West v. Lincoln Benefit

Opinions of the United
2007 Decisions States Court of Appeals
for the Third Circuit

12-13-2007

West v. Lincoln Benefit
Precedential or Non-Precedential: Precedential

Docket No. 06-3491

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 06-3491

PATRICIA WEST,

Appellant

v.

LINCOLN BENEFIT LIFE COMPANY

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 05-cv-00561)
District Judge: Honorable Donetta W. Ambrose

Argued May 16, 2007
Before: FISHER and ROTH, Circuit Judges,
and RAMBO,* District Judge.

*
The Honorable Sylvia H. Rambo, United States District
Judge for the Middle District of Pennsylvania, sitting by
designation.
 (Filed: December 13, 2007)

John W. Jordan, IV (Argued)
Matis, Baum, Rizza & O’Connor
444 Liberty Avenue
Four Gateway Center, Suite 300
Pittsburgh, PA 15222
Attorney for Appellant

Alan H. Abes (Argued)
Dinsmore & Shohl
255 East Fifth Street
1900 Chemed Center
Cincinnati, OH 45202

R. Stanley Mitchel
Rose, Schmidt, Hasley & DiSalle
900 Oliver Building
Pittsburgh, PA 15222-5369
Attorneys for Appellee

OPINION OF THE COURT

RAMBO, District Judge.

This matter arises out of a dispute over whether a policy
for life insurance was in force upon the death of James West, Jr.
The insurer, Appellee Lincoln Benefit Life Company (“Lincoln

2
Benefit”), argues that Mr. West’s policy had lapsed for
nonpayment of premiums and had not been reinstated. Because
the policy was not in force at the time of Mr. West’s death,
Lincoln Benefit submits, it is not obligated to pay benefits under
the policy terms. Appellant Patricia West, James West’s wife
and beneficiary of the policy, argues that Pennsylvania law
imposed a temporary contract of insurance when, after notice of
lapse, she sent an application for reinstatement and payment of
overdue premiums. For the reasons that follow, we agree with
Lincoln Benefit and will affirm summary judgment in its favor.

I.

On April 4, 1998, Mr. West obtained a life insurance
policy from Allstate Insurance Company. On the application for
the policy, he stated that he was taking medicine for high blood
pressure. After medical testing or examination by Allstate, the
insurance policy was issued. In February 2002, Mr. West
converted the Allstate policy to a $50,000 term policy with
Lincoln Benefit and added a $50,000 term rider benefit (“the
Policy”). At the time of conversion, Lincoln Benefit did not
require a medical examination or other proof of insurability.
Mr. West named Mrs. West beneficiary of the Policy.

The Policy terms are as follows: the insured must remit
a quarterly payment of $228.51 to remain insured. If a premium
payment is not received by its due date, a grace period of sixty-
one days goes into effect. At the end of sixty-one days, if the
premium is still outstanding, the Policy is terminated. After
termination but before the death of the insured, however, the
Policy may be reinstated provided that the insured: 1) requests

3
reinstatement within five years of the date that the Policy
entered the grace period; 2) gives Lincoln Benefit “the proof [it]
require[s] that the insured is still insurable” in the payment class
under which the Policy was issued; 3) pays an amount large
enough to cover the unpaid monthly deductions for the grace
period; 4) makes a payment sufficient to keep the policy in force
for three subsequent policy months; and 5) pays or asks Lincoln
Benefit to reinstate any outstanding loan, with interest. (R. at
60a.)

Lincoln Benefit addressed all correspondence to Mr.
West at his home address. Mr. West would open the mail
addressed to him, then give Mrs. West any mail that required a
response, including bills and notices of payment due issued by
Lincoln Benefit. Mrs. West would respond or write a check for
payment, as appropriate, and maintain the file of insurance
documents. Mrs. West recalled two occasions when Mr. West
gave her a notice from Lincoln Benefit that the premium
payment was overdue and coverage would terminate unless
payment was made by a particular date. Both times she sent a
check immediately to continue the policy in force. She saw only
the correspondence from Lincoln Benefit that Mr. West gave to
her. She does not know if there were letters or bills from
Lincoln Benefit sent to her husband that he did not then pass on
to her. The Wests paid all premiums due through February 17,
2004.

On April 1, 2004, Lincoln Benefit sent Mr. West a
reminder that his next premium was due on May 1, 2004. On
May 3, 2004, because it had not received payment, Lincoln
Benefit sent Mr. West a letter informing him that the Policy had

4
entered the grace period. His Policy would terminate on July 3,
2004 if the premium was not received on or before that date. On
May 11, 2004, Lincoln Benefit sent Mr. West a second notice
that his May premium was due.1

Mr. West did not submit payment to Lincoln Benefit on
or before July 3, 2004. Thus, on July 5, 2004, Lincoln Benefit
sent him a letter stating that the grace period for premium

1
According to Lincoln Benefit’s records, Mr. West was
sent eleven reminder letters substantially identical to the one he
received on May 3, 2004. He was sent six second notices of
payment due, like the one he received on May 11, 2004. Janet
Dever, a Claim Consultant for Allstate Life Insurance Company
with authority to act for Lincoln Benefit, submitted an affidavit
in support of Lincoln Benefit’s motion for summary judgment.
She averred that the correspondence described in this opinion
was sent to Mr. West in due course of business for Lincoln
Benefit on or about the date reflected on each item. Mrs. West
testified that she never saw any of this correspondence (aside
from the two times she admits to having seen similar notices)
and therefore denies that Lincoln Benefit sent these letters. In
the alternative, she claims that her husband never received them.
Mrs. West admits, however, that she is without knowledge as to
whether Mr. West received these letters. Mrs. West’s admitted
lack of knowledge is insufficient to rebut the presumption that
correspondence mailed in the ordinary course of business is
received. See West v. Lincoln Benefit Life Co., No. 05-561,
2006 WL 1788384, at *7 (W.D. Pa. June 26, 2006); Fed. R. Civ.
P. 56(e).

