2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-13-2007

West v. Lincoln Benefit

Precedential or Non-Precedential: Precedential

Docket No. 06-3491

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2007

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2007 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"West v. Lincoln Benefit" (2007). 2007 Decisions. Paper 7.

http://digitalcommons.law.villanova.edu/thirdcircuit_2007/7
The Honorable Sylvia H. Rambo, United States District *

Judge for the Middle District of Pennsylvania, sitting by

designation.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 06-3491

 

PATRICIA WEST,

 Appellant

 v.

LINCOLN BENEFIT LIFE COMPANY

 

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. No. 05-cv-00561)

District Judge: Honorable Donetta W. Ambrose

 

Argued May 16, 2007

Before: FISHER and ROTH, Circuit Judges,

and RAMBO, District Judge.

*
2

(Filed: December 13, 2007)

John W. Jordan, IV (Argued)

Matis, Baum, Rizza & O’Connor

444 Liberty Avenue

Four Gateway Center, Suite 300

Pittsburgh, PA 15222

Attorney for Appellant

Alan H. Abes (Argued)

Dinsmore & Shohl

255 East Fifth Street

1900 Chemed Center

Cincinnati, OH 45202

R. Stanley Mitchel

Rose, Schmidt, Hasley & DiSalle

900 Oliver Building

Pittsburgh, PA 15222-5369

Attorneys for Appellee

 

OPINION OF THE COURT

 

RAMBO, District Judge.

This matter arises out of a dispute over whether a policy

for life insurance was in force upon the death of James West, Jr.

The insurer, Appellee Lincoln Benefit Life Company (“Lincoln
3

Benefit”), argues that Mr. West’s policy had lapsed for

nonpayment of premiums and had not been reinstated. Because

the policy was not in force at the time of Mr. West’s death,

Lincoln Benefit submits, it is not obligated to pay benefits under

the policy terms. Appellant Patricia West, James West’s wife

and beneficiary of the policy, argues that Pennsylvania law

imposed a temporary contract of insurance when, after notice of

lapse, she sent an application for reinstatement and payment of

overdue premiums. For the reasons that follow, we agree with

Lincoln Benefit and will affirm summary judgment in its favor.

I.

On April 4, 1998, Mr. West obtained a life insurance

policy from Allstate Insurance Company. On the application for

the policy, he stated that he was taking medicine for high blood

pressure. After medical testing or examination by Allstate, the

insurance policy was issued. In February 2002, Mr. West

converted the Allstate policy to a $50,000 term policy with

Lincoln Benefit and added a $50,000 term rider benefit (“the

Policy”). At the time of conversion, Lincoln Benefit did not

require a medical examination or other proof of insurability.

Mr. West named Mrs. West beneficiary of the Policy.

The Policy terms are as follows: the insured must remit

a quarterly payment of $228.51 to remain insured. If a premium

payment is not received by its due date, a grace period of sixtyone days goes into effect. At the end of sixty-one days, if the

premium is still outstanding, the Policy is terminated. After

termination but before the death of the insured, however, the

Policy may be reinstated provided that the insured: 1) requests
4

reinstatement within five years of the date that the Policy

entered the grace period; 2) gives Lincoln Benefit “the proof [it]

require[s] that the insured is still insurable” in the payment class

under which the Policy was issued; 3) pays an amount large

enough to cover the unpaid monthly deductions for the grace

period; 4) makes a payment sufficient to keep the policy in force

for three subsequent policy months; and 5) pays or asks Lincoln

Benefit to reinstate any outstanding loan, with interest. (R. at

60a.)

Lincoln Benefit addressed all correspondence to Mr.

West at his home address. Mr. West would open the mail

addressed to him, then give Mrs. West any mail that required a

response, including bills and notices of payment due issued by

Lincoln Benefit. Mrs. West would respond or write a check for

payment, as appropriate, and maintain the file of insurance

documents. Mrs. West recalled two occasions when Mr. West

gave her a notice from Lincoln Benefit that the premium

payment was overdue and coverage would terminate unless

payment was made by a particular date. Both times she sent a

check immediately to continue the policy in force. She saw only

the correspondence from Lincoln Benefit that Mr. West gave to

her. She does not know if there were letters or bills from

Lincoln Benefit sent to her husband that he did not then pass on

to her. The Wests paid all premiums due through February 17,

2004.

On April 1, 2004, Lincoln Benefit sent Mr. West a

reminder that his next premium was due on May 1, 2004. On

May 3, 2004, because it had not received payment, Lincoln

Benefit sent Mr. West a letter informing him that the Policy had
According to Lincoln Benefit’s records, Mr. West was 1

sent eleven reminder letters substantially identical to the one he

received on May 3, 2004. He was sent six second notices of

payment due, like the one he received on May 11, 2004. Janet

Dever, a Claim Consultant for Allstate Life Insurance Company

with authority to act for Lincoln Benefit, submitted an affidavit

in support of Lincoln Benefit’s motion for summary judgment.

She averred that the correspondence described in this opinion

was sent to Mr. West in due course of business for Lincoln

Benefit on or about the date reflected on each item. Mrs. West

testified that she never saw any of this correspondence (aside

from the two times she admits to having seen similar notices)

and therefore denies that Lincoln Benefit sent these letters. In

the alternative, she claims that her husband never received them.

