Dilworth v. Metropolitan Ins. Co.

• Decision Date: 12 August 2005
• Docket Number: No. 04-2480.,04-2480.
• Parties: Adrienne DILWORTH v. METROPOLITAN LIFE INSURANCE COMPANY.
• Court: U.S. Court of Appeals — Third Circuit

418 F.3d 345

Adrienne DILWORTH v. METROPOLITAN LIFE INSURANCE COMPANY.

No. 04-2480.

United States Court of Appeals, Third Circuit.

Argued June 2, 2005.

August 12, 2005.

Kenneth R. Behrend (Argued), Behrend & Ernsberger, Pittsburgh, PA, for Appellant.

B. John Pendleton, Jr. (Argued), Jessica Pici, McCarter & English, Newark, NJ, for Appellee.

Before FUENTES, GREENBERG, and COWEN, Circuit Judges.

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

This matter arises from a dispute regarding alleged misrepresentations made to the plaintiff-appellant, Adrienne Dilworth, when she purchased a life insurance policy from the Metropolitan Life Insurance Company (hereinafter called "MetLife") to insure her nine-year old daughter, Aisha Sharif. In particular, Dilworth asserted claims predicated on negligence, common law fraud and deceit, violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, Pa. Stat. Ann. tit. 73, § 201-1 (West 1993) (hereinafter called "UTPCPL"), breach of the implied covenant of good faith and fair dealing, bad faith under 42 Pa. Cons.Stat. Ann. § 8371 (West 1998), and breach of fiduciary duty.¹ The district court on MetLife's motion under Federal Rule of Civil Procedure 12(b)(6) dismissed Dilworth's claims for breach of the implied covenant of good faith and fair dealing, bad faith, and breach of fiduciary duty. Inasmuch as Dilworth has not appealed from the order of dismissal of those claims, we are not concerned with them on this appeal. Accordingly at this point Dilworth's claims are for negligence and fraud and deceit, thus sounding in tort, or are statutory under the UTPCPL.

Subsequently, MetLife moved for summary judgment and the court granted that motion by an order entered April 6, 2004. Dilworth then moved for reconsideration of the order for summary judgment but the court denied that motion by an order entered on May 10, 2004. The court's bases for granting MetLife summary judgment were that the statute of limitations barred all of Dilworth's claims remaining after the Rule 12(b)(6) dismissal, except those under the UTPCPL, as her causes of action on the barred counts accrued when MetLife delivered the policy more than two years before she brought this case. In reaching this conclusion the court rejected Dilworth's argument that the discovery rule saved her claims. The court then held that the UTPCPL claim failed on the merits as she had not relied justifiably on MetLife's misrepresentations when she purchased the policy.² Dilworth appeals from these two orders. For the reasons we set forth below we will reverse the orders of April 6, 2004, and May 10, 2004, and will remand the case to the district court for trial.

The circumstances leading to this litigation may be traced to November 1, 1991, when Dilworth met with Haisela Dorsey, a MetLife agent, regarding the purchase of a life insurance policy insuring the life of her daughter.³ Dorsey had a close relationship to Dilworth as she was Dilworth's sister's best friend. On that same day, Dilworth signed an application for life insurance insuring her daughter. Metlife subsequently issued the policy which provided for a face amount of $75,000 and required monthly premium payments of $39.75. MetLife delivered the policy on December 14, 1991, to Dilworth who did not read it in detail but instead merely "skimmed" it.⁴ App. at 255, 257, 258.

Dilworth asserts that she believed that she was purchasing a life-insurance policy requiring a minimal number of out-of-pocket cash payments. She alleges that Dorsey, the MetLife sales agent, represented that the policy would require her to make premium payments for only nine years because after that period the remaining premium payments would be fully funded. The policy was said to "self-fund" through the use of accrued dividends, accumulated cash value, and interest. Policies with such provisions commonly are referred to as "vanishing premium" policies. Thus, Dilworth contends that it was her understanding that "after nine, close to ten years, I wouldn't have to pay anything else into it." App. at 250-51.

In our experience defendants and their agents usually contest the factual predicate underlying claims similar to those Dilworth asserts. While MetLife may take that position at the trial, this case nevertheless is unusual in that Dorsey, the MetLife sales agent, acknowledged in her deposition that she had characterized the policy to Dilworth as self-funding.⁵ Thus, Dorsey stated in her deposition that:

The way it was supposed to be, it was an Accelerated Payment Plan to be paid up in ten years. She bought it to have college money for her daughter. And she bought it somewhere in '90, so by the year 2000 it was supposed to be paid up and then collect dividends.

