Supreme Court Rules Insurers’ Potential Conflict of Interest Must Be Taken Into Account When Ruling on Employee Benefits Decisions

The U.S. Supreme Court on Thursday in a 6-3 decision said that courts must take into consideration an insurer's potential conflict of interest when reviewing the denial of employees' health or disability benefits claims, the AP/Minneapolis Star Tribune reports (AP/Minneapolis Star Tribune, 6/19). The decision upheld a ruling by the Appellate Court for the Sixth Circuit that found MetLife acted inappropriately when it denied coverage for an Ohio woman who took a leave of absence from work after developing heart disease (Williams Walsh, New York Times, 6/20). The woman, Wanda Glenn, claimed that insurers have a financial conflict of interest to deny claims and that courts should favor employees when reviewing benefits decisions (AP/Minneapolis Star Tribune, 6/19).

A 1989 Supreme Court decision acknowledged the conflict of interest, but the opinion stated that if employers gave discretionary authority to plan administrators, then the court should defer to the third party. According to the New York Times, many companies responded to that decision by inserting clauses into plans making administrators' decisions "final," "conclusive" and "binding."

In his majority opinion, Justice Stephen Breyer wrote that it would be inappropriate for district courts to stop treating plan administrators with deference, or to fully review every dispute, but he said judges must take into account the administrator's conflict of interest. He noted that in the case, MetLife emphasized a medical report favoring denial but de-emphasized other reports suggesting that benefits should be granted (New York Times, 6/20). Justice Antonin Scalia in his dissenting opinion wrote that there must be evidence that a conflict improperly led to a denial of benefits (AP/Minneapolis Star Tribune, 6/19). Scalia added that the Breyer opinion was "painfully opaque, despite its promise of elucidation."

Comments
Lonie Hassel, a partner at Groom Law Group representing companies in employee benefit litigation, said, "This is going to put the thumb on the scale in the employees' favor," but "I think it's only going to make a difference in close cases." Yale law professor John Langbein said, "We had hoped the court would give greater clarity and guidance in these cases," but "they did not move the ball at all" (New York Times, 6/20).