In an ERISA disability case in Chicago, a federal district court judge awarded attorney’s fees of $109,312.75 to the successful complainant, Ms. Holmstrom. After MetLife made the decision to terminate her claim for long term disability benefits, she sued MetLife and her employer’s benefit plan.

Holmstrom willingly discharged her own lawsuit after MetLife offered to consider her second internal appeal. However, after MetLife declined to change its mind, she re-filed her case. After the district court agreed with MetLife’s decision to terminate her claim, she appealed to the 7th Circuit Court of Appeals.

The appeals court reversed the judge and ruled in Holmstrom’s favor. The appeals court found that MetLife had acted arbitrarily and capriciously. The appeals court reinstated Holmstrom’s disability payments benefits but then left the issue of attorney’s fees for the district court to decide.

The court noted that the U.S. Supreme recently ruled, in a case called Hardt, that ERISA’s legal fee provisions allow fees to be awarded to an ERISA litigant who has achieved “some success” on the merits. The court said that Hardt supplanted the 7th Circuit’s standard for ERISA fee awards. The district court ruled that Holmstrom had achieved more than some quantity of success on the merits since the 7th Circuit had reinstated her disability insurance benefits.

A federal magistrate in a California disability case has ruled that lawyers can seek evidence, as part of the discovery process, as to a group disability insurer’s potential conflict of interest. The magistrate agreed with the view that the US Supreme Court’s decision in Glenn v. Metlife last year permits inquiry into a potential history of bias and whether an insurer has taken steps to wall off claims personnel from insurer’s financial personnel.

Evan Schwartz and Michail Hack of Quadrino Schwartz published an article in the wake of the Glenn v. Metlife decision arguing that the Supreme Court’s analysis authorized such investigations of insurer claims practices in ERISA cases. Click here for a description of the Schwartz and Hack Article

The Supreme Court struck a blow against insurance companies and in favor of workers with its ruling in the case of Metropolitan Life Insurance Co. v. Glenn (June 2008). The ruling states that “courts reviewing an employee’s denial of ERISA benefits should consider an insurer’s conflict of interest in deciding claims and paying for benefits.”

When Sears Roebuck & Co. employee Wanda Glenn was diagnosed with a heart condition and applied for plan disability benefits, Met Life initially concluded that Glenn’s claim was valid, and encouraged her to also apply for Social Security benefits. However, Metlife later reneged on that decision, claiming that Glenn was indeed able to perform sedentary tasks, and was therefore ineligible for long term disability benefits.

Evan S. Schwartz and Michael Z. Hack of Quadrino Schwartz published an article in the New York Law Journal entitled “’Met Life v. Glenn’: Innovative Worker Benefits Decision. In their article, Schwartz and Hack point out that a prior Supreme Court decision, Firestone Tire and Rubber Co. v. Bruch, actually made it more difficult for employee plan beneficiaries to demonstrate a conflict of interest, or self-interest, in the administrative authority of an insurance company when determining the validity of an employee’s claim. Establishing a conflict allows a court to level the playing field and more closely scrutinize the claims decision of a long term disability insurance company.

Met Life v. Glenn removes much of that difficulty by stating that a court must, at a minimum, take into consideration the following elements, among many others, in determining the severity of the financial conflict of interest:

1. The insurance carrier’s history of biased claims administration;

2. The quality of the firewalls, if any, erected between the claims administrators and those interested in the carrier’s finances;

3. The carrier’s reliance on evidence favorable to it to the exclusion of evidence favorable to the claimant;

4. The carrier’s insistence that the claimant apply for Social Security Disability benefits and, in the same breath, denying the claimant is disabled; and

5. The failure to provide evaluators with all the relevant evidence.

Based upon the existence of evidence as to the scheme of Unum, Unumprovident and its subsidiaries, claimants suing those companies may be placed on a more equal footing. Claimants pursuing benefits against other insurers may now be allowed to investigate further, to uncover biased claim administration and other conduct that would allow more scrutiny of the insurer’s claim decisions.