Hofkin v. Provident Life ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
4-15-1996
Hofkin v. Provident Life
Precedential or Non-Precedential:
Docket 95-1608
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 95-1608
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)
Argued March 11, 1996
Before: STAPLETON, SCIRICA and COWEN
Circuit Judges
(Filed April 15, l996)
Alan I. Lourie (argued)
Law Offices of Michael Steiman
17th & JFK Boulevard
1750 Eight Penn Center
Philadelphia, PA 19103
Counsel for Appellant
Richard L. McMonigle, Jr.
Sara J. Thomson (argued)
McKissock & Hoffman
1700 Market Street
Suite 3000
Philadelphia, PA 19103
Counsel for Appellee
OPINION OF THE COURT
1
COWEN, Circuit Judge.
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.
2
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
3
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 disabled0 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.0
0
The Provident policy provides the following definition of
"total disability":
(a) Until the date you attain age 55, or
until the date indemnity for total disability
has been paid during a period of disability
under this policy for five years, whichever
is later, 'Total Disability' means your
inability to perform the substantial and
material duties of your occupation.
App. at 21.
0
The policy defines "residual disability" in the following
manner:
(a) your inability to perform one or more of
your important daily business duties, or
(b) your inability to perform your usual
daily business duties for as much time as is
usually required for the performance of such
duties.
4
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
Id. at 16.
5
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. § 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
6
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.
§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
nonmovant 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,
7
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
§753(A)(11)).0
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
0
This is not to say that Pennsylvania's rule of contra
proferentum in construing policy language drafted by the insurer
is necessarily inapplicable when evaluating the language of
specific policy provisions required by statute. Section 753(A)
expressly permits an insurer to "substitute for one or more such
provisions corresponding provisions of different wording approved
by the commissioner which are in each instance not less favorable
in any respect to the insured or the beneficiary." Under this
analysis, if the insurer chose to modify the required language,
any modifications that are ambiguous should be construed in the
insured's favor. The language that we must interpret in the
instant case is strictly provided by statute.
8
Property & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994),
alloc. denied, 659 A.2d 560 (Pa. 1995). Our review of the
dismissal of Hofkin's bad faith claim as a matter of law is
plenary. Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747,
750 (3d Cir. 1994).
III.
A.
The disposition of this case rests upon our
interpretation of the Provident policy's "Legal Actions" clause
and "Proofs of Loss" clause. The Provident policy language
mirrors that of the controlling statutory language:
§ 753. Policy Provisions
(A) Required Provisions. Except as
provided in paragraph (C) of this section,
each such policy delivered or issued for
delivery to any person in this Commonwealth
shall contain the provisions specified in
this subsection in the words in which the
same appear in this section: Provided,
however, That the insurer may, at its option,
substitute for one or more of such provisions
corresponding provisions of different wording
approved by the commissioner which are in
each instance not less favorable in any
respect to the insured or the beneficiary. .
. .
. . .
(7) . . .
Proofs of Loss: Written proof of loss
must be furnished to the insurer at its said
office in case of claim for loss for which
this policy provides any periodic payment
contingent upon continuing loss within ninety
days after the termination of the period for
which the insurer is liable and in case of
9
claim for any other loss within ninety days
after the date of such loss. Failure to
furnish such proof within the time required
shall not invalidate nor reduce any claim if
it was not reasonably possible to give proof
within such time, provided such proof is
furnished as soon as reasonably possible and
in no event, except the absence of legal
capacity, later than one year from the time
proof is otherwise required.
. . .
(11) . . .
Legal Actions: No action in law or in
equity shall be brought to recover on this
policy prior to the expiration of sixty days
after written proof of loss has been
furnished in accordance with the requirements
of this policy. No such action shall be
brought after the expiration of three years
after the time written proof of loss is
required to be furnished.
PA. STAT. ANN. tit. 40, § 753(A)(7), (11) (1992 & 1995 Supp.)
(emphasis added). The only difference between the Provident
Proofs of Loss clause and the language of § 753(A)(7) is the
substitution of the word "Company" for "insurer." The language
of the statutory Legal Actions section is identical to that
contained in the Provident policy.
