United States Court of Appeals

FOR THE EIGHTH CIRCUIT

 ___________

 No. 03-3510

 ___________

In re: General American Life Insurance *

Company Sales Practices Litigation. *

*

Charles Kenneth Knouse; Lillian *

Elizabeth Knouse, husband and wife, *

*

Plaintiffs/Appellants, *

*

v. *

*

General American Life Insurance *

Company, also known as Genserve, *

doing business as Genamerica; *

Metropolitan Life Insurance Company; *

Ronald L. Gribschaw, *

*

Defendants/Appellees. *

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Appeals from the United States

 No. 03-3516 District Court for the

 ___________ Eastern District of Missouri.

In re: General American Life Insurance *

Company Sales Practices Litigation. *

*

Patricia S. Palashoff, *

*

Plaintiff/Appellant, *

*

Nicholas P. Palashoff, *

*

Plaintiff, *
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*

General American Life Insurance *

Company, also known as Genserve, *

doing business as Genamerica; *

Metropolitan Life Insurance Company; *

William Wrenshall & Associates, Inc.; *

Ronald L. Gribschaw, *

*

Defendants/Appellees. *

 ___________

 No. 03-3517

 ___________

In re: General American Life Insurance *

Company Sales Practices Litigation. *

*

Carol Louise Brown, *

*

Plaintiff/Appellant, *

*

v. *

*

General American Life Insurance *

Company; also known as Genserve, *

doing business as Genamerica; *

Metropolitan Life Insurance Company; *

William J. Katzbeck; Derrick F. *

Eaglin, *

*

Defendants/Appellees. *

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Submitted: September 16, 2004

Filed: December 6, 2004

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1

The Honorable Richard S. Arnold died on September 23, 2004. This opinion

is filed by the remaining judges of the panel pursuant to 8th Cir. Rule 47E.

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Before WOLLMAN, RICHARD S. ARNOLD,1

 and BYE, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Plaintiffs in these consolidated cases appeal from the district court’s grant of

defendants’ motions to dismiss in each case. We reverse and remand for further

proceedings.

I.

A.

The following facts are taken from the plaintiffs’ complaints. Plaintiff insureds

originally brought their cases individually, but have now consolidated their appeals.

Plaintiffs Charles and Lillian Knouse met with insurance agent Ronald Gribschaw on

June 17, 1985. At this meeting, Gribschaw presented the Knouses with illustrations

stating that the Knouses could obtain a whole life insurance policy on Mrs. Knouse

by paying a one-time advance payment to defendant General American. Gribschaw

represented that the policy’s premiums would “vanish” after the first payment because

the dividends and accrued interest on the policy would be sufficient to cover the

annual premiums without any additional out-of-pocket payments from the Knouses.

Gribschaw also represented that the Knouses could obtain a similar policy for Mr.

Knouse by making a first-year payment followed by annual premium payments for

14 years. Gribschaw represented that the premiums on that policy would also

“vanish” after the last annual premium payment. The Knouses then purchased both

policies. The Knouses purchased an additional policy in 1987 after similar

representations by Gribschaw.
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In July 1993, Mrs. Knouse received a telephone call from Gribschaw and a

letter from General American indicating that an additional out-of-pocket payment was

due on her policy. The letter stated that her premiums had failed to vanish because

the vanishing premium concept itself was heavily dependent on dividends, which

were not guaranteed. The Knouses later received letters from General American

asking for additional payments in 1997 and 2000. The Knouses made payments to

General American after each request. 

The Knouses received notice of a pending class action against General

American in September 2000. The class action—later consolidated with two similar

class actions—was filed in February 1996 and included all plaintiffs in these cases

as class members. See Henderson v. General American Life Ins. Co. (In re General

American Life Ins. Co. Sales Practices Litig.), 268 F.3d 627, 629-30 (8th Cir. 2001),

vacated, 536 U.S. 919 (2002) (class definition). After opting out of a proposed class

action settlement, the Knouses commenced their individual action against defendants

General American, Metropolitan Life (General American’s parent company), and

Gribschaw on January 9, 2001. The Knouses brought claims against defendants for

negligence/willful disregard; common law fraud and deceit; violations of the

Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), Pa.

Stat. Ann. tit. 73, § 201-1, et seq.; violation of Pennsylvania’s bad faith statute, 42 Pa.

