Justofin v. Metropolitan Life Insurance

Opinions of the United

2004 Decisions States Court of Appeals

for the Third Circuit

6-25-2004

Justofin v. Metro Life Ins Co

Precedential or Non-Precedential: Precedential

Docket No. 02-4264

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PRECEDENTIAL 225 North Flowers Mill Road

Langhorne, PA 19047

UNITED STATES

COURT OF APPEALS Attorneys for Appellants

FOR THE THIRD CIRCUIT

Alvin Pasternak, Esquire

No. 02-4264 Anthony J. Tomari, Esquire

Metropolitan Life Insurance Company

Law Department

JEFFREY JUSTOFIN, CHRISTOPHER One Madison Avenue

JUSTOFIN; DAMIAN JUSTOFIN; New York, NY 10010-3690

ROBERT JUSTOFIN; IVAN

JUSTOFIN, (Beneficiaries of Loretta K. Veronica W. Saltz, Esquire (Argued)

Justofin, Deceased), Saltz Polisher

993 Old Eagle School Road

Appellants Suite 412

Wayne, PA 19087

v.

Attorneys for Appellee

METROPOLITAN LIFE

INSURANCE CO.

OPINION OF THE COURT

On Appeal from the

AM BRO, Circuit Judge

United States District Court

for the Eastern District of Pennsylvania The Justofins, beneficiaries under

D.C. Civil Action No. 01-cv-06266 the life insurance policy of their mother

(Honorable John R. Padova) Loretta K. Justofin (“Loretta”), sued

Metropolitan Life Insurance Company

(“MetLife”) for denying a portion of death

Argued October 27, 2003 benefit proceeds. The District Court

granted summary judgment in favor of

B e f o r e : S CIR ICA , C hief J udge, MetLife by finding the amendment to the

NYGAARD and AMBRO, Circuit Judges life insurance policy increasing the benefit

void because of Loretta’s failure to

(Opinion filed: June 25, 2004) disclose fully her medical history. The

issues before us are: (1) whether MetLife

Timothy M. Kolman, Esquire established that the amended policy was

Wayne A. Ely, Esquire (Argued) void as a matter of law because of

Timothy M. Kolman & Associates Loretta’s false representations, thus

warranting summary judgment against the son, Dr. Christopher Justofin,1 as her

Justofins on their breach of contract claim; personal physician, mentioning that Dr.

(2) whether M etLife waived its right to Justofin treated her for occasional arthritis

contest the validity of the amended policy of her hands and feet. MetLife issued the

because it failed to investigate Loretta’s life insurance policy to Loretta in the

representation before issuing the policy; amount of $100,000.

(3) whether the District Court properly

Five years later, at the age of sixty-

disposed of the Justofins’ bad faith claim

four, Loretta applied to increase the policy

against MetLife by finding the amended

amount, from $100,000 to $300,000, by

policy void; (4) whether the District Court

completing an “Application for Change of

erroneously granted MetLife’s motion to

Placed Personal Life Insurance” form. It

amend its pleading; and (5) whether the

contained the following pertinent

District Court erred in not addressing the

questions and answers.

Justofins’ motions for discovery and

sanctions. 11. Has any person EVER received

treatment, attention, or advice from any

We vacate the District Court’s

physician, practitioner or health facility

summary judgment in favor of MetLife

for, or been told by any physician,

and remand this case for further

practitioner or health facility that such

proceedings. Specifically, we conclude

person had:

that the amended life insurance policy

issued by MetLife was not void as a matter (j) Arthritis, paralysis, or

of law; that MetLife did not waive its disease or deformity of the

challenge to the validity of the amended bones, muscles or joints?

policy; that whether MetLife acted in bad Yes

faith should be dealt with separately from

....

the contract claim; and that the District

Court properly exercised its discretion in 15. In past 5 years, has any

allowing MetLife to amend its pleading. physician, practitioner or health facility

As for the Justofins’ motions for discovery examined, advised or treated any person?

and sanctions, we leave them to the Yes

District Court’s discretion on remand.

