two counts. In Count I, the plaintiff demands that the defendant resume payment of the monthly disability allowance under the policy and pay with interest the payments allegedly due in the past but not made. Count II of the complaint demands punitive damages of $ 10,000,000.00 on the basis that: (1) the defendant never intended to pay the plaintiff under this policy and purposefully and maliciously refused to pay the benefits due to the plaintiff under the policy; and (2) that the actions of the defendant caused the plaintiff to suffer anxiety, nervousness, and distress.
The defendant has moved to dismiss Count II of the complaint under Fed.R.Civ.P. 12(b)(6) on the ground that Count II fails to state a claim upon which relief can be granted in either assumpsit or tort. Subject matter jurisdiction is based on diversity of citizenship. For the reasons hereinafter set forth, the defendant's motion to dismiss Count II will be granted.
In ruling on a motion to dismiss, the Court must assume that all of the plaintiff's allegations are true and all inferences favorable to the plaintiff must be drawn. Mortensen v. First Federal Savings and Loan Association, 549 F.2d 884 (3d Cir. 1977). Furthermore, pursuant to Fed.R.Civ.P. 8(f), we shall construe Count II of the complaint in a manner that does "substantial justice."
The preamble of the complaint states that the complaint is filed "in Assumpsit and Trespass for punitive damages." Count I of the complaint alleges what appears to be a claim in assumpsit alleging that the plaintiff purchased a disability insurance policy from the defendant in 1962, that he fulfilled the terms of the policy, paid the premiums required by the policy, and in 1971 became totally disabled under the terms of the policy. It further alleges that the defendant began to make monthly disability payments to the plaintiff as required by the policy, but that the defendant terminated the payments in 1973, and although it resumed the payments sometime "prior to 1976," it again ceased making payments to the plaintiff in July of 1976 and has not made any further payments since that date. As previously stated, the damages demanded in Count I are the payments allegedly due under the contract of insurance.
Count II, which incorporates by reference the preamble and the allegations in Count I of the complaint, alleges that the defendant drafted the policy "with an intent to defraud the plaintiff" and that the defendant had "maliciously . . . (misled) the plaintiff to believe he had purchased a policy affording coverage." The plaintiff further alleges that the defendant "maliciously refused to pay" the policy's monthly disability benefits and that the defendant's actions were designed to intentionally harass and annoy the plaintiff and as a result the plaintiff suffered anxiety and distress. Count II demands punitive damages only, and is not specific as to whether the claim for punitive damages is being made on the basis of an action in assumpsit or a tort action. We will therefore determine whether, under Pennsylvania law, Count II states a claim upon which relief can be granted either in an action in assumpsit or in trespass.
We must apply Pennsylvania law to the plaintiff's allegations pleaded in Count II of the complaint. In interpreting Pennsylvania law, we are bound by the decisions of the Supreme Court of Pennsylvania. National Surety Corp. v. Midland Bank, 551 F.2d 21 (3d Cir. 1977). Where the highest court of Pennsylvania has not decided an issue, however, we must predict the manner in which that court would decide the issue. Becker v. Interstate Properties, 569 F.2d 1203 (3d Cir. 1977), cert. denied, 436 U.S. 906, 98 S. Ct. 2237, 56 L. Ed. 2d 404 (1978). In making such a prediction, decisions of the Superior Court of Pennsylvania may be considered "as an indication of how the state's highest court would rule." Adams v. Cuyler, 592 F.2d 720, 725 n.5 (3d Cir. 1979).
A. Recovery of Punitive Damages in a Contract Action
As heretofore pointed out, the plaintiff in Count II demands punitive damages only and does not state whether his claim for punitive damages is in assumpsit or trespass. We shall, however, assume that in Count II the plaintiff has alleged a breach of contract action based on the defendant's breach of its duty as an insurer to deal fairly and in good faith with the plaintiff. In Gray v. Nationwide Mutual Insurance Co., 422 Pa. 500, 223 A.2d 8 (1966), the Supreme Court of Pennsylvania acknowledged the existence of a contract action by an insured party against his insurer for breach of the insurer's duty to deal fairly and in good faith with an insured party. The Gray Court stated that an insurer had an obligation to represent in good faith the rights of the insured, and held that:
a breach of such an obligation constitutes a breach of the insurance contract for which an action in assumpsit will lie. Id. 223 A.2d at 11.
There is nothing in Gray, however, authorizing the recovery of punitive damages in such an action of assumpsit. On the contrary, it is well established law in Pennsylvania that punitive damages are not recoverable in an action in assumpsit. Fincke v. Phoenix Mutual Life Insurance Co., 448 F. Supp. 187 (W.D.Pa.1978); Carpel v. Saget Studios, Inc., 326 F. Supp. 1331 (E.D.Pa.1971); Pittsburgh, C. & St. L. Ry. Co. v. Lyon, 123 Pa. 140, 16 A. 607 (1889); Restatement of Contracts, § 342. Therefore, assuming Count II attempts to allege a breach of contract action for breach of the insurer's duty of fair dealing as authorized by Gray, it must be dismissed for failure to state a claim upon which relief can be granted since it demands punitive damages only in an action of assumpsit.
B. Recovery of Punitive Damages in Tort for Intentional Infliction of Emotional Distress
If we consider Count II of the complaint as seeking punitive damages only in a trespass action, the allegations of Count II may be interpreted as pleading an action in tort for intentional infliction of emotional distress. Section 46 of the Restatement (Second) of Torts, which defines the elements of this action, provides:
One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for such bodily harm.