5
payment on his policy had expired. The letter advised Mr. West
that he could apply for reinstatement. The second paragraph of
the letter stated, “[t]o continue your valuable coverage, complete
the Application for Reinstatement form on the back and return
it with your payment of $228.51. Upon underwriting approval,
and receipt of the sufficient payment, coverage will continue
uninterrupted.” (R. at 183a.) Enclosed with the letter was an
application for reinstatement. The application itself states, “I
(each undersigned) request that the Company reinstate this
policy. . . . Coverage will not start again until this request is
approved by the company and all required premiums and interest
are paid. If this request is not approved, any amount tendered
will be returned.” (Id. at 187a.)

Mrs. West recalls having read only the first sentence of
the second paragraph of the letter, “[t]o continue your valuable
coverage, complete the Application for Reinstatement form on
the back and return it with your payment of $228.51.” She
interpreted it to mean that if she filled out the form and sent it to
Lincoln Benefit with payment, Mr. West’s insurance would be
reinstated. Mrs. West did not read, or does not remember
reading, any of the language in the letter or the application
stating that underwriting approval was required before
reinstatement would be effective.

The application asked ten questions regarding the
applicant’s medical history. Mrs. West filled out the application
on Mr. West’s behalf. She answered nine questions in the
negative, indicating that Mr. West had no medical issues relating
to those questions. She answered “yes” and “no” to one
question – whether, in the past ten years or during the time Mr.

6
West was insured under the Policy, he had been “diagnosed
with, sought or received treatment or advice for: heart attack,
disease of coronary arteries or other blood vessels, other heart
disorder, high blood pressure, diabetes or stroke.” (Id.) In the
blank provided for an explanation of “full details, including
diagnosis, severity, treatment, name and address of doctors,
hospitals, and clinics,” she wrote “controlled with medication.”
(Id.) She answered “yes” because Mr. West still had the high
blood pressure disclosed on his initial application for life
insurance with Allstate. She knew Mr. West to be in good
health because he was taking medication to control his blood
pressure and he had recently passed a physical exam with no
medical problems. Thus, she believed that Lincoln Benefit
would approve the application for reinstatement immediately
upon receipt of the application and payment.

Lincoln Benefit received the application for reinstatement
on July 15, 2004, along with Mr. West’s check for $228.51. On
July 19, 2004, Lincoln Benefit deposited the check pursuant to
its standard practice.

Mr. West died on July 24, 2004, and Lincoln Benefit
received notice of his death two days later. The Underwriting
Department had not completed its review of the application and
had not made a decision on whether to reinstate his Policy.
Because Lincoln Benefit did not consider Mr. West’s Policy to
be in effect at the time of his death, on July 30, 2004, the
company denied Mrs. West’s claim for payment of benefits and
refunded the premium payment of $228.51 that had
accompanied the application for reinstatement.

7
 II.

The District Court had subject matter jurisdiction to hear
this claim pursuant to 28 U.S.C. § 1332(a)(1). We have
jurisdiction to review the District Court’s decision on summary
judgment under 28 U.S.C. § 1291. We review the decision de
novo. State Farm Mut. Auto. Ins. Co. v. Rosenthal, 484 F.3d
251, 253 (3d Cir. 2007).

Because subject matter jurisdiction is based on diversity
of citizenship, we look to the substantive law of Pennsylvania to
determine the rights and obligations of the parties. Erie R.R. Co.
v. Tompkins, 304 U.S. 64, 77 (1938). The law of the
Commonwealth is declared by “its Legislature in a statute or by
its highest court.” Id. The Pennsylvania Supreme Court is the
best authority on Pennsylvania law, but when the Supreme Court
has not issued a clear pronouncement in a particular area, we
“must consider relevant state precedents, analogous decisions,
considered dicta, scholarly works, and any other reliable data”
to determine what the law is. McKenna v. Ortho Pharm. Corp.,
622 F.2d 657, 661, 663 (3d Cir. 1980); see also Comm’r v.
Estate of Bosch, 387 U.S. 456, 465 (1967). We may not rest on
“blind adherence to state precedents without evaluating the
decisions in light of other relevant data as to what the state law
is.” McKenna, 622 F.2d at 663 (quotation and alteration
omitted); accord Scotts African Union Methodist Protestant
Church v. Conference of African Union First Colored Methodist
Protestant Church, 98 F.3d 78, 92 (3d Cir. 1996); cf. Bernhardt
v. Polygraphic Co. of Am., Inc., 350 U.S. 198, 204 (1956)
(affirming district court’s use of forty-five-year-old state
supreme court precedent when “there appear[ed] to be no

8
confusion in [state] decisions, no developing line of authorities
that casts a shadow over the established ones, no dicta, doubts
or ambiguities in the opinions of [state] judges on the question,
[and] no legislative development that promises to undermine the
judicial rule”). Opinions from inferior Pennsylvania courts are
not controlling in our analysis, but they are entitled to significant
weight when there is no indication that the Pennsylvania
Supreme Court would rule otherwise. Rosenthal, 484 F.3d at
253.

