As many ERISA attorneys will tell you, the Sixth Circuit has a rather unique way of reviewing a long-term disability plan’s claims administrator denial of benefits when the participant alleges that the administrator had a conflict of interest that may have influenced its benefits determination. Now, the Supreme Court will decide whether the standard of review adopted by the Sixth Circuit is appropriate. On January 18, 2008, the Supreme Court agreed to hear arguments in Metlife, et al. v. Glenn,U.S., No. 06-923. In deciding the case, the Court will answer the following question: “If an administrator who both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?” 

It is perfectly legal, though maybe not prudent, for an ERISA plan’s claims administrator to determine whether participants are entitled to benefits under the terms of the plan while also being responsible for paying claims under the plan. But participants’ attorneys argue that courts must consider the fact that an administrator has such dual responsibilities—both determining whether a participant is entitled to benefits and actually writing the check—and that courts should presume that this fact necessarily disadvantages participants. So, instead of reviewing an administrator’s decision under a pure form of the highly deferential “arbitrary and capricious” standard, participants’ attorneys argue—and the Sixth Circuit held in Glenn, 461 F.3d 660 (6th Cir. 2006)—that courts instead should review an administrator’s decision under the arbitrary and capricious standard of review while taking into account the existence of a conflict of interest. A conflict of interest would thus operate as a crack in the armor of the arbitrary and capricious standard of review.

To be fair, a reviewing court must consider all sorts of factors in determining whether an administrator’s decision was arbitrary and capricious. For instance, in the Sixth Circuit’s opinion in Glenn, the court considered, in addition to the claimed conflict of interest, the administrator’s encouragement of the plaintiff to seek out Social Security benefits; the administrator’s allegedly incomplete review of the medical evidence; and the plan’s rejection of the treating physician’s assessment. But, the question soon to be answered by the Supreme Court, is this: Does the existence of a potential conflict of interest alone render an administrator’s denial of benefits arbitrary and capricious? Or must other factors coexist to demonstrate that the conflict of interest actually influenced the benefits determination for a court to overturn that determination? Only time will tell…