Metropolitan Life Ins. v. Glenn

The Respondent, Glenn, an employee at a Sears retail store, sought federal-court review under the Employee Retirement Income Security Act of 1974 (ERISA) of Sears’ insurer, Metropolitan Life Insurance Company (MetLife), due to its denial to extend payment of her disability benefits.

MetLife was the administrator and the insurer of Sears’ long-term disability insurance plan, which was governed by ERISA. The plan gave MetLife, as administrator, discretionary authority to determine the validity of an employee’s benefits claim and required that MetLife itself, as insurer, pay valid benefit claims.

Glenn was initially granted 24 months of benefits under the insurance plan following a diagnosis of severe dilated cardiomyopathy, a heart condition whose symptoms included fatigue and shortness of breath. She was also in receipt of federal disability benefits, based on the Social Security Administration’s finding that her illness prevented her from performing any job for which she could qualify. These benefits were passed on in full to MetLife to offset their more generous benefits. When Glenn applied to MetLife for extended disability benefits under the Sears’ insurance plan after 24 months, MetLife reviewed her ability to work against its criteria, and denied her extended benefits based on its finding that she was “capable of performing full time sedentary work.”

The District Court denied Glenn relief. The Court of Appeals for the Sixth Circuit reversed that decision and set aside MetLife’s benefits denial based on a combination of circumstances. This included the finding that a conflict of interest existed as MetLife both determined an employee’s eligibility for benefits and paid the benefits out of its own pocket.

The Court held that a Metlife’s dual role as administrator and payer created a conflict of interest for ERISA purposes. It applied trust law principles established in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), analogizing an insurance plan administrator, such as MetLife, to a trustee and considering a benefit determination as a fiduciary act. The Court found that a conflict of interest existed because MetLife’s fiduciary interest might favor the granting of a borderline claim, while its immediate financial interest may advise the opposite. The Court also held that a conflict of interest could extend to an employer regarding its selection of an insurance company to administer its employee’s plans; a conflict of interest could arise between the employer’s interest in low rates and its interest in accurate claims processing.

The Court explained that ERISA imposed “higher-than-marketplace quality standards” on insurers by: requiring a plan administrator to “discharge its duties,” with respect to discretionary claims processing, “solely in the interests of the plan’s participants and beneficiaries”; placing importance on accurate claims processing by insisting that administrators “provide a full and fair review of claim denials”; supplementing marketplace and regulatory controls with judicial review of individual claim denials; and treating insurance company administrators and employers alike.

The Court further held that a conflict of interest was but one factor among many that a reviewing judge must take into account in determining whether an insurance plan administrator abused its discretion in denying benefits. It added that its importance would prove greater where circumstances indicated “a higher likelihood that it affected a benefits decision.”

The Court noted that there was nothing improper in the way the Court of Appeals reviewed Glenn’s benefit denial as it gave the conflict some weight but focused more heavily on other serious concerns. The other concerns included: (1) MetLife failed to reconcile its own conclusion that Glenn could work in other jobs with the Social Security Administration's conclusion that she could not; (2) 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; and (3) that MetLife failed to provide its independent vocational and medical experts with all of the relevant evidence.

“That answer is clear where it is the employer that both funds the plan and evaluates the claims. In such a circumstance, ‘every dollar provided in benefits is a dollar spent by ... the employer; and every dollar saved ... is a dollar in [the employer's] pocket.’ Bruch v. Firestone Tire & Rubber Co., 828 F.2d 134, 144 (C.A.3 1987). The employer's fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary. Thus, the employer has an ‘interest ... conflicting with that of the beneficiaries,’ the type of conflict that judges must take into account when they review the discretionary acts of a trustee of a common-law trust. Restatement § 187, Comment d; see also Firestone, supra, at 115, 109 S.Ct. 948 (citing that Restatement comment); cf. Black's Law Dictionary 319 (8th ed.2004) (‘conflict of interest’ is a ‘real or seeming incompatibility between one's private interests and one's public or fiduciary duties’).” 128 U.S., p. 2348.

“We believe that Firestone means what the word "factor" implies, namely, that when judges review the lawfulness of benefit denials, they will often take account of several different considerations of which a conflict of interest is one. This kind of review is no stranger to the judicial system. Not only trust law, but also administrative law, can ask judges to determine lawfulness by taking account of several different, often case-specific, factors, reaching a result by weighing all together. See Restatement § 187, Comment d; cf., e.g., Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-417, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971)(review of governmental decision for abuse of discretion); Universal Camera Corp. v. NLRB, 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951) (review of agency factfinding).” 128 U.S., p. 2351