Phillips v. Principal Life Insurance Company
MEMORANDUM OPINION AND ORDER granting 14 Defendant's Motion for Summary Judgment; and denying 12 Plaintiff's Motion for Summary Judgment. Signed by Judge G. Thomas Eisele on 7/15/11. (hph)
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
CASE NO. 4:10--CV–01092 GTE
PRINCIPAL LIFE INSURANCE CO., d/b/a
PRINCIPAL FINANCIAL GROUP, and
MEMORANDUM OPINION AND ORDER
Alexander Phillips filed this action under the Employee Retirement Income Security Act
of 1974, 29 U.S.C. §§ 1001 et seq., contending that he was wrongfully denied long-term
disability (LTD) benefits by Defendants Principal Life Insurance Company of America and
Target Corporation. The parties have filed cross-motions for summary judgment.
For the reasons stated below, the Court denies Plaintiff's motion and grants summary
judgment to Defendants.
Plaintiff Alexander Phillips started working for Target in 1992. He initially worked in
the warehouse and his duties included driving forklifts, unloading and loading trucks and pallets,
and spending time on a catwalk (a raised walkway). On July 2, 1995, Phillips elected LTD
coverage under a plan provided by Target.
Plaintiff stopped working at Target after he suffered a seizure on October 28, 2005.
Shortly thereafter, on January 13, 2006, he applied for LTD benefits under the Target provided
plan. He initially claimed disability based on "seizures." (AR 0055-56).
By letter dated March 16, 2006, Defendant Principal advised Phillips that his claim was
being denied. (AR 0070-72). The denial was based on Principal's finding that Phillips was
capable of performing work in some capacity considering his education, training, and
experience. Accordingly, Principal found that Phillips failed to meet the Plan’s definition of
“Total Disability.”1 The letter specifically advised Phillips of his right to request an appeal and
how to seek one.
On April 6, 2006, Philips appealed the denial of his LTD claim. (AR 0035). In his
appeal, he wrote that he was unable to work because of seizures, hypertension, posttraumatic
stress and back trouble. He further noted that his doctor had restricted him from driving for a
year. He also summarized his job history, stating:
I started work at Jacuzzi in 1969 as a assembly line worker. After I finish four years
of college in Social Science, the company gave me a job in administration. When
Jacuzzi sold the company, my education did not fit the job. I was terminated. I was
not able to find a job in my field. After 4 years I was employed by Target in 1992
as a warehouse worker. I have been working for Target for 13 years.
By letter dated August 4, 2006, Principal advised Phillips of the denial of his first level
appeal. (AR. 0062-68). The denial letter reaffirmed Principal’s earlier finding that Phillips was
not disabled from performing any occupation. It listed all the information it considered, which
included additional information not presented during the initial review. The additional
information included medical records and a note from Dr. Elaine Wilson, medical records and a
letter from Dr. Joseph Farmer, 3 telephone conversations with Phillips, and an employability
assessment and labor market survey dated July 28, 2006. The labor market survey, completed by
an independent vocational consultant, indicated that there were other existing jobs in the labor
At this time, Principal was the "Plan Manager" hired by Target to investigate and
initially approve or deny claims, and Target was the "Plan Administrator.'" This later changed.
On April 1, 2009, The Hartford Life and Accident Insurance Company ("The Hartford")
purchased Target's LTD trust at which point it became the Plan Administrator. Principal also
raises a challenge based on the assertion that Principal is not an ERISA plan fiduciary subject to
ERISA liability. In light of the Court’s ruling on the exhaustion issue, it is not necessary to
address that contention.
market that Phillips could perform. The survey identified open positions for security guard,
telemarketer and alarm monitor in the Little Rock area. Phillips was found qualified to perform
all such jobs. (AR 0064-66).
The first level appeal denial letter specifically advised Phillips of his right to appeal the
denial to Target and advised him of the need to do so within 180 days of receipt of the denial
letter. (AR 0067).
