ERISA-Fourth Circuit Determines That Insurer Abused Its Discretion In Terminating Employee’s Long-Term Disability Benefits

In Williams v. Metropolitan Life Insurance Company, Nos. 09-1025, 09-1568 (4th Cir. 2010), the plaintiff, Gloria Williams, had been employed by Cingular Wireless as a customer services clerk. She became a participant in Cingular’s insurance plan (the “Plan”), which offered long-term disability benefits. The Plan was insured by the defendant, Metropolitan Life Insurance Company (“MetLife”), who was the claims administrator, and served in the dual role of evaluating benefit claims and paying approved claims. The terms of the Plan granted MetLife the discretionary authority to interpret the Plan and to determine benefit eligibility.

The plaintiff had developed medical issues with her hands and wrists, causing severe pain when she engaged in work activities, such as typing on a computer. Eventually, the plaintiff left work and filed a claim with MetLife for long-term disability benefits. MetLife paid the benefits for about 18 months, and then terminated them. The plaintiff filed this suit under ERISA, challenging MetLife’s decision to terminate the long-term disability benefits, and the case found its way to the Fourth Circuit Court of Appeals.

The Court said that when, as here, a plan subject to ERISA grants the claims administrator the discretionary authority to make eligibility determinations for participants, a reviewing court evaluates the claims administrator’s decision to deny or stop benefits for abuse of discretion. Under that standard,the Court will not overturn the claims administrator’s decision so long as it is reasonable. To be “reasonable”, the decision must result from a deliberate, principled reasoning process, and must be supported by substantial evidence.

The Court continued by noting that under the Supreme Court’s decision in Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008), where, as here, the claims administrator has a structural conflict of interest because it both decides and pays claims, the conflict becomes one of the factors that a judge must take into account in determining whether the claims administrator’s decision to deny or terminate benefits is reasonable. In this case, however, this conflict should not have a significant role in the Court’s evaluation of MetLife’s decision to terminate the plaintiff’s benefits. MetLife’s initial finding and payment of the long-term disability benefits, and its referral of its termination decision to two independent doctors, suggests that MetLife was not inherently biased in making its decision to terminate the benefits.

Nevertheless, the Court found that MetLife’s termination decision is not supported by substantial evidence. The plaintiff’s claims file contained overwhelming evidence reflecting significant problems with her hands and wrists. Her physicians repeatedly concluded that she should not return to work, or required a modification of job duties, due in part to the pain in her hands and her inability to type on a computer. MetLife itself noted that the plaintiff was unable to turn her head and use her hands for extended periods of time due to the pain. Based on its review of the administrative record, the Court said that MetLife’s decision to terminate the benefits was not reasoned and principled, and was not supported by substantial evidence. MetLife appears to have disregarded, without justification, the plaintiff’s treating physicians’ conclusions regarding her medical problems. The Supreme Court has said that claims administrators may not arbitrarily refuse to credit a claimant’s reliable evidence, including the opinions of a treating physician.

Based on the foregoing, the Court concluded that MetLife’s decision to terminate the plaintiff’s long-term disability benefits was an abuse of discretion and thus had to be overturned.

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