Cons. Stat. § 8371; breach of fiduciary duty; and negligent supervision. Their action

was then removed to the Western District of Pennsylvania and transferred to the

Eastern District of Missouri by the Judicial Panel on Multidistrict Litigation (MDL

Panel). The Eastern District of Missouri denied the Knouses’ motion to remand the

action to Pennsylvania state court on the ground that the non-diverse defendant in the

case (Gribschaw) had been fraudulently joined. The district court then granted

defendants’ motion to dismiss the Knouses’ complaint because all of the claims

therein were barred by the applicable Pennsylvania statutes of limitations.
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B.

Plaintiffs Nicholas and Patricia Palashoff met with Gribschaw on October 10,

1985. Gribschaw again utilized policy illustrations and represented that the

Palashoffs could purchase a policy for Mrs. Palashoff with premiums that would

vanish after ten years and a policy for Mr. Palashoff with vanishing premiums after

27 years. The Palashoffs then purchased two policies from Gribschaw and agreed to

make their premium payments through a monthly automatic withdrawal from their

checking account. The Palashoffs continued to make payments through this

automatic method at least until the date that they filed their individual action.

The Palashoffs received notice of the pending class action in September 2000

and promptly opted out of the proposed settlement. They instituted their individual

action against General American, Metropolitan Life, Gribschaw, and William

Wrenshall & Associates, Inc. (Gribschaw’s employer) on January 16, 2001, alleging

the same six claims as the Knouses. The case was then removed and transferred to

the Eastern District of Missouri in the same manner as the Knouses’ case. The district

court similarly denied the Palashoffs’ motion to remand the case and then granted

defendants’ motion to dismiss on statute of limitations grounds.

C.

 Plaintiff Carol Brown met with agents William Katzbeck and Derrick Eaglin

on January 4, 1985. The agents showed Brown illustrations predicting that she could

obtain a policy on her own life with premiums that would vanish after 20 years of

payments as well as a policy on her son’s life with premiums that would vanish after

10 years of payments. Brown purchased both policies and agreed to make monthly

premium payments through an automatic withdrawal from her checking account.

Brown continued to make payments at least through the date that she commenced her

individual action.
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Although not included in her complaint, it appears that Brown also received

notice of the pending class action against General American in September 2000. She

opted out of the proposed settlement and filed an individual action against General

American, Metropolitan Life, Katzbeck, and Eaglin on January 30, 2001. Brown

alleged the same six claims as the Knouse and Palashoff plaintiffs. Brown’s case was

removed to the Western District of Pennsylvania, which denied her motion to remand.

The case was then transferred by the MDL Panel to the Eastern District of Missouri.

The district court granted defendants’ motion to dismiss and denied Brown’s motion

for reconsideration.

II.

We have jurisdiction to hear this appeal under 28 U.S.C. § 1291. We review

the district court’s grant of a motion to dismiss de novo, applying the same standards

as the district court. Ballinger v. Culotta, 322 F.3d 546, 548 (8th Cir. 2003). We

accept the allegations in the plaintiffs’ complaints as true and will dismiss the cases

only when it appears beyond doubt that the plaintiffs can prove no set of facts that

would entitle them to relief. McCormick v. Aircraft Mechs. Fraternal Ass’n, 340 F.3d

642, 644 (8th Cir. 2003). We review the district court’s denial of a motion to

reconsider for abuse of discretion. Davidson & Schaaff, Inc. v. Liberty Nat’l Fire Ins.

Co., 69 F.3d 868, 871 (8th Cir. 1995).

When a transferee court receives a case from the MDL Panel, the transferee

court applies the law of the circuit in which it is located to issues of federal law.

Temporomandibular Joint (TMJ) Implant Recipients v. E.I. du Pont de Nemours and

Co. (In re Temporomandibular Joint (TMJ) Implants Prods. Liab. Litig.), 97 F.3d

1050, 1055 (8th Cir. 1996). When considering issues of state law, however, the

transferee court must apply the state law that would have applied had the cases not

been transferred for consolidation. Id. All parties agree that Pennsylvania law,

including its statutes of limitations, would have applied in these cases had they not

been transferred. See also Larsen v. Mayo Med. Ctr., 218 F.3d 863, 866 (8th Cir.
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2000) (statutes of limitations are components of a state’s substantive law). Because

this is a diversity case, we review the district court’s interpretation of Pennsylvania

law de novo. Davidson & Schaaff, 69 F.3d at 870.

