The Court of Appeals for the Eleventh Circuit recently reversed a district court’s decision by upholding an insurer’s denial of a long-term disability benefit claim. The Eleventh Circuit gave deference to the insurer’s determination, despite the fact that the insurer had a structural conflict of interest as the insurer was both the plan administrator and the payor of benefits.
In this case, the employer’s long-term disability plan delegated authority to the insurer to interpret the plan’s terms and determine whether a claimant is disabled. While participating in the plan, the employee plaintiff began receiving long-term disability benefits after suffering a heart attack and later continued to receive benefits following knee surgery. The insurer ultimately terminated benefits after concluding that the plaintiff was no longer disabled under the terms of the plan, prompting the plaintiff to appeal the insurer’s decision. The insurer denied the appeal after requesting that the file be reviewed by three independent medical specialists.
After exhausting the plan’s appeals process, the plaintiff filed a complaint in district court. The district court concluded that the insurer’s decision to deny benefits was arbitrary and capricious, mainly because of the insurer’s structural conflict of interest. While the Eleventh Circuit recognized that a structural conflict existed, they also noted that “the burden remained on the plaintiff to show the decision was arbitrary; it is not the defendant’s burden to prove its decision was not tainted by self-interest.” In this instance, the Eleventh Circuit concluded that, based on the administrative record, the insurer possessed a reasonable basis for its benefits decisions and that the structural conflict of interest did not render those decisions arbitrary and capricious.
In Metropolitan Life Insurance Company v. Glenn, the United States Supreme Court noted that courts must take into account structural conflicts of interest. However, as this case demonstrates, courts continue to struggle with how to appropriately adjudicate this conflict. (Blankenship v. Metropolitan Life Insurance Company, 11th Cir. 2011)