APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (D.C. Civ. Action No. 03-CV-0602) District Judge: Honorable Joy Flowers Conti
The opinion of the court was delivered by: Greenaway, Jr., Circuit Judge,
Argued on October 20, 2010
Before: HARDIMAN, GREENAWAY, JR., and NYGAARD, Circuit Judges
Appellee and Cross-Appellant James Meyer ("Plaintiff" or "Meyer"), a Union Railroad employee for approximately 31 years, purchased a credit disability insurance policy from Appellant CUNA Mutual Group ("CUNA") in connection with the financing by the URE Federal Credit Union (the "credit union") of an automobile Meyer purchased. The policy would make the car loan payment on Meyer‟s behalf in the event he was deemed disabled. Following an injury on the job, Meyer received, pursuant to the policy, disability benefits in the form of credit union payments on the loan for his vehicle. After covering Meyer‟s payments for approximately three years, CUNA notified him that it would not continue to pay his disability benefits. CUNA found that Meyer no longer met the definition of Total Disability, as defined under CUNA‟s policy.
Meyer filed a complaint in the District Court for the Western District of Pennsylvania on his own behalf and on behalf of a class of similarly situated individuals, each claiming disability insurance benefits that had been initially granted and later denied under credit disability insurance policies that had been purchased from CUNA. The principal claim asserted a breach of contract, pursuant to the credit disability insurance policy.
Both parties filed cross-motions seeking the grant of summary judgment. The crux of the dueling motions involved the definition of Total Disability. The District Court granted Meyer‟s motion for partial summary judgment and granted in part CUNA‟s motion for summary judgment. Specifically, the District Court found the definition of the term "Total Disability" ambiguous and therefore construed it in favor of Meyer, the insured.
Before the Court entered its Final Judgment, it asked the parties to submit supplemental briefing on the issues of estoppel, waiver, prejudgment interest, and a claims process related to resolution of the claims. Based on the Court‟s summary judgment finding that the more inclusive interpretation of total disability prevailed, Meyer argued that CUNA had either waived its right to request medical information from class members to show their respective disability status during the requisite time period because CUNA told them they no longer qualified or should be estopped from doing so in the claims process. He also argued that class members should be awarded prejudgment interest on their claims.
The Court entered a Permanent Injunction and Final Judgment setting up a claims review process for former class members. It rejected Meyer‟s claims for waiver, estoppel, and prejudgment interest and then decertified the class, pursuant to CUNA‟s motion for decertification.
CUNA appeals that part of the District Court‟s grant of summary judgment in favor of Meyer on the interpretation of the definition of "Total Disability" as well as its Permanent Injunction and Final Judgment. On cross-appeal, Meyer argues that the District Court erred in not applying the theory of estoppel or waiver to the class members‟ claims for damages and in not awarding prejudgment interest to the class members‟ benefits.*fn1
For the reasons set forth below, we will affirm the District Court‟s grant of summary judgment with respect to its interpretation of "Total Disability," vacate its Permanent Injunction and Final Judgment, and remand the case for further proceedings consistent with this opinion.
I. FACTUAL AND PROCEDURAL BACKGROUND
Appellee James Meyer was a brakeman and conductor for Union Railroad for approximately 31 years. On February 24, 1999, Meyer purchased credit disability insurance, pursuant to a group policy issued by CUNA to the credit union, in connection with his automobile loan. The policy provided that if Meyer became totally disabled, CUNA would make payments to the credit union covering Meyer‟s outstanding debt on his car loan. The policy‟s definition of "Total Disability" provided: during the first 12 consecutive months of disability means that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury. After the first 12 consecutive months of disability, the definition changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is reasonably qualified by education, training or experience.
(App. at 39.) As required by Pennsylvania law, the policy was approved by the Pennsylvania Insurance Department.
Diane Konz ("Konz"), a CUNA employee, worked with a team of employees at CUNA to draft and submit insurance contracts to state regulators. The drafting team included the manager of claims, the manager of underwriting, the manager of accounting, and an actuary. Konz testified, during her deposition, that she drafted the policy language at issue during CUNA‟s efforts to modify policies to include plain language.
