                              In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 04-1653
ANDREW RUTTENBERG,
                                                  Plaintiff-Appellant,

                                  v.


UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK,
a subsidiary of American General
Corporation,
                                                  Defendant-Appellee.
                          ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
          No. 01 C 8200—Joan Humphrey Lefkow, Judge.
                          ____________
     ARGUED NOVEMBER 10, 2004—DECIDED JUNE 30, 2005
                          ____________


  Before COFFEY, RIPPLE and SYKES, Circuit Judges.
  RIPPLE, Circuit Judge. Andrew Ruttenberg filed a claim for
total disability benefits with his insurer, United States Life
Insurance Company in the City of New York (“U.S. Life” or
the “Company”). After protracted consultations with a
number of physicians and consultants produced no ruling
on the claim, Mr. Ruttenberg filed suit. Originally, he
alleged claims under Illinois law. The parties agreed to a
stay in the proceedings while U.S. Life considered
2                                                 No. 04-1653

Mr. Ruttenberg’s claim. When U.S. Life denied the claim,
the parties returned to the district court. The district court
then determined that Mr. Ruttenberg’s claim was pre-
empted by the Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001 et seq. It therefore dismissed the
action with leave to file a claim under that statute.
  After Mr. Ruttenberg filed an ERISA claim, the parties
conducted discovery, and, eventually, each filed motions for
summary judgment. The district court granted U.S. Life’s
motion; it concluded that Mr. Ruttenberg did not qualify for
coverage under the plan because he could not be considered
a full-time employee under its terms.
  Mr. Ruttenberg now appeals both the grant of summary
judgment and the district court’s previous ERISA preemp-
tion determination; U.S. Life cross-appeals certain rulings
made by the district court in the course of this litigation. For
the reasons set forth in the following opinion, we reverse the
judgment of the district court and remand this case for
proceedings consistent with this opinion.


                               I
                      BACKGROUND
A. Facts
  Mr. Ruttenberg worked as an independent commodity
trader at the Chicago Board of Trade and Mercantile
Exchange (the “exchange”), a position requiring a certain
amount of screaming in order to gain the attention of other
traders on the floor. The exchange floor was open for thirty-
five hours per week. He did not keep regular hours on
trading days. Sometimes, he would work several hours at
the exchange. Other times, he would leave early after
making significant gains or taking losses. He spent time
No. 04-1653                                                   3

away from the floor preparing for trades or reconciling
accounts. Trading constituted his primary occupation, and
the evidence shows that, at times, he made over $30,000 in
profits per month.
  Mr. Ruttenberg cleared his trades through SMW Trading
                                                       1
Co. (“SMW”). The firm contracted through U.S. Life to
provide disability insurance to independent traders.
Mr. Ruttenberg paid premiums on a policy which entitled
him to $10,000 per month in coverage. On March 29, 2001,
Mr. Ruttenberg filed a claim for disability benefits. He
submitted evidence from his physician, Dr. Goldberg, that
asthma prevented him from performing his job. Two other
physicians, Dr. Taitz and Dr. Fisher, performed tests at
Dr. Goldberg’s request and found no nasal or other obstruc-
tions. U.S. Life forwarded the claim to its administrator,
Disability Reinsurance Management Services (“RMS”). The
RMS in-house consultant, Dr. Hogan, reviewed the claim
and offered medical opinions; RMS determined that Dr.
Goldberg’s opinion was based on subjective complaints.
RMS then arranged an appointment for Mr. Ruttenberg with
another specialist, Dr. Diamond.
  Dr. Diamond examined Mr. Ruttenberg and diagnosed
asthma and vocal cord dysfunction and expressed concern
that Mr. Ruttenberg’s hoarseness, still apparent after
Mr. Ruttenberg had been away from work for seven months,
might be permanent. To the diagnosis, he attached a
pulmonary function report and a plethysmograph report; in
the latter, the technician noted that Mr. Ruttenberg had been
unable to achieve reproducible results in his exhalation flow
rate. Dr. Diamond appended an additional letter to the



1
  In 2001, U.S. Life replaced SMW’s previous insurance provider,
Paul Revere Life Insurance Co.
4                                                No. 04-1653

report, in which he sought to clarify his opinion that Mr.
Ruttenberg is permanently disabled because he could not
continue to work as a trader.
   Dr. Hogan reviewed Dr. Diamond’s report and concluded
that a definitive diagnosis could not be made without
viewing Mr. Ruttenberg’s vocal cords. A claims analyst for
U.S. Life told Mr. Ruttenberg that the company might accept
liability if the test supported Dr. Diamond’s conclusion. A
month later, RMS contacted Mr. Ruttenberg and said it was
waiting for Dr. Fisher to review Dr. Hogan’s interpretation.
Mr. Ruttenberg filed suit the next week.