I. Background

The application instructed Loretta to

In April 1994 Loretta initially provide the details about her “yes” answers

applied for a life insurance policy from in questions 11 and 15, including the name

MetLife. In the application, she listed her

1

At the time, Dr. Justofin had just begun

his residency in family medicine, which he

finished in February 1996.

2

of each physician, nature and severity of of Pennsylvania,3 claiming breach of

condition, frequency of attacks, specific contract, bad faith, and negligence.

diagnosis, and treatment. She provided MetLife counterclaimed, seeking a

names of several doctors and the details of declaration that the policy increase was

surgeries and treatment, including her foot void ab initio, and moved for summary

surgery for arthritis. Although Loretta judgment. The District Court granted

listed several doctors who treated her, MetLife’s summary judgment motion on

including Dr. Eugene Jacobs (her then the negligence issue but denied it as to the

personal physician), she did not mention other issues.

Dr. Justofin in this 1999 change

MetLife then filed a motion for

application. In Part B of the application,

reconsideration based on the evidence that

Loretta again noted that she had arthritis

Loretta used Prednisone, a drug used to

and that she self-medicated Prednisone in

treat Lupus. MetLife deposed Dr. Justofin

1969 for her arthritis when she owned a

regarding this matter. He testified that he

pharmacy. Part C, the “Paramedical

was a personal physician of his mother

Evaluation,” shows that Loretta disclosed

from 1994 until sometime in 1998. During

that she had an “unknown type” of arthritis

this period, Dr. Justofin visited Loretta

that caused noticeable hand swelling.

weekly at her home to examine her and

Effective May 1999, MetLife issued the

also to pick up his mail. 4 Dr. Justofin

increase in death benefit coverage.

asserted that, although he treated his

Loretta died on December 7, 1999. mother for arthritis, she never had Lupus.

MetLife paid the Justofins $100,000 based Although Dr. Justofin was not sure what

on the original 1994 policy but informed kind of arthritis Loretta had, he speculated

them that it was voiding the amended that she had rheumatoid arthritis,

policy’s $200,000 increase. Initially, osteoarthritis, or both.5 Dr. Justofin also

MetLife’s stated reason for voiding the mentioned that he used to write a six-

increase was that Loretta failed to disclose month supply of Prednisone for Loretta’s

that she had Lupus.2 The Justofins brought

suit against MetLife in the Eastern District

3

The District Court had jurisdiction

under 28 U.S.C. § 1332.

2

Systemic Lupus Erythematosus, a 4

Dr. Justofin explained that he used his

slowly progressive systemic disease mother’s address as his permanent address.

marked by, among other things, arthritic

5

changes. Whether Loretta in fact had Dr. Justofin testified that he never

Lupus is disputed but is not relevant to our performed any tests to determine what

decision. We note, however, that the kind of arthritis his mother had, partly

record does not show any evidence that because she did not want to make a trip to

Loretta’s death was related to Lupus. his office.

3

arthritis and she would adjust the dose Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir.

depending on her condition.6 Dr. Justofin 2002)). We therefore apply the same

also opined that Prednisone is a standard the District Court employed

medication routinely prescribed for under Federal Rule of Civil Procedure

rheu mato id arth ritis, r ather than 56(c). We should affirm the District

osteoarthritis. Court’s summary judgment if “there is no

genuine issue as to any material fact and

MetLife thereupon motioned for

. . . the moving party is entitled to a

leave to file a supplemental counterclaim,

judgment as a matter of law.” Fed. R. Civ.

seeking a declaration that the policy

P. 56(c). A fact is material when its

increase was void based on Loretta’s

resolution “might affect the outcome of the

failure to disclose that her son had treated

suit under the governing law,” and a

her and prescribed Prednisone for her. 7

dispute about a material fact is genuine “if

The District Court granted the motion.

the evidence is such that a reasonable jury

MetLife then sought summary judgment

could return a verdict for the nonmoving

on its new counterclaim and on the

party.” Anderson v. Liberty Lobby, Inc.,

Justofins’ breach of contract and bad faith

477 U.S. 242, 248 (1986). In reviewing

claims. The District Court entered

the record, we draw all justifiable

summary judgment in favor of MetLife on

inferences in favor of the nonmoving

all claims. The Justofins appealed. We

party. Id. at 255.

have appellate jurisdiction under 28 U.S.C.

