Court Opinion

ID: 4169605
Source: CourtListenerOpinion
Date Created: 2017-05-18 17:03:43.720645+00
Date Added: 2024-06-11T09:27:37.288929
License: Public Domain

NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT
                                  _____________

                                       No. 16-1614
                                      _____________

            NICOLE MOLL, Administrator of the Estate of Paul L. Robbins, III,
                                                           Appellant

                                             v.

                        PRUCO LIFE INSURANCE COMPANY
                                 ______________

               APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
                               (M.D. Pa. No. 1-14-cv-1040)
                    District Judge: Honorable Christopher C. Conner
                                    ______________

                      Submitted Under Third Circuit L.A.R. 34.1(a)
                                  November 4, 2016
                                  ______________

           Before: JORDAN, GREENAWAY, JR., and RENDELL, Circuit Judges.

                              (Opinion Filed: May 18, 2017)
                                    ______________

                                        OPINION*
                                     ______________

GREENAWAY, JR., Circuit Judge.

       Nicole Moll, administrator of the estate of her stepfather, Paul L. Robbins, III,

       *
        This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7
does not constitute binding precedent.
seeks review of the District Court’s decision granting summary judgment in favor of

Pruco Life Insurance Company.1 For the reasons set forth below, we will affirm the

District Court’s decision.

I.     FACTS

       On July 3, 2012, Robbins obtained a life insurance policy from Pruco, naming his

three stepchildren (Moll, Larry Reinhardt, III, and Christine Reinhardt) and Moll’s minor

son as the beneficiaries of the $250,000 death benefit. Under the terms of the policy,

“[c]ontract premiums are due on the contract date and every 1 month after that date.”

(Supp. App. 5.) The contract date was July 3, 2012, thus making payments due on the

third of each month. The contract also provided for a 31-day grace period, as required by

40 PA. STAT. AND CONS. STAT. ANN. § 510(b). That is, “[i]f the premium has not been

paid by its due date, the contract will stay in force during the grace period. If the

premium has not been paid when its grace period is over, the contract will end and have

no value.” (Supp. App. 12.)

       Robbins made the first payment of $42.53 via debit card on July 14, 2012.2 He

did not make the payment due on August 3, 2012. Instead, on August 20, 2012, Robbins

submitted Pruco’s “Request for Initial Premium (E-PAY) and/or to Establish Monthly

       1
        Our review of the District Court’s decision is plenary. Auto-Owners Ins. Co. v.
Stevens & Ricci Inc., 835 F.3d 388, 402 (3d Cir. 2016) (quoting Tristani ex rel. Karnes v.
Richman, 652 F.3d 360, 366 (3d Cir. 2011)).
       2
        While Robbins’s bank statements showed his initial payment was deducted from
his bank account on July 14, 2012, Pruco’s records reflected a payment date of August
23, 2012, which was the date the payment was processed after the policy was fully
underwritten.

                                              2
Electronic Funds Transfer (EFT)” form (the “EFT Form”) authorizing payments to be

made monthly by automatic withdrawal from his bank account. The EFT Form asked the

insured to select a date on which withdrawals would be made, stating that “[t]he monthly

withdrawal date must be on or before the premium due date.” (Supp. App. 71.) Despite

this instruction, Robbins selected the 18th as his withdrawal date. By letter dated August

24, 2012, Pruco informed Robbins that the first withdrawal for the missed August

payment would be made on September 10, 2012, and that the September payment would

be withdrawn from his account on September 18, 2012. The record shows that all

subsequent withdrawals were made on the 18th (or the next business day if the 18th fell

on a weekend or holiday) of every month.

       The automatic withdrawals continued until February 9, 2013 when Robbins called

Pruco, expressing his desire to cancel his policy. During that call, the Pruco

representative explained that the withdrawal for the February payment was already

scheduled, the March withdrawal would be stopped, Robbins’s coverage was in force

until March 3, 2013, and the paperwork for cancelling the policy would be mailed to him.

Robbins did not complete the cancellation paperwork, but he called Pruco again on

March 11, 2013 to confirm the policy was cancelled. Since he had not completed the

necessary cancellation form, the policy was still in effect. However, the representative

explained that “if [he] would want to keep the policy, the quarterly premium [was]

$125.22. This [was] due March 3, 2013. If [he] want[ed] to keep the policy, [he had]

until April 3, 2013 to make the payment.” (Supp. App. 30.)

