Federal Courts Struggle with Supreme Court Refusal to Promulgate a Bright-Line Rule for Evaluating ERISA Plan Administrators' Conflicts of Interest
Speiser, Shoshana, American Journal of Law & Medicine
Federal Courts Struggle with Supreme Court Refusal to Promulgate a Bright-Line Rule for Evaluating ERISA Plan Administrators' Conflicts of Interest- Metropolitan Life Insurance Company v. Glenn.1 - The Employee Retirement Income Security Act of 1974 ("ERISA") regulates employer-provided pension and welfare benefit plans to ensure that participants receive their promised benefits.2 Under an ERISA-governed employee benefit plan, a single entity may act in a "dual role" as both an insurer and the payer of benefit claims.3 ERISA requires administrators to "provide a full and fair review of claim denials."4 In the event of a benefit denial, beneficiaries may seek judicial review after exhausting their administrative remedies.5 Where ERISA "grant[s] the administrator or fiduciary discretionary authority to determine eligibility for benefits," courts must review denials deferentially.6
In Metropolitan Life Insurance Company v. Glenn, after being diagnosed with a heart condition, Respondent Wanda Glenn ("Glenn") applied for disability benefits from Metropolitan Life Insurance Company ("MetLife").7 MetLife served as both the administrator and insurer of Glenn's insurance plan under ERISA.8 In 2000, MetLife determined that Glenn qualified for 24 months of disability and in 2002 an Administrative Law Judge determined that she could not "perform any job for which she could qualify existing in significant numbers in the national economy."9 Accordingly, the Social Security Administration ("SSA") awarded Glenn permanent disability payments.10 MetLife, however, denied Glenn's claim for continued benefits under a similar standard requiring Glenn's condition prevent her from both performing her own job and "the material duties of any gainful occupation for which she was reasonably qualified [,]" finding her "capable of performing full time sedentary work."11
Following the exhaustion of her administrative remedies, Glenn filed suit in the Southern District of Ohio, as permitted under ERISA.12 The federal district court denied Glenn relief.13 However, on appeal the Sixth Circuit, under a deferential standard of review as prescribed by ERISA, 14 reversed the lower court's holding.15 In finding an abuse of discretion, the Sixth Circuit specifically determined that MetLife 's position as both determining eligibility for and providing benefits presented a conflict of interest, but treated it only as a "relevant factor."16 The Sixth Circuit also considered the following factors: (l) the SSA's contradictory conclusion that Glenn could not work; (2) MetLife's focus upon a single physician report which favored their position while ignoring other, more detailed reports; (3) MetLife neglecting to provide their experts with all relevant physician reports; and (4) MetLife's disregard of evidence demonstrating the aggravation of Glenn's condition by stress.17
MetLife sought and obtained certiorari regarding the existence of conflict of interest for dual-role plan administrators. 18 The United States Supreme Court also considered the Solicitor General's request to consider "how any such a conflict should be taken into account" and affirmed.19 In its holding, the Court applied the principles from Firestone Tire Ö Rubber Co. v. Bruch which similarly entailed an entity that both evaluated claim validity and paid the benefits.20 Specifically, benefit denials in this context demand a deferential standard of review21 and "if a benefit plan gives discretion to an administrator... who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion."22
The United States Supreme Court held that a conflict of interest exists when the same entity serves as an ERISA plan administrator and payer of benefits.23 However, this conflict of interest serves as only one factor in the deferential review of whether the denial of the claim constituted an abuse of discretion.24 The Court specifically stated that "it [is neither] necessary [n]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."25 Rather, the weight given to the conflict of interest factor depends on the facts of the case at hand since a "one-size-fits all procedural system... is [un]likely to promote fair and accurate review."26
Nevertheless, the court did provide some additional guidance for future courts to apply when evaluating dual-role plan administrators' abuse of discretion. First, when all but one factor are "closely balanced," any single factor may serve as a "tiebreaker."27 Specifically, the Court noted that a conflict of interest "should prove more important... where circumstances suggest a higher likelihood that it affected the benefits decision." 28 For instance, this principle would apply in a "case where an insurance company administrator has a history of biased claims administration."29 Conversely, the Court noted that it "should prove less important... where the administrator has taken active steps to reduce potential bias and to promote accuracy."30 This could be accomplished by, for example, "walling off claims administrators from those interested in firm finance, or by imposing management checks that penalize inaccurate decisionmaking [sic]."31
In the two years since the Supreme Court's ruling, federal courts struggle to determine the proper balance to apply to conflicts of interest in the review of benefit denials. According to Majeski v. MetLife Ins. Co., for instance, there is more than one possible reading of Glenn.32 First, Glenn "might require a reviewing court to consider a plan administrator's conflict of interest in all cases," while also considering various other factors.33 For instance, in one case which adopted this view, Raybourne v. Cigna Life. Ins. Co. of N.Y. , the court interpreted the Glenn holding to merely require the court to "be aware of these conflicts of interest.34
Marrs v. Motorola, Inc., however, rejected this first approach "in which unweighted factors mysteriously are weighted."35 Instead, Marrs interpreted Glenn to require courts to "focus on the gravity of a plan administrator's conflict of interest."36 Specifically, courts should evaluate the facts of the case to determine the likelihood that the conflict impacted the denial of benefits.37
Marrs' interpretation seems most consistent with the Glenn holding. While Glenn did state that a conflict serves as "one factor among many[,]" the Court also held that circumstances exist where the conflict should prove more or less important.38 As Cusson ?. Liberty Life Assurance Company of Boston understood that language, "courts are duty-bound to inquire into what steps a plan administrator has taken to insulate the decisionmaking process."39
While Marrs' and Cusson's interpretations appear better aligned with the Glenn Court's intent, a reviewing court's decision would not likely differ regardless of which interpretation of Glenn it adopted. The Court provided very loose guidelines and merely made suggestions about what to consider. However, even if a court claimed to only "be aware of 40 the various factors, common sense would dictate that if an administrator "t[ook] active steps to reduce potential bias and to promote accuracy," 41 the conflict should be attributed relatively little weight, regardless of what the court deems the official standard.
