United States District Court, E.D. Pennsylvania
January 22, 2004.
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
The opinion of the court was delivered by: THOMAS O'NEILL, Senior District Judge
Plaintiff Roscoe Franklin sued defendant, General Electric Capital
Assurance Company (GECA), asserting claims under Pennsylvania law for
breach of contract, bad faith by an insurer, and unfair or deceptive
trade practices. The parties dispute whether GECA applied the correct
formula for the calculation of benefits following the death of Franklin's
wife and the amount of the gross Principal Sum to which the contractual
benefit formula is to be applied. Presently before me are defendant's
motion for partial summary judgment and plaintiffs cross motion for
partial summary judgment. For the reasons stated below I will deny both
parties' motions without prejudice to the filing of motions for summary
judgment after completion of discovery on the amount of the contributory
Blanche Franklin, plaintiff's wife, died as the result of an accident
on December 12, 2000. She was seventy-three years old at the time of her
death. Plaintiff is an "insured person"
under a group insurance policy issued by GECA to Sentry Federal Credit
Union. On or about July 21, 2001, GECA issued a check to plaintiff for
$9,900 in response to a plaintiff's claim arising from his wife's death.
In 1991, Franklin, a member of the credit union, enrolled for the basic
$1,000 non-contributory coverage under the group insurance policy.
Plaintiff further elected voluntary coverage under the "Family Plan"
which covered his wife, who was his sole dependant. The amount of the
voluntary or contributory coverage is currently disputed by the parties.
Plaintiff alleges that he originally contracted for $50,000 of coverage
under the Family Plan and that he subsequently increased his contributory
coverage to $100,000 on August 19, 1993; to $110,000 on November 2, 1995;
and to $130,000 on February 3, 1998. Defendant maintains that Franklin
had only $30,000 of contributory coverage in December of 2000 when Mrs.
The policy consists of a series of written documents setting forth the
terms and conditions of insurance coverage and provides accidental injury
or death coverage for members of the credit union. The policy schedule
If the Insured has made application for the "Family
Plan" and paid the required premium therefor, then his
or her Spouse is automatically insured for 50% of the
contributory Principal Sum which applied to the
Insured on the date of the accident. If there are no
insured children on the date of the accident, this
percentage is increased to 60%. . . .
The benefits to be paid under the Policy for loss
sustained by an Insured Person as a result of an
accident which occurs on or after the date such person
attains 70 years of age shall be reduced to 50% of the
benefits otherwise payable. This applies to both
contributory and non-contributory.
(Pl's Br. in Opp., Ex. B, GE 000005. See also Id. at GE 000019). A 1996
policy rider alters the Family Plan provision to read in part:
If an Insured Member has applied for the "Family
Plan" and paid the premium
required for it, his or her spouse is automatically
insured for a Principal Sum that is 50% of the
Contributory Principal Sum which applied to the
Insured Member on the date of the accident. If there
are no insured children on the date of the accident,
this percentage is increased to 60%.
(Id at GE 000024) (emphasis added).
The "Accidental Death and Dismemberment Benefit" section of the policy
When an Insured person's injury results in one of
the losses stated below within 1 year of the date of
the accident, We will pay the percentage of the
principal sum stated for such loss. . . . Only one
benefit, whichever is greatest, will be paid for all
losses which result from any one accident.
Loss of Life 100%
(Id. at GE 000009, GE 00020) (emphasis added). The policy does not
provide an explicit definition for the term "principal sum." The 1996
policy rider defines "insured person" as "You and each of Your Eligible
Dependents who is insured under the Policy." Id at GE 000024).
Under the policy terms, plaintiff also was entitled to a continuous
coverage bonus of five percent for each two years of continuous coverage.
(Pl.'s. Br. in Opp., Ex. B, GE 000010). In calculating the benefit
payable to plaintiff, GECA applied a continuous coverage bonus of ten
percent to what it believed was the entire amount of coverage, the amount
now in dispute.
III. PROCEDURAL HISTORY
Plaintiff commenced this action by filing a complaint in the Court of
Common Pleas for Philadelphia County. GECA timely removed the case to
this Court. Defendant then filed its answer and the parties exchanged
discovery. Both GECA and Franklin now move for partial summary judgement.
IV. STANDARD FOR SUMMARY JUDGMENT
Summary judgment is appropriate if "the pleadings, depositions, answers
interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56. The Supreme Court has recognized that the moving party
"bears the initial responsibility of informing the district court of the
basis for its motion, and identifying those portions . . . which it
believes demonstrate the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). After the moving
party has filed a properly supported motion, the burden shifts to the
nonmoving party to "set forth specific facts showing that there is a
genuine issue for trial." Fed.R.Civ.P. 56(e). The nonmoving party may not
rest upon the mere allegations or denials of the party's pleading. See
Celotex, 477 U.S. at 324.
