2005 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit

11-30-2005 

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. B a b a ya n

P r e c e de n t i al or N on-P r e c e de n t i al : P r e c e de n t i al

D ock e t N o . 04-3521

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Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a U niv e r sit y S choo l of L a

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w . v i l l a no v a . e du/thir dc ir c uit_2005/174PREC EDENTIAL

U N IT E D S T A T E S C O U R T O F A P P E A LS F O R T H E T H IR D C IR C U IT

No. 04-3521

THE NORTHWESTERN MUTUAL L I FE I NSURANCE CO.

v.
KATHL EEN L . BA BA YAN
D.C. Civil Action No. 03-c v-00717

KATHL EEN B AB AYAN

v.
THE NORTHWESTERN MUTUAL L I FE I NSURANCE COMPANY; J OSEPH M. SAVI

NO, GEN ERALAGENT NORTHWESTERN MUTUAL F I NA NC I AL NE TWO RK

A/ K/A AND D/B /A THE SAVI

NO FI NANCI AL

GROUP; THOMAS GAL L I NA
D.C. Civil Action No. 03-c v-016222 Kathlee n L . Ba

bay an, Appellant

On Appea l from the United States District Court fo r t he Ea ste rn

Di str ic t of

Pe nn sylva

nia (D.C. Nos. 03-c v-00717 and 03- cv-01622) District J udg e: Honora

ble Michae l M. Bay

lson

Argued Oc tober 26, 2005

Be fore : SL OVI TER, FI SHER, and GREENB ERG, Circuit Judges

.

(F iled November

30, 2005) David S. Senoff ( Argued) Billet & Connor 2000 Marke t Street, Suite 2803 Philadelphia, PA 19103 Attorney for Appellant

Daniel J. Zuc ker ( Argued) 260 South Broad Stre et, Suite 1200 Philadelphia, PA 19102 Attorney for Appellee

, Northw estern Mutual Life Ins. Co.3 Charles W. Craven ( Argued) J ohn P. Penders Marsha ll, Dennehe y , Warner, Col e man & Go g g in 1845 Walnut S tree t, 16th Floor Philadelphia, PA 19103 Attorneys for Appellee

, Thomas Gallina

OPI NI ONOF TH E CO UR T

FI SHER, Circuit Judge

. F or the thi rd tim e in t

he pa st f ou r y e ars , w e are a sk e d to deter mine whether

summary judgme nt was proper ly g rante d in favor of an insurer on the basis that an insuranc e applica nt’s materia l omissions on an application constitut ed bad f aith as a matter of law and re ndere d the policy void ab initio. Com

pa re Justof

i n v. Metropolitan Lif

e Ins. Co. , 372 F.3d 517 ( 3d Cir. 2004), with Bu rk e rt v. Equit able L ife Assur. Soc. of America , 287 F.3d 293 ( 3d Cir. 2002). Ap pe lla nt K a thl e e n B a

ba y an argue s th a t ou

r r e c e nt d e c isi on

in Jus to fin c r e a te d a “ b r ig h t- li n e ” r u le th a t b a d f

a it h c an n e v e r be inferr ed as a

matt er o f l aw if the applica nt provides some re levant
me d ic a l in f

o r mati o n , b u t f

a il s to p r o v id e c o mp le te in f o r mati o n

. We decline to adopt Ba

bay an’s proposed brig ht-line rule in this case . The
rec ord conta ins incontrovertible doc umentary evidenc e that B abayan omi tte d in fo rm a tio n in

ba d f a ith , a nd the re is n o r e le va

nt r e latio ns hip betwee n the information Baba y an provided on her a

pplication and the specific informa t ion she omitted. Accor dingly , we will af firm the4 judgme nt of the Di s t ri ct Court that Ba bay an’s omissions on her insurance application constituted bad f aith as a matter of law

. We a ls o r e

je c t B a b ay an ’ s r e ma in in g g r o u n d s f o r a p p e a l. We conclude that the Distri ct C ourt did not err in g rantingsummary judgme nt in f

av or of Appe llee Nor

thwestern Mutua l L ife Insuranc e Co. (“No rt

hw e ste rn ” ) w ithre sp e c t to B a ba y an’ s n ov e l ba d f

a ithc la im pr e mis e d u

po n N or thw e ste rn ’s “ po st- c la im und e rwri tin g ” pr a c tic e s. I n addition, we hold that the District C ourt did not err in g ranting summary judgme nt in favo r o f Babayan’s insura nce a g ent, Thomas Gallina, as to Ba

bay an’s neg lige nce claim beca use Gallina’s a ctions d i d n o tc a u s e N o rt h w e s t e r

nt o r e s c i n d

B a b ayan ’ s p o l i c y.
I. Bac kgr ound

A. The App lic at ion P r oc e ss
Af te r m iss ingsix day s o f w or k b e c a us e of B e ll’ s Pa lsy Di so rd e r i n late De c e mbe r 2 00 0, B a ba y an d e c ide d to ob ta in d isa bil ity i n co me insuranc e. In J anuar y 2001, Ba bay an telephone d Gallina’s insurance ag ency . Shortly there afte r, Ga llina met with Baba y an at he r office in New J erse y
. During this mee ting, Ba bay an provided Ga llina wi t h gen er al , p er s o n al i n fo rm at i o nfo r G al l i n a t o u s e i np r ep ar i n g a specific insurance proposal. Sever al wee ks later, on F ebrua ry 11, 2001, Gallina pre sented his proposal to B abayan.
B a ba y an a g re e d to g o f

or wa rd wi th t he a pp lic a tio n p ro c e ss and fi l l ed o ut a disability insurance application and a nonmedical questionnaire. E ach of the documents require d Ba bay an to re spond to a number of specific questions that require d either a “y es” or “no” response

. Gallina verba lly asked Ba bay an eac h question, t hen
rec orded he r re sp o n s e on the application and the nonmedica lWit h her me mory re fr eshed at her de position, Babayan 1 acknow ledg ed that she ha d b ee n in a motor vehicle acc ident on Se pte mbe r 2 4, 19 96 , w ith in f ive y e ars of

the F e br ua ry 11 , 2 00 1 d a te she submitted her a

pplication.
5 questionnaire. G allina testified at his deposit i o n t h at he r ead the qu e sti on s f

ro m th e do c ume nts ve rb a tim

. The c rux of t he dis pute between the parties is t he intera ction b et we en Ga l l i n a a n d

Ba b ay anat t h e F eb ru ary

2 0 0 1 m ee t i n g, particula rly Ba bay an’s “ response s” to two of the que stions. Question 14.K.2 of the disability

insurance application aske d:

I n the past 5 y ear s, has the Insured be en in a motor vehicle acc ident, has the I nsured been c harg ed with a moving violation of a

ny motor vehicle la

w, or ha s the I nsured’ s driver’ s license been r estricted, suspe nded,
or re voked?

Ba bay an does not dispute that Question 14.K.2 was a nswere d “no” on the insuranc e applica

tion. Neither doe s Ba b ay an dispute that the
answe r to Question 14.K.2 is false . Acc ordi n g t o Ba bay an, she informed Ga llina t h at s he had pr eviously been involved in a

motor vehicle a ccide nt and a s l ip-and-f all acc ident in 1995 or 1996. 1 B a ba y an c la ims that G a lli na

tol d h e r n ot t o d isc lose th e inc ide nts beca use “that’s far enoug h awa y .” Ga llina alleg edly

told her, “I

don’t think it will be a problem, but when you sign the medical wa iver, they g o g et y our rec ords from y our doctors and they ’ll find out that stuff.” Thus, Ba bay an asserts that she acquiesce d in Gallina’s advice to mar k “no” on the application.

I n addition, B abayan answe red “no” to Q uestion 33.k o f t he nonmedical que stionnaire, which stated: “In the last 10 y ear s, haveNorthwe stern ar g ued in its moti on for summary judgme nt 2 that B a ba y an’ s fa ls e re sp on se s to Qu e sti on s 3 6 a nd 37 a lso constituted bad fa ith as a matter of law. The District Court, however , reje cted that a

rg ument, stating that: “Ba bay an’s a nswers to que stions 36 and 3[7] appea

r to ca ll for more subjec tive answe rs, such that inconsistencies in re sponses might not incontrove rtibly establish bad fa ith , a s a matte r o f l aw. ” B e c a

us e the Di str ic t Co urt di d not r e ly upon Ba bay an’s a nswers to these questions in i t s opinion, we nee d
no t e xami ne the se dis c re pa nc ie s in de ta il.
Ba bay an’s insura

nce ap p lication contained the following 3 repr esentation:

The Insured c onsents to this application and decla res that th e a

ns we rs and

statem ents ma de on

thi s application ar e cor

rec tly rec orded, complete and true to the best of the I n s ured’ s knowledg e and be lief. Answer s and statements broug ht to the attention of the ag ent, medica l e xa

mine r, or pa

rame dical examiner a

re not considere d information broug ht to the attention of the Com pany unle ss s tate d in

the a pp lic a tio ns

. Statements in this application are repr esentations and
6 y ou had, been told y ou had or be en tre ated f or: Arthritis, sciatica , go u t , o r any

disorder of

the muscles, bones, joints, spine, bac k or neck? ” There is no evidence in the rec ord that B abayan aske d

2 Gallina any

questions relatingto Question 33.k, or that Gallina g ave Ba bay an any

advice on how to answe r the que stion.

