Court Opinion

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Opinions of the United
1996 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-15-1996

Hofkin v. Provident Life
Precedential or Non-Precedential:

Docket 95-1608

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_1996/196

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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                            No. 95-1608

                            MARK HOFKIN,
                                           Appellant

                                  v.

                    PROVIDENT LIFE & ACCIDENT
                        INSURANCE COMPANY

         On Appeal from the United States District Court
            for the Eastern District of Pennsylvania
              (D.C. Nos. 93-cv-01044 & 93-cv-01051)

                        Argued March 11, 1996

              Before:    STAPLETON, SCIRICA and COWEN
                            Circuit Judges

                    (Filed     April 15, l996)

Alan I. Lourie (argued)
Law Offices of Michael Steiman
17th & JFK Boulevard
1750 Eight Penn Center
Philadelphia, PA 19103

          Counsel for Appellant

Richard L. McMonigle, Jr.
Sara J. Thomson (argued)
McKissock & Hoffman
1700 Market Street
Suite 3000
Philadelphia, PA 19103

          Counsel for Appellee

                        OPINION OF THE COURT

                                  1
COWEN, Circuit Judge.

             In this diversity action we are called upon to

interpret the meaning of insurance policy language that a state

statute requires to be included in all Pennsylvania insurance

contracts.    Plaintiff-appellant Mark Hofkin contends that

language in the "Proofs of Loss" and "Legal Actions" clauses in

his accident and sickness insurance policy require only that he

submit adequate proofs of loss within ninety days after the

termination of a continuous period of disability.    Defendant-

appellee Provident Life & Accident Insurance Company

("Provident") argues that it properly denied Hofkin's claims

because the policy language, considered as a whole, requires the

insured to submit monthly proofs of loss in order to be eligible

to receive disability benefits.

             Provident filed a motion to dismiss pursuant to Rule 50

of the Federal Rules of Civil Procedure on statute of limitations

grounds.     The district court, citing policy considerations that

underlie suit limitations provisions, granted Provident's motion

to dismiss.     In so doing, the district court declined to follow

the majority of state and federal courts that have interpreted

identical policy language to require only that a claimant submit

adequate proofs of loss within ninety days after an uninterrupted

aggregate period of disability covered by the policy.

                                  2
          The language contained in the Provident policy is

essentially a verbatim recitation of the terms of the

Pennsylvania statute we must interpret.     The Pennsylvania courts

have not addressed the issue as to when proofs of loss are

required to be filed in cases involving a continuous period of

disability.   We predict that the Pennsylvania Supreme Court would

elect to follow the majority of courts that have interpreted the

phrase "period for which the insurer is liable" to require the

insured to submit proofs of loss within ninety days after the

termination of a continuous period of disability, rather than on

a monthly basis during the entire period of disability.

          Under our interpretation of the policy language, an

issue of fact remains as to whether Hofkin was totally disabled

for the continuous period of time that he has alleged.    As such,

the order of the district court

granting Provident's Rule 50 motion to dismiss will be reversed

and the matter remanded for further proceedings.    As to the other

issues raised on this appeal, we will affirm the district court's

rejection of Hofkin's argument that his claims were denied in bad

faith.   The district court's denial of Hofkin's application to

amend his complaint will also be affirmed.

                                  I.

          Mark Hofkin was insured by Provident under an accident

and sickness policy that took effect in July of 1980.     At that

time, Hofkin was the sole proprietor of a heating and air

conditioning installation company.     On March 13, 1986, Hofkin was

                                  3
involved in an automobile accident in which he injured his neck,

back, left wrist and elbow.   Hofkin contends that he has never

recovered fully from the injuries he sustained in this accident.

          On September 13, 1986, Hofkin had his attorney submit

to Provident a supplementary statement of claim form.    On this

form, Hofkin indicated that he had been totally disabled0 from

March 13, 1986 through June 16, 1986.    Hofkin also contended that

he was partially disabled from June 17 up until the time he

submitted his claim form in September.   On September 16, 1986,

Provident paid Hofkin $5,760.00 for the time he was totally

disabled in the months immediately following the accident.    In

addition to the cash payment, Provident also sent Hofkin a claim

form that he was required to complete in order to be eligible to

receive residual disability benefits.0

0
  The Provident policy provides the following definition of
"total disability":

          (a) Until the date you attain age 55, or
          until the date indemnity for total disability
          has been paid during a period of disability
          under this policy for five years, whichever
          is later, 'Total Disability' means your
          inability to perform the substantial and
          material duties of your occupation.

