WASHINGTON (Reuters) – The Supreme Court sided against MetLife Inc on Thursday, ruling that insurance companies or employers have a conflict of interest when they both decide claims under employee benefit plans and pay the benefits.

The justices ruled that federal courts should consider that conflict in deciding whether the plan administrator has abused its discretion in denying benefits under an employee’s health or disability claim.

The Employee Retirement Income Security Act permits a person denied benefits under an employee benefit plan to challenge the denial in federal court.

The high court concluded the plan’s administrator, such as an insurance company like MetLife or an employer, has a conflict when it performs the dual role of determining whether an employee is eligible for benefits and then pays the benefits.

Justice Stephen Breyer wrote for the court majority that a reviewing federal court should consider that conflict in determining whether the plan administrator abused its discretion in denying benefits.

He said the significance of the conflict will depend on the circumstances of the particular case.

The case before the court began in 2000 when Wanda Glenn, who worked at the company now called Sears Holdings Corp for 14 years, sought disability benefits because of a heart condition.

MetLife provided Glenn benefits for two years, but in 2003 denied her request for benefits under a long-term disability plan.

MetLife, which served as both the administrator and the insurer of the Sears long-term disability insurance plan, disputed her claim that she was totally disabled.

Glenn sued. A federal judge refused to overturn MetLife’s decision, but a U.S. appeals court ruled for Glenn. The Supreme Court upheld that ruling.

MetLife had been supported by health and life insurance groups, while the federal government and AARP, a special interest group for people over 50, supported Glenn.

Justice Antonin Scalia dissented and said there must be evidence the conflict actually and improperly motivated the decision to deny benefits. Justices Clarence Thomas and Anthony Kennedy also dissented.

MetLife said it accepted the court’s ruling.

“While the decision does not substantively change the law, it did affirm the award of benefits to Glenn, and we will pay those benefits promptly,” MetLife spokesman Chris Breslin said. “The court does provide some guidance on how courts should review disputed claims which will be important to the employee-benefits community.”

(Editing by Gunna Dickson, editing by Gerald E. McCormick)

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