Last spring, a significant case was brought before the U.S. Supreme Court involving an insurance company’s conflict of interest in denying an employee’s health or disability benefits claim. The Supreme Court later ruled that insurance companies or employers have a conflict of interest when they both decide claims under employee benefit plans and pay the benefits.
The lawsuit was filed against MetLife Inc., arguing that the insurance companies have a financial incentive to deny benefit claims. The justices made a ruling that federal court should consider that conflict when deciding whether the plan administrator has abused its discretion in denying benefits under an employee’s health or disability claim.
According to the Employee Retirement Income Security Act (ERISA) a person who is denied benefits under an employee benefit plan is allowed to dispute the denial in federal court.
The Supreme Court decided the plan’s administrator, including insurance companies such as MetLife or an employer, has a conflict when it performed the dual role of determining whether an employee is eligible for benefits and then pays the benefits.
The court majority was written by Justice Stephen Breyer, which indicated that a reviewing federal court should take into consideration that conflict in determining whether the plan administrator abused its discretion in denying benefits. However, the significance of the conflict depends on the details of each case.
Wanda Glenn filed the lawsuit against MetLife after she was denied long-term disability benefits. Glenn had worked at a company now called Sears Holdings Corp. for 14 years when she pursued disability benefits due to a heart condition. MetLife paid disability benefits to Glenn for two years, but later denied her requests for benefits under her long-term disability plan. MetLife was serving as both the administrator and insurer of the Sears long-term disability insurance plan and disputed her claim that she was totally disabled.