Friday, July 1, 2011

Eleventh Circuit: MetLife saves itself half a million dollars by exercising its "discretion" in its own favor. No problem.

I’ve discussed before the absurdity of allowing an ERISA “insurer” to be judge and jury about its own contractual obligation to, well, provide insurance. Recently we took a look at one judge’s opinion it’s not such a problem after all, because ERISA imposes supposedly sky-high fiduciary duties protecting beneficiaries from insurer abuse.

Would that it worked that way. That it doesn’t is demonstrated by this week’s Eleventh Circuit opinion in Blankenship v. MetLife. Blankenship illustrates perfectly how allowing ERISA “insurers” to exercise “discretion” over their own contractual obligations leads to disaster for claimants who deserve better.

Frank Blankenship was diagnosed with coronary artery disease, and suffered a heart attack, in 2003. Because his job as manager of a Sears Roebuck store was so stressful, and because his physicians concluded stress would very likely exacerbate his coronary condition, Mr, Blankenship submitted a disability claim to Sears’ ERISA disability “insurer,” MetLife. MetLife paid benefits for a time, and then cut them off, based on opinions it commissioned from its paid physician consultants (none of whom, by the way, ever so much as met Mr. Blankenship).

The trial judge, William M. Acker, Jr. (whose work we have enjoyed before on this blog), issued an order in January 2010 overturning MetLife’s termination of benefits. MetLife appealed, leading to the Eleventh Circuit debacle this week.

Why did the Eleventh Circuit reverse Judge Acker’s conclusion MetLife had been not only incorrect but absurdly incorrect in terminating benefits? Because MetLife had granted itself discretion in its “insurance” policy, and therefore mere federal judges could not question the decision of the MetLife Oracle:

We see nothing in the record that would lead us to conclude that MetLife did not act reasonably in relying on the independent medical opinions or in crediting those opinions over the opinions of Blankenship’s doctors.

Never mind that Mr. Blankenship’s physicians had, you know, seen him on occasion and had, you know, examined him personally. The Eleventh Circuit then moved on to conclude MetLife had no meaningful conflict of interest when it saved itself over $500,000 by terminating Mr. Blankenship’s claim:

Even if the potential claim at issue “involves over $510,000, not including future benefits,” as the district court stated, Blankenship, 686 F. Supp. 2d at 1236, the size of the award is not enough to be the dispositive factor in this case. Even half a million dollars -- a large sum, to be sure -- is a relative amount when the plan administrator is a global, Fortune 100 company with annual revenues exceeding $50 billion.

Wow. Looks like it would take a hell of a claim to convince the Eleventh Circuit MetLife operated under a meaningful conflict of interest. Of course any one claim is just a rounding error, if that, on MetLife’s books. But it is undeniable that ERISA “insurers” like MetLife spare themselves very significant costs through denying and terminating valid claims in general; this particular claim was an example of that. By requiring that the stakes in an individual claim be high enough, by themselves, to directly impact a “Fortune 100 company with annual revenues exceeding $50 billion,” the Eleventh Circuit has effectively eliminated any real impact a conflict of interest might otherwise have – and it is supposed to have an impact, as the Supreme Court has quite distinctly directed.

Read Judge Acker’s discussion of the facts, and then read the Eleventh Circuit’s views on just how flimsy a claim denial can be and still qualify as “reasonable.” And then ask yourself whether ERISA’s supposed fiduciary duties offer any real protection at all.

1 comment:

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