Af t e r G a lli na fi nis he d f ill ingou t th e qu e sti onna ir e in r e sp on se to Ba bay an’s a nswers, B abayan sig ned both the insuranc e application and the nonmedic al questionnaire . Eac h of the doc uments contained
c e rta in r e p r e s e n tati o n s a

b o v e th e s ig n a tu

r e li n e

. B y s ig ning the

3no t w arr anti e s.
Simi larly , the nonmedica l qu es t i onnaire contained the following repr esentation above t h e si g nature line: “I decla re that my

answe rs and state me nts are c or

re c tly re c or de d, c omp le te , tr

ue to the be st o f my knowledg e and be lief. Statements in this application are repr esentations and not warr anties.”
7 application and the nonmedi cal que stionnaire, B abayan re prese nted that her a nswers on both for

ms were truthful and ac curate.
The a ns we rs contained on the insurance application and the nonmedical questionnaire set forth above, howeve r, wer e false. Ba bay an wa s in an automobile ac cident on September 24, 1996, within five y ear s of the date she submitt ed her insurance application. I n addition, Ba

bay an wa s treate d by sever al phy sicians between 1996 and F ebrua

ry 2001 for n ec k , b ack, hip, leg, a nd knee pa in resulting fr om he r a

uto mob ile a c c ide nt, a s we ll a s a se parate s lip -a nd -f a ll
acc ident in J uly

1996. Ba bay an acknow ledg ed in her deposition that the answe r to Question 33.k was false; she st ated, howe ver, that she thought that the w o rd “d isorder” meant “dise ase.” Ba bay an fur ther tes t i fi ed that had she rea d Question 33.k at the F ebrua ry 11, 2001 meeting with Gallina, she would have asked Ga llina to ex plain what the question meant to cle ar up a ny misunderstanding . She claims that if Gallina ha d told her that Que stio n 3 3

. k ref err ed to “tre atment for ong oing problems,” she would have answe red “ y es” ba sed upon her “new understanding .”

Ba b ay an a s s e rts th a t w r itte n n o te s s h e to o k d u r ing her Fe bruar y 11, 2001 meeting with Gal l i na conf irm her ve rsion of the
e ve nts

. Ad dit ion a lly , B a

ba y an state d that Ga lli na

tol d h e r s he wo uld have to sig n a wa iver authorizi ng Northwe stern to obtain her me dical
rec ords. B abayan sig ned the a uthorization for rele ase of her me dicalQuestions 31-42 of th e par amedica l questionnaire we re 4 identical to questions 31-42 on the nonmedic al questionnaire completed by

Gallina.
8 rec ords, and she informed Nor th we s tern on the nonme dical questionnaire that Dr. Jos eph Kipp wa s her pr imary car e phy sician.

B. Par am edical Exam ination

On Fe bruar

y 13, 2001, a par amedica l examiner to ok Ba bay an’s blood pre ssure a

nd asked he r some fur

ther questions about her med i cal hist ory . Severa l of the questions the examiner aske d B a ba y an we re ide nti c a l to qu e sti on s sh e ha d p re vio us ly ans we re d in her me eting with Gallina. B abayan testified at her de position t hat she d i d not rem em b er

s p ec i fi c q u es t i o n s t h e e x am i n er as k edh er , al t h o u gh sh e state d th a t th e e xami ne r “ mus t hav e a sk e d me o bv iou sly a t le a st
some o f t hem.” One of the que stions the ex aminer a sked B abayan was Que st i o n 3 3

. k . As in her pr ior answe r on the nonmedic al questionnaire, B abayan answ ere d “no” to Que stion 33.k on the para medical questionnaire. Ba bay an testified at her

deposition that 4 she did not rea d the para

medical questionnaire befor e signing it. She further stated that if she ha d rea d the re sponses marke d by the examiner, she would have rea liz ed the answe rs wer e incomplete a nd inacc urate . Despite not re ading the answe rs marke d by the examiner, Ba bay an signe d the para

medical que stionnaire, ther eby repr esenting that her a nswers a nd statements wer e “c orre ctly rec orded, c omplete, and true to the best of [her] knowledg e and be lief.”

After rec eiving Ba

bay an’s a

pplication, nonmedical questionnaire, a

nd para medical que stionnaire, Nor thwestern underw riter Cy

nthia Guss approve d Ba

bay an’s po l icy

on Marc h 3, 2001. Guss did not obtain any of B abayan’s medic al re cords at the tim e bec ause she “didn’t fe el that the medica l history providedReg arding Question 36, Ba

bay an told the examiner that she 5 saw Dr . Kipp for a virus in J anuar y 2001. Guss stated that she did not view a vi rus “a s being something that would cause an extended disability , keep one from preve nting to w ork at their own oc cupation fo r a ny sig nif ic ant a mou nt of tim e .” Re g ard ingQu e sti on 37 , G us s conclude d that Ba

bay an’s a

nswer did not mer it further inquiry beca use B abayan said she only missed six da y s of work due to Be ll’s Pa lsy vir us

. Al tho ug h a

re sid e nt o f P e nn sylva

nia , B a ba y an w or ke d in 6 New Jersey an d was e ntitled short-term disability benef its pursuant to New Jersey

law.
9 war rante d medical rec ords beingorder ed.” I n addition, Guss testified
a t he r de po sit ion that the inc on sis te nc ie s in Qu e sti on s 3 6 a

nd 37 did not merit order ing B abayan’s medical rec ords. After the application 5
w a s a p p r o v e d , G a ll in a

d e li v e r e d

th e p o li c y

to B a b ay anin M arc h 2001. Th e e f

f e c ti v e d a te o f th e p o li c y w a s F e b r u ar y 1 3 , 2 0 0 1 , the date B abayan under

went the pa

rame dical examination.

C. Subse que nt Ill ne sse s a nd R e je c ti on o f Cla im

Be g inning in Mar ch or A

pril 2001, Ba

bay an starte d suffe ring from fatig ue, pain, he adac hes, and a n inability

to conce ntrate. D r. Kipp g ave B abayan a preliminary diag nosis of fibromy alg ia. Over the cour se of the ne x t ten months, Baba y an soug ht treatment fr om Dr. K i p p an d a nu mb e r o f

o t h e r p h y s i c i an s f

o r h e r s y mp t o m s

. In F e br ua r y 2 0 0 2 , B a b a ya n a p p l i e d f o r a nd re c e ive d s ho rt -t e rm

dis a bil ity i n c o m e p aym e n t s f

r o m t h e S t a t e o f

N e w J e r s e y. 6

On Marc h 23, 2002, approximately one y ear

afte r her sy mp t oms beg an, B abayan applied f or disability

benef its under her ins ur anc e po lic y . N or

thw e ste rn a ssi g ne d d isa

bil ity be ne fi t sp e c ia lis t10 L isa Duller to re view B abayan’s c laim. Duller testified in her d e p o s i t i o nt h a ts h e m a d e t h e d e c i s i o n t o i n s t i tu t e a “ c o n s t e s t a

b i l i t y” revie w of B abayan’s c laim beca use compa

ny policy provides that such a revie w i s automatically perf ormed if a claim is filed within two y e ars of the a pp lic a tio n d a te . B a

ba y an’ s a pp lic a tio n c a

us e d D ull e r t o reque st certa in information fro m Ba bay an, including an “A ttending Phy sician’s Statement” from Dr

. Ki pp. Dr. Kipp c ompleted the state me nt, ind ic ati ng that he ha d d ia g no se d B a ba y an w ith fibromy algia, depr ession, chronic pain, and c og nitive dy sfunction,
and tha t he ha d s e t for th a tr e a tme nt p lan th a t in c lud e d p a in manag ement and e x amination by specia lists. Duller a lso requeste d medical r ecor ds fr o m all of the doc tors identified in Dr. Kipp’ s rec ords as providingtreatment to Baba y an.
There afte r, No rthwester n beg an a mor e extensive investigation of Ba

bay an’s c laim. Duller authoriz ed an outside private inve stigation servi ce to obtain information about Ba bay an. F ur the rm or e , o n M ay

3, 20 02 , a

No rt hw e ste rn re pr e se ntativ e , Jim Porter, intervie wed Baba

y an at her home. During the course of that int e rv ie w, Por

te r i nf or me d B a ba y an th a t her

fu ll a nd c omp le te medical history , including he r m o t o r vehicle ac cident and slip-andfall acc ident, had not be en repor ted to N orthwester

n by Gallina or the para medical e x aminer.

I n summer 2002, B abayan wa s diag nosed with Sjogre n’s Sy nd rom e, an a

uto immun e dis or de r, and pr ima ry bil iary c ir rh os is. Ba bay an advise d Nort h wester n of her new diag nosis, and informed the company

that the orig inal diag nosis of fibrom y al g ia might no longe r be a

pplicable.

On J uly 11, 2002, Duller re fer

red B abayan’s f

ile t o Steve Ki e n, an un de rw ri te r a t N or thw e ste rn . K ie n’ s jo b w a s to re vie w a ll of the infor

mation in Baba

y an’s f i l e to come to a de terminationThere wer e two draf ts of the final Aug ust 21, 2 0 0 2 letter. 7 Duller testified that the Aug us t 2 1 , 2 0 0 2 letter c ontained all of the b a s e s f o r N o rt h w e s t e r

nt o r e s c i n d

t h e p o l i c y.
11 whether Northwe stern would have issued the policy to B a b a ya n based
u p o nt h e i n f

o r m a t i o n i t r e c e i v e d

d u r i n g t h e c o n t e s t a

b i l i t y r e v i e w
. In
a memora ndum to Duller dated J uly 19, 2002, Kien conc luded: “Ha d
we be e n a

wa re of th e chronic pa in a nd art hr a lg ia s sy

mpt oms , extensive treatment history and MRIconfirme d disc disease and deg ener ative cha

ng es in the rig ht knee, policy D1408128 would have been de clined.” Du ller made the dec ision to recommend re scission of the policy

on J uly 26, 2002.
On that s am e d ate, Duller sent a memora

ndum to her supervisor, Shar on Ray

mond. Duller testified at her deposition that she made the re commendation to re scind the policy based upon Ki e n’ s c on c lus ion s. Du lle r f ur the r te sti fi e d that sh e pr ob a bly wo uld ha ve r e c o m m e n d e d

t h a tt h e p o l i c y

b e r e f o r m e d b y a d d i n g c e rt a in riders to the pol icy had that been K ien’s re commendation. Ray mond ag ree d with Duller’s re commendation, and, on Aug ust 21, 2002, Duller sent a

letter to Ba

bay an resc inding her policy . Duller e nclosed a che ck totaling Ba

bay an’s pr emium pay

ments, plus interest, and in f o r m e d B a b ay ant h a tb y

c a s h i n g t h e c h e c k

s h e w o u l d

r e l e a se Northwe stern fr om all claims. Ba bay an did not cash the chec k. 7