B. District Court Proceedings
  Mr. Ruttenberg’s action initially was based in diversity,
but the district court dismissed the suit without prejudice on
August 21, 2002, because Mr. Ruttenberg had not pleaded
diverse defendants. He later refiled the complaint, and the
parties agreed to a stay of proceedings while RMS re-
reviewed the claim. Mr. Ruttenberg submitted additional
medical evidence, including the results of a nasopharyn-
                                             2
goscopy performed by Dr. Diamond. The test led
Dr. Diamond to confirm his previous diagnosis and disabil-
ity opinion because he saw the “classic posterior chinking”
associated with vocal cord dysfunction. He further stated
that the inconsistent results noted by the plethysmograph
technician a year earlier were not the result of insufficient
effort on Mr. Ruttenberg’s part, as had been implied by U.S.
Life, but were associated with the dysfunction.



2
   U.S. Life’s review of the claim took well over one year;
Dr. Diamond performed this test approximately one year after
first diagnosing Mr. Ruttenberg.
No. 04-1653                                                    5

  RMS forwarded the medical records to another expert, Dr.
Karetzky, for review. This physician determined that Mr.
Ruttenberg’s results stemmed from his poor effort and
                                                          3
found nothing that would impair significantly his work. On
November 19, 2002, RMS reported the results to
Mr. Ruttenberg. It also raised questions about whether he
qualified as a full-time employee under the policy and re-
quested documentation to establish that he had worked
more than thirty hours per week as required by the policy.
Mr. Ruttenberg responded that it was impossible to actually
work on the floor of the exchange for thirty hours per week
and asserted that he worked on trades and performed other
job-related functions which, taken together with his time on
the floor, amounted to more than thirty hours. On December
6, 2002, U.S. Life denied Mr. Ruttenberg’s claim. It con-
cluded, among other things, that his injury did not meet the
definition of disability under the policy and that U.S. Life
could not substantiate his eligibility. The letter stated that
Mr. Ruttenberg had the right to appeal the decision; the
parties then returned to the district court.
  U.S. Life filed a motion alleging that ERISA preempted
Mr. Ruttenberg’s state law claims and seeking dismissal for
failure to exhaust administrative remedies. In response, Mr.
Ruttenberg argued that his insurance plan was not an
ERISA plan because (1) SMW did not establish or maintain


3
  In an addendum to this report, submitted after
Mr. Ruttenberg’s claim ultimately was denied, Dr. Karetzky
admitted that the finding of posterior chinking validated
Dr. Diamond’s initial diagnosis but that he could not confirm the
chinking because the nasopharyngoscopy procedure had not
been videotaped. He further suggested that Mr. Ruttenberg’s
hoarseness could be psychosomatic.
6                                                    No. 04-1653

it and (2) as an independent contractor, he was not a
participant or beneficiary as ERISA employs those terms.
   The district court rejected the first argument because
SMW created the insurance plan, designated eligible em-
ployees and contributed funds. With respect to
Mr. Ruttenberg’s second argument, the district court stated
that Mr. Ruttenberg qualified as a “beneficiary” under
        4
ERISA, 29 U.S.C. § 1002(8), and his state law claims thus
were preempted by that statute, id. § 1144. The court based
its beneficiary determination on the plain language of
§ 1002(8), which defines a beneficiary as “a person desig-
nated . . . by the terms of an employee benefit plan, who is
or may become entitled to a benefit thereunder,” and pre-
cedent in other courts. Having determined that the policy
qualified as an ERISA plan, the district court found
                                                       5
Mr. Ruttenberg’s state law claims to be preempted. The
district court dismissed Mr. Ruttenberg’s complaint with
leave to refile an ERISA cause of action; it thus found no
need to address U.S. Life’s argument that Mr. Ruttenberg
had failed to exhaust his administrative remedies.
Mr. Ruttenberg refiled an ERISA action.


4
  In its order, the district court “conclude[d] that Ruttenberg
would qualify as a ‘participant’ under ERISA.” R.31 at 7. The
district court subsequently corrected this typographical error,
confirming that it meant to say “beneficiary” rather than
“participant.” R.62 at 13 n.4.
5
  Mr. Ruttenberg argued that ERISA’s saving clause avoided
preemption on one state law claim for vexatious refusal to pay.
The district court rejected his position because state law provided
for remedies not allowed in ERISA and allowing the claim to
proceed would thus undermine ERISA’s enforcement procedures.
See 29 U.S.C. § 1132(a).
No. 04-1653                                                       7

