<nobr>Jun 20, 2008</nobr>

Supreme Court Rules that Conflicts of Dual Role Administrators Must Be Considered in Benefit Determination Cases

The U.S. Supreme Court on June 19 upheld an appeals court reversal of a district court ruling finding that a plan administrator operated under a conflict of interest as it made eligibility determinations and paid benefits (Metropolitan Life Ins. Co. v. Glenn). The Court found that, in the case of a plan administrator that both evaluates and pays claims, reviewing courts must consider conflicts of interest as a factor in deciding whether a plan participant was wrongly denied benefits.

The Court ruled that the Sixth Circuit Court of Appeals appropriately weighed several factors, including the administrator's conflict of interest in determining the insurer abused its discretion by denying benefits to the participant.

Relying on its ruling in Firestone Tire & Rubber Co. v. Bruch, the Court ruled that an insurance company that has such a dual role has an inherent conflict of interest that courts must weigh in deciding whether the plan administrator has abused its discretion in denying benefits to an employee or other plan participant. The Court held that the conflict should be weighed as just one factor among many in determining whether there was an abuse of discretion, and the significance of the conflict would depend on the circumstances of each case.

Justice Antonin Scalia in a dissenting opinion said there must be evidence that a conflict actually and improperly motivates a decision to find that an administrator abused its discretion, and that there is no evidence in this case.

Since the Firestone decision, the circuit courts have been divided over to what extent a conflict of interest in the administrator should affect the level of a court's deference to the administrator's decision. The MetLife decision has provided some answers, but the Court's opinion leaves the matter sufficiently open that we can expect legislation in the next Congress to require some level of a firewall protection between the financial interests of the insurer and its claims administrator.

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