Court clarifies standards for denial of disability benefits
In a ruling
Thursday, it guides federal judges to weigh conflicts of
interest by insurance companies.
By Warren Richey
| Staff writer of The Christian Science Monitor
from the June
20, 2008 edition
approach medical disability and health insurance disputes with a
skeptical eye when they involve insurance companies that both
evaluate and pay employee claims.
In a 6 to 3
decision announced Thursday, the US Supreme Court ruled that
benefit denials by such companies must be examined with caution
when circumstances suggest a high likelihood that financial
considerations affected a benefits decision.
added that an apparent conflict of interest is only one of many
factors that a reviewing judge must consider.
is important because it offers guidance to federal judges
presiding over lawsuits challenging medical disability and
health insurance determinations in group policies.
review the lawfulness of benefit denials, they will often take
account of several different considerations of which a conflict
of interest is one," writes Justice Stephen Breyer in the
decision, in Metlife v. Glenn, comes in the case of an Ohio
woman diagnosed with a severe heart condition, who had her
disability benefits withdrawn by the Metropolitan Life Insurance
judge upheld the denial of benefits, but the Sixth US Circuit
Court of Appeals reversed that finding, ruling that the judge
had not fully considered the impact of MetLife's potential
conflict of interest in both administering the plan and deciding
which claims to pay and which to deny.
Breyer said the appeals court followed the correct
"combination-of-factors method of review." He said judges should
examine the record for potentially inconsistent positions taken
by a company, and whether the company gave due weight to the
entire record or favored certain reports while downplaying
justices dissented. Justice Antonin Scalia wrote that the court
was giving too much weight to an appearance of conflict. He said
that under the law of trusts "[A] fiduciary with a conflict does
not abuse its discretion unless the conflict actually and
improperly motivates the decision." He adds, "There is no
evidence of that here."
were also filed by Justices Anthony Kennedy and Clarence Thomas.
the Employee Retirement Income Security Act of 1974 (ERISA),
Congress authorized insurance companies to both evaluate and pay
claims. ERISA also authorizes employees to file a lawsuit in
federal court challenging an unfair denial of benefits.
doesn't set a clear standard for judges who are called upon to
decide disputes over benefits.
In 1989, the
Supreme Court ruled that judges hearing such lawsuits must apply
a more rigorous standard of review in cases in which the plan
administrator served as both the evaluator and payer of claims.
court did not explain what constitutes a conflict of interest or
how federal judges should weigh such a conflict while
considering a particular case.
decision stems from the case of Wanda Glenn, a sales manager at
a Sears store from 1986 to 2000. In 2000, her physician
diagnosed a severe heart condition. He advised that she no
longer work. She applied for disability benefits under Sears'
plan, administered by MetLife.
On the basis
of the diagnosis and the physician's recommendation, MetLife
found that Ms. Glenn was totally disabled and began paying
benefits. With the help of MetLife, she also applied for and
obtained disability payments from the Social Security
years, the MetLife policy required a new assessment of whether
Glenn could perform any job or was still totally disabled. Her
physician had repeatedly verified the severity of her condition,
but at one point he checked a box on an evaluation form
indicating that Glenn was able to work in a "sedentary physical
exertion level occupation."
later, contrary to the checked box, Glenn's physician again
stated that he did not believe she could handle any kind of
stress at work.
evaluating Glenn's disability claim, MetLife focused on the
checked box and decided to stop making disability payments to
challenged the decision and eventually took MetLife to court.
with Glenn, the Sixth Circuit said MetLife cherry-picked certain
aspects of Glenn's medical records, while ignoring others. This
selective review, combined with MetLife's conflict of interest
in both evaluating and paying claims, rendered the decision
arbitrary and capricious, the appeals court found.
the Sixth Circuit, Justice Breyer said: "All of 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. We can find nothing improper
in the way in which the court conducted its review."