Philips made no attempt to appeal the decision until October 5, 2009, when his attorney
sent a letter stating that Phillips had heard nothing since he appealed Principal's initial denial of
his claim. (AR 0034). On November 2, 2009, Plaintiff's attorney wrote a follow-up letter to
Principal inquiring as to the current status of the claim and asking that Principal consider the fact
that Phillips had been awarded social security disability. (AR 0054).
On May 11, 2010, The Hartford notified Phillips that “[b]ecause a [second-level appeal]
request was not submitted within the contractual timeframe, the decision communicated on
August 4, 2006 is final and Mr. Phillips has exhausted his appeal rights under the Plan.” (AR
0024). Because Phillips failed to lodge a second level appeal, the Plan Administrator never
reviewed the denial of benefits.
Before considering Phillips’ claim on the merits, the Court must determine whether it is
barred by his failure to exhaust his administrative remedies.
Phillips contends that the did not receive a copy of the August 4, 2006, decision until
May 11, 2010, when his counsel advised him of the unfavorable decision. (Complaint at ¶ 7).
Plaintiff offers nothing more than this bare contention to excuse his failure to exhaust.
The allegation is discredited by the administrative record. Principal’s internal claim
notes indicate that Phillips called on August 14, 2006, shortly after the denial letter was mailed
to him on August 4, 2006. (AR 0615-16). The notes indicate that Phillips was “calling about his
denial” which he did “not agree with.” The notes further indicate that Phillips was advised
during the conversation that he “could ask for a reconsideration,” in response to which Phillips
indicated he had but that he might “ask again.” Id.
Although there is no express requirement in ERISA that employees exhaust their
contractual remedies before filing suit for wrongful denial of benefits, the Eighth Circuit has
“recognized a judicially created exhaustion requirement.” Wert v. Liberty Life Assur. Co. of
Boston, Inc. 447 F.3d 1060, 1063 (8th Cir. 2006). “[E]xhaustion of contractual remedies is
required in the context of a denial of benefits action under ERISA when there is available to a
claimant a contractual review procedure that is in compliance with 29 U.S.C. § 1133 and 29
C.F.R. § 2560.503-1(f) and (g).” Id. Exhaustion is required “so long as the employee has notice
of the procedure, even if the plan, insurance contract, and denial letters do not explicitly describe
the review procedure as mandatory or as a prerequisite to suit.” Id. Exhaustion may be excused
upon a showing of futility. Id. at 1065. However, unsupported and speculative claims of futility
will not excuse a claimant’s failure to exhaust his administrative remedies. Chorosevic v.
MetLife Choices, 600 F.3d 934, 945 (8th Cir. 2010). Phillips has not even alleged that exhaustion
would be futile.
Target’s Plan appears to comply fully with all statutory and regulatory requirements for
reasonable claim procedures. See 29 U.S.C. § 1133 (requiring adequate notice in writing of
claim denials and “a reasonable opportunity” for a “full and fair review by the appropriate
named fiduciary of the decision denying the claim.”); and 29 C.F.R. § 2560.503-1(f) (requiring
plans to “establish and maintain a procedure by which a claimant shall have a reasonable
opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the
plan, and under which there will be a full and fair review of the claim and the adverse benefit
Plaintiff does not argue otherwise.
Phillips was required to exhaust his administrative remedies before seeking a district
court review of the denial of benefits. He failed to take any action to appeal, within 180 days,
the denial to the Plan Administrator under the procedures outlined in Principal’s August 4,
2006, denial letter. His attorney’s letter of inquiry, made over 3 years after the denial of
benefits, was too late.
The Court concludes that Plaintiff failed to exhaust his administrative remedies and that
such failure is fatal to his ability to obtain a judicial review of the adverse benefit decision. His
claim must be dismissed.
For the reasons herein stated,
IT IS THEREFORE ORDERED that Defendant’s Motion for Summary Judgment (Doc.
No. 14) be, and it is hereby, GRANTED. Judgment will be entered separately.
IT IF FURTHER ORDERED that Plaintiff’s Motion for Summary Judgment (Doc. No.
12) be, and it is hereby, DENIED.
Dated this 15th day of July, 2011.
_/s/Garnett Thomas Eisele_______________
UNITED STATES DISTRICT JUDGE
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