U.S. Supreme Court to hear key disability case

Chris Rizo Apr. 23, 2008, 4:26am

WASHINGTON (Legal Newsline)-The U.S. Supreme Court on Wednesday morning is scheduled to hear arguments in a case involving conflicts of interest for ERISA plan administrators.

The case, MetLife v. Glenn, centers on whether there is an inherent conflict of interest for insurance companies that both administer employee disability plans and pay benefits under the same plans.

The arrangement is allowed under the Employee Retirement Income Security Act.

In briefs filed with the high court, insurance companies have warned that if the justices rule against the Metropolitan Life Insurance Company (MetLife) it could make providing employee benefits more expensive for companies.

They said that is because employers would be forced to hire separate companies to handle the administration of their disability plans and the pay sections of the plan.

The American Council of Life Insurers said in a brief to the justices that insurance companies have no interest in denying valid disability claims.

"An insurer's economic success will depend on its ability to accurately underwrite the policies it issues - not on its denial of valid claims," Bart Karwath wrote in the ACLI brief.

The case began in 2000 when Wanda Glenn of Columbus, Ohio, who worked at Sears, Roebuck & Co. for 14 years, sought disability benefits after suffering from a heart attack.

New York-based MetLife, which administered Sears' employee disability plan, provided her short-term disability. But in 2003, the insurance company denied her request for long-term disability.

Glenn, 55, sued, but a federal district court refused to overturn MetLife's decision.

A three-judge panel of the Sixth U.S. Circuit Court of Appeals, however, ruled in Glenn's favor, ordering MetLife to reinstate her benefits.

Appealing, MetLife petitioned the Supreme Court to take the case, MetLife v. Glenn, 06-923. Sears, which is now owned by Sears Holding Corp., is not a party to the case.

Glenn contends that MetLife had a conflict of interest in deciding her disability claim because the insurer not only decided whether employees should receive benefits, but it also had to pay any claims.

"MetLife is equally conflicted when it decides whether a beneficiary is entitled to benefits. If MetLife answers 'yes,' then it is the one who has to pay; the beneficiary's gain is MetLife's loss," Glenn's attorney, E. Joshua Rosenkranz, wrote in a brief to the high court.

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.

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