In PNC Bank v. Amerus Life Insurance Company, the insureds had purchased a $10 Million life insurance policy, paying $25,000/quarter, which was held in trust by PNC. There was a failure to pay premiums and the policy was terminated. The policyholders claimed that they only missed the payment because of inaccurate assurances by the carrier’s representatives, and the carrier claimed (1) this was not true and (2) even if true, that there was no reasonable reliance on the incorrect information as a matter of law. The Court found there were disputes of material fact over what, if any, assurances were given, and whether or not any reliance was reasonable. The court added that it could not rule as a matter of law on whether the insureds’ own alleged errors broke the chain of causation from any allegedly wrongful conduct by the carrier. Thus, summary judgment was denied.
Date of decision: May 25, 2006
In a subsequent bench trial, the court ruled in the insured’s favor. PNC Bank v. Amerus Life Insurance Company, No. 05-02966, 2006 U.S. Dist. LEXIS 48152 (E.D.Pa. July 17, 2006). This was reversed by the Third Circuit. PNC Bank v. Amerus Life Insurance Company, No. 06-3742, 2007 U.S. App. LEXIS 24148 (3d Cir. October 15, 2007) (Fuentes, J.). The trial court had ruled on the facts that the carrier improperly cancelled the policy, because the carrier itself provided incorrect information which caused the premium payments to lapse, and then refused to accept late payment and cancelled the policy. The appellate court found that the proximate cause was not a mistaken statement by the carrier’s agent, but the failure of the trustee responsible vis-à-vis payments to heed notices to make the payments was the proximate cause of the harm and/or a superseding cause. The key difference with the trial court’s authority, Amrovcik v. Metro. Life Ins. Co., 119 Pa. Super. 176, 180 A. 727 (1935); Aetna Cas. & Sur. Co. v. Netz, No. 91-6944, 1993 U.S. Dist. LEXIS 3845, 1993 WL 89766, at *8 (E.D. Pa. Mar. 29, 1993), is that in those cases the insurer itself prevented the insured from performing as required on the policy; but in this case, the trustee was not prevented from performance by the insurer’s acts, even though mistaken. The trustee had received notices after the initial mistake that could and should have been acted on to prevent the lapse.