Supreme Court Sides with Disabled Employee in Benefits Case

On June 19, 2008, the Supreme Court decided Metropolitan Life Insurance
Company v. Glenn.  In that case, the Court supported the claim of Wanda
Glenn, a disabled former employee of Sears Roebuck, whose long term
disability benefits had been cut off even though the Social Security
Administration had determined that it would be impossible for her to
return to full-time employment.  Legal Services NYC and South Brooklyn
Legal Services filed a friend of the court brief in support of Ms.
Glenn’s claim.

Ms. Glenn had been an employee of Sears Roebuck for 14 years when life-threatening heart disease suddenly forced her to quit work. Despite the consistent and repeated word of her doctor that she was unable to return to work, Met Life, the insurance company contracted out by Sears to handle their long term health insurance policy, refused to acknowledge that she was permanently disabled and insisted she return to some form of work.

As with almost all policies written by insurance companies, the Met Life policy had a clause that gave it “discretion” in making eligibility determinations.  The practical effect of this is that employees who challenge a decision by filing a lawsuit have very little chance of winning– even if the federal judges themselves believe the company made the wrong decision.  This is because the courts have been required to give great deference to how a benefit plan “exercises its discretion.” 

In this case, Ms. Glenn lost her case in federal district court but won when she appealed to the United States Court of Appeals for the Sixth Circuit. The Court of Appeals, taking into account Met Life’s conflict of interest, refused to rubber-stamp Met Life’s decision and instead looked closely at the evidence.  Based on this review, the Sixth Circuit came to the conclusion that the cutoff of Ms. Glenn’s benefits had been unreasonable.

Met Life asked the Supreme Court to review the Sixth Circuit decision. Met Life argued that the Court should adopt the standard used in the Second Circuit, which includes New York State.  In the Second Circuit, judges had refused to take into consideration a conflict of interest unless the claimant was able to show a smoking gun, proving that the conflict actually affected the plan’s decision to deny benefits. In its Amicus brief, Legal Services NYC and South Brooklyn Legal Services pointed out that in almost all cases, it was impossible to find such a smoking gun, noting that out of 65 cases decided in the federal courts in New York State that involved a plan with a conflict of interest, in only two was the claimant able to find the required smoking gun.  This rule had led to a “judicial regime of passive acquiescence to virtually all fiduciary decisions, irrespective of whether the courts themselves believe the decision to be unfair or mistaken.”

Fortunately, the Supreme Court refused to adopt this approach and instead upheld the Sixth Circuit’s decision.  According to the Supreme Court, in cases such as this, courts should take into consideration conflicts of interest as well as any other facts that might indicate that the denial was unfair.  Although the Met Life case concerned a long term disability plan, the Court made it clear that its ruling applied to all types of employee benefits, including retirement pensions that are regulated under the Employee Retirement Income Security Act.

Read more about the case in the New York Times and the New York Law Journal (subscription required).