§ 1291. III. Discussion

II. Standard of Review A. Breach of Contract Claim

“We review the District Court’s 1. Is the 1999 Policy Amendment

grant of summary judgment de novo.” void as a matter of law because of

Fakete v. Aetna, Inc., 308 F.3d 335, 337 allegedly false material

(3d Cir. 2002) (citing Fogleman v. Mercy misrepresentations?

We first determine whether the

policy amount increase was void as a

6

It is not clear from the record when Dr. matter of law. If so, we shall affirm the

Justofin started prescribing Prednisone and District Court’s summary judgment in

when he stopped. He recalled that the favor of MetLife on the Justofins’ breach

prescription began sometime in 1994 or of contract claim.

the beginning of 1995 and ended sometime

between 1997 and 1998. To void an insurance policy under

the law of Pennsylvania,8 the insurer has

7

MetLife does not claim, however, that

Loretta’s death was in any way related to

8

her arthritic condition or the medication The parties agree that the substantive

for that condition. law of Pennsylvania applies.

4

the burden to prove that: (1) the insured But if the evidence is such that a

made a false representation; (2) the insured reasonable jury could find that MetLife

knew the representation was false when it has not shown all the elements by clear

was made or the insured made the and convincing evidence, we shall reverse.

representation in bad faith; and (3) the

(a) Did Loretta make false

representation was material to the risk

representations?

being insured. Coolspring Stone Supply,

Inc. v Am. States Life Ins. Co., 10 F.3d In this context, we first decide

144, 148 (3d Cir. 1993) (citing Shafer v. whether a rational jury must find that

John Hancock M ut. Life Ins. Co., 189 A.2d MetLife has shown that Loretta made

234, 236 (Pa. 1963)). The insurer has the false representations. The District Court

burden to prove all three elements by clear found that her failure to list Dr. Justofin’s

and convincing evidence. Batka v. Liberty treatment, along with his prescription of

Mut. Fire Ins. Co., 704 F.2d 684, 687 (3d Prednisone, in her 1999 application so

Cir. 1983) (“Pennsylvania requires that an qualified.

insurer establish the defense of fraud in the

In Pe nns y lv a n i a , a f alse

application by ‘clear, precise and

representation includes omission of an

indubitable’ evidence . . . [and] that the

insured’s medical information. See

factfinder be satisfied of the elements of

Grimes v. Prudential Ins. Co. of Am., 585

the defense by clear and convincing

A.2d 29, 31-32 (Pa. Super. Ct. 1991)

evidence.”) (citations omitted).

(using the term “a misstatement of fact” to

This heightened burden of proof refer to an insured’s failure to disclose

should be taken into account in ruling on fully her medical history). The Justofins

summary judgment. Anderson, 477 U.S. at correctly point out that their mother indeed

255 (“[T]he determination of whether a disclosed in her initial 1994 application

given factual dispute requires submission that Dr. Justofin was her personal

to a jury must be guided by the substantive physician.9 But Loretta failed to inform

evidentiary standards that apply to the MetLife about her son’s prescription of

case.”). Consequently, where the clear and Prednisone. Although the Justofins claim

convincing evidence standard applies, the that Loretta disclosed that she took

trial judge must inquire whether the Prednisone for her arthritis, the record

evidence presented is such that a jury

applying that evidentiary standard could

9

find only for one side. In this case, if the We agree with the Justofins that the

evidence in the record reasonably supports 1994 and 1999 applications must be read

the inescapable conclusion that MetLife together for the purpose of this litigation

has shown all three elements to void the because the 1999 application was

policy by clear and convincing evidence, completed only for the purpose of

we shall affirm the summary judgment. increasing the face amount of the 1994

policy.