App. at 21.
0
  The policy defines "residual disability" in the following
manner:

          (a) your inability to perform one or more of
          your important daily business duties, or

          (b) your inability to perform your usual
          daily business duties for as much time as is
          usually required for the performance of such
          duties.

                                4
          On January 19, 1987, Hofkin submitted an application

for residual disability benefits, alleging that he had been

unable to work full time since June of 1986.   Hofkin failed,

however, to include necessary details as to the amount of income

he had lost as a consequence of the March 1986 accident.    In a

letter dated January 23, 1987, a Provident claims representative

responded by sending Hofkin a letter requesting the additional

information he would be required to provide in order to be

eligible to receive any residual disability benefits.

          In March of 1987, Hofkin submitted a statement of claim

for residual disability benefits, a supplementary statement of

claim, an accountant's report and a 1985 tax return.    Again,

specific financial information as to Hofkin's alleged loss of

income, which was required to calculate residual disability

benefits, was omitted.   Within a week, a Provident representative

contacted Hofkin's attorney and reiterated the insurer's need for

more complete information.   Hofkin responded on April 29, 1987,

with a revised claim form for residual benefits, simply stating

"None" where he was asked to indicate his present income.     On

June 25, 1987, Provident sent yet another letter to Hofkin

requesting further documentation of his alleged reduction of

income and additional information regarding the extent to which

his business activities had been curtailed.

          On March 8, 1990, after almost a three-year gap in

communication between Hofkin and Provident, Hofkin's counsel

Id. at 16.

                                5
again wrote to Provident requesting additional claims forms.

Although Provident supplied the forms, Hofkin never completed

them.   Additional proofs of loss were sent to Provident only

after the onset of litigation.     On March 12, 1993, June 17, 1993,

June 30, 1993, March 7, 1994, and March 10, 1994, Hofkin provided

supplementary proofs of loss in support of his claim for total

disability benefits.

           Hofkin's attorney filed a writ of summons in the Court

of Common Pleas of Philadelphia County in January of 1993.      In

March of 1993, this matter was removed to the District Court for

the Eastern District of Pennsylvania.    Hofkin asserted the

following claims in his district court complaint:    (1) he is

entitled to total disability benefits from June of 1986 until the

present;   (2) in the alternative, he is entitled to residual

disability benefits from June of 1986, until the present;      and

(3) Provident has acted in "bad faith" under 42 PA. CONS. STAT.

ANN. § 8371 by refusing to pay Hofkin's claims and failing to

inform him of his alleged eligibility for total disability

benefits at a much earlier date.          Hofkin filed a motion for

leave to file an amended complaint which was denied.    On December

1, 1994, after a four day jury trial, the district court granted

Provident's motion for judgment as a matter of law on the basis

of the Legal Actions clause contained in the Provident policy.

Hofkin then filed a motion to vacate the judgment as a matter of

law, a motion for a new trial, and requested leave to file an

amended complaint pursuant to Fed. R. Civ. P. 59.    By order dated

                                 6
June 30, 1995, the district court denied Hofkin's postjudgment

motions.   This appeal followed.

                                II.

           The district court had jurisdiction pursuant to 28

U.S.C. § 1332.    We have appellate jurisdiction under 28 U.S.C.

§1291.   An entry of judgment as a matter of law is subject to

plenary review.   Lightning Lube, Inc. v. Witco Corp., 4 F.3d
1153, 1166 (3d Cir. 1993).    A Rule 50 motion should be granted

"only if, viewing the evidence in the light most favorable to the

nonmovant and giving it the advantage of every fair and

reasonable inference, there is insufficient evidence from which a

jury could reasonably find liability."      Id.   A Rule 50 motion

must be denied "if there is evidence reasonably tending to

support the recovery by plaintiff as to any of its theories of

liability."   Bielevicz v. Dubinon, 915 F.2d 845, 849 (3d Cir.

1990) (citation omitted).

