Jeffrey Justofin, Christopher Justofin v. METROPOLITAN LIFE INSURANCE CO. On Appeal from the United States District Court for…

PRECEDENTIAL
UNITED STATES
COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-4264
JEFFREY JUSTOFIN, CHRISTOPHER
JUSTOFIN; DAMIAN JUSTOFIN;
ROBERT JUSTOFIN; IVAN
JUSTOFIN, (Beneficiaries of Loretta K.
Justofin, Deceased),
Appellants
v.
METROPOLITAN LIFE
INSURANCE CO.
On Appeal from the
United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 01-cv-06266
(Honorable John R. Padova)
Argued October 27, 2003
B e f o r e : S CIR ICA , Chief Judge,
NYGAARD and AMBRO, Circuit Judges
(Opinion filed: June 25, 2004)
Timothy M. Kolman, Esquire
Wayne A. Ely, Esquire (Argued)
Timothy M. Kolman & Associates
225 North Flowers Mill Road
Langhorne, PA 19047
Attorneys for Appellants
Alvin Pasternak, Esquire
Anthony J. Tomari, Esquire
Metropolitan Life Insurance Company
Law Department
One Madison Avenue
New York, NY 10010-3690
Veronica W. Saltz, Esquire (Argued)
Saltz Polisher
993 Old Eagle School Road
Suite 412
Wayne, PA 19087
Attorneys for Appellee
OPINION OF THE COURT
AM BRO, Circuit Judge
The Justofins, beneficiaries under
the life insurance policy of their mother
Loretta K. Justofin (“Loretta”), sued
Metropolitan Life Insurance Company
(“MetLife”) for denying a portion of death
benefit proceeds. The District Court
granted summary judgment in favor of
MetLife by finding the amendment to the
life insurance policy increasing the benefit
void because of Loretta’s failure to
disclose fully her medical history. The
issues before us are: (1) whether MetLife
established that the amended policy was
void as a matter of law because of
Loretta’s false representations, thus

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warranting summary judgment against the
Justofins on their breach of contract claim;
(2) whether M etLife waived its right to
contest the validity of the amended policy
because it failed to investigate Loretta’s
representation before issuing the policy;
(3) whether the District Court properly
disposed of the Justofins’ bad faith claim
against MetLife by finding the amended
policy void; (4) whether the District Court
erroneously granted MetLife’s motion to
amend its pleading; and (5) whether the
District Court erred in not addressing the
Justofins’ motions for discovery and
sanctions.
We vacate the District Court’s
summary judgment in favor of MetLife
and remand this case for further
proceedings. Specifically, we conclude
that the amended life insurance policy
issued by MetLife was not void as a matter
of law; that MetLife did not waive its
challenge to the validity of the amended
policy; that whether MetLife acted in bad
faith should be dealt with separately from
the contract claim; and that the District
Court properly exercised its discretion in
allowing MetLife to amend its pleading.
As for the Justofins’ motions for discovery
and sanctions, we leave them to the
District Court’s discretion on remand.
I. Background
In April 1994 Loretta initially
applied for a life insurance policy from
MetLife. In the application, she listed her
son, Dr. Christopher Justofin,1 as her
personal physician, mentioning that Dr.
Justofin treated her for occasional arthritis
of her hands and feet. MetLife issued the
life insurance policy to Loretta in the
amount of $100,000.
Five years later, at the age of sixty-
four, Loretta applied to increase the policy
amount, from $100,000 to $300,000, by
completing an “Application for Change of
Placed Personal Life Insurance” form. It
contained the following pertinent
questions and answers.
11. Has any person EVER received
treatment, attention, or advice from any
physician, practitioner or health facility
for, or been told by any physician,
practitioner or health facility that such
person had:
(j) Arthritis, paralysis, or
disease or deformity of the
bones, muscles or joints?
Yes
. . . .
15. In past 5 years, has any
physician, practitioner or health facility
examined, advised or treated any person?
Yes
The application instructed Loretta to
provide the details about her “yes” answers
in questions 11 and 15, including the name
1At the time, Dr. Justofin had just begun
his residency in family medicine, which he
finished in February 1996.

