Understanding How Courts Evaluate Long Term Disability Claims

Since 2008, the starting point to even begin understanding how federal courts evaluate long-term disability claims covered by ERISA is Metropolitan Life v. Glenn (Glenn).

In Glenn, Metropolitan Life Insurance Company (MetLife) was an administrator and the insurer of Sears, Roebuck & Company’s long term disability insurance plan, which is governed by the Employee Retirement Income Security Act of 1974 (ERISA). The plan gives MetLife (as administrator) discretionary authority to determine the validity of an employee’s benefits claim and provides that MetLife (as insurer) will pay the claims. The claimant, Wanda Glenn, a Sears employee, was granted an initial 24 months of benefits under the plan following a diagnosis of a heart disorder. MetLife encouraged her to apply, and she began receiving, Social Security disability benefits based on an agency determination that she could not work.

However, when MetLife itself had to determine whether she could work in order to establish eligibility for extended plan benefits, it found her capable of doing sedentary work (desk work, or work requiring mostly sitting) and terminated her claim for benefits. Glenn sought federal-court review under ERISA, but the District Court denied relief. On appeal, the Sixth Circuit Court of Appeal reversed the District Court; the Sixth Circuit used a deferential standard of review and considered it a conflict of interest that MetLife both determined an employee’s eligibility for benefits and paid the benefits out of its own pocket. Based on a combination of this conflict and other circumstances, it set aside MetLife’s benefits denial.

MetLife appealed this reversal and took the claim to the Supreme Court of the United States.

The Supreme Court held:

1. Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, sets out four principles as to the appropriate standard of judicial review under §1132(a)(1)(B): (1) A court should be “guided by principles of trust law,” analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act, id., at 111–113; (2) trust law principles require de novo review unless a benefits plan provides otherwise, id., at 115; (3) where the plan so provides, by granting “the administrator or fiduciary discretionary authority to determine eligibility, “a deferential standard of review [is] appropriate,” id., at 111, 115; and (4) if the administrator or fiduciary having 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,’ ” id., at 115.

2. A plan administrator’s dual role of both evaluating and paying benefits claims creates the kind of conflict of interest referred to in Firestone. That conclusion is clear where it is the employer itself that both funds the plan and evaluates the claim, but a conflict also exists where, as here, the plan administrator is an insurance company. For one thing, the employer’s own conflict may extend to its selection of an insurance company to administer its plan. For another, ERISA imposes higher-than-marketplace quality standards on insurers, requiring a plan administrator to “discharge [its] duties” in respect to discretionary claims processing “solely in the interests of the [plan’s] participants and beneficiaries,” 29 U. S. C. §1104(a)(1); underscoring the particular importance of accurate claims processing by insisting that administrators “provide a ‘full and fair review’ of claim denials,” Firestone, supra, at 113; and supplementing marketplace and regulatory controls with judicial review of individual claim denials, see §1132(a)(1)(B). Finally, a legal rule that treats insurers and employers alike in respect to the existence of a conflict can nonetheless take account of different circumstances by treating the circumstances as diminishing the conflict’s significance or severity in individual cases.

3. The significance of the conflict of interest factor will depend upon the circumstances of the particular case. Firestone’s “weighed as a ‘factor’ ” language, 489 U. S., at 115, does not imply a change in the standard of review, say, from deferential to de novo. Nor should this Court overturn Firestone by adopting a rule that could bring about near universal de novo review of most ERISA plan claims denials. And it is not necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict. Firestone means what the word “factor” implies, namely, that judges reviewing a benefit denial’s lawfulness may take account of several different considerations, conflict of interest being one. This kind of review is no stranger to the judicial system. Both trust law and administrative law ask judges to determine lawfulness by taking account of several different, often case-specific, factors, reaching a result by weighing all together. Any one factor will act as a tiebreaker when the others are closely balanced. Here, the Sixth Circuit gave the conflict some weight, but focused more heavily on other factors: that MetLife had encouraged Glenn to argue to the Social Security Administration that she could do no work, received the bulk of the benefits of her success in doing so (being entitled to receive an offset from her retroactive Social Security award), and then ignored the agency’s finding in concluding that she could do sedentary work; and that MetLife had emphasized one medical report favoring denial of benefits, had deemphasized other reports suggesting a contrary conclusion, and had failed to provide its independent vocational and medical experts with all of the relevant evidence. 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. There is nothing improper in the way this review was conducted. Finally, the Firestone standard’s elucidation does not consist of detailed instructions, because there “are no talismanic words that can avoid the process of judgment.” Universal Camera Corp. v. NLRB, 340 U. S. 474, 489.

The Supreme Court affirmed, or upheld, the Sixth Circuit’s decision (461 F. 3d 660).