           This dispute is governed by Pennsylvania law.     The

district court's application and interpretation of state law is

subject to plenary review.    C.L. Grimes v. Vitalink

Communications Corp., 17 F.3d 1553, 1557 (3d Cir.), cert. denied,

115 S. Ct. 480 (1994).    As a state statute required the

dispositive policy language, we must discern the intent of the

Pennsylvania General Assembly, not the contracting parties.         As

such, our review of the district court's interpretation of the

Legal Actions clause is plenary.       See, e.g., Ogelsby v. Penn

Mutual Life Ins. Co., 877 F. Supp. 872, 886 n.9 (D. Del. 1995)

("Since [the] policy provision is required by statutory mandate,

                                   7
the Court looks to rules of statutory construction.");   Laidlaw

v. Commercial Ins. Co. of Newark, 255 N.W.2d 807, 811 (Minn.

1977) ("The usual rule of construction most favorable to the

insured does not apply to a provision required by statute."); cf.

Margolies v. State Farm Fire and Cas. Co., 810 F. Supp. 637, 640

(E.D. Pa. 1992) (insurance company cannot contractually override

the statutorily mandated suit limitation provisions of

§753(A)(11)).0

           We review the district court's denial of Hofkin's

motion for leave to file an amended complaint for an abuse of

discretion.   See Gay v. Petsock, 917 F.2d 768, 772 (3d Cir.

1990).   A district court abuses its discretion when its "decision

rests upon a clearly erroneous finding of fact, an errant

conclusion of law, or an improper application of law to fact."

International Union, United Auto., Aerospace and Agric. and

Implement Workers of Am., UAW v. Mack Trucks, Inc., 820 F.2d 91,

95 (3d Cir. 1987), appeal on remand, 917 F.2d 107, cert. denied,

499 U.S. 921, 111 S. Ct. 1313 (1991). Under Pennsylvania law, an

insurer's "bad faith must be established by clear and convincing

evidence and not merely insinuated."   Terletsky v. Prudential

0
  This is not to say that Pennsylvania's rule of contra
proferentum in construing policy language drafted by the insurer
is necessarily inapplicable when evaluating the language of
specific policy provisions required by statute. Section 753(A)
expressly permits an insurer to "substitute for one or more such
provisions corresponding provisions of different wording approved
by the commissioner which are in each instance not less favorable
in any respect to the insured or the beneficiary." Under this
analysis, if the insurer chose to modify the required language,
any modifications that are ambiguous should be construed in the
insured's favor. The language that we must interpret in the
instant case is strictly provided by statute.

                                8
Property & Cas. Ins. Co., 649 A.2d 680, 688 (Pa. Super. 1994),

alloc. denied, 659 A.2d 560 (Pa. 1995).   Our review of the

dismissal of Hofkin's bad faith claim as a matter of law is

plenary.   Polselli v. Nationwide Mut. Fire Ins. Co., 23 F.3d 747,

750 (3d Cir. 1994).

                               III.

                                A.

           The disposition of this case rests upon our

interpretation of the Provident policy's "Legal Actions" clause

and "Proofs of Loss" clause.   The Provident policy language

mirrors that of the controlling statutory language:
          § 753. Policy Provisions

                (A) Required Provisions. Except as
           provided in paragraph (C) of this section,
           each such policy delivered or issued for
           delivery to any person in this Commonwealth
           shall contain the provisions specified in
           this subsection in the words in which the
           same appear in this section: Provided,
           however, That the insurer may, at its option,
           substitute for one or more of such provisions
           corresponding provisions of different wording
           approved by the commissioner which are in
           each instance not less favorable in any
           respect to the insured or the beneficiary. .
           . .

             . . .

           (7) . . .

                Proofs of Loss: Written proof of loss
           must be furnished to the insurer at its said
           office in case of claim for loss for which
           this policy provides any periodic payment
           contingent upon continuing loss within ninety
           days after the termination of the period for
           which the insurer is liable and in case of

                                9
          claim for any other loss within ninety days
          after the date of such loss. Failure to
          furnish such proof within the time required
          shall not invalidate nor reduce any claim if
          it was not reasonably possible to give proof
          within such time, provided such proof is
          furnished as soon as reasonably possible and
          in no event, except the absence of legal
          capacity, later than one year from the time
          proof is otherwise required.
            . . .

          (11) . . .

               Legal Actions: No action in law or in
          equity shall be brought to recover on this
          policy prior to the expiration of sixty days
          after written proof of loss has been
          furnished in accordance with the requirements
          of this policy. No such action shall be
          brought after the expiration of three years
          after the time written proof of loss is
          required to be furnished.

PA. STAT. ANN. tit. 40, § 753(A)(7), (11) (1992 & 1995 Supp.)