The district court looked to policy considerations to
support its conclusion that Hofkin's construction of the Proofs
of Loss and Legal Actions clauses was "unreasonable." Looking to
what it perceived to be the consequences of interpreting § 753 in
the manner favored by Hofkin, the district court opined that
[e]ven in interpreting the policy in
light most favorable to plaintiff, it would
be unreasonable to interpret the clause as
plaintiff suggests. Under plaintiff's
proposed interpretation of the three year
suit limitation clause, there would be no
10
limitation during a policyholder's lifetime
until after he reaches age of fifty-five,
when the policyholder would no longer meet
the contract definition of total disability
because of his age. Theoretically, a
policyholder may sit on a claim for more than
fifty years before he files suit. Therefore,
the policy of having a suit limitation
clause, as mandated by the State of
Pennsylvania legislature, to expedite
litigation and to discourage the pursuit of
stale claims in order to reduce prejudice
toward the defense would be inconsistent with
plaintiff's interpretation.
Hofkin v. Provident Life and Accident Ins. Co., No. CIV.A.93-
1044, 1995 WL 394118, at *5 (E.D. Pa. June 30, 1995).
As a general observation, we do not disagree with the
district court's assessment that statutes of limitations can and
do serve beneficial purposes. Indeed, the Pennsylvania Supreme
Court has stated recently that statutes of limitations "are vital
to the welfare of society and are favored in the law. They are
found and approved in all systems of enlightened jurisprudence.
They promote repose by giving security and stability to human
affairs. An important public policy lies at their foundation."
Armco, Inc. v. Worker's Compensation Appeal Bd. (Mattern), 667
A.2d 710, 716 n.12 (Pa. 1995) (citations omitted). Although we
agree with the district court that important policy
considerations underlie suit limitation provisions, these
statutes nonetheless must be enforced as written. Therefore, the
policy considerations upon which the district court premised its
dismissal of Hofkin's suit should not have been addressed prior
11
to making an effort to interpret what the "plain meaning" of the
relevant paragraphs of § 753.0
The interpretation of Pennsylvania statutes is governed
by the state's Statutory Construction Act of 1972, 1 PA. CONS.
STAT. ANN. §§ 1501-1991 (1995 Supp.). When interpreting statutory
language, the Pennsylvania Supreme Court is guided by the "plain
meaning" rule of construction. Commonwealth v. Stanley, 446 A.2d
583, 587 (Pa. 1982) (citing 1 PA. CONS. STAT. ANN. § 1903(a)).0
"When the words of a statute are clear and free of ambiguity, the
letter of it is not to be disregarded under the pretext of
pursuing its spirit." 1 PA. CONS. STAT. ANN. § 1921(b) (1995
Supp.).
Under Pennsylvania law, the policy considerations cited
by the district court would have been relevant only if the court
had found the language of the Proofs of Loss and Legal Actions
0
Nor do all of the policy considerations involved here weigh in
favor of Provident. Although Provident contended at oral
argument that the plain meaning of "period for which the Company
is liable" obviously referred to monthly payment intervals, when
confronted with the implications of its reading of the statute,
Provident attempted to distance itself from the natural
consequences of this reading, contending that, in actual
practice, Provident would not make monthly demands for proofs of
loss upon insurance claimants.
0
Section 1903(a) provides as follows:
Words and phrases shall be construed
according to rules of grammar and according
to their common and approved usage; but
technical words and phrases and such others
as have acquired a peculiar and appropriate
meaning or are defined in this part, shall be
construed according to such peculiar and
appropriate meaning or definition.
1 PA. CONS. STAT. ANN. § 1903(a) (1995 Supp.).
12
clauses is ambiguous. See id. § 1921(c). An insurance policy
term is deemed to be "ambiguous if reasonable people, considering
it in the context of the entire policy, could fairly ascribe
different meanings to it. . . . A court, however, should not
torture the language of the policy to create ambiguities."
Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423, 427
(E.D. Pa. 1994) (citations omitted), aff'd, 60 F.3d 813 (3d Cir.
1995). Statutory ambiguities are to be resolved with reference
to § 1921(c) of the Statutory Construction Act.0 We conclude,
however, that when the policy language is considered as a whole,
the insurance policy terms mandated by § 753 are not ambiguous
and thus are amenable to "plain meaning" analysis under § 1903(a)
of the Statutory Construction Act.