Mrs. West admits, however, that she is without knowledge as to

whether Mr. West received these letters. Mrs. West’s admitted

lack of knowledge is insufficient to rebut the presumption that

correspondence mailed in the ordinary course of business is

received. See West v. Lincoln Benefit Life Co., No. 05-561,

2006 WL 1788384, at *7 (W.D. Pa. June 26, 2006); Fed. R. Civ.

P. 56(e).

5

entered the grace period. His Policy would terminate on July 3,

2004 if the premium was not received on or before that date. On

May 11, 2004, Lincoln Benefit sent Mr. West a second notice

that his May premium was due.1

Mr. West did not submit payment to Lincoln Benefit on

or before July 3, 2004. Thus, on July 5, 2004, Lincoln Benefit

sent him a letter stating that the grace period for premium
6

payment on his policy had expired. The letter advised Mr. West

that he could apply for reinstatement. The second paragraph of

the letter stated, “[t]o continue your valuable coverage, complete

the Application for Reinstatement form on the back and return

it with your payment of $228.51. Upon underwriting approval,

and receipt of the sufficient payment, coverage will continue

uninterrupted.” (R. at 183a.) Enclosed with the letter was an

application for reinstatement. The application itself states, “I

(each undersigned) request that the Company reinstate this

policy. . . . Coverage will not start again until this request is

approved by the company and all required premiums and interest

are paid. If this request is not approved, any amount tendered

will be returned.” (Id. at 187a.)

Mrs. West recalls having read only the first sentence of

the second paragraph of the letter, “[t]o continue your valuable

coverage, complete the Application for Reinstatement form on

the back and return it with your payment of $228.51.” She

interpreted it to mean that if she filled out the form and sent it to

Lincoln Benefit with payment, Mr. West’s insurance would be

reinstated. Mrs. West did not read, or does not remember

reading, any of the language in the letter or the application

stating that underwriting approval was required before

reinstatement would be effective.

The application asked ten questions regarding the

applicant’s medical history. Mrs. West filled out the application

on Mr. West’s behalf. She answered nine questions in the

negative, indicating that Mr. West had no medical issues relating

to those questions. She answered “yes” and “no” to one

question – whether, in the past ten years or during the time Mr.
7

West was insured under the Policy, he had been “diagnosed

with, sought or received treatment or advice for: heart attack,

disease of coronary arteries or other blood vessels, other heart

disorder, high blood pressure, diabetes or stroke.” (Id.) In the

blank provided for an explanation of “full details, including

diagnosis, severity, treatment, name and address of doctors,

hospitals, and clinics,” she wrote “controlled with medication.”

(Id.) She answered “yes” because Mr. West still had the high

blood pressure disclosed on his initial application for life

insurance with Allstate. She knew Mr. West to be in good

health because he was taking medication to control his blood

pressure and he had recently passed a physical exam with no

medical problems. Thus, she believed that Lincoln Benefit

would approve the application for reinstatement immediately

upon receipt of the application and payment.

Lincoln Benefit received the application for reinstatement

on July 15, 2004, along with Mr. West’s check for $228.51. On

July 19, 2004, Lincoln Benefit deposited the check pursuant to

its standard practice.

Mr. West died on July 24, 2004, and Lincoln Benefit

received notice of his death two days later. The Underwriting

Department had not completed its review of the application and

had not made a decision on whether to reinstate his Policy.

Because Lincoln Benefit did not consider Mr. West’s Policy to

be in effect at the time of his death, on July 30, 2004, the

company denied Mrs. West’s claim for payment of benefits and

refunded the premium payment of $228.51 that had

accompanied the application for reinstatement.
8

II.

The District Court had subject matter jurisdiction to hear

this claim pursuant to 28 U.S.C. § 1332(a)(1). We have

jurisdiction to review the District Court’s decision on summary

judgment under 28 U.S.C. § 1291. We review the decision de

novo. State Farm Mut. Auto. Ins. Co. v. Rosenthal, 484 F.3d

251, 253 (3d Cir. 2007).

Because subject matter jurisdiction is based on diversity

of citizenship, we look to the substantive law of Pennsylvania to

determine the rights and obligations of the parties. Erie R.R. Co.

v. Tompkins, 304 U.S. 64, 77 (1938). The law of the

Commonwealth is declared by “its Legislature in a statute or by

its highest court.” Id. The Pennsylvania Supreme Court is the

best authority on Pennsylvania law, but when the Supreme Court

has not issued a clear pronouncement in a particular area, we

“must consider relevant state precedents, analogous decisions,

considered dicta, scholarly works, and any other reliable data”

to determine what the law is. McKenna v. Ortho Pharm. Corp.,

622 F.2d 657, 661, 663 (3d Cir. 1980); see also Comm’r v.

Estate of Bosch, 387 U.S. 456, 465 (1967). We may not rest on

“blind adherence to state precedents without evaluating the

decisions in light of other relevant data as to what the state law

is.” McKenna, 622 F.2d at 663 (quotation and alteration

omitted); accord Scotts African Union Methodist Protestant

Church v. Conference of African Union First Colored Methodist

Protestant Church, 98 F.3d 78, 92 (3d Cir. 1996); cf. Bernhardt

v. Polygraphic Co. of Am., Inc., 350 U.S. 198, 204 (1956)

(affirming district court’s use of forty-five-year-old state

supreme court precedent when “there appear[ed] to be no
9

confusion in [state] decisions, no developing line of authorities

that casts a shadow over the established ones, no dicta, doubts

or ambiguities in the opinions of [state] judges on the question,

[and] no legislative development that promises to undermine the

judicial rule”). Opinions from inferior Pennsylvania courts are

not controlling in our analysis, but they are entitled to significant

weight when there is no indication that the Pennsylvania

Supreme Court would rule otherwise. Rosenthal, 484 F.3d at

253.

