Alarming Question: MetLife v. Glenn

Written by: Philip J. Gutwein II

In the wake of yesterday's landmark decision in LaRue, it may be tempting to think that the Supreme Court will leave ERISA alone for the rest of the term. No such luck. 

On January 18, 2008, the Court announced that it had granted certiorari in the Sixth Circuit case of MetLife v. Glenn, No. 06-923, on a single issue: "If an administrator that both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?" 

To an ERISA defense lawyer, the Court's construction of the issue is alarming.  Why?  Because it suggests that an administrator that both determines and pays claims under an ERISA plan may be deemed—perhaps even presumed—to operate under a conflict of interest that affects the standard of review, such that the real question is exactly how that conflict should be taken in account on judicial review of a discretionary benefit determination. 

The issue of whether an administrator that determines and pays claims is presumed to operate under a conflict of interest is a source of splintered jurisprudence across the federal circuits.  The disparate rules from the Sixth and Seventh Circuits provide an example.  In Glenn, the Sixth Circuit held that, because MetLife was "authorized both to decide whether an employee is eligible for benefits and to pay those benefits," its "dual function create[d] an apparent conflict of interest" that must be taken into account in assessing whether MetLife abused its discretion in deciding Glenn's claim.  461 F.3d 660, 666 (6^th Cir. 2006).  In contrast, the Seventh Circuit has concluded that there is not "an inherent conflict of interest due to [a party's] dual role as insurer and administrator of the Plan."  Kobs v. United Wis. Ins. Co., 400 F.3d 1036, 1039 (7^th Cir. 2005).  Rather, the Seventh Circuit "presume[s] that a fiduciary is acting neutrally unless a claimant shows by providing specific evidence of actual bias that there is a significant conflict.”  Id. 

To ERISA litigators, therefore, the Court has granted cert in Glenn on what are actually two distinct issues: (i) whether an administrator that both determines and pays claims under an ERISA plan is presumed to operate under a conflict of interest; and, if so, (ii) how that conflict should be taken into account on judicial review of a discretionary benefit determination.  ERISA defense counsel hope that the Court's description of the issue does not foreshadow its ruling on the threshold question of whether a conflict is presumed to exist when an administrator both decides and pays claims.  Irrespective, Glenn is poised to produce a rule from the Court with profound implications for entities that serve the dual function under an ERISA plan of deciding and paying claims—and that means that insurance companies, which are frequently responsible for deciding claims under the ERISA plans they fund, are watching this case closely. So, too, should employers who sponsor and decided appeals under a self-funded plan.