The opinion of the court was delivered by: Conti, District Judge.
Pending before the court is a motion for partial summary judgment filed in the above-captioned civil action by plaintiff James D. Meyer ("plaintiff" or "Meyer"), and a motion for summary judgment filed by defendant CUNA Mutual Group ("defendant" or "CUNA"). Plaintiff brought this action on his own behalf, and on behalf of similarly situated individuals who were granted, but later denied, benefits under credit disability insurance policies purchased from defendant. (Joint Statement of Material Facts for Plaintiff's motion for Partial Summary Judgment ("JF-P"), ¶ 5.). Plaintiff filed a motion for partial summary judgment (Doc. No. 108) seeking the court's interpretation of a clause in an insurance contract defining "Total Disability." Defendant filed a motion for summary judgment (Doc. No. 141) seeking dismissal of all plaintiff's remaining claims: count two - breach of contract; count four - violation of the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law, 73 PA. CONS. STAT. ANN. § 201-1, et seq. ("UTPCPL"); count five - violation of Pennsylvania's bad faith insurance statute, 42 PA. CONS. STAT. ANN. § 8371 ("Section 8371"); and count six - breach of Pennsylvania's common law covenant of good faith and fair dealing. After considering the submissions of the parties, the court will grant plaintiff's motion for partial summary judgment and grant in part and deny in part defendant's motion for summary judgment for the reasons set forth herein.
Plaintiff's initial complaint (Doc. No. 1) sought certification of a nationwide class based upon claims for breach of contract, breach of fiduciary duty, violation of the UTPCPL, and violation of Pennsylvania's bad faith insurance statute. Defendant filed a motion to dismiss that complaint (Doc. No. 6), which the court in its memorandum order of February 11, 2004, granted in part as to the breach of fiduciary duty claim and denied in part as to the remaining claims. (Doc. No. 12.)
Plaintiff subsequently filed an amended complaint (Doc. No. 21) with leave of the court realleging claims for breach of contract, breach of fiduciary duty, and violation of the Pennsylvania bad faith statute, and further alleging violations of unfair trade practice and consumer protection laws of all 50 states and the District of Columbia as well as violation of the covenant of good faith and fair dealing under the common laws of all 50 states, the District of Columbia, and federal common law. (JF-P ¶ 8).
Defendant filed a motion to dismiss that complaint (Doc. No. 22) which the court in its memorandum order of December 20, 2004 (Doc. No. 41) granted as to count three, the breach of fiduciary duty claim, granted in part as to count four, the unfair trade practices claim, and denied without prejudice as to count six, the breach of the implied covenant of good faith and fair dealing claim. (JF-P ¶ 9.) Specifically, with respect to count four, the unfair trade practices and consumer protection claims, the court dismissed that claim to the extent that it purported to state a claim for violations of unfair trade practices of all 50 states and the District of Columbia as well as the federal statute prohibiting unfair trade, and permitted plaintiff to maintain such a claim to the extent the claim alleges violations of the Pennsylvania UTPCPL. (Id.) The court denied defendant's motion to dismiss count six without prejudice to defendant's right to revisit the issue upon a fully developed record in a motion for summary judgment. (Id.)
On January25, 2006, this court granted plaintiff's motion for class certification. The following class of plaintiffs was certified:
All persons who purchased disability insurance issued in Pennsylvania from the defendant CUNA Mutual Group, or its subsidiaries, which policies contain the definition of total disability including the following material language: "After the first twelve consecutive months of disability, the definition changes and requires the Member to be unable to perform any of the duties of his occupation, or any occupation for which he is reasonably qualified", [sic] to the extent that such individuals were determined by the defendant to be not able to perform all of the duties of his or her occupation, but were determined by the defendant to be capable of sufficient physical activity that the defendant decided that they were no longer eligible for total benefits under the defendant's interpretation of the subject policy. (Memorandum Opinion of January 25, 2006, Doc. No. 50 at 47-48.)
On February 24, 1999, plaintiff purchased credit disability insurance pursuant to a group policy (the "policy") issued by defendant CUNA to URE Federal Credit Union (the "credit union") in connection with the financing by the credit union of an automobile purchase made by plaintiff. (JF-P ¶ 16.) The policy provided that, in the event plaintiff became totally disabled, defendant would make payments on the loan to the credit union on plaintiff's behalf. (Id. at 17 (citing Group Credit Insurance Policy at 4).) The policy contained a definition of "Total Disability" that provided:
during the first 12 consecutive months of disability means that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury. After the first 12 consecutive months of disability, the definition changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is reasonably qualified by education, training or experience. (Id. at 18 (citing Group Credit Insurance Policy at 1).)
This policy was approved by the Pennsylvania Insurance Department, as required by Pennsylvania law, before being sold to plaintiff. (Joint Statement of Material Facts: Defendant's motion for summary judgment ("JF-D"), ¶ 40.) The policy at issue - including the language defining total disability - resulted from defendant's efforts to modify language in its policies during the 1980s and to use "plain language" in drafting its policies. (Deposition of Diane Konz ("Konz Dep.") at 14-18.)
