Pension Protection Act Blog

Often the entity that administers the 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. 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 Breyer, majority opinion

In today’s decision in Metropolitan Life Insurance Co. v. Glenn, No. 06-923, the Supreme Court extends the four principles from Firestone Tire & Rubber Co. B. Bruch, 489 U.S. 101, in determining whether a conflict of interest materially affected MetLife’s decision to ultimately deny Glenn long term disability benefits. Firestone involved an employer who administered an ERISA benefits plan as well as evaluating claims for benefits and paying those benefits. MetLife has the Court evaluating a conflict of interest one step removed from the employer, where the plan administrator is not the employer but a professional insurance company who is evaluating claims for benefits as well as paying those benefits under a contractual relationship with the employer.

Glenn was a participant in her employer’s disability plan. She was diagnosed with a heart condition called severe dilated cardiomyopathy, and applied for disability benefits under the plan. MetLife approved her benefits for the initial 24 month period under the plan language which provided that she qualified for benefits under the terms of the plan if she could not perform the material duties of her own job. MetLife then referred her to a law firm who assisted her in applying for, and receiving, federal Social Security benefits. Under the terms of the plan, MetLife was entitled to reimbursement of benefits paid from her Social Security benefits, so when she was approved for retroactive Social Security benefits, her entire retroactive amount was paid to MetLife and the attorneys MetLife referred her to with Glenn receiving none of that award. The decision of the Administrative Law Judge, in approving the Social Security benefits, found that Glenn could not perform her own job and also was unable to perform any jobs for which she could qualify.

To continue receiving benefits, the plan required that after the initial 24 month period, Glenn had to meet a stricter standard of being incapable of performing not only her own job but also incapable of performing the material duties of any gainful occupation for which she was reasonably qualified. Despite medical reports to the contrary, and also contrary to the finding of the Administrative Law Judge which MetLife had materially benefited from, MetLife denied Glenn benefits for this extended period, finding that she was capable of performing full time sedentary work.

Glenn sought restoration of her benefits, first through administrative review and then by bringing a lawsuit against MetLife in federal district court. The federal district court ruled in favor of MetLife. Glenn appealed to the Sixth Circuit Court of Appeals, which found MetLife’s conflict of interest in this case troubling, and who reversed the decision of the district court and remanded the case back to the district court. MetLife then appealed to the U.S. Supreme Court.

The Supreme Court found nothing improper in the way in which the 6th Circuit conducted its review, and affirmed the 6th Circuit’s decision in this case. In making that determination, the Court discussed all four principles from Firestone. The majority opinion, written by Justice Breyer and joined by Justices Stevens, Souter, Ginsburg and Alito, is clearly troubled by MetLife’s conduct in this case, and in the potential financial motivation MetLife may have had in its’ decision to deny Glenn’s benefits. I wonder if the difficulty in completing a sentence at oral argument has come back to haunt MetLife with this opinion. Or it might be that MetLife’s behavior toward Glenn spoke louder than words to the Court when it came to deciding this case.

I’ve been working on a book about plan documents and divorce. This decision may not look that significant, but I think this decision will be viewed in hindsight as cutting the gordian knot if it results in divorcing the act of administering plans and evaluating claims for benefits from the act of paying those benefits, not that such a change is needed except in Glenn-type situations.

Additional information:

A New Firestone Drill: MetLife v. Glen, Andrew L. Oringer, BNA’s Pension & Benefits Blog;

Holding Pat and Satisfying No One: The Glenn ERISA Conflict of Interest Decision, Paul M. Secunda, Workplace Prof Blog;

MetLife Decision Handed Down - Supreme Court Affirms the Sixth Circuit, Roy F. Harmon III, Health Plan Law;

MetLife v. Glenn Decided!, Brian S. King, Brian King’s ERISA Blog;

The Supreme Court’s Ruling in MetLife v. Glen, Stephen Rosenberg, Boston ERISA & Insurance Litigation Blog - yes, Stephen, I do wish the Supreme Court would have asked before releasing this opinion today. Where were they last week when nothing happened in Planland so I spent the week proofreading my Cycle C ESOP/KSOP plan document and working on my DBK plan document. Today, I was finally able to confirm that the President signed the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) Act (affects the definition of comp in plans); the IRS released more cash balance-related regulations, the Court also released the opinion in Kentucky Retirement Systems v. EEOC; and my teenage daughter is holding a sleepover tonight.

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