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of each physician, nature and severity of
condition, frequency of attacks, specific
diagnosis, and treatment. She provided
names of several doctors and the details of
surgeries and treatment, including her foot
surgery for arthritis. Although Loretta
listed several doctors who treated her,
including Dr. Eugene Jacobs (her then
personal physician), she did not mention
Dr. Justofin in this 1999 change
application. In Part B of the application,
Loretta again noted that she had arthritis
and that she self-medicated Prednisone in
1969 for her arthritis when she owned a
pharmacy. Part C, the “Paramedical
Evaluation,” shows that Loretta disclosed
that she had an “unknown type” of arthritis
that caused noticeable hand swelling.
Effective May 1999, MetLife issued the
increase in death benefit coverage.
Loretta died on December 7, 1999.
MetLife paid the Justofins $100,000 based
on the original 1994 policy but informed
them that it was voiding the amended
policy’s $200,000 increase. Initially,
MetLife’s stated reason for voiding the
increase was that Loretta failed to disclose
that she had Lupus.2 The Justofins brought
suit against MetLife in the Eastern District
of Pennsylvania,3 claiming breach of
contract, bad faith, and negligence.
MetLife counterclaimed, seeking a
declaration that the policy increase was
void ab initio, and moved for summary
judgment. The District Court granted
MetLife’s summary judgment motion on
the negligence issue but denied it as to the
other issues.
MetLife then filed a motion for
reconsideration based on the evidence that
Loretta used Prednisone, a drug used to
treat Lupus. MetLife deposed Dr. Justofin
regarding this matter. He testified that he
was a personal physician of his mother
from 1994 until sometime in 1998. During
this period, Dr. Justofin visited Loretta
weekly at her home to examine her and
also to pick up his mail.4 Dr. Justofin
asserted that, although he treated his
mother for arthritis, she never had Lupus.
Although Dr. Justofin was not sure what
kind of arthritis Loretta had, he speculated
that she had rheumatoid arthritis,
osteoarthritis, or both.5 Dr. Justofin also
mentioned that he used to write a six-
month supply of Prednisone for Loretta’s
2Systemic Lupus Erythematosus, a
slowly progressive systemic disease
marked by, among other things, arthritic
changes. Whether Loretta in fact had
Lupus is disputed but is not relevant to our
decision. We note, however, that the
record does not show any evidence that
Loretta’s death was related to Lupus.
3The District Court had jurisdiction
under 28 U.S.C. § 1332.
4Dr. Justofin explained that he used his
mother’s address as his permanent address.
5Dr. Justofin testified that he never
performed any tests to determine what
kind of arthritis his mother had, partly
because she did not want to make a trip to
his office.

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arthritis and she would adjust the dose
depending on her condition.6 Dr. Justofin
also opined that Prednisone is a
medication routinely prescribed for
rheu mato id arth ritis, r ather than
osteoarthritis.
MetLife thereupon motioned for
leave to file a supplemental counterclaim,
seeking a declaration that the policy
increase was void based on Loretta’s
failure to disclose that her son had treated
her and prescribed Prednisone for her.7
The District Court granted the motion.
MetLife then sought summary judgment
on its new counterclaim and on the
Justofins’ breach of contract and bad faith
claims. The District Court entered
summary judgment in favor of MetLife on
all claims. The Justofins appealed. We
have appellate jurisdiction under 28 U.S.C.
§ 1291.
II. Standard of Review
“We review the District Court’s
grant of summary judgment de novo.”
Fakete v. Aetna, Inc., 308 F.3d 335, 337
(3d Cir. 2002) (citing Fogleman v. Mercy
Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir.
2002)). We therefore apply the same
standard the District Court employed
under Federal Rule of Civil Procedure
56(c). We should affirm the District
Court’s summary judgment if “there is no
genuine issue as to any material fact and
. . . the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ.
P. 56(c). A fact is material when its
resolution “might affect the outcome of the
suit under the governing law,” and a
dispute about a material fact is genuine “if
the evidence is such that a reasonable jury
could return a verdict for the nonmoving
party.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). In reviewing
the record, we draw all justifiable
inferences in favor of the nonmoving
party. Id. at 255.
III. Discussion
A. Breach of Contract Claim
1. Is the 1999 Policy Amendment
void as a matter of law because of
a l l e g e d l y f a l s e m a t e r i a l
misrepresentations?
We first determine whether the
policy amount increase was void as a
matter of law. If so, we shall affirm the
District Court’s summary judgment in
favor of MetLife on the Justofins’ breach
of contract claim.
To void an insurance policy under
the law of Pennsylvania,8 the insurer has
6It is not clear from the record when Dr.
Justofin started prescribing Prednisone and
when he stopped. He recalled that the
prescription began sometime in 1994 or
the beginning of 1995 and ended sometime
between 1997 and 1998.
7MetLife does not claim, however, that
Loretta’s death was in any way related to
her arthritic condition or the medication
for that condition.
8The parties agree that the substantive
law of Pennsylvania applies.

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the burden to prove that: (1) the insured