HARVEY BARTLE, III, District Judge.
Plaintiffs Joel Burstein and Elli Weinstein have instituted this putative class action against Sun Life Assurance Company of Canada ("Sun Life"). Plaintiffs are suing for breach of contract arising out of Sun Life's alleged failure to pay full death benefits to them as beneficiaries of a life insurance policy issued to plaintiffs' father, Harold Burstein, who died in April 2011. Plaintiffs also claim a violation of the Massachusetts Consumer Protection Act, ALM GL ch. 93A, § 2. Before the court is Sun Life's motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
The undisputed facts are as follows. Harold Burstein was the insured under a Keystone Provident Life Insurance Company ("Keystone") life insurance policy, which he purchased in 1985 for a single premium of $10, 000. Sun Life acquired Keystone in 2001, and is responsible for all of the obligations under the Policy to Harold Burstein and his beneficiaries.
According to the Policy, Sun Life sets various interest rates annually, that is a Declared Rate for Unborrowed Cash Value, Basic and Excess Rates for Borrowed Cash Value, and a Loan Interest Rate. The cash value of the Policy accumulates based on the amount of unborrowed cash, the Declared Rate for Unborrowed Cash Value, and the loan balance. If a policyholder takes a loan against the Policy, the policyholder pays interest at the Loan Interest Rate in effect at the time. Sun Life also credits interest to the policyholder on the loan balance at the appropriate Borrowed Cash Value Interest Rate during any year that the Declared Rate for Unborrowed Cash Value is greater than 4%. Under certain circumstances, a wash loan will be created when the Loan Interest Rate is offset by the Rates for Borrowed Cash Value. Sun Life additionally credits interest to the policyholder on the unborrowed cash value of the Policy during any year if the Declared Rate for Unborrowed Cash Value is greater than 4%. Id . Upon the death of the insured, the Policy pays a death benefit. The gross death benefit at any time equals the projected cash accumulation through the policy maturity date. The net benefit payable to the beneficiaries under the Policy is the projected cash accumulation through policy maturity decreased by any outstanding loan.
The Policy provided that the Loan Interest Rate was 8.0% unless the Declared Rate for Unborrowed Cash Value dropped to or below 4%. If that occurred, the Policy called for the Loan Interest Rate to decrease to a level equal to or "greater than the Declared Rate, but not more than 1.5% greater". Each year, Keystone, and subsequent to 2001, Sun Life, sent Harold Burstein an Anniversary Report, which announced the Declared Interest Rate for Unborrowed Cash Value for that year. The Reports also contained the insured's loan balance and net death benefit. Along with the Anniversary Report, Sun Life also sent the insured an updated page 5 of the Policy stating the "Guaranteed Death Benefit." The updated page 5 that was sent to the insured each year was intended to replace the original page 5 in the Policy.
Starting in 1993, it is undisputed that the Anniversary Reports and the updated page 5 of the Policy contained loan balance and gross death benefit amounts based on an inaccurate Loan Interest Rate. The rate was higher than allowed under the Policy since it did not take into account the Declared Rate for Unborrowed Cash Value which had fallen to or below 4%. Because of the interaction of the various interest rates, the report showed a larger death benefit and a larger loan balance than were correct under the Policy. The inaccuracy was caused by a defect in Keystone's, and later Sun Life's, software system. The system was incapable of adjusting the Loan Interest Rate below a certain threshold. Having discovered the error, Sun Life in or about 2010 began the process of recalculating policy values to reflect the correct Declared Rate for Unborrowed Cash Value and Loan Interest Rate.
The September 13, 2010 Anniversary Report sent to Harold Burstein reflected a gross death benefit of $54, 681 and a loan balance of $45, 636.44. These numbers were wrong. In December 2010 the insured sent Sun Life a payment of $46, 000 to be applied against his outstanding loan balance. Because interest due to Sun Life had accrued on the purported loan balance between September and December 2010, the insured, according to Sun Life, was left with a loan balance of $630 as of December 12, 2010.
Harold Burstein, as noted above, died on April 13, 2011. On June 10, 2011, Sun Life sent a letter to Elli Weinstein explaining the inaccuracy in the reported gross death benefit and loan balance. In October 2011, Ms. Weinstein and her brother, Joel Burstein, made a death benefit claim on the Policy. In November and December 2011 Sun Life issued payments to plaintiffs, as beneficiaries, totaling $28, 842.98, the recalculated gross death benefit. Specifically, Weinstein was issued a check for $14, 530.57 and Burstein was issued 2 checks totaling $14, 312.41. On February 7, 2012, Sun Life also sent plaintiffs a payment of $26, 627.53, which reflected the amount by which Harold Burstein had overpaid his loan balance, based on the inaccurate Loan Interest Rate. The payment included interest. Plaintiffs accepted the refund as well as the death benefit payments. Thereafter, plaintiffs filed this lawsuit.
Plaintiffs maintain that Sun Life has failed to pay a net death benefit of $54, 681 as stated in the September 2010 Anniversary Report. It is their position that they are entitled to the payment as a matter of contract and that Sun Life was not entitled to correct the figures in the Anniversary Report and pay them a reduced death benefit. Accordingly, plaintiffs are seeking the difference, with interest, between the reported death benefit of $54, 681 and the reduced death benefit of $28, 842.98 they received from Sun Life. They do not challenge the amount of the loan refund.
Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2); see also Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). A dispute is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 254 (1986). After reviewing the evidence, the court makes all reasonable inferences from the evidence in the light most favorable to the non-movant. In re Flat Glass Antitrust Litig. , 385 F.3d 350, 357 (3d Cir. 2004). When ruling on a motion for summary judgment, we may only rely on admissible evidence. See, e.g., Blackburn v. United Parcel Serv., Inc. , 179 F.3d 81, 95 (3d Cir. 1999).
We turn first to plaintiffs' contractual claim, which all agree is governed by Pennsylvania law. Plaintiffs do not contest that Sun Life may have used an incorrect Loan Interest Rate in making its calculations. Plaintiffs simply maintain that these incorrect calculations became incorporated into the Policy and that Sun Life breached the insurance contract when it failed to pay the death benefit reported in the September 2010 Anniversary Report and the September 2010 page 5 of the Policy. Sun Life counters that the death benefit and loan balance reported in the Anniversary Report and page 5 of the Policy that were sent to Harold Burstein in September 2010 contained mistaken calculations based on an inflated Loan Interest Rate and that the ...