II. P roce dural Hi story
On Fe bruar

y 4, 2003, Northwe stern filed a two count
c omp la int a lle g ing mis re pr e se ntatio n and fr a ud and dece it. Northwe stern soug ht to have B abayan’s policy decla red void a

b initio, t o have the policy

returne d, and to re ceive costs, fee s and other
re lie f. On Mar ch 1 7, 20 03 , B a ba y an f ile d a c omp la int

a g a ins t No rthwest e rn

and Jose phM. Sa vin o. Th e pa rt ie s st ipu late d toBa bay an’s a mended c omplai n t o rig inally alleg ed bre ach of 8 fi du c iary du ty and ne g lig e nc e c la ims a g a ins t N or thw e ste rn , a s w e ll. B a ba y an, ho we ve r, vo lun tari ly dis mis se d wi th pr e

jud ic e tho se c la ims on J anuar y 7, 2004.
The District Court’s de ter m i n ation as to the bre ach of 9 fi du c iary du ty c la im i s n ot a

su bje c t of thi s a pp e a l.
12 consolidate the a ctions for a ll pur poses, and, pur suant to an additional stipulation, S avino was dismissed with prejudice

. Ba bay an filed an amende d five c ount complaint on Dece mber 24, 2003, ag ainst Northw es t ern and Gallina see king a decla ratory judgme nt ag ainst Northweste rn, alleg ing ba d faith d e nial of insuranc e benef its and brea ch of c ontrac t ag ainst both defe ndants, and a lleg ing brea ch of f

iduci ar y duty

and neg lige nce a g ainst Gallina. 8 No rt hw e ste rn and Ga lli na fi le d mot ion s fo r summa ry jud g me nt a s to all counts in the complaint. On August 24, 2004, the District Court g rante d summary

judgment to Northwester n and Ga llina. The District Cour t first deter mined that Northwe stern could r escind Ba bay an’s policy

beca use B abayan kno wi n g ly made f alse a nd
mater ia l mi sr e pr e se ntatio ns a s a matte r o f l aw. B e c a

us e thi s determinati o nr e n d e r e d

th e p o li c y

v o id a b in it io , th e D is tr ic t C o u rt then held that Nor

thwestern w as entitled to s u m m ary judgme nt on B a bay an’s b r e a c h o f

c o n tr a c t c la im

. T h e D is tr ic t C o u rt n e xt conclude d that su m m ar y judgme nt was appr opriate in fa vor of Northwe stern with re spect to B abayan’s ba d faith cla im. Finally , the District Court held that Gallina was entitled to summary judgme nt as to B a ba y an’ s n e g lig e nc e and br e a c h of fi du c iary du ty c la ims

. As to 9 the ne g ligence claim, the Di str ic t Co ur t he ld t hat B a ba y an f a ile d to pr od uc e su ff ic ie nt e vid e nc e e sta

bli sh ing that Ga lli na

ow e d h e r a

du ty of ca re. In addition (based upon its ea rl ier findingthat Ba

bay an’s
c on du c t w a s f

ra ud ule nt a s a matte r o f l aw) , th e Di str ic t Co ur t he ld13 that Ba bay an cou ld not obtain contribution for her ow n willful misconduct as an intentional tortfe asor. Alter natively , the District Court held that Ba

bay an’s c laims ag ainst Gallina we re ba rre d by the
a pp lic a ble tw o- y e ar s tatut e of

lim itatio ns

. Ba bay an filed a

timely notice of a

ppeal on August 26, 2004. The District Court h ad subject matter jur isdiction pursuant to 28 U.S.C. § 1332, because the par ties are ci t i z ens of diff

ere nt states (B aby an: Pennsylvani a; Northwestern: Wisconsin; Gallina: New J erse y ) and the amount in controver sy exceeds the sum of $75,000, exclusive of interest and c osts. W e have jurisdiction over an a ppeal from a final order of the Dis trict Court pursuant to 28 U.S .C. § 1291. We exer ci s e plenar

y revie w over

the District Court’s entry of
s u m m ar y judgme nt in favor of

Northwe stern and G allina. M o r ton Int’l, Inc . v. A.E. Staley

Mfg. Co. , 343 F.3d 669, 679 (3d Cir. 2003). We theref

ore a pply the summary

judgme nt s t andar d set forth unde r F e de ra l Ru le of Civ il Pro c e dure 56 (c ). Un de r t hat st and ard , w e wi ll
a ff ir m th e jud g me nt o f t

he Di str ic t Co ur

t “ if the ple a din g s, depositions , answe rs to interrog atories, a nd admissions on file, toge ther with the a ffidavits, if any , show that there is no ge nuine issue as to any materia l fac t and that the m o ving pa rty is entitled to a judgme nt as a matter

of law.” F ED .R.C IV .P. 56(c).

III. Discussion

A. No r th wes te r n’ s R e sc iss ion Cl aim
The initial is sue conf

ronting the Court is whether B abayan’s
answe rs to Question

1 4 .K.2 of the insura

nce a pplication and Que stion 3 3

. k of the nonmedic al and pa rame dical questionnaire s were kn ow ing ly

fa lse or ma de in b a d f

a ith

. Af te r r e vie wi ngthe a

pp lic a ble
c a se law, we c on c lud e that B a ba y an’ s ans we r t o Q ue sti on

14 .K .2 did not constitute b ad fa ith as a matter of law. I f we wer e conside ringThe pa rties agr ee that Pennsy lvania law a pplies to the 10 pe nd inga pp e a l.
Under Pennsy lvania law, a

false r epre sentation includes an 11 omission of an insured’s medica l information. See J us tof in , 372 F.3d at 5 2 2 (c i t i n g Grimes v. Prudential Ins. Co. of Am. , 585 A.2d 29, 31- 32 (Pa. Super. Ct. 1991)).
14 B a ba y an’ s ans we r t o Q ue sti on

14 .K .2 a lon e , w e wo uld

be re qu ir e d to
reve rse the judg ment of the District Court. We are not, however , and
we ho ld that B a

ba y an’ s ans we r t o Q ue sti on

33 .k c on sti tut e d b a d f

a ith matter of la

w for the rea sons set forth below.

1.

Gene rally , in order to void an insur ance policy under Pennsy lvania law, an insurer has the burde n of proving , by clea r and 10 convincing evidenc e, the following three fac tors: (1) the i n s u red made a false r epre sentation; (2) the insure d knew the r epre sentation 11
wa s fa lse wh e n it wa s ma de or the ins ur e d ma de the re pr e se ntatio n in bad fa ith; and (3) the r epre sentati o n was mate rial to the risk being insured. J

us tof in , 3 7 2 F. 2 d at 5 2 1 (c i t i n g Coolspri ng Stone Supply, Inc., v . Am. States Life Ins. Co. , 1 0 F

. 3 d 1 4 4 , 1 4 8 ( 3 d C i r

. 1 9 9 3 ) )

. In deciding a mot ion for summ ary judgme nt, the court is required to take the heig htened standa

rd of pr oof into a ccount. Id. at 521-22 (“ Where the clea r and c onvincing standard a pplies, the trial judg e must inquire whether the evidence pre sented is such that a jury applying that evidentiar y standard c ould find only

for one side.”).

T h e p arti e s d o n o t d is p u te th a t th e g e n e r a l f r a me w o r k as set forth in Jus to

fin g overns Nor

thwestern’ s resc ission claim. Nor do they dispute that Northweste rn prove d the first (falsity) and third (mater iality) f

ac t o rs as a matter of law . The dispute ce nters ar oundS i milar to Ba bay an’s a

pplication above, Jamison’s 12 application conta ined a r epre sentation that his answer s were “true and complete to the be st of my knowledg e and be lief.” Id.
15 the District C ourt’s determination that there w ere no g enuine issues of mate ri a l f

a c t a s to wh e the r Babay an’ s ans we rs we re kn ow ing ly false or made in bad f

aith.

2.

Two rec ent decisions of this Court rea ched contrary conclusions as to w hether , at the summary judgme nt sta g e, an insurer could obtain a judg ment as a matter of law based upon the insured’ s fa lse mis re pr e se ntatio ns in a n in sura nc e a pp lic a tio n. B e c a

us e of the ir imp or tanc e to the pe nd ing a

pp e a l, we dis c us s e a c h o f t he de c isi on s in de ta il.

I n the first dec ision, Bu rk e rt , we he ld that a life insura nce policy was void ab initio beca use the a pplicant knowingl y

made
m a t e r i a l l y

f a l s e m i s r e p r e s e n t a t i o n s i n h i s i n s u r an c e a

p p l i c a t i o n

. In that case , the decedent, Seth J amison, applied for a $1 million doll ar lif e ins ur anc e po lic y thr ou g h Eq uit a ble L if e

. I n c onne c tio n w ithhis application, J amison was re quired to state: (1) whether he used
narc otics and other dr

ug s within the l ast ten y ear s; and (2) w hether he
re c e ive d me dic a l c ouns e lin g or me dic a l tr e a tme nt re g ard ingthe us e of alc ohol or drug s. J amison answe red that he was tre ated f or coc aine
a bu se in the late 19 80 s and e arl y 19 90 s, bu t th a t he ha d “ no pr ob le ms since.” Bu rk

e rt , 287 F.3d at 297. We gr anted summary judgme nt 12 in f a vo r o f the ins ur e r on its re sc iss ion c la im be c a us e the ir re futa ble evidenc e re veale d that J amison was underg oing treatment f or coc aine addiction with his clinical psy chi atrist at the time he f illed out the
a p p li c a ti o n. Id. We rejec ted the bene ficiar ies’ ar g ument that J amison’s answe rs wer e ambiguou s , finding that J amison’s16 “incomplete” answe rs did not raise a question of f act be cause “fr aud is presumed . . . fr om knowledge o f t he fa lsity .” Id. (quoting Coolspri ng Stone Supply, Inc

. , 10 F.3d at 148)

