Articles Posted in ERISA

At least they weren’t ranked as the worst insurance company for consumers. (That award goes to Allstate.) Long Term Disability Insurer-Unum was ranked second from worst in a recent study cited by the Despite agreeing to pay a massive fine and review thousands of its Long Term Disability claims decisions in a Multi-State Regulatory Settlement Agreement, Unum was still ranked near the absolute bottom of insurers.

According to the article Unum earned a profit in 2007 of more than 679 million dollars while paying its CEO a whopping 7.3 million dollars. Unum was joined in the study by Allstate, AIG, State Farm and Conseco as the most anti-consumer insurance companies in the U.S.

On June 19 the Supreme Court issued its much anticipated decision in Metlife v Glenn regarding the conflict of interest created by a long term disability insurer who both determines whether an insured is eligible for benefits and pays benefits out of its own pockets.

Justice Breyer authored the majority opinion confirming that when a plan administrator both evaluates claims for benefits and pays those benefits a conflict of interest is created which requires the reviewing court to weigh that conflict as a factor in determining whether there was an abuse of discretion.

The majority opinion reaffirms the principles first identified in the Firestone decision. Any practitioners who were hoping this decision might change the landscape are sure to be dissapointed as the Court specfically recognized that it was not providing any detailed set of instructions on determining the effect of the insurer’s conflict on its ultimate decision to deny benefits.

Recently, the US District Court (Judge Richard Enslen) upheld the Michigan Insurance Commissioner’s right to prevent any Long Term Disability Insurer from including discretionary clauses in their insurance contracts in the case American Council of Life Insurer’s v Waters.

This could be a tremendously important decision for anyone with a long term disability claim. For years now the insurance companies have included clauses giving themselves the discretionary authority to interpret and enforce the provisions of their own insurance policies. The natural result of this power grab was to restrict the Court’s ability to review the appropriateness of the insurance companies decisions. As a result countless otherwise meritorious claims were denied. The insurance companies racked up huge profits while the individuals who filed claims lost their homes and were forced into poverty.

It remains to be seen whether this well reasoned decision is upheld on appeal. The AARP filed an amicus brief in support of the Michigan Insurance Commissioner.

“That Smells Bad” said Justice Scalia as he described disability insurer-MetLife’s conflict of interest.

The US Supreme Court heard Oral arguments last week in Glenn v. Metlife. This is an important decision for all disability claims governed by ERISA. The Supreme Court examined how Metlife’s inherent conflict of interest–as both the entity which determines eligibility and then must pay those claims–should affect a reviewing court’s analysis.

The Justices clearly recognize the problem. Metlife had to determine whether Wanda Glenn was disabled. Metlife helped Wanda Glenn get social security disability. Metlife got repaid most of its money when Wanda Glenn was paid social security disability. Then Metlife decided Wanda Glenn was no longer disabled and cut off her long term disability benefits. The lower Courts determined Metlife’s decision was not supported by the evidence and Metlife’s inherent conflict of interest was a factor.