Target Worker Loses Disability Denial Appeal

October 21, 2008 ( - A former Target Corp. worker lost her challenge to a disability benefits denial when a federal judge said the plan administrator reasonably determined that the woman could have performed sedentary work.

U.S. District Judge Lewis T. Babcock of the U.S. District Court for the District of Colorado issued the ruling in a suit filed by Tess Peterson who worked for Target until October 2001 when she stopped after having surgery for injuries received in a car accident. Peterson applied for long-term disability in the self-insured plan administered by Principal Life Insurance Co., according to the decision.

Principal denied Peterson’s claim for extended benefits and upheld its decision on administrative appeal, after determining that she was qualified for four alternate jobs. Target affirmed Principal’s decision after Peterson appealed the denial for a second time, and Peterson filed the lawsuit under the Employee Retirement Income Security Act (ERISA).

Babcock turned aside Peterson’s argument that Principal committed a serious procedural irregularity by not producing medical and vocational reports it relied on in denying the initial benefits claims and subsequent administrative appeals.

Babcock also denied Peterson’s argument that Principal’s decision should be more open to challenge because the administrator had a conflict of interest. The court found that because the plan was funded by employee contributions and because Principal did not receive any financial bonuses or compensation relating to its claims determinations, there was no conflict of interest.

The court said Principal relied on Peterson’s medical records, which noted that she managed her pain with medication, was able to attend classes and work as an intern to become a school counselor, a functional capacity exam indicated Peterson could perform light duty work, and video surveillance showed her performing activities she told Principal she could not perform, the court said.

The case is Peterson v. Principal Financial Group, D. Colo., No. 07-cv-01741-LTB-CBS, 10/17/08.