5

shows that she listed only her self- v. Plumer, 380 U.S. 460, 473-74 (1965).

medication of Prednisone in 1969 but not W hen “the [Federal] Rule speaks to the

her more recent use of the drug between point in dispute and is valid, it is

1994 and 1998. Because there is no controlling,” and we need not pay any

evidence to contradict that Loretta failed to regard to state provisions, regardless

disclose this information, no genuine whether they are in conflict with the

dispute exists as to whether her Federal Rule. 19 Charles Alan Wright,

representations were false. Arthur R. Miller, & Edward H. Cooper,

Federal Practice and Procedure § 4508 (2d

(b) Did Loretta know that

ed. 1996). Only if there is no Federal Rule

her representations were false or did she

covering the point in dispute, or the scope

make them in bad faith?

of the Federal Rule is not sufficiently

Next, MetLife must show that broad to control the issue before us, do we

Loretta knew her representations were ask whether to apply the state law. Walker

false or she made them in bad faith. While v. Armco Steel Corp., 446 U.S. 740, 750-

both involve state of mind, our discussion 53 (1980); see also McEwen v. Delta Air

focuses primarily on bad faith, which was Lines, Inc., 919 F.2d 58, 60 (7th Cir.

also the focus of the District Court. 1990) (“Only when the federal rules are

silent need the federal court ask whether to

The Justofins assert that a genuine

use state rules as templates.” (citing

issue of material fact exists whether

Walker)). Even then, a federal court

Loretta’s omissions were innocent,

“must apply the federal rule within its

inadvertent mistakes rather than bad faith

sphere of coverage.” Wright, Miller &

misrepresentations. If so, the District

Cooper, supra, § 4508.

Court erred in determining Loretta’s bad

faith as a matter of law. Rule 56(c) directly speaks to and

thus controls the process pertaining to

MetLife argues that we should

Loretta’s intent in this case. MetLife in

adopt the summary judgment standard that

fact concedes that Rule 56(c) is

Pennsylvania courts apply to insurance

sufficiently broad enough to cover the

fraud cases. It contends that this case falls

point in dispute. Appellee’s Letter Brief at

into one of the rare instances in which

6. Nevertheless, it argues that we are

Pennsylvania courts would infer bad faith

compelled to adopt the Pennsylvania law

as a matter of law when considering

because, it claims, there is no conflict

summary judgment, and therefore we must

between the federal and state law in this

also do so. We disagree for the following

case. Contrary to MetLife’s argument,

reasons.

however, when a Federal Rule is clearly

A federal court sitting in diversity applicable (as is the case here), the

jurisdiction follows a Federal Rule of Civil absence of conflicting state law is all the

Procedure when one of the Federal Rules more reason to adopt the controlling

is controlling the point in dispute. Hanna

6

Federal Rule. Walker, 446 U.S. at 747. Generally an insured’s state of mind

Accordingly, by applying Pennsylvania’s is an issue of fact for the jury. Coolspring,

substantive law, we do not impress a 10 F.3d at 148. The issue of intent is

different procedural requirement on Rule “particularly inappropriate for resolution

56.10 by summary judgment” because evaluating

10

In contending that Pennsylvania law bad faith as a matter of law must be

compels us to find bad faith as a matter of confined to the cases where “the insured

law, the dissent relies on a Pennsylvania [falsely] denies in his answer that any

Supreme Court case from 1941 that physician has been consulted, or any

entered judgment for the insurance medical or surgical treatment has been

company notwithstanding a contrary received during the period of inquiry.” Id.

verdict. Freedman v. Mutual Life Ins. Co. at 84. In this case, Loretta did inform

of New York, 21 A.2d 81 (Pa. 1941). We MetLife that: (a) she had arthritis; (b) Dr.

note that we would still reverse the District Justofin treated her for this condition at

Court on this issue even under Freedman. some point; (c) she had surgery on her foot

There, the insured flatly denied having for arthritis; (d) she suffered noticeable

consulted any physician or having had any hand swelling because of her arthritis; and

kind of treatment for any ailment in his (e) she tried different types of drugs to

insurance application form. Id. at 83. To alleviate this ailment. Whether Loretta’s

the contrary, the insured consulted or failure to provide further details (such as

visited five physicians more than twenty the use of a particular drug) establishes her

times over the period. Id. He also bad faith is an issue for the jury.

