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High Court Rules Against Disability Insurer

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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.

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.

In the MetLife decision, the Supreme Court held that, as in Firestone, “A court should be ‘guided by principles of trust law’, analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act.”

Chief Justice John Roberts concurred in the judgment and wrote an opinion agreeing in part with the court’s opinion.

Justice Anthony Kennedy concurred in part and dissented in part, and Justice Antonin wrote a dissenting opinion on behalf of himself and Justice Clarence Thomas.

“We accept the decision of the court,” MetLife Inc., New York, says in a statement about the ruling. “While the decision does not substantively change the law, it did affirm the award of benefits to Glenn, and we will pay those benefits promptly. The court does provide some guidance on how courts should review disputed claims which will be important to the employee-benefits community. As both an insurer and claim fiduciary, MetLife holds itself to the highest standards of integrity and ethical behavior to ensure we make appropriate, timely determinations on behalf of our clients and their employees.”

Joshua Rosenkranz of Heller Ehrman L.L.P., New York, who represented the claimant, welcomed the ruling.

“This was a critically important ruling for any employee seeking to recover the benefits that he was promised,” Rosenkranz says.

MetLife took the position that the court should defer to the judgment of the insurance company when the company denies benefits, assuming that it is indifferent to whether or not it must pay claims, Rosenkranz says.

“The Supreme Court understood that this position defies common sense,” Rosenkranz says. “Anyone who has ever had a dispute with an insurance company knows that they are not necessarily always bent on paying what they owe. The Supreme Court held that lower courts should consider that reality when they review claim denials.”


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