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Hofkin v. Provident Life & Acc. Ins. Co.

April 15, 1996

MARK HOFKIN, APPELLANT

v.

PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY



On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Nos. 93-cv-01044 & 93-cv-01051)

Before: STAPLETON, SCIRICA and COWEN Circuit Judges

COWEN, Circuit Judge.

Argued March 11, 1996

Filed April 15, l996)

OPINION OF THE COURT

In this diversity action we are called upon to interpret the meaning of insurance policy language that a state statute requires to be included in all Pennsylvania insurance contracts. Plaintiff-appellant Mark Hofkin contends that language in the "Proofs of Loss" and "Legal Actions" clauses in his accident and sickness insurance policy require only that he submit adequate proofs of loss within ninety days after the termination of a continuous period of disability. Defendant-appellee Provident Life & Accident Insurance Company ("Provident") argues that it properly denied Hofkin's claims because the policy language, considered as a whole, requires the insured to submit monthly proofs of loss in order to be eligible to receive disability benefits.

Provident filed a motion to dismiss pursuant to Rule 50 of the Federal Rules of Civil Procedure on statute of limitations grounds. The district court, citing policy considerations that underlie suit limitations provisions, granted Provident's motion to dismiss. In so doing, the district court declined to follow the majority of state and federal courts that have interpreted identical policy language to require only that a claimant submit adequate proofs of loss within ninety days after an uninterrupted aggregate period of disability covered by the policy.

The language contained in the Provident policy is essentially a verbatim recitation of the terms of the Pennsylvania statute we must interpret. The Pennsylvania courts have not addressed the issue as to when proofs of loss are required to be filed in cases involving a continuous period of disability. We predict that the Pennsylvania Supreme Court would elect to follow the majority of courts that have interpreted the phrase "period for which the insurer is liable" to require the insured to submit proofs of loss within ninety days after the termination of a continuous period of disability, rather than on a monthly basis during the entire period of disability.

Under our interpretation of the policy language, an issue of fact remains as to whether Hofkin was totally disabled for the continuous period of time that he has alleged. As such, the order of the district court granting Provident's Rule 50 motion to dismiss will be reversed and the matter remanded for further proceedings. As to the other issues raised on this appeal, we will affirm the district court's rejection of Hofkin's argument that his claims were denied in bad faith. The district court's denial of Hofkin's application to amend his complaint will also be affirmed.

I.

Mark Hofkin was insured by Provident under an accident and sickness policy that took effect in July of 1980. At that time, Hofkin was the sole proprietor of a heating and air conditioning installation company. On March 13, 1986, Hofkin was involved in an automobile accident in which he injured his neck, back, left wrist and elbow. Hofkin contends that he has never recovered fully from the injuries he sustained in this accident.

On September 13, 1986, Hofkin had his attorney submit to Provident a supplementary statement of claim form. On this form, Hofkin indicated that he had been totally disabled *fn1 from March 13, 1986 through June 16, 1986. Hofkin also contended that he was partially disabled from June 17 up until the time he submitted his claim form in September. On September 16, 1986, Provident paid Hofkin $5,760.00 for the time he was totally disabled in the months immediately following the accident. In addition to the cash payment, Provident also sent Hofkin a claim form that he was required to complete in order to be eligible to receive residual disability benefits. *fn2

On January 19, 1987, Hofkin submitted an application for residual disability benefits, alleging that he had been unable to work full time since June of 1986. Hofkin failed, however, to include necessary details as to the amount of income he had lost as a consequence of the March 1986 accident. In a letter dated January 23, 1987, a Provident claims representative responded by sending Hofkin a letter requesting the additional information he would be required to provide in order to be eligible to receive any residual disability benefits.

In March of 1987, Hofkin submitted a statement of claim for residual disability benefits, a supplementary statement of claim, an accountant's report and a 1985 tax return. Again, specific financial information as to Hofkin's alleged loss of income, which was required to calculate residual disability benefits, was omitted. Within a week, a Provident representative contacted Hofkin's attorney and reiterated the insurer's need for more complete information. Hofkin responded on April 29, 1987, with a revised claim form for residual benefits, simply stating "None" where he was asked to indicate his present income. On June 25, 1987, Provident sent yet another letter to Hofkin requesting further documentation of his alleged reduction of income and additional information regarding the extent to which his business activities had been curtailed.

