Opinion ID: 790842
Heading Depth: 2
Heading Rank: 4

Heading: Eligibility under the Policy

Text: 35 Mr. Ruttenberg submits that the district court erred in finding the full-time, thirty-hour work requirement to be unambiguous. In the alternative, he challenges the court's determination that he did not provide sufficient evidence demonstrating that he worked more than thirty hours per week. U.S. Life argues in its cross-appeal that the district court erred in finding Mr. Ruttenberg to be an employee under the policy. The Company asserts that he was ineligible for coverage because he was neither an employee nor did he work full-time. 36 Before considering Mr. Ruttenberg's eligibility under the policy, we must resolve two threshold disputes between the parties. First, Mr. Ruttenberg, relying on Great-West Life Assurance Co. v. Levy, 382 F.2d 357, 360 (10th Cir.1967), contends that the burden of proving his ineligibility rests with U.S. Life. We cannot accept this view. Mr. Ruttenberg seeks to enforce benefits under the policy; he therefore bears the burden of proving his entitlement to contract benefits. See Santaella v. Metro. Life Ins. Co., 123 F.3d 456, 461 (7th Cir.1997); Fuja v. Benefit Trust Life Ins. Co., 18 F.3d 1405, 1408 (7th Cir.1994). 37 Second, Mr. Ruttenberg submits that U.S. Life waived a challenge to his eligibility under the policy because it did not raise this contention before the administrative record closed. U.S. Life responds that Mr. Ruttenberg had adequate notice that the Company challenged his eligibility during the administrative process. Although U.S. Life did not consistently challenge Mr. Ruttenberg's eligibility in the course of this claim, 14 we agree with the Company's assessment. Before the administrative record closed, the Company twice notified Mr. Ruttenberg that it questioned whether he met the full-time eligibility requirement: through a letter sent to his counsel on November 19, 2002, and in the letter denying Mr. Ruttenberg's claim. Mr. Ruttenberg acknowledged U.S. Life's challenge by stating, in response to the November 19 letter, that he obviously spent more than thirty hours per week preparing for trades. See R.49 at 5; see also R.36-2 at 505. Given that he had notice that his full-time status was at issue and had the burden of proving eligibility, Mr. Ruttenberg's waiver argument fails. We thus must consider his eligibility as an employee who works full-time. 38
39 In its cross-appeal, U.S. Life asserts error in the district court's finding that the term employee is ambiguous, and in its use of the contra proferentem maxim to construe the term against U.S. Life. The district court considered the term employee as used in the contract ambiguous because its terms include filers of form 1099 who are typically independent contractors rather than common law employees. For his part, Mr. Ruttenberg argued at various points that he is not an employee, but an independent contractor. Regardless of the label, however, Mr. Ruttenberg presumably agrees that he must be considered an employee as the policy uses that term; otherwise, he would be ineligible for any benefits. 40 U.S. Life submits that looking to the form 1099 provision is only one factor in determining whether a person is an employee or an independent contractor. The company also asserts that contra proferentem is an interpretive tool that ought to be employed only to tiebreaker situations and, consequently, was improperly applied here. See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323-25, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). In its view, the court first must analyze extrinsic evidence to resolve the ambiguity and resort to contra proferentem only if consideration of such extrinsic evidence does not yield a resolution. 41 The situation here differs significantly from that confronted in Darden. There, the Court was called upon to interpret the ERISA term employee in determining what constituted an ERISA participant. But the issue in this case does not present a question of statutory interpretation; rather it presents a question of contract construction. The district court here had to interpret the term employee contained in this contract to determine whether the parties intended it to cover traders like Mr. Ruttenberg. The relevant contract provision describes Eligible Classes of Employees as 42 [a]ll full-time employees of the Participating Employer who are: 43 — managers and officers earning over $20,000 annually 44 — traders who report earnings on their 1099 form 45 — firm traders who report prior years on their 1099 DDE form, 46 but not those who are temporary, part-time or seasonal. 47 R.36-1 at 299 (the eligibility clause). 48 Within this provision, the term employee is not otherwise defined in the policy, unlike terms such as full-time. An employee in the traditional sense is a person who works in the service of another person . . . under which the employer has the right to control the details of work performance. Black's Law Dictionary 543 (7th ed.1999). However, employers account for income paid to these employees on IRS form W-2. 15 Generally speaking, a worker whose income is reported on form 1099 is an independent contractor, not a common law employee. See EEOC v. N. Knox Sch. Corp., 154 F.3d 744, 747 (7th Cir.1998). The inclusion of form 1099 in defining the contractual term employee thus indicates that the term includes more than just common law employees, and that other workers may be eligible under the policy. Those other workers may include independent contractors like Mr. Ruttenberg, but the scope of the contractual term is ambiguous. 49 We have endorsed the use of contra proferentem to resolve such ambiguities, at least in circumstances where—as here—the plan administrator was not empowered to interpret contract terms. See Phillips v. Lincoln Nat'l Life Ins. Co., 978 F.2d 302, 311-13 (7th Cir.1992). U.S. Life argues that this court's more recent precedent, see Hall v. Life Ins. Co. of N. America, 317 F.3d 773, 776 (7th Cir.2003), 16 limits contra proferentem to tiebreaker situations; the proper approach, according to the Company, was for the court to look first to extrinsic evidence in interpreting the ambiguous term. Even if U.S. Life is correct that the district court should have looked to extrinsic evidence in construing the eligibility clause, it offered no such evidence to the district court, nor does it suggest the existence of such evidence to this court. 17 Given the lack of extrinsic evidence, the use of contra proferentem would be justified as a tiebreaker even under Hall. Indeed, we have noted that the contra proferentem doctrine serves its function when it prevents traps for the unwary. Id. Allowing Mr. Ruttenberg to purchase insurance for which U.S. Life now claims that he is ineligible constitutes the type of trap for the unwary that contra proferentem is meant to prevent. The district court correctly found the term employee to be ambiguous, and properly construed the term against the policy's drafter, U.S. Life. 50
