Originally published September 29, 2008
Keywords: Employee Retirement Income Security Act, ERISA, structural conflict, conflict of interest, plan administrator, insurer, benefits plan, retirement plan, pension, Metlife, Glenn,
On several occasions over the past year we have published updates about the "Metlife v. Glenn" case, in which the Supreme Court addressed so-called "structural" conflicts of interest and held that (1) an insurer who both administers and funds an Employee Retirement Income Security Act (ERISA) benefits plan operates under a conflict of interest; and (2) courts should consider that conflict of interest when reviewing a conflicted insurer's denial of benefits, but should give the conflict varying weight based on the circumstances of the case. (Our summary of the Court's decision in Glenn is available, and please see also our discussion of the oral argument in the case.)
The federal courts of appeals have now started applying Glenn—five different circuits have issued opinions relying on it just during the past month—and thus we thought a brief update would be useful to our clients and friends.
Although it is too early to be confident about the matter, Glenn may end up being more favorable to defendants in practice than many initially feared. For example, some people read the Glenn case to mean that, if all other things were equal, the existence of a structural conflict would tip the scales in favor of the claimant. The Eleventh Circuit's recent opinion in Doyle v. Liberty Life Assurance Co., __ F.3d __, 2008 WL 4272748 (11th Cir. Sept. 18, 2008), suggests that this concern may have been misplaced. The court applied the arbitrary and capricious standard—rather than de novo review or some other intermediate standard of review—notwithstanding the existence of a structural conflict. The panel held that the denial of long-term-disability benefits in that case was not an abuse of discretion, and stressed that, even when a structural conflict exists, "the burden remains on the plaintiff to show the decision was arbitrary; it is not the defendant's burden to prove its decision was not tainted by self-interest." Id. at *7. The court also rejected the argument that courts "must give greater weight to the existence of a conflict if there is no evidence that the administrator put in place procedures to assure accurate claims assessment." Id. at *9.
Similarly, the Fifth Circuit has adhered to its pre-Glenn view that an entity serving in the dual roles of administrator and insurer "creates only a minimal conflict, not a substantial one," and that in such instances courts should review benefits determinations using "only a modicum less deference than would otherwise be afforded under the abuse of discretion standard." Dunn v. GE Group Life Assurance Co., 2008 WL 3842929 (5th Cir. Aug. 18, 2008) (emphasis in original; internal quotation marks omitted). The Sixth Circuit, too, recently noted that, post-Glenn, even when there exists a structural conflict of interest "the [abuse-of-discretion] standard of review plays a particularly significant role, often tipping the balance in favor of the plan administrator's denial." Roumeliote v. Long Term Disability Plan for Employees of Worthington Indus., 2008 WL 4181187 (6th Cir. Sept. 11, 2008).
Other post-Glenn appellate cases rejecting challenges to benefits determinations made by administrators operating under a conflict of interest include Crowell v. Shell Oil Co., __ F.3d __, 2008 WL 3485331 (5th Cir. Aug. 14, 2008); Young v. Wal-Mart Stores, Inc., 2008 WL 4302590 (5th Cir. Sept. 22, 2008) (noting that fact that administrator had not "wall[ed] off claims administrators from those interested in firm finances" was "not of great importance"); Gutta v. Standard Select Trust Ins. Plans, 2008 WL 3271414 (7th Cir. Aug. 8, 2008); Wakkinen v. Unum Life Ins. Co., 531 F.3d 575 (8th Cir. 2008); and Daiic v. Hawaii Pacific Health Group Plan for Employees 0f Hawaii Pacific Health, 2008 WL 3862074 (9th Cir. Aug. 13, 2008);
But the news is not entirely rosy. Most importantly, the Ninth Circuit just held, in Burke v. Pitney Bowes Inc. Long-Term Disability Plan, __ F.3d __, 2008 WL 4276910 (9th Cir. Sept. 19, 2008), that there exists a structural conflict of interest—the effects of which must be analyzed under Glenn in reviewing any benefit determination—even when benefits are not paid directly by an employer 0r insurance company but instead are paid out of a VEBA trust fund. See id. at *8. In so holding, the Ninth Circuit acknowledged it was creating a circuit split with (pre-Glenn) cases from the Third, Fourth, and Eleventh Circuits. The Eleventh Circuit recently reaffirmed its contrary view, in White v. Coca-Cola Co., __ F.3d __, 2008 WL 4149706 (11th Cir. Sept. 10, 2008). We anticipate this will be the subject of significant litigation in the months to come.
Nor have defendants won all cases involving structural conflicts of interest—the Tenth Circuit recently cited the existence of a structural conflict of interest as one reason for rejecting an insurer's denial of a benefits claim, and explained that it viewed Glenn as essentially adopting its "sliding scale approach" to deference—under which the court will "decrease the level of deference given in proportion to the seriousness of the conflict." Weber v. GE Group Life Assurance Company, __ F.3d __, 2008 WL 4182360, at *6 (10th Cir. Sept. 12, 2008). Many other cases have been remanded to trial courts to reanalyze in light of Glenn, so we expect to see this area of law continue to develop over the next months.
We will continue to issue occasional briefings as developments warrant them in this important area of law. We are also happy to discuss these or related issues further at any point.
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