Diane Konz ("Konz"), testified in her deposition that she worked with a team at CUNA that drafted insurance contracts, submitted them to state regulators, and worked with the regulators to gain approval. (Konz Dep. at 6-7.) Konz testified that the drafting team included the manager of claims, the manager of underwriting, the manager of accounting, an actuary, and herself on behalf of the government relations and regulatory compliance group. (Id.) Konz testified that she drafted the language of the policy at issue during CUNA's efforts to modify policies to contain plain language. (Konz Dep. at 21.)
Plaintiff obtained a loan in the face amount of $19,838.44 and purchased a credit disability insurance policy with respect to that loan. The policy was effective on February 24, 1999, and the premium for the policy was $1,230.00. (JF-D ¶ 7.) Plaintiff worked as a brakeman and conductor for Union Railroad for approximately 31 years. (JF-P ¶ 15). On May 27, 2000, plaintiff suffered an injury at work while moving a train from one yard to another.*fn1
(Id. at 19.) In connection with this injury, plaintiff filed a claim for disability benefits under the policy at issue in this lawsuit. (Id.) In response to plaintiff's claim, CUNA began to pay plaintiff disability benefits. (Id. at 24.) CUNA made its first payment of disability benefits to plaintiff on August 2, 2000, for the period of July 7, 2000 through July 27, 2000. (Id.) CUNA paid plaintiff disability benefits for the period between July 7, 2000, and July 7, 2001, pursuant to the definition of "Total Disability" that governed the first twelve months of disability because for that period CUNA determined that plaintiff was totally disabled according to that definition. (Id. at 25.) CUNA paid plaintiff disability benefits for the period between July 8, 2001 through November 24, 2002, pursuant to CUNA's interpretation of the definition of "Total Disability" that governed the time period after twelve months had passed from the date the disability commenced because for that period CUNA determined that plaintiff was totally disabled according to that definition. (JF-P ¶ 26.)
On or about January 27, 2003, CUNA informed plaintiff by letter that he was no longer eligible for benefits under the policy. (JF-P ¶ 27.) In the letter plaintiff was informed that, though CUNA had processed his claim for the period September 25, 2000 through November 24, 2002, it was terminating his benefits under the policy. The letter explained in pertinent part:
Based on information obtained, no additional benefits may be extended at this time.
The information obtained indicated you're capable of modified light duty work. This, along with other information contained in your claim file, indicates that you are no longer unable to perform any occupation. Therefore, your claim has been closed.
The Credit Disability Insurance contract contains a definition of total disability. According to this definition, total disability during the initial 12consecutive [sic] months of disability means you are not able to perform the duties of your occupation. After the initial 12 consecutive months of disability, the definition changes and states that you must be disabled from performing any occupation for which you are reasonably qualified by education, training, or experience.
(Def. App., Blanke Aff., Ex. A (Letter from Carolyn J. Frye to James D. Meyer) (the "January 27, 2003 letter")). The January 27, 2003 letter was a form letter sent by CUNA to disability claimants (1) to whom CUNA had paid twelve consecutive months of benefits under a credit disability policy, and (2) for whom CUNA had received information indicating that the claimant was capable of returning to work in some capacity. (JF-P ¶ 28.)
Although several physicians authorized plaintiff at various times after his disabling injury to return to working in some capacity subject to light or medium duty restrictions, plaintiff was never cleared by any physician to return to his time-of-injury occupation as conductor/brakeman at Union Railroad. (JF-D ¶ 11.)
For class notice purposes, CUNA determined that 4,734 persons had received the benefit denial letter in question and potentially fit within the class definition. The class notice was mailed to those persons. (Affidavit of Dale Statz ("Statz Aff.").) Of the 4,734 persons who received the class notice, 176 returned to their pre-injury jobs, without restrictions (Statz Aff. ¶¶ 8(a)-9(a)), 1,530 persons submitted additional information, and had the payment of credit disability benefit payments reinstated until the underlying loan was paid off (Statz Aff. ¶¶ 8(b)-9(b)), and 51 persons had their credit disability claims closed due to their failure to respond to requests for information from CUNA. (Statz Aff. ¶ 8(c)-9(c).)
Plaintiff received the claims files materials for all the potential class members from defendant. (See plaintiff's amended supplemental responses to defendant's second set of requests for admissions ("Pl.'s Amend. Adm.").) These files contain all the necessary materials to determine (1) which of these members should be included in the class, and (2) what their damages would be if liability is determined. ( Id.) Specifically, these files contain: the initial claim reports (including occupation and job description at time of disability); medical records, functional capacity evaluations and doctors' reports submitted to determine disability; documentation of when a class member returned to work; monthly payments on loans, outstanding balance on the loans, balance at distribution, and duration of the loans. (Id. ¶¶ 1-6.)
Plaintiff Meyer understood the definition of "total disability" in the insurance contract to mean disabled from his time of injury job. Meyer testified in his deposition as follows:
Q: And do you recall reviewing or looking at that definition of total disability prior to finalizing your application and getting the loan on the truck?
A: I would have went over the whole thing before I signed it, the whole application.
Q: And do you recall any discussion that you had with anybody at the credit union about the definition of total disability at any time prior to getting the loan?
Q: What is your understanding today as to what the definition of total disability is in CUNA's insurance policy as it relates to you?
A: Total disability would be me not able to perform the duties as my job as a brakeman or conductor under the agreement with Union Railroad Company.
Q: Is that your understanding of the definition?
A: And if I couldn't resume my, if I couldn't go back to doing my job that I was doing for 31 years on the railroad, that I was considered totally ...