The United States Supreme Court decided an insurance-related case last week involving the insurer’s potential conflict of interest in its dual role in administering and paying benefits under an ERISA plan.  Metropolitan Life Ins. Co. v. Glenn, No. 06-923 (U.S. Supreme Ct. June 19, 2008).  MetLife was the administrator and insurer of Sears, Roebuck & Company’s long-term disability insurance plan, governed by ERISA.  As the plan administrator, MetLife had discretionary authority to determine the validity of an employee’s benefits claim.  MetLife also paid the claim. 

     The employee was initially found eligible for twenty-four months of disability benefits for a heart condition that impaired her ability to work.  The employee actually received Social Security disability benefits, for which MetLife had encouraged her to apply.  When MetLife eventually had to determine whether she could work in order to establish entitlement to extended benefits, it found her capable of doing sedentary work, and denied her benefits.

     The employee filed suit but lost before the District Court.  The 6th Circuit reversed, however, finding MetLife had abused its discretion.  MetLife had ignored the findings of the Social Security Administration, disregarded certain medical reports that supported the employee’s claim, withheld some of the reports from an expert hired to review the medical files, and failed to address evidence that job-related stress exacerbated the employee’s condition.  Further, the 6th Circuit found MetLife had a conflict of interest in both determining the employee’s eligibility for benefits and paying the benefits from its own pocket.

     The Supreme Court affirmed, but provided sparse guidance to the lower courts.  The Court agreed the conflict of interest was one of many factors to be weighed in determining whether there was an abuse of discretion.  The significance of the conflict of interest factor would depend on the circumstances of a particular case, however.  The 6th Circuit’s decision was proper in that it did not find the conflict of interest alone determinative, but also focused on other factors related to MetLife’s mishandling of the employee’s claim.  These serious concerns, taken together with some degree of conflict of interest, led the court to set aside MetLife’s discretionary decision.