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MetLife and Benefit Denials: The Good, the Bad and the Ugly

Last month, the United States Supreme Court addressed the issue of how courts should review a benefit plan’s denial of an application for benefits. The results were mixed for workers and retirees.

A little background first. An employee submits a claim for benefits from a pension, disability or health plan. The plan’s claims administrator denies the request for benefits. The employee appeals the denial to the plan. The plan turns down the appeal.

The employee’s next step is to go to court. What should a court do? Should it hear evidence, look carefully at the documents, and reach an independent decision on whether the employee should get her benefits? Or should it simply rubber-stamp the plan’s decision?

Almost 20 years ago, in a case called Firestone v. Bruch, the Supreme Court said courts should generally rubber-stamp decisions unless the plan “abused its discretion.” But, what does “abuse discretion” mean? One judge said that a plan abuses its discretion only if its decision is “off the wall.”

In the Firestone case, the Supreme Court also ruled that, when a court decides whether a plan has abused its discretion, one factor it should consider is whether the plan administrator had a conflict of interest when denying the claim for benefits. As can be expected, conflicts of interest can frequently occur, especially if the entity responsible for approving the claim is the same entity responsible for paying the benefit. In the Firestone decision the court did not offer any guidance on how to tell whether the plan administrator had a conflict of interest or what a court should do if there was a conflict of interest.

These were the questions answered by the Supreme Court when it decided MetLife v. Glenn.

These are the basic facts in MetLife v. Glenn. Wanda Glenn was covered by a disability insurance plan, which was managed by MetLife. She applied for disability benefits, which MetLife, as the insurer, would have had to pay out of its own pocket. MetLife denied the claim and her appeal.

Ms. Glenn sued MetLife. MetLife claimed that its decision should be upheld because it did not abuse its discretion in rejecting the benefit application.

Ms. Glenn claimed that MetLife had a conflict of interest because it denied a benefits claim it would have had to pay for, so the Court should not simply rubber-stamp the company’s decision. It should make its own independent decision, after considering the evidence and the terms of the plan.

MetLife replied: we don’t have a conflict of interest; we are just an insurance company making a routine benefit denial.

So what did the Supreme Court decide?

Was there a conflict? The Supreme Court said that, since MetLife was deciding whether it had to pay a benefit out of its own pocket, it had a conflict of interest. This part of the decision is obviously good for employees.

What should a court do when there is a conflict? Ms. Glenn’s attorneys argued that because there was a conflict of interest, the trial court should disregard the plan’s decision and make an independent judgment as to whether she is entitled to benefits. The Supreme Court disagreed, stating that, even though MetLife had a conflict of interest, the court should have upheld the benefit denial unless MetLife had abused its discretion. In deciding whether MetLife abused its discretion, the court should have considered the conflict as “a factor” when making its decision. (The Supreme Court did find that, in this case, MetLife had abused its discretion, so Ms. Glenn won.)

Unfortunately, the Supreme Court did not provide trial judges with any real instruction on how much weight they should give to conflicts of interest. Without instruction, judges will have to wing it. And when pro-business judges wing it, they will probably de-emphasize any conflict of interest and side with the plan if the benefit denial passes the “off the wall” test. Combined with the vagueness of what constitutes an “abuse of discretion,” MetLife v. Glenn ends up being a decidedly mixed bag for workers and business.

Want to know more? Read my in-depth discussion of MetLife v. Glenn.

Comments

I say it's time for Congress to take some actions against these types of pension plan abusers and give relief to these people. These companies relishes the fact that the retirees probably can't afford attorneys and may very well die before they'll be ordered to pay up, if ever. But, what do you expect from an administration that allows abusers to go on in their own Office of Personnel Management.

Companies like MetLife should be made to pay punitive damages to claimants when they capriciously and maliciously deny a claim where the claimant's physician has submitted adequate test results and diagnosis to support their patient's disability. MetLife hides behind the ERISA laws that only limits them to paying just the back claims. This is wrong. MetLife is preying on the sick and the disabled. I worked 23 years for my employer, until I had a tri-level cervical fudion that went wrong and left me with residual stenosis and degenerative disc disease. These plan administrators at MetLife are truly vicious for putting sick claimants through the financial distress that only adds to a claimant's existing ailmants. This whole process is sooooo un-American. Metlife is allowed to pick and choose the diagnosis that supports their claim denial. Just look on-line. Why would anyone put themselves through this hell of a process if they absolutely were disabled? Sometimes, I think there is no justice in this world. MetLife banks on the fact that if they drive the claimant to suicide, oh well, one less claim for them to pay. Do you know how disabilitating it is to live with no electricity in a hot apartment where all the food in the fridge has putrefied because all the while trying to keep the pain in your neck and in your leg in check with pain medication? MetLife is allowed to put people through this and no one is keeping them accountable. It's a shame. Where is the outrage? Who will speak out for the disabled and the people who are cheated by these insurance companies?

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