(emphasis added).   The only difference between the Provident

Proofs of Loss clause and the language of § 753(A)(7) is the

substitution of the word "Company" for "insurer."   The language

of the statutory Legal Actions section is identical to that

contained in the Provident policy.

          The district court looked to policy considerations to

support its conclusion that Hofkin's construction of the Proofs

of Loss and Legal Actions clauses was "unreasonable."    Looking to

what it perceived to be the consequences of interpreting § 753 in

the manner favored by Hofkin, the district court opined that
               [e]ven in interpreting the policy in
          light most favorable to plaintiff, it would
          be unreasonable to interpret the clause as
          plaintiff suggests. Under plaintiff's
          proposed interpretation of the three year
          suit limitation clause, there would be no

                                10
           limitation during a policyholder's lifetime
           until after he reaches age of fifty-five,
           when the policyholder would no longer meet
           the contract definition of total disability
           because of his age. Theoretically, a
           policyholder may sit on a claim for more than
           fifty years before he files suit. Therefore,
           the policy of having a suit limitation
           clause, as mandated by the State of
           Pennsylvania legislature, to expedite
           litigation and to discourage the pursuit of
           stale claims in order to reduce prejudice
           toward the defense would be inconsistent with
           plaintiff's interpretation.

Hofkin v. Provident Life and Accident Ins. Co., No. CIV.A.93-
1044, 1995 WL 394118, at *5 (E.D. Pa. June 30, 1995).

           As a general observation, we do not disagree with the

district court's assessment that statutes of limitations can and

do serve beneficial purposes.   Indeed, the Pennsylvania Supreme

Court has stated recently that statutes of limitations "are vital

to the welfare of society and are favored in the law.    They are

found and approved in all systems of enlightened jurisprudence.

They promote repose by giving security and stability to human

affairs.   An important public policy lies at their foundation."

Armco, Inc. v. Worker's Compensation Appeal Bd. (Mattern), 667
A.2d 710, 716 n.12 (Pa. 1995) (citations omitted).    Although we

agree with the district court that important policy

considerations underlie suit limitation provisions, these

statutes nonetheless must be enforced as written.     Therefore, the

policy considerations upon which the district court premised its

dismissal of Hofkin's suit should not have been addressed prior

                                11
to making an effort to interpret what the "plain meaning" of the

relevant paragraphs of § 753.0

          The interpretation of Pennsylvania statutes is governed

by the state's Statutory Construction Act of 1972, 1 PA. CONS.

STAT. ANN. §§ 1501-1991 (1995 Supp.).   When interpreting statutory

language, the Pennsylvania Supreme Court is guided by the "plain

meaning" rule of construction.   Commonwealth v. Stanley, 446 A.2d
583, 587 (Pa. 1982) (citing 1 PA. CONS. STAT. ANN. § 1903(a)).0

"When the words of a statute are clear and free of ambiguity, the

letter of it is not to be disregarded under the pretext of

pursuing its spirit."   1 PA. CONS. STAT. ANN. § 1921(b) (1995

Supp.).

          Under Pennsylvania law, the policy considerations cited

by the district court would have been relevant only if the court

had found the language of the Proofs of Loss and Legal Actions

0
  Nor do all of the policy considerations involved here weigh in
favor of Provident. Although Provident contended at oral
argument that the plain meaning of "period for which the Company
is liable" obviously referred to monthly payment intervals, when
confronted with the implications of its reading of the statute,
Provident attempted to distance itself from the natural
consequences of this reading, contending that, in actual
practice, Provident would not make monthly demands for proofs of
loss upon insurance claimants.
0
  Section 1903(a) provides as follows:

               Words and phrases shall be construed
          according to rules of grammar and according
          to their common and approved usage; but
          technical words and phrases and such others
          as have acquired a peculiar and appropriate
          meaning or are defined in this part, shall be
          construed according to such peculiar and
          appropriate meaning or definition.

1 PA. CONS. STAT. ANN. § 1903(a) (1995 Supp.).

                                 12
clauses is ambiguous.    See id. § 1921(c).   An insurance policy

term is deemed to be "ambiguous if reasonable people, considering

it in the context of the entire policy, could fairly ascribe

different meanings to it. . . . A court, however, should not

torture the language of the policy to create ambiguities."

Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423, 427

(E.D. Pa. 1994) (citations omitted), aff'd, 60 F.3d 813 (3d Cir.

