Henning v. Metropolitan Life Ins. Co.

• Decision Date: 31 August 1982
• Docket Number: Civ. No. 81-1183.
• Citation: 546 F. Supp. 442
• Parties: Bruce HENNING, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Pennsylvania

546 F. Supp. 442

Bruce HENNING, Plaintiff, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant.

Civ. No. 81-1183.

United States District Court, M. D. Pennsylvania.

August 31, 1982.

George Westervelt, Jr., Stroudsburg, Pa., for plaintiff.

Harvey Bartle III, Philadelphia, Pa., Cody H. Brooks, Scranton, Pa., for defendant.

MEMORANDUM AND ORDER

CONABOY, District Judge.

Plaintiff, a resident of Pennsylvania, originally filed a Complaint against the Defendant Metropolitan Life Insurance Company (Metropolitan or Defendant) in the Court of Common Pleas of Monroe County, Pennsylvania. Metropolitan, a New York corporation with its principal place of business in New York City, then removed the action to this Court on October 16, 1981 pursuant to 28 U.S.C. § 1441(a) on the basis of diversity of citizenship between the parties, 28 U.S.C. § 1332(a). By this action, Plaintiff seeks to enjoin Metropolitan from setting-off the amount of Social Security benefits he receives from the monetary sum he is entitled to under a disability insurance plan provided by Metropolitan. Presently before the Court are cross-motions for summary judgment filed by each party. Fed.R. Civ.P. 56. The litigants agree that no genuine issues of material fact exist in this case and have fully briefed the legal questions involved; thus, the matter is currently ripe for disposition. For the reasons set forth below, the Defendant's motion for summary judgment will be granted and the Plaintiff's motion will be denied.

I. FACTS

Our review of the materials submitted herein reveals the following facts to be undisputed. In August of 1976 Bruce Henning was a non-union hourly employee of General Electric Company at its Carbon Products Operation plant in East Stroudsburg, Pennsylvania. On August 5, 1976, Plaintiff elected insurance coverage under the "General Electric Long Term Disability Plan" (Plan) and executed a payroll deduction authorization form. The form signed by Plaintiff stated:

"I elect to be insured for the General Electric Long Term Disability Insurance Plan for hourly employees as set forth in the current announcement, copy of which I have received, and I hereby authorize my employer to make the necessary deductions from my pay to cover the cost of my insurance under such plan.

"This request and authorization applies with respect to any long term disability coverage for which I am or may become eligible under the General Electric Long Term Disability Insurance Plan for hourly employees as presently constituted or hereafter amended, and shall continue to apply, unless rescinded by me in writing." Affidavit of Robert Grzybowski, ¶ 2 and Exh. A attached hereto.

Henning was accepted into the Plan effective August 9, 1976 and premiums for participation were thereafter deducted from his salary.

The group disability policy in question, No. 23126-G, was originally issued by Metropolitan to General Electric on January 1, 1970. Several amendments have been made to the policy since its inception date. General Electric had sought such a policy as a result of negotiations with the International Union of Electric, Radio & Machine Workers and other unions representing General Electric employees, as part of the collective bargaining process. A provision in the group policy provides for a reduction in benefits to a participant by the amount received from Social Security for disability compensation. Specifically, it is stated therein that:

"Benefits will be paid monthly and will be one twenty-fourth of your normal straight-time annual earnings reduced by ... (2) any primary Social Security benefits ...."¹

Plaintiff became totally disabled on April 28, 1978 and was thereby entitled to and received compensation under the Plan. Shortly thereafter, he also filed a claim for Social Security disability benefits but was initially denied by notice dated October 30, 1978. Concurrent with his Social Security claim, Henning signed an agreement with Metropolitan on October 3, 1978, which provided in part:

"In connection with my claim for Long Term Disability benefits provided under the General Electric Long Term Disability Insurance Plan, I certify that I have filed with the Social Security Administration timely application and submitted any required medical evidence for whatever primary benefits, which may be due me under the Federal Old Age, Survivors and Disability Insurance Benefits Program.

I understand that Disability Benefits under the General Electric Long Term Disability Insurance Plan are to be reduced by the amount payable for any period of time for which I am eligible for or receive primary Disability Insurance Benefits under the Social Security Act on my own account.

Pending adjudication of my claim for Social Security Disability Insurance Benefits, I hereby request Metropolitan Life Insurance Company to postpone deducting from my Long Term Disability Monthly Benefits the monthly amount of such primary Social Security Disability Insurance Benefits for which I am or may be eligible or entitled.