. We f urther stated that an “inf ere nce of fra ud is irresistible when, for example, unr ep o rt ed illness or disability of the insured wa s so serious and so re cent that he could not have f

org otten it.” Id. (q u o t i n g Ev ans v . P e nn . M ut. Life Ins. Co. , 186 A. 133, 138 (Pa. 1936)) . Acc ording ly , we he ld that the be ne fi c iari e s’ arg ume nt t hat Jam iso n’ s a

ns we rs we re sim

ply

“ inc omp le te ” wa s “ fr ivolo us ” in t he fa c e of

su bs tanti a l, incontrover

tible evi d ence that J amison was using drug s and underg oing tr eatment for drugand alc ohol abuse at the time he completed hi s appli cation. Thus, Jamison’s mi srepr esentations constituted bad fa ith as a matter of law. Two y ear s afte r o u r dec ision in Bu rk e rt , we c ame to a differ ent conc lusion after c onsidering a similar issue in J us tof in reg ardingwhether

an insuranc e applic an t ’s misstatements in her application constituted bad f aith as a matter of law

. L oretta Justofin ini tiall y ap p l ied for a life insuranc e policy from MetL ife in 1994. In that application, she stated that her son, Dr

. Christopher J ustofin (“D r. J ustofin”) was her pe rsonal phy sician, and thath e t r e a t e d

h e r f o r o c c a s i o n a l art h r i t i s o f

t h e h an d s an d

f e e t. J us tof in , 372 F.3d at 519. MetL ife subseque ntly issued J ustofin a life insurance policy

in the amount of $100,000. I n 1999, J ustofin applied to MetL ife for

additional cover ag e (up to $300,000). I n connec tion with that proce ss, J u s t o fi n was re quired to complete an additional applicati o n

. J ustofin answer ed “yes” to two que stions on the application: (1) that she had bee n treated for, inte r a lia , arthritis; and (2) that she had bee n examined by a phy sici an wi thin the past five y ear s. Id. a t 51 9- 20 . B e c a us e Justo fi n a

ns we re d “y es” to bot

h qu e sti on s, th e applic a tio n in str uc te d h e r t o p ro vid e fu

rt he r d e ta ils , including: the name of eac h phy sician, the nature a nd sever ity

of her17 c on dit ion , th e fr e qu e nc y

of a tta c ks , s pe c if

ic dia g no se s, and

tr e a tme nt. Id. at 520. J u s t ofin listed the names of se vera l doctors she ha d consulted for

treatment, details of the tre atment she unde rg one, and that she had f

oot surg ery for her arthritis. J ustofin, however , did not
m e n t i o ni nt h e a

p p l i c a t i o nt h a th e r

s o nw a s h e r

p h y s i c i a n

. In addi t ion, J ustofin stated in part B of the a pplication that she had arthritis and that she took Pre dnisone for he r ar thri t i s b ac kin 1969. I n part C of the a

pplication, J ustofin indicated that she had an

“ un kn ow n” ty

pe of art hr iti s th a t c a

us e d h e r h and s to sw e ll.

Af te r Jus tof in p a sse d a

wa y , M e tL if e brou g ht a

n a c tio n to
re sc ind he r p oli c y

on the ba sis that sh e kn ow ing ly fa ile d to dis c los e that her son wa s her phy s i ci an and that she was pr escr ibed Prednisone. The insured re lied upon deposition te stimony from Dr

. Justo fi n th a t he wa s his moth e r’ s per so na l phy sic ian f ro m 19 94 un til 1998; that he vis ited his mother weekly during that period to examine her a nd pick up his mail; that his m o t h er h ad ar thritis (either
r h e umato id , o s te o arthr it is , o r b o th ) ; a n d th a t h e u s e d

to p r e s c ib e a

s ixmonth supply

of P rednisone f

or his mother’s a

rthritis. Id. a t 5 2 0

. We agr ee d t h at J u s t o fi nm ad e f

al s e r ep re s en t at i o n s i nt h e 1 9 9 9 ch an ge application bec ause the irref utable evidenc e in the rec ord showed that J ustofin clear ly failed to infor m MetL ife that she took Pre dnisone for h e r arthr it is b e tw e e n 1 9 9 4 an d 1 9 9 8. Id. at 522. We disag ree d, howeve r, that Jus tofin’s misrepre sentatio n s const ituted bad fa ith as a matter of l aw. We noted the g ener al rule that “an insure d’s state of mind is an issue o f fa ct for the jury ” bec ause “ evaluating state of mind often requir es the dra wing of infe rences fr om the conduct of parties about which rea sonable persons mig ht differ .” Id. at 522-23. Ap p l y i n g t h i s s t an d ar d , we h el d t h at J u s t o fi n ’s an s we rs i nh er ch an ge a pp lic a tio n d id n ot i nc on tr ov e rt ibl y e sta bli shhe r b a d f

a ith . In s o ho ldi ng , w e state d th a t th e re we re a t le a st t wo po ssi ble re a so na

ble inf e re nc e s f ro m th e e vid e nc e tha

t pr e c lud e d s umm ary

ju dgment. First, a jury could conclude that J ustofin might not have thoug ht thatI n a footnote, w e stated that the 1994 and 1999 applica tions 13 had to b e r e a d

to g e th e r f o r p u r p o s e s o f d e te r mi n in g w h e th e r

the
answe rs on the 1999 chang e application we re ma de in bad f aith. Id. at 522 n.9.
Alternatively , we he l d that summary judgme nt was 14 inappropriately

g rante d beca

use there was a g enuine issue of mater ial fac t a s to whether Justofin’s repre sentations wer e mater ial. Id. at 525.
18 her son’ s casua l visit s were important enoug h to repor t i n h er new application bec ause: (a ) she ha d alre ady disclosed in the initial application that h er son was her phy sician; and (b) her son discontinued his weekly

visits one y ea r prior to he r submitting the chang e application. Id. a t 52 4. Se c on d, a s to Justo fi n’s f a ilure to 13 list t he ty pe of arthritis she suffe red f rom, and to disclose that she w as takin g Pr e dn iso ne to c omb a t he r art hr iti s, we state d th a t a

jur y c ou ld deter mine that fur t h er de tail on the chang e application was
unnece ssary beca

use she alre ady

listed on her cha

ng e application that her a rthritis was treated, inte r a lia , b y surg e ry

. F or

the se re a so ns , 14
we held th a t a

mate ri a l is su e of

fa c t e xiste d a s to wh e the r Jus tof in
answe red the application in bad f aith.

The c rux of the parties’ c ompeting a rg uments on the merits of Northwe stern’s r escission claim is the prope r interpr etation of our decision in J

us tof in . B a ba y an a rgue s th a t “

Jus tofin can be rea d as
c re a tin g a

br ig ht l ine ru le that w here an ins ur e d p ro vid e s so me re le va nt m e dic a l in fo rm a tio n b ut f ail s to pr ov ide c omp le te infor mati o n , th e qu e s ti o no f

th e in s u r e d ’ s in te n t c ann o t b e in f err ed
a s a matt e r o f la

w
. ” I n o p p o s it io n , N o rthw e s te r n r a is e s two arguments. First, Northwe stern ar g ues that “[f]ar from esta blishing a brig ht line rule, the J us tof in court c onfined its holding to the fac ts[ .]” Second, Northwe stern ar g ues that, assuming a brig ht line rule wa s cre ated in J

us tof in , th a t r ule is i na pp lic a ble un de r t

he fa c ts19 of this c ase beca

use Ba bay an’s own te stimony

demonstrates that she provided knowing ly

false a

ns wer s in the application and qu e sti on na ir e s. We agree wi th N or

thw e ste rn that J us tof in did not create a brig ht-line rule; rather, the holdingin J u s t o fin confirms the importance of ana ly

zing bad f

aith case s at the summary judgme nt stag e under the particula

r fac tual backg round of e ach c ase. J us tof in and Bu rk

e rt applied the same t h re e-pa rt fra mework unde r Pe nn sylva

nia law. We d e c lin e to e xten d th e sp e c if ic ho ldi ngin J us tof in to a broa d brig ht-line rule , particula rly wher e numer ous courts have applied the framew ork to diverse fac tual situations over the past si x ty

y ear s. Com

pa re J us tof in , su pra ; Bu rto n v . P ac ifi c Mutual Lif

e Ins. Co. , 84 A.2d 310, 312 (Pa. 1951) ( holding that judgme nt should not be entere d in favor of the insurer b ec ause the insured wa s unawa

re at the time he applied fo r insuranc e that he suffe red f rom incura

ble throat c ance r); and Gr im es v. Pru de nti al I ns

. Co. of America , 585 A.2d 29 (P a. Super. Ct. 1991) (f inding that insure d d id n o t a c t in b a d f a it h w h e n s h e f

a il e d to d is c lo s e a

liver disorder a

nd hy perte nsion on her application where there was te sti mony that: ( a ) t

he ins ur e d’ s d oc tor

tol d h e r t hat he r l ive r r e su lts
wer e “e levated” b u t normal; and (b) her hy perte nsion was an
a sy mpt omatic dis or de r) ; with Bu rk e rt , su pra ; Freedma n v. Mutual L if e In s. Co. of N

e w York, 21 A.2d 81 (Pa. 1941) ( holding that judgme nt notwithst anding verdic t should be entere d in favor of insurer w here insured answ ere d in his application he ha d not visit ed any phy sicians over

the past five year s, y et the uncontr adicted eviden ce reve aled he had made twenty visits t o five phy sician over the fi ve -y e ar p e ri od ); Sto

pp e r v

. Ma nh att

an LifeIn s. Co. of N

e w York, 241 F.2d 465 (3d Cir. 1957) (re ly ing up on Freedm an , Court of Appea ls found that applicant’ s withholding of medic al i n formation
c on sti tut e d b a d f

a itha s a matte r o f l aw) ; W

als h v

. J oh n Ha nc oc k

Mu t. Life Ins. Co. , 6 3 A.2d 472 (P a. Super. Ct. 1949) (holdingthat trialWe applied this s t an d ar d in our dec isions in Bu rk e rt and 15 J us tof in . Summa

ry jud g me nt i n fa

vo r of the ins ur e r w a s a

pp ro pr iate in Bu rk e rt beca use the only rea sonable infere nce that could be dr awn from Ja m i s o n ’s fa ilure to disclose his extensive history of drugand alcohol abuse and tre atment was that his omission was made in bad faith. In contra st, such an infe renc e could not be drawn in J us tof in on the basis of the re cord e vidence beca use (a s in Grimes and Burton ): (1) it was unclea

r whether J ustofin e ven knew the ty pe of arthritis she suffe red f rom; and (2) J ustofin a ctually disclosed that she under went surg ery for arthritis, an event she m ight have thought more sig nificant
20 court prope rly

enter ed judg ment notwithstanding the ve rdict in favor of insurer o n insured’s ba d faith whe re e vidence reve aled that plaintiff withheld from insura nce a pplication that he had be en hospitaliz ed for car diac disorder twenty -two day s prior to application date ); Am e ric an Fr

an k lin LifeIn s. Co. v . G ala ti , 776 F. Supp. 1054 (E.D. Pa. 1991) (g rantingjudgme nt on the pleading s in favor of ins u re r) ; and Monarch Life Ins. Co. v. Donahue , 708 F. Supp. 674 (E.D. Pa. 1989) (g rantingsummary judgme nt in favor of

insurer)