1995).   Statutory ambiguities are to be resolved with reference

to § 1921(c) of the Statutory Construction Act.0     We conclude,

however, that when the policy language is considered as a whole,

the insurance policy terms mandated by § 753 are not ambiguous

and thus are amenable to "plain meaning" analysis under § 1903(a)

of the Statutory Construction Act.

0
    See 1 PA. CONS. STAT. ANN. § 1921(c) (1995 Supp.):

            (c) When the words of the statute are not
            explicit, the intention of the General
            Assembly may be ascertained by considering,
            among other matters:

                 (1) The occasion and necessity for the
            statute.
                 (2) The circumstances under which it
            was enacted.
                 (3) The mischief to be remedied.
                 (4) The object to be attained.
                 (5) The former law, if any, including
            other statutes upon the same or similar
            subjects.
                 (6) The consequences of a particular
            interpretation.
                 (7) The contemporaneous legislative
            history.
                 (8) Legislative and administrative
            interpretations of such statute.

                                  13
                                  B.

            Both parties contend that the policy language is not

ambiguous and warrants a decision in their favor.        Hofkin argues

that since the Proofs of Loss section states that no proofs have

to be submitted until "90 days after the termination of the

period for which the Company is liable," there is a jury question

as to whether Hofkin met the contractual definition of total

disability on a continuous basis.

            Provident, on the other hand, places emphasis upon the

terms "periodic payment," "period" and "monthly" in the policy

language.    Provident notes that the Proofs of Loss clause states

that "for loss for which this policy provides any periodic

payment contingent upon continuing loss," written proof of loss

must be furnished "within 90 days after the termination of the

period for which the company is liable."        Provident also refers

to language contained in the policy's "Time of Payment of Claims"

clause,0 which states, in relevant part, that "subject to due
0
    See PA. STAT. ANN. tit. 40, § 753 (A)(8):

                 Time of Payment of Claims: Indemnities
            payable under this policy for any loss other
            than loss for which this policy provides any
            periodic payment will be paid immediately
            upon receipt of due written proof of such
            loss. Subject to due written proof of loss,
            all accrued indemnities for loss for which
            this policy provides periodic payment will be
            paid . . . . . . . . . . . . (insert period
            for payment which must not be less frequently
            than monthly) and any balance remaining
            unpaid upon termination of liability will be
            paid immediately upon receipt of due written
            proof.

                                  14
written proof of loss, all accrued indemnities for loss for which

this policy provides periodic payment will be paid monthly."

Provident construes this language as meaning that the "periodic

payment" interval is what determines the subsequently referenced

"period for which the Company is liable."   Under this

interpretation, the Legal Actions clause's three-year limitation

period would begin to run after the expiration of the ninety-day

period following the first month for which benefits are at issue.

          Although Pennsylvania state courts have not ruled upon

this question, a significant number of state and federal courts

have addressed the issue as to how the same (or virtually

indistinguishable) statutorily mandated insurance policy language

should be construed.   A substantial majority of those courts have

expressly rejected Provident's construction of the statute,

holding that the most plausible reading of "period for which the

Company is liable" requires that this phrase be interpreted to

encompass the entire length of an ongoing period of disability.

          The meaning of the phrase "period for which the Company

is liable" was most recently discussed by the district court in

Ogelsby v. Penn Mutual Life Insurance Co., 877 F. Supp. 872 (D.

Del. 1994).   The Ogelsby court interpreted insurance policy

language prescribed by Delaware law which was essentially

identical to the policy language at issue here.   See 18 Del. C.

§3311 ("Written proof of loss must be furnished to the company at

Within the terms of this section, Provident elected to set the
payment period on a monthly basis.

                                15
its said office in case of claim for loss for which this policy

provides any periodic payment contingent upon continuing loss

within ninety days after the termination of the period for which

the company is liable. . . ."), quoted in Ogelsby, 877 F. Supp.

at 885 n.7.   The Ogelsby court elected to follow the weight of

authority in this area of the law, noting that "the

interpretation that plaintiff advances has been characterized as

the most natural interpretation."     Ogelsby, 877 F. Supp. at 886.

            The one Pennsylvania diversity case that has expounded

upon the same Pennsylvania statute that we must interpret has

also favored Hofkin's interpretation of § 753.     In Liberto v.

Mutual Benefit Health & Accident Ass'n, 323 F. Supp. 1274 (W.D.