0
See 1 PA. CONS. STAT. ANN. § 1921(c) (1995 Supp.):
(c) When the words of the statute are not
explicit, the intention of the General
Assembly may be ascertained by considering,
among other matters:
(1) The occasion and necessity for the
statute.
(2) The circumstances under which it
was enacted.
(3) The mischief to be remedied.
(4) The object to be attained.
(5) The former law, if any, including
other statutes upon the same or similar
subjects.
(6) The consequences of a particular
interpretation.
(7) The contemporaneous legislative
history.
(8) Legislative and administrative
interpretations of such statute.
13
B.
Both parties contend that the policy language is not
ambiguous and warrants a decision in their favor. Hofkin argues
that since the Proofs of Loss section states that no proofs have
to be submitted until "90 days after the termination of the
period for which the Company is liable," there is a jury question
as to whether Hofkin met the contractual definition of total
disability on a continuous basis.
Provident, on the other hand, places emphasis upon the
terms "periodic payment," "period" and "monthly" in the policy
language. Provident notes that the Proofs of Loss clause states
that "for loss for which this policy provides any periodic
payment contingent upon continuing loss," written proof of loss
must be furnished "within 90 days after the termination of the
period for which the company is liable." Provident also refers
to language contained in the policy's "Time of Payment of Claims"
clause,0 which states, in relevant part, that "subject to due
0
See PA. STAT. ANN. tit. 40, § 753 (A)(8):
Time of Payment of Claims: Indemnities
payable under this policy for any loss other
than loss for which this policy provides any
periodic payment will be paid immediately
upon receipt of due written proof of such
loss. Subject to due written proof of loss,
all accrued indemnities for loss for which
this policy provides periodic payment will be
paid . . . . . . . . . . . . (insert period
for payment which must not be less frequently
than monthly) and any balance remaining
unpaid upon termination of liability will be
paid immediately upon receipt of due written
proof.
14
written proof of loss, all accrued indemnities for loss for which
this policy provides periodic payment will be paid monthly."
Provident construes this language as meaning that the "periodic
payment" interval is what determines the subsequently referenced
"period for which the Company is liable." Under this
interpretation, the Legal Actions clause's three-year limitation
period would begin to run after the expiration of the ninety-day
period following the first month for which benefits are at issue.
Although Pennsylvania state courts have not ruled upon
this question, a significant number of state and federal courts
have addressed the issue as to how the same (or virtually
indistinguishable) statutorily mandated insurance policy language
should be construed. A substantial majority of those courts have
expressly rejected Provident's construction of the statute,
holding that the most plausible reading of "period for which the
Company is liable" requires that this phrase be interpreted to
encompass the entire length of an ongoing period of disability.
The meaning of the phrase "period for which the Company
is liable" was most recently discussed by the district court in
Ogelsby v. Penn Mutual Life Insurance Co., 877 F. Supp. 872 (D.
Del. 1994). The Ogelsby court interpreted insurance policy
language prescribed by Delaware law which was essentially
identical to the policy language at issue here. See 18 Del. C.
§3311 ("Written proof of loss must be furnished to the company at
Within the terms of this section, Provident elected to set the
payment period on a monthly basis.
15
its said office in case of claim for loss for which this policy
provides any periodic payment contingent upon continuing loss
within ninety days after the termination of the period for which
the company is liable. . . ."), quoted in Ogelsby, 877 F. Supp.
at 885 n.7. The Ogelsby court elected to follow the weight of
authority in this area of the law, noting that "the
interpretation that plaintiff advances has been characterized as
the most natural interpretation." Ogelsby, 877 F. Supp. at 886.
The one Pennsylvania diversity case that has expounded
upon the same Pennsylvania statute that we must interpret has
also favored Hofkin's interpretation of § 753. In Liberto v.
Mutual Benefit Health & Accident Ass'n, 323 F. Supp. 1274 (W.D.