On May 27, 2000, Meyer suffered a work place injury and filed a claim for disability benefits under his CUNA policy. In response to the claim, CUNA awarded Meyer benefits for the period of July 7, 2000 to July 7, 2001, pursuant to the definition of "Total Disability," that governed the first 12 months of disability. CUNA found that Meyer was totally disabled according to the policy for that time period. CUNA continued to pay Meyer benefits from July 8, 2001 through November 24, 2002, as it found that Meyer was covered according to the definition regarding the post-12 month period.
Meyer visited his doctor, Dr. Antoin Munirji, on a monthly basis during this period, who provided CUNA with medical information about Meyer. Pursuant to the policy‟s eligibility requirements, Meyer‟s physicians, including Munirji, regularly provided CUNA with updates regarding Meyer‟s disability status. On several occasions, Meyer‟s physicians certified to CUNA that he was capable of returning to work in a sedentary, light, or medium duty capacity, which Meyer does not dispute.
On January 27, 2003, CUNA notified Plaintiff that it was terminating his benefits based on information received from his physicians that Meyer could return to work in some capacity. CUNA determined that Meyer was therefore no longer totally disabled as defined in the post-12 month period. CUNA sent Meyer a form letter which stated that "the information obtained indicated [he was] capable of modified light duty work." (App. at 41.) That, "along with other information contained in [his] file," indicated that he was "no longer unable to perform any occupation." (Id.)
Although Meyer was authorized by several physicians to return to work in some capacity subject to light or medium duty restrictions, he was never cleared by any physician to return to his time-of-injury occupation as a conductor/brakeman at Union Railroad.
ii. Procedural Background
Subsequent to CUNA‟s termination of his benefits, Meyer brought an action in the United States District Court for the Western District of Pennsylvania on behalf of himself and similarly situated individuals who were granted, and later denied, benefits (that is, disability payments on loan debt) under credit disability insurance policies they obtained from CUNA, pursuant to its definition of "Total Disability."
In his amended complaint, Meyer sought certification of a nationwide class based on claims for breach of contract, breach of fiduciary duty, violation of the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law, 73 PA. CONS. STAT. ANN. § 201-1, et seq. ("UTPCPL"), violation of Pennsylvania‟s bad faith insurance statute, 42 PA. CONS. STAT. ANN. § 8371 ("Section 8371"), and breach of Pennsylvania‟s common law covenant of good faith and fair dealing.
Before the District Court, Meyer argued that the policy definition of "Total Disability" was unambiguous and should be interpreted to mean that after the first 12 consecutive months, the insured qualifies as totally disabled if he can show either (1) that he is unable to perform the duties of his occupation; or (2) that he is unable to perform the duties of any occupation for which he is reasonably qualified by education, training, or experience. CUNA submitted that the language in the policy created a shift from an "own occupation" definition of disability to an "any occupation" definition after 12 months and that the clause was unambiguous. It argued that for coverage, a claimant must not be able to perform his duties and any of the duties of a job for which he was qualified.
On December 16, 2004, the Court held a class certification hearing. CUNA also filed a motion to dismiss Meyer‟s amended complaint which, on December 20, 2004, the District Court granted as to the breach of fiduciary duty claim, granted, in part, as to the unfair trade practices claim, and denied, without prejudice, as to the breach of implied covenant of good faith and fair dealing claim. On January 25, 2006, the Court granted plaintiff‟s motion for class certification under Federal Rule of Civil Procedure 23(b)(3) for the following class of plaintiffs:*fn2
All persons who purchased disability insurance issued in Pennsylvania from the defendant CUNA Mutual Group, or its subsidiaries, which policies contain the definition of total disability including the following material language: "After the first twelve consecutive months of disability, the definition changes and requires the Member to be unable to perform any of the duties of his occupation, or any occupation for which he is reasonably qualified‟, [sic] to the extent that such individuals were determined by the defendant to be not able to perform all of the duties of his or her occupation, but were determined by the defendant to be capable of sufficient physical activity that the defendant decided that they were no longer eligible for total benefits under the defendant's interpretation of the subject policy.
On February 5 and 6, 2007, the parties filed cross-motions for summary judgment. Meyer moved for partial summary judgment on the District Court‟s interpretation of the "Total ...