West v. Lincoln Benefit Life Co.

509 F.3d 160

Patricia WEST, Appellant v. LINCOLN BENEFIT LIFE COMPANY.

No. 06-3491.

United States Court of Appeals, Third Circuit.

Argued May 16, 2007.

Filed: December 13, 2007.

John W. Jordan, IV (Argued), Matis, Baum, Rizza & O'Connor, Pittsburgh, PA, for Appellant.

Alan H. Abes (Argued), Dinsmore & Shohl, Cincinnati, OH, R. Stanley Mitchel, Rose, Schmidt, Hasley & DiSalle, Pittsburgh, PA, for Appellee.

Before: FISHER and ROTH, Circuit Judges, and RAMBO,^* District Judge.

OPINION OF THE COURT

RAMBO, District Judge.

This matter arises out of a dispute over whether a policy for life insurance was in force upon the death of James West, Jr. The insurer, Appellee Lincoln Benefit Life Company ("Lincoln Benefit"), argues that Mr. West's policy had lapsed for nonpayment of premiums and had not been reinstated. Because the policy was not in force at the time of Mr. West's death, Lincoln Benefit submits, it is not obligated to pay benefits under the policy terms. Appellant Patricia West, James West's wife and beneficiary of the policy, argues that Pennsylvania law imposed a temporary contract of insurance when, after notice of lapse, she sent an application for reinstatement and payment of overdue premiums. For the reasons that follow, we agree with Lincoln Benefit and will affirm summary judgment in its favor.

I.

On April 4, 1998, Mr. West obtained a life insurance policy from Allstate Insurance Company. On the application for the policy, he stated that he was taking medicine for high blood pressure. After medical testing or examination by Allstate, the insurance policy was issued. In February 2002, Mr. West converted the Allstate policy to a $50,000 term policy with Lincoln Benefit and added a $50,000 term rider benefit ("the Policy"). At the time of conversion, Lincoln Benefit did not require a medical examination or other proof of insurability. Mr. West named Mrs. West beneficiary of the Policy.

The Policy terms are as follows: the insured must remit a quarterly payment of $228.51 to remain insured. If a premium payment is not received by its due date, a grace period of sixty-one days goes into effect. At the end of sixty-one days, if the premium is still outstanding, the Policy is terminated. After termination but before the death of the insured, however, the Policy may be reinstated provided that the insured: 1) requests reinstatement within five years of the date that the Policy entered the grace period; 2) gives Lincoln Benefit "the proof [it] require[s] that the insured is still insurable" in the payment class under which the Policy was issued; 3) pays an amount large enough to cover the unpaid monthly deductions for the grace period; 4) makes a payment sufficient to keep the policy in force for three subsequent policy months; and 5) pays or asks Lincoln Benefit to reinstate any outstanding loan, with interest. (R. at 60a.)

Lincoln Benefit addressed all correspondence to Mr. West at his home address. Mr. West would open the mail addressed to him, then give Mrs. West any mail that required a response, including bills and notices of payment due issued by Lincoln Benefit. Mrs. West would respond or write a check for payment, as appropriate, and maintain the file of insurance documents. Mrs. West recalled two occasions when Mr. West gave her a notice from Lincoln Benefit that the premium payment was overdue and coverage would terminate unless payment was made by a particular date. Both times she sent a check immediately to continue the policy in force. She saw only the correspondence from Lincoln Benefit that Mr. West gave to her. She does not know if there were letters or bills from Lincoln Benefit sent to her husband that he did not then pass on to her. The Wests paid all premiums due through February 17, 2004.

On April 1, 2004, Lincoln Benefit sent Mr. West a reminder that his next premium was due on May 1, 2004. On May 3, 2004, because it had not received payment, Lincoln Benefit sent Mr. West a letter informing him that the Policy had entered the grace period. His Policy would terminate on July 3, 2004 if the premium was not received on or before that date. On May 11, 2004, Lincoln Benefit sent Mr. West a second notice that his May premium was due.¹

Mr. West did not submit payment to Lincoln Benefit on or before July 3, 2004. Thus, on July 5, 2004, Lincoln Benefit sent him a letter stating that the grace period for premium payment on his policy had expired. The letter advised Mr. West that he could apply for reinstatement. The second paragraph of the letter stated, "[t]o continue your valuable coverage, complete the Application for Reinstatement form on the back and return it with your payment of $228.51. Upon underwriting approval, and receipt of the sufficient payment, coverage will continue uninterrupted." (R. at 183a.) Enclosed with the letter was an application for reinstatement. The application itself states, "I (each undersigned) request that the Company reinstate this policy.... Coverage will not start again until this request is approved by the company and all required premiums and interest are paid. If this request is not approved, any amount tendered will be returned." (Id. at 187a.)