III.

The facts of this case implicate a specific area of

insurance law – reinstatement of a lapsed policy of life

insurance – and general principles of insurance law as declared

by the Pennsylvania courts. We will address each paradigm in

turn.

A. The Law of Reinstatement

Pennsylvania’s Insurance Department Act of 1921 was

enacted to protect the insurance-buying public. Collister v.

Nationwide Life Ins. Co., 388 A.2d 1346, 1355 (Pa. 1978). One

of its requirements is that all life insurance policies delivered in

Pennsylvania contain the consumer-protective provisions of 40

Pa. Cons. Stat. Ann. § 510, or terms more favorable to the

insured. See generally Lee R. Russ & Thomas F. Segalla,

Couch on Insurance § 33.48 (3d ed. 1995) (“[W]here statutory

requirements are enacted, they automatically become part of any

insurance policy issued thereafter, notwithstanding more

limiting language in the policy.”). The statute requires that all
10

premiums may be paid in advance, § 510(a), and if a premium

is not received when due, the insured is entitled to a grace period

in which to pay, § 510(b). If an insured does not pay within the

grace period and the policy lapses, § 510(k) governs the rights

and obligations of the insured after lapse of a policy, should the

insured wish to apply for reinstatement:

[T]he holder of a policy shall be entitled to have

the policy reinstated, upon written application

therefor, [1] at any time within three years from

the date of default in premium payments, unless

the policy has been duly surrendered or the

extension period expired, [2] upon the production

of evidence of insurability satisfactory to the

company, . . . [3] payment of all overdue

premiums with interest at a rate to be specified in

the policy . . . and [4] the payment of any other

indebtedness to the company upon said policy

with interest . . . .

§ 510(k).

The conjunctive phrasing of § 510(k) makes it clear that

each requirement must be satisfied – mere payment of overdue

premiums is not sufficient to effect reinstatement. Fisher v. Am.

Nat’l Ins. Co., 241 F.2d 175, 177 (3d Cir. 1957); Sykes v. United

Ins. Co., 76 A.2d 227, 229 (Pa. Super. Ct. 1950); Selby v.

Equitable Beneficial Mut. Life Ins. Co., 17 A.2d 696, 697 (Pa.

Super. Ct. 1941); Peters v. Colonial Life Ins. Co. of Am., 193 A.

460, 463 (Pa. Super. Ct. 1937); Stager v. Fed. Life Ins. Co., 189

A. 776, 778 (Pa. Super. Ct. 1937); Fishman v. Eureka-Md.
11

Assurance Corp., 183 A. 98, 102 (Pa. Super. Ct. 1936); Franklin

L. Best, Jr., Pennsylvania Insurance Law § 13.7 (3d ed. 2005);

see Russ & Segalla, supra, § 33.46 (“Where two or more

conditions to reinstatement exist, it is necessary that the insured

satisfy all of the conditions in order to obtain reinstatement

. . . .”). The insured holds the burden of proving compliance

with all conditions precedent to reinstatement. Riebel v.

Prudential Ins. Co. of Am., 179 A. 447, 448 (Pa. 1935); Sykes,

76 A.2d at 229; Selby, 17 A.2d at 697-98; Peters, 193 A. at 464;

Stager, 189 A. at 779; Fishman, 183 A. at 101. Because our

analysis turns on the second requirement, that the insured must

provide evidence of insurability satisfactory to the insurer, we

will evaluate the law on that issue only.

The Pennsylvania Supreme Court was presented with an

opportunity to interpret the meaning of “evidence of insurability

satisfactory to the insurer” in Riebel. A man applied for life

insurance and received a policy. 179 A. at 447. The policy

lapsed for non-payment of premiums. Id. The reinstatement

provision in Riebel was phrased in exact accordance with the

statutory text of § 510(k) that was then in effect, such that the

lapsed insured was required to pay past arrears and furnish

evidence of insurability satisfactory to the insurer. Id. at 447-48.

The lapsed insured submitted his application for reinstatement

and payment of past-due premiums. Id. He also submitted a

physician’s report of his health indicating that he had lost twenty

pounds, looked anemic, had contracted the flu during the

previous year and had not felt well since. Id. at 448. The next

day, he died. Id. Four days later, and without notice of the

lapsed insured’s death, the application for reinstatement was

denied because the evidence presented did not satisfy the
An earlier case held that even when an insurance 2

company approved an application for reinstatement after the

applicant had died, the company was not liable for death

benefits. Meerbach v. Metro. Life Ins. Co., 46 Pa. Super. 133,

1911 WL 4460, at *1 (Pa. Super. Ct. Dec. 19, 1910). The court

held that the posthumous approval “would operate to revive the

policy on a life which had then ceased to exist. No such thing

could have been contemplated by either the company or the

insured.” Id.

