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Blair v. Manhattan Life Insurance Co.

November 4, 1982



Seitz, Chief Judge, Garth and Rosenn, Circuit Judges. Garth, Circuit Judge, dissenting.

Author: Rosenn


ROSENN, Circuit Judge.

Margaret M. Blair, the plaintiff in this diversity action,*fn1 appeals from an order of the United States District Court for the Western District of Pennsylvania denying her motion for judgment notwithstanding the verdict. Mrs. Blair sued Manhattan Life Insurance Company (Manhattan) to recover life insurance benefits in the principal sum of $19,000.00 on the ground that Manhattan had issued an "interim life insurance policy" on the life of her late husband, Joseph R. Blair, designating her as the beneficiary, which policy was in effect at the time of his death. Manhattan filed an answer denying liability and following discovery, each party moved for summary judgment. The district court denied both motions and the case was tried to a jury. The jury returned a verdict in favor of Manhattan whereupon plaintiff timely filed a motion for judgment notwithstanding the verdict. The district court denied plaintiff's motion and she filed this appeal. We affirm.


Dr. Blair, formerly a sole practitioner specializing in obstetrics and gynecology, joined Source Gyneatric Associates (Source) as a permanent employee on or about March 1, 1975. On September 15, 1975, Source submitted an application for membership in the Affiliated Employers Group Life Insurance Trust Fund (Affiliated or Fund). By that application Source requested Affiliated to provide life insurance coverage for Dr. Blair in the amount of $19,000.00 under Manhattan's group policy. In connection with this application, Source submitted a check dated September 30, 1975, in the sum of $134.02 payable to Arthur Tripp, Jr., an independent insurance broker who had been engaged by Source to aid in finding life insurance for Dr. Blair. The insurance application contained on its reverse side terms and conditions, of which paragraph 11 specifically provided:

No insurance provided through the Trust shall take effect until this application has been approved and accepted in writing by the Trustee and that insurance as specified in the Schedule has been approved for coverage in writing by the insurer. (P/E3)

Dr. Blair's medical history accompanying the application reported a cardiac condition and the name of his treating physician. Nonetheless, Tripp did not, as was his practice with his prospects, advise Dr. Blair whether or not he was uninsurable. The medical examiner's report completed by Dr. Gillette, Dr. Blair's attending physician, disclosed a cardiac condition consisting of a systolic murmur, mild enlargement of the heart, and mild arteriosclerosis. The examining physician reported that the applicant appeared healthy and he recommended the risk.

At trial, the parties also stipulated to the following:

Number 6. Following a review of Blair's medical condition, Manhattan declined to approve insurance coverage for Blair.

Number 7. Blair died on November 9, 1975.

Number 8. Manhattan, by letter dated November 14, 1975, advised the Melvin Agency that the application of Source had been declined and as administrator for the trustee of the Affiliated Employers Group Life Insurance Trust, forwarded a check in the amount of $134.02.

Number 9. The Melvin Agency, by letter dated November 18, 1975, advised Arthur D. Tripp, Jr., the soliciting agent, that the application of Source had been declined and forwarded the administrator's check in the amount of $134.02.

Relying on the Pennsylvania Supreme Court decision in Collister v. Nationwide Life Insurance Co., 479 Pa. 579, 388 A.2d 1346 (1978), cert. denied, 439 U.S. 1089, 59 L. Ed. 2d 55, 99 S. Ct. 871 (1979), plaintiff presented her case on the theory that the acceptance of the advance premium by the insurance company gave rise to a reasonable expectation of interim insurance coverage and placed the burden upon the insurer to negate this inference by "clear and convincing evidence." At the conclusion of all the evidence, plaintiff submitted a written motion for a directed verdict on the ground that defendant had "failed to establish by clear and convincing evidence, that Joseph R. Blair had no reasonable expectation for believing that he was purchasing immediate insurance coverage." In denying the motion, the trial court instructed the jury, as the plaintiff acknowledges, in accordance with Collister. The jury, however, returned a verdict in favor of the defendant.


The sole issue raised by the appellant is whether she is entitled to judgment notwithstanding the verdict because, as she maintains, the defendant failed to establish by clear and convincing evidence that Dr. Blair, the applicant, had no reasonable basis for believing that he was purchasing interim insurance coverage.*fn2 Plaintiff asserts that once she had made out a prima facie case based on stipulated facts, Manhattan then bore the burden under Pennsylvania law of rebutting her case with clear and convincing evidence. She contends that this it failed to do.

Although neither party has briefed the issue, a preliminary question confronting us is whether federal law or substantive state law governs the burden of proof and the standard to be applied.

The question of which party bears the burden of proof in a diversity case ordinarily is a matter of substantive law within the meaning of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), and so is governed by state law. Palmer v. Hoffman, 318 U.S. 109, 63 S. Ct. 477, 87 L. Ed. 645 (1943); Alcaro v. Jean Jordeau, Inc., 138 F.2d 767 (3d Cir. 1943). In such a case, the district court is obligated to determine the burden of proof in accordance with the law of the forum state as required by the choice of law principles of Klaxon v. Stentor Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941).

DeMarines v. KLM Royal Dutch Airlines, 580 F.2d 1193, 1200 (3d Cir. 1978). Also see Fireman's Fund Insurance Co. v. Videfreeze Corporation, 540 F.2d 1171, 1174-75 (3d Cir. 1976), cert. denied, 429 U.S. 1053, 97 S. Ct. 767, 50 L. Ed. 2d 770 (1977). Relying on Collister v. Nationwide Life Insurance Co., 479 Pa. 579, 388 A.2d 1346 (1978), the district court instructed the jury on the burden of proof in accordance with Pennsylvania substantive law.*fn3 Nonetheless, the jury rendered its verdict in behalf of Manhattan, a verdict which the plaintiff now maintains is inconsistent with Pennsylvania's "clear and convincing evidence" standard because the only evidence introduced to meet Manhattan's burden was the testimony of one witness, Arthur D. Tripp, Jr., and, as a matter of law, this testimony was insufficient.

Plaintiff also contends that Tripp's memory was faulty, lacked required detail, and essentially consisted of generalities. Although plaintiff concludes that as a general rule an appellate court may not, in considering a judgment notwithstanding the verdict, weigh the evidence, it urges us to do so in this case because the sufficiency of the evidence to meet the heavy burden imposed upon the defendant by the "clear and convincing" standard is a question of law under Aliquippa National Bank v. Harvey, 340 Pa. 223, 16 A.2d 409 (1940). In a supplemental memorandum responding to questions of this court at oral argument, counsel for plaintiff also argues that under this standard, the Pennsylvania Supreme Court in Easton v. Washington County Ins. Co., 391 Pa. 28, 137 A.2d 332 (1957), requires that evidence must be established by two witnesses or by one witness and corroborating circumstances. He asserts that Manhattan introduced no corroborating evidence to support Tripp's testimony in behalf of the defendants.

Manhattan's position, on the other hand, is, as it was in the district court, that Collister is inapplicable because it dealt with an ambiguous conditional receipt; this case does not involve a conditional receipt and the limitations in the application are clear and unambiguous. Furthermore, Manhattan argues on appeal that even under the Collister standard, the evidence adduced at trial by Manhattan was sufficient to sustain the jury's verdict. As for the Pennsylvania two-witness rule, Manhattan's counsel replies that the rule was largely abolished by the Act of May 28, 1913, P.L. 358, 12 P.S. ยง 1222.*fn4 That statute preserved the rule only "where ...

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