Last week, the Supreme Court issued its long-awaited decision in Met Life v. Glenn, which will influence ERISA claims for benefits for years. Glenn involves the commonly-found situation in which a party (in this case, an insurer) both pays benefits under an ERISA plan and is also granted discretionary authority to resolve claims for benefits under that plan. The question raised in Glenn is whether (and under what circumstances) that party’s resolution of a claim for benefits is entitled to discretionary review. (Although Glenn involved an insurance company, the opinion states that it will also apply to employers who decide and pay claims as well.) Glenn will make litigating ERISA claims for benefits somewhat more difficult and complex.

The Glenn court begins by reaffirming the long-held rule that an ERISA plan can give its administrator discretionary authority to resolve claims for benefits. When this occurs, the administrator’s decision is presumptively reviewed under the deferential abuse of discretion standard. Glenn goes on to hold, however, that a plan administrator who both pays benefits and resolves claims for benefits operates under a conflict of interest that must be “taken into account on judicial review of a discretionary benefit determination.” The Supreme Court left it to the lower courts to determine precisely how this conflict should be weighed in any particular case, believing that this deliberately vague standard would allow courts the flexibility to resolve claims on a case-by-case basis, without imposing “one-size-fits-all” procedural rules that would “create further complexity” for reviewing courts and claimants.

While Glenn does not mark a radical departure from existing law, it may make defending claims for benefits more difficult and expensive. In at least some circuits (including the Eighth Circuit), Glenn will result in courts applying more scrutiny to benefits decisions by conflicted administrators. Previously, the Eighth Circuit law held that a “funding conflict” only altered the standard of review if the plaintiff could prove that the conflict actually affected the administrator’s decision. Glenn, however, requires the reviewing court to consider a funding conflict as a factor wherever it exists. Although many judges have implicitly (and perhaps even unconsciously) taken a funding conflict into account in the past, Glenn formalizes this factor in their decision-making process.

Perhaps more importantly, Glenn’s refusal to create any hard and fast rules for how to resolve the conflict of interest issue will likely result in an increase in the amount of discovery allowed in ERISA claims for benefits. Prior to Glenn, most courts would view requests for discovery on a funding conflict of interest with disfavor, and at least some would deny them altogether. The Glenn court’s determination that the extent to which a funding conflict matters in any particular case depends on such factors as whether the insurer had a history of biased claims decisions, whether claims reviewers were rewarded for accuracy, or were insulated from those interested in company finances, etc., would seem to make those topics viable areas for discovery. This will likely result in broader (and more costly) discovery in claims for benefits, at least in claims large enough to merit the investment of time by a plaintiff’s lawyer.

Glenn highlights the importance of creating proper procedures for reviewing claims for benefits. We would be happy, of course, to discuss how to do so in a practical and effective way at your convenience.