In Metropolitan Life, an insurance carrier served as both the administrator and the insurer of an employer's long term disability plan, which plan granted Metropolitan (as the administrator) discretionary authority to determine whether to grant benefits. Metropolitan ultimately denied Ms. Glenn's claim for benefits, and she filed suit.
It is well settled that if the plan gives the administrator discretionary authority to review claims, an abuse of discretion standard applies to a court's review of the administrator's decision; however, if the administrator has a conflict of interest, the court should weigh that conflict in its analysis. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). Since Bruch, courts have struggled trying to determine exactly when a conflict exists and how much weight to give to the conflict. In Metropolitan Life, the Supreme Court partially answered these questions.
The court began by stating that (1) where an employer both funds the plan and evaluates claims, the employer has a conflict of interest, and (2) the same rule applies to an insurance carrier that both insures the benefits and decides claims. Next, the court held that the conflict is only one of many factors a court should consider when evaluating a denial of benefits, but refused to ascribe any set weight to the conflict, leaving such determinations to the reviewing court. Nonetheless, the court offered the following insights:
In such instances, any one factor will act as tiebreaker when the other factors are closely balanced, the degree of closeness necessary depending upon the tiebreaking factor's inherent or case-specific importance. The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where the circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases when an insurance company administrator has a history of biased claims administrations. [Citation omitted.] It should prove less important (perhaps to the vanishing point) where the administrator has taken steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decision making irrespective of whom the inaccuracy benefits.
Slip op. at 11.
Accordingly, the decision in Metropolitan Life establishes that administrators that both fund and administer benefit plans have a conflict of interest that a reviewing court must weigh, even if the plan gives the administrator discretionary authority to decide claims. Unfortunately, the court did not provide a definitive standard to use when deciding the significance of the conflict. However, the court suggested that the conflict may have greater weight if the administrator has a past history of denying claims, and less weight if controls are put into place to separate the administrator's claims review and fact finding functions from its other activities. Thus, employers that sponsor self-insured benefits plans may want to evaluate their processes and identify possible improvements that may help to reduce or eliminate the weight to be given to any inherent potential or actual conflict of interest.