complained of pains in his chest, a nervous Moreover, we do not believe that our

disorder, and dizziness to his physician, Court in Burket v. Equitable Life

was prescribed a heart stimulant, and had Assurance Society of America, 287 F.3d

his heart examined by three different 293 (3d Cir. 2002), adopted a rule that

physicians (all of whom spotted heart infers bad faith as a matter of law under

irregularities). Id. The only (and Freedman. The Burket panel merely cited

decidedly weak) evidence the plaintiff the dicta portion of Grimes, a

offered in rebuttal was the testimony of the Pennsylvania Superior Court case.

insured’s secretary that she thought he was Though the Court in Grimes referred to

in good health and had no knowledge of Freedman, it did not deem Freedman to

his visits to physicians. Id. The Court apply to the facts in Grimes, where the

concluded that, under the circumstances, insured had disclosed her medical history

“[t]he only reasonable assumption that can but omitted material facts. 585 A.2d at 33.

be drawn . . . is that the insured knowingly Grimes therefore held that the insured’s

and fraudulently gave false answers.” Id. intent and bad faith were for a jury to

at 85. We believe Freedman’s finding of decide. Id.

7

state of mind often requires the drawing of rheumatoid arthritis and in bad faith

inferences from the conduct of parties concealed this information from MetLife

about which reasonable persons might by omitting her son’s treatment visits and

differ. Riehl v. Travelers Ins. Co., 772 prescription of Prednisone. As this case

F.2d 19, 24 (3d Cir. 1985) (citing Ness v. came to us on summary judgment, all

Marshall, 660 F.2d 517, 519 (3d Cir. permissible inferences are to be drawn in

1981)). the Justofins’ favor. Anderson, 477 U.S.

at 255. A jury might conclude that Loretta

Contrary to the District Co urt’s

did not think that her son’s casual visits

finding, we are not satisfied that Dr.

were so important to report in her new

Justofin’s testimony and Loretta’s answers

application in great detail, especially when

in her policy applications incontrovertibly

she had already disclosed that he was her

established her bad faith. Dr. Justofin

personal physician and treating her for

merely testified that she suffered from

arthritis in her initial application, and when

arthritis of an unknown type, which she

he had discontinued his weekly visits a

disclosed. The testimony also showed that

year or two before the time of her new

Loretta saw her son on a weekly basis for

application. Furthermore, a jury might

a few years and he prescribed Prednisone

determine that Loretta not only was

for her during that period. She did not

unaware of the type of arthritis she was

disclose this information in her 1999

suffering but also believed that further

application. With respect to Dr. Justofin’s

detail on the application, such as taking a

treatment, the District Court noted

particular drug, was unnecessary when she

Loretta’s disclosure of Dr. Justofin’s

already stated that she had arthritis that

treatment of her arthritis in her initial 1994

was treated, inter alia, by a surgery.

application. This shows, the Court

concluded, that Loretta in bad faith did not We again emphasize that MetLife

disclose Dr. Justofin’s treatment in the has the burden to prove Loretta’s state of

1999 application. The District Court also mind, a difficult task nearly always and

referred to Loretta’s omission of Dr. especially when she is dead. In the context

Justofin’s prescription of Prednisone and of this case, Loretta’s knowledge of

contrasted it with her disclosure of taking misrepresentations and bad faith may not

self-medicated Prednisone from many be inferred as a matter of law, as they are

years before. genuine issues of material fact to be

decided by a jury.

It is possible that a jury could find

it suspicious that Loretta somehow thought ( c ) W e r e t h e

it unnecessary to reveal this information. misrepresentations material?

But we do not believe that the only

The third issue we consider is

reasonable inference from this evidence is

whether the information Loretta failed to

that Loretta must have had (or, at least,

disclose was material. Information is

must have believed that she had)

material if it would have influenced the

8

judgment of the insurer in making the 2. Did MetLife waive its right to

contract or in fixing a premium. Piccinini contest the validity of the amended

v. Teachers Protective Mut. Life Ins. Co., policy by failing to investigate?

