conflict that should be considered in determining whether the administrator abused its discretion. A review by the court should be guided by principles of trust law and consider a benefit determination to be a fiduciary act, an act in which the administrator owes a special duty of loyalty to plan beneficiaries. The court also stated that ERISA imposes higher than marketplace-quality standards on insurers and underscores the particular importance of claims processing by insisting that claim administrators provide a full and fair review of claim denials. Under Glenn, an administrator's conflicted status is to be taken into account, along with other factors that may show that an administrator did not conduct an accurate claims assessment, such as focusing on a medical report that suggests the claimant can work over more detailed medical reports indicating that a claimant cannot work, a failure to provide all of the treating physician reports to its own hired expert, etc.

The court suggested that an administrator could protect itself to reduce potential bias and promote accuracy, for example, "by walling off claims administrators from those interested in firm finances or by imposing management checks that penalize inaccurate decision making irrespective of whom the inaccuracy benefits."

The Glenn case will not change the up-hill battle that claimants face. Deference will still be given to insurers and other plan administrators if the insurance policy or plan document provides that they have discretionary authority. However, the courts will give greater scrutiny to decisions made by plan administrators who operate under a conflict of interest.