High Court Hears Benefits Conflict-Of-Interest Case

The Supreme Court will decide whether a benefit plan administrator that both determines and pays benefits operates under a conflict of interest that must be considered by courts reviewing benefits cases.

The high court heard arguments Wednesday, April 23, in a case that raises the question about plans governed by the Employee Retirement Income Security Act. The case—Metropolitan Life Insurance Co. et al vs. Wanda Glenn—involves a former Sears, Roebuck & Co. employee who suffers from a severe heart condition.

Glenn received benefits for “total disability” from MetLife, which administers and insures the Sears-sponsored plan. After Glenn’s condition began to improve, MetLife rescinded the benefits, holding that Glenn could perform low-stress work.

Glenn sued, and a U.S. district court ruled for MetLife. Glenn appealed, and a three-judge panel of the U.S. 6th Circuit Court of Appeals ruled on September 1, 2006, that MetLife’s dual role in both determining and paying benefits represented a conflict of interest, and that its decision to stop the benefits was “arbitrary and capricious.” MetLife appealed to the Supreme Court.

The federal government weighed in on Glenn’s side in a brief filed with the high court before Wednesday’s arguments.

“An ERISA plan administrator that both makes benefits determinations and pays benefits out of its own funds, such as MetLife, is operating under a conflict of interest, because it benefits financially if it denies an employee’s claim,” wrote the U.S. solicitor general in the brief. “A court reviewing a benefit determination by a dual-role administrator should consider the administrator’s conflict of interest, even in the absence of evidence indicating that the administrator was motivated by its financial self-interest.”

Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.