Plaintiffs’ claims for negligence/willful disregard, common law fraud and

deceit, breach of fiduciary duty, and negligent supervision are governed by

Pennsylvania’s general two-year tort statute of limitations. See 42 Pa. Cons. Stat. §

5524(7). The applicable limitations periods for plaintiffs’ bad faith and UTPCPL

claims, however, have not been squarely addressed by either the Pennsylvania

General Assembly or the Supreme Court of Pennsylvania. Accordingly, we must

predict how the Supreme Court of Pennsylvania would rule on these issues. Penn.

Nat. Mut. Cas. Ins. Co. v. City of Pine Bluff, 354 F.3d 945, 952 (8th Cir. 2004). “In

making our prediction[s], we may consider relevant state precedent, analogous

decisions, considered dicta, ...and any other reliable data.” Jurrens v. Hartford Life

Ins. Co., 190 F.3d 919, 922 (8th Cir. 1999) (internal citations omitted). Decisions

from Pennsylvania’s intermediate appellate court (the Superior Court of

Pennsylvania) are particularly relevant and must be followed when they are the best

evidence of Pennsylvania law. Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d 1055,

1066 (8th Cir. 2003).

We predict that the Supreme Court of Pennsylvania would assign a two-year

statute of limitations to plaintiffs’ bad faith claims and a six-year statute of limitations

to plaintiffs’ UTPCPL claims. The Third Circuit recently conducted an extensive

inquiry into the limitations period applicable to violations of Pennsylvania’s bad faith

statute using a standard identical to our own, and we agree with our sister circuit’s

determination that the Supreme Court of Pennsylvania would apply a two-year statute

of limitations to such claims. See Haugh v. Allstate Ins. Co., 322 F.3d 227, 234-36

(3d Cir. 2003); Ash v. Continental Ins. Co., No. 1842 WDA 2003, 2004 WL

2453762, at *4-*5 (Pa. Super. Ct. Nov. 3, 2004) (adopting Third Circuit’s reasoning).

In addition, given the Pennsylvania Superior Court’s holding that a six-year statute
2

Because the district court’s grant of the motions to dismiss was premised

solely on statute of limitations grounds, we address only those claims of error raised

by plaintiffs which pertain to the commencement of the limitations period.

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of limitations applies to UTPCPL violations, we predict that the Supreme Court of

Pennsylvania would hold UTPCPL claims subject to a six-year limitations period.

See Gabriel v. O’Hara, 534 A.2d 488, 496 (Pa. Super. Ct. 1987).

III.

Plaintiffs argue that the district court erred by concluding as a matter of law

that the statutes of limitations on all of plaintiffs’ claims had elapsed because each

plaintiff could have discovered their alleged injuries at the time they occurred or

shortly thereafter. They contend that Pennsylvania’s “reasonable expectations”

doctrine, as well as the 1996 class action, may toll some or all of their claims. We

agree.2

A.

In Pennsylvania, “the statute of limitations begins to run as soon as the right

to institute and maintain a suit arises.” Dalrymple v. Brown, 701 A.2d 164, 167 (Pa.

1997). The running of the statute may be tolled, however, by Pennsylvania’s

discovery rule. Id. The discovery rule is an equitable rule that tolls the statute of

limitations for that period of time “during which the injured party is reasonably

unaware that an injury has been sustained.” Id. (emphasis in original). In order to

invoke the discovery rule, a party bears the burden of showing that it could not

discover its injury despite the exercise of “reasonable diligence.” Id. Reasonable

diligence is an objective standard, and the discovery rule will apply to toll a statute

of limitations only where no amount of reasonable diligence would have enabled the

injured party to discern the injury. Id. at 167, 170. 
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Although the question whether a party could have discovered its injury through

the exercise of reasonable diligence is normally a factual issue “best determined by

the collective judgment, wisdom and experience of jurors,” the commencement of the

limitations period may be determined as a matter of law if the facts are so clear that

reasonable minds cannot differ. Crouse v. Cyclops Indus., 745 A.2d 606, 611 (Pa.

2000).

Pennsylvania appellate courts have not yet explored the discovery rule’s

application to vanishing premium cases such as this one. The Supreme Court of

Pennsylvania has stated, however, that the reasonable diligence standard is

“sufficiently flexible...to take into account the differences between persons and their

capacity to meet certain situations and the circumstances confronting them at the time

in question.” Id. (quoting Burnside v. Abbott Labs., 505 A.2d 973, 988 (Pa. Super.

