Court Clarifies Standards for Denial of Disability Benefits
Richey, Warren, The Christian Science Monitor
Judges must 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.
The court added that an apparent conflict of interest is only one of many factors that a reviewing judge must consider.
The ruling is important because it offers guidance to federal judges presiding over lawsuits challenging medical disability and health insurance determinations in group policies.
"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," writes Justice Stephen Breyer in the majority opinion.
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v. Glenn, comes in the case of an Ohio woman diagnosed with a severe heart condition, who had her disability benefits withdrawn by the Metropolitan Life Insurance Co.
A federal 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.
Justice 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 others.
Three 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."
Dissents were also filed by Justices Anthony Kennedy and Clarence Thomas.
In passing 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. …