463 A.2d 1017, 1024 (Pa. Super. Ct.

We do not agree with the Justofins,

1983). The District Court found that

however, that MetLife waived its right to

Loretta was treated for rheumatoid arthritis

contest the validity of the amended policy

and that as a matter of law the information

by failing to investigate. True, “the law of

was material since MetLife’s guidelines

Pennsylvania is . . . that when a policy is

showed that rheumatoid arthritis, a more

issued on an application containing an

serious type of arthritis than osteoarthritis,

ambiguous, unresponsive or incomplete

was an important factor in determining the

answer[,] the insurer waives the right to

insurance risk. But it is not at all obvious

assert the falseness or materiality of the

from the record that MetLife would have

question and answer.” Franklin Life Ins.

cancelled the policy (or even demanded a

Co. v. Bieniek, 312 F.2d 365, 373 (3d Cir.

higher premium) had it known that Dr.

1962). From this, the Justofins argue that

Justofin was prescribing Prednisone. This

when their mother mentioned that she had

is because MetLife adjusts its premiums

an “unknown type arthritis,” her answer

based on the severity of an insured’s

was ambiguous on its face and, therefore,

rheumatoid arthritis, not the type of

MetLife should have investigated further.

prescription drugs involved. MetLife

We need not decide here whether

argues that had Loretta disclosed her use

“unknown type arthritis” was ambiguous

of Prednisone for either moderate or

on its face for, even if so, an insurer

severe rheumatoid arthritis, there could

waives only the right to contest the validity

have been a decline of the increase in

of those particular responses while

coverage. The record before us, however,

retaining the right to contest the validity of

does not clearly establish that Loretta even

any other misrepresentations (such as, in

had rheumatoid arthritis or that her use of

this case, Loretta’s omission of her son’s

Prednisone was to treat her presumably

treatment and drug prescription). Id. at

rheumatoid condition.11 Therefore, a jury

375.

must determine whether the undisclosed

information was material. B. Bad Faith Claim

The Justofins argue that finding the

amended policy void should not have

11

Again we emphasize that no record resulted in the summary disposition of

evidence indicates that Loretta’s death was their bad faith claim against MetLife.

related to any form of arthritic condition or Case law treats contract and bad faith

the medication for it. Indeed, as noted claims as separate in insurance cases.

above, MetLife initially asserted that Margolies v. State Farm Fire & Cas. Co.,

Loretta used Prednisone to treat her Lupus. 810 F. Supp. 637, 641-42 (E.D. Pa. 1992)

(rejecting the insurer’s contention that bad

9

faith assertion was contingent to a contract should have denied the amendment

claim because the bad faith claim was because MetLife’s claims are meritless and

essentially a claim on the policy itself).12 in bad faith. We disagree. First, we have

The Justofins have not pointed to much (if concluded that the merit of the parties’

any) evidence in support of their bad faith claims relating to the policy amendment

claim. But because the claim survived the should be decided by a jury. Moreover,

first summary judgment motion, the the case the Justofins rely on, Heyl &

District Court should have given a reason Patterson Int’l, Inc. v. F.D. Rich Housing

why it failed the second time. On remand, of the Virgin Islands, Inc., 663 F.2d 419

the District Court should treat the bad faith (3d Cir. 1981), does not help their

claim against MetLife separately from the position.

contract claim, though we note that we

[L]eave to amend “shall be

voice no opinion whether the bad faith

freely given when justice so

claim should yet again survive summary

requires”; this mandate is to

judgment.

be heeded . . . . Of course,

C. Leave to Amend MetLife’s Pleading the grant or denial of an

opportunity to amend is

The Justofins argue that the District

within the discretion of the

Court abused its discretion when it granted

District Court, but outright

MetLife leave to amend its pleading to add

refusal to grant the leave

a counterclaim. See Fed. R. Civ. P.

without an y justifying

15(a). 13 They assert that the District Court

reason appearing for the

denial is not an exercise of

12

Although Pennsylvania’s statute under discretion; it is merely abuse

which the plaintiff in Margolies brought a of that discretion and

bad faith claim was later preempted, that inconsistent with the spirit

does not change that a bad faith claim is a of the Federal Rules. The

separate and independent cause of action. trial court’s discretion under

Rule 15, however, must be

13

The Rule provides: tempered by considerations

of prejudice to the non-

A party may amend the party’s pleading moving party, for undue

once as a matter of course at any time prejudice is “the touchstone

before a responsive pleading is served . . . for the denial of leave to

. Otherwise a party may amend the party’s amend.” In the absence of

pleading only by leave of court or by substantial or undue

written consent of the adverse party; and prejudice, denial must be

leave shall be freely given when justice so grounded in bad faith or

requires. dilatory motives, truly

10

u n d u e o r deny summarily the Justofins’ claim of bad

unexplained delay, faith against Metlife, needs to set out these

repeated failure to reasons; the District Court did not abuse its

cure deficiency by discretion in granting MetLife’s motion to

a m e n d m e n t s amend its pleadings to add a counterclaim;

