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Kelly v. Lincoln Benefit Life Co.

United States District Court, M.D. Pennsylvania

December 18, 2017

KATRINA L. KELLY, BENEFICIARY FOR THE ESTATE OF WILLIAM KELLY, Plaintiff
v.
LINCOLN BENEFIT LIFE COMPANY, Defendant

          MEMORANDUM

          JAMES M. MUNLEY UNITED STATES DISTRICT COURT JUDGE

         Before the court for disposition is Defendant Lincoln Benefit Life Company's motion for summary judgment in this case involving a life insurance dispute. The parties have briefed their respective positions, and the motion is ripe for disposition.

         Background [1]

         On October 23, 2013, William Kelly obtained a life insurance policy from defendant with a benefit of $200, 000.00 and with Plaintiff Katrina L. Kelly as beneficiary. Approximately ten months later, on August 20, 2014, William Kelly passed away from respiratory failure. Plaintiff made a claim to defendant for the life insurance benefits. Defendant denied the claim. Plaintiff then instituted this case by filing a three-count complaint. The complaint raises the following causes of action: Count I- breach of contract; Count II - bad faith; and Count III - negligent supervision/vicarious liability. At the close of discovery, the defendant filed the instant motion for summary judgment, bringing the case to its present posture.

         Jurisdiction

         The court has jurisdiction pursuant to the diversity statute, 28 U.S.C. § 1332. Plaintiff is a citizen of Pennsylvania. (Doc. 1, Not. of Removal ¶ 6). Defendant Lincoln Benefit is incorporated under the laws of the State of Nebraska with its principal place of business in Nebraska. (Id. ¶ 7). Thus, defendant is a citizen of Nebraska. Additionally, the amount in controversy exceeds $75, 000. (Id. ¶ 9). Because complete diversity of citizenship exists among the parties and the amount in controversy exceeds $75, 000, the court has jurisdiction over this case. See 28 U.S.C. § 1332 (Adistrict courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between . . . citizens of different states[.]@). As a federal court sitting in diversity, the substantive law of Pennsylvania shall apply to the instant case. Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie R.R. v. Tomkins, 304 U.S. 64, 78 (1938)).

         Legal standard

         Granting summary judgment is proper A>if the pleadings, depositions, answers to 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 judgment as a matter of law.'" See Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d Cir. 1997) (quoting Fed.R.Civ.P. 56(c)). A[T]his standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

         In considering a motion for summary judgment, the court must examine the facts in the light most favorable to the party opposing the motion. Int'l Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949 (3d Cir. 1990). The burden is on the moving party to demonstrate that the evidence is such that a reasonable jury could not return a verdict for the non-moving party. Anderson, 477 U.S. at 248 (1986). A fact is material when it might affect the outcome of the suit under the governing law. Id. Where the non-moving party will bear the burden of proof at trial, the party moving for summary judgment may meet its burden by showing that the evidentiary materials of record, if reduced to admissible evidence, would be insufficient to carry the non-movant's burden of proof at trial. Celotex v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies its burden, the burden shifts to the nonmoving party, who must go beyond its pleadings, and designate specific facts by the use of affidavits, depositions, admissions, or answers to interrogatories showing that there is a genuine issue for trial. Id. at 324.

         Discussion

         In the motion for summary judgment, the defendant insurance company argues that it properly rescinded the life insurance policy when it learned of inaccuracies in the insurance application. Because defendant properly rescinded the policy, it had no duty to pay benefits and plaintiff's breach of contract fails. The remaining two claims rely on the validity of the breach of contract cause of action. No breach of contract occurred, and thus, according to the defendant, these two claims fail also and judgment should be entered in favor of the defendant.

         Defendant raised this issue in its answer to the complaint, stating: “Plaintiff's claims are barred because there were material, knowing and/or fraudulent misrepresentations in the application for the policy, which rendered the policy void and of no force and effect, and [Defendant] Lincoln Benefit properly and timely rescinded and contested the policy.” (Doc. 6, Ans. at 5). Defendant argues that William Kelly (hereinafter “Mr. Kelly” or “decedent”) failed to disclose an extensive history of medical treatment, including multiple recent hospital visits, and the diagnostic testing for, and diagnosis of, lung cancer. Thus, at issue is whether Mr. Kelly materially misrepresented his health and medical condition when he purchased the policy and whether such misrepresentation allows defendant to rescind the policy. Plaintiff argues that questions of material fact preclude us from granting summary judgment. After a careful review, we agree with the defendant.

         Pennsylvania law allows for rescission of an insurance contract when in applying for a policy an applicant makes a 1) false representation; 2) which the insured knew was false when made or was made in bad faith; and 3) the representation was material to the risk being insured. New York Life Ins. Co. v. Johnson, 923 F.2d 279, 281 (3d Cir. 1991); Estate of Genovese v. AAA Life Ins. Co., No. 3:11cv348, 2011 WL 5835097 *8 (Nov. 21, 2011) .

         Defendant argues that all off these elements are met. Plaintiff made false statements, he knew they were false and they were material to the risk being ...


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