In one of the first published decisions interpreting the Ninth Circuit’s recent Abatie decision, a federal district court in California has upheld a plan administrator’s denial of an employee’s claim for long-term disability benefits under ERISA, despite the fact that the plan administrator was also the funding source for benefits and had a “structural conflict of interest.” Frost v. Metropolitan Life Ins. Co., 470 F. Supp. 2d 1101 (C.D. Cal. January 12, 2007).

The employee, Sandra Frost, worked at Wells Fargo Bank and held long-term disability insurance through a MetLife group plan. MetLife acted as both claims administrator and plan fiduciary. Frost’s health began to decline in 2001 and MetLife approved her claim for short-term disability benefits effective January 1, 2002. After Frost’s short-term disability benefits were extended several times throughout the first part of 2002, she was referred to a long-term disability case manager who eventually approved Frost’s claim for long-term disability benefits.

MetLife requested evidence of continuing disability and referred Frost’s file to an independent physician consultant for review. The consultant reviewed reports from Frost’s treating physicians and noted that Frost had a “large number of complaints, many neurological, but little in the way of objective findings to substantiate any of them,” and that “extensive testing had been unrevealing.” The consultant concluded that there was no objective information suggesting any physical impairment that would render Frost disabled under the policy. MetLife forwarded the consultant’s report to two of Frost’s treating physicians. One concluded that Frost was disabled due to a “yet undiagnosed condition”; the other did not provide any opinion on whether or not Frost was disabled. MetLife terminated Frost’s long-term disability benefits effective February 29, 2004 on the grounds that its review “failed to establish a pathological level of impairment” that would preclude her from performing her material job duties.

Frost appealed the decision. She submitted additional letters from treating physicians, family and friends. MetLife obtained additional reviews from three independent physicians. While all of the reviews noted some degree of impairment, none found any evidence that Frost was totally disabled. After MetLife denied Frost’s appeal, Frost filed her complaint with the federal district court under ERISA.

The court first decided that it would apply the “abuse of discretion” standard because the group plan unambiguously granted discretionary authority to MetLife. The court then addressed Frost’s argument that MetLife’s decision nevertheless should be reviewed under a “de novo” standard because MetLife had a conflict of interest as the plan administrator and the funding source for benefits. Citing the Ninth Circuit’s recent decision in Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (2006), the court concluded that MetLife had a “structural conflict of interest,” but that the conflict was simply one of several factors used to determine whether MetLife had abused its discretion.

Applying the facts, the court held that MetLife’s determination was entitled to deference because, among other things, MetLife adequately investigated and credited Frost’s evidence. The court also held that there was “simply no evidence in the record of any malice, self-dealing, or that MetLife has a ‘parsimonious claims-granting history.’” In holding that MetLife did not abuse its discretion, the court also noted that the opinions of Frost’s own physicians were “less than favorable to her” and that Frost’s subjective complaints were not supported by any medical tests or evidence.

This case is significant because it interprets the Ninth Circuit’s Abatie decision and further clarifies the impact of “structural conflicts of interest” when courts review claims decisions under the “abuse of discretion” standard.