III.

The facts of this case implicate a specific area of
insurance law – reinstatement of a lapsed policy of life
insurance – and general principles of insurance law as declared
by the Pennsylvania courts. We will address each paradigm in
turn.

A. The Law of Reinstatement

Pennsylvania’s Insurance Department Act of 1921 was
enacted to protect the insurance-buying public. Collister v.
Nationwide Life Ins. Co., 388 A.2d 1346, 1355 (Pa. 1978). One
of its requirements is that all life insurance policies delivered in
Pennsylvania contain the consumer-protective provisions of 40
Pa. Cons. Stat. Ann. § 510, or terms more favorable to the
insured. See generally Lee R. Russ & Thomas F. Segalla,
Couch on Insurance § 33.48 (3d ed. 1995) (“[W]here statutory
requirements are enacted, they automatically become part of any
insurance policy issued thereafter, notwithstanding more
limiting language in the policy.”). The statute requires that all

9
premiums may be paid in advance, § 510(a), and if a premium
is not received when due, the insured is entitled to a grace period
in which to pay, § 510(b). If an insured does not pay within the
grace period and the policy lapses, § 510(k) governs the rights
and obligations of the insured after lapse of a policy, should the
insured wish to apply for reinstatement:

[T]he holder of a policy shall be entitled to have
the policy reinstated, upon written application
therefor, [1] at any time within three years from
the date of default in premium payments, unless
the policy has been duly surrendered or the
extension period expired, [2] upon the production
of evidence of insurability satisfactory to the
company, . . . [3] payment of all overdue
premiums with interest at a rate to be specified in
the policy . . . and [4] the payment of any other
indebtedness to the company upon said policy
with interest . . . .

§ 510(k).

The conjunctive phrasing of § 510(k) makes it clear that
each requirement must be satisfied – mere payment of overdue
premiums is not sufficient to effect reinstatement. Fisher v. Am.
Nat’l Ins. Co., 241 F.2d 175, 177 (3d Cir. 1957); Sykes v. United
Ins. Co., 76 A.2d 227, 229 (Pa. Super. Ct. 1950); Selby v.
Equitable Beneficial Mut. Life Ins. Co., 17 A.2d 696, 697 (Pa.
Super. Ct. 1941); Peters v. Colonial Life Ins. Co. of Am., 193 A.
460, 463 (Pa. Super. Ct. 1937); Stager v. Fed. Life Ins. Co., 189
A. 776, 778 (Pa. Super. Ct. 1937); Fishman v. Eureka-Md.

10
Assurance Corp., 183 A. 98, 102 (Pa. Super. Ct. 1936); Franklin
L. Best, Jr., Pennsylvania Insurance Law § 13.7 (3d ed. 2005);
see Russ & Segalla, supra, § 33.46 (“Where two or more
conditions to reinstatement exist, it is necessary that the insured
satisfy all of the conditions in order to obtain reinstatement
. . . .”). The insured holds the burden of proving compliance
with all conditions precedent to reinstatement. Riebel v.
Prudential Ins. Co. of Am., 179 A. 447, 448 (Pa. 1935); Sykes,
76 A.2d at 229; Selby, 17 A.2d at 697-98; Peters, 193 A. at 464;
Stager, 189 A. at 779; Fishman, 183 A. at 101. Because our
analysis turns on the second requirement, that the insured must
provide evidence of insurability satisfactory to the insurer, we
will evaluate the law on that issue only.

The Pennsylvania Supreme Court was presented with an
opportunity to interpret the meaning of “evidence of insurability
satisfactory to the insurer” in Riebel. A man applied for life
insurance and received a policy. 179 A. at 447. The policy
lapsed for non-payment of premiums. Id. The reinstatement
provision in Riebel was phrased in exact accordance with the
statutory text of § 510(k) that was then in effect, such that the
lapsed insured was required to pay past arrears and furnish
evidence of insurability satisfactory to the insurer. Id. at 447-48.
The lapsed insured submitted his application for reinstatement
and payment of past-due premiums. Id. He also submitted a
physician’s report of his health indicating that he had lost twenty
pounds, looked anemic, had contracted the flu during the
previous year and had not felt well since. Id. at 448. The next
day, he died. Id. Four days later, and without notice of the
lapsed insured’s death, the application for reinstatement was
denied because the evidence presented did not satisfy the

11
company that he was still insurable. Id. The arrearage payment
was tendered back to the estate of the lapsed insured. Id.

