Court Opinion

ID: 3014046
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Date Created: 2015-10-13 22:00:08.560538+00
Date Added: 2024-06-11T11:46:50.062223
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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-25-2004

Justofin v. Metro Life Ins Co
Precedential or Non-Precedential: Precedential

Docket No. 02-4264

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"Justofin v. Metro Life Ins Co" (2004). 2004 Decisions. Paper 535.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/535

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                         PRECEDENTIAL       225 North Flowers Mill Road
                                            Langhorne, PA 19047
         UNITED STATES
        COURT OF APPEALS                           Attorneys for Appellants
      FOR THE THIRD CIRCUIT

                                            Alvin Pasternak, Esquire
              No. 02-4264                   Anthony J. Tomari, Esquire
                                            Metropolitan Life Insurance Company
                                            Law Department
JEFFREY JUSTOFIN, CHRISTOPHER               One Madison Avenue
JUSTOFIN; DAMIAN JUSTOFIN;                  New York, NY 10010-3690
    ROBERT JUSTOFIN; IVAN
JUSTOFIN, (Beneficiaries of Loretta K.      Veronica W. Saltz, Esquire (Argued)
        Justofin, Deceased),                Saltz Polisher
                                            993 Old Eagle School Road
                     Appellants             Suite 412
                                            Wayne, PA 19087
                    v.
                                                   Attorneys for Appellee
       METROPOLITAN LIFE
         INSURANCE CO.
                                                  OPINION OF THE COURT

           On Appeal from the
                                            AM BRO, Circuit Judge
       United States District Court
 for the Eastern District of Pennsylvania           The Justofins, beneficiaries under
   D.C. Civil Action No. 01-cv-06266        the life insurance policy of their mother
       (Honorable John R. Padova)           Loretta K. Justofin (“Loretta”), sued
                                            Metropolitan Life Insurance Company
                                            (“MetLife”) for denying a portion of death
       Argued October 27, 2003              benefit proceeds. The District Court
                                            granted summary judgment in favor of
B e f o r e : S CIR ICA , C hief J udge,    MetLife by finding the amendment to the
NYGAARD and AMBRO, Circuit Judges           life insurance policy increasing the benefit
                                            void because of Loretta’s failure to
     (Opinion filed: June 25, 2004)         disclose fully her medical history. The
                                            issues before us are: (1) whether MetLife
Timothy M. Kolman, Esquire                  established that the amended policy was
Wayne A. Ely, Esquire (Argued)              void as a matter of law because of
Timothy M. Kolman & Associates              Loretta’s false representations, thus
warranting summary judgment against the            son, Dr. Christopher Justofin,1 as her
Justofins on their breach of contract claim;       personal physician, mentioning that Dr.
(2) whether M etLife waived its right to           Justofin treated her for occasional arthritis
contest the validity of the amended policy         of her hands and feet. MetLife issued the
because it failed to investigate Loretta’s         life insurance policy to Loretta in the
representation before issuing the policy;          amount of $100,000.
(3) whether the District Court properly
                                                          Five years later, at the age of sixty-
disposed of the Justofins’ bad faith claim
                                                   four, Loretta applied to increase the policy
against MetLife by finding the amended
                                                   amount, from $100,000 to $300,000, by
policy void; (4) whether the District Court
                                                   completing an “Application for Change of
erroneously granted MetLife’s motion to
                                                   Placed Personal Life Insurance” form. It
amend its pleading; and (5) whether the
                                                   contained the following pertinent
District Court erred in not addressing the
                                                   questions and answers.
Justofins’ motions for discovery and
sanctions.                                                 11. Has any person EVER received
                                                   treatment, attention, or advice from any
        We vacate the District Court’s
                                                   physician, practitioner or health facility
summary judgment in favor of MetLife
                                                   for, or been told by any physician,
and remand this case for further
                                                   practitioner or health facility that such
proceedings. Specifically, we conclude
                                                   person had:
that the amended life insurance policy
issued by MetLife was not void as a matter                (j) Arthritis, paralysis, or
of law; that MetLife did not waive its                    disease or deformity of the
challenge to the validity of the amended                  bones, muscles or joints?
policy; that whether MetLife acted in bad                 Yes
faith should be dealt with separately from
                                                          ....
the contract claim; and that the District
Court properly exercised its discretion in                15. In past 5 years, has any
allowing MetLife to amend its pleading.            physician, practitioner or health facility
As for the Justofins’ motions for discovery        examined, advised or treated any person?
and sanctions, we leave them to the                Yes
District Court’s discretion on remand.
             I. Background
                                                   The application instructed Loretta to
       In April 1994 Loretta initially             provide the details about her “yes” answers
applied for a life insurance policy from           in questions 11 and 15, including the name
MetLife. In the application, she listed her

                                                     1
                                                      At the time, Dr. Justofin had just begun
                                                   his residency in family medicine, which he
                                                   finished in February 1996.

