Supreme Court justices on April 23 appeared torn about the advice they would give lower courts in evaluating conflicts of interest in disability cases where an insurance company serves as both an administrator of a company benefits plan as well as the provider of the benefits.
In an hour of intense arguments in which the U.S. Solicitor General joined with the claimant, the justices first wrestled with the question of the level of scrutiny lower courts should consider in cases where the insurance company plays a dual role.
The case, MetLife vs. Glenn, was brought by Metropolitan Life Insurance Company, which both administered and funded the benefits of an ERISA plan for Sears Roebuck.
In this case, MetLife appealed a decision of the 6th U.S. Circuit Court of Appeals, which reversed a lower federal court decision in Columbus, Ohio backing MetLife decision denying benefits in 2002 to Wanda Glenn, now 55, after two years. Glenn went on disability in 2000 after suffering for years with heart disease, which included in 1989 an incident of cardiac arrest.
MetLife then suggested Glenn should seek Social Security benefits, even providing her with the name of an attorney who was aware of her medical problems. MetLife told Glenn that any Social Security award could be deducted from her MetLife payments.
A federal administrative law judge eventually determined, based in part on information submitted by MetLife, that Glenn was disabled and entitled to Social Security payments. About a month later, after reviewing conflicting evaluations from Glenn’s physician about her ability to do sedentary work, MetLife revised its opinion and decided she was no longer eligible for disability benefits. Glenn’s administrative appeals failed, and she eventually sued MetLife in federal court.
In its decision reversing a lower court, a 6th Circuit panel sided in September 2006 with Glenn, saying that it was entitled to consider MetLife’s dual role in deciding benefits and paying them.
The 6th Circuit decision held that MetLife “acted under a conflict of interest” and made a decision that “was not the product of a principled and deliberative reasoning process.”
In seeking review, MetLife noted the issue has deeply divided appellate courts. The 4th, 5th, 6th, 8th, 9th and 11th Circuits require consideration of such dual roles when reviewing an ERISA award, while the 1st and 7th Circuits do not require consideration of such “structural” conflicts.
The Supreme Court first took up the issue in 1989 in Firestone v. Bruch.
But the cases are different because the Bruch case involved a self-funded pension plan, not an ERISA plan funded through purchase of a group insurance policy.
The case is important because the Supreme Court has never required federal courts to defer to an insurer’s denial of benefits based on the insurer’s self-granted discretionary authority, according to several lawyers who have studied the issue.