The Pennsylvania Supreme Court held that the insurer
was clearly within its rights to deny reinstatement under the
statutory predecessor to § 510(k), the insurance policy, and the
application for reinstatement, when no satisfactory evidence of
the insurability of the lapsed insured was provided.2 Id.; see
Best, supra, § 13.7; Russ & Segalla, supra, § 33:61
(“[R]einstatement may be denied if the insured is uninsurable at
the time he or she seeks reinstatement . . . .”). “[E]ven if the
court could overlook the contractual and statutory requirement,
that ‘the evidence of the insurability of the insured [must be]
satisfactory to the Company,’ . . . plaintiff has furnished no
evidence which would justify either the court or jury in so
determining on [this] unsatisfactory proof . . . .” Riebel, 179 A.
at 448. Accordingly, the Supreme Court affirmed entry of
judgment for the insurance company and against the beneficiary
of the lapsed insurance policy. Id.

2
An earlier case held that even when an insurance
company approved an application for reinstatement after the
applicant had died, the company was not liable for death
benefits. Meerbach v. Metro. Life Ins. Co., 46 Pa. Super. 133,
1911 WL 4460, at *1 (Pa. Super. Ct. Dec. 19, 1910). The court
held that the posthumous approval “would operate to revive the
policy on a life which had then ceased to exist. No such thing
could have been contemplated by either the company or the
insured.” Id.

12
 As demonstrated by Riebel, evidence of insurability
satisfactory to the company must, in fact, be satisfactory to the
company. If this evidence is not provided, or is not satisfactory,
the insurer need not reinstate. Id.; Stager, 189 A. at 778; Russ
& Segalla, supra, § 33:61. The insurer “cannot be arbitrary or
capricious in considering the evidence of insurability” provided
in an application for reinstatement. Rothschild v. N.Y. Life Ins.
Co., 162 A. 463, 466 (Pa. Super. Ct. 1932). Ultimately,
however, the insurer has the right to make the final decision as
to whether it will accept or deny an application for
reinstatement. Fishman, 183 A. at 102; see § 510(k) (evidence
of insurability must be satisfactory to the insured).

The method of proof of insurability may vary. Insurers
often rely initially on forms to provide evidence of insurability.
These forms require the insured or an examining physician to
answer questions about the insured’s health. See Stager, 189 A.
at 778. Incomplete or non-responsive answers to the insurer’s
questions do not provide satisfactory evidence of insurability.
Id. at 778-79. In Stager, such a form was used in an application
for reinstatement. The application asked, “Have you now any
diseases or disorders? If any, give details.” Id. at 778. The
lapsed insured responded “Bladder.” Id. The insurer replied
with the following: “If that question is answered correctly and
[the insured] now has a bladder disorder he would not be
insurable. We are returning the application for him to modify if
that question is incorrectly answered.” Id. This answer,
unchanged, imposed no obligation upon the insurer to reinstate
because it was not responsive to the question asked and did not
provide satisfactory evidence that the lapsed insured remained
insurable. Id. at 779.

13
 B. Subsequent Developments in Insurance Law

In the late 1970s, the Pennsylvania Supreme Court issued
decisions that demonstrated its consumer-oriented approach to
insurance law by allowing the expectations of the insured rather
than the plain terms of a policy to control insurance disputes.
None of these decisions involved reinstatement of a lapsed
policy; none purport to interpret or modify the law governing
reinstatement described supra.

In Rempel v. Nationwide Life Insurance Co., Inc., 370
A.2d 366 (Pa. 1977) (plurality), the plaintiff-beneficiary claimed
negligent misrepresentation by an insurer’s agent. Id. at 367.
The agent informed the insured that upon his death, his policy
would pay the remainder of his mortgage balance plus $5,000.
Id. The terms of the policy did not, in fact, contain such
provisions. Id. The Rempels did not read the policy to confirm
the agent’s assertions, but the Pennsylvania Supreme Court did
not impose a duty upon them to do so. Id. at 368. Instead,
“[c]onsumers, such as the Rempels, view an insurance agent . . .
as one possessing expertise in a complicated subject. It is
therefore not unreasonable for consumers to rely on the
representations of the expert rather than on the contents of the
insurance policy itself.” Id. Put another way, consumers rely on
an agent to “translate” the specialized language of an insurance
policy into words that they understand. Id.; accord Collister,
388 A.2d at 1353 (“[T]he insurance industry forces the
insurance consumer to rely upon the oral representations of the
insurance agent. Such representations may or may not
accurately reflect the contents of the written document and
therefore the insurer is often in a position to reap the benefit of

14
the insured’s lack of understanding . . . .”). Because there was
“no evidence . . . indicating that the Rempels knew, or should
have known, that the policy which they received did not contain
the provisions which [the agent] led them to believe would be in
the policy,” the Rempels were entitled to the additional $5,000
that they reasonably expected as a result of the agent’s
misrepresentation. Rempel, 370 A.2d at 369.

A year later, in Collister, the Pennsylvania Supreme
Court considered the question of whether a temporary contract
of insurance arose when a proposed insured submitted a new
application for insurance and contemporaneously paid his first
premium. 388 A.2d at 1347-48. The insurance agent who
received the application and payment informed the proposed
insured that a medical examination was required. Id. at 1355.
The agent also provided the proposed insured a “conditional
receipt” which stated “NO INSURANCE WILL BECOME
EFFECTIVE PRIOR TO POLICY DELIVERY UNLESS THE
ACTS REQUIRED BY THIS RECEIPT ARE COMPLETED.”
Id. at 1356. One of the acts required was a medical examination
demonstrating the applicant’s insurability. Id. The applicant
died before submitting the results of a medical exam. Id. at
1347. The insurer had not accepted or rejected his application
for a new policy. Id. The beneficiary claimed that a temporary
contract for insurance had arisen at the moment of premium
payment. Id. at 1348. The Pennsylvania Supreme Court agreed.
Id. at 1355.

