Tuesday, August 12, 2008
MetLife has been creating a lot of ERISA law lately, and not all of it helpful to insurers.
Discovery in benefit denial cases has always been a trickier subject than it should be. Traditionally, in those cases in which the court evaluates claims administrators' decisions for an abuse of discretion, insurers and other defendants have long maintained that no discovery is appropriate because the job of the courts is merely to evaluate the administrative record to determine whether the administrators' decisions were rational (i.e., not an abuse of discretion).If you find yourself struggling with your ERISA plan's administrator or insurer over your benefits (pension, disability, health, or otherwise), let us see if we can help.
Plaintiffs (most often participants and beneficiaries of employer-sponsored heath insurance and disability insurance policies) maintained that at a minimum, they should be permitted to conduct discovery into whether the administrator had a conflict of interest that affected its decision making. An example might be where the individual who makes the claim determination gets a bonus tied to how many claims he or she rejects. Courts have long held that where there is such a conflict of interest, that the level of deference paid to the administrator's determination will be significantly attenuated. As a result, plaintiff's generally want to get as much discovery as possible related to the conflict.
This battle played out in hundreds, if not thousands, of benefit cases in federal courts all over the country. In some courts some plaintiffs sometimes prevailed, but at the same time the approach of other federal courts has been to limit severely the scope of discovery available to plaintiffs in such cases.
In its recent decision in Metropolitan Mutual Life Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008), the Court held that whenever the same entity is required to make the claims decision and also to pay the claim, there is always a conflict of interest. The Court specifically suggested, inter alia, that trial courts might consider an insurer's "history of biased claims administration," whether the administrator "has taken active steps to reduce potential bias and promote accuracy," and whether the administrator has imposed "management checks that penalize inaccurate decisionmaking, irrespective of whom the inaccuracy benefits." Id. at 2351.
Though one might have thought this would resolve the issue once and for all, just two weeks ago I had an insurer's attorney express to the court at a case management conference that, in light of the MetLife decision, no discovery is appropriate because her client (also MetLife), as both the payor and the decision-maker, was conflicted as a matter of law, and no further inquiry was required.
That's an interesting position, but the one post-MetLife court that has considered it has rejected it, and adopted the position that discovery that is reasonably calculated to lead to the discovery of admissible evidence of the scope and effect of an insurer's conflict is appropriate. In Hogan-Cross v. Metropolitan Life Insurance Co., --- F. Supp. 2d ---, 2008 WL 2938056 (S.D.N.Y. 2008), the court could not have expressed my sentiments better: "[E]ach case must be considered on its own merits. Blunderbuss attempts to cut of discovery on the ground that it never or rarely should be permitted in [ERISA benefit denial] cases, whatever their merits before Glenn, no longer have merit." Id. at *4.
Blunderbuss is such a great word.