  After discovery, the parties filed cross-motions for
                       6
summary judgment. U.S. Life based its motion on two
grounds, both relating to Mr. Ruttenberg’s eligibility under
the policy: (1) that he was not an “employee” of SMW and
therefore was not covered by the policy terms; and (2) that
even if he was an “employee,” he did not qualify as “full-
time” as required by the policy because there was no
                                                           7
evidence that he worked more than thirty hours per week.
The district court rejected the first argument, concluding


6
  The district court had to address several threshold matters
before reaching the merits. First, Mr. Ruttenberg requested
reconsideration of the previous determination that his state law
claims were preempted, but the court reaffirmed its previous
decision. Second, U.S. Life argued that the court should apply an
arbitrary and capricious standard in reviewing its decision to
reject Mr. Ruttenberg’s claim. The district court found no
language in the policy reserving discretion to the administrator
and rejected—as not part of the plan—an attendant document
offered by U.S. Life to establish its discretion. As a result, the
court reviewed the denial of benefits de novo. Third, the court
had to address whether Mr. Ruttenberg exhausted his adminis-
trative remedies, which had been deferred in the previous
decision. It excused exhaustion on the basis of futility: Nothing
in the course of the parties’ dealings indicated any result other
than that U.S. Life would once again deny Mr. Ruttenberg’s
claim.
7
  These arguments are just two that U.S. Life adopted in the
course of this litigation. Its primary position has been that
Mr. Ruttenberg actually is not disabled, and, to this end, U.S. Life
has argued that he is faking the injury, that he had an undis-
closed preexisting condition or that his injury is connected to past
alcohol or drug abuse. In the alternative, U.S. Life has argued,
among other things, that he failed to exhaust administrative
remedies and, finally, that Mr. Ruttenberg never was covered by
the policy.
8                                                 No. 04-1653

that the policy was ambiguous because it limited benefits to
“employees” but listed as employees traders reporting
income on IRS 1099 forms, even though such individuals
generally are considered independent contractors. Given the
ambiguity, the district court applied the maxim contra
proferentem and construed that ambiguity against U.S. Life,
foreclosing the company from arguing that Mr. Ruttenberg
was not an “employee” under the policy.
  The court, however, accepted U.S. Life’s second argument.
The district court read the policy’s terms to require plainly
that Mr. Ruttenberg be a full-time employee and, just as
plainly, that he work at least thirty hours per week. The
evidence submitted by Mr. Ruttenberg indicated that he
spent at most fifteen to twenty hours working the exchange
floor, and the court noted that
    [p]resumably by those hours he meant to suggest that
    he was trading in the pit during those times, and it is
    reasonable to suggest that Ruttenberg may have spent
    another 10 hours a week preparing for his trades.
    However, with no evidence in the record to support this
    or otherwise create a question of fact on this issue, there
    is little basis to say that Ruttenberg could be considered
    “Full-Time” based on the policy’s express terms.
R.62 at 23. Finding no evidence that Mr. Ruttenberg was
eligible for benefits under the policy, the court granted U.S.
Life’s motion for summary judgment.
  Mr. Ruttenberg appeals the grant of summary judgment
based on his ineligibility under the “full-time” provision,
and U.S. Life cross-appeals the district court’s initial
determinations that the Company did not have interpretive
authority under the policy and that Mr. Ruttenberg quali-
fied as an “employee.”
No. 04-1653                                                      9

                                II
                        DISCUSSION
A. Standard of Review
  This court reviews a district court’s grant or denial of
summary judgment de novo, making all reasonable infer-
ences in favor of the nonmoving party. See Vallone v. CNA
Fin. Corp., 375 F.3d 623, 631 (7th Cir. 2004). In interpreting
ERISA plans, we apply general principles of contract law
under the federal common law guiding interpretation of
ERISA claims. Bock v. Computer Assocs. Int’l, Inc., 257 F.3d
700, 704 (7th Cir. 2001).
  In ERISA cases, an important principle governs the scope
of a district court’s, and therefore our, review: A district
court reviews de novo a denial of benefits unless the plan
grants to the plan administrator the discretionary authority
to construe policy terms. See Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989); see also Phillips v. Lincoln
Nat’l Life Ins. Co., 978 F.2d 302, 311 (7th Cir. 1992). If the plan
grants an administrator such authority, that administrator’s
interpretation of contract terms is reviewed under an
arbitrary and capricious standard. Firestone, 489 U.S. at 115.
U.S. Life submits that the district court erred in determining
that the policy did not give U.S. Life interpretive discretion;
in its view, the appropriate review should be deferential
rather than de novo.
  To avoid an overly broad grant of discretionary authority
based on boilerplate policy language, we have articulated a
notice requirement that must be met before an insurer may
be said to have retained interpretive discretion: An em-
ployee must be told in clear terms that the administrator
reserves the authority to construe terms in the plan. See
Herzberger v. Standard Ins. Co., 205 F.3d 327, 333 (7th Cir.
2000). Absent notice sufficient to satisfy the Herzberger
10                                                  No. 04-1653