Pa. 1971), an action was brought to recover under an accident
policy four years after the company had discontinued paying
benefits. Id. at 1275. The insurer argued that the plaintiff's
claim was time barred under § 753. Expressly rejecting this
argument, the district court held that the policy's Proofs of
Loss and Legal Actions clauses, considered along with other
language in the policy providing that "the insurer is liable to
pay the totally and permanently disabled insured ``so long as the
insured lives'," id. at 1276, necessarily led to the conclusion
that the three-year period in the Legal Actions clause had not
yet run, and would not be triggered until the claimant was
deceased. By analogy, the continuing period of disability in the
instant case could conceivably continue until Hofkin reached age
fifty-five, the expiration date of the policy.
16
In Wall v. Pennsylvania Life Insurance Co., 274 N.W.2d
208 (N.D. 1979), the Supreme Court of North Dakota interpreted
identical language from state-required Proofs of Loss and Legal
Actions clauses. Adopting the reasoning of the court below, the
Wall court held that the
"period for which the insurer is liable"
phrase means the total period of liability in
a continuous disability case and not a
monthly period during which benefits accrue.
Penn's own provision authorizing monthly
benefits payments does not alter the specific
wording of [the statute which provides] that
proof of loss must be filed only after the
insurer's liability terminates.
Id. at 213-14. The supreme court agreed with the lower court's
determination "that Wall's claim against Penn. Life was based
upon continuing disability, Penn. Life's period of disability had
not terminated, proof of loss was not yet required to be
furnished and the Statute of Limitations had not begun to run."
Id. at 214. See Goodwin v. National Ins. Co., 656 P.2d 135, 143-
44 (Idaho Ct. App. 1982) (same).
Similarly, interpreting Arkansas law, the Court of
Appeals for the Eighth Circuit has concluded that
[a]ny theory that supplying of proof of loss
was a condition precedent to liability under
the policy tends to be dispelled by the
following policy language: "written proof of
loss must be given . . . within 90 days after
. . . the period for which the company is
liable." . . . Thus the policy itself
contemplates that proof of loss may be
submitted after disability terminates; and
at least to some extent difficulty the
insurer may have in investigating a
disability that has already ended is part and
parcel of the insurance agreement.
17
Clark v. Massachusetts Mut. Life Ins. Co., 749 F.2d 504, 507 (8th
Cir. 1984).
The Supreme Court of Minnesota has also addressed this
issue. In Laidlaw v. Commercial Insurance Co. of Newark, 255
N.W.2d 807 (Minn. 1977), the court held that an expansive
interpretation of "period for which the Company is liable" was
warranted by identical language contained in the Proofs of Loss
and Legal Actions clauses, considered along with substantially
similar language contained in a Time of Payment of Claims clause.
The Laidlaw court found that Hofkin's interpretation of "period
for which the Company is liable" was "the most natural
interpretation of the phrase," id. at 811, and held that "``the
period for which (Company) is liable' refers to the total
continuous period of disability, be it short or long, and not
individual four-week periods." Id. When a Laidlaw-type claim is
presented, "the question becomes whether a genuine issue of
material fact exists as to the existence and continuity of [the
claimant's] total disability." Ryan v. ITT Life Ins. Corp., 450
N.W.2d 126, 129 (Minn. 1990).
A New York trial court has also addressed this specific
issue and concluded that judgment as a matter of law was
inappropriate. In Turner v. Mutual Benefit Health & Accident
Ass'n, 160 N.Y.S.2d 883, 890 (Sup. Ct. Oneida Cty. 1957), aff'd,
172 N.Y.S.2d 571 (App. Div. 1958), the New York supreme court,
interpreting the phrase "period for which the Association is
liable," noted that
18
plaintiff's affidavit detail[ed] at length
his circumstances during the period in
question and sets forth facts which, if
believed, might establish that he has been
continuously disabled . . . . In these
circumstances, an issue of fact is presented
which cannot be disposed of on a motion for
summary judgment.
Finally, in Continental Casualty Co. v. Freeman, 481
S.W.2d 309 (Ky. 1972), the court interpreted identical language
in the Legal Actions and Proofs of Loss clauses as meaning
either (a) that one proof of loss will
suffice for one continuous period of
disability or (b) that each month of
continuing loss must be covered by a proof of
loss submitted within 90 days thereafter.
