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Flaaen v. Principal Life Insurance Co.

United States District Court, W.D. Washington, Tacoma

September 27, 2017

ANTHONY R. FLAAEN, Plaintiff,
v.
PRINCIPAL LIFE INSURANCE COMPANY, Defendant.

          FINDINGS OF FACT, CONCLUSION OF LAW, AND ORDER

          BENJAMIN H. SETTLE United States District Judge

         This matter comes before the Court on Plaintiff Anthony R. Flaaen's (“Flaaen”) trial brief on the administrative record (Dkt. 33) and Defendant Principal Life Insurance Company's (“Principal”) motion for judgment on the administrative record (Dkt. 34). The Court concludes that Flaaen is entitled to a reinstatement of benefits and an award of benefits back to the date of termination.

         I. PROCEDURAL HISTORY

         On December 10, 2015, Flaaen filed a complaint for long-term disability benefits against Defendants McLane Company, Inc. (“McLane”) and Principal Life Insurance Company, Inc. (“Principal”). Dkt. 1. Flaaen's sole claim is wrongful denial of benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”). Id. On February 1, 2016, Flaaen dismissed McLane. Dkt. 6.

         On June 22, 2016, Flaaen filed a motion for partial summary judgment arguing that the applicable long-term disability plan's (“LTD”) discretionary clause is invalid and unenforceable as a matter of law. Dkt. 16. On December 22, 2016, the Court granted the motion and determined that the standard of review is de novo. Dkt. 28.

         On April 3, 2017, Principal filed the administrative record. Dkt. 31. On May 4, 2017, Principal supplemented the record. Dkt. 32.

         On May 31, 2017, the parties filed opening briefs. Dkts. 33, 34. On June 16, 2017, the parties responded. Dkts. 36, 37. On June 30, 2017, the parties replied. Dkts. 39, 40. On August 9, 2017, the Court requested additional briefing. Dkt. 42. On August 18, 2017, the parties submitted additional responses. Dkts. 43, 44. On August 25, 2017, the parties submitted additional replies. Dkts. 46, 47.

         II. FACTUAL BACKGROUND

         A. The Plan

         On August 31, 2005, McLane applied for a group LTD plan with Principal. AR 119-123. On January 1, 2006, Principal issued an LTD plan effective that day. AR 1- 118 (“Plan”). Relevant to this matter, the Plan provides that “A Member will qualify for Disability benefits if . . . The Member is Disabled under the terms of this Group Policy.” AR 36. The Plan defines Disability and Disabled as follows:

A Member will be considered Disabled if, solely and directly because of sickness, injury or pregnancy:
During the Elimination Period and the Own Occupation Period, one of the following applies:
a. The Member cannot perform one or more of the Substantial and Material Duties of his or her Own Occupation.
***
After completing the Elimination Period and the Own Occupation Period, one of the following applies:
a. The Member cannot perform the majority of 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.
b. The Member is performing the Substantial and Material Duties of his or her Own Occupation or any occupation on a Modified Basis and is unable to earn more than 60% of his or her Indexed Predisability Earnings.

AR 36-37.

         The Plan defines Own Occupation as “The occupation the Member is routinely performing when Disability begins as performed in the national economy.” AR 38. The Plan defines Gainful Occupation as “Employment in which the Member could reasonably be expected to earn an amount equal to or greater than the Primary Monthly Benefit.” AR 38. Finally, the Plan proscribes that benefits will not continue beyond “the date Disability ends.” AR 50.

         B. Flaaen's Benefits

         On June 12, 1989, McLane hired Flaaen as a truck driver in Tacoma, Washington. Dkt. 16-1, Declaration of Chris Roy, ¶ 6. On September 21, 2006, Flaaen suffered an injury to his back. AR 1813. His last day of work for McLane was January 29, 2007. Id. On April 10, 2007, Flaaen applied for LTD benefits under the Plan. AR 1811. On June 8, 2007, Principal approved benefits effective July 29, 2007, at an amount of $3, 927.04 per month. AR 1096, 1683.

         Although Flaaen was unable to perform his previous occupation as a truck driver, he qualified for retraining. Flaaen obtained an associate's degree in Media Design and applied to the University of Washington (“UW”) to pursue a bachelor's degree in Art/Media/Culture. UW accepted Flaaen, and his expected graduation was December 2014. On November 4, 2014, Principal referred Flaaen's file for an independent review “to determine which occupations would meet Gainful requirement of $47, 124.48.” AR 1041. On December 12, 2014, a rehabilitation consultant from Adling and Associates produced a report that listed potential occupations and salaries as follows:

Occupation Sample

Mean/Median Wages*

Producer

$49, 525

Sales-Service Promoter/

$54, 517

Graphic Designer

$50, 461

Public-Relations

$65, 395

Representative/Reporter

$29, 557

AR 1849 (“Adling Report”).

         On December 24, 2014, Principal terminated Flaaen's benefits. AR 1836-9. In relevant part, Principal's letter provides as follows:

We have been evaluating your current employability and on 12/12/2014 obtained an updated and current Labor Market Search. Based off of the Labor Market Search with your current educational and work history we found several Gainful Occupations that you are capable of performing on a full time basis. Examples would be Producer which has a mean or median wage of $49, 525.00 Annually, Public Relations Representative which has a mean or median annual wage of $65, 395.00, Sales-Service Promoter which has a mean or median annual wage of $54, 517.00.

AR 1837. The letter also provided that Flaaen could seek reconsideration of the decision. AR 1838.

         On June 22, 2015, Flaaen appealed. AR 935-68. As part of his appeal, Flaaen asserted that his relevant work history was as follows:

During his education, Mr. Flaaen developed and produced several documentary films both by himself as well as working collaboratively with other student filmmakers. He interned at Sirius Films as a camera operator while attending Clover Park Technical College. While at the University of Washington he held an internship with the Greater Tacoma Community Foundation in which he produced local community interest videos for Kickstarter to raise funds for the Foundation.
Mr. Flaaen did not work while he was attending college full-time. After graduating, he accepted a part-time position teaching art classes to children with the Young Rembrandts. He has taught a total of 2 classes to date. Each class is 2 hours in length. He was paid $60 per class. He is not scheduled on a regular basis as the company does not offer a schedule of ongoing classes, but rather has short-term contracts at local venues.
In January, 2015, Mr. Flaaen opened his own production company, Mariposa Productions. He develops and produces video segments for use by local companies. While Mr. Flaaen has been able to secure a couple of contracts which he has completed at this time, he does not have a regular or guaranteed income.

AR 937.

         Flaaen's primary contention on appeal was that Principal's decision was based on “a deeply flawed employability ...


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