previously allowed and, on remand, the District Court retains

or futility of discretion to address the Justofins’

amendment. allegations of discovery abuse and motions

for sanctions and additional discovery. In

Id. at 425 (citations omitted). In this case

this context, we vacate the District Court’s

the Justofins do not show that they are

grant of summary judgment and remand

unduly prejudiced by the District Court’s

for further proceedings consistent with this

grant of the amendment. Hence the

opinion.

District Court did not abuse its discretion

in doing so.

D. Motions for Sanctions and Additional

Discovery

The Justofins also argue that the

District Court abused its discretion when it

did not rule on their motions for sanctions

and additional discovery before it entered

a summary judgment. We leave to the

District Court’s discretion to address them

on remand.

IV. Conclusion

Contrary to the decision of the

District Court, we conclude that the 1999

amendment to Loretta Justofin’s life

insurance policy was not void as a matter

of law, as it is for a jury to decide whether

the misrepresentations in the application

for the policy amendment were made

knowingly or in bad faith and whether they

were material. As to the other issues

appealed: MetLife did not waive its right

to contest the amended policy’s validity by

failing to investigate Loretta’s statements

pertaining to her arthritis; the District

Court, while it may have good reasons to

11

56(c), regardless whether Pennsylvania

courts would infer in certain instances bad

Justofin v. Metropolitan Life Insurance

faith as a matter of law when considering

Company, No. 02-4264

summary judgment. I disagree.

Federal courts must apply the

NYGAARD, J., dissenting. properly enacted Federal Rules of Civil

Procedure in place of any state rule that

I believe that Pennsylvania’s bad

directly collides with those rules.

faith inference, as explained in Freedman

Chamberlain v. Giampapa, 210 F.3d 154,

v. Mut. Life Ins. Co. of N.Y., 21 A.2d 81,

159 (3d Cir. 2000) (citing Hanna v.

84 (Pa. 1941), is not in conflict with Rule

Plumer, 380 U.S. 460, 470-74 (1965)). I

56 of the Federal Rules of Civil Procedure

do not believe that Pennsylvania’s bad

and, therefore, should be applied by this

faith inference directly collides with Rule

Court to analyze MetLife’s motion for

56(c). In Anderson v. Liberty Lobby, Inc.,

summary judgment. Under that analysis, I

the Supreme Court stated that under Rule

believe Loretta Justofin’s failure to

56(c), “the substantive law will identify

disclose her weekly medical examinations

which facts are material.” 477 U.S. 242,

with her son and the Prednisone

248 (1986). Further, “only disputes over

prescriptions she received as a result of

facts that might affect the outcome of the

those examinations were ma terial

suit under the governing law will properly

omissions from which bad faith must be

preclude the entry of summary judgment.”

inferred. Accordingly, I do not believe the

Id. As the majority acknowledges, there is

District Court erred by granting MetLife’s

no dispute that Pennsylvania’s substantive

motion for summary judgment on the

law applies to this case. Under Anderson,

Appellants’ breach of contract claim, and

I see no conflict between Pennsylvania’s

so dissent from the majority on this point.

bad faith inference and Rule 56(c);

Pennsylvania’s law simply identifies what

is and is not material under the Federal

Pennsylvania courts will infer bad

Rule. Specifically, if Loretta Justofin

faith as a matter of law when an insured

failed to disclose medical treatment on her

fails, in the face of a direct and pointed

insurance application that “a person of

question, to disclose medical treatment that

ordinary intelligence could not have

a person of reasonable intelligence could

forgotten,” then facts about whether or not

not have forgotten. Id.; Grimes v.

