McKenna v. Metropolitan Life Insurance

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
3-30-2005
McKenna v. Metro Life Ins Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-2642
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 04-2642
___________
PAUL V. McKENNA, JR.
Appellant,
v.
METROPOLITAN LIFE INSURANCE COMPANY;
ALBERT T. CHURNAY
___________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 01-cv-00077)
District Judge: The Honorable Donetta W. Ambrose
___________
Submitted Under Third Circuit LAR 34.1(a)
March 7, 2005
Before: NYGAARD, McKEE, and RENDELL, Circuit Judges.
(Filed: March 30, 2005)
___________
OPINION OF THE COURT
___________
NYGAARD, Circuit Judge.
Appellant Paul McKenna appeals the District Court’s denial of his Motion for
Reconsideration of the Order granting summary judgment in favor of Metropolitan Life
Insurance Company on his claims arising from two life insurance policies and an annuity.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and will affirm.
I.
McKenna purchased a life insurance policy in 1969, another in 1982, and
purchased an annuity contract in 1983, which are the subject of this lawsuit. The
application for the 1982 Policy, stated at the top of the form in large bold text
“Application for Life Insurance.” The annual premium set forth on the 1982 Policy
specification page — the first page, excluding the cover — was $615 per year, payable
for 55 years. The 1982 Policy contained a "10-Day Right to Examine Policy" provision.1
It also contained a “Limitation on Sales Representative’s Authority,” which stated: “No
1. The provision provides: "Please read this policy. You may return the policy to
Metropolitan or to the sales representative through whom you bought it within 10 days
from the date you receive it. If you return it within the 10-day period, the policy will be
void from the beginning. We will refund any premium paid."
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change in this policy can be made by a sales representative. Any change must be in
writing and signed by our President, Vice-President, or the Secretary.” 2
The 1983 Annuity, which named him owner and annuitant, provided in large bold
text “Application for Annuity” at the top of the page. McKenna made a single premium
payment to MetLife in the amount of $10,000. Like the 1982 Policy, the 1983 Annuity
contained a “10-Day Right to Examine Contract” provision on the cover and a limitation
of authority provision. The Annuity stated that “interest [is] credited to [plaintiff’s]
contract at the rate set by [MetLife] from time to time.” McKenna also received an
annual annuity statement, informing him of the contract’s actual performance, which
varied from time to time. In addition, McKenna was given an Annuity Illustration stating
that “illustrative figures are not guaranteed for the future.”
MetLife issued a check in the amount of $7,898.82 payable to McKenna, as full
payment for the cash surrender of his 1969 Policy. The check itself has the 1969 Policy
number printed on it and directly above the Policy number the phrase “FULL PAYMENT
OF POLICY DESCRIBED BELOW.” McKenna admits receiving the check and using
the money to partially pay for the Annuity. In addition, McKenna admits that he was
informed that his 1969 Policy no longer existed when he requested a copy of the 1982
Policy sometime before 1988.
2. A similar limitation of authority is also found in the application.
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II.
McKenna filed a Complaint against MetLife and Albert Churnay,3 asserting causes
of action for Negligence (Count I); Common Law Fraud and Deceit (Count II); violations
of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”)
(Counts III and IV); Breach of Implied Covenant of Good Faith and Fair Dealing (Count
V); Bad Faith (Count VI); Breach of Fiduciary Duty (Count VII); and Negligent
Supervision (Count VIII).
MetLife filed a Motion to Strike Certain Allegations and to Dismiss Certain
Claims. The District Court granted that motion in part, dismissing Counts V, VI, and VII.
McKenna filed a Motion for Reconsideration, which the District Court denied. McKenna
has not appealed that decision.
MetLife then filed a Motion for Summary Judgment with respect to the remaining
counts on the grounds of statute of limitations, which the District Court granted.
McKenna filed another Motion for Reconsideration, which the District Court denied.
This appeal followed.
III.
3. McKenna served “Albert Churney, Jr.” a retired school teacher, who was never
employed by MetLife in any capacity and who has never had any contact with McKenna.
MetLife business records indicate that the sales representative who sold McKenna the
policy and contract at issue is “Albert F. Chernay” who is a resident of Texas. “Albert F.
Chernay” was not served. The District Court properly dismissed the Complaint as to
“Albert Churney.” McKenna has not appealed the District Court’s decision on that issue.
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McKenna raises three issues. First, he argues that the District Court improperly
placed an affirmative duty on him to read his policy. Second, he claims that the District
Court erred when holding that the discovery rule did not apply to his case. He argues,
finally, that collateral estoppel precludes MetLife’s defenses.