12

company that he was still insurable. Id. The arrearage payment

was tendered back to the estate of the lapsed insured. Id.

The Pennsylvania Supreme Court held that the insurer

was clearly within its rights to deny reinstatement under the

statutory predecessor to § 510(k), the insurance policy, and the

application for reinstatement, when no satisfactory evidence of

the insurability of the lapsed insured was provided. Id.; see 2

Best, supra, § 13.7; Russ & Segalla, supra, § 33:61

(“[R]einstatement may be denied if the insured is uninsurable at

the time he or she seeks reinstatement . . . .”). “[E]ven if the

court could overlook the contractual and statutory requirement,

that ‘the evidence of the insurability of the insured [must be]

satisfactory to the Company,’ . . . plaintiff has furnished no

evidence which would justify either the court or jury in so

determining on [this] unsatisfactory proof . . . .” Riebel, 179 A.

at 448. Accordingly, the Supreme Court affirmed entry of

judgment for the insurance company and against the beneficiary

of the lapsed insurance policy. Id.
13

As demonstrated by Riebel, evidence of insurability

satisfactory to the company must, in fact, be satisfactory to the

company. If this evidence is not provided, or is not satisfactory,

the insurer need not reinstate. Id.; Stager, 189 A. at 778; Russ

& Segalla, supra, § 33:61. The insurer “cannot be arbitrary or

capricious in considering the evidence of insurability” provided

in an application for reinstatement. Rothschild v. N.Y. Life Ins.

Co., 162 A. 463, 466 (Pa. Super. Ct. 1932). Ultimately,

however, the insurer has the right to make the final decision as

to whether it will accept or deny an application for

reinstatement. Fishman, 183 A. at 102; see § 510(k) (evidence

of insurability must be satisfactory to the insured).

The method of proof of insurability may vary. Insurers

often rely initially on forms to provide evidence of insurability.

These forms require the insured or an examining physician to

answer questions about the insured’s health. See Stager, 189 A.

at 778. Incomplete or non-responsive answers to the insurer’s

questions do not provide satisfactory evidence of insurability.

Id. at 778-79. In Stager, such a form was used in an application

for reinstatement. The application asked, “Have you now any

diseases or disorders? If any, give details.” Id. at 778. The

lapsed insured responded “Bladder.” Id. The insurer replied

with the following: “If that question is answered correctly and

[the insured] now has a bladder disorder he would not be

insurable. We are returning the application for him to modify if

that question is incorrectly answered.” Id. This answer,

unchanged, imposed no obligation upon the insurer to reinstate

because it was not responsive to the question asked and did not

provide satisfactory evidence that the lapsed insured remained

insurable. Id. at 779.
14

B. Subsequent Developments in Insurance Law

In the late 1970s, the Pennsylvania Supreme Court issued

decisions that demonstrated its consumer-oriented approach to

insurance law by allowing the expectations of the insured rather

than the plain terms of a policy to control insurance disputes.

None of these decisions involved reinstatement of a lapsed

policy; none purport to interpret or modify the law governing

reinstatement described supra.

In Rempel v. Nationwide Life Insurance Co., Inc., 370

A.2d 366 (Pa. 1977) (plurality), the plaintiff-beneficiary claimed

negligent misrepresentation by an insurer’s agent. Id. at 367.

The agent informed the insured that upon his death, his policy

would pay the remainder of his mortgage balance plus $5,000.

Id. The terms of the policy did not, in fact, contain such

provisions. Id. The Rempels did not read the policy to confirm

the agent’s assertions, but the Pennsylvania Supreme Court did

not impose a duty upon them to do so. Id. at 368. Instead,

“[c]onsumers, such as the Rempels, view an insurance agent . . .

as one possessing expertise in a complicated subject. It is

therefore not unreasonable for consumers to rely on the

representations of the expert rather than on the contents of the

insurance policy itself.” Id. Put another way, consumers rely on

an agent to “translate” the specialized language of an insurance

policy into words that they understand. Id.; accord Collister,

388 A.2d at 1353 (“[T]he insurance industry forces the

insurance consumer to rely upon the oral representations of the

insurance agent. Such representations may or may not

accurately reflect the contents of the written document and

therefore the insurer is often in a position to reap the benefit of
15

the insured’s lack of understanding . . . .”). Because there was

“no evidence . . . indicating that the Rempels knew, or should

have known, that the policy which they received did not contain

the provisions which [the agent] led them to believe would be in

the policy,” the Rempels were entitled to the additional $5,000

that they reasonably expected as a result of the agent’s

misrepresentation. Rempel, 370 A.2d at 369.

A year later, in Collister, the Pennsylvania Supreme

Court considered the question of whether a temporary contract

of insurance arose when a proposed insured submitted a new

application for insurance and contemporaneously paid his first

premium. 388 A.2d at 1347-48. The insurance agent who

received the application and payment informed the proposed

insured that a medical examination was required. Id. at 1355.

The agent also provided the proposed insured a “conditional

receipt” which stated “NO INSURANCE WILL BECOME

EFFECTIVE PRIOR TO POLICY DELIVERY UNLESS THE

ACTS REQUIRED BY THIS RECEIPT ARE COMPLETED.”