. Ag a ins t th is b a c kd

ro p, it i s c le ar t

hat th e diff

e re nt r e su lts in Bu rk e rt and J us tof in did not depend on the a

pplication of a br ight- line leg al rule; instea d , we a pplied the same standa

rd, examined the
re c ord ev ide nc e , a

nd sim ply c a me to d if

fe re nt c on c lus ion s a s to wh e th e r th e r e w a s in c o n tr o v e rti b le e v id e n c e o f b a d f a it h

. O ur decision in J

us tof in did not forec lose the possibili t y of summary jud g me nt b e inge nte re d in the ba d f a ithre sc iss ion c onte xt. In th is respe ct, the cur

rent case does not r equire us to break a ny new g round. There fore , we rea ffirm that summary judgme nt may be ente red on a
re sc iss ion c la im w he n, ba se d u

po n th e evid e nc e pr od

uc e d in dis c ov e ry , th e on ly

re a so na ble inf e re nc e a fact fi nd e r c ou ld d

ra w i s that the applica

nt’s answe rs wer e knowing ly fa l s e, o r made in bad faith. 15t h ant h e p art i c u l ar dr u g s h e t o o k

a f t e r h e r s u r g e r y.
To ana logize B abayan’s c ase to J us tof in , the applica

nt there 16
answe red “y es” to two he alth-re lated questions. J ustofin’s purported failure to disclose i nformation related to the incomplete infor mation
21 Ba bay an’s br ight- lin e ap proac h would cre ate a number of pr a c tic a l pr ob le ms. F ir st, the a pp ro a c h ig no re s th a t w e have to consider e ach r esponse in the a pplication separ ately

. C er tainly , a number of que stions mi g ht be similar in an insuranc e application, g e ne ratin g sim ila

r re sp on se s. I n that re sp e c t, a c omp le te (o r p art ia lly complete) answe r to one question may raise a n issue of fa ct as to bad faith if the a

pplicant answe red a

simil ar que stion differe ntly

. See J us tof in , su pra . Howeve r, if a que sti o n in an application inquires about a specific health disorder, and the rec ord reve als th at the
a pp licant’ s ans we r w a s in c on tr ov e rt ibl y fa lse , th e a

pp lic ant s ho uld not be permitted to rely upon the fact that she provided inf ormation
a bo ut a wh oll y unre late d a ilm e nt i n r e sp on se to ano the r q ue sti on in order to cre ate a

g enuine issue of

materia l fact as t o b ad faith. As examin e d in Se c ti o nI I I

. A

. 4 b e lo w , th is is a p r in c ip a l f

a il u r e of Ba bay an’s approa ch. Second (and related to the first conce rn), Ba bay an’s approa ch would relieve the insurance applicant f rom eve r h a v i n g t o an s w e r

i n s u r an c e ap p l i c a t i o n s c o mp l e t e l y an d t r u t h f u l l y. Ra the r, the a

pp lic ant c ou ld c re a te a

smo ke sc re e n b y

pr ov idi ngso me evidenc e of unr elated disorde rs in response to a specific question and then ar g ue, if the insure r attempted to re sci nd the policy , that the inf or matio n p ro vid e d w a s n ot f a lse , bu t “ inc omp le te .” We d e c lin e to
a do pt a br oa d s tand ard

that wo uld e nc oura g e ins ur anc e a pp lic ants to be l e s s th anf

o rth c o mi n g in

th e ir a p p li c a ti o n s

. F in a ll y , B a

b ay an ’s sta nd ard c on ta ins too e xpans ive a c on c e pt o f “ c omplet eness.” I t is impr u d e n t t o a d o p t a

r u le th a t s ig n in g a

w a iv e r f o r th e in s u r ance com p an y t o re t ri ev e m ed i ca l i n fo rm at i o nab s o l v es t h e ap p l i ca n tof the obligation to provide truthful information. 16she provided in the “De tails” section adjac ent to her r es ponse. Perhaps in that ty

pe of situation, a st rong er a rg ument could be made for r equiringthe insurer

to investigate fu rt h er

. There , the insurer knows that the applica

nt suffer s from a pa

rticular a ilment; the issue from th e p o in t o f

v ie w o f th e in s u r e r

w o u ld b e th e s e v e r it

y o f the ailment. I n contra st, a d i fferent situation arises he re, w here the applicant f

ailed to ac knowledg e the ex i stence of an a ilment in the fac e of inc ontrovertible opposing evidenc e.
22 I n s umm ary , we do no t f

ind tha t J us tof in upset the fr amewor

k applied by

courts considering Pennsy lvania law in this context over the past six ty

y ear s. Thus, we will consider Ba bay an’s a ppeal unde r the exist ing f

rame work a

nd will not adopt a brig ht-line approa ch that would eng ender

more c onfusion than clar ification.

3. Apply ing the framew o r

k to th e s p e c if

ic false a nswers B abayan g a ve to N or

thw e ste rn , we agree wi th B a ba y an th at he r a

ns we r t o Question 14.K.2 did not cons t i t u t e b ad fa ith as a matter of law. Question 14.K.2 stated:

I n the past 5 y ear s, has t he Insured be en in a motor vehicle a ccide nt, has the I nsured been charg ed with a moving violation of any

motor vehicle la

w, or ha s the I nsured’ s driver’ s license been r estricted, suspe nded,
or re voked?

B a ba y an ans we re d “ no ” to Q ue sti on 14 .K .2 . B a

ba y an s ub se qu e ntl y a c kn ow le dg e d in

her de po sit ion

te sti mony

that he r a

ns we r t o Question 14.K.2 wa s false.23 The issue, howe ver, is whe ther a fac t finder co u l d drawa re a so na ble inf e re nc e fr om the re c or d th a t B a ba y an k ne w at th e tim e she answe red Question 14.K.2 that her answe r was false, and/or wa s ma de in ba d fa ith

. A r e vie w o f t he re c or d d e mon str a te s th a t th e re is a g enuine issue of materia l f act on this point . For

example, Ba

bay an al s o t es t i fi edi nh er

d ep o s i t i o nt h at s h e h adth e f o l l o wi n g ex ch an ge with Gallina:

Irec all Idid talk about the slip and fall and the c ar acc ident . Ireme mber I

was e mbarra ssed that I

had tw o in c ide nts wi thi n thre e mon ths

. I fe lt lik e Iwa s a klutz or something. And I told him and he said to me, when wa s it? Isaid Ican’ t reme mber rig ht now. I t h i n k i tw a s ‘ 9 6 , ‘ 9 5

. H e s a i d , t h a t ’ s f ar e n o u g h aw ay. Id o n ’t t h i n k

i twi l l b e ap ro b l em , b u twh en y o u s i gn the medic al waiver, they g o g et y our re cords f

rom y our doctors a

nd they ’ll find out that stuff.

F ro m th is e vid e nc e , it

wo uld no t be unr e a so na

ble fo r a fa c t f

ind e r t o infer that Ba

bay an wa s not sure of the date of h er ac cident. Taking Ba bay an’s testimony

as true, a n infere nce can be draw n that Ba bay an re l i edu p o nGa l l i n a’ s re p re s en t at i o n t h at t h e a cc i d en twa s “f ar en o u gh
awa y ” that it did not have to be listed in the application. A fa ct finder could ultimately

decide to rejec t Ba

bay an’s a nswer a s implaus i ble, but, based upon e vidence i n t h e record, it wa s inappropriate for the court to re ach that conclusion at the summary judgme nt stag e.
4.

I n contra st, the District Court corre ctly deter mined that B a ba y an’ s f a lse ans we r t o Q uest io n 33. k c on sti tut e d b a d f a itha s a matter of law. B ased upon the detailed nature of Q uestion 33.k, B a ba y an’ s r e sp on se , a

nd B a ba y an’ s d e po sit ion

te sti mony , th e on lyTh e qu e sti on , in fu ll, re a ds a s f

oll ow s: 17

33

. I n the las t 10 y e ars , h a ve y ou ha d, be e n to ld y ou had or be en tre ated f

or: a

. Di s o r d e r

o f e y e s ( in c lu d in g d o u

b le v is ion) , ear s, nose, mouth, throat, or spee ch? b. Dizz iness, lo s s o f

b a la n c e , heada ches, se izures or convulsions , muscle we akness, tre mor, pa ra ly sis , str ok e , me mor

y los s, or any dis e a se of the br a in o r n e rv ou s sy ste m?
c

. Anxi ety , depre ssion, stress, or a ny psy cholog ical or emotional condition or disorder?
24 rea sonable infe renc e a f act f inder c ou l d d raw would be that the
answe r to Question 33.k was made in bad faith or with knowledg e of i t s f a l s i t y.
I n support of her

argument that she produc ed suff ici ent evidenc e to cre ate a g enuine issue of materia l fac t as to whether her
answe rs wer e made i n b ad faith, B abayan points out that she disclosed: the name of

her f amily doctor; that she ha d on ce be en hospitaliz ed overnig ht; that she suffe red from Be ll’s Palsy within the pa st y e ar; and that sh e wa s tr e a te d fo r pa in re lie f a s a re su lt o f a

