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ROTTMUND v. CONTINENTAL ASSUR. CO.

December 14, 1992

PATTI M. ROTTMUND, Executrix of the Estate of DAVID R. ARTZ, Deceased Plaintiff
v.
CONTINENTAL ASSURANCE COMPANY Defendant



The opinion of the court was delivered by: DANIEL H. HUYETT, 3RD

MEMORANDUM AND ORDER

 HUYETT, J.

 December 14, 1992

 Plaintiff, Patti M. Rottmund, is the widow of David R. Artz and the executrix of his estate. Defendant Continental Assurance Company (Continental) is the issuer of a life insurance policy on the life of David R. Artz. Plaintiff seeks to recover the proceeds of the policy pursuant to section 8811(a) of the Pennsylvania Slayer's Act, 20 Pa. Cons. Stat. Ann. §§ 8801-15 (1975 & Supp. 1992). Defendant has opposed Plaintiff's claim on several grounds, including assignment, fraud, illegal purpose, lack of an insurable interest, equitable and promissory estoppel, and waiver. This Court has jurisdiction under 28 U.S.C. § 1332(a) because the parties are citizens of different states and the matter in controversy exceeds $ 50,000.

 In its third motion in limine, Continental moved the Court to bar Plaintiff from pursuing any claim for the remedies listed in 42 Pa. Cons. Stat. Ann. § 8371 (Supp. 1992). *fn1" Defendant argued that Plaintiff was barred from pursuing a cause of action under section 8371 because Defendant's denial of Plaintiff's claim occurred on March 30, 1989, well before the statute's effective date of July 1, 1990. The Court, in a memorandum and order dated July 31, 1992 and entered August 4, 1992, denied Continental's motion, holding that because Plaintiff argued that in addition to denying her claim, Continental engaged in two additional acts of bad faith which occurred after July 1, 1990, "Plaintiff has presented a claim which, if proved, could possibly lead to liability for Defendant under Section 8371." Memorandum and Order of July 31, 1992, entered August 4, 1992 at 4.

 Defendant has moved the Court for reconsideration of that memorandum and order, or, in the alternative, for certification of the order pursuant to 28 U.S.C. § 1292(b). Continental argues that (1) Plaintiff is barred from recovering under section 8371 because this is not an action arising under an insurance policy, and (2) even assuming that this is an action under an insurance policy, neither of the acts of bad faith alleged by Plaintiff give rise to liability under section 8371. For the reasons discussed below, the Court will deny Defendant's motion in its entirety.

 I. Standards Governing Motions for Reconsideration

 A federal district court has inherent power over interlocutory orders and may modify, vacate, or set aside these orders "when it is consonant with justice to do so." United States v. Jerry, 487 F.2d 600, 605 (3d Cir. 1973). Because of the interest in finality, however, courts should grant motions for reconsideration sparingly. See Good Luck Nursing Home, Inc. v. Harris, 636 F.2d 572, 577 (D.C. Cir. 1980) In addressing motions for reconsideration pursuant to Federal Rule of Civil Procedure 59(e), the Third Circuit has stated that the purpose of a motion for reconsideration is to "correct manifest errors of law or fact or to present newly discovered evidence. Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). The parties are not "free to relitigate issues which the court has [already] resolved." Johnson v. Township of Bensalem, 609 F. Supp. 1340, 1342 (E.D. Pa. 1985). Motions for reconsideration must be served within ten days after the entry of the order. U.S.D.C. E.D. Pa. Local R. Civ. P. 20(g). *fn2"

 II. "Action Arising Under An Insurance Policy"

 Section 8371 provides certain remedies against an insurer "in an action arising under an insurance policy." Defendant argues that Plaintiff cannot assert a claim under section 8371 because Plaintiff's action does not arise under a contract of insurance. Defendant points to this Court's language in its memorandum and order dated August 27, 1990 in which the Court stated that "the Estate of David Arts is not bringing this action pursuant to any contract right . . . . Rather, the Estate of David Arts is bringing this action pursuant to a statutory right created by the Pennsylvania Slayer's Act." Rottmund v. Continental Assur. Co., 761 F. Supp. 1203, 1209 (E.D. Pa. 1990) (emphasis in original). The Court reiterated this conclusion in an order dated July 31, 1992 in which it quoted the above language and held that the four year statute of limitations for contracts found in 42 Pa. Cons. Stat. Ann. § 5525 (1981 & Supp. 1992) does not apply to this action. Since Plaintiff asserts a statutory cause of action, and the Pennsylvania Slayer's Act does not provide a limitation, the Court held that the six-year residual statute of limitations found at 42 Pa. Cons. Stat. Ann. § 5527 (1981 & Supp. 1992) applies.

 Defendant also points to decisions in other jurisdictions concerning the tort of bad faith conduct of insurers that hold that the duty of good faith and fair dealing of an insurer derives from and exists solely because of a contractual relationship between the parties. Where no such relationship exists, the insurer is not liable for bad faith. See, e.g., Austero v. National Casualty Co., 62 Cal. App. 3d 511, 133 Cal. Rptr. 107 (1976). Defendant presumably argues that no contractual relationship exists between it and Plaintiff.

 Both parties have changed their characterization of this action in the course of this litigation to support their arguments on various motions. Plaintiff has maintained throughout that her action is a statutory one, arising under the Pennsylvania Slayer's Act, but now asserts that it is also an action under an insurance policy so that she may recover under section 8371. Defendant has maintained throughout that Plaintiff's claim, and its defenses to that claim, are subject to and dependent upon principles of contract law, but now asserts that Plaintiff's claim is not an action under a contract of insurance to support its argument that Plaintiff cannot pursue its bad faith claim under section 8371.

 The Court concludes that attempts to characterize this action as either exclusively an insurance contract action or exclusively a statutory action is not helpful because this action involves elements of both insurance contract law and statutory law. To succeed on her claim for the proceeds of the Continental insurance policy, Plaintiff must prove that Continental had a contractual obligation to pay the proceeds of the insurance policy to the named beneficiary. Continental has raised several defenses to that claim that are dependent upon principles of insurance contract law. Plaintiff must also prove that the named beneficiary in the insurance policy is a "slayer" within the meaning of section 8801 of the Pennsylvania Slayer's Act so that she can invoke the language of section 8811(a) that directs the payment of the insurance proceeds from the slayer to the estate of the decedent. *fn3" This action, then, involves an interplay between an insurer's contractual obligation under an insurance policy to pay insurance proceeds on the one hand, and entitlement of a decedent's estate to those insurance policy proceeds by virtue of a statute on the other hand. The Court holds, therefore, that this lawsuit is "an action arising under an insurance policy" within the meaning of 42 Pa. Cons. Stat. Ann. § 8371 (1975 & Supp. 1992).

 Furthermore, were the Court to accept Defendant's argument that an action under the Slayer's Act is not an action under an insurance policy, no person who brought an action pursuant to section 8811 of the Pennsylvania Slayer's Act would be able to assert a claim for the remedies provided by section 8371 to compensate for an insurer's bad faith. Insurers' bad faith conduct in these cases would go unpunished. There is nothing in the statute, its legislative history, or case law to support this result. To the contrary, the legislature enacted section 8371 to create a new cause of action for bad faith on the part of insurers because there was no such remedy in the common law of Pennsylvania. See D'Ambrosio v. Pennsylvania Nat'l Mut. Casualty Ins Co., 431 A.2d ...


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