Pa. 1971), an action was brought to recover under an accident

policy four years after the company had discontinued paying

benefits.   Id. at 1275.   The insurer argued that the plaintiff's

claim was time barred under § 753.     Expressly rejecting this

argument, the district court held that the policy's Proofs of

Loss and Legal Actions clauses, considered along with other

language in the policy providing that "the insurer is liable to

pay the totally and permanently disabled insured `so long as the

insured lives'," id. at 1276, necessarily led to the conclusion

that the three-year period in the Legal Actions clause had not

yet run, and would not be triggered until the claimant was

deceased.   By analogy, the continuing period of disability in the

instant case could conceivably continue until Hofkin reached age

fifty-five, the expiration date of the policy.

                                 16
          In Wall v. Pennsylvania Life Insurance Co., 274 N.W.2d
208 (N.D. 1979), the Supreme Court of North Dakota interpreted

identical language from state-required Proofs of Loss and Legal

Actions clauses.   Adopting the reasoning of the court below, the

Wall court held that the
          "period for which the insurer is liable"
          phrase means the total period of liability in
          a continuous disability case and not a
          monthly period during which benefits accrue.
          Penn's own provision authorizing monthly
          benefits payments does not alter the specific
          wording of [the statute which provides] that
          proof of loss must be filed only after the
          insurer's liability terminates.

Id. at 213-14.   The supreme court agreed with the lower court's

determination "that Wall's claim against Penn. Life was based

upon continuing disability, Penn. Life's period of disability had

not terminated, proof of loss was not yet required to be

furnished and the Statute of Limitations had not begun to run."

Id. at 214.   See Goodwin v. National Ins. Co., 656 P.2d 135, 143-

44 (Idaho Ct. App. 1982) (same).

          Similarly, interpreting Arkansas law, the Court of

Appeals for the Eighth Circuit has concluded that
          [a]ny theory that supplying of proof of loss
          was a condition precedent to liability under
          the policy tends to be dispelled by the
          following policy language: "written proof of
          loss must be given . . . within 90 days after
          . . . the period for which the company is
          liable." . . . Thus the policy itself
          contemplates that proof of loss may be
          submitted after disability terminates; and
          at least to some extent difficulty the
          insurer may have in investigating a
          disability that has already ended is part and
          parcel of the insurance agreement.

                                17
Clark v. Massachusetts Mut. Life Ins. Co., 749 F.2d 504, 507 (8th

Cir. 1984).

           The Supreme Court of Minnesota has also addressed this

issue.   In Laidlaw v. Commercial Insurance Co. of Newark, 255
N.W.2d 807 (Minn. 1977), the court held that an expansive

interpretation of "period for which the Company is liable" was

warranted by identical language contained in the Proofs of Loss

and Legal Actions clauses, considered along with substantially

similar language contained in a Time of Payment of Claims clause.

The Laidlaw court found that Hofkin's interpretation of "period

for which the Company is liable" was "the most natural

interpretation of the phrase,"   id. at 811, and held that "`the

period for which (Company) is liable' refers to the total

continuous period of disability, be it short or long, and not

individual four-week periods."   Id.   When a Laidlaw-type claim is

presented, "the question becomes whether a genuine issue of

material fact exists as to the existence and continuity of [the

claimant's] total disability."   Ryan v. ITT Life Ins. Corp., 450
N.W.2d 126, 129 (Minn. 1990).

           A New York trial court has also addressed this specific

issue and concluded that judgment as a matter of law was

inappropriate.   In Turner v. Mutual Benefit Health & Accident

Ass'n, 160 N.Y.S.2d 883, 890 (Sup. Ct. Oneida Cty. 1957), aff'd,

172 N.Y.S.2d 571 (App. Div. 1958), the New York supreme court,

interpreting the phrase "period for which the Association is

liable," noted that

                                 18
          plaintiff's affidavit detail[ed] at length

          his circumstances during the period in

          question and sets forth facts which, if

          believed, might establish that he has been

          continuously disabled . . . .   In these

          circumstances, an issue of fact is presented

          which cannot be disposed of on a motion for

          summary judgment.