vir us

. The proble m with Baba

y an’s a rg ument is that the information she provided c annot be rec onciled with the ac tual false r epre sentation she made in filling out her application. The information she poi nts to as sufficie nt to create a g enuine issue of materia l fac t is irreleva

nt to the specific question at issue. Question 33 (set for

th in the footnote below), contains fiftee n detailed a nd dis t i n ct cate g ories of que ries re g ardingthe applica nt’s medical tre atment over

the past ten y ear s. I n this contex t, it is clea r 17d. Pers ist e nt s ho rt ne ss o f b re a th, ho ars e ne ss, coug h, coughi n g up blood, asthma, emphy sema, tuber culosis, or any l ung or respiratory

disorder?
e. J aundice , hepatitis, intestinal bleeding , ulcer , hern i a, co l i t i s , d i v er t i cu l itis, recurr ent indige s tion, or any

disorder of

the stomach, int e sti ne s, liv e r, g a ll b la dd e r, or pa nc re a s? f. Hi g h b lood pre ssu re , c he st p a in, c he st discomfort, che st tightness, irre g ular he art beat, he art murmur, heart attack or a ny other dis or de r o f t

he he art or blo od ve sse ls? g

. Suga

r, albumin, blo o d or pus in the urine,
s e xu a ll y tr an s mi tt e d o r v e n e r e a l d is e a s e , or any disorder of the kidney , bladder , prostrate , or re pr od uc tiv e or g ans ? h. Diabete s, thy

roid or any

g landular ( endocr ine) disorder? i. Cance r, tumor, poly p, or disorder

of the ly mph g land(s) or

brea st(s)? j. Anemia, blee ding te ndency , or any disorder of the blood? k. Arthriti s, sciatica, gout, or any disorder of the muscles, bone

s, joints, s pine, back

, or neck ? l. Chronic or une x plained fa t igue , feve r, or ill ne ss?
m. Any

a lle rg ie s?
n. Any

disorders of

the skin?
o. Def

ormity , lameness or

amputation?
25 that Question 33.k requir es a spe cific answer as to whe ther the
a pp lic ant w a s d ia g no se d w ithor tr e a te d f or any of the sp e c if

ic disorders that a

re listed ( arthritis, sciatica , g out, or any disorder of

theBa bay an’s de position t estimony in the state court matter, 18 wh ic h c on ta ins a

le ng thy dis c us sio n o f t

he inj ur ie s sh e su ff

e re d a s a
26 muscles , b o n e s , jo in ts , s p in e , b a c k , o r n e c k )

. D u r in g a

le n g thy colloquy with Northwester n’s counse l during her de position Babayan e xpre ssl y a dmi tte d e a c h o f t

he fo llo wi ngfa c ts:

• s h e soug ht treatment a nd car e fr om five (5) phy sicians re g ardingknee a nd b ac k pain on
numerous occ asions during the re levant teny ear time period listed on the application;

• sh e un de rw e nt at le a st f ive (5 ) m a g neti c resona nce imag ing (“MRI ”) te sts on her knee s and/or back, and she had an electromy og ram (“ EM G” ) b e c a

us e of c hr on ic ba c k p ro ble ms;

• sh e was awa

re that th e se dia g no sti c te sts
reve aled a

bnormalities in her knees and ba ck;

• she wa s awa

re that she was dia gnosed with a bulgingdisc in her ba ck; and

• she re ceive d a cor tisone injection in her kne e to reduc e consta

nt pain.

Fur thermore , the rec ord contains a verifie d complaint Ba bay an filed in state court f

ollowing he r slip-and-f

all acc ident in which she alleg ed tha t, a s a r e s u lt o f h e r a c c id e n t, s h e “ w a s c a

u s e d to s u s ta in

serious persona l injuries t o h er k nee a nd hip and surrounding

are as.” See W hiting v. Krassner , 391 F.3d 540, 543- 44 (3d Cir. 2004) (“ J udicial estoppel pre vents p ar t i es fr om taking dif fer ent positions on matters in l iti g a tio n to g a in a dv anta g e .” ). I n s pit e of th e se c on c e ssi on s, 18result of he r ac cidents, is part of the rec ord.
Ba bay an cla ims s h e thoug ht the term “disorde r” me ant 19 “disea se,” a

nd that she should have a sked Ga llina for cla rification.
That information would have been releva nt if, for e x ample, 20 Nor thw e s te r nh a d c h a ll e n g e d

B a b ay an ’ s “ n o ” an s w e r

to Q u e s tion 33.b. That question aske d whether the applicant had bee n treated for or di ag nosed wit h “[d] izz iness, loss of balance, he adac hes, seizures or convulsions , muscle weakness, tre mor, para ly sis, stroke, memory loss, or any

disease of

the br ai n o r nervous sy stem.” B abayan’s diag nosis o f Be ll’s Palsy arguably falls under

the categ ory

of sy m p t o ms list ed in Question 33.b, y et she fa iled to answer the question aff

irmatively . Ba

b ay an answ ere d “y es” to Que stion 37, howeve r, and state d that she missed some time at work d u e to a “virus which c aused B ell’s Palsy .” Unde r those cir cumstance s, there would have c erta inly

been a n issue of fa ct as to whethe r B abayan’s false answe r to Q uestion 33.b was made in bad f aith when c onsidered
27 Ba bay an answe red “no” to Q uestion 33.k. She testified i n h er deposition that the question was uncle ar , but that with her “ne w 19 understanding ” she a g ree d that her pr evious an s wers were

“ ina c c ur a te.” In a dd iti on , a lth ou g h B a ba y an c on c e de d th a t sh e did not rea d her r esponses on the final application, she a dmitted that she
cer tified her a

nswers w ere truthful and ac cura te.
The fac t that B abayan was hospitaliz ed for one nig ht for blood te sts , r e c e ive d a

pr e sc ri pti on

fo r p a in r e lie f a s a

re su lt of a vir

us in Janu ary 20 01 , a nd mis se d six da

y s o f w or k w ithB e ll’ s Pa lsy

wi thi n the six months prior

to her a pplication is irreleva

nt to the question of whether she wa s diag nosed with or tre ated for “ arthritis, sciatica , g out, or any

disorder of

the muscles , b ones, joints, spine, back, or neck.” Neither is it rele vant t hat Gallina may have told B abayan not 20in connec tion to her response to the subsequent question.
There is no support in the recor d fo r Ba bay an’s a rg ument 21 that she re l i ed u pon Gallina’s a dvice to answ er Q uestion 33.k. See section I I I .E, inf

ra
. 28 to list the automobile ac cident on the a pplication beca

use it occur

red far enoug h in the past. I n fo rm ati on reg ardingthe ac cident is not 21 “incomplete” as to the is s u e of w hether Ba bay an wa s treate d for or diag nosed with any

of the spec ific disorder s listed in Question 33.k. Rather, like the answe r at issue in Bu rk e rt , Ba bay an’s a nswer c an be char acte rized as “f

rivolous” in the fa ce of

subst an t i al evidenc e that she visited five differ ent phy sicians on a number of occ asions relating to p ro ble ms w ithhe r k

ne e s and ba c k, and th a t di a g no sti c te sts confirme d that she had knee and back problems. On this information, the only rea sonable infe renc e a fac t f inder could drawis that Baba y an answe red “ no” in bad f

aith or knowing that her a nswer w as fa lse.

Ba bay an’s c oncept of “incompletene ss” s eems to be that if an appl icant provide s evidenc e of a cer tain medical pr oblem, the applica nt doe s not have to provide a ny other infor

mation in answering
a qu e sti on re g ard inga

tot a lly dif fe re nt t y pe of medic a l pr ob le m in
or de r t o s ur

viv e a mot ion fo r sum mary

jud g me nt. Th a t argume nt i s a non sequitur . For

example , suppose B abayan, who c hecke d “no” to a question asking whether she had “hig h blood pr essure ,” took a daily presc ription to control her hig h blood pressure . Would t he fa ct that sh e dis c los e d th a t sh e ha d B e ll’ s Pa lsy fo r six da y s ov e r the pa st y ear be sufficient to support an infe renc e that her answe r to the blood pr e ssu re qu e sti on

wa s me re ly

“ inc omp le te ” rathe r t

han kn ow ing ly false? S ound public poli cy counsels ag ainst embrac ing B abayan’s
conce pt of “incompleteness.” See Orr v. Union Fidelity Life I ns. Co. , 198 A.2d 431, 432-33 (Pa. Super. C t. 1964) (holding t hat an answer descr ibing only

one of nume rous injuries to a question asking29 applicant to list “any” injuries was not a truthful answe r t o a question
on an in su ra

nc e a pp lic a tio n) . In th e fa c e of inc on tr ov e rt ibl e d o cu m en t ary

ev i d en ce t h at s h e w as t re at edo nnu m er ous occa sions for back a nd knee pain during the relevant t ime period, B abayan ca nnot de fe a t N or

thw e ste rn ’s mot ion fo r sum mary jud g me nt by po int ingto her disclosure of unre lat ed ail ments. I n this respec t, the District Court did not err

in finding that Ba

bay an’s a nswer to Que stion 33.k
wa s ma d e in b a d f

a it h a s a matt e r o f la

w an d in e n te r in g summary judgme nt in favor o f No rthwester n on counts one a

nd two of No rt hw e ste rn ’s c omp la int

. B. B aba ya n’ s Br e ac h of C ont r ac t C lai m
Be cause the Dis trict Court corr ectly conclude d that the dis a bil ity ins ur anc e c on tr a c t wa s void a b init io, the Di str ic t Co ur

t di d not err in g rantingNorthwe stern’s motion for summ ary judgme nt as to Ba bay an’s br eac h of contract claim. I t is axiom atic that a bre ach of c on tr a c t c la im may

no t be ma int a ine d in

the a bs e nc e of a va lid contra ct. See Reformed Church of Asc ension v. Theodore Hoove n & Sons, Inc. , 764 A.2d 1106, 1109 (Pa. Super. Ct. 2000) (holdingthat
a c la im f or br e a c h o f c on tract requ ir e s th e e xiste nc e of a c on tr a c t, inc lud ingits e sse nti a l ter ms ). Thus , th e Di str ic t Co ur t pr op e rl y dis mis se d c ount f

our o f B a ba y an’ s c omp la int

. C. Baba ya n’ s Ba d F ait h Cl aim

Ba bay an’s ba d faith cla im ag ainst Northwe stern is premised pr ima ri ly on the argume nt t

hat N or thw est ern ’s “ po st- c la im underw riting pr actice s” constituted bad f aith. We conclude that the Di str ic t Co ur

t c or re c tly de te rm ine d that N or thw e ste rn wa s e nti tle d to
summa ry jud g me nt o n B a

ba y an’ s b a d f

a ithc la im.30 1. The Pennsylvania statute g overningbad fa ith insurance
a c tio ns pr ov ide s:
I n an ac tion arising unde r an insura nce policy , if the
c ourt fi nd s th a t th e ins ur e r h a s a cted i n b a d f a ith toward the insured, the c ourt may take a ll o f the fo llo wi nga c tio ns : (1) Aw ard inter est on the am o u nt of the cla im from the date the claim was made by the insured in an amount equal to the pr ime rate of intere st plus 3%. (2) Aw ard punitive damag es ag ainst the insurer. (3) Asse ss court costs and attorne y fee s ag ainst the insurer.