                                               2
of each physician, nature and severity of           of Pennsylvania,3 claiming breach of
condition, frequency of attacks, specific           contract, bad faith, and negligence.
diagnosis, and treatment. She provided              MetLife counterclaimed, seeking a
names of several doctors and the details of         declaration that the policy increase was
surgeries and treatment, including her foot         void ab initio, and moved for summary
surgery for arthritis. Although Loretta             judgment. The District Court granted
listed several doctors who treated her,             MetLife’s summary judgment motion on
including Dr. Eugene Jacobs (her then               the negligence issue but denied it as to the
personal physician), she did not mention            other issues.
Dr. Justofin in this 1999 change
                                                           MetLife then filed a motion for
application. In Part B of the application,
                                                    reconsideration based on the evidence that
Loretta again noted that she had arthritis
                                                    Loretta used Prednisone, a drug used to
and that she self-medicated Prednisone in
                                                    treat Lupus. MetLife deposed Dr. Justofin
1969 for her arthritis when she owned a
                                                    regarding this matter. He testified that he
pharmacy. Part C, the “Paramedical
                                                    was a personal physician of his mother
Evaluation,” shows that Loretta disclosed
                                                    from 1994 until sometime in 1998. During
that she had an “unknown type” of arthritis
                                                    this period, Dr. Justofin visited Loretta
that caused noticeable hand swelling.
                                                    weekly at her home to examine her and
Effective May 1999, MetLife issued the
                                                    also to pick up his mail. 4 Dr. Justofin
increase in death benefit coverage.
                                                    asserted that, although he treated his
        Loretta died on December 7, 1999.           mother for arthritis, she never had Lupus.
MetLife paid the Justofins $100,000 based           Although Dr. Justofin was not sure what
on the original 1994 policy but informed            kind of arthritis Loretta had, he speculated
them that it was voiding the amended                that she had rheumatoid arthritis,
policy’s $200,000 increase.        Initially,       osteoarthritis, or both.5 Dr. Justofin also
MetLife’s stated reason for voiding the             mentioned that he used to write a six-
increase was that Loretta failed to disclose        month supply of Prednisone for Loretta’s
that she had Lupus.2 The Justofins brought
suit against MetLife in the Eastern District
                                                          3
                                                        The District Court had jurisdiction
                                                    under 28 U.S.C. § 1332.
     2
      Systemic Lupus Erythematosus, a                 4
                                                      Dr. Justofin explained that he used his
slowly progressive systemic disease                 mother’s address as his permanent address.
marked by, among other things, arthritic
                                                          5
changes. Whether Loretta in fact had                     Dr. Justofin testified that he never
Lupus is disputed but is not relevant to our        performed any tests to determine what
decision. We note, however, that the                kind of arthritis his mother had, partly
record does not show any evidence that              because she did not want to make a trip to
Loretta’s death was related to Lupus.               his office.

                                                3
arthritis and she would adjust the dose            Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir.
depending on her condition.6 Dr. Justofin          2002)). We therefore apply the same
also opined that Prednisone is a                   standard the District Court employed
medication routinely prescribed for                under Federal Rule of Civil Procedure
rheu mato id arth ritis, r ather than              56(c). We should affirm the District
osteoarthritis.                                    Court’s summary judgment if “there is no
                                                   genuine issue as to any material fact and
         MetLife thereupon motioned for
                                                   . . . the moving party is entitled to a
leave to file a supplemental counterclaim,
                                                   judgment as a matter of law.” Fed. R. Civ.
seeking a declaration that the policy
                                                   P. 56(c). A fact is material when its
increase was void based on Loretta’s
                                                   resolution “might affect the outcome of the
failure to disclose that her son had treated
                                                   suit under the governing law,” and a
her and prescribed Prednisone for her. 7
                                                   dispute about a material fact is genuine “if
The District Court granted the motion.
                                                   the evidence is such that a reasonable jury
MetLife then sought summary judgment
                                                   could return a verdict for the nonmoving
on its new counterclaim and on the
                                                   party.” Anderson v. Liberty Lobby, Inc.,
Justofins’ breach of contract and bad faith
                                                   477 U.S. 242, 248 (1986). In reviewing
claims.     The District Court entered
                                                   the record, we draw all justifiable
summary judgment in favor of MetLife on
                                                   inferences in favor of the nonmoving
all claims. The Justofins appealed. We
                                                   party. Id. at 255.
have appellate jurisdiction under 28 U.S.C.
§ 1291.                                                         III. Discussion
         II. Standard of Review                    A. Breach of Contract Claim
       “We review the District Court’s                   1. Is the 1999 Policy Amendment
grant of summary judgment de novo.”                void as a matter of law because of
Fakete v. Aetna, Inc., 308 F.3d 335, 337           allegedly        false      material
(3d Cir. 2002) (citing Fogleman v. Mercy           misrepresentations?
                                                          We first determine whether the
                                                   policy amount increase was void as a
  6
   It is not clear from the record when Dr.        matter of law. If so, we shall affirm the
Justofin started prescribing Prednisone and        District Court’s summary judgment in
when he stopped. He recalled that the              favor of MetLife on the Justofins’ breach
prescription began sometime in 1994 or             of contract claim.
the beginning of 1995 and ended sometime
between 1997 and 1998.                                    To void an insurance policy under
                                                   the law of Pennsylvania,8 the insurer has
  7
    MetLife does not claim, however, that
Loretta’s death was in any way related to
                                                      8
her arthritic condition or the medication             The parties agree that the substantive
for that condition.                                law of Pennsylvania applies.