The Court held that “the proper resolution of questions
such as that presented by the instant appeal depends upon an

15
analysis of the totality of the transaction involved.” Id. at 1353.
It further held that

[i]n situations where the circumstances of the
transaction do not indicate that the insurer
intended to provide interim insurance, but
nevertheless show that the insurer accepted
payment of the first premium at the time it took
the application, it is then up to the insurer to
establish by clear and convincing evidence that
the consumer had no reasonable basis for
believing that he or she was purchasing
immediate insurance coverage.

Id. Ultimately, courts were directed to “examine the dynamics
of the insurance transaction to ascertain what are the reasonable
expectations of the consumer” and give effect to those
expectations, regardless of the ambiguity or clarity of the
language of an insurance contract. Id. at 1353-54.

Following Rempel and Collister, however, insurance case
law appeared to diverge under two subsequent decisions by the
Pennsylvania Supreme Court: Standard Venetian Blind Co. v.
American Empire Insurance Co., 469 A.2d 563 (Pa. 1983), and
Tonkovic v. State Farm Mutual Automobile Insurance Co., 521
A.2d 920 (Pa. 1987). Standard Venetian Blind adhered to the
language of the insurance contract to determine an insurer’s
obligation to pay, without regard to the expectations of the
insured. It did not cite Collister. Instead, the Pennsylvania
Supreme Court stated that the intent of the parties is

16
 manifested by the language of the written
instrument. Where a provision of a policy is
ambiguous, the policy provision is to be construed
in favor of the insured and against the insurer, the
drafter of the agreement. Where, however, the
language of the contract is clear and
unambiguous, a court is required to give effect to
that language. In the absence of proof of fraud,
failure to read the contract is an unavailing excuse
or defense and cannot justify an avoidance,
modification or nullification of the contract or any
provision thereof.

Standard Venetian Blind, 469 A.2d at 566 (quotation, citations,
and alterations omitted). Standard Venetian Blind did admonish
that “in light of the manifest inequality of bargaining power
between an insurance company and a purchaser of insurance, a
court may on occasion be justified in deviating from the plain
language of a contract of insurance.” Id. at 567.

The facts of that case, however, did not permit such
deviation because the policy limitation at issue was clearly
worded and conspicuously displayed. Id. The insured, upon
application for the policy, requested “full coverage on
everything we have.” Id. at 565. The policy contained standard
exclusion provisions, which were clear, unambiguous, and not
contrary to law. Id. at 566. The insurer did not describe the
limitations of the policy, but neither did it misrepresent that the
policy had no exclusions or that the exclusions were anything
other than what they purported to be. See id. To allow the
insured “to avoid application of the clear and unambiguous

17
policy limitations in these circumstances would [have required
the Supreme Court] to rewrite the parties’ written contract,”
which the court would not do. Id. Instead, it sought to “accord
proper significance to the written contract, which has
historically been the true test of parties’ intentions.” Id. at 567.

By contrast, Tonkovic focused on the reasonable
expectations of the insured rather than the clear language of the
contested policy because the insured specifically requested
disability insurance, but was issued a policy that did not include
disability insurance. 521 A.2d at 924. Tonkovic held that where
“an individual applies and prepays for specific insurance
coverage, the insurer may not unilaterally change the coverage
provided without an affirmative showing that the insured was
notified of, and understood, the change, regardless of whether
the insured read the policy.” Id. at 925. There is “a crucial
distinction between cases where one applies for a specific type
of coverage and the insurer unilaterally limits that coverage,
resulting in a policy quite different from what the insured
requested,” as the facts of Tonkovic demonstrated, and “cases
where the insured received precisely the coverage that he
requested but failed to read the policy to discover clauses that
are the usual incident of the coverage applied for,” as occurred
in Standard Venetian Blind. Id.; accord Toy v. Metro. Life Ins.
Co., 863 A.2d 1, 13 (Pa. Super. Ct. 2004) (affirming that an
insurer has a duty to inform an insured that it issued a policy
different from what the insured requested).

The cases that follow reflect the Tonkovic distinction. In
the absence of an affirmative misrepresentation by the insurer or
its agent about the contents of the policy, the plain and

18
unambiguous terms of a policy demonstrate the parties’ intent
and they control the rights and obligations of the insurer and the
insured. E.g., Kvaerner Metals Div. of Kvaerner U.S., Inc. v.
Commercial Union Ins. Co., 908 A.2d 888, 897 (Pa. 2006);
Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d
100, 106 (Pa. 1999) (“The polestar of our inquiry . . . is the
language of the insurance policy.”); Gene & Harvey Builders,
Inc. v. Pa. Mfrs.’ Ass’n Ins. Co., 517 A.2d 910, 913 (Pa. 1986).
When a provision of the policy is clear and unambiguous, it
must be enforced. Madison Constr. Co., 735 A.2d at 106. An
unclear, ambiguous provision will be construed against the
insurer and in favor of the insured. Id.