standard, an insurer is not entitled to arbitrary and capri-
cious review of its interpretations.
  U.S. Life submits that it met the Herzberger notice stan-
dard. According to the Company, the relevant notice is
contained in a document titled the “Master Application for
Employee Benefits” (“Master Application”). R.36-1 at 51.
Specifically, U.S. Life invites our attention to the
“Applicant’s Declaration” section of the Master Application,
which states that
     [i]f the insurance contract [that SMW applied for]
     compromises a part of an employee benefit plan, [U.S.
     Life] is granted sole discretionary authority to deter-
     mine eligibility, make all factual determinations and to
     construe all terms of the policy.
Id. at 53, ¶ 6. The district court erred, according to U.S. Life,
in ignoring the Master Application and basing its lack-of-
notice determination on the summary plan description
                                 8
(“SPD”) given to the insured. Further, U.S. Life argues that
its relationship is actually with the policyholder, SMW, and
that the terms of the plan (in its view, the Master
Application) control over the SPD. In U.S. Life’s view,
responsibility for notifying independent traders of the
Master Application provisions rested with SMW; while
Mr. Ruttenberg might have an independent cause of action
against SMW, that fact does not change the discretionary
authority vested in U.S. Life by the Master Application.
  Both the SPD and the plan’s terms are silent as to U.S.
Life’s interpretive authority. U.S. Life points only to lan-
guage contained in the Master Application, but the Master


8
  A summary plan description is “a plain language version of the
Plan.” Powell v. A.T. & T. Communications, Inc., 938 F.2d 823, 824
(7th Cir. 1991).
No. 04-1653                                                     11

Application is, by its terms, an application for group
insurance coverage submitted by SMW, not the policy itself.
Neither the SPD, the certificate of insurance, nor any
subsequent insurance document reproduces the discretion
provision and no document notifies an insured that U.S. Life
                                9
retains interpretive discretion. Given the lack of discretion-
ary language in any document except for the Master
Application, we cannot say that boilerplate language in a
contract application—representing the negotiations leading
to contract formation rather than the substance of the
contract—qualifies as the type of notice required by
Herzberger. We, like the district court, therefore review Mr.
Ruttenberg’s claims de novo and afford no deference to U.S.
Life’s interpretation of contract terms.


B. ERISA Preemption
   Mr. Ruttenberg first challenges the district court’s deter-
mination that ERISA preempted his state law claims. The
statute “supersede[s] any and all State laws insofar as they
. . . relate to any employee benefit plan described in [29
U.S.C. §] 1003(a).” 29 U.S.C. § 1144(a). Under § 1003, ERISA
applies to “any employee benefit plan” that is, among other
things, maintained by an employer engaged in commerce.
Id. § 1003(a)(1). As relevant to this appeal, the statute




9
  For example, the discretionary language did not recur in the
“Digest of Group Insurance Plan.” R.36-1 at 54. Nor is there
language reserving interpretive authority to U.S. Life in the
certificate of insurance. Id. at 273 et seq. Notably, a transmittal
sheet from U.S. Life’s Contract Development office itself refers to
the certificate of insurance as “the contract.” Id. at 273.
12                                                     No. 04-1653
                                          10
defines an “employee benefit plan,” as “any plan, fund, or
program which was . . . established or maintained by an
employer . . . for the purpose of providing for” one of two
classes of covered persons: “participants or their beneficia-
ries.” Id. § 1002(1). A “participant” in an ERISA-qualifying
plan
     means any employee or former employee of an em-
     ployer, or any member or former member of an em-
     ployee organization, who is or may become eligible to
     receive a benefit of any type from an employee benefit
     plan which covers employees of such employer or
     members of such organization, or whose beneficiaries
     may be eligible to receive any such benefit.
Id. § 1002(7). The other qualifying ERISA class members are
“beneficiaries,” that is, “a person designated by a partici-
pant, or by the terms of an employee benefit plan, who is or
may become entitled to a benefit thereunder.” Id. § 1002(8).
Thus, Mr. Ruttenberg’s state law claims would be pre-
empted by the ERISA scheme if he qualifies as either a
“participant” or a “beneficiary” of the U.S. Life plan. Given
the procedural posture in which it determined the question,
the district court assumed that Mr. Ruttenberg was not an
“employee” of SMW and therefore could not be considered
a plan “participant.” For purposes of the present discussion,
we also shall assume that Mr. Ruttenberg does not qualify
as an employee and therefore is not an ERISA “partici-