Neither of these alternatives would appear to
achieve an entirely satisfactory arrangement,
but we see no room for any other possible
construction of the sentence as it is worded.
The most natural import of the expression
'the period for which the company is liable'
is the total continuous period, be it five
days or five years
Id. at 312. Interpreting the statutory language in a manner that
favored the insured, the Freeman court concluded that "the clause
is not ambiguous and there is no reason not to construe it as
meaning just what it says." Id. at 311-12.
There is, however, some case authority in support of
Provident's position as to how the policy language at issue
should be interpreted. In Nikaido v. Centennial Life Insurance
Co., 42 F.3d 557 (9th Cir. 1994), the Ninth Circuit, applying
19
California law, held that a "more reasonable reading of these
provisions" supports the conclusion that "``the period for which
the Company is liable' refers to each month of disability." Id.
at 560.
Similarly, in Goff v. Aetna Life and Casualty Co., 563
P.2d 1073 (Kan. Ct. App. 1977), a state appellate court also
interpreted "period for which the insurer is liable" in the
manner that Provident urges us to adopt. The state court
concluded that
[th]e phrase [period for which the insurer is
liable] speaks of a 'period' and applies only
in a case where 'any periodic payment' is due
under the pollicy (sic). Where, as here,
payments are due monthly it seems inescapable
that each month for which a payment is due is
a 'period for which the insurer is liable.'
Id. at 1077.
We expressly reject and depart from this reasoning and
analysis. We agree with the North Dakota Supreme Court's
statement in Wall that the policy language "authorizing monthly
benefits does not alter the specific wording of [the policy] that
proof of loss must be filed only after the insurer's liability
terminates." Wall, 274 N.W.2d at 214. Provident's reading of
§753, by contrast, is far less straightforward. To adopt
Provident's "plain meaning" interpretation would require the
adaptation of a strained analytical framework that imparts
questionable significance to various discrete references in the
statute. See Bertera's Hopewell Foodland, Inc. v. Masters, 236
A.2d 197, 204 (Pa. 1967), appeal dismissed, 390 U.S. 597, 88 S.
20
Ct. 1261 (1968) ("A statute cannot be dissected into individual
words, each one being thrown onto the anvil of dialectics to be
hammered into a meaning which has no association with the words
from which it has violently been separated."), overruled on other
grounds by Goodman v. Kennedy, 329 A.2d 224 (Pa. 1974). The
"plain meaning" that Provident asks us to adopt is not at all
clear from the face of the statute.
If the Proofs of Loss clause had simply included the
word "monthly" before "period for which the Company is liable"
Provident's reading of the statute would obviously be correct. In
order to obtain such a change, however, Provident would be
required to obtain the approval of the Commissioner of Insurance.
See PA. STAT. ANN. tit. 40, § 753(A). We seriously doubt that
such permission would be forthcoming. Given our interpretation
of the statute and the weight of authority interpreting
essentially identical policy language, we refuse to interpolate
by judicial fiat the term "monthly" before "period for which the
Company is liable," when the Pennsylvania General Assembly
declined to follow this course.
IV.
The district court also based its decision that
Hofkin's claim was timed barred on the alternative ground that
even if Hofkin's reading of the statute were to be adopted, the
fact that Hofkin gave timely notice of the March 1986 accident
and that he
last submitted [a] claim . . . on April 29,
1987, the running of the three year time
limit for filing suit under the Legal Actions
21
clause was triggered at that time because the
submission, which also included submissions
on behalf of plaintiff by his attorney and
physicians, constituted sufficient proofs of
loss.
Hofkin, 1995 WL 394118, at *3. The district court went on to say
that
[r]egardless of when proof of loss was
required to have been furnished under the
Proofs of Loss clause to trigger the Legal
Actions clause as interpreted by plaintiff or
the court, plaintiff admits in his complaint
that he gave timely notice of his accident
and that he provided the defendant with all
required proofs of loss. Therefore, in
having fulfilled his obligation to provide
proofs of loss, he was under obligation
mandated by statute to file suit within three
years after the time proofs of loss were
required to be furnished. Clearly he did not
do so, and that is why plaintiff is barred
from proceeding in this case.