An analysis of the reasonable expectations of the insured
is rightly employed when a claimant alleges that the insurer
engaged in deceptive practices toward the insured, either to
misrepresent the terms of the policy or to issue a policy different
than the one requested by the insured and promised by the
insurer. Matcon Diamond, Inc. v. Penn Nat’l Ins. Co., 815 A.2d
1109, 1114 (Pa. Super. Ct. 2003); Pressley v. Travelers Prop.
Cas. Corp., 817 A.2d 1131, 1140 (Pa. Super. Ct. 2003). In this
context, the clear and unambiguous language in the policy is one
aspect of the totality of the circumstances that may lead to the
reasonable expectations of the insured. Bubis v. Prudential
Prop. & Cas. Ins. Co., 718 A.2d 1270, 1272 (Pa. Super. Ct.
1998); Frain v. Keystone Ins. Co., 640 A.2d 1352, 1354 (Pa.
Super. Ct. 1994); see Reliance Ins. Co. v. Moessner, 121 F.3d
895, 903 n.7 (3d Cir. 1997); Pressley, 817 A.2d at 1143 (Lally-
Green, J., concurring and dissenting); but see Dibble v. Sec. of
Am. Life Ins. Co., 590 A.2d 352, 355 (Pa. Super. Ct. 1991)
(evaluating “the dynamics of the transaction viewed in its

19
entirety” without regard to the language of an application for a
new policy or the policy itself); Bierer v. Nationwide Ins. Co.,
461 A.2d 216, 221 (Pa. Super. Ct. 1983) (“The fact that the
policy rider and application are unambiguous in their provisions
does not, by itself, defeat the reasonable expectations of the
consumer.”). “[A]n insured may not complain that his or her
reasonable expectations were frustrated by policy limitations
which are clear and unambiguous.” Frain, 640 A.2d at 1354.
However, “even the most clearly written exclusion will not bind
the insured where the insurer or its agent has created in the
insured a reasonable expectation of coverage.” Reliance Ins.
Co., 121 F.3d at 903. “[M]ere assertions that a party expected
coverage will not ordinarily defeat unambiguous policy
language excluding coverage.” Matcon Diamond, Inc., 815
A.2d at 1115.

We believe that this synthesized standard is the truest
statement of Pennsylvania law. We have applied it in the past,
Tran v. Metro. Life Ins. Co., 408 F.3d 130, 136-37 (3d Cir.
2005); Reliance Ins. Co., 121 F.3d at 903; Bensalem Twp. v.
Int’l Surplus Lines Ins. Co., 38 F.3d 1303, 1309 (3d Cir. 1994);
see Altimari v. John Hancock Variable Life Ins. Co., 247 F.
Supp. 2d 637, 644-45 (E.D. Pa. 2003); Barrar v. Metro. Life Ins.
Co., 151 F. Supp. 2d 617, 621-22 (E.D. Pa. 2001), and we will
apply it here.

IV.

The parties have asked us to determine which source of
law determines their rights and obligations to one another: the
law governing reinstatement or the law governing the reasonable

20
expectations of the insured. Considering the evolution of the
case law under the “reasonable expectations” standard, we
believe that the outcome of this matter is the same no matter
which law we choose. Lincoln Benefit is not obliged to pay
benefits on Mr. West’s lapsed Policy.

A. Under the Law of Reinstatement

We believe that the Pennsylvania Supreme Court would
decide this matter under 40 Pa. Cons. Stat. Ann. § 510(k), its
interpretive precedent, and the reinstatement terms of the Policy.
The burden of proving compliance with all conditions precedent
to reinstatement of the Policy is thus on Mrs. West. See, e.g.,
Sykes, 76 A.2d at 229. She cannot meet this burden. Both the
case law and the Policy are clear: payment of the overdue
premium was insufficient to effect reinstatement. It was
incumbent upon Mr. West to give Lincoln Benefit the proof it
required that he was still insurable. (R. at 60a); see § 510(k)
(requiring a lapsed insured to produce “evidence of insurability
satisfactory to the company.”).

Lincoln Benefit had the right, statutorily and under the
terms of the Policy, to decide whether the evidence provided by
the Wests was satisfactory proof of Mr. West’s insurability. See
Riebel, 179 A. at 448; Fishman, 183 A. at 102. At the time of
his death, the Underwriting Department had not decided whether
the statements on the application provided satisfactory evidence
of insurability. Mrs. West does not argue that Lincoln Benefit
was arbitrary, capricious, or even unreasonable in not deciding
the merits of the application for reinstatement within eleven
days of its receipt. Thus, reinstatement was not effected because

21
Lincoln Benefit had not yet accepted his application.3 Mr. West
was not insured at the time of his death and Lincoln Benefit is
not contractually obligated to pay benefits.4

