788 F.2d 139 (3rd Cir. 1986), 85-1463, Atlin v. Security-Connecticut Life Ins. Co.

Docket Nº:85-1463.
Citation:788 F.2d 139
Party Name:Lillian ATLIN v. SECURITY-CONNECTICUT LIFE INSURANCE CO. v. NATIONAL PARAGON CORPORATION v. NILTA ENTERPRISES, INC. Appeal of Lillian ATLIN.
Case Date:April 14, 1986
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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Page 139

788 F.2d 139 (3rd Cir. 1986)

Lillian ATLIN

v.

SECURITY-CONNECTICUT LIFE INSURANCE CO.

v.

NATIONAL PARAGON CORPORATION

v.

NILTA ENTERPRISES, INC.

Appeal of Lillian ATLIN.

No. 85-1463.

United States Court of Appeals, Third Circuit

April 14, 1986

Argued Feb. 20, 1986.

Allan D. Windt (argued), Paul R. Rosen, Spector, Cohen, Gadon & Rosen, Philadelphia, Pa., for appellant Lillian Atlin.

Arthur H. Rainey (argued), George S. Leone, Dechert, Price & Rhoads, Philadelphia, Pa., for appellee Security-Connecticut Life Ins. Co.

Michael G. Trachtman, Sean P. Flynn, Waters, Gallager & Trachtman, Norristown, Pa., for Nat. Paragon Corp.

Page 140

Before WEIS and SLOVITER, Circuit Judges, and ZIEGLER, [*] District judge.

OPINION

WEIS, Circuit Judge.

In this diversity case, the question is whether a life insurance company is required to pay interest on policy proceeds for the interim between receipt of proof of death and payment into court as part of an interpleader action. We conclude that under Pennsylvania law interest is payable as a matter of right for loss of use of the principal. Institution of an interpleader in response to competing claims will not defeat the claimant's entitlement to interest. Accordingly, we will reverse the ruling of the district court and will direct entry of a judgment for interest at the legal rate.

After it had entered summary judgment for the insurance company denying the plaintiff's demand for prejudgment interest, the district court ruled in favor of her claim for the proceeds. She then appealed the adverse decision on interest.

When he died on May 15, 1984, Melvin Atlin, a resident of Pennsylvania, was covered by a life insurance policy issued by Security-Connecticut Life Insurance Company. Plaintiff Lillian Atlin is the widow of Mr. Atlin and the primary beneficiary of the policy. Under its terms, she forwarded proof of death which was received by the company on June 7, 1984.

On July 11, 1984, National Paragon Company wrote Security, asserting a claim against the policy. The insurance company sent a copy of the letter to Mrs. Atlin, who responded by filing this diversity suit against Security on July 20, 1984. The company joined National Paragon as a third-party defendant and filed an interpleader counterclaim. On September 11, 1984, Security paid into the court registry the face amount of the policy, together with interest at 3 1/2 percent from the date it had received the proof of loss. Although not required by the terms of the policy, Security's interest payment was standard company practice.

In a summary judgment motion, plaintiff demanded interest at the rate of thirteen percent for the period before deposit into the registry. The district court accepted Security's premise that, absent an unreasonable delay, an insurance company that interpleads the funds in dispute is not liable for interest. Finding that Security had acted with due diligence and had not delayed unreasonably, the court denied the plaintiff's motion.

Plaintiff then sought discovery related to Security's retention of the money for three months. The company objected, and the record does not clearly indicate whether plaintiff sought enforcement of her request. The docket entries do show that the court denied a motion by plaintiff to compel discovery; however, that same order also required a...

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