       Robbins never completed the cancellation paperwork, but he also never made

                                             3
another payment on the policy, despite receiving written reminder notices dated February

20, 2013 and March 8, 2013. As a result, upon conclusion of the 31-day grace period, the

policy lapsed on April 3, 2013. On April 8, 2013, Robbins died of an unexpected,

massive heart attack.

II.    DISCUSSION3

       Before the District Court, Moll asserted that Pruco breached an implied

contractual provision created by Pennsylvania’s Insurance Department Act of 1921, 40

PA. STAT. AND CONS. STAT. ANN. § 510(a), which provides that all life insurance policies

“shall . . . contain[] . . . [a] provision that all premiums shall be payable in advance.”

Applying Pennsylvania’s Statutory Construction Act,4 the District Court concluded that

“a permissive interpretation [of ‘payable in advance’] best effectuates the legislature’s

intent.” (App. 14.) That is, Moll’s requested interpretation of “payable in advance” as

requiring all payments to be made prior to the due date “would nullify the grace period

[provision].” (Id.) As the District Court noted, such a strict interpretation would be in

contravention of Pennsylvania’s statutory construction principles.

       Before us, Moll argues that the District Court erred by accepting Pruco’s

permissive interpretation of the statutory phrase “all premiums shall be payable in

advance.” Moll contends that “such an interpretation results in a law that serves no real

       3
        The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367. We
have jurisdiction pursuant to 28 U.S.C § 1291.
       4
        Pennsylvania’s Statutory Construction Act requires that “[e]very statute [] be
construed, if possible, to give effect to all its provisions.” 1 PA. STAT. AND CONS. STAT.
ANN. § 1921(a).
                                               4
purpose and, importantly, fails to meet the test of ‘more favorable to the policyholder.’”

(Appellant’s Br. 15 (quoting 40 PA. STAT. AND CONS. STAT. ANN. § 510).) Essentially,

Moll asserts that this phrase should instead be read as requiring all payments to be made

prior to their due date. As the District Court aptly concluded, however, this interpretation

would render 40 PA. STAT. AND CONS. STAT. ANN. § 510(b), which establishes a grace

period for payments, being superfluous and devoid of meaning. Contrary to Moll’s

assertion, a permissive interpretation protects the public by providing flexibility in the

payment schedule.

       Moll also contends that the District Court misconstrued her argument. Her

       true position is that §510(a) exists to prevent precisely the scenario
       which occurred here in which the insurer relied on the earlier due
       date when calculating the statutorily-mandated grace period while at
       the same time regularly collecting the premium approximately two
       weeks beyond the original due date, a process which had the effect
       of a establishing a new, later due date.

(Appellant’s Br. 14.)

       Moll’s argument is flawed in at least two respects. First, no support exists in the

statute, case law, or the contract for her assertion that Pruco’s acceptance of late

payments pursuant to the EFT Form effectively established a new due date.5 In fact,

accepting this argument would create an unmanageable payment system for insurance

       5
         Moll claims that Pruco mandated when payments were made. To the contrary,
Robbins established the payment schedule when he completed the EFT Form, and,
contrary to the form’s instruction, chose a payment date that was after the due date.
Moreover, despite her arguments regarding the effect of the EFT Form, Moll concedes
that she “did not and does not assert that the EFT Agreement constituted a modification
of the Policy.” (Appellant’s Br. 19.) Only a modification of the policy could alter the
payment due date.
                                              5
premiums, which would effectively eliminate any certainty or clarity for both the insured

and the insurance company. That is, accepting Moll’s position would result in an ever-

changing due date for premium payments since each late payment would adjust the due

date for subsequent premiums.

       Second, her claim that §510(a) exists to prevent the situation presented here

ignores the grace period established in §510(b). As the District Court noted, Moll’s

suggested interpretation “would nullify the grace period” which would “violate[] the

Statutory Construction Act’s overarching command that a statute must be construed ‘to

give effect to all its provisions.’” (App. 14 (quoting 1 PA. STAT. AND CONS. STAT. ANN.

§ 1921(a)).) In fact, Moll concedes as much, stating that “such a position is too rigid and

obviously not proper in light of the fact that the Insurance Act explicitly allows for

payment of an overdue premium to be made after the due date by virtue of the grace

period provided for in [§510(b)].” (Appellant’s Br. 14.)

       Moll’s remaining arguments are variations on the theme that Robbins’s payments

should have been applied to the upcoming due date as opposed to the past due date, in

accordance with the “payable in advance” provision. Moll comments that “Pruco

inarguably did not make Robbins’ [sic] premiums payable in advance.” (Appellant’s Br.