10
  The term “employee benefit plan” or “plan” in the ERISA
statute refers to either an employee welfare benefit plan or an
employee pension benefit plan. 29 U.S.C. § 1002(3). The parties
agree that the plan at issue here would be an employee welfare
benefit plan, id. § 1002(1), if indeed it qualifies as any ERISA plan.
No. 04-1653                                                     13
       11
pant.” Under this assumption, ERISA preemption is only
possible if Mr. Ruttenberg qualifies as a “beneficiary.”
   We look first to the language of the statute. When the
language of a statutory provision is clear, our sole function
is to enforce its terms. See United States v. Jones, 372 F.3d 910,
912 (7th Cir. 2004). Read alone, the ERISA definition of
“beneficiary” seems clear. A beneficiary is defined as one
who is “designated by a participant, or by the terms of an
employee benefit plan, who is or may become entitled to a
benefit thereunder.” 29 U.S.C. § 1002(8) (emphasis added).
By employing commas to set the emphasized language
apart, the statute appears to establish two distinct classes of
individuals who might be “beneficiaries”: those designated
by a participant and those who are, like Mr. Ruttenberg,
directly designated to receive benefits by the plan itself.
  But other ERISA provisions might be said to raise ques-
tions about the clarity of § 1002(8). For example, one might
reach an apparent contradiction between the definition of a
qualified benefit plan as one “maintained for the purpose of
providing for its participants or their beneficiaries,” id. §
1002(1) (emphasis added), and the § 1002(8) language. The
congressional findings that introduce ERISA in the United
States Code, see id. § 1001(b) (declaring ERISA’s purpose to
be the protection of commerce and “the interests of partici-
pants in employee benefit plans and their beneficiaries”


11
  The question of Mr. Ruttenberg’s status arose when the district
court decided U.S. Life’s preemption motion. At the time, the
district court did not have occasion to construe the contractual
term “employee” and its application to Mr. Ruttenberg, as it did
in the subsequent motion for summary judgment. We place
ourselves in the district court’s shoes and assume, for the present
discussion, that Mr. Ruttenberg is not an “employee” or an
ERISA “participant.”
14                                                   No. 04-1653

(emphasis added)), might also be said to be in tension with
§ 1002(8). Mr. Ruttenberg therefore suggests a limited
reading of the term “beneficiary.” In his view, the term
encompasses only those individuals designated as such by
plan participants (i.e., SMW employees). By contrast, the
district court, and U.S. Life here, take the view that § 1002(8)
includes within the definition of “beneficiary” those who,
like Mr. Ruttenberg, are designated to receive benefits by
the plan itself and not just those who are designated
beneficiaries by a participant.
  We do not think these provisions, when read in the
context of the entire statute, create a severe textual ambigu-
ity. Our sister circuits that have considered the question
agree with U.S. Life’s view that, under § 1002(8), a “benefi-
ciary” may be a person designated to receive benefits under
a plan; “beneficiary” is not limited to those who are desig-
nated as beneficiaries by a “participant.” See Hollis v.
Provident Life & Accident Ins. Co., 259 F.3d 410, 415 (5th Cir.
2001); Wolk v. UNUM Life Ins. of America, 186 F.3d 352, 356
(3d Cir. 1999); Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d
1346, 1351 (11th Cir. 1998); Prudential Ins. Co. of America v.
Doe, 76 F.3d 206, 208 (8th Cir. 1996); Peterson v. American Life
& Health Ins. Co., 48 F.3d 404, 408-09 (9th Cir. 1995). Indeed,
the same interpretation has been applied by district courts
in this circuit. See, e.g., Turnoy v. Liberty Life Assurance Co. of
Boston, No. 02 C 6066, 2003 WL 223309 (N.D. Ill. Jan. 30,
2003).
  Mr. Ruttenberg largely grounds his construction of the
term “beneficiary” on a single case, Ritter v. Massachusetts
                                                          12
Casualty Insurance Co., 786 N.E.2d 817 (Mass. 2003).


12
  In addition to Ritter, Mr. Ruttenberg urges us to consider the
position of the United States Department of Labor, which in a
                                                   (continued...)
No. 04-1653                                                    15

Certainly, Ritter criticized what it considered to be an
overly-broad reading of the ERISA term “beneficiary.” See
id. at 823-24. Although Mr. Ruttenberg is correct that the
Supreme Judicial Court of Massachusetts’ interpretation
appears to support his position, we agree with the district
court that, at most, Ritter simply is inconsistent with the
approach in our sister circuits. We join the weight of
authority in concluding that an ERISA “beneficiary” may be
a person designated to receive benefits under the terms of
the plan itself; the definition is not limited to individuals
designated by a “participant” to receive benefits. The


