Supreme Court finds conflict of interest in most insurance denial claims

In a 6-3 decision announced yesterday, the Supreme Court ruled that businesses that administer their own plans or insurance companies that administer a company plan have a financial conflict of interest because they save money virtually every time they reject claims filed by their employees (Source: "High court allows for insurance appeals," Columbus Dispatch, June 20, 2008).

Because nearly all companies either administer their own plans or hire an insurance company to supervise it, the conflict of interest argument can now be used almost any time an employee files a federal claim that their employer unfairly denied claims.  However, the court also ruled that a person can not win a claim based solely on that conflict of interest.

At the heart of the court's conflict of interest designation is a 1974 federal employee benefits law that requires plan administrators to act solely in the interest of workers but also allows plan administrators to be hired by the company that pays for benefits.

Writing for the majority, Justice Stephen G. Breyer concluded that "this dual role creates a conflict of interest; that a reviewing court should consider that conflict as a factor in determining whether the plan administrator has abused its discretion in denying benefits."