Id. at *6. We reject this reading of § 753(A)(11). The Legal
Actions clause provides, in relevant part, that "No action . . .
shall be brought after the expiration of three years after the
time written proof of loss is required to be furnished." PA.
STAT. ANN. tit. 40, § 753 (A)(11) (1992 & 1995 Supp.) (emphasis
added). Nothing in this language suggests that Hofkin should be
penalized for at least attempting, however intermittently, to
provide proofs of loss at an earlier time than is required by
§753(A)(11). We therefore conclude that a factual issue remains
as to the period of time, if any, that Hofkin was continuously
disabled in order to assess properly his eligibility for total
disability or residual disability benefits.
22
V.
We must still dispose of two other issues Hofkin has
raised on appeal; i.e., Hofkin's bad faith claim and his
argument that he was improperly denied the opportunity to amend
his complaint. We reject both of these claims.
A.
Pursuant to 42 PA. CONS. STAT. ANN. § 8371 (1982 & 1995
Supp.), an insurer can be held liable for punitive damages and
other sanctions if it is found to have acted in bad faith toward
the insured.0 Based on proofs of loss that Provident had
received in 1986, Hofkin alleges that Provident was aware that he
has been totally and continuously disabled since that time. Thus,
the argument goes, by informing him that he may qualify for
additional residual disability benefits but not telling him that
he might qualify for additional total disability benefits,
Provident had acted in bad faith. As the district court noted,
0
Section § 8371 provides as follows:
In an action arising under an insurance
policy, if the court finds that the insurer
has acted in bad faith towards the insured,
the court may take all of the following
actions:
(1) Award interest on the amount of the
claim from the date the claim was made by the
insured in an amount equal to the prime rate
of interest plus 3%.
(2) Award punitive damages against the
insurer.
(3) Assess court costs and attorney
fees against the insurer.
42 PA. CONS. STAT. ANN. § 8371.
23
however, § 8371 did not take effect until July 1, 1990. Liberty
Mut. Ins. Co. v. Paper Mfg. Co., 753 F. Supp. 156, 158 (E.D. Pa.
1990). Therefore, even if we were to assume arguendo that
Provident acted in bad faith before that date, such conduct is
not actionable under § 8371. Lombardo v. State Farm Mut. Ins.
Co., 800 F. Supp. 208, 213 (E.D. Pa. 1992). Furthermore, Hofkin
has failed to provide clear and convincing evidence that
Provident acted in bad faith after July 1, 1990. The record is
clear that Hofkin and the attorneys retained in his on-and-off
pursuit of earlier benefits claims have been less than diligent
in providing information that was necessary to evaluate Hofkin's
various claims. The record does not show that Provident engaged
in any improper business practices. At most, Provident appeared
to hold Hofkin to its own regulations. There was plainly no bad
faith here.
B.
Finally, the district court did not abuse its
discretion by denying Hofkin's motion for leave to file an
amended complaint. Hofkin filed the motion to amend on September
22, 1994, seeking to include a claim for refund of premium.
Hofkin concedes that his complaint did not specifically plead
waiver of premium but argues that the "Wherefore" clause of the
complaint, which stated that Hofkin was entitled to "any other
relief this Honorable Court deems appropriate," was sufficient to
apprise Provident of Hofkin's intention to seek a refund of
premium in this case. We disagree. Given the late date of the
24
request and the prejudice it would impose upon Provident
(requiring it to prepare new defenses), the district court did
not abuse its discretion in denying Hofkin's motion to amend his
complaint.
VI.
We hold that the Pennsylvania Supreme Court would adopt
the majority approach and interpret "the period for which was
Company is liable" language in the Proofs of Loss clause as
referring to a continuous period of disability. Under this
analysis, it is still possible that the suit limitation provision
in the Legal Actions clause has not yet been triggered.
Therefore, the order of the district court granting Provident's
Rule 50 motion for judgment as a matter of law will be reversed
and the matter remanded to the district court to conduct the
necessary fact finding. We will affirm the June 25, 1995 order
of the district court insofar as it denied Hofkin's bad faith
claim and his motion to amend his complaint. Costs taxed against
the appellee.
25