                                               4
the burden to prove that: (1) the insured           But if the evidence is such that a
made a false representation; (2) the insured        reasonable jury could find that MetLife
knew the representation was false when it           has not shown all the elements by clear
was made or the insured made the                    and convincing evidence, we shall reverse.
representation in bad faith; and (3) the
                                                                 (a) Did Loretta make false
representation was material to the risk
                                                    representations?
being insured. Coolspring Stone Supply,
Inc. v Am. States Life Ins. Co., 10 F.3d                   In this context, we first decide
144, 148 (3d Cir. 1993) (citing Shafer v.           whether a rational jury must find that
John Hancock M ut. Life Ins. Co., 189 A.2d          MetLife has shown that Loretta made
234, 236 (Pa. 1963)). The insurer has the           false representations. The District Court
burden to prove all three elements by clear         found that her failure to list Dr. Justofin’s
and convincing evidence. Batka v. Liberty           treatment, along with his prescription of
Mut. Fire Ins. Co., 704 F.2d 684, 687 (3d           Prednisone, in her 1999 application so
Cir. 1983) (“Pennsylvania requires that an          qualified.
insurer establish the defense of fraud in the
                                                           In     Pe nns y lv a n i a , a  f alse
application by ‘clear, precise and
                                                    representation includes omission of an
indubitable’ evidence . . . [and] that the
                                                    insured’s medical information.            See
factfinder be satisfied of the elements of
                                                    Grimes v. Prudential Ins. Co. of Am., 585
the defense by clear and convincing
                                                    A.2d 29, 31-32 (Pa. Super. Ct. 1991)
evidence.”) (citations omitted).
                                                    (using the term “a misstatement of fact” to
        This heightened burden of proof             refer to an insured’s failure to disclose
should be taken into account in ruling on           fully her medical history). The Justofins
summary judgment. Anderson, 477 U.S. at             correctly point out that their mother indeed
255 (“[T]he determination of whether a              disclosed in her initial 1994 application
given factual dispute requires submission           that Dr. Justofin was her personal
to a jury must be guided by the substantive         physician.9 But Loretta failed to inform
evidentiary standards that apply to the             MetLife about her son’s prescription of
case.”). Consequently, where the clear and          Prednisone. Although the Justofins claim
convincing evidence standard applies, the           that Loretta disclosed that she took
trial judge must inquire whether the                Prednisone for her arthritis, the record
evidence presented is such that a jury
applying that evidentiary standard could
                                                       9
find only for one side. In this case, if the            We agree with the Justofins that the
evidence in the record reasonably supports          1994 and 1999 applications must be read
the inescapable conclusion that MetLife             together for the purpose of this litigation
has shown all three elements to void the            because the 1999 application was
policy by clear and convincing evidence,            completed only for the purpose of
we shall affirm the summary judgment.               increasing the face amount of the 1994
                                                    policy.

