Supreme Court Upholds Less Deferential Standard of ERISA Review Against TPA Insurance Company.

On June 19, 2008, the Supreme Court affirmed the Sixth Circuit Court of Appeals in Metropolitan Life Ins. Co. v. Glenn, No.. 06-923. In that case, Sears purchased long-term disability insurance from MetLife and appointed MetLife as the Third Party Administrator of the LTD claims of Sears’ employees. Sears’ LTD Plan also gave MetLife discretionary authority to determine employees’ eligibility for benefits. When the plaintiff applied for LTD, MetLife initially granted her application for 24 months of benefits. However, after encouraging her to apply for SSI benefits (which she obtained), it then determined that she was ineligible for extended benefits in that one of the medial reports submitted indicated that she was capable of performing sedentary work.

The Supreme Court had previously noted in Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, the proper judicial standard of review for ERISA benefit claims under §1132(a)(1)(B). First, courts should be "guided by principles of trust law," analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act. Next, the principles of trust law require that de novo review be utilized unless the terms of a benefits plan provide otherwise. Finally, if the terms of the benefit plan grant the administrator or fiduciary discretionary to determine the participant’s eligibility for benefits, the court should utilize a deferential standard of review as appropriate. However, if the administrator or fiduciary with such discretion "is operating under a conflict of interest, that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.’”

In Glenn, the Court determined that this analysis from Firestone applied equally to an insurance company acting as both the insurer and the TPA and not just an employer who acts as both the fiduciary evaluating the claims and the employer which funds the benefits. That "[e]very dollar provided in benefits is a dollar spent by ... the employer; and every dollar saved ... is a dollar in [the employer's] pocket" is equally applicable to this situation. Nonetheless, the Court reiterated that the TPA was still entitled to a deferential standard of review pursuant to the terms of the LTD plan, but that – in light of the conflict of interest inherent in an insurance company deciding for itself whether to award benefits out of its own accounts -- the reviewing court was permitted to consider a number of factors, including ”(1) the conflict of interest; (2) MetLife's failure to reconcile its own conclusion that Glenn could work in other jobs with the Social Security Administration's conclusion that she could not; (3) MetLife's focus upon one treating physician report suggesting that Glenn could work in other jobs at the expense of other, more detailed treating physician reports indicating that she could not; (4) MetLife's failure to provide all of the treating physician reports to its own hired experts; and (5) MetLife's failure to take account of evidence indicating that stress aggravated Glenn's condition.”

Insomniacs can read the full decision at http://www.supremecourtus.gov/opinions/07pdf/06-923.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.