The U.S. Supreme Court today ruled 7-2 that an insurer that serves as both the provider and administrator of disability benefits has an inherent conflict of interest.
“We here decide that this dual role creates a conflict of interest; that a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits; and that the significance of the factor will depend upon the circumstances of the particular case,” Justice Stephen Breyer writes in an opinion for the majority.
The court handed down the ruling in MetLife vs. Glenn, No. 06-923.
A unit of MetLife Inc., New York, was appealing a decision of a panel of the 6th U.S. Circuit Court of Appeals, Columbus, Ohio. The court sided with Wanda Glenn, a former employee of Sears, Roebuck & Company, Chicago, whose request for permanent disability benefits was rejected by MetLife.
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The lower court held that MetLife had not been “arbitrary and capricious” and had not abused its discretion.
In September 2006, the appellate court panel reversed the district court decision and held that the court was entitled to consider MetLife’s dual role in evaluating claims and deciding whether to pay benefits.
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 the new MetLife ruling, the Supreme Court majority upheld the decision of the appellate court panel.
The court also bolstered the standard set in a 1989 Supreme Court decision, Firestone Tire & Rubber Company vs. Bruch.