                                                5
shows that she listed only her self-                v. Plumer, 380 U.S. 460, 473-74 (1965).
medication of Prednisone in 1969 but not            W hen “the [Federal] Rule speaks to the
her more recent use of the drug between             point in dispute and is valid, it is
1994 and 1998. Because there is no                  controlling,” and we need not pay any
evidence to contradict that Loretta failed to       regard to state provisions, regardless
disclose this information, no genuine               whether they are in conflict with the
dispute exists as to whether her                    Federal Rule. 19 Charles Alan Wright,
representations were false.                         Arthur R. Miller, & Edward H. Cooper,
                                                    Federal Practice and Procedure § 4508 (2d
             (b) Did Loretta know that
                                                    ed. 1996). Only if there is no Federal Rule
her representations were false or did she
                                                    covering the point in dispute, or the scope
make them in bad faith?
                                                    of the Federal Rule is not sufficiently
        Next, MetLife must show that                broad to control the issue before us, do we
Loretta knew her representations were               ask whether to apply the state law. Walker
false or she made them in bad faith. While          v. Armco Steel Corp., 446 U.S. 740, 750-
both involve state of mind, our discussion          53 (1980); see also McEwen v. Delta Air
focuses primarily on bad faith, which was           Lines, Inc., 919 F.2d 58, 60 (7th Cir.
also the focus of the District Court.               1990) (“Only when the federal rules are
                                                    silent need the federal court ask whether to
        The Justofins assert that a genuine
                                                    use state rules as templates.” (citing
issue of material fact exists whether
                                                    Walker)). Even then, a federal court
Loretta’s omissions were innocent,
                                                    “must apply the federal rule within its
inadvertent mistakes rather than bad faith
                                                    sphere of coverage.” Wright, Miller &
misrepresentations. If so, the District
                                                    Cooper, supra, § 4508.
Court erred in determining Loretta’s bad
faith as a matter of law.                                   Rule 56(c) directly speaks to and
                                                    thus controls the process pertaining to
       MetLife argues that we should
                                                    Loretta’s intent in this case. MetLife in
adopt the summary judgment standard that
                                                    fact concedes that Rule 56(c) is
Pennsylvania courts apply to insurance
                                                    sufficiently broad enough to cover the
fraud cases. It contends that this case falls
                                                    point in dispute. Appellee’s Letter Brief at
into one of the rare instances in which
                                                    6. Nevertheless, it argues that we are
Pennsylvania courts would infer bad faith
                                                    compelled to adopt the Pennsylvania law
as a matter of law when considering
                                                    because, it claims, there is no conflict
summary judgment, and therefore we must
                                                    between the federal and state law in this
also do so. We disagree for the following
                                                    case. Contrary to MetLife’s argument,
reasons.
                                                    however, when a Federal Rule is clearly
        A federal court sitting in diversity        applicable (as is the case here), the
jurisdiction follows a Federal Rule of Civil        absence of conflicting state law is all the
Procedure when one of the Federal Rules             more reason to adopt the controlling
is controlling the point in dispute. Hanna

                                                6
Federal Rule. Walker, 446 U.S. at 747.                      Generally an insured’s state of mind
Accordingly, by applying Pennsylvania’s             is an issue of fact for the jury. Coolspring,
substantive law, we do not impress a                10 F.3d at 148. The issue of intent is
different procedural requirement on Rule            “particularly inappropriate for resolution
56.10                                               by summary judgment” because evaluating

   10
     In contending that Pennsylvania law            bad faith as a matter of law must be
compels us to find bad faith as a matter of         confined to the cases where “the insured
law, the dissent relies on a Pennsylvania           [falsely] denies in his answer that any
Supreme Court case from 1941 that                   physician has been consulted, or any
entered judgment for the insurance                  medical or surgical treatment has been
company notwithstanding a contrary                  received during the period of inquiry.” Id.
verdict. Freedman v. Mutual Life Ins. Co.           at 84. In this case, Loretta did inform
of New York, 21 A.2d 81 (Pa. 1941). We              MetLife that: (a) she had arthritis; (b) Dr.
note that we would still reverse the District       Justofin treated her for this condition at
Court on this issue even under Freedman.            some point; (c) she had surgery on her foot
There, the insured flatly denied having             for arthritis; (d) she suffered noticeable
consulted any physician or having had any           hand swelling because of her arthritis; and
kind of treatment for any ailment in his            (e) she tried different types of drugs to
insurance application form. Id. at 83. To           alleviate this ailment. Whether Loretta’s
the contrary, the insured consulted or              failure to provide further details (such as
visited five physicians more than twenty            the use of a particular drug) establishes her
times over the period. Id. He also                  bad faith is an issue for the jury.
complained of pains in his chest, a nervous             Moreover, we do not believe that our
disorder, and dizziness to his physician,           Court in Burket v. Equitable Life
was prescribed a heart stimulant, and had           Assurance Society of America, 287 F.3d
his heart examined by three different               293 (3d Cir. 2002), adopted a rule that
physicians (all of whom spotted heart               infers bad faith as a matter of law under
irregularities).     Id.     The only (and          Freedman. The Burket panel merely cited
decidedly weak) evidence the plaintiff              the dicta portion of Grimes, a
offered in rebuttal was the testimony of the        Pennsylvania Superior Court case.
insured’s secretary that she thought he was         Though the Court in Grimes referred to
in good health and had no knowledge of              Freedman, it did not deem Freedman to
his visits to physicians. Id. The Court             apply to the facts in Grimes, where the
concluded that, under the circumstances,            insured had disclosed her medical history
“[t]he only reasonable assumption that can          but omitted material facts. 585 A.2d at 33.
be drawn . . . is that the insured knowingly        Grimes therefore held that the insured’s
and fraudulently gave false answers.” Id.           intent and bad faith were for a jury to
at 85. We believe Freedman’s finding of             decide. Id.