12
  (...continued)
Supreme Court amicus brief criticized the “broad interpretation
of ‘beneficiary’ ” “with no logical stopping point” articulated
in Hollis. See Brief for the United States as Amicus Curiae
Supporting Petitioners at 25, Yates v. Hendon, 541 U.S. 1 (2004)
(No. 02-458).
  He argues that the Government’s position is entitled to Chevron
deference, but we need not consider this argument in detail
because we cannot accept Mr. Ruttenberg’s reliance on the Yates
brief for two reasons. First, the Government’s position arose in a
different context; at issue in Yates was whether a working owner,
not an independent contractor designated to receive benefits by
the plan, could be considered a plan beneficiary. Second, more
importantly, it would appear that Mr. Ruttenberg does meet even
the Government’s interpretation of the term. In Yates, the
Government indicated that it objected to an overly broad reading
of the term “beneficiary” that included persons who “lack[ ] any
employment nexus with the plan sponsor.” Id. It is clear that in
Mr. Ruttenberg’s case there is no danger of an individual lacking
any employment nexus being covered by the plan. Even if he
cannot be considered an employee, Mr. Ruttenberg cleared his
trades through SMW, and thus had a significant nexus with the
plan sponsor.
16                                                    No. 04-1653

district court did not err in determining that Mr. Ruttenberg
qualified as a “beneficiary” of the U.S. Life policy for ERISA
purposes and correctly found his state law claims pre-
                                 13
empted by the federal statute.


C. Exhaustion of Administrative Remedies
  An ERISA plaintiff must exhaust all available administra-
tive remedies before filing suit to challenge a denial of
benefits. Zhou v. Guardian Life Ins. Co. of America, 295 F.3d
677, 679 (7th Cir. 2002). Because the ERISA plaintiff need
only exhaust available remedies, “we have recognized two
circumstances in which a failure to exhaust may be excused.
One is if there is a lack of meaningful access to review
procedures, and the other applies if pursuing internal
remedies would be futile.” Stark v. PPM America, Inc., 354
F.3d 666, 671 (7th Cir. 2004); see also Lindemann v. Mobil Oil
Corp., 79 F.3d 647, 650 (7th Cir. 1996). Futility is demon-
strated by showing that it is “certain” a plaintiff’s claim will
be denied by the plan administrator. Robyns v. Reliance
Standard Life Ins. Co., 130 F.3d 1231, 1238 (7th Cir. 1997). The
decision to require exhaustion is committed to the sound


13
   Alternatively, for reasons that will become clear, we believe
that the operative assumption—that Mr. Ruttenberg does not
qualify as a “participant”—is incorrect. In reaching its decision,
the district court did not, at the time, find it necessary to deter-
mine whether Mr. Ruttenberg was an “employee” under the plan
and, therefore, an ERISA “participant.” The district court
subsequently found that he was an employee under the plan and,
for reasons noted below, we agree that the contract term
“employee” should be construed to include Mr. Ruttenberg.
Given this determination, Mr. Ruttenberg is an ERISA “em-
ployee” and his state law claims would be preempted because he
is a “participant” under 29 U.S.C. § 1002(7).
No. 04-1653                                                17

discretion of the district court and, consequently, is re-
viewed only for abuse of that discretion. Stark, 354 F.3d at
671.
  Our review of the record reveals that Mr. Ruttenberg did
not follow U.S. Life’s administrative requirements.
Mr. Ruttenberg filed suit prematurely; U.S. Life had not
officially granted or denied his claim when he brought suit.
He agreed to stay the proceedings to conclude the adminis-
trative process, but, once U.S. Life denied his claim, he
undoubtedly failed to file an administrative appeal within
the allowable 180-day time period. Despite these failures,
there certainly is nothing in the record indicating that, had
Mr. Ruttenberg complied with the administrative appeals
requirement, U.S. Life would have altered its decision to
deny benefits. Indeed, the record indicates that U.S. Life has
opposed Mr. Ruttenberg’s claim at every step. U.S. Life
spent more than eighteen months adjudicating
Mr. Ruttenberg’s claim. In the course of this process, it con-
tested every medical opinion favorable to Mr. Ruttenberg,
including that of its own expert Dr. Diamond. After
Mr. Ruttenberg agreed to a stay in the proceedings, U.S. Life
spent over a year reviewing his submission before it denied
the claim, knowing that he would resume the suit in the
event of an unfavorable result.
  The history of this matter, both before the district court
and in administrative proceedings, provides ample support
for the district court’s view that U.S. Life would have denied
Mr. Ruttenberg’s claim even if he had filed an administra-
tive appeal. Indeed, there is no evidence in the record
demonstrating that U.S. Life’s denial would be anything but
“certain” if the company had reviewed Mr. Ruttenberg’s
claim once again. Accordingly, we cannot say that the
district court’s futility determination was “ ‘down-right
unreasonable.’ ” Zhou, 295 F.3d at 679 (quoting Cincinnati
18                                                  No. 04-1653

Ins. Co. v. Flanders Elec. Motor Serv., 131 F.3d 625, 628 (7th
Cir. 1997)). Therefore, the district court’s futility determina-
tion was a proper exercise of discretion.


