The number of cases which apply the Supreme Court’s opinion in Metropolitan Life Insurance Company v. Glenn, 128 S. Ct. 2343 (2008) , when reviewing under ERISA a decision to deny or terminate employee benefits by a plan administrator with a conflict of interest, continue to grow. In Raybourne v. Cigna Life Insurance Company of New York, No. 08-2754 (7th Cir. 2009), the Court was faced with such a review.
In this case, the plaintiff was a participant in his employer’s long-term disability benefits plan. The plan was insured by the defendant, Cigna Life Insurance Company of New York. The plaintiff had been receiving long-term disability benefits under the plan. However, after a period of time, the defendant determined that the plaintiff no longer qualified for the benefits, since the plaintiff could no longer meet the plan’s definition of disability, and therefore terminated the benefits. Under the plan, the defendant had the discretion to determine eligibility for benefits. The plaintiff sued the defendant to reinstate the benefits, and the case would up in the Seventh Circuit. The question before the Court was the appropriate standard of judicial review under ERISA of the defendant’s decision to terminate the plaintiff’s benefits, in view of Glenn.
The Court found that, due to the defendant’s discretion under the plan to determine benefit eligibility, the Court must apply the abuse-of-discretion standard when reviewing the defendant’s decision to terminate the benefits. However, when applying this standard, as required by Glenn, the Court must take into account the “structural” conflict of interest which exists because the defendant both determines eligibility for benefits and pays any benefits which are awarded. A structural conflict is one factor among many that are relevant in the abuse-of-discretion analysis–including whether the decision maker overemphasized medical reports that favored its decision and whether it gave its medical examiners all of the relevant evidence–and will act as a tiebreaker when the other factors are closely balanced. Glenn emphasizes that a court should give additional weight to a structural conflict where the decision maker has a history of biased claim administration or helped a claimant obtain a social security award it then disregarded. The conflict may be less important (perhaps to the vanishing point) when the decision maker has taken active steps to reduce potential bias and to promote accuracy.
The Court found that the district court had given only cursory treatment of Glenn, and remanded the case back to the district court to consider the impact of the structural conflict of interest on the defendant’s decision to terminate the benefits.