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U.S. Supreme Court Affirms That MetLife's Conflict of Interest And Employee's SSD Award Supported Reversal of MetLife's Denial of LTD Benefits

In Metropolitan Life Ins. Co. v. Glenn, the Supreme Court of the United States held last month that a reviewing court should consider the conflict of interest arising from the dual role of an entity as an ERISA plan administrator and payer of plan benefits as a factor in determining whether the plan administrator has abused its discretion in denying benefits, with the significance of the factor depending upon the circumstances of the particular case, including an award of SSD benefits.

Where the entity that administers an Employee Retirement Income Security Act (ERISA) plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket, a conflict of interest is created, and a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits, with the significance of the factor depending upon the circumstances of the particular case.

In this case, Wanda Glenn, a Sears employee, was granted an initial 24 months of benefits under the plan following a diagnosis of a heart disorder. MetLife encouraged her to apply for, and she began receiving, Social Security disability benefits based on an agency determination that she could do no work. But when MetLife itself had to determine whether she could work, in order to establish eligibility for extended plan benefits, it found her capable of doing sedentary work and denied her the benefits. In reversing, the Court of Appeals considered it a conflict of interest that MetLife both determined an employee's eligibility for benefits and paid the benefits out of its own pocket. Based on a combination of this conflict and other circumstances, it set aside MetLife's benefits denial.

ERISA imposes higher-than-marketplace quality standards on insurers, requiring a plan administrator to discharge its duties in respect to discretionary claims processing solely in the interests of the plan's participants and beneficiaries, underscoring the particular importance of accurate claims processing by insisting that administrators provide a full and fair review of claim denials.

The factors considered by the court were that MetLife had encouraged Glenn to argue to the Social Security Administration that she could do no work, received the bulk of the benefits of her success in doing so (being entitled to receive an offset from her retroactive Social Security award), and then ignored the agency's finding in concluding that she could do sedentary work; and that MetLife had emphasized one medical report favoring denial of benefits, had deemphasized other reports suggesting a contrary conclusion, and had failed to provide its independent vocational and medical experts with all of the relevant evidence. These serious concerns, taken together with some degree of conflicting interests on MetLife's part, led the court to set aside MetLife's discretionary decision.

Alan Olson writes this web-log to provide helpful information regarding long-term disability cases. He practices long-term disability law throughout the United States from his offices in New Berlin, Wisconsin. Attorney Olson may be contacted at [email protected] with questions about the information posted here or for advice on specific disability benefit claims.

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