                                                7
state of mind often requires the drawing of          rheumatoid arthritis and in bad faith
inferences from the conduct of parties               concealed this information from MetLife
about which reasonable persons might                 by omitting her son’s treatment visits and
differ. Riehl v. Travelers Ins. Co., 772             prescription of Prednisone. As this case
F.2d 19, 24 (3d Cir. 1985) (citing Ness v.           came to us on summary judgment, all
Marshall, 660 F.2d 517, 519 (3d Cir.                 permissible inferences are to be drawn in
1981)).                                              the Justofins’ favor. Anderson, 477 U.S.
                                                     at 255. A jury might conclude that Loretta
        Contrary to the District Co urt’s
                                                     did not think that her son’s casual visits
finding, we are not satisfied that Dr.
                                                     were so important to report in her new
Justofin’s testimony and Loretta’s answers
                                                     application in great detail, especially when
in her policy applications incontrovertibly
                                                     she had already disclosed that he was her
established her bad faith. Dr. Justofin
                                                     personal physician and treating her for
merely testified that she suffered from
                                                     arthritis in her initial application, and when
arthritis of an unknown type, which she
                                                     he had discontinued his weekly visits a
disclosed. The testimony also showed that
                                                     year or two before the time of her new
Loretta saw her son on a weekly basis for
                                                     application. Furthermore, a jury might
a few years and he prescribed Prednisone
                                                     determine that Loretta not only was
for her during that period. She did not
                                                     unaware of the type of arthritis she was
disclose this information in her 1999
                                                     suffering but also believed that further
application. With respect to Dr. Justofin’s
                                                     detail on the application, such as taking a
treatment, the District Court noted
                                                     particular drug, was unnecessary when she
Loretta’s disclosure of Dr. Justofin’s
                                                     already stated that she had arthritis that
treatment of her arthritis in her initial 1994
                                                     was treated, inter alia, by a surgery.
application.     This shows, the Court
concluded, that Loretta in bad faith did not                We again emphasize that MetLife
disclose Dr. Justofin’s treatment in the             has the burden to prove Loretta’s state of
1999 application. The District Court also            mind, a difficult task nearly always and
referred to Loretta’s omission of Dr.                especially when she is dead. In the context
Justofin’s prescription of Prednisone and            of this case, Loretta’s knowledge of
contrasted it with her disclosure of taking          misrepresentations and bad faith may not
self-medicated Prednisone from many                  be inferred as a matter of law, as they are
years before.                                        genuine issues of material fact to be
                                                     decided by a jury.
        It is possible that a jury could find
it suspicious that Loretta somehow thought                       ( c )   W e r e             t h e
it unnecessary to reveal this information.           misrepresentations material?
But we do not believe that the only
                                                            The third issue we consider is
reasonable inference from this evidence is
                                                     whether the information Loretta failed to
that Loretta must have had (or, at least,
                                                     disclose was material. Information is
must have believed that she had)
                                                     material if it would have influenced the