3
Even if Lincoln Benefit had evaluated the information
on the application, the information would not have provided
satisfactory proof of Mr. West’s continued insurability. The
application asked, in the past ten years or for the time during
which Mr. West was insured under the Policy, whether he had
been “diagnosed with, sought or received treatment or advice
for: heart attack, disease of coronary arteries or other blood
vessels, other heart disorder, high blood pressure, diabetes, or
stroke.” Mrs. West’s answers of both “yes” and “no” are
conflicting in themselves. Moreover, when asked for “full
details, including diagnosis, severity, treatment, name and
address of doctors, hospitals, and clinics,” she wrote “controlled
with medication.” Her answer was not responsive to the
question asked and did not provide the additional details
requested by Lincoln Benefit to assist the company in
determining Mr. West’s continued insurability. Even if Lincoln
Benefit had reviewed the application, Mrs. West’s answer would
have been insufficient for immediate reinstatement. See Stager,
189 A. at 778-79.
4
We are urged to apply the specific holding in Collister,
such that by accepting the Wests’ payment of $228.51 before
deciding whether to reinstate, a temporary contract of insurance
arose between Lincoln Benefit and Mr. West that Lincoln
Benefit may not now disclaim. See 388 A.2d at 1355. Nothing
about Collister itself or subsequent case law suggests that

22
 B. Under the Law of the Reasonable
Expectations of the Insured

Mrs. West argues, however, that her expectation that
coverage would exist upon submission of the application and

temporary insurance may arise when an application for
reinstatement rather than a new policy is pending. None of the
cases cited by the majority or the dissent in Collister speak to
reinstatement. Commentators discuss contracts for temporary
insurance coverage in the context of new policies only.
Compare Russ & Segalla, supra, § 13.1 and Peter Nash
Swisher, Insurance Binders Revisited, 39 Tort Trial & Ins. Prac.
L.J. 1011, 1024-25 (2004) with Best, supra, § 13.7 and Russ &
Segalla, supra, §§ 33:1-33:119. An entirely different legal
structure applies to applications for reinstatement. Neither
commentators nor courts conflate the two.
The clear difference is that statutory and contractual
obligations, described supra, govern an application for
reinstatement and simply do not apply to an application for a
new policy. Upon lapse of an insurance policy, the contractual
provisions governing reinstatement remain in force until the
allotted time to apply for reinstatement has passed. Rothschild,
162 A. at 466. Thus, any action taken toward reinstatement
must comply with the contractual or statutory terms that
continue to be in effect. Id.; see § 510(k); Best, supra, § 13.7;
Russ & Segalla, supra, § 33.8 (whether the insured has a right
to reinstate a policy “is determined from the contract of
insurance” or pertinent statute).

23
payment should control the outcome.5 Under the reasonable
expectations analysis, Mrs. West “may not complain that [her]
reasonable expectations were frustrated by policy limitations
which are clear and unambiguous.” See Frain, 640 A.2d at
1354. The reinstatement provision, described above, is clear
and unambiguous as to the conditions precedent to
reinstatement. It is also clear that those conditions were not met.

Yet even the most clearly-written policy limitation will
not bind Mrs. West if Lincoln Benefit misrepresented the terms
and conditions under which reinstatement would be effected and
created a reasonable expectation that coverage would be
immediate. The only communication from Lincoln Benefit to
the Wests on the topic of reinstatement was by letter. If Lincoln
Benefit, in those letters, created a reasonable expectation that
Mr. West would be insured immediately upon payment of the

5
We have very little direct information as to what the
insured, Mr. West, expected regarding reinstatement or whether
he expected anything at all. It is unknown whether he read the
Policy. All correspondence from Lincoln Benefit was addressed
to him, which he then gave to his wife to handle. Pennsylvania
courts appear to have allowed the beneficiary’s expectations to
inform the court’s decision on what the insured expected, see
Bierer, 461 A.2d 216, and it appears that Mr. and Mrs. West
spoke about the matters herein discussed. We will allow Mrs.
West’s perspective to inform our decision on what Mr. West
expected.

24
past-due premium, Lincoln Benefit would be required to pay
benefits.6

In the reasonable expectations analysis, the insurer must
demonstrate that the insured did not have a reasonable
expectation of coverage. Tonkovic, 521 A.2d at 922, 925;
Bensalem Twp., 38 F.3d at 1311. Although Collister requires
this showing by clear and convincing evidence, 388 A.2d at
1355, Tonkovic expressly approved a jury charge instructing that
the insurer must show a mere preponderance, 521 A.2d at 922,
925. Because it is the heavier burden, we will proceed under the

6
Mrs. West argues that she and Mr. West expected
coverage to start immediately upon submitting payment for the
overdue premium because there was no reason to believe that
his application would be denied. The Wests knew that Mr. West
disclosed both his high blood pressure and the medicine he was
taking to control it on his initial application for life insurance.
He received a physical exam within six to eight months before
the Wests filed the application for reinstatement and his blood
pressure was fine. According to Mrs. West, “I just assumed that
since I sent the money that [the Policy] would have been
reinstated because nothing had changed as far as his health
. . . .” (West Dep. 55:18-56:3.) This subjective belief is not
pertinent to our evaluation of their expectations of insurance
coverage, however. Pennsylvania courts look only to whether
the insurer created in the insured a reasonable expectation of
coverage, not whether the insured came to an independent
conclusion that coverage existed or would exist. Matcon
Diamond, Inc., 815 A.2d at 1115.