she actually knew about that treatment or

Prudential Ins. Co. of Am., 585 A.2d 29,

actually engaged in bad faith conduct are

31-33 (Pa. Super. Ct. 1991) (applying this

immaterial, because judgment can be

bad faith inference in the summary

entered in favor of MetLife on this issue

judgment context). The majority,

even in the face of a contrary conclusion

however, does not apply the inference and,

by the jury. Freedman, 21 A.2d at 84-85

instead, decides this issue under Rule

12

(affirming the trial court’s decision to set I also believe the District Court

aside a jury verdict in favor of the plaintiff properly found the medical treatment

where the un contradicted evidence omitted by Loretta Justofin was of such a

established that the plaintiff’s history of nature that bad faith was properly inferred.

medical treatments was such that no It is undisputed that she did not disclose on

person of ordinary intelligence could have either of the rele vant insurance

forgotten those treatments). applications that from 1994 until some

point in 1998 she was examined by her

son, Dr. Justofin, on a weekly basis and

We have recently applied this rule that, as part of those examinations, Dr.

in a case similar to this case. In Burkert v. Justofin prescribed Prednisone to treat her

Equitable Life Assurance Soc’y of Am., arthritis.

287 F.3d 293, 297-98 (3d Cir. 2002), we

had to determine whether summary

judgment was properly entered against an There is no question that for

insured who failed to fully disclose on his between three and four years Dr. Justofin

insurance application the extent of his drug examined Loretta Justofin on a weekly

abuse and related treatment. We held that basis and treated her arthritis. He began

the District Court acted appropriately by that treatment with over-the-counter drugs

“not[ing] that cour ts app lying and then switched to the prescription drug

Pennsylvania law have routinely held that Voltran. Finally, he prescribed Prednisone

misrepresentations regarding alcohol abuse to treat what he believed to be a

are deemed to be made in bad faith as a combination of osteoarthritis and

matter of law and extend[ing] this holding rheumatoid arthritis. In 1994, when

to include misrepresentations regarding Loretta Justofin initially applied for

drug use.” Id. We cited Grimes, among insurance with MetLife, she indicated that

other cases, for the proposition that fraud she was being seen by her son and was

can be properly inferred in these types of taking Voltran. However, on her change

situations. Id. at 298. of insurance application, she never

indicated that she continued to see her son

after 1994 and that he changed her

I see no material difference between treatment to Prednisone.14 Loretta

Pennsylvania’s inference of bad faith for Justofin was still taking Prednisone when

failing to disclose alcohol abuse and its

same inference for failing to disclose

s u b s t a n ti a l m e d i c a l t r e a t m e n t. 14

It should also be noted that the record

Accordingly, based on Burkert and

shows that Loretta Justofin was familiar

Anderson, I believe the District Court

with Prednisone because she had self-

properly applied Pennsylvania’s bad faith

medicated with it in 1969 to treat her

inference.

arthritis.

13

she completed this change of insurance For these reasons I would not

application. reverse the District Court’s grant of

summary judgment in favor of MetLife

and respectfully dissent on this point. I

The question that must be asked in agree with the majority on the remaining

order to determine whether an inference of issues addressed in its opinion.

bad faith arises from Loretta Justofin’s

failure to disclose is whether “a person of

ordinary intelligence could not have

forgotten these [treatments] in answering

a direct and pointed question in an

application for insurance.” Freedman, 21

A.2d at 84. Based on the frequency of Dr.

Justofin’s examinations and the fact that

Loretta Justofin took Prednisone for at

least three years to treat a symptomatic

disease, I do not believe a person of

ordinary intelligence could have forgotten

these treatments when filling out the

relevant insurance application.

This omission was also material.

The unrebutted affidavit of a MetLife

representative establishes that Dr.

Justofin’s treatment of his mother with a

steroid prescription drug for arthritis

would result in MetLife increasing her

premium to take into account moderate

rheumatoid arthritis. See New York Life

Ins. Co. v. Johnson, 923 F.2d 279, 281 (3d

Cir. 1991) (“A misrepresented fact is

material if being disclosed to the insurer it

would have caused it . . . to demand a

higher premium.”). This statement is

supported by MetLife’s underwriting

guidelines.

14