                                                 8
judgment of the insurer in making the                       2. Did MetLife waive its right to
contract or in fixing a premium. Piccinini           contest the validity of the amended
v. Teachers Protective Mut. Life Ins. Co.,           policy by failing to investigate?
463 A.2d 1017, 1024 (Pa. Super. Ct.
                                                             We do not agree with the Justofins,
1983). The District Court found that
                                                     however, that MetLife waived its right to
Loretta was treated for rheumatoid arthritis
                                                     contest the validity of the amended policy
and that as a matter of law the information
                                                     by failing to investigate. True, “the law of
was material since MetLife’s guidelines
                                                     Pennsylvania is . . . that when a policy is
showed that rheumatoid arthritis, a more
                                                     issued on an application containing an
serious type of arthritis than osteoarthritis,
                                                     ambiguous, unresponsive or incomplete
was an important factor in determining the
                                                     answer[,] the insurer waives the right to
insurance risk. But it is not at all obvious
                                                     assert the falseness or materiality of the
from the record that MetLife would have
                                                     question and answer.” Franklin Life Ins.
cancelled the policy (or even demanded a
                                                     Co. v. Bieniek, 312 F.2d 365, 373 (3d Cir.
higher premium) had it known that Dr.
                                                     1962). From this, the Justofins argue that
Justofin was prescribing Prednisone. This
                                                     when their mother mentioned that she had
is because MetLife adjusts its premiums
                                                     an “unknown type arthritis,” her answer
based on the severity of an insured’s
                                                     was ambiguous on its face and, therefore,
rheumatoid arthritis, not the type of
                                                     MetLife should have investigated further.
prescription drugs involved. MetLife
                                                     We need not decide here whether
argues that had Loretta disclosed her use
                                                     “unknown type arthritis” was ambiguous
of Prednisone for either moderate or
                                                     on its face for, even if so, an insurer
severe rheumatoid arthritis, there could
                                                     waives only the right to contest the validity
have been a decline of the increase in
                                                     of those particular responses while
coverage. The record before us, however,
                                                     retaining the right to contest the validity of
does not clearly establish that Loretta even
                                                     any other misrepresentations (such as, in
had rheumatoid arthritis or that her use of
                                                     this case, Loretta’s omission of her son’s
Prednisone was to treat her presumably
                                                     treatment and drug prescription). Id. at
rheumatoid condition.11 Therefore, a jury
                                                     375.
must determine whether the undisclosed
information was material.                            B. Bad Faith Claim
                                                             The Justofins argue that finding the
                                                     amended policy void should not have
   11
      Again we emphasize that no record              resulted in the summary disposition of
evidence indicates that Loretta’s death was          their bad faith claim against MetLife.
related to any form of arthritic condition or        Case law treats contract and bad faith
the medication for it. Indeed, as noted              claims as separate in insurance cases.
above, MetLife initially asserted that               Margolies v. State Farm Fire & Cas. Co.,
Loretta used Prednisone to treat her Lupus.          810 F. Supp. 637, 641-42 (E.D. Pa. 1992)
                                                     (rejecting the insurer’s contention that bad

                                                 9
faith assertion was contingent to a contract         should have denied the amendment
claim because the bad faith claim was                because MetLife’s claims are meritless and
essentially a claim on the policy itself).12         in bad faith. We disagree. First, we have
The Justofins have not pointed to much (if           concluded that the merit of the parties’
any) evidence in support of their bad faith          claims relating to the policy amendment
claim. But because the claim survived the            should be decided by a jury. Moreover,
first summary judgment motion, the                   the case the Justofins rely on, Heyl &
District Court should have given a reason            Patterson Int’l, Inc. v. F.D. Rich Housing
why it failed the second time. On remand,            of the Virgin Islands, Inc., 663 F.2d 419
the District Court should treat the bad faith        (3d Cir. 1981), does not help their
claim against MetLife separately from the            position.
contract claim, though we note that we
                                                           [L]eave to amend “shall be
voice no opinion whether the bad faith
                                                           freely given when justice so
claim should yet again survive summary
                                                           requires”; this mandate is to
judgment.
                                                           be heeded . . . . Of course,
C. Leave to Amend MetLife’s Pleading                       the grant or denial of an
                                                           opportunity to amend is
        The Justofins argue that the District
                                                           within the discretion of the
Court abused its discretion when it granted
                                                           District Court, but outright
MetLife leave to amend its pleading to add
                                                           refusal to grant the leave
a counterclaim. See Fed. R. Civ. P.
                                                           without an y justifying
15(a). 13 They assert that the District Court
                                                           reason appearing for the
                                                           denial is not an exercise of
  12
   Although Pennsylvania’s statute under                   discretion; it is merely abuse
which the plaintiff in Margolies brought a                 of that discretion and
bad faith claim was later preempted, that                  inconsistent with the spirit
does not change that a bad faith claim is a                of the Federal Rules. The
separate and independent cause of action.                  trial court’s discretion under
                                                           Rule 15, however, must be
  13
       The Rule provides:                                  tempered by considerations
                                                           of prejudice to the non-
A party may amend the party’s pleading                     moving party, for undue
once as a matter of course at any time                     prejudice is “the touchstone
before a responsive pleading is served . . .               for the denial of leave to
. Otherwise a party may amend the party’s                  amend.” In the absence of
pleading only by leave of court or by                      substantial or undue
written consent of the adverse party; and                  prejudice, denial must be
leave shall be freely given when justice so                grounded in bad faith or
requires.                                                  dilatory motives, truly

