Court Orders Principal Life to Reinstate Long Term Disability Benefits
Author: Attorney Rachel Alters
Flaaen v. Principal Life Insurance Company, is a win for the claimant who suffered a severe back injury in August 2005 in his job as a truck driver. In January 2006, Principal granted his application for long term disability benefits since he could no longer perform the regular and substantial duties of his own occupation.
On December 14, 2014, Principal terminated Flaaen’s disability benefits on the grounds that he now had to meet the standard of being disabled only if he could not perform “the Substantial and Material Duties of any Gainful Occupation for which he or she is or may reasonably become qualified based on education, training, or experience.” Principal listed several occupations for which it determined Flaaen was qualified.
Flaaen objected, exhausted his administrative remedies and then filed this ERISA lawsuit. In his administrative appeals and in this court action, Flaaen argued that none of the jobs Principal said he could perform were ones he was qualified for. Additionally, even if he was qualified for them, he would be unable to earn an amount equal to or more than his primary monthly benefit payment.
The Court agreed with Flaaen and ordered the long term disability benefits to be reinstated. It also ordered Principal to pay benefits dating back to the termination date of December 14, 2014.
Standard of Review
The Court made it clear that the standard of review in this case made a difference in the outcome. Under the de novo standard, which the Court determined was the proper standard in this case, the Court was charged with reviewing the file to determine “whether Flaaen was disabled in the sense defined in the policy.”
If an arbitrary and capricious standard had applied, the Court would have been required to give deference to the plan administrator’s decision and uphold it if there was a “reasonable explanation, based on the evidence, for that decision.”
Ambiguous Policy Language of “Gainful Occupation” was Interpreted in the Claimant’s Favor
The major dispute in this case involved whether or not the claimant was able to perform the substantial duties of any gainful occupation for which he was trained, educated or in which he had experience. The policy defined “gainful occupation” as one where the claimant “could reasonably be expected to earn an amount equal to or greater than the Primary Monthly Benefit.”
Principal argued that as long as the occupation for which the claimant qualified had the potential of the claimant earning a median wage sometime in the future, it should meet the standard and the claimant should no longer be eligible for benefits.
Flaaen argued that such an interpretation was unreasonable and the clause should mean “what is reasonably likely now, as of the date of denial of his benefits.”
The Court agreed with Flaaen’s interpretation as being the most reasonable, noting that when a clause is subject to two different interpretations, it is ambiguous. Under ERISA, ambiguous clauses are interpreted in a way that favors the claimant.
Occupations Proposed by Principal Did Not Meet the Income Standard Required by the Policy Language
Principal conducted several vocational analyses and listed several different jobs it concluded claimant could perform. Flaaen disagreed and argued that none of them met the income qualifications required by the policy language and he was not even qualified to perform most of them.
The Court found in favor of Flaaen, concluding, “Flaaen has shown that he is currently unable to procure any gainful occupation in any field identified or proposed by Principal.” It also ordered Principal to pay benefits back to the date of termination of benefits.
Dell and Schaefer did not represent the Plaintiff in this case, however our lawyers are available to answer any questions you may have regarding your disability claim.