42 P A

. C O NS

. S TAT

. ANN . § 8371. The statute doe s not define the te rm “ ba d f a ith .” We h a ve pr e dic te d th a t th e Pe nn sylva nia Sup re me Court would define the t erm accor ding to the definiti on set forth by the P ennsylvania S uperior Court in Te rle tsk y v . Pru de nti al Pro

pe rty and Casualty Ins. Co. , 649 A.2d 680 (Pa. S uper. Ct. 1984). See Ke e fe v. Prudential Property and Cas. Ins. Co. , 203 F.3d 218, 225 (3d Cir. 2000). Ther e, the c ourt adopted t h e fo l l owing definition of “ba d faith”:

“B ad fa it

h ” o np art o f

in s u r e r is an y f r iv o lo u s or unfounded refusa l to pay proce eds of a policy ; it is not
nece ssary that such re fusal be f raudul en t. For purp os e s o f a

n a c tio n a g a ins t an in sure r f or fa ilure to pa y a c la im, su c h c on du c t imp or ts a dis ho ne st p ur

po seFor example, an ins u re r’s denial of a c laim does not 22 constitute bad faith if it is based on a rea sonable leg al position in an
u n s e tt le d ar e a o f th e law. T er l etsky , 6 49 A. 2d

a t 69 0; Br own , 860
31 an d m e an s a b r e a c h o f

a kn o w nd u t y ( i.e. , g oo d f

a ith
and fa ir de a lin g ), thr ou g h so me mot ive of se lf -i nte re st
or ill will; me re ne g lige nce or bad judg ment is not bad faith. Terletsky , 6 4 9 A. 2 d

at 6 8 8 (q u o t i n g B LACK ’ S L AW D I C TI ONAR Y 139 (6th ed. 1990)) (citations omitted). Ultimately , in order t o rec over on a bad fa ith claim, the ins ur ed mu st p ro ve : ( 1) tha t th e ins ur e r d id n ot h ave a re a so na ble basis for de ny ing b en ef

i t s under the policy ; and (2) that the insurer kn e w o f o r r e c kle ssl y

dis re g ard e d it s la ck of

a re a so na ble ba sis in denying the claim. Ke e

fe , 203 F.3d at 225. Courts have extended the
c on c e p t o f “ b a d f

a i t h ” b e y o n d an i n s u r e d ’ s d e n i a l o f a c l a i m in
sever al limited area s. See W .V. Realty, Inc . v. Northern Ins. Co. , 334 F.3d 306, 317-18 (3d Cir. 2003) (insurer ’s fa ilure to follow interna l g uid e lin e s e vid e nc e of

ba d faith) ; Bo ne nb e rg e r v . Na tio nwi deMu t. Ins. Co. , 7 91 A.2d 37 8, 38 1 ( Pa . Su pe r. Ct. 20 02 ) ( ins ur e r’ s c la ims pr a c tic e manu a l is rel evan t evi de nc e in b a d f a ithc la im a g a ins t ins ur e r) ; O’

Do nn e ll e x re l. Mi tro v

. Al lst

ateIn s. , 734 A.2d 901 (Pa. Super. Ct. 1999) (ba d faith may extend to the mis conduct of an ins ur e d duri ng the pe nd e nc y of lit ig a tio n) ; Liberty Mut. Ins. Co. v. Marty’s Ex

p., Inc. , 910 F. Supp. 221 (E.D. Pa. 1996) (bad f aith may extend to an ins urer ’s conduct in retrospe ctively ratingand collec ting pre mi u ms )

. T h e in s u r e d is r e qu ir e d

to me e t i ts b u r d e no f

p r o ving “bad f aith” by clea r and c onvincing evidenc e. Terletsky , 649 A.2d at 688. Although the i n surer ’s conduc t need not be f raudule nt, “mere neg lige nce or

bad judg ment is not bad fa ith.” Brown v. Progressive Ins. Co. , 860 A. 2d 493, 501 (Pa. Super. Ct. 2004). The insure d 22A. 2d a t 50 1. Ne ith e r doe s an ins ur e r’ s low , but r e a so na ble e sti mate of dama g es or loss constitute bad fa ith. Id.

I n Le wis , the Mississi ppi Supreme Court held that an insurer 23 eng ag ed in post-claim under writing in bad fa ith because th e ins urer iss ue d a po lic y un de r si mp li fi e d guid e lin e s a nd a dmi tte dly

fa ile d to perf orm any underw riting on the policy under a fter the insured filed her c laim. 637 So.2d at 188-89. A subse quent dec ision int erpr eting Le wis , howeve r made a distinction betwee n post-claim under writing
32 mus t ul tim a te ly

sh ow that “th e ins ur e r br e a c he d its duty of g oo d f a ith throug h some motive of

self-inter est or ill will.” Id. At the summary judgme nt stag e, the insure d’s burde n in opposing a summary j u d gm en tm o t i o nb ro u gh tb y t h e i n s u re r i s “c o m m en s u ra t el y h i gh be c a u s e th e c o u rt mu s t v ie w th e e v id e n c e p r e s e n te d in li g h t o f the substantive evidentiar

y burden at trial.” Kos ie ro wsk i v . A lls tate In s. Co. , 5 1 F. S u

p p

. 2 d 5 8 3 , 5 8 8 (E

. D. P a. 1 9 9 9 ) ( ci t i n g Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255 (1986)).

2.

B a ba y an a rgue s th a t w e sh ou ld p re dic t th a t th e Pe nn sylva nia Supreme Court would conclude t hat “post-c laim underwr iting” ma y constitute bad fa ith. Baba y an conc edes in he r brief that there are no de c isi on s in te rp re tin g Pe nn sylva nia law that have e xten de d ba d f a ith claims to post-claim underwriting pr actice s. Ba b ay an, howe ver, u r g e s u s t o c o n s i d e r

“ t h e l aw o f

b a d f a i t h g e n e r a l l y. ” S p e c i f

i c a l l y, sh e dir e c ts u s to c onside r a de c isi on of the Mis sis sip pi S up re me Court, Le wis v . E

qu ity Nat ion al L ifeIn s. , 6 37 So. 2d 18 3 ( Mis s. 1994), and a

law re view ar

ticle conde mning the pra ctice. See Thomas C. Cady & G eorg ia L ee G ates, Post Clai m Underwriting , 102 W.Va. L . Re v. 80 9, 81 0 (20 00 ) ( c on c lud ingtha t po st- c la im und e rwri tin g is pe r seevidenc e of ba d faith). 23and post-cla im investigation of e ligibil i ty . I n W esley v. Union Nat ion al L ife , 919 F. Supp. 232 (S.D. Miss. 1995), the district court deter mined that an insurer

did not e ng ag e in post-claim under writing b ec ause, unlike the simpli fied a pplication at issue in Le wis , “the questions on the insurance application were one method for sc ree ning out applicants who pre sented unacce ptable risks.” Id. a t 23 5. Thus , the cour t concluded that the insurer ’s pra ctices did not constitute bad fa ithbe c a us e “ to d e ny

[the ins ur e r] the ri g ht t o e ng a g e in p os t c la im inv e sti g a tio n w ou ld m e an th a t in sure rs wo uld have to i nv e sti g a te
ever y answe r by

ever y applicant b ef

ore insuringthem and to pay
c la ims regardless of the misreprese ntations contained in the application .” Id. (empha sis added).
As No rthw e ste rn

po int s o ut i n it s b ri e f, a Pe nn sylva

nia 24 statute seeming ly

condones the prac tice of post-c laim investigation with respec t to health and acc ident insurance policies. That statutory pr ov isi on state s:
The fa lsity

of any statement in the application for any po lic y c ov e re d b y su

bd ivi sio n (b ) of

thi s a rt ic le sh a ll
33 We n e e d n ot de te rm ine wh e the r t he Pe nn sylva

nia Sup re me C o u rt would hold that the prac tice utiliz ed by the insurer

in Le wis
c on sti tut e s b a d f

a ith

. W e no te that th e c on c e pt o f “ po st- c la im
un de rw ri tin g ” its e lf is ne bu lou s, pa rt ic ula rl y be c a us e it i s d if

fi c ult to drawa distinction b etween post-claim elig ibilit y investigation and post-claim underwriting. F or example, Pennsy lvania law pr ovides that it is not bad fa ith to conduct a thoroug h investi gation into a questionable c laim. See O’ Do nn e ll , 734 A.2d at 907-08 ( noting the exis tence of “r ed fla g s” that prompted t h e investig ation). See als o New Y ork Life Ins. Co. v. Johnson , 923 F.2d 279, 280 ( 3d Cir. 1991) (re fer encingperiod of c ont es t abil ity based upon ma

terial mis re pr e se nta tio ns ). B a ba y a n’ s c on c e pt of “ po st- c la im 24not bar the r ight to re cove ry there under, unle ss such fa lse state me nt w a s ma de with a c tua l in te nt t o dec e iv e , o r

u n le s s it mate r ia ll y

a f f e c te d e it h e r the
acc ep ta n c e o f th e r is k o r h a za r d a s s u me d b y the insurer.