I agree that if this request is granted, I will reimburse Metropolitan Life Insurance Company in full for any postponed deductions immediately upon receipt from the Social Security Administration of any retroactive primary Disability Insurance Benefits to the full amount thereof. Furthermore, I agree that in the event of my failure to reimburse Metropolitan Life Insurance Company in full per this Agreement, Metropolitan Life Insurance Company may recoup the amount of the postponed deductions by withholding or reducing future benefit amounts which may become payable under any General Electric coverage for which I am insured." Affidavit of Robert Grzybowski, ¶ 6 and Exh. D attached thereto.

Thereafter, on November 28, 1979, Plaintiff's initial Social Security determination was reversed and he was granted such benefits retroactive to April 28, 1978. After being informed of the change in Plaintiff's Social Security benefit status, Metropolitan advised him that, pursuant to the aforementioned exclusion in the Plan and the October 3, 1978 agreement, it intended to reduce his benefits otherwise due under the Plan by the amount of such award. This set-off would also entail a deduction for previous overpayments to the Plaintiff occasioned by the retroactivity of the Social Security award. Dissatisfied with Metropolitan's decision, Plaintiff then filed an action in the Court of Common Pleas of Monroe County which, as noted above, has been removed to this Court by the Defendant.

As his sole basis for summary judgment, Plaintiff asserts that he was never made aware of the policy exclusion in question nor was its actual effect ever explained to him by the insurer² and, therefore, under Hionis v. Northern Mutual Insurance Co., 230 Pa.Super. 511, 327 A.2d 363 (1974), such a limitation cannot be enforced.

The Defendant's response to Plaintiff's position is two-fold. First, Metropolitan contends that, under the factual circumstances of this case, the substantive law of New York should govern and, thus, there being no similar Hionis rule in New York insurance law, summary judgment in its favor is warranted. Alternatively, Metropolitan argues that even under Pennsylvania law it is entitled to summary judgment because the principles espoused in Hionis have no application in the group insurance policy context. Consequently, there are two legal issues for the Court to resolve: (1) the appropriate state law which should govern the case; and (2) the enforceability of the exclusion or limitation in the Metropolitan group insurance policy under that state's substantive law.

II. CHOICE OF LAW

In a diversity action such as this, we are, of course, required to apply the choice of law rules of the forum state, Pennsylvania. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); see Melville v. American Home Assurance Co., 584 F.2d 1306, 1308 (3d Cir. 1978); Jewelcor Inc. v. St. Paul Fire & Marine Ins. Co., 499 F.Supp. 39, 41 n.2 (M.D. Pa.1980). In Jewelcor, this Court described the recent shift in Pennsylvania law away from its previous "stiff" approach in choice-of-law problems, whereby the appropriate state law was determined by either the place of the injury in a tort action or the place of agreement in a contract action. Id. at 41-42. Adopting the formula espoused in Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964), we concluded that in Pennsylvania it was now "necessary to look to that jurisdiction which has more contacts with and more interest in the matter at issue rather than any static application of antiquated laws." Jewelcor, supra, 499 F.Supp. at 42. For purposes of our present inquiry, then, it has been aptly stated that:

The current Pennsylvania rule governing breach of contract actions directs the courts to make their choice of law by means of a two-part analysis that considers both the significant contacts that the contract has with the various jurisdictions and the interest, if any, that the various jurisdictions have in the subject matter of the contract.

Mashuda v. Western Beef, Inc., 527 F.Supp. 887, 891 (W.D.Pa.1981); see Melville v. American Homes Assurance Co., supra, 584 F.2d at 1311-13; Graves v. Republic Insurance Co., 516 F.Supp. 424, 426 (E.D.Pa. 1981); Nationwide Mutual Insurance Co. v. Walter, 290 Pa.Super. 129, 136-37, 434 A.2d 164 (1981). In undertaking this conflicts analysis in the instant case, the Court has examined in detail the pleadings, exhibits, affidavits and briefs submitted by the parties.

We turn first to consider the extent of the contacts the contract under consideration has with the two concerned jurisdictions, Pennsylvania and New York. From a sheer numerical standpoint, a computation of the significant "contacts" preponderates in favor of the application of New York law. For instance, it is undisputed that the group policy in question and all amendments thereto were applied for,...