12.) Moll insists that the February 19, 2013 payment was for the March 3, 2013 due date,

resulting in the next payment being due on April 3, 2013. As a result, the grace period

would end on May 3, 2013, resulting in Robbins dying within the grace period. Statutory

interpretation aside, this scenario defies common sense since it would result in Robbins

having missed one month’s payment during the brief existence of the policy. As the

                                              6
record shows, Robbins never made a payment on or before the due date. 6 All of his

payments, including the first one, were made after the due date.

      Moll also argues that insurance premiums must be payable in advance to avoid

confusion among insureds over the default date, and faults Pruco for never issuing default

notices. As Pruco’s representative, Angela Pompey, explained, “by us electronically

withdrawing [the] payments, we know that every month [the] premium is going to be

paid and the policy will never enter its grace [period].” (Supp. App. 119.) Therefore, so

long as the automatic payment authorization was in effect, there was no need for Pruco to

send default notices. When Robbins withdrew his automatic payment authorization on

February 9, 2013, Pruco began sending reminder notices regarding the payment that was

due on March 3, 2013. As noted above, the March 3, 2013 payment was never made.

After the final payment for February 3, 2013 was made and the 31-day grace period

      6
          Robbins’s payment history for the Pruco policy is summarized as follows:

      Premium Due Date             Payment Date               Amount
      July 3, 2012                 July 14, 2012              $42.53 (Visa debit)
      Aug. 3, 2012                 Sept. 10, 2012             $42.53 (EFT)
      Sept. 3, 2012                Sept. 18, 2012             $42.53 (EFT)
      Oct. 3, 2012                 Oct. 18, 2012              $42.53 (EFT)
      Nov. 3, 2012                 Nov. 19, 2012              $42.53 (EFT)
      Dec. 3, 2012                 Dec. 18, 2012              $42.53 (EFT)
      Jan. 3, 2013                 Jan. 19, 2013              $42.53 (EFT)
      Feb. 3, 2013                 Feb. 19, 2013              $42.53 (EFT)

(App. 7.) As Moll notes, “[i]f Pruco had applied Robbins’ [sic] premiums as ‘payable in
advance’ as required by law” or “[h]ad Pruco merely applied Robbins’ [sic] premiums for
the premium period ahead, . . . his death would have fallen within [the grace] period and
coverage would be afforded.” (Appellant’s Br. 18.) This could not have happened given
the number of payments Robbins made. Thus, the March 3, 2013 payment was never
made, and the grace period ended on April 3, 2013.
                                             7
expired, the policy lapsed.

       Finally, Moll argues that “Pruco’s actions in violating Pennsylvania law and its

own EFT Agreement, improperly applying premiums, relying on its improper application

of the premium to justify denying the claim and then forcing the beneficiaries to litigate

the matter . . . provide sufficient evidence of bad faith.” (Appellant’s Br. 23.) The

District Court evaluated this claim under Pennsylvania’s insurance bad faith statute, 42

PA. STAT. AND CONS. STAT. ANN. § 8371, and correctly concluded that Pruco’s actions

did not amount to bad faith.

       Pennsylvania courts broadly consider an insurer’s bad faith to be “any frivolous or

unfounded refusal to pay proceeds of a policy; it is not necessary that such refusal be

fraudulent.” Terletsky v. Prudential Prop. & Cas. Ins. Co., 649 A.2d 680, 688 (Pa.

Super. Ct. 1994) (citing BLACK’S LAW DICTIONARY 139 (6th ed. 1990)). “‘[T]o recover

under a claim of bad faith,’ the insured must show that the insurer ‘did not have a

reasonable basis for denying benefits under the policy and that the insurer knew of or

recklessly disregarded its lack of reasonable basis in denying the claim.’” Amica Mut.

Ins. Co. v. Fogel, 656 F.3d 167, 179 (3d Cir. 2011), as amended (Dec. 9, 2011) (quoting

Terletsky, 649 A.2d at 688). Here, Pruco’s actions did not constitute bad faith because

Pruco had a reasonable basis for denying benefits. As the District Court noted, Robbins

knew of his “impending policy lapse” but “made no premium payments to prevent this

lapse, [so] Pruco appropriately and timely declined to pay the death benefits.” (App. 18.)

                                             8
III. CONCLUSION

      For the foregoing reasons, we will affirm the District Court’s decision granting

summary judgment in favor of Pruco.

                                           9