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Supremes Ax Disability Ruling

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The U.S. Supreme Court has told the 9th U.S. Circuit Court of Appeals to reconsider a group disability ruling.

The 9th Circuit Court, which covers California and other Western states, should review its conclusions in Metropolitan Life Insurance Company vs. Peggy Hawkins-Dean in light of an August 9th Circuit group life ruling, Abatie vs. Alta Health & Life Insurance Company, the Supreme Court said in a short summary order.

The Supreme Court also has given the American Council of Life Insurers, Washington, permission to file a brief supporting MetLife, New York.

The new order and the 9th Circuit ruling deal with the rules for determining when to conduct full reviews of decisions made by benefit plans governed by the Employee Retirement Income Security Act, not with the merits of the plaintiff’s case.

Charles Fleishman, a Beverly Hills, Calif., lawyer who represents Peggy Hawkins-Dean, says his client will win when the case returns to the 9th Circuit.

A spokesperson for MetLife declined to comment on the order.

Hawkins-Dean, a group LTD claimant who suffers from fibromyalgia, sued after a MetLife insurance unit set the annual income figure used in benefits computations at $28,850, rather than $151,855, by excluding stock option income. MetLife should include the stock option income because “the stock options qualify as a bonus, and bonuses are specifically included in the plan’s definition of basic monthly earnings,” lawyers for Hawkins-Dean argue.

The U.S. District Court in Pasadena, Calif., ruled in favor of MetLife because of a policy clause giving the company discretion over policy interpretation.

A 3-judge 9th Circuit appeals court panel ruled in January that the district court should review the claim from scratch, because of a possible a conflict of interest.

Until August, the 9th Circuit had relied on a 1995 decision, Atwood vs. Newmont, that required benefit plan decision makers to prove that they had no conflicts of interest if they wanted to avoid “de novo” reviews. Other circuits have given more deference to ERISA plan discretionary clauses.

In August, all judges serving on the 9th Circuit Court held in Abatie that a court should evaluate evidence about alleged conflicts before calling for a de novo review.

The ACLI told the Supreme Court it wants to file a brief on the problems caused by the circuits’ clashing claim decision reviews standards, and on what it believes to be the impracticality of including stock option income in insured income.

The release of the new order “is a positive development,” says Lisa Tate, an ACLI senior counsel.

The order means “you can’t just automatically tell trial courts that they have to review claims decisions from scratch,” says Andy Bernstein, general counsel at Disability Reinsurance Management Services Inc., Westbrook, Maine.