                                                10
              u n d u e       o r                    deny summarily the Justofins’ claim of bad
              unexplained delay,                     faith against Metlife, needs to set out these
              repeated failure to                    reasons; the District Court did not abuse its
              cure deficiency by                     discretion in granting MetLife’s motion to
              a m e n d m e n t s                    amend its pleadings to add a counterclaim;
              previously allowed                     and, on remand, the District Court retains
              or futility of                         discretion to address the Justofins’
              amendment.                             allegations of discovery abuse and motions
                                                     for sanctions and additional discovery. In
Id. at 425 (citations omitted). In this case
                                                     this context, we vacate the District Court’s
the Justofins do not show that they are
                                                     grant of summary judgment and remand
unduly prejudiced by the District Court’s
                                                     for further proceedings consistent with this
grant of the amendment. Hence the
                                                     opinion.
District Court did not abuse its discretion
in doing so.
D. Motions for Sanctions and Additional
Discovery
       The Justofins also argue that the
District Court abused its discretion when it
did not rule on their motions for sanctions
and additional discovery before it entered
a summary judgment. We leave to the
District Court’s discretion to address them
on remand.
             IV. Conclusion
        Contrary to the decision of the
District Court, we conclude that the 1999
amendment to Loretta Justofin’s life
insurance policy was not void as a matter
of law, as it is for a jury to decide whether
the misrepresentations in the application
for the policy amendment were made
knowingly or in bad faith and whether they
were material. As to the other issues
appealed: MetLife did not waive its right
to contest the amended policy’s validity by
failing to investigate Loretta’s statements
pertaining to her arthritis; the District
Court, while it may have good reasons to

                                                11
                                                    56(c), regardless whether Pennsylvania
                                                    courts would infer in certain instances bad
Justofin v. Metropolitan Life Insurance
                                                    faith as a matter of law when considering
Company, No. 02-4264
                                                    summary judgment. I disagree.
                                                            Federal courts must apply the
NYGAARD, J., dissenting.                            properly enacted Federal Rules of Civil
                                                    Procedure in place of any state rule that
        I believe that Pennsylvania’s bad
                                                    directly collides with those rules.
faith inference, as explained in Freedman
                                                    Chamberlain v. Giampapa, 210 F.3d 154,
v. Mut. Life Ins. Co. of N.Y., 21 A.2d 81,
                                                    159 (3d Cir. 2000) (citing Hanna v.
84 (Pa. 1941), is not in conflict with Rule
                                                    Plumer, 380 U.S. 460, 470-74 (1965)). I
56 of the Federal Rules of Civil Procedure
                                                    do not believe that Pennsylvania’s bad
and, therefore, should be applied by this
                                                    faith inference directly collides with Rule
Court to analyze MetLife’s motion for
                                                    56(c). In Anderson v. Liberty Lobby, Inc.,
summary judgment. Under that analysis, I
                                                    the Supreme Court stated that under Rule
believe Loretta Justofin’s failure to
                                                    56(c), “the substantive law will identify
disclose her weekly medical examinations
                                                    which facts are material.” 477 U.S. 242,
with her son and the Prednisone
                                                    248 (1986). Further, “only disputes over
prescriptions she received as a result of
                                                    facts that might affect the outcome of the
those examinations were ma terial
                                                    suit under the governing law will properly
omissions from which bad faith must be
                                                    preclude the entry of summary judgment.”
inferred. Accordingly, I do not believe the
                                                    Id. As the majority acknowledges, there is
District Court erred by granting MetLife’s
                                                    no dispute that Pennsylvania’s substantive
motion for summary judgment on the
                                                    law applies to this case. Under Anderson,
Appellants’ breach of contract claim, and
                                                    I see no conflict between Pennsylvania’s
so dissent from the majority on this point.
                                                    bad faith inference and Rule 56(c);
                                                    Pennsylvania’s law simply identifies what
                                                    is and is not material under the Federal
        Pennsylvania courts will infer bad
                                                    Rule. Specifically, if Loretta Justofin
faith as a matter of law when an insured
                                                    failed to disclose medical treatment on her
fails, in the face of a direct and pointed
                                                    insurance application that “a person of
question, to disclose medical treatment that
                                                    ordinary intelligence could not have
a person of reasonable intelligence could
                                                    forgotten,” then facts about whether or not
not have forgotten. Id.; Grimes v.
                                                    she actually knew about that treatment or
Prudential Ins. Co. of Am., 585 A.2d 29,
                                                    actually engaged in bad faith conduct are
31-33 (Pa. Super. Ct. 1991) (applying this
                                                    immaterial, because judgment can be
bad faith inference in the summary
                                                    entered in favor of MetLife on this issue
judgment context).         The majority,
                                                    even in the face of a contrary conclusion
however, does not apply the inference and,
                                                    by the jury. Freedman, 21 A.2d at 84-85
instead, decides this issue under Rule