Ultimately, the Glenn court found accuracy more important than expethency in the context of judicial review of discretionary benefit determinations.42 The Court held that a conflict of interest exists whenever the same entity both determines and pays benefits, but refused to promulgate a bright-line test regarding the weight to attribute to that factor.43 In the absence of explicit guidance, federal courts struggle to consider the facts of each abuse of discretion case, considering the conflict, as the Supreme Court wished, as just "one factor among many."44
1 Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. 2343 (2008); see generally Claims Administration: As Federal Courts Respond to Glenn Ruling, Standard of Review, Discovery Issues Persist,\9 Health L. Rep. (BNA) 125 (Jan. 28,2010).
2 Purcell, Patrick & Staman, Jennifer, Congressional Research Service Report for Congress, Summary of the Employee Retirement Income Security Act, 1, 37 (2008).
3 Metropolitan Life Ins. Co., 128 S.Ct. at 2346.
4 Id. at 2350.
5 29 U.S. CA. § 1132(a)(1); Robyns v. Reliance Standard Life Ins. Co., 130 F.3d 1231 (7th Cir. 1997); Andrew M. Campbell, Annotation, Exhaustion of Administrative Remedies as Prerequisite to Suit Under Employee Retirement Income Security Act of 1974 (29 U. S. CA. § 1001 et seq.), 162 A.L.R. FED. 1 (2000).
6 Metropolitan Life Ins. Co., 128 S.Ct. at 2348 (discussing Firestone Tire & Rubber Co., 489 U.S. 101, 115 (1989) and trust principles). See also id. at 2350 (stating that the Court "do[es] not believe that Firestone's statement implies a change in the standard of review, say from deferential to de novo review.").
7 Id. at 2346.
9 Id. (internal quotations and brackets omitted).
10 Id. at 2346-47.
11 Id. at 2347 (internal quotations omitted).
12 Id. (citing 29 U.S.C. § 1132(a)(1)(B) (allowing those denied benefits under ERISA to bring suit in federal court)); Glenn v. Metropolitan Life Ins. Co., 2005 WL 1364625 (S.D. Ohio 2005).
13 See surpa note 11.
14 See supra note 5. See also id. (stating that "the plan granted MetLife 'discretionary authority... to determine benefits").
15 Glenn v. MetLife, 461 F.3d 660 (6th Cir. 2006).
16 Metropolitan Life Ins. Co., 128 S.Ct. at 2347 (discussing Glenn v. MetLife).
18 Id. at 2347-48.
19 Id. at 2347 (internal quotations omitted).
20 Id. at 2348.
22 Id. See also supra note 13.
24 Id. at 2350 (citing Firestone, 489 U.S. at 115).
25 Id. at 2351.
30 Id. (citing Herzel & Colling, The Chinese Wall and Conflict of Interest in Banks, 34 Bus. Law 73, 114 (1978); Brief for Blue Cross and Blue Shield Association as Amicus Curiae 15; and J. Mashaw, Bureaucratic Justice (1983)).
31 See supra note 29.
32 Majeski v. MetLife Ins. Co., 590 F.3d 478, 482 (7th Cir. 2009).
33 Id. (emphasis added).
34 576 F.3d 444, 449-50 (7th Cir. 2009). See also, e.g., Jenkins v. Price Waterhouse LongTerm Disability Plan, 564 F.3d 856, 861 (7th Cir. 2009) and Fischer v. Liberty Life Assurance Co. of Boston, 576 F.3d 369, 375 (7th Cir. 2009).
35 590 F.3d at 482 (citing 577 F.3d 783, 788 (7th Cir. 2009)).
38 S.Ct. at 2351. See also supra notes 26-29 and accompanying text.
39 592 F.3d 215, 224 (1st Cir. 2010).
40 Supra note 32.
41 Supra note 28.
42 S.Ct. at 2351 (stating that "[njeither do we believe it 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... Benefits decisions arise in too many contexts... for us to come up with a one-size-fits-all procedural system that is likely to promote fair and accurate review.").
43 Id. at 2348.
44 Id. at 2351.…
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Publication information: Article title: Federal Courts Struggle with Supreme Court Refusal to Promulgate a Bright-Line Rule for Evaluating ERISA Plan Administrators' Conflicts of Interest. Contributors: Speiser, Shoshana - Author. Journal title: American Journal of Law & Medicine. Volume: 36. Issue: 1 Publication date: January 1, 2010. Page number: 273+. © Not available. Provided by ProQuest LLC. All Rights Reserved.
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