Court Upholds Ruling on Health Benefits


Employees whose benefits claims are denied are entitled to a fuller day in court than they tend to get now, the United States Supreme Court decided Thursday, in a case that examined the conflicts of interest underlying most benefits decisions.

Until now, employees who felt wrongly deprived of benefits could expect little help in court unless they could show that their plan administrators had behaved in an arbitrary, capricious or unprincipled way.

Justice Stephen G. Breyer, writing for the majority, eased that requirement, but stopped well short of setting out specific new rules for when and how employees could challenge adverse benefits decisions.

Employers said it was a ruling they could live with. “This is going to put the thumb on the scale in the employees’ favor,� said Lonie A. Hassel, a partner at the Groom Law Group in Washington who represents companies in employee benefits litigation. “But I think it’s only going to make a difference in close cases.�

But others were deeply disappointed. “We had hoped the court would give greater clarity and guidance in these cases,� said John H. Langbein, a Yale law professor who is an authority on employee benefits law. “But they did not move the ball at all.�

The Supreme Court issued its 6-to-3 ruling in favor of Wanda Glenn, an Ohio woman who worked for 14 years as a supervisor in the women’s department of a Sears store. She suffered from heart disease and took a leave of absence in 2000, providing extensive documentation from her doctor that she could not return to work.

Sears offered employees long-term disability insurance as a benefit, but the plan administrator, MetLife, said Ms. Glenn did not qualify. She sued, and the trial court rejected her complaint because she had not shown that MetLife behaved arbitrarily.

But the Appellate Court for the Sixth Circuit found in Ms. Glenn’s favor, saying that MetLife had acted under a conflict of interests. The Supreme Court’s affirmed that ruling, and Ms. Glenn will receive her benefits.

The conflict the Supreme Court observed in MetLife’s role is one that employers, employees and insurance companies have been struggling with ever since Congress enacted a landmark employee benefits law in 1974. The law requires the officials who make decisions about employee benefits, known as plan administrators, to act solely in the interest of workers, yet they are usually hired by the company that pays for the benefits, and thus share the employer’s interest in keeping costs down.

A 1989 Supreme Court decision acknowledged this potential conflict but stirred up confusion about how to address it. In the 1989 decision, the court decided that when district courts reviewed benefits disputes, they should review all the facts afresh, something called a de novo review. Employers feared this would undercut their plan administrators’ decisions and make the plans a legal battleground.

But the opinion said that if companies explicitly gave discretionary authority to their plan administrators, then judges should generally defer to the plan administrator. Companies quickly began inserting clauses into their plans making the administrators’ decisions “final,� “conclusive,� and “binding.�

But the 1989 decision also said that employees could sometimes win by showing that the plan administrator had acted under a conflict of interest.

In his majority opinion, Justice Breyer wrote that it would be inappropriate for district courts to stop treating administrators with deference, or to give every dispute a full-blown de novo review.

Instead, he called for something in between, requiring district judges to bear the administrator’s conflict in mind and factor it into their thinking.

In a dissent, Justice Antonin Scalia called the majority opinion “painfully opaque, despite its promise of elucidation.�

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