25
Collister evidentiary standard. When the party moving for
summary judgment bears the burden of proving certain facts by
clear and convincing evidence, we must evaluate the facts in
support of the motion in light of that evidentiary burden.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
Accordingly, we must determine, here, whether Lincoln Benefit
has shown with convincing clarity that the Wests did not have
a reasonable expectation that insurance coverage would restart
immediately upon remittance of payment or whether Mrs. West
has come forward with sufficient evidence to defeat that
showing. See id.; El v. Southeastern Pa. Transp. Auth., 479
F.3d 232, 237-38 (3d Cir. 2007). Evidence that is merely
colorable or not significantly probative is insufficient to create
a genuine issue of material fact for trial. See Anderson, 477
U.S. at 248; El, 479 F.3d at 238.

The chronology of correspondence between Lincoln
Benefit and Mr. West demonstrates that the Wests did not have
a reasonable expectation of immediate coverage upon
submission of the application for reinstatement and payment of
the overdue premium. Lincoln Benefit sent Mr. West notices of
payment approximately one month before each premium was
due. On eleven occasions, when the premium was not received
by its due date, Lincoln Benefit sent follow-up letters stating
that his policy value was insufficient to cover the costs of his
insurance. These letters requested payment of the overdue
premium as soon as possible. They noted that without the
premium payment, his Policy would terminate. On six
occasions, when the Wests still did not remit payment, Lincoln
Benefit sent a second notice of payment due. Each second
notice asked again for payment of the premium. Because the

26
Policy was in grace period, the only necessary action to keep the
Policy in effect was to pay the overdue premium.

On April 1, 2004, Lincoln Benefit sent Mr. West a notice
of payment due informing him that his quarterly premium
payment was due on May 1, 2004. The premium was not paid
by that date. On May 3, 2004, Lincoln Benefit sent a follow-up
letter like the ones described above, informing him that his
Policy would terminate on July 3, 2004, if his premium was not
paid. It asked him to submit payment as soon as possible,
preferably within ten days. On May 11, 2004, Lincoln Benefit
sent Mr. West a second notice of premium due.

On July 5, 2004, Lincoln Benefit sent Mr. West a letter
stating that “[t]he grace period for premium payment on your
policy has expired.” (R. at 183a.) It advised that Mr. West
could apply for reinstatement. The letter stated, “[t]o continue
your valuable coverage, complete the Application for
Reinstatement form on the back and return it with your payment
of $228.51. Upon underwriting approval, and receipt of the
sufficient payment, coverage will continue uninterrupted.” (Id.)
Mr. West showed Mrs. West the document. Mrs. West read
only the first sentence of the excerpt quoted and interpreted the
language “to continue your valuable coverage” to mean “to
continue [uninterrupted] your valuable coverage” rather than “to
[restart after cessation] your valuable coverage.” (West Dep.
43:24-44:2); see Webster’s 3d New Int’l Dictionary 493 (1981).
She thought that if she “filled out the form and sent in the
money, the policy would continue.” (West Dep. 45:2-4.) Mrs.
West did not read, or does not remember reading, the language

27
in the letter clearly stating that underwriting approval of the
application was a condition precedent to reinstatement.

Mrs. West then turned to the application on the reverse
of the letter. She filled out the blanks at the top for the policy
number and the name of the insured. She then read and
answered questions below regarding Mr. West’s health. She did
not read the paragraph immediately below the blanks for the
policy number and the name of the insured that she filled out,
and immediately above the questions that she read and
answered, which stated, “I (each undersigned) request that the
Company reinstate this policy. . . . Coverage will not start again
until this request is approved by the company and all required
premiums and interest are paid. If this request is not approved,
any amount tendered will be returned.” (R. at 187a.)

Lincoln Benefit did not misrepresent the conditions
precedent to reinstatement. The text of the letter and of the
application clearly state that underwriting approval by Lincoln
Benefit was required before coverage would begin again. This
statement is entirely consistent with the clear language of the
Policy itself and the statute, supra, governing applications for
reinstatement. Mrs. West may not avoid these conditions with
the mere assertion that she expected coverage to begin
immediately because of a single sentence in the letter and
application for reinstatement.

Moreover, the record of the previous correspondence
from Lincoln Benefit to Mr. West regarding payment of overdue
premiums demonstrates that it was unreasonable to expect that
submission of payment and a completed application would result

28
in immediate reinstatement. When the Wests were late in
paying their premium but still within the grace period,
immediate payment was, in fact, all that was required for Mr.
West’s Policy to remain in effect. Each notice from Lincoln
Benefit stated exactly that. The reinstatement letter was
different, however. It was accompanied by an application with
questions about Mr. West’s health – something Lincoln Benefit
had never before required to keep the Policy in force. Thus,
simply by the nature of the transaction, the Wests were on notice
that this time, there was at least one additional level of review
that would take place before the Policy would be effective.
Further, Mrs. West’s testimony indicates that she did not believe
that the application would be denied. This demonstrates an
understanding that the application was something that Lincoln
Benefit had the power to accept or deny, and not simply a
ministerial exercise that effected reinstatement immediately.

In light of the totality of these circumstances, the
evidence is clear and convincing: it was unreasonable for the
Wests to expect the Policy to be in force at the time they mailed
the overdue premium and application for reinstatement. Thus,
even under the reasonable expectations analysis, Lincoln Benefit
has no obligation to pay benefits on James West, Jr.’s lapsed
policy of life insurance.

V.

For the foregoing reasons, we will affirm the order of the
District Court.

29