51 The term full-time is defined to mean[ ] active work on the Participating Employer's regular work schedule for the class of employees to which you belong. The work schedule must be at least 30 hours a week. 52 R.36-1 at 298. Basic to the definition of full-time is the requirement that a covered employee work for more than thirty hours per week. The district court found the term to be unambiguous and determined that Mr. Ruttenberg failed to offer sufficient evidence that he worked the requisite thirty hours per week. 53 U.S. Life urges us to affirm the district court's determinations, both its finding that the term full-time is unambiguous and its conclusion that Mr. Ruttenberg failed to offer sufficient evidence. The company contends that Mr. Ruttenberg failed to provide evidence that he met the thirty-hour requirement, even off of the trading floor; in response to questions about his eligibility Mr. Ruttenberg argued only that he spent more than thirty hours per week working on trades and that it was impossible to spend more than thirty hours per week on the floor. Assuming that the full-time requirement unambiguously includes working more than thirty hours per week, U.S. Life asserts that the district court correctly determined that Mr. Ruttenberg failed to demonstrate his eligibility. 54 In reply, Mr. Ruttenberg submits that the plain language of the definition, requiring active work on the Participating Employer's regular work schedule for the class of employees to which you belong, id. (emphasis added), indicates that the full-time requirement applies only to SMW's common law employees, not to independent traders covered by the policy; he asserts that, at the very least, the thirty-hour requirement's application is ambiguous. As for the evidence presented, he contends that, at certain stages in the litigation, U.S. Life adopted his view that a trader could not work thirty hours on the floor and that he did work more than thirty hours per week in preparing for trades. He points out that other courts have relaxed contractual full-time requirements to find that an insured is covered. See Burke v. Blue Cross Blue Shield of Nebraska, 251 Neb. 607, 558 N.W.2d 577 (1997); Jetson v. CNA Ins. Co., 536 So.2d 569 (La.Ct.App.1988). Mr. Ruttenberg also submits that it would defeat the reasonable expectations of the insured to deny coverage to more than eighty traders, based on a full-time requirement they cannot meet, after they have paid for the insurance. 55 Contrary to Mr. Ruttenberg's assertion, U.S. Life did not adopt in its statement of facts the position that he could not work more than thirty hours on the floor and that he worked the required hours in preparing for trades. U.S. Life's statement of facts listed the text of a letter received from Mr. Ruttenberg's attorney only to support the fact that the letter was received, not the letter's contents. Indeed, aside from assertions that he obviously worked more than thirty hours per week preparing for trades, he submitted no evidence that such was the case, for example, through affidavits from himself or associates. He was aware before the administrative record closed that U.S. Life questioned his eligibility under the full-time requirement, but failed to supplement the record. Thus, Mr. Ruttenberg presented insufficient evidence that he actually worked more than thirty hours per week. On this record, therefore, any relief Mr. Ruttenberg may be granted must be found through contractual ambiguity. 56 Turning to the ambiguity question, other courts' interpretations of the term full-time in other contracts do not control the present inquiry. Rather, we must determine what the term means in this insurance contract. 57 In interpreting a contractual term, we cannot give meaning to a word standing alone. Rather, we must take into account its placement in the text and discern its proper relationship to the text in which it is placed. Here, given the ambiguity in the term employee, it is not clear from the contract that the full-time requirement applies to noncommon law classes of employees like independent traders. Indeed, in defining full-time, the policy simply refers back to the ambiguous term employee: FULL-TIME means active work on the Participating Employer's [SMW's] regular work schedule for the class of employees to which you belong. R.36-1 at 298. If, as we have determined, the term employee is itself ambiguous as applied to Mr. Ruttenberg, then the policy is equally ambiguous about the application of the full-time requirement to his class of worker. 58 Moreover, the full-time provision is ambiguous even apart from the lack of clarity in the term employee. Independent traders like Mr. Ruttenberg do not work according to a work schedule established by SMW; independent traders clear their trades through SMW but the company does not control the details of their work schedules. Similarly, to qualify as a full-time worker, the employee must render active work, defined as performing each duty of your job for full pay. Id. It is not clear how full pay is measured for independent traders who do not draw a salary from SMW and simply clear their trades through the company. The inclusion of independent traders as employees under the eligibility clause cannot be reconciled with a definition of full-time that such workers cannot meet. 18 One of the provisions must take precedence, and arguably this means that the full-time requirement does not apply to the class of eligible employees that includes Mr. Ruttenberg. 59 Mr. Ruttenberg's proposed interpretation, that the full-time requirement does not apply to his category of eligible employee, is at least as plausible as U.S. Life's. The term cannot be said to be unambiguous, and the district court erred in dismissing his claim on that ground. Given the error, we remand to the district court for further proceedings. 19 60 Apart from the ambiguity questions, Mr. Ruttenberg and U.S. Life each argue that they are entitled to summary judgment on the merits of their respective claims. U.S. Life asserts that Mr. Ruttenberg is not disabled; for his part Mr. Ruttenberg contends that U.S. Life's own expert in fact found him to be disabled. The merits of Mr. Ruttenberg's claim, whether he is disabled and therefore entitled to the policy benefits, is a matter properly reserved to the district court on remand.