A. Duty to Read Policy
McKenna argues that the District Court improperly placed an affirmative duty on
him to read the 1982 Policy, the Annuity, and the check from the cash surrender of the
1969 Policy. We disagree and will discuss each in turn.
McKenna claims that he purchased the 1982 Policy based on MetLife’s
misrepresentation that he was purchasing an annuity contract not a life insurance policy
and that the purported “annuity” required premium payments for only seven years. He
argues that the District Court, by ruling that his claims accrued when he received a copy
of the 1982 Policy in 1988,4 improperly placed an affirmative duty on him to read and
understand the terms of the Policy. The Pennsylvania Supreme Court has stated that “the
policyholder has no duty to read the policy unless under the circumstances it is
unreasonable not to read it.” Rempel v. Nationwide Life Ins. Co., 370 A.2d 366, 369 (Pa.
1977) (emphasis added). In Rempel, nothing on the face of the policy would have alerted
4. The 1982 Policy was issued on December 6, 1982, but McKenna denies receiving
a copy of the policy until three to five years later when he called MetLife. Nevertheless, it
is beyond dispute that McKenna has had the 1982 Policy since at least 1988.
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the insureds that the policy did not contain the coverage expected. See Id. Here,
however, it was unreasonable for McKenna not to read the policy.
The face of the 1982 Policy should have alerted McKenna that it required a period
of payments longer than seven years, and that the agreement was for life insurance rather
than for an annuity. The specification page specifically provides for 55 years of
payments. The words “Application for Life Insurance” appear at the top of the cover
page in large bold text. The District Court did not improperly place an affirmative duty
on McKenna to read the policy. Rather, the District Court thought it was “unreasonable
under the circumstances” for McKenna not to read the policy.
Next, McKenna asserts that MetLife misrepresented the future performance of the
1983 Annuity. He relies on Pennsylvania law that an insured has no duty to examine a
policy on receipt but only to conduct a “cursory examination.” See Matcon Diamond v.
Pennsylvania Nat’l, 815 A.2d 1109 (Pa. Super. 2003). Even a “cursory review” of the
Annuity would have alerted McKenna that the Annuity’s future performance would vary.
The Annuity contract provides that “interest [is] credited to [plaintiff’s] contract at the
rate set by [MetLife] from time to time.” McKenna also received an annual annuity
statement, informing him of the contract’s actual performance, which varied from time to
time. In addition, McKenna was given an Annuity Illustration stating that “illustrative
figures are not guaranteed for the future.” Therefore, McKenna’s claim regarding the
misrepresentation is without merit.
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Finally, McKenna asserts that the 1969 Policy was cash surrendered without his
knowledge to purchase the 1983 Annuity. MetLife issued a check in the amount of
$7,898.82 payable to McKenna, as full payment for the cash surrender of the 1969 Policy.
The check itself has the 1969 Policy number printed on it and directly above the policy
number the phrase “FULL PAYMENT OF POLICY DESCRIBED BELOW.” McKenna
admits receiving the check and using the money to partially pay for the Annuity.
“Under Pennsylvania insurance law, if the language of an insurance policy is clear
and unambiguous, an insured does not have a colorable claim against an insurer in the
event of a coverage dispute on the basis that he did not read or understand the policy.”
Worldwide Underwriters Ins. Co. v. Brady, 973 F.2d 192, 194 (3d Cir. 1992) (citing
Standard Venetian Blind Co. v. Am. Empire Ins. Co., 469 A.2d 563, 567 (Pa. 1983)).
“Moreover, in the absence of proof of fraud, failure to read the contract is an unavailing
excuse or defense and cannot justify an avoidance, modification, or nullification of the
contract or any provision thereof.” Lazovick v. Sun Life Ins. Co., 586 F. Supp. 918, 922
(E.D. Pa. 1984) (internal quotations omitted).5 Because the check is clear and
unambiguous and there is no proof of fraud, McKenna may not rely on the excuse of
failure to read the contract.
B. Discovery Rule
5. Citing In re Olson’s Estate, 291 A.2d 95, 98 (Pa. 1972) (quoting Orner v. T.W.
Phillips Gas & Oil Co., 163 A.2d 880, 883 (Pa. 1960)).
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McKenna also argues that the District Court erred by determining that the
discovery rule exception did not apply to his case. We do not agree.
Generally, a party asserting a cause of action is under a duty to use all reasonable
diligence to be informed of the facts and circumstances on which his claims would be
based, and to institute suit within the prescribed statutory period. See Pocono Int'l
Raceway, Inc. v. Pocono Produce, Inc., 468 A.2d 468, 471 (Pa. 1983). “[L]ack of
knowledge, mistake or misunderstanding do not toll the running of the statute of
limitations.” Id. The discovery rule “arises from the inability, despite the exercise of
diligence, to determine the injury or its cause, not upon a retrospective view of whether
the facts were actually ascertained within the period.” Id. at 471– 472. McKenna, as the
plaintiff seeking to benefit from the discovery rule, has the burden of establishing his
inability to know of the injury despite the exercise of due diligence.
