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(District of New Jersey D.C. 01-cv-04183) - page 23 / 30

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company, pursuant to a contract with an employer or benefit plan, determines eligibility for benefits and pays those benefits from its own funds, a structural conflict of interests arises. In this situation, “the fund from which monies are paid is the same fund from which the insurance company reaps its profits. This is in contrast to the actuarially determined benefit funds typically maintained by employers (especially in the pension area) that usually cannot be recouped by the employer or directly redound to its benefit.” Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 378-79 (3d Cir. 2000). Because of the conflict inherent in an insurer’s profit motive, we have held that when an insurer exercises discretionary authority over benefits, we will review its discretionary acts under a different, heightened standard of review than we will use to review the acts of other

ERISA

fiduciaries.

conflict

of interests

See id.

at 379.

increases

the need

Although a structural for judicial scrutiny, it

also undermines the argument that counsel, the real clients being served Pinto, we adopted a sliding scale

when an insurer retains are the beneficiaries. In approach to reviewing

fiduciaries’ discretionary acts, under scrutiny as the fiduciary’s conflicts Inversely, as a fiduciary’s conflicts

which we increase. with its

increase our Id. at 392. beneficiaries

increase, the beneficiaries’ ability to clients of counsel retained by the Although the presence of a conflict

claim that they are the real fiduciary must diminish. of interest, without more,

may not be inapplicable, it

enough to render the is a factor that weighs in

fiduciary exception favor of retaining the

23

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