Ct. 1985)). A plaintiff’s actions must be evaluated, therefore, to determine whether

they conform to “those qualities of attention, knowledge, intelligence and judgment

which society requires of its members for the protection of their own interests....” Id.

(quoting Burnside, 505 A.2d at 988). Each plaintiff must exercise “only the level of

diligence that a reasonable man would employ under the facts and circumstances

presented in a particular case.” Id. at 611-12.

One Pennsylvania trial court has stated that, at least in the case of a noncommercial insured who is unsophisticated with regard to insurance policies,

reasonable diligence entails a cursory examination of the cover page of the policy.

See Half v. Metropolitan Life Ins. Co., 65 Pa. D. & C.4th 246, 254-56 (Ct. C. P.

Allegheny Co. December 8, 2003). If this is indeed true, there is nothing on the cover

pages of any of the policies at issue here that would inexorably lead to a conclusion

that plaintiffs (non-commercial, unsophisticated insureds) should have known that the

vanishing premium concept allegedly explained to them would not occur as

represented. Each cover page states only that plaintiffs had a right to examine each

policy and that flexible premiums were “payable” until each insured reached a certain
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age. See Appellants’ Consolidated App. at 73a-74a (Palashoff), 130a-131a

(Palashoff), 610a (Knouse), 647a (Knouse), 686a (Knouse), 1120a (Brown), 1153a

(Brown). These provisions could be read by a reasonable unsophisticated insured as

being completely consistent with the agents’ alleged representations that the

premiums paid by plaintiffs for a limited time, in combination with policy interest and

dividends paid, would be sufficient to cover future premiums.

The same is true for the illustrations given to each plaintiff by the insurance

agent defendants at or shortly after the date that each policy was sold. The sets of

illustrations given to the Knouse and Brown plaintiffs indicate that the “insurance

will terminate prior to the maturity date if the premium paid and the interest credited

are insufficient to cover the monthly deductions.” See id. at 606a-608a (Knouse),

644a-645a (Knouse), 682a-683a (Knouse), 1115a-1119a (Brown). This provision is

not necessarily inconsistent with the agents’ alleged representations that the

premiums paid and interest credited during the “vanish” period would be sufficient

to cover monthly deductions. In addition, although the Knouse and Palashoff

plaintiffs received illustrations stating that the dividend calculations used in the

illustrations were “based on the current scale” and were “neither guarantees nor

estimates” of future dividends, see id. at 106a-113a (Palashoff), 115a-120a

(Palashoff), 122a-128a (Palashoff), 606a-608a (Knouse), 644a-645a (Knouse), 682a683a (Knouse), reasonable minds could differ as to whether these statements were

necessarily inconsistent with the agents’ alleged representations that plaintiffs’

premium payments would vanish and would not increase at any time. At the very

least, this issue should go before a jury.

Even if reasonable diligence required plaintiffs to read their entire policies, the

policy language is insufficient to show that plaintiffs would have discovered their

injuries as a matter of law. For instance, most of the policies at issue contain

language identical or very similar to the “insurance may terminate prior to maturity

date” language contained in the Knouse and Brown illustrations. See Brief for
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Appellants General American & Metropolitan Life at 47. Outside of such provisions,

defendants rely on two words in regular type (“if any”) located in the middle pages

of each set of policy documents in order to show that plaintiffs should have been on

notice that dividends may not be paid to their policies and thus that the vanishing

premium concept was not guaranteed. See id. These provisions do not show beyond

a reasonable doubt that plaintiffs should have discovered their injuries.

Furthermore, Pennsylvania courts have repeatedly acted to protect the

“reasonable expectations” of non-commercial, unsophisticated insureds against

deception and against policy terms that are not readily apparent. See Pressley v.

Travelers Prop. Cas. Corp., 817 A.2d 1131, 1140 n.3 (Pa. Super. Ct. 2003). The

Supreme Court of Pennsylvania has held—in the context of insurance coverage

disputes—that because consumers view insurance agents as “possessing expertise in

a complicated subject,” it is not unreasonable for consumers to rely on the

representations of the insurance agents rather than on the contents of the insurance

policy. Rempel v. Nationwide Life Ins. Co., 370 A.2d 366, 368 (Pa. 1977).

Therefore, where an insurance company or its agent “creates in the insured a

reasonable expectation of coverage that is not supported by the terms of the policy,”

the insured’s reasonable expectation will prevail over the actual terms of the policy.

