Penn Cent. Nat. Bank v. CONNECTICUT GENERAL LIFE
| Decision Date | 10 October 1990 |
| Docket Number | Civ. A. No. 86-2694. |
| Citation | 765 F. Supp. 1228 |
| Parties | PENN CENTRAL NATIONAL BANK, Guardian of the Estate of Barry Meshyock, and Lillian Meshyock, Guardian of the person of Barry Meshyock, an incompetent, Plaintiffs, v. CONNECTICUT GENERAL LIFE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Frank Salpietro, Pittsburgh, Pa., for plaintiffs.
David B. Fawcett, III, Pittsburgh, Pa., for defendant.
This is a civil action for breach of contract in which plaintiffs Penn Central National Bank (Penn Central), Guardian of the Estate of Barry Meshyock and Lillian Meshyock, Guardian of the person of Barry Meshyock, seek damages from defendant Connecticut General Life Insurance Company (Connecticut General) for money allegedly owed to plaintiffs under a Group Medical Expense Insurance Policy (Group Policy). Presently before the court is defendant's motion for summary judgment. After consideration of the motions and the memoranda filed in support thereof, the affidavits and other evidentiary materials, the arguments heard on May 10, 1990 and the subsequently filed supplemental briefs, defendant's motion shall be granted for the reasons that follow.
Defendant Connecticut General contends that the General Limitation provision contained in section 12 of its Group Policy excluding coverage for expenses reimbursable under a no-fault policy is valid. Connecticut General has moved for summary judgment, arguing that because section 12 is valid, it properly refused to pay plaintiffs costs that had already been reimbursed by Ms. Meshyock's no-fault policy. In opposition to defendant's motion for summary judgment, plaintiffs assert that the General Limitation clause is contrary to the law of both the Commonwealth of Pennsylvania and the state of Michigan.
The issue to be resolved then is twofold. The threshold question that must be answered is a conflicts of law question: whether, under Pennsylvania choice-of-law rules, Michigan or Pennsylvania law applies. And the second issue is whether, under the relevant state law, the General Limitation clause in defendant Connecticut General's insurance policy excluding coverage for expenses reimbursable under a no-fault policy is valid.
The relevant undisputed facts are set forth below:
1. On August 13, 1982, Barry Meshyock suffered severe injuries from an auto accident that occurred in Huntingdon County, Pennsylvania.
2. At the time of the accident, Barry Meshyock was covered under his parents' no-fault policy provided by State Farm Insurance Company. The State Farm policy has covered most, if not all, of Mr. Meshyock's medical expenses.
3. At the time of the accident, Lillian Meshyock, mother and guardian of Barry Meshyock, was employed in Pennsylvania by the Elco Corporation (ELCO). ELCO is a Pennsylvania corporation that is a division of Gulf & Western Manufacturing Company, a Delaware corporation headquartered in Michigan. The ELCO Connector Division (ELCO Connector) in Huntingdon, Pennsylvania, where Ms. Meshyock worked, was ELCO's primary manufacturing division. By virtue of her employment with ELCO, Ms. Meshyock, as well as her dependents, were covered by a Group Policy issued by Connecticut General. It is this Group Policy that is the subject matter of the present dispute.
4. In 1982 ELCO Connector recognized Local 2099 of the International Brotherhood of Electrical Engineers (Local 2099) as the sole and exclusive bargaining agency for all of its hourly production and maintenance employees. All of Local 2099's members worked at the ELCO Connector plant in Pennsylvania.
5. In Huntingdon, Pennsylvania, ELCO and Local 2099 negotiated, executed, and, on August 3, 1982, entered into a Collective Bargaining Agreement, the subject matter of which pertained solely to the working conditions at the ELCO Connector plant in Huntingdon.
6. Under the terms of this agreement, ELCO agreed to change its group health insurance carrier to Connecticut General.
7. Connecticut General issued the Group Policy referred to in paragraph three to ELCO's parent corporation, Gulf & Western. The policy was issued and delivered in Michigan and was submitted to and approved by the Michigan State Insurance Commissioner.
8. Although Gulf & Western obtained the policy, it did so for the sole benefit of those employees who worked at the ELCO plant in Huntingdon, Pennsylvania. Section five of the policy, entitled "Eligibility for Insurance," provides that coverage under the policy extends to "each hourly Employee who is a member of a collective bargaining unit represented by International Brotherhood of Electrical Workers Local 2099." It further states that any employee who is not a member of that unit is not eligible.