I must determine whether any genuine issue of material fact exists. An
issue is "material" only if the dispute over facts "might affect the
outcome of the suit under the governing law." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). If the record taken as a whole in a light
most favorable to the nonmoving party, "could not lead a rational trier
of fact to find for the nonmoving party, there is no `genuine issue for
trial.'" Matsushita Elec. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986)
(citation omitted). If the evidence for the nonmoving party is merely
colorable, or is not significantly probative, summary judgment may be
granted. Anderson, 477 U.S. at 249-50 (citations omitted).
Defendant correctly interpreted the policy language. The rules of
contract interpretation govern the principles of insurance policy
interpretation under Pennsylvania law:
(1) the terms of the insurance policy must be
given their ordinary meaning; (2) a
term is ambiguous only if reasonably intelligent
people considering the term in the context of the
entire policy would honestly differ as to its meaning;
and (3) the parties's intent must be determined not
only from the language but from all of the
Allstate Ins. Co. v. Drumheller, NO. 02-CV-7411, 2003 WL 22006815, at *3
(Aug. 19, 2003 E.D. Pa.), citing State Farm Fire & Cas. Co. v. Bellina,
No. 02-5816, 2003 WL 21246484, at *3 (E.D.Pa. April 30, 2003). "When
interpreting an insurance policy, a court must ascertain the intent of
the parties as manifested by the language of the written agreement. When
the policy language is clear and unambiguous, the court must give effect
to the language of the contract." Richmond v. Prudential Prop. & Cas.
Ins. Co., 789 A.2d 271, 274 (Pa. Super. 2001). If an insurance policy is
not clear and unambiguous, "ambiguities are to be resolved in favor of
the insured." Allstate Ins. Co., 2003 WL 22006815, at *3, citing Pacific
Indemnity Co. v. Linn, 766 F.2d 754, 761 (3d Cir. 1985).
Plaintiff argues that the policy terms contained in the Accidental
Death and Dismemberment Benefit section of the policy unambiguously
establish that the plaintiff is entitled to one hundred percent of the
Principal Sum for the loss of his wife's life. However, the Accidental
Death and Dismemberment provision does not stand alone and in reaching
his conclusion, plaintiff fails to read the Accidental Death and
Dismemberment provision in conjunction with the rest of the policy. "The
challenged language must be considered in the context of the entire
policy; courts should read policy provisions to avoid ambiguities, if
possible, and not torture language to create them. Sorbee Int'l Ltd. v.
Chubb Custom Ins. Co., 735 A.2d 712, 717 (Pa. Super. 1999) (citations
omitted). "An interpretation will not be given to one part of the
contract which will annul another part of it." Capek v. Devito,
767 A.2d 1047,
1051 (Pa. 1999). quoting Cerceo v. DeMarco, 391 Pa. 157, 137 A.2d 296,
298 (Pa. 1958).
In Prudential Property and Casualty Company v. Hinson,
277 F. Supp.2d 468, 473 (E.D. Pa. 2003), the Court elected not to adopt
the interpretation of an insurance policy proposed by defendants which
would have required finding that one exclusion in the policy overrode
another. "Given two competing interpretations, we find that the one
creating consistency is the better one, and that `reasonably intelligent
persons' would not honestly differ as to this interpretation of the
policy." Id., citing Westport Ins. Co. v. Bayer, 284 F.3d 489, 496 (3d
Cir. 2002); and Fed. Kemper Ins. Co. v. Ward, 679 F. Supp. 489, 494 (E.D.
Pa. 1988). Plaintiff's proposed interpretation of the policy language
does not create consistency.
If the language in the Accidental Death and Dismemberment Benefits
provision is read to stand alone, the family plan language in the 1996
policy rider (which clarified the earlier policy language) becomes
meaningless. Under the plaintiffs interpretation of the "principal sum
stated" in the Accidental Death and Dismemberment Benefits provision,
there would be no need to define the principal sum for family members
under the family plan, as all persons under the policy would be entitled
to the same principal sum. The language contained in the family plan
description indicates this was not the intent of the insurer. The 1996
Policy Rider clearly and unambiguously establishes that the Principal Sum
for a spouse is 60 percent of the Contributory Principal Sum where there
are no insured children on the date of an accident and also that after
age 70, any benefits payable under the policy for the death of an insured
person are reduced to 50 percent of the benefits otherwise payable.