Bensalem Township v. Int’l Surplus Lines Ins. Co., 38 F.3d 1303, 1311 (3d Cir.

1994). A non-commercial, unsophisticated insured is thus under a duty to read a

policy to discover inconsistent terms only when, under the circumstances, it is

“unreasonable not to read it.” Rempel, 370 A.2d at 369. 

Given Pennsylvania’s solicitude for non-commercial, unsophisticated insureds,

as well as the flexible nature of the discovery rule, we predict that the Supreme Court

of Pennsylvania would import its reasonable expectations analysis into its discovery

rule jurisprudence when dealing with vanishing premium cases. We also predict that

the Supreme Court of Pennsylvania would apply the reasonable expectations doctrine,

standing alone, to toll the applicable statute(s) of limitations in such cases. It would
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be inconsistent for the Supreme Court of Pennsylvania to allow an insured’s

reasonable expectations to prevail over the actual terms of the policy and to allow

such reasonable expectations to excuse a failure to read an insurance policy to

discover inconsistent terms while at the same time holding that the insureds must read

their policy and discover their injury or risk losing their opportunity to bring suit

within the relevant limitations period.

Because neither the applicability of the discovery rule nor the content of the

plaintiffs’ reasonable expectations can be determined as a matter of law at this stage

of the litigation, both issues should be submitted to a jury. Accordingly, the district

court should not have granted defendants’ motions to dismiss.

B.

Plaintiffs also claim that their membership in a class action filed against

General American in February 1996 tolled the statutes of limitations on their claims.

In Ravitch v. Price Waterhouse, the Superior Court of Pennsylvania held that

Pennsylvania does not allow class actions filed in other jurisdictions to toll the

statutes of limitations on claims brought in individual actions in Pennsylvania state

courts (cross-jurisdictional tolling). 793 A.2d 939, 943-45 (Pa. Super. Ct. 2002). If

we applied the Pennsylvania rule to these cases, the pendency of the 1996 class action

would have no effect on the statutes of limitations for plaintiffs’ claims. We have

stated, however, that the federal interest in “the efficiency and economy of the classaction procedure” outweighs any state interest and therefore justifies tolling in

diversity cases where the otherwise-applicable state law provides no relief. Adams

Pub. Sch. Dist. v. Asbestos Corp., 7 F.3d 717, 718-19 (8th Cir. 1993). Because the

law of our circuit applies to all issues of federal law in these consolidated cases, the

district court should have considered whether the 1996 class action claims and the

accompanying class description were sufficient to put each defendant on notice of the

substantive Pennsylvania claims brought in these cases and to inform each defendant

of the “generic identities” of these plaintiffs, see American Pipe & Const. Co. v. Utah,
3

Thus, the latest that the claims of the Knouse, Palashoff, and Brown plaintiffs

could have accrued is July 1993, September 1995, and April 1995, respectively.

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414 U.S. 538, 554-55 (1974), and thus were sufficient to toll any or all of the

applicable statutes of limitations.

IV.

We accordingly reverse the district court’s grant of the motions to dismiss and

remand for further proceedings. On remand, the district court should reevaluate the

statute of limitations issues in light of this opinion and of our prior holding that, in

vanishing premium cases like this one, the latest that the statutes of limitations on

each of the plaintiffs’ claims can commence is when each plaintiff was asked to make

out-of-pocket payments after the date on which the agents allegedly represented that

each plaintiffs’ premiums would “vanish.” Parkhill v. Minn. Mut. Life Ins. Co., 286

F.3d 1051, 1055 (8th Cir. 2002).3

 

The district court should also determine whether our decision in this matter

deprives it of jurisdiction over any or all of the consolidated cases. Each set of

plaintiffs filed a motion to remand their respective cases to Pennsylvania state court

on the basis of incomplete diversity. The district courts in each case (the Eastern

District of Missouri in the Knouse and Palashoff actions and the Western District of

Pennsylvania in the Brown action) disregarded the lack of diversity because, in the

judgment of those courts, no claims could be stated against any non-diverse

defendants because all of plaintiffs’ claims were time-barred. Thus, the joinder of

such defendants was fraudulent. Our decision today may reinstate some or all of

plaintiffs’ claims against the non-diverse defendants and accordingly render the

joinder of those defendants non-fraudulent.

The judgments are reversed and the cases are remanded to the district court for

further proceedings consistent with the views set forth in this opinion.

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