ERISA STANDARD OF REVIEW
The Metropolitan Life Insurance Company v. Glenn case (“Glenn”), decided in the spring of 2008, keeps spinning off some interesting decisions on the abuse of discretion standard of review of ERISA long term disability benefits denials by insurance companies. One recent case within the Fifth Circuit is Merrell v. The Hartford Insurance Company, a case in the Southern District of Texas, Corpus Christi Division (Judge Janis Jack) was decided on September 4, 2009 (“Merrell”)
In the Merrell case the Plaintiff claimed that the insurance company was not paying him the full amount due under the long term disability plan; there was no dispute as to Merrell’s disability.
The Hartford acknowledged that it was both the insurer of the plan and the administrator. Prior to Glenn the district courts within the Fifth Circuit would consistently treat that situation, without additional proof by the Plaintiff, which is impossible, as only a deminimus conflict of interest. The courts would “determine” the amount of deference to afford, under the Fifth Circuit’s abuse of discretion standard, by a so-called “sliding scale”. Typically that standard would then be used in a summary judgment proceeding to analyze the insurance company’s finding on the issue of disability, i.e., not disabled. Not surprisingly, by using this standard the district courts in the Fifth Circuit rarely find a genuine issue of material fact. The result is almost always a summary judgment in favor of the insurance company, often even though the Plaintiff is clearly disabled and has been found to be so by a United States Administrative Law Judge in a Social Security hearing.
The Glenn case is certainly not going to be a solution for claimants covered by employee long term disability plans. The Glenn case gave the Supreme Court an opportunity to abandon the abuse of discretion standard in review of claims decisions made by insurance companies that decide whether it will or will not pay benefits. (If the insurance company will have to pay the benefits, and it’s sure that no court will reverse its decision, and even then it will not have to pay punitive damages, how likely will it decide to pay?) But in a 7 to 2 decision (the dissent was on another issue) the Court continued the abuse standard, although with some modification. So short of repeal of ERISA* claimants will continue to be faced with an impossible burden, with no meaningful help from federal courts, in actually obtaining benefits that they had assumed to be available in case of emergency. Put another way: don’t bank on actually receiving any money from your long term disability policy. That’s the bad news.
To her credit, Judge Jack, following Glenn’s treatment of the dual role of insurer and administrator as in itself a substantial conflict, a fact that had seemed obvious to other circuit courts for years, the Corpus Christi court placed some of the evidentiary burden on the conflicted insurance company to prove how much weight the court should give to the conflict of interest in its review of a denial of benefits. Prior to Judge Jack’s analysis courts in the Fifth Circuit have been consistent for decades in placing all of that burden on the plaintiffs. Her specific holding on this issue is quoted below for convenience. She found facts in controversy which precluded either party from a summary judgment. In addition she found, citing Glenn, as to the conflict of interest …
“Defendant has not presented evidence to demonstrate that it has taken steps to ‘reduce potential bias and to promote accuracy’ 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’. There is little, if any, evidence in the record that would allow the Court to determine how to weigh the conflict of interest in this case. In light of the new standard announced in Metropolitan Life [called Glenn herein], the lack of evidence on this issue alone counsels against granting summary judgment in favor of Defendant.”
* This would provide a fair opportunity to hold the insurer responsible but would require a change by Congress.