D. Eligibility under the Policy
  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 ineligi-
ble for coverage because he was neither an “employee” nor
did he work “full-time.”
  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).
  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
No. 04-1653                                                      19
                      14
course of this claim, we agree with the Company’s assess-
ment. 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


14
   The first time U.S. Life questioned Mr. Ruttenberg’s eligibility
was in a November 19, 2002 letter, during the administrative
review—more than a year after Mr. Ruttenberg filed suit and
more than a year and a half after he filed his claim. Prior to this
letter, U.S. Life disputed whether Mr. Ruttenberg was disabled
and the amount owed under the policy, not whether he was
covered by the terms of the policy. On November 27, 2002,
Mr. Ruttenberg responded by submitting trading records (which
did not indicate hours worked) and stating that the time he spent
on the floor was supplemented by preparation time, administra-
tive tasks and market research, all totaling over thirty hours per
week. His submissions did not provide documentation of the
time he spent preparing for or closing out trades; in his deposi-
tion to U.S. Life he stated that he did not keep records of this
time, and there is no indication that the policy required keeping
such records, let alone that Mr. Ruttenberg was informed of such
a requirement. In its final letter of denial, U.S. Life reserved the
right to challenge his eligibility under the policy because it did
not have documentation establishing that he was a full-time
worker. This disclaimer was contained in a single paragraph after
four pages discussing whether Mr. Ruttenberg was disabled. U.S.
Life next raised the issue in its response to Mr. Ruttenberg’s
motion for summary judgment, to which Mr. Ruttenberg
responded as he does here: that working thirty hours on the
trading floor was impossible, that the thirty-hour requirement
did not apply to him and that, at any rate, he worked more than
the required hours in off-floor activities. U.S. Life reasserted its
belief that he did not qualify as a full-time employee in its cross-
motion for summary judgment, and Mr. Ruttenberg stood by the
answer in the reply brief to his motion. U.S. Life gave its fullest
articulation of Mr. Ruttenberg’s infirmity under the thirty-hour
provision in its reply to his response.
20                                                No. 04-1653

sent to his counsel on November 19, 2002, and in the letter
denying Mr. Ruttenberg’s claim. Mr. Ruttenberg acknowl-
edged 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.”


  1. “Employee”
   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 inde-
pendent 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. Regard-
less 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.
  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 (1992). In its
view, the court first must analyze extrinsic evidence to
No. 04-1653                                                    21

resolve the ambiguity and resort to contra proferentem only
if consideration of such extrinsic evidence does not yield a
resolution.
  The situation here differs significantly from that con-
fronted 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
     [a]ll full-time employees of the Participating Employer
     who are:
     - managers and officers earning over $20,000 annually
     - traders who report earnings on their 1099 form
     - firm traders who report prior years on their 1099 DDE
     form,
     but not those who are temporary, part-time or seasonal.
R.36-1 at 299 (the “eligibility clause”).
  Within this provision, the term “employee” is not other-
wise 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
                                   15
“employees” on IRS form W-2. Generally speaking, a

15
  The IRS requires employers to account for “employees”
through form W-2, see generally Internal Revenue Serv., U.S. Dep’t
                                                   (continued...)
22                                                     No. 04-1653

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.
  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
                                                 16
N. America, 317 F.3d 773, 776 (7th Cir. 2003), limits contra


15
  (...continued)
of the Treasury, Publication 15: Employer’s Tax Guide (2005), not on
form 1099, see Internal Revenue Serv., U.S. Dep’t of the Treasury,
Frequently Asked Questions 12.2: Small Business/Self-Employed/Other
Business: Form 1099-MISC & Independent Contractors, at
http://www.irs.gov/faqs/faq12-2.html.

16
  In Hall v. Life Insurance Co. of North America, 317 F.3d 773 (7th
Cir. 2003), the plaintiff sought to use contra proferentem to
preclude the defendant from reducing her benefits by the amount
that she received from an additional insurer. We held that the
maxim could not be invoked “to justify a pro-insured decision in
every case.” Id. at 776. That is, there first must be an ambiguity:
     The contra proferentem rule that Hall invokes is, however, just
     a tiebreaker; it does not entitle insureds to prevail simply
     because lay readers do not know all technical details of
                                                       (continued...)
No. 04-1653                                                        23

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
                                                              17
does it suggest the existence of such evidence to this court.
Given the lack of extrinsic evidence, the use of contra