Id. at 1356. One of the acts required was a medical examination

demonstrating the applicant’s insurability. Id. The applicant

died before submitting the results of a medical exam. Id. at

1347. The insurer had not accepted or rejected his application

for a new policy. Id. The beneficiary claimed that a temporary

contract for insurance had arisen at the moment of premium

payment. Id. at 1348. The Pennsylvania Supreme Court agreed.

Id. at 1355.

The Court held that “the proper resolution of questions

such as that presented by the instant appeal depends upon an
16

analysis of the totality of the transaction involved.” Id. at 1353.

It further held that

[i]n situations where the circumstances of the

transaction do not indicate that the insurer

intended to provide interim insurance, but

nevertheless show that the insurer accepted

payment of the first premium at the time it took

the application, it is then up to the insurer to

establish by clear and convincing evidence that

the consumer had no reasonable basis for

believing that he or she was purchasing

immediate insurance coverage.

Id. Ultimately, courts were directed to “examine the dynamics

of the insurance transaction to ascertain what are the reasonable

expectations of the consumer” and give effect to those

expectations, regardless of the ambiguity or clarity of the

language of an insurance contract. Id. at 1353-54.

Following Rempel and Collister, however, insurance case

law appeared to diverge under two subsequent decisions by the

Pennsylvania Supreme Court: Standard Venetian Blind Co. v.

American Empire Insurance Co., 469 A.2d 563 (Pa. 1983), and

Tonkovic v. State Farm Mutual Automobile Insurance Co., 521

A.2d 920 (Pa. 1987). Standard Venetian Blind adhered to the

language of the insurance contract to determine an insurer’s

obligation to pay, without regard to the expectations of the

insured. It did not cite Collister. Instead, the Pennsylvania

Supreme Court stated that the intent of the parties is
17

manifested by the language of the written

instrument. Where a provision of a policy is

ambiguous, the policy provision is to be construed

in favor of the insured and against the insurer, the

drafter of the agreement. Where, however, the

language of the contract is clear and

unambiguous, a court is required to give effect to

that language. In the absence of proof of fraud,

failure to read the contract is an unavailing excuse

or defense and cannot justify an avoidance,

modification or nullification of the contract or any

provision thereof.

Standard Venetian Blind, 469 A.2d at 566 (quotation, citations,

and alterations omitted). Standard Venetian Blind did admonish

that “in light of the manifest inequality of bargaining power

between an insurance company and a purchaser of insurance, a

court may on occasion be justified in deviating from the plain

language of a contract of insurance.” Id. at 567.

The facts of that case, however, did not permit such

deviation because the policy limitation at issue was clearly

worded and conspicuously displayed. Id. The insured, upon

application for the policy, requested “full coverage on

everything we have.” Id. at 565. The policy contained standard

exclusion provisions, which were clear, unambiguous, and not

contrary to law. Id. at 566. The insurer did not describe the

limitations of the policy, but neither did it misrepresent that the

policy had no exclusions or that the exclusions were anything

other than what they purported to be. See id. To allow the

insured “to avoid application of the clear and unambiguous
18

policy limitations in these circumstances would [have required

the Supreme Court] to rewrite the parties’ written contract,”

which the court would not do. Id. Instead, it sought to “accord

proper significance to the written contract, which has

historically been the true test of parties’ intentions.” Id. at 567.

By contrast, Tonkovic focused on the reasonable

expectations of the insured rather than the clear language of the

contested policy because the insured specifically requested

disability insurance, but was issued a policy that did not include

disability insurance. 521 A.2d at 924. Tonkovic held that where

“an individual applies and prepays for specific insurance

coverage, the insurer may not unilaterally change the coverage

provided without an affirmative showing that the insured was

notified of, and understood, the change, regardless of whether

the insured read the policy.” Id. at 925. There is “a crucial

distinction between cases where one applies for a specific type

of coverage and the insurer unilaterally limits that coverage,

resulting in a policy quite different from what the insured

requested,” as the facts of Tonkovic demonstrated, and “cases

where the insured received precisely the coverage that he

requested but failed to read the policy to discover clauses that

are the usual incident of the coverage applied for,” as occurred

in Standard Venetian Blind. Id.; accord Toy v. Metro. Life Ins.

Co., 863 A.2d 1, 13 (Pa. Super. Ct. 2004) (affirming that an

insurer has a duty to inform an insured that it issued a policy

different from what the insured requested).

The cases that follow reflect the Tonkovic distinction. In

the absence of an affirmative misrepresentation by the insurer or

its agent about the contents of the policy, the plain and
19

unambiguous terms of a policy demonstrate the parties’ intent

and they control the rights and obligations of the insurer and the

insured. E.g., Kvaerner Metals Div. of Kvaerner U.S., Inc. v.

Commercial Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006);

Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d

100, 106 (Pa. 1999) (“The polestar of our inquiry . . . is the

language of the insurance policy.”); Gene & Harvey Builders,

Inc. v. Pa. Mfrs.’ Ass’n Ins. Co., 517 A.2d 910, 913 (Pa. 1986).

When a provision of the policy is clear and unambiguous, it

must be enforced. Madison Constr. Co., 735 A.2d at 106. An

unclear, ambiguous provision will be construed against the

insurer and in favor of the insured. Id.

