Under ERISA, employees have the right to challenge decisions under a covered plan in federal court. The court will review the plan administrator's decision under different standards, depending on the circumstances. In certain cases, the court defers to the administrator's decision unless the administrator "abused its discretion." In other situations, the court applies "de novo" review and does not defer to the plan administrator at all. To determine what standard of review to apply, the trial court considers a number of circumstances, one of which is whether the plan administrator had a "conflict of interest."
The Supreme Court considered whether a plan administrator has a conflict when it is responsible for deciding to approve claims AND is the entity responsible for funding benefits. In a 5-4 decision, the Court said that such plan administrators do have a conflict. Therefore, the district court must consider this situation as "a factor" in deciding the deference to give the administrator's decision.
The case is Metropolitan Life Ins. Co. v. Glenn and the opinion is here.