40 P A

. C ONS

. S TAT

. ANN . § 757.
Northwe stern’s c laims manual s t ates: “I f, duringthe two 25 y ear contestab i l ity

period, the Company

become s awa

re of materia l misrepre sentations in that inf ormation, it ha s the rig ht in most states to rescind the policy

and deny the claim.”
34 underw riting ” would usurp this g ener al principa l and pre vent insurer s from eng ag ing in post-c laim in v es tigations, even in the fa ce of incontrover

tible evidence that an i n s u re d m ad e a cle ar misrepre sentation.

Moreove r, B abayan’s ba d faith cla im would not succ eed e ven under the more de manding Mississ ipp i test set forth in Le wis . The evidenc e i s c le a

r th a t G u s s approve d Ba

bay an’s policy

afte r re viewing the application, nonmedical qu est ionnaire, a nd the par amedica l qu e sti on na ir e . B a se d u

po n B a ba y an’ s re sp on se s in

the do c ume nts , including the medical infor mation t h at s he provide d, Guss did not seek to obtain B abayan’s medic al re cords. Thus, Nor thwestern utiliz ed Ba b ay an’s r esponses a s “one me thod for scr eeningout applicants who pr esente d unacc eptable r isks.” W esley , 919 F. Supp. at 235. When Ba

b ay an broug ht her c laim within the two-y ear contestability

period, an investig ation was trig g ere d under c ompany

25 policy . The fa ct that someo n e wi t h the title of “unde rwriter ” wa s inv olv e d in

the inv e s t i g a

t or y pr oc e ss d oe s n ot t

ra ns fo rm a pe rm iss ibl e po st- c la im i nv e sti g a tio n in to im per mis sib le po st- c la imI n f a c t, t he c la ims manu a l r e c og nize s th a t, i n o rd e r t o 26 determine whether

a policy

should be contested, the company “nee d[s] input from Under writing Standards, and, on oc casion, fr om the L aw De partment to make that decision.” Additionally , Ba

bay an ar g ues t hat Northwestern c ommitt ed 27 b ad fa ith by

failing to follow its own claim reviewpolicies. The District Court stated in its opinion that Ba bay an failed to provide any
su pp or t f or the pr op os iti on

tha t an ins ur e r’ s f

a ilure to f oll owits c la im revie w policies would cons t i tute bad fa ith. Although no cour t interpre tin g Pennsy lvania law ha s directly spoken on the issue, we sug g ested in W

.V. Realty, I

nc. that an in sure r’ s f

a ilure to f oll owits internal guidelines could constitute evidenc e of bad faith. 334 F .3d
a t 31 7- 18 ; se e als o Bonenbe rger , 791 A.2 d at 381 (holding that an ins ur e r’ s c la ims pr a c tic e manu a l w a s re le va nt ev ide nc e in a

ba d f a ith
c la im a g a ins t th e ins ur e r)

. As sumin g wi tho ut de c idi ngthat f a ili ngto follow internal c laims procedur es could c ons ti tu te b a d f a it h , summary judgme nt remains appro priate in this particula r ca se. I t is true that Northwe stern’s c laims manual lists t wo “f actor s” to consider

(the
cause of the disability

and inconsistent information provide d by the applicant) in undertakinga conte stable re view, and that Dul ler testified that n either of

these fa ctors existed in Baba y an’s c ase. A revie w of the claims manua l, however , reve als that these two f actor s are not exclusi ve re quirements to tri gger a contestable revie w. Rather, the ma

nual s tates t hat t he review proc ess must be completed if a c laim is brought within the “two- y ear co n t estable pe riod,” a nd that the claims ana ly st must “start the proc es s o f verifying the information provided on the application as soon a s possible.” Duller testified that she re quested re cords from B abayan’s doc tor and
35 underw riting. Fo r these re asons, we c onclude that the pa rticular 26 pra c tic e un de rt a ke n b y

No rt hw e ste rn in t his c a se did

no t c on sti tut e bad fa ith. Acc ording ly , the District C ourt did not err in g ranting

27attempted to verify information as pa

rt of “pe rfor

ming a routine revie w.” Kie n confirme d in his deposi t i o n t est imony that, over the
course of his 25-y ear

tenure at Northwe stern, ana ly sts were require d to “automatica lly

perf orm” a “routine r eview if

a cla im prese nts in a contestable time fra

me.” Ba bay an is unable to point to any evidenc e to refute this testim ony an dto support her a rg ument that Northwe stern’s r eview of her c laim within the t wo-y ear time period
c on sti tut e s a

fa ilure to f

oll owint e rn a l g uid e lin e s.
We have state d, under Pennsy lvania law, that “an insura nce 28 broker is under a duty to exercise the car e that a r easona bly prudent busin e s s ma

nin th e b r o k e r a g e f

ie ld w o u ld e xe r c is e u n d e r

s imilar
36 summary judgme nt in favor of

Northwe stern as to c ount one of B a ba y an’ s c omp la int

.

D. Baba ya n’ s N e gli ge nc e Cl aim
A claim for

neg lige nce unde r Pennsylvania law c ontains four elements : (1 ) a duty

or oblig ation rec og nized by the law, r equiring the ac tor to confor

m to a certain standar d of conduc t for the pr ote c tio n o f o the rs a g a ins t unre a so na ble ri sk s; ( 2) a

fa ilu re to confor m to the standard required; (3) a causal c onnection betwe en the
co n d u ct an d t h e r es u l t i n g i n

j u ry ; an d (4 ) a ct u al l o s s o r d am age resulting in ha

rm to the interests of a

nother. In re TMI

, 67 F.3d 1103, 11 17 (3 d Ci r. 19 95 ) ( c itatio ns omi tte d)

. B a ba y an’ s ne g lig e nc e c la im is premis ed o n t he alleg ation that “Ms. B abayan followe d Mr. Gallina’s instructions and did not advise [Northwe stern] of her motor vehicle a ccide nt and slip and fall ac ciden t

. ” Accepting Ba bay an’s alleg ation as true, her neg lige nce c laim fails based upon our holding that Northwe stern is e ntitled to resc ission bec ause of B abayan’s ba d fa ithre sp on se to Q ue sti on 33 .k . A s a

re su lt, e ve n if

B a ba y an c ou ld establish that Gallina bre ache d a duty to a dvise Ba bay an to provide 28circ umstances. . . .” Consolidat ed Sun Ray, Inc. v . Lea , 401 F.2d 650, 656 (3d Cir. 1968).

B a ba y an c ite s to de po sit ion

te sti mony rel atin g so le ly to 29 Gallina’s a lleg ed fa ilure to advise he r appr opriately regarding her
ans we rs to Q ue sti on

14 .K .2

. Th is de po sit ion te sti mony wo uld on ly be su ff ic ie nt t o c re a te a g e nu ine iss ue of fa c t a s to B a ba y an’ s r e sp on se to Question 14.K.2, and is insu ff i ci ent t o establish causation and damag es with respe ct to Question 33.k. The pa rties ag ree d at ora l argument that the District Court’s 30 alternative basis for g ranting summary judgme nt on the neglig ence
37 an ac curate response to Q uestion 14.K.2, Ba bay an ca nnot prove that G a l l i n a ’ s p u r

p o rt e d b r e a c h w a s t h e c a

u s e o f h e r da ma g e s – Northwe stern’s r es ci s s ion of the insuranc e ag ree ment. That
resc ission was based upon Que stion 33.k.

Ba bay an’s assertion that Gallina instructe d her not to put information about her

p ri o r m edica l history

on her insura

nce application is not supported by the rec ord. The fac t th at Ga l l ina 29 alleg edly told Baba

y an not to worry about the date of her acc ident on
a qu e sti on that inqu ir e d ab ou t moto r ve hic le a c c ide nts wi thi n th e pa st five y ear s is irreleva

nt to Baba y an’s r esponse to a que stion asking he r to l ist sp e c if ic me dic a l ailm e nts sh e su ff e re d with in the pa st t e n y e ars

. Thus, beca

use there is no evidence that Gallina’s a lleg ed neg lige nce cause d Northwe stern to re scind Ba bay an’s policy , we will af firm the District Court’s entry

of summary

judgme nt in favor o f Gallina on Ba bay an’s ne g lige nce c laim at count three o f her c omplaint. See Industrial Valley Bank &Tru s t Co . v. Dilks Age ncy , 751 F.2d 637, 640 (3d C ir. 1985) (a

n insurance customer must prove that broker’ s fa ilure to ex erci se due c are is t he “ dir e c t c a

us e of los s to his customer” ). 30c la im – that the c omm on law dis c ov e ry ru le wa s in a

pp lic a ble be c a us e B a ba y an le arn e d of he r a lle g e d inj ur y wi thi n th e appl ic a

ble lim itatio ns pe ri od , y e t f

a ile d to e xer c ise du e dil ig enc e to p ro se c ute her c laim – was over

ruled by the Pennsylvania Supreme Court’s
rec ent dec ision in Fi nev . Ch e c c io , 8 7 0 A

. 2 d 8 5 0 , 8 5 9 ( P a

. 2 0 0 5 )

. In that decision, the Pennsylvania S upreme Court held t hat, for pur poses of applying the discovery

rule, it is immaterial whethe r the pre scribed limit ations period has e x pired at the time the plaintiff bec omes awa re of an injury . Rather, “ the discover y rule applies to toll the statute of lim itatio ns in a

ny c a se wh e re a

pa rt y ne ith e r k no ws no r r e a so na

bly sh ou ld h ave kn ow n o f h is i nju ry and its c a us e a t th e tim e his ri g ht t o instit ute suit arises.” Id. at 859.
38 IV. Conclusion

Ba sed upon t he foreg oing r easons, we will affirm the D istrict Co u rt’ s g r an t o f s u mm ar y ju d g me n t in f

a v o r o f N o rthw e s te r

nand Gallina.