An analysis of the reasonable expectations of the insured

is rightly employed when a claimant alleges that the insurer

engaged in deceptive practices toward the insured, either to

misrepresent the terms of the policy or to issue a policy different

than the one requested by the insured and promised by the

insurer. Matcon Diamond, Inc. v. Penn Nat’l Ins. Co., 815 A.2d

1109, 1114 (Pa. Super. Ct. 2003); Pressley v. Travelers Prop.

Cas. Corp., 817 A.2d 1131, 1140 (Pa. Super. Ct. 2003). In this

context, the clear and unambiguous language in the policy is one

aspect of the totality of the circumstances that may lead to the

reasonable expectations of the insured. Bubis v. Prudential

Prop. & Cas. Ins. Co., 718 A.2d 1270, 1272 (Pa. Super. Ct.

1998); Frain v. Keystone Ins. Co., 640 A.2d 1352, 1354 (Pa.

Super. Ct. 1994); see Reliance Ins. Co. v. Moessner, 121 F.3d

895, 903 n.7 (3d Cir. 1997); Pressley, 817 A.2d at 1143 (LallyGreen, J., concurring and dissenting); but see Dibble v. Sec. of

Am. Life Ins. Co., 590 A.2d 352, 355 (Pa. Super. Ct. 1991)

(evaluating “the dynamics of the transaction viewed in its
20

entirety” without regard to the language of an application for a

new policy or the policy itself); Bierer v. Nationwide Ins. Co.,

461 A.2d 216, 221 (Pa. Super. Ct. 1983) (“The fact that the

policy rider and application are unambiguous in their provisions

does not, by itself, defeat the reasonable expectations of the

consumer.”). “[A]n insured may not complain that his or her

reasonable expectations were frustrated by policy limitations

which are clear and unambiguous.” Frain, 640 A.2d at 1354.

However, “even the most clearly written exclusion will not bind

the insured where the insurer or its agent has created in the

insured a reasonable expectation of coverage.” Reliance Ins.

Co., 121 F.3d at 903. “[M]ere assertions that a party expected

coverage will not ordinarily defeat unambiguous policy

language excluding coverage.” Matcon Diamond, Inc., 815

A.2d at 1115.

We believe that this synthesized standard is the truest

statement of Pennsylvania law. We have applied it in the past,

Tran v. Metro. Life Ins. Co., 408 F.3d 130, 136-37 (3d Cir.

2005); Reliance Ins. Co., 121 F.3d at 903; Bensalem Twp. v.

Int’l Surplus Lines Ins. Co., 38 F.3d 1303, 1309 (3d Cir. 1994);

see Altimari v. John Hancock Variable Life Ins. Co., 247 F.

Supp. 2d 637, 644-45 (E.D. Pa. 2003); Barrar v. Metro. Life Ins.

Co., 151 F. Supp. 2d 617, 621-22 (E.D. Pa. 2001), and we will

apply it here.

IV.

The parties have asked us to determine which source of

law determines their rights and obligations to one another: the

law governing reinstatement or the law governing the reasonable
21

expectations of the insured. Considering the evolution of the

case law under the “reasonable expectations” standard, we

believe that the outcome of this matter is the same no matter

which law we choose. Lincoln Benefit is not obliged to pay

benefits on Mr. West’s lapsed Policy.

A. Under the Law of Reinstatement

We believe that the Pennsylvania Supreme Court would

decide this matter under 40 Pa. Cons. Stat. Ann. § 510(k), its

interpretive precedent, and the reinstatement terms of the Policy.

The burden of proving compliance with all conditions precedent

to reinstatement of the Policy is thus on Mrs. West. See, e.g.,

Sykes, 76 A.2d at 229. She cannot meet this burden. Both the

case law and the Policy are clear: payment of the overdue

premium was insufficient to effect reinstatement. It was

incumbent upon Mr. West to give Lincoln Benefit the proof it

required that he was still insurable. (R. at 60a); see § 510(k)

(requiring a lapsed insured to produce “evidence of insurability

satisfactory to the company.”).

Lincoln Benefit had the right, statutorily and under the

terms of the Policy, to decide whether the evidence provided by

the Wests was satisfactory proof of Mr. West’s insurability. See

Riebel, 179 A. at 448; Fishman, 183 A. at 102. At the time of

his death, the Underwriting Department had not decided whether

the statements on the application provided satisfactory evidence

of insurability. Mrs. West does not argue that Lincoln Benefit

was arbitrary, capricious, or even unreasonable in not deciding

the merits of the application for reinstatement within eleven

days of its receipt. Thus, reinstatement was not effected because
Even if Lincoln Benefit had evaluated the information 3