          Finally, in Continental Casualty Co. v. Freeman, 481
S.W.2d 309 (Ky. 1972), the court interpreted identical language

in the Legal Actions and Proofs of Loss clauses as meaning
          either (a) that one proof of loss will
          suffice for one continuous period of
          disability or (b) that each month of
          continuing loss must be covered by a proof of
          loss submitted within 90 days thereafter.
          Neither of these alternatives would appear to
          achieve an entirely satisfactory arrangement,
          but we see no room for any other possible
          construction of the sentence as it is worded.
          The most natural import of the expression
          'the period for which the company is liable'
          is the total continuous period, be it five
          days or five years

Id. at 312.   Interpreting the statutory language in a manner that

favored the insured, the Freeman court concluded that "the clause

is not ambiguous and there is no reason not to construe it as

meaning just what it says."   Id. at 311-12.

          There is, however, some case authority in support of

Provident's position as to how the policy language at issue

should be interpreted.   In Nikaido v. Centennial Life Insurance

Co., 42 F.3d 557 (9th Cir. 1994), the Ninth Circuit, applying

                                19
California law, held that a "more reasonable reading of these

provisions" supports the conclusion that "`the period for which

the Company is liable' refers to each month of disability."    Id.

at 560.

            Similarly, in Goff v. Aetna Life and Casualty Co., 563
P.2d 1073 (Kan. Ct. App. 1977), a state appellate court also

interpreted "period for which the insurer is liable" in the

manner that Provident urges us to adopt.    The state court

concluded that
          [th]e phrase [period for which the insurer is
          liable] speaks of a 'period' and applies only
          in a case where 'any periodic payment' is due
          under the pollicy (sic). Where, as here,
          payments are due monthly it seems inescapable
          that each month for which a payment is due is
          a 'period for which the insurer is liable.'

Id. at 1077.
            We expressly reject and depart from this reasoning and

analysis.    We agree with the North Dakota Supreme Court's

statement in Wall that the policy language "authorizing monthly

benefits does not alter the specific wording of [the policy] that
proof of loss must be filed only after the insurer's liability

terminates."    Wall, 274 N.W.2d at 214.   Provident's reading of

§753, by contrast, is far less straightforward.    To adopt

Provident's "plain meaning" interpretation would require the

adaptation of a strained analytical framework that imparts

questionable significance to various discrete references in the

statute.    See Bertera's Hopewell Foodland, Inc. v. Masters, 236
A.2d 197, 204 (Pa. 1967), appeal dismissed, 390 U.S. 597, 88 S.

                                 20
Ct. 1261 (1968) ("A statute cannot be dissected into individual

words, each one being thrown onto the anvil of dialectics to be

hammered into a meaning which has no association with the words

from which it has violently been separated."), overruled on other

grounds by Goodman v. Kennedy, 329 A.2d 224 (Pa. 1974).     The

"plain meaning" that Provident asks us to adopt is not at all

clear from the face of the statute.

          If the Proofs of Loss clause had simply included the

word "monthly" before "period for which the Company is liable"

Provident's reading of the statute would obviously be correct. In

order to obtain such a change, however, Provident would be

required to obtain the approval of the Commissioner of Insurance.

See PA. STAT. ANN. tit. 40, § 753(A).   We seriously doubt that

such permission would be forthcoming.    Given our interpretation

of the statute and the weight of authority interpreting

essentially identical policy language, we refuse to interpolate

by judicial fiat the term "monthly" before "period for which the

Company is liable," when the Pennsylvania General Assembly

declined to follow this course.

                                IV.

          The district court also based its decision that

Hofkin's claim was timed barred on the alternative ground that

even if Hofkin's reading of the statute were to be adopted, the

fact that Hofkin gave timely notice of the March 1986 accident

and that he
          last submitted [a] claim . . . on April 29,
          1987, the running of the three year time
          limit for filing suit under the Legal Actions

                                  21
           clause was triggered at that time because the
           submission, which also included submissions
           on behalf of plaintiff by his attorney and
           physicians, constituted sufficient proofs of
           loss.

Hofkin, 1995 WL 394118, at *3.    The district court went on to say

that
               [r]egardless of when proof of loss was
          required to have been furnished under the
          Proofs of Loss clause to trigger the Legal
          Actions clause as interpreted by plaintiff or
          the court, plaintiff admits in his complaint
          that he gave timely notice of his accident
          and that he provided the defendant with all
          required proofs of loss. Therefore, in
          having fulfilled his obligation to provide
          proofs of loss, he was under obligation
          mandated by statute to file suit within three
          years after the time proofs of loss were
          required to be furnished. Clearly he did not
          do so, and that is why plaintiff is barred
          from proceeding in this case.