In this civil action, where jurisdiction is based on diversity of citizenship, the district court must apply the choice-of-law rules of the forum state, Pennsylvania. Klaxon Co. v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Complaint of Bankers Trust Co., 752 F.2d 874, 881 (3d Cir.1984); Melville v. American Home Assurance Co., 584 F.2d 1306, 1308 (3d Cir. 1978). The United States Court of Appeals for the Third Circuit has determined that the "flexible conflicts methodology" adopted by the Pennsylvania Supreme Court for tort actions in Griffith v. United Airlines, Inc., 416 Pa. 1, 203 A.2d 796 (1964) likely would be employed by that same court in contract actions when the occasion arises. Melville, 584 F.2d at 1311; Bankers Trust, 752 F.2d at 881. See also McCabe v. Prudential Property and Casualty Insurance Co., 356 Pa.Super. 223, 514 A.2d 582, 585 (1986) ().
Applying the law of the circuit, this court will resolve the conflicts of law issue presented by the instant contract dispute within the rubric of Griffith, a two-prong "contacts" and "interest" inquiry. This flexible methodology combines the approaches of the Restatement Second of Conflicts, which considers the contacts of the various concerned jurisdictions and an "interest analysis" which entails a qualitative appraisal of the relevant states' interests and policies with respect to the controversy. Melville, 584 F.2d at 1311. "Thus, under Pennsylvania choice-of-law principles, the place having the most interest in the problem and which is the most intimately concerned with the outcome is the forum whose law should be applied." Bankers Trust, 752 F.2d at 882, citing Griffith, 203 A.2d at 805-806.
Plaintiffs contend that the court should apply Michigan law to this matter and rely on a case from the western district of Pennsylvania, Home For Crippled Children v. Prudential Insurance Co., 590 F.Supp. 1490 (W.D.Pa.1984) to support their assertion. The Home case presented a choice-of-law question on facts similar to those presently before the court. In that case, Servico, Inc. obtained a group health insurance policy from Connecticut General Life Insurance Company for the benefit of its employees. As an employee of Servico, Ms. Sentner and her son Jason were covered under the group policy. Connecticut General refused to reimburse fully the Home for Crippled Children for expenses it had incurred in connection with treatment of Jason Sentner, asserting that Jason was not entitled to coverage under the policy because he suffered from a pre-existing condition which was explicitly exempted from coverage by the terms of the agreement.
Plaintiff argued that the provision exempting coverage was unenforceable. Defendant responded that it was valid under both Tennessee and Pennsylvania law. It was incumbent upon the court to determine which law applied.
The Home for Crippled Children was a Pennsylvania corporation. The patient, Jason, and the insured, Jason's mother, were Pennsylvania residents. The Servico facility where the insured worked was located in Pennsylvania, but its corporate headquarters was in Tennessee. The policy was issued and delivered to Servico in Memphis, Tennessee, was filed with and approved by the Tennessee Department of Insurance, and "covered employees of Servico facilities throughout the United States." Home For Crippled Children, 590 F.Supp. at 1501. The court determined that Tennessee law should apply.
In reaching this conclusion, Judge Mansmann relied upon a case from the middle district of Pennsylvania, Henning v. Metropolitan Life Ins. Co., 546 F.Supp. 442 (M.D.Pa.1982). In Henning, General Electric (GE) had obtained a group insurance policy from Metropolitan Life Insurance Company for its employees who worked at various GE plants all over the United States. The policy had been applied for, signed, issued and delivered in New York. The only contacts with Pennsylvania were plaintiff's residence and the location of the particular plant at which plaintiff worked.
The Henning court had determined that New York had the greatest interest in having the policy interpreted according to its own state laws. Judge Mansmann discussed the Henning court's rationale:
The court reasoned that the significance of Pennsylvania's interest in protecting its resident-consumers from policy exclusions diminishes in the group policy context where the real insured is not the individual employee but rather the entity or group of employees. In that situation, the employer, as representative of the entity, acts as the agent of the insured.
Crippled Children, 590 F.Supp. at 1500, citing Henning, 546 F.Supp. at 446.
The Servico policy, just like the GE policy, was obtained for the benefit of employees from all over the United States who were employed at various locations throughout the country. Relying on the reasoning in Henning, the court in Home For Crippled Children concluded that where the only contact Pennsylvania had with the dispute was that...
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