(Pl.'s Br. in Opp., Ex. B, GE 000024). With the Principal Sum for a
spouse thus defined, the effect of the Accidental Death and Dismemberment
Benefits provision is clear when considered in the context of defendant's
entire policy, as the
percentages in this provision apply to the "principal sum stated."
In order to create consistency and to avoid annulling the family plan
language, both provisions must be read together to derive the formula
used to calculate plaintiff's award.
Plaintiff further argues that the 1996 rider is inapplicable because it
unilaterally reduces the coverage that he purchased. He avers that under
Tonkovic v. State Farm Mutual Auto Insurance Co., 521 A.2d 920, 924 (Pa.
1987), defendant must produce evidence that plaintiff received and
understood the changes to the policy contained in the rider provision.
Tonkovic is distinguishable because it involved an insurance policy that
plaintiff had never seen and that included an exclusionary clause not
present in the policy plaintiff had applied for. Id. at 922. Here
plaintiff makes no allegation that he was never shown the language in the
rider and he made no objections to the changed language at the time the
rider was issued. The rider itself clearly and unambiguously states at
the outset that "[t]his Rider is to be attached to and forms a part of
the Policy shown above." (Id. at GE 000023) (emphasis added).
Where a rider has been added to a general policy, rules of construction
dictate that an endorsement or rider becomes and forms a part of the
contract and the policy and endorsement or rider shall be construed
together. "If there is a conflict between the terms of the endorsement
and those in the body of the main policy, then the endorsement prevails.
. . ." St. Paul Fire and Marine Ins. Co. v. U.S. Fire Ins. Co.,
655 F.2d 521, 524 (3d Cir. Pa. 1981), citing, Lumbermens Mutual Casualty
Co. v. Sutch, 197 F.2d 79, 81-82 (3d Cir. 1952). Any ambiguity in the
original language is therefore eliminated by the incorporation of the
rider provision. The 1996 rider clarifies what the principal sum is for a
spouse, clearly establishing that it is "50% of the Contributory Principal
Sum which applied to the Insured Member on the date of the accident."
(Id. at GE 000024).
Further, it is not necessary that defendant show that plaintiff
understood the implications of the changed language in the policy rider.
The effect of the family plan language in the rider is similar to that of
a policy exclusion as it places a limitation on the amount of coverage
available. "Exclusions from coverage of an insurance policy will be
effective against an insured if they are `clearly worded' and
`conspicuously displayed' without regard to whether the insured read the
limitations or understood their significance." Allstate Ins. Co., 2003 WL
22006815, at *3, citing Pacific Indemnity Co., 766 F.2d at 761. In this
case, the original family plan description and the subsequent 1996 rider
provided limitations on coverage of an insured spouse who was over age
seventy that were clearly worded and conspicuously displayed. Reasonably
intelligent people considering the effect of the family plan provision on
the entire policy could not conclude that the family plan did not apply
when reading the Accidental Death and Dismemberment Benefits section.
Defendant correctly determined the formula for determining the amount
of benefits to be awarded to plaintiff for the death of his wife. The
limitations on spousal coverage and coverage for those over age seventy
were conspicuously displayed in the policy and the 1996 policy rider and
clearly worded. The effect of the Accidental Death and Dismemberment
provision is clear when read in conjunction with the rest of plaintiff's
policy. Under the Family Plan provision, plaintiff's spouse was insured
for sixty percent of the contributory principal sum (because there were
no insured children under the policy) until she turned seventy. After her
seventieth birthday, her coverage decreased to fifty percent of the
coverage otherwise payable, or fifty
percent of sixty percent. Under the Accidental Death and Dismemberment
Benefit provision, plaintiff should be awarded one hundred percent of
this amount for his spouse's loss of life. Therefore plaintiff should be
awarded thirty percent of the contributory principal sum under the policy
plus the applicable continuing coverage bonus.
Although the formula for determining the benefit award is clear, the
correct amount of the contributory principal sum to which is should be
applied is not. This factual dispute precludes me from issuing summary
judgment at this juncture. In view of the uncertainty regarding the
amount of the gross principal sum and thus the correct benefits award
amount when the formula described above is applied, I will deny both
parties' motions for summary judgment without prejudice to the filing of
motions for summary judgment after completion of discovery on the amount
of the contributory principal sum.
AND NOW, this ___ day of January 2004, after considering defendant's
motion for partial summary judgment, plaintiff's cross-motion for partial
summary judgment, and all responses thereto and for the reasons set forth
in the accompanying memorandum, it is ORDERED that both defendant's and
plaintiffs motions are DENIED without prejudice to the filing of motions
for summary judgment after completion of discovery on the amount of the
contributory principal sum.
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