Mrs. West recalls having read only the first sentence of the second paragraph of the letter, "[t]o continue your valuable coverage, complete the Application for Reinstatement form on the back and return it with your payment of $228.51." She interpreted it to mean that if she filled out the form and sent it to Lincoln Benefit with payment, Mr. West's insurance would be reinstated. Mrs. West did not read, or does not remember reading, any of the language in the letter or the application stating that underwriting approval was required before reinstatement would be effective.

The application asked ten questions regarding the applicant's medical history. Mrs. West filled out the application on Mr. West's behalf. She answered nine questions in the negative, indicating that Mr. West had no medical issues relating to those questions. She answered "yes" and "no" to one question — whether, in the past ten years or during the time Mr. West was insured under the Policy, he had been "diagnosed with, sought or received treatment or advice for: heart attack, disease of coronary arteries or other blood vessels, other heart disorder, high blood pressure, diabetes or stroke." (Id.) In the blank provided for an explanation of "full details, including diagnosis, severity, treatment, name and address of doctors, hospitals, and clinics," she wrote "controlled with medication." (Id.) She answered "yes" because Mr. West still had the high blood pressure disclosed on his initial application for life insurance with Allstate. She knew Mr. West to be in good health because he was taking medication to control his blood pressure and he had recently passed a physical exam with no medical problems. Thus, she believed that Lincoln Benefit would approve the application for reinstatement immediately upon receipt of the application and payment.

Lincoln Benefit received the application for reinstatement on July 15, 2004, along with Mr. West's check for $228.51. On July 19, 2004, Lincoln Benefit deposited the check pursuant to its standard practice.

Mr. West died on July 24, 2004, and Lincoln Benefit received notice of his death two days later. The Underwriting Department had not completed its review of the application and had not made a decision on whether to reinstate his Policy. Because Lincoln Benefit did not consider Mr. West's Policy to be in effect at the time of his death, on July 30, 2004, the company denied Mrs. West's claim for payment of benefits and refunded the premium payment of $228.51 that had accompanied the application for reinstatement.

II.

The District Court had subject matter jurisdiction to hear this claim pursuant to 28 U.S.C. § 1332(a)(1). We have jurisdiction to review the District Court's decision on summary judgment under 28 U.S.C. § 1291. We review the decision de novo. State Farm Mut. Auto. Ins. Co. v. Rosenthal, 484 F.3d 251, 253 (3d Cir.2007).

Because subject matter jurisdiction is based on diversity of citizenship, we look to the substantive law of Pennsylvania to determine the rights and obligations of the parties. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 77, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The law of the Commonwealth is declared by "its Legislature in a statute or by its highest court." Id. The Pennsylvania Supreme Court is the best authority on Pennsylvania law, but when the Supreme Court has not issued a clear pronouncement in a particular area, we "must consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data" to determine what the law is. McKenna v. Ortho Pharm. Corp., 622 F.2d 657, 661, 663 (3d Cir.1980); see also Comm'r v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886 (1967). We may not rest on "blind adherence to state precedents without evaluating the decisions in light of other relevant data as to what the state law is." McKenna, 622 F.2d at 663 (quotation and alteration omitted); accord Scotts African Union Methodist Protestant Church v. Conference of African Union First Colored Methodist Protestant Church, 98 F.3d 78, 92 (3d Cir.1996); cf. Bernhardt v. Polygraphic Co. of Am., Inc., 350 U.S. 198, 204, 76 S.Ct. 273, 100 L.Ed. 199 (1956) (affirming district court's use of forty-five-year-old state supreme court precedent when "there appear[ed] to be no confusion in [state] decisions, no developing line of authorities that casts a shadow over the established ones, no dicta, doubts or ambiguities in the opinions of [state] judges on the question, [and] no legislative development that promises to undermine the judicial rule"). Opinions from inferior Pennsylvania courts are not controlling in our analysis, but they are entitled to significant weight when there is no indication that the Pennsylvania Supreme...