16
     (...continued)
        insurance law. English does not contain words for all
        complex economic arrangements; whenever the language
        lacks a one-to-one mapping of words to ideas (or words to
        things) there is a potential for ambiguity and confusion. This
        potential is not enough to justify a pro-insured decision in
        every case, however . . . .
          The doctrine that ambiguities are resolved against insurers
       serves its function when it prevents traps for the unwary.
       Hall was not ensnared; even a modest degree of diligence
       would have enabled a CPA to understand that the New York
       Life policy, offered through a professional group and
       captioned “Group Insurance,” probably would be classified
       as “group insurance” under the [defendant] LINA policy.
       Hall did not read the LINA policy, misunderstand a vague
       passage or veiled allusion, and only then opt into the New
       York Life policy; she did not read the LINA policy at all until
       it was too late. That omission led her to pay for coverage
       under the New York Life policy, which, as things have
       turned out, offered her no net benefit, but ERISA does not
       protect employees against their own imprudence.
Id. (citations omitted).
17
  For this reason we cannot accept U.S. Life’s invitation to
remand to the district court so that it may offer extrinsic evidence
supporting its position. U.S. Life had ample opportunity to offer
this evidence to the district court in the first instance.
24                                               No. 04-1653

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 insur-
ance 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.


  2. “Full-Time”
     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.
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.
  U.S. Life urges us to affirm the district court’s determina-
tions, both its finding that the term “full-time” is unambigu-
ous 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
No. 04-1653                                                25

more than thirty hours per week, U.S. Life asserts that the
district court correctly determined that Mr. Ruttenberg
failed to demonstrate his eligibility.
  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 litiga-
tion, 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, 558 N.W.2d 577 (Neb.
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” require-
ment they cannot meet, after they have paid for the insur-
ance.
  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
26                                                No. 04-1653

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.
  Turning to the ambiguity question, other courts’ interpre-
tations 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.
  In interpreting a contractual term, we cannot give mean-
ing 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 non-
common 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 deter-
mined, 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.
  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; inde-
pendent traders clear their trades through SMW but the
company does not control the details of their work sched-
ules. Similarly, to qualify as a “full-time” worker, the
No. 04-1653                                                     27

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
              18
cannot meet. 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.
  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


18
   These ambiguities, set forth above, are in addition to the
apparent question of the “class” of “employees” to which traders
like Mr. Ruttenberg belong. Documents which outline the details
of the policy divide individuals into four numbered classes that
do not necessarily correspond to the categories in the bulleted
eligibility clause. Mr. Ruttenberg initially took the position that
he belonged to “Class 3,” which he argued made him a non-
employee. As the district court noted, this classification would be
problematic for him because, as a non-employee, he would be
ineligible for any policy benefits. Some policy documents list Mr.
Ruttenberg as “Class 4,” R.36-1 at 72. The only differences
between the classifications seem to be in titles: Class 3 members
are titled “Program Traders,” id. at 75, and Class 4 members are
listed in the category “All Others,” id. at 76; but Classes 3 and 4
are both governed by the same contractual provisions, see id. at
294. To confuse matters further, the policy terms seem to en-
compass Mr. Ruttenberg regardless of his classification number
because the policy’s eligibility clause includes traders like
Mr. Ruttenberg “who report earnings on the 1099 form.” Id. at
299.
28                                                    No. 04-1653

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 proceed-
      19
ings.


  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.




19
  Because the district court erred in finding the term “full-time”
to be unambiguous, our decision need not rest on
Mr. Ruttenberg’s argument that the position adopted by U.S. Life
defeats the expectations of the insured. However, we note in the
alternative that courts in ERISA claims interpret policies based on
normal contract principles; this includes considering the reason-
able expectations of the insured. See Lifson v. INA Life Ins. Co. of
New York, 333 F.3d 349, 353 (2d Cir. 2003); Tester v. Reliance
Standard Life Ins. Co., 228 F.3d 372, 375 (4th Cir. 2000); Perez v.
Aetna Life Ins. Co., 150 F.3d 550, 556-57 (6th Cir. 1998) (en banc);
Saltarelli v. Bob Baker Group Med. Trust, 35 F.3d 382, 386 (9th Cir.
1994). Mr. Ruttenberg offered sufficient evidence that he and
other independent traders expected to be covered by the plan’s
terms, and we do not believe that such an expectation is so
unreasonable to warrant summary judgment. We further note
that, on this record, and for reasons discussed above, application
of the contra proferentem maxim to interpret the “full-time”
provision on remand may be appropriate.
No. 04-1653                                                29

                       Conclusion
  For the foregoing reasons, we reverse the district court’s
decision and remand for further proceedings consistent with
this opinion. Mr. Ruttenberg may recover his costs in this
court.
                                 REVERSED and REMANDED
A true Copy:
       Teste:

                          _____________________________
                           Clerk of the United States Court of
                             Appeals for the Seventh Circuit




                   USCA-02-C-0072—6-30-05
