The case, Metropolitan Life Insurance Co. v. Wanda Glenn, involved a denial of disability benefits. Glenn, a former employee of Sears, Roebuck & Co., suffered from a severe heart condition. She received “total disability” payments from MetLife, which administers and insures the Sears-sponsored plan that is governed by the Employee Retirement Income Security Act. But when Glenn’s condition began to improve, MetLife rescinded the benefits, holding that she could perform low-stress work.

Glenn sued and a federal court ruled for MetLife.

The decision was overturned in 2006 by a three-judge panel of the 6th U.S. Circuit Court of Appeals, which held that MetLife’s role in both determining and paying benefits represented a conflict of interest that had to be considered when reviewing a denial of benefits.

The Supreme Court agreed with the appeals court in a 6-3 decision written by Associate Justice Stephen Breyer. He wrote that a plan administrator’s dual role of both evaluating and paying benefits claims creates the kind of conflict of interest the court had noted in its 1989 decision in Firestone v. Burch. In that case, the high court said courts should review denial of ERISA plan benefits only for arbitrariness and capriciousness, as long as the plan explicitly grants discretionary authority to make benefit decisions to a plan administrator or other fiduciary.

The Firestone decision held that the courts could take potential conflicts of interest into account in such review.

Justice Breyer wrote that such a conclusion is clear when an employer both funds and evaluates claims and that such a conflict can exist when an insurer plays both roles.

Filed by Mark A. Hofmann of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.