on the application, the information would not have provided

satisfactory proof of Mr. West’s continued insurability. The

application asked, in the past ten years or for the time during

which Mr. West was insured under the Policy, whether he had

been “diagnosed with, sought or received treatment or advice

for: heart attack, disease of coronary arteries or other blood

vessels, other heart disorder, high blood pressure, diabetes, or

stroke.” Mrs. West’s answers of both “yes” and “no” are

conflicting in themselves. Moreover, when asked for “full

details, including diagnosis, severity, treatment, name and

address of doctors, hospitals, and clinics,” she wrote “controlled

with medication.” Her answer was not responsive to the

question asked and did not provide the additional details

requested by Lincoln Benefit to assist the company in

determining Mr. West’s continued insurability. Even if Lincoln

Benefit had reviewed the application, Mrs. West’s answer would

have been insufficient for immediate reinstatement. See Stager,

189 A. at 778-79.

We are urged to apply the specific holding in Collister,

4

such that by accepting the Wests’ payment of $228.51 before

deciding whether to reinstate, a temporary contract of insurance

arose between Lincoln Benefit and Mr. West that Lincoln

Benefit may not now disclaim. See 388 A.2d at 1355. Nothing

about Collister itself or subsequent case law suggests that

22

Lincoln Benefit had not yet accepted his application. Mr. West 3

was not insured at the time of his death and Lincoln Benefit is

not contractually obligated to pay benefits.4
temporary insurance may arise when an application for

reinstatement rather than a new policy is pending. None of the

cases cited by the majority or the dissent in Collister speak to

reinstatement. Commentators discuss contracts for temporary

insurance coverage in the context of new policies only.

Compare Russ & Segalla, supra, § 13.1 and Peter Nash

Swisher, Insurance Binders Revisited, 39 Tort Trial & Ins. Prac.

L.J. 1011, 1024-25 (2004) with Best, supra, § 13.7 and Russ &

Segalla, supra, §§ 33:1-33:119. An entirely different legal

structure applies to applications for reinstatement. Neither

commentators nor courts conflate the two.

The clear difference is that statutory and contractual

obligations, described supra, govern an application for

reinstatement and simply do not apply to an application for a

new policy. Upon lapse of an insurance policy, the contractual

provisions governing reinstatement remain in force until the

allotted time to apply for reinstatement has passed. Rothschild,

162 A. at 466. Thus, any action taken toward reinstatement

must comply with the contractual or statutory terms that

continue to be in effect. Id.; see § 510(k); Best, supra, § 13.7;

Russ & Segalla, supra, § 33.8 (whether the insured has a right

to reinstate a policy “is determined from the contract of

insurance” or pertinent statute).

23

B. Under the Law of the Reasonable

Expectations of the Insured

Mrs. West argues, however, that her expectation that

coverage would exist upon submission of the application and
We have very little direct information as to what the 5

insured, Mr. West, expected regarding reinstatement or whether

he expected anything at all. It is unknown whether he read the

Policy. All correspondence from Lincoln Benefit was addressed

to him, which he then gave to his wife to handle. Pennsylvania

courts appear to have allowed the beneficiary’s expectations to

inform the court’s decision on what the insured expected, see

Bierer, 461 A.2d 216, and it appears that Mr. and Mrs. West

spoke about the matters herein discussed. We will allow Mrs.

West’s perspective to inform our decision on what Mr. West

expected.

24

payment should control the outcome. Under the reasonable 5

expectations analysis, Mrs. West “may not complain that [her]

reasonable expectations were frustrated by policy limitations

which are clear and unambiguous.” See Frain, 640 A.2d at

1354. The reinstatement provision, described above, is clear

and unambiguous as to the conditions precedent to

reinstatement. It is also clear that those conditions were not met.

Yet even the most clearly-written policy limitation will

not bind Mrs. West if Lincoln Benefit misrepresented the terms

and conditions under which reinstatement would be effected and

created a reasonable expectation that coverage would be

immediate. The only communication from Lincoln Benefit to

the Wests on the topic of reinstatement was by letter. If Lincoln

Benefit, in those letters, created a reasonable expectation that

Mr. West would be insured immediately upon payment of the
Mrs. West argues that she and Mr. West expected 6

coverage to start immediately upon submitting payment for the

overdue premium because there was no reason to believe that

his application would be denied. The Wests knew that Mr. West

disclosed both his high blood pressure and the medicine he was

taking to control it on his initial application for life insurance.

He received a physical exam within six to eight months before

the Wests filed the application for reinstatement and his blood

pressure was fine. According to Mrs. West, “I just assumed that

since I sent the money that [the Policy] would have been

reinstated because nothing had changed as far as his health

. . . .” (West Dep. 55:18-56:3.) This subjective belief is not

pertinent to our evaluation of their expectations of insurance

coverage, however. Pennsylvania courts look only to whether

the insurer created in the insured a reasonable expectation of

coverage, not whether the insured came to an independent

conclusion that coverage existed or would exist. Matcon

Diamond, Inc., 815 A.2d at 1115.

25

past-due premium, Lincoln Benefit would be required to pay

benefits.6

In the reasonable expectations analysis, the insurer must

demonstrate that the insured did not have a reasonable

expectation of coverage. Tonkovic, 521 A.2d at 922, 925;

Bensalem Twp., 38 F.3d at 1311. Although Collister requires

this showing by clear and convincing evidence, 388 A.2d at

1355, Tonkovic expressly approved a jury charge instructing that

the insurer must show a mere preponderance, 521 A.2d at 922,

925. Because it is the heavier burden, we will proceed under the
26

Collister evidentiary standard. When the party moving for

summary judgment bears the burden of proving certain facts by

clear and convincing evidence, we must evaluate the facts in

support of the motion in light of that evidentiary burden.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

Accordingly, we must determine, here, whether Lincoln Benefit

has shown with convincing clarity that the Wests did not have

a reasonable expectation that insurance coverage would restart

immediately upon remittance of payment or whether Mrs. West

has come forward with sufficient evidence to defeat that

showing. See id.; El v. Southeastern Pa. Transp. Auth., 479

F.3d 232, 237-38 (3d Cir. 2007). Evidence that is merely

colorable or not significantly probative is insufficient to create

a genuine issue of material fact for trial. See Anderson, 477

U.S. at 248; El, 479 F.3d at 238.