It wasn't anything like she was to get monthly dividend payments, no. It was to be a ten-year policy that would be paid up in ten years, and that there would be dividends — by the time [the daughter] was 95, [the daughter] was supposed to have millions of dollars, and she was supposed to be able to collect the money before death, because at 95, they can declare you legally dead, if she wanted to get the other part.

App. at 445. In the circumstances, we regard it as clear for purposes of this appeal that Dorsey misled Dilworth. We also regard it as established at this time that MetLife was hardly an innocent party in Dorsey's conduct for she testified that MetLife instructed her to inform her customers that the life insurance policies were guaranteed to self-fund, even though this was not an accurate representation of them:

Q: And the dividends on the life insurance policies were not guaranteed either; right?

A. They were not guaranteed. They told me that they were not guaranteed, but I was told to tell the clients that they were guaranteed.

App. at 446.⁶

Notwithstanding Dorsey's representations, the life insurance policy that MetLife delivered to Dilworth did not provide that after a minimal number of payments it automatically would self-fund. Therefore, rather than providing for the premiums vanishing, the policy required Dilworth to make monthly premiums, every month for its duration. This requirement did not involve a short-term undertaking as its premium schedule provided for monthly premiums of $39.75 for 86 years.

The appeal raises two questions that we discuss in detail: (1) whether the district court erred in holding that Dilworth needed to undertake a cursory examination of the policy to show due diligence and that such a review would have revealed her injury thus depriving her of the benefit of the discovery rule to overcome MetLife's statute of limitations defense; and (2) whether the district court erred in holding that Dilworth's UTPCPL claim failed as she could not demonstrate that she justifiably had relied on the representations made to her because the plain language of the policy expressly contradicted Dorsey's alleged oral misrepresentations.⁷

II. STANDARD OF REVIEW

On an appeal from an order entering summary judgment, we undertake a de novo review and apply the same standard the district court applies on such motions. Petruzzi's IGA Supermarkets, Inc. v. Darling-Delaware Co., 998 F.2d 1224, 1230 (3d Cir.1993). Accordingly, summary judgment is appropriate only when "there is no genuine issue as to any material fact and. . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Union Pac. R.R. Co. v. Greentree Transp. Trucking Co., 293 F.3d 120, 125 (3d Cir.2002). We view the record on appeal in the light most favorable to the party who lost on summary judgment in the district court. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). The parties agree that Pennsylvania law, including its statute of limitations, applies in this case. See Guaranty Trust Co. v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 166 (3d Cir.1976). Under Pennsylvania law, a party seeking to benefit from the discovery rule to delay the running of the statute of limitations has the burden of establishing that she was unable to know of her injury and could not ascertain that knowledge exercising reasonable diligence. Dalrymple v. Brown, 549 Pa. 217, 701 A.2d 164, 167 (1997) (citing Pocono Int'l Raceway v. Pocono Produce, Inc., 503 Pa. 80, 468 A.2d 468, 471 (1983)); Drelles v. Mfgs. Life Ins. Co., No. 890 WDA 2004, 2005 WL 1545533, at *11, ___ A.2d ___ (Pa.Super.Ct. July 5, 2005). The standard of reasonable diligence is objective. Redenz v. Rosenberg, 360 Pa.Super. 430, 520 A.2d 883, 886 (1987). If the discovery rule is applicable the statute of limitations does not begin to run against a plaintiff during the period in which she reasonably was unaware of her injury.

The Pennsylvania Supreme Court has not spoken directly to the issues raised on this appeal in a vanishing premium context. Thus, its decisions do not establish clear law to enable us to answer the following questions: (1) whether Dilworth can demonstrate that she acted with reasonable diligence and obtain the benefit of the discovery rule when the precise terms of her policy possibly were inconsistent with her reasonable expectations of what the policy contained; and (2) whether her reasonable expectations excuse her failure to perform a cursory examination of her insurance policy for purposes of delaying the running of the statute of limitations? Therefore, we must predict how that court would resolve these issues should it be called upon to do so. See Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir.1990). In this undertaking we examine: (1) what the Pennsylvania Supreme Court has said in related areas; (2) the "decisional law" of the Pennsylvania intermediate courts; (3) opinions of federal courts of appeals and ...