The opinion of the court was delivered by: EDUARDO C. ROBRENO
This case stems from the decision of defendant Federal Kemper Life Assurance Company ("Federal Kemper") not to pay the proceeds of a million dollar life insurance policy, taken out by Dr. Leonard N. Horowitz a few months before his death. Federal Kemper contends that Dr. Horowitz committed fraud by failing to disclose in an amendment to his application that he was dying of cancer. Plaintiff Dona Horowitz, Dr. Horowitz's wife and the named beneficiary under the policy, denies that fraud was committed and contends that, in any event, Federal Kemper is precluded as a matter of law from relying upon the alleged fraudulent amendment by its failure to comply with the Pennsylvania insurance statute that requires that the amendment be physically attached to the policy.
Plaintiff seeks a million dollars in proceeds under the policy, attorneys' fees, and treble damages under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (the "UTPCPL") as well as punitive damages, costs, and attorneys' fees for alleged bad faith on the part of Federal Kemper in denying payment under the policy.
Before the Court are cross-motions for summary judgment. The Court finds that there is no genuine issue of material fact that Frederick Raffetto, who acted as Federal Kemper's agent in the transaction with Dr. Horowitz, failed to attach the amendment signed by Dr. Horowitz to the policy. Based on this uncontroverted fact, the Court concludes that Federal Kemper is barred as a matter of law from interposing as a defense to the claim any fraudulent misrepresentations contained in the application, amendment, or policy. The Court also finds that plaintiff is not entitled to recover on her bad faith claim because the evidence of Dr. Horowitz's fraud provided Federal Kemper with a reasonable basis for contesting the claim. Finally, the Court finds that plaintiff has no claim under the UTPCPL because that statute does not provide a cause of action for an insurance company's refusal to pay an insurance claim.
On September 26, 1991, at the suggestion of Frederick Raffetto, an independent insurance agent, plaintiff's deceased husband, Dr. Leonard N. Horowitz, applied to defendant for a $ 1,000,000 life insurance policy that named the plaintiff as the beneficiary. On that same day, Mr. Raffetto helped Dr. and Mrs. Horowitz to complete the application. Both Dr. and Mrs. Horowitz signed Part B of the application which stated: "I (we) promise to tell the Company of any change in the health or habits of the Proposed Insured that occurs after completing this application, but before the policy is delivered to me (us) and the first premium is paid." Mr. Raffetto took the application with him when he left the Horowitz's home.
On October 3, 1991, Federal Kemper arranged to have Carol Coady, a registered nurse, examine Dr. Horowitz. During the examination Ms. Coady checked Dr. Horowitz's vital signs, took a urine sample, performed a blood vena puncture and centrifuged his blood for further testing by a commercial laboratory. As part of the examination, Dr. Horowitz completed Part F of the application which was a questionnaire asking for information regarding his health and past medical history. In completing this questionnaire, Dr. Horowitz failed to disclose that he had seen a gastroenterologist, Anthony DiMarino, M.D., on a few occasions beginning in 1986-87, and that Dr. DiMarino had performed some medical tests on Dr. Horowitz relating to his intestines and colon.
Although the adenocarcinoma that would eventually prove fatal to Dr. Horowitz was present on October 3, 1991, Dr. and Mrs. Horowitz were unaware of it and the examination performed by Ms. Coady failed to detect it. Sometime around Thanksgiving 1991, Dr. Horowitz began to have difficulty swallowing and felt like he had heartburn. On December 4, 1991, he underwent a CT scan and an endoscopy with biopsy. The next day, December 5, he was diagnosed as having terminal adenocarcinoma.
The day after he received the diagnosis, December 6, 1991, Dr. and Mrs. Horowitz went to Hahnemann University Hospital to see the physician in charge of the cancer department. They were told that the cancer had metastasized to Dr. Horowitz's liver and that he had from 5 1/2 to 6 months to live. During the next week, Dr. Horowitz consulted Dr. Kevin Fox, Dr. Dougherty from the Sloan-Kettering Cancer Institute, and Dr. McDonald from Temple University Hospital to obtain second, third, and fourth opinions on the diagnosis. All three doctors confirmed the original diagnosis.
On December 16, 1991, Dr. Horowitz had a surgical procedure to insert a permanent catheter for purposes of administering chemotherapy and his chemotherapy treatments began. On the morning of December 20, 1991, Dr. and Mrs. Horowitz met with Dr. McDonald at Temple University Hospital and the diagnosis was reconfirmed. Later that day, Mr. Raffetto visited Dr. Horowitz's office to deliver the Federal Kemper policy.
At this time, both Dr. and Mrs. Horowitz signed an amendment of application which provided in pertinent part as follows:
The above noted application of Federal Kemper Life Assurance Company dated September 26, 1991 is amended as follows:
THE REPRESENTATIONS MADE IN THE APPLICATION ARE STILL VALID AS OF THE DATE IN THIS AMENDMENT, AND THE PROPOSED INSURED HAS NOT HAD ANY ILLNESS OR INJURY, AND HAS NOT CONSULTED, OR RECEIVED MEDICAL ADVICE OR TREATMENT FROM, ANY PHYSICIAN OR OTHER MEDICAL PRACTITIONER SINCE THE DATE OF APPLICATION EXCEPT AS FOLLOWS:
It is agreed that this amendment is part of the application and of the policy issued, and it will be binding on any person who will have any interest under the policy. This amendment, and the policy, will not take effect until signed as required below. It is agreed that no coverage is in effect if any changes are made to the above statements on this form.
Def.'s Summ. J. Mot., Ex. I (emphasis in original).
The evidence is uncontradicted that, although Dr. and Mrs. Horowitz had read, understood and signed the amendment, they did not inform Mr. Raffetto on December 20 of Dr. Horowitz's terminal diagnosis or of his consultations with Drs. Dougherty, McDonald, and Fox. Def.'s Summ. J. Mot., Ex. F at 77-80, 84-87, 98. The evidence is also uncontradicted that Mrs. Horowitz understood that she was bound by Part B of the September 26 application to inform Federal Kemper of her husband's terminal diagnosis. Id. at 100-102.
Dr. Horowitz died on May 21, 1992. In a letter dated September 25, 1992, to Frederick Hanselman, a lawyer for Dr. Horowitz's estate, Federal Kemper refused to pay the proceeds of the policy on the basis of Dr. Horowitz's misrepresentations. Mrs. Horowitz filed this lawsuit on December 16, 1992, in the Montgomery County, Pennsylvania Court of Common Pleas. The case was removed to this Court on January 14, 1993. After completing discovery, the parties filed cross-motions for summary judgment.
A. Subject Matter Jurisdiction
The Petition for Removal that Federal Kemper filed on January 14, 1993, contained the ...