The chronology of correspondence between Lincoln

Benefit and Mr. West demonstrates that the Wests did not have

a reasonable expectation of immediate coverage upon

submission of the application for reinstatement and payment of

the overdue premium. Lincoln Benefit sent Mr. West notices of

payment approximately one month before each premium was

due. On eleven occasions, when the premium was not received

by its due date, Lincoln Benefit sent follow-up letters stating

that his policy value was insufficient to cover the costs of his

insurance. These letters requested payment of the overdue

premium as soon as possible. They noted that without the

premium payment, his Policy would terminate. On six

occasions, when the Wests still did not remit payment, Lincoln

Benefit sent a second notice of payment due. Each second

notice asked again for payment of the premium. Because the
27

Policy was in grace period, the only necessary action to keep the

Policy in effect was to pay the overdue premium.

On April 1, 2004, Lincoln Benefit sent Mr. West a notice

of payment due informing him that his quarterly premium

payment was due on May 1, 2004. The premium was not paid

by that date. On May 3, 2004, Lincoln Benefit sent a follow-up

letter like the ones described above, informing him that his

Policy would terminate on July 3, 2004, if his premium was not

paid. It asked him to submit payment as soon as possible,

preferably within ten days. On May 11, 2004, Lincoln Benefit

sent Mr. West a second notice of premium due.

On July 5, 2004, Lincoln Benefit sent Mr. West a letter

stating that “[t]he grace period for premium payment on your

policy has expired.” (R. at 183a.) It advised that Mr. West

could apply for reinstatement. The letter stated, “[t]o continue

your valuable coverage, complete the Application for

Reinstatement form on the back and return it with your payment

of $228.51. Upon underwriting approval, and receipt of the

sufficient payment, coverage will continue uninterrupted.” (Id.)

Mr. West showed Mrs. West the document. Mrs. West read

only the first sentence of the excerpt quoted and interpreted the

language “to continue your valuable coverage” to mean “to

continue [uninterrupted] your valuable coverage” rather than “to

[restart after cessation] your valuable coverage.” (West Dep.

43:24-44:2); see Webster’s 3d New Int’l Dictionary 493 (1981).

She thought that if she “filled out the form and sent in the

money, the policy would continue.” (West Dep. 45:2-4.) Mrs.

West did not read, or does not remember reading, the language
28

in the letter clearly stating that underwriting approval of the

application was a condition precedent to reinstatement.

Mrs. West then turned to the application on the reverse

of the letter. She filled out the blanks at the top for the policy

number and the name of the insured. She then read and

answered questions below regarding Mr. West’s health. She did

not read the paragraph immediately below the blanks for the

policy number and the name of the insured that she filled out,

and immediately above the questions that she read and

answered, which stated, “I (each undersigned) request that the

Company reinstate this policy. . . . Coverage will not start again

until this request is approved by the company and all required

premiums and interest are paid. If this request is not approved,

any amount tendered will be returned.” (R. at 187a.)

Lincoln Benefit did not misrepresent the conditions

precedent to reinstatement. The text of the letter and of the

application clearly state that underwriting approval by Lincoln

Benefit was required before coverage would begin again. This

statement is entirely consistent with the clear language of the

Policy itself and the statute, supra, governing applications for

reinstatement. Mrs. West may not avoid these conditions with

the mere assertion that she expected coverage to begin

immediately because of a single sentence in the letter and

application for reinstatement.

Moreover, the record of the previous correspondence

from Lincoln Benefit to Mr. West regarding payment of overdue

premiums demonstrates that it was unreasonable to expect that

submission of payment and a completed application would result
29

in immediate reinstatement. When the Wests were late in

paying their premium but still within the grace period,

immediate payment was, in fact, all that was required for Mr.

West’s Policy to remain in effect. Each notice from Lincoln

Benefit stated exactly that. The reinstatement letter was

different, however. It was accompanied by an application with

questions about Mr. West’s health – something Lincoln Benefit

had never before required to keep the Policy in force. Thus,

simply by the nature of the transaction, the Wests were on notice

that this time, there was at least one additional level of review

that would take place before the Policy would be effective.

Further, Mrs. West’s testimony indicates that she did not believe

that the application would be denied. This demonstrates an

understanding that the application was something that Lincoln

Benefit had the power to accept or deny, and not simply a

ministerial exercise that effected reinstatement immediately.

In light of the totality of these circumstances, the

evidence is clear and convincing: it was unreasonable for the

Wests to expect the Policy to be in force at the time they mailed

the overdue premium and application for reinstatement. Thus,

even under the reasonable expectations analysis, Lincoln Benefit

has no obligation to pay benefits on James West, Jr.’s lapsed

policy of life insurance.

V.

For the foregoing reasons, we will affirm the order of the

District Court.