Plan Administrator's Dual Role In Evaluating And Paying Benefits Claims Creates Conflict Of Interest
Metropolitan Life Insurance Company is an administrator and the insurer of Sears, Roebuck & Company's long-term disability insurance plan, which is governed by the Employee Retirement Income Security Act of 1974 (ERISA). The plan gives MetLife (as administrator) discretionary authority to determine the validity of an employee's benefits claim and provides that MetLife (as insurer) will pay the claims. Wanda Glenn, a Sears employee, was granted an initial 24 months of benefits under the plan following a diagnosis of a heart disorder. MetLife encouraged her to apply for, and she began receiving, Social Security disability benefits based on an agency determination that she could do no work. But when MetLife itself had to determine whether she could work, in order to establish eligibility for extended plan benefits, it found her capable of doing sedentary work and denied her the benefits. Glenn sought federal-court review under ERISA, but the District Court denied relief.
On appeal, the Sixth Circuit Court of Appeals reversed, considering as a relevant factor the "conflict of interest" arising out of the petitioner's role as the entity that both decided the employee's eligibility for benefits and paid the benefits.
The US Supreme Court affirmed, holding that where the entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket, this dual role creates a conflict of interest; that a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits; and that the significance of the factor will depend upon the circumstances of the particular case.
Metropolitan Life Ins. Co. v. Glenn