Id. at *6.     We reject this reading of § 753(A)(11).   The Legal

Actions clause provides, in relevant part, that "No action . . .

shall be brought after the expiration of three years after the

time written proof of loss is required to be furnished."      PA.

STAT. ANN. tit. 40, § 753 (A)(11) (1992 & 1995 Supp.) (emphasis

added).   Nothing in this language suggests that Hofkin should be

penalized for at least attempting, however intermittently, to

provide proofs of loss at an earlier time than is required by

§753(A)(11).    We therefore conclude that a factual issue remains

as to the period of time, if any, that Hofkin was continuously

disabled in order to assess properly his eligibility for total

disability or residual disability benefits.

                                  22
                                  V.

           We must still dispose of two other issues Hofkin has

raised on appeal;    i.e., Hofkin's bad faith claim and his

argument that he was improperly denied the opportunity to amend

his complaint.    We reject both of these claims.

                                  A.

           Pursuant to 42 PA. CONS. STAT. ANN. § 8371 (1982 & 1995

Supp.), an insurer can be held liable for punitive damages and

other sanctions if it is found to have acted in bad faith toward

the insured.0    Based on proofs of loss that Provident had

received in 1986, Hofkin alleges that Provident was aware that he

has been totally and continuously disabled since that time. Thus,

the argument goes, by informing him that he may qualify for

additional residual disability benefits but not telling him that

he might qualify for additional total disability benefits,

Provident had acted in bad faith.      As the district court noted,

0
    Section § 8371 provides as follows:

                In an action arising under an insurance
           policy, if the court finds that the insurer
           has acted in bad faith towards the insured,
           the court may take all of the following
           actions:
                (1) Award interest on the amount of the
           claim from the date the claim was made by the
           insured in an amount equal to the prime rate
           of interest plus 3%.
                (2) Award punitive damages against the
           insurer.
                (3) Assess court costs and attorney
           fees against the insurer.

42 PA. CONS. STAT. ANN. § 8371.

                                  23
however, § 8371 did not take effect until July 1, 1990.    Liberty

Mut. Ins. Co. v. Paper Mfg. Co., 753 F. Supp. 156, 158 (E.D. Pa.

1990).   Therefore, even if we were to assume arguendo that

Provident acted in bad faith before that date, such conduct is

not actionable under § 8371.   Lombardo v. State Farm Mut. Ins.

Co., 800 F. Supp. 208, 213 (E.D. Pa. 1992).    Furthermore, Hofkin

has failed to provide clear and convincing evidence that

Provident acted in bad faith after July 1, 1990.   The record is

clear that Hofkin and the attorneys retained in his on-and-off

pursuit of earlier benefits claims have been less than diligent

in providing information that was necessary to evaluate Hofkin's

various claims.   The record does not show that Provident engaged

in any improper business practices.    At most, Provident appeared

to hold Hofkin to its own regulations.   There was plainly no bad

faith here.

                                B.

          Finally, the district court did not abuse its

discretion by denying Hofkin's motion for leave to file an

amended complaint.   Hofkin filed the motion to amend on September

22, 1994, seeking to include a claim for refund of premium.

Hofkin concedes that his complaint did not specifically plead

waiver of premium but argues that the "Wherefore" clause of the

complaint, which stated that Hofkin was entitled to "any other

relief this Honorable Court deems appropriate," was sufficient to

apprise Provident of Hofkin's intention to seek a refund of

premium in this case.   We disagree.   Given the late date of the

                                24
request and the prejudice it would impose upon Provident

(requiring it to prepare new defenses), the district court did

not abuse its discretion in denying Hofkin's motion to amend his

complaint.

                               VI.

          We hold that the Pennsylvania Supreme Court would adopt

the majority approach and interpret "the period for which was

Company is liable" language in the Proofs of Loss clause as

referring to a continuous period of disability.   Under this

analysis, it is still possible that the suit limitation provision

in the Legal Actions clause has not yet been triggered.

Therefore, the order of the district court granting Provident's

Rule 50 motion for judgment as a matter of law will be reversed

and the matter remanded to the district court to conduct the

necessary fact finding.   We will affirm the June 25, 1995 order

of the district court insofar as it denied Hofkin's bad faith

claim and his motion to amend his complaint.   Costs taxed against

the appellee.

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