                                               12
(affirming the trial court’s decision to set                         I also believe the District Court
aside a jury verdict in favor of the plaintiff               properly found the medical treatment
where the un contradicted evidence                           omitted by Loretta Justofin was of such a
established that the plaintiff’s history of                  nature that bad faith was properly inferred.
medical treatments was such that no                          It is undisputed that she did not disclose on
person of ordinary intelligence could have                   either of the rele vant insurance
forgotten those treatments).                                 applications that from 1994 until some
                                                             point in 1998 she was examined by her
                                                             son, Dr. Justofin, on a weekly basis and
        We have recently applied this rule                   that, as part of those examinations, Dr.
in a case similar to this case. In Burkert v.                Justofin prescribed Prednisone to treat her
Equitable Life Assurance Soc’y of Am.,                       arthritis.
287 F.3d 293, 297-98 (3d Cir. 2002), we
had to determine whether summary
judgment was properly entered against an                             There is no question that for
insured who failed to fully disclose on his                  between three and four years Dr. Justofin
insurance application the extent of his drug                 examined Loretta Justofin on a weekly
abuse and related treatment. We held that                    basis and treated her arthritis. He began
the District Court acted appropriately by                    that treatment with over-the-counter drugs
“not[ing] that cour ts app lying                             and then switched to the prescription drug
Pennsylvania law have routinely held that                    Voltran. Finally, he prescribed Prednisone
misrepresentations regarding alcohol abuse                   to treat what he believed to be a
are deemed to be made in bad faith as a                      combination of osteoarthritis and
matter of law and extend[ing] this holding                   rheumatoid arthritis. In 1994, when
to include misrepresentations regarding                      Loretta Justofin initially applied for
drug use.” Id. We cited Grimes, among                        insurance with MetLife, she indicated that
other cases, for the proposition that fraud                  she was being seen by her son and was
can be properly inferred in these types of                   taking Voltran. However, on her change
situations. Id. at 298.                                      of insurance application, she never
                                                             indicated that she continued to see her son
                                                             after 1994 and that he changed her
          I see no material difference between               treatment to Prednisone.14          Loretta
Pennsylvania’s inference of bad faith for                    Justofin was still taking Prednisone when
failing to disclose alcohol abuse and its
same inference for failing to disclose
s u b s t a n ti a l m e d i c a l t r e a t m e n t.          14
                                                                 It should also be noted that the record
Accordingly, based on Burkert and
                                                             shows that Loretta Justofin was familiar
Anderson, I believe the District Court
                                                             with Prednisone because she had self-
properly applied Pennsylvania’s bad faith
                                                             medicated with it in 1969 to treat her
inference.
                                                             arthritis.

                                                        13
she completed this change of insurance                      For these reasons I would not
application.                                         reverse the District Court’s grant of
                                                     summary judgment in favor of MetLife
                                                     and respectfully dissent on this point. I
        The question that must be asked in           agree with the majority on the remaining
order to determine whether an inference of           issues addressed in its opinion.
bad faith arises from Loretta Justofin’s
failure to disclose is whether “a person of
ordinary intelligence could not have
forgotten these [treatments] in answering
a direct and pointed question in an
application for insurance.” Freedman, 21
A.2d at 84. Based on the frequency of Dr.
Justofin’s examinations and the fact that
Loretta Justofin took Prednisone for at
least three years to treat a symptomatic
disease, I do not believe a person of
ordinary intelligence could have forgotten
these treatments when filling out the
relevant insurance application.

       This omission was also material.
The unrebutted affidavit of a MetLife
representative establishes that Dr.
Justofin’s treatment of his mother with a
steroid prescription drug for arthritis
would result in MetLife increasing her
premium to take into account moderate
rheumatoid arthritis. See New York Life
Ins. Co. v. Johnson, 923 F.2d 279, 281 (3d
Cir. 1991) (“A misrepresented fact is
material if being disclosed to the insurer it
would have caused it . . . to demand a
higher premium.”).       This statement is
supported by MetLife’s underwriting
guidelines.

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