On March 8, 1990, after almost a three-year gap in communication between Hofkin and Provident, Hofkin's counsel again wrote to Provident requesting additional claims forms. Although Provident supplied the forms, Hofkin never completed them. Additional proofs of loss were sent to Provident only after the onset of litigation. On March 12, 1993, June 17, 1993, June 30, 1993, March 7, 1994, and March 10, 1994, Hofkin provided supplementary proofs of loss in support of his claim for total disability benefits.

Hofkin's attorney filed a writ of summons in the Court of Common Pleas of Philadelphia County in January of 1993. In March of 1993, this matter was removed to the District Court for the Eastern District of Pennsylvania. Hofkin asserted the following claims in his district court complaint: (1) he is entitled to total disability benefits from June of 1986 until the present; (2) in the alternative, he is entitled to residual disability benefits from June of 1986, until the present; and (3) Provident has acted in "bad faith" under 42 Pa. Cons. Stat. Ann. Section(s) 8371 by refusing to pay Hofkin's claims and failing to inform him of his alleged eligibility for total disability benefits at a much earlier date. Hofkin filed a motion for leave to file an amended complaint which was denied. On December 1, 1994, after a four day jury trial, the district court granted Provident's motion for judgment as a matter of law on the basis of the Legal Actions clause contained in the Provident policy. Hofkin then filed a motion to vacate the judgment as a matter of law, a motion for a new trial, and requested leave to file an amended complaint pursuant to Fed. R. Civ. P. 59. By order dated June 30, 1995, the district court denied Hofkin's postjudgment motions. This appeal followed.

II.

The district court had jurisdiction pursuant to 28 U.S.C. 1332. We have appellate jurisdiction under 28 U.S.C. Section(s) 1291. An entry of judgment as a matter of law is subject to plenary review. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993). A Rule 50 motion should be granted "only if, viewing the evidence in the light most favorable to the non-movant and giving it the advantage of every fair and reasonable inference, there is insufficient evidence from which a jury could reasonably find liability." Id. A Rule 50 motion must be denied "if there is evidence reasonably tending to support the recovery by plaintiff as to any of its theories of liability." Bielevicz v. Dubinon, 915 F.2d 845, 849 (3d Cir. 1990) (citation omitted).

This dispute is governed by Pennsylvania law. The district court's application and interpretation of state law is subject to plenary review. C.L. Grimes v. Vitalink Communications Corp., 17 F.3d 1553, 1557 (3d Cir.), cert. denied, 115 S. Ct. 480 (1994). As a state statute required the dispositive policy language, we must discern the intent of the Pennsylvania General Assembly, not the contracting parties. As such, our review of the district court's interpretation of the Legal Actions clause is plenary. See, e.g., Ogelsby v. Penn Mutual Life Ins. Co., 877 F. Supp. 872, 886 n.9 (D. Del. 1995) ("Since [the] policy provision is required by statutory mandate, the Court looks to rules of statutory construction."); Laidlaw v. Commercial Ins. Co. of Newark, 255 N.W.2d 807, 811 (Minn. 1977) ("The usual rule of construction most favorable to the insured does not apply to a provision required by statute."); cf. Margolies v. State Farm Fire and Cas. Co., 810 F. Supp. 637, 640 (E.D. Pa. 1992) (insurance company cannot contractually override the statutorily mandated suit limitation provisions of Section(s) 753(A)(11)). *fn3

We review the district court's denial of Hofkin's motion for leave to file an amended complaint for an abuse of discretion. See Gay v. Petsock, 917 F.2d 768, 772 (3d Cir. 1990). A district court abuses its discretion when its "decision rests upon a clearly erroneous finding of fact, an errant conclusion of law, or an improper application of law to fact." International Union, United Auto., Aerospace and Agric. and Implement Workers of Am., UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d Cir. 1987), appeal on remand, 917 F.2d 107, cert. denied, 499 U.S. 921, 111 S. Ct. 1313 (1991). Under Pennsylvania law, an insurer's "bad faith must be established by clear and convincing evidence and not merely insinuated." Terletsky v. Prudential Property & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994), ...


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