See Toy v. Metropolitan Life Ins. Co., 863 A.2d 1, 7 (Pa. Super. 2004) (citing Dalrymple
v. Brown, 701 A.2d 164, 167 (Pa. 1997)).
McKenna claims that he did not receive the 1982 Policy at or around the time the
Policy was issued. Even assuming his claim is accurate, he admits that he received a copy
of the 1982 Policy on or before 1988 from MetLife. We agree with the District Court that
McKenna was “clearly put on notice, had he exercised reasonable diligence, of all his
claims during the 1980's, and at no time later than 1988 . . . [and] [a]ccordingly, even the
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six year statute of limitations 6 had long run by the time that this lawsuit was filed in
1999.” (App. at 1579a). Therefore, McKenna is not entitled to the protections of the
discovery rule for the claims regarding the purchase of the 1982 Policy.
Nor are McKenna’s claims, involving the purchase of the 1983 Annuity and the
cash surrender of the 1969 Policy, subject to tolling by the discovery rule. McKenna did
not exercise diligence to determine the alleged misrepresentation regarding the purchase
of the 1983 Annuity and the cash surrender of the 1969 Policy. The facts indicate that
even a “cursory review” of the Annuity would have alerted McKenna that the Annuity’s
future performance would vary. With respect to the cashing in of the 1969 Policy, the
check issued to McKenna for $7,898.82 indicated that it was in full payment for the 1969
Policy.
McKenna was put on notice. Had he exercised reasonable diligence, he would
have known that all of these claims regarding the 1983 Annuity purchase and cash
surrender of the 1969 Policy began to run in 1983. Therefore, the discovery rule
exception does not apply. Since, the statute of limitations started to run in 1983, these
claims are untimely.
6. The applicable statute of limitations period for a claim under Pennsylvania’s
UTPCPL is six years. Gabriel v. O’Hara, 534 A.23d 488, 494–95 (Pa. Super. 1987)
(applying Pennsylvania’s “most analogous” rule to locate limitations period for UTPCPL
claim would result in inconsistent rulings, therefore “catchall” six-year period applies).
The District Court held that the Ocel’s UTPCPL claims are not barred by the statute of
limitations.
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C. Collateral Estoppel
McKenna argues that the decisions in Toy v. MetLife et al., 863 A.2d 1 (Pa. Super.
2004) and In re General American Life Insurance, 391 F.3d 907 (8th Cir. 2004) should be
afforded “full faith and credit” through collateral estoppel to preclude MetLife’s defenses.
For collateral estoppel to be afforded the following four factors must be met in
Pennsylvania:
(1) the issue decided in the prior adjudication was identical with the one
presented in the later action;
(2) there was a final judgment on the merits;
(3) the party against whom the plea is asserted was a party or in privity with
a party to the prior adjudication; and
(4) the party against whom it is asserted has had a full and fair opportunity
to litigate the issue in question in a prior action.
Greenleaf v. Garlock, Inc., 174 F.3d 352, 357–58 (3d Cir. 1999). The first factor is
dispositive here.
The burden is on the moving party to demonstrate that the “issue actually litigated”
in a previous action is identical to the current issue before the court. Suppan v. Dadonna,
203 F.3d 228, 233 (3d Cir. 2000). “Identity of the issue is established by showing that the
same general rules govern both cases and that the facts of both cases are indistinguishable
as measured by those rules.” Suppan, 203 F.3d at 233 (3d Cir. 2000) (emphasis added).
McKenna failed to meet his burden of establishing that the issues decided in the
prior adjudications were identical with the issues presented in this action. First, unlike
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this case, the sales representative in Toy told appellant that she had invested in a “50/50
Savings Plan” with the added benefit of life insurance when, in reality, appellant had only
purchased a life insurance policy. Toy, 863 A.2d at 9. Here, McKenna received what the
sales representative told him he would receive. Also, the insured in Toy ceased her
monthly payments upon receipt of a letter informing her of her right to cancel or restore
her original policy. McKenna, however, did not take any action until 1999 when filing
the complaint. Second, in General American Life Insurance the Eighth Circuit stated that
“[e]ven if reasonable diligence required plaintiffs to read their entire policies, the policy
language is insufficient to show that plaintiffs would have discovered their injuries as a
matter of law.” Id. at 913. Here, however, the cover pages of the 1982 Policy and the
1983 Annuity would have put McKenna on notice of his “injury.” The issues decided in
these prior adjudications were not identical to the issue here, and therefore collateral
estoppel does not bar MetLife from arguing their defenses.
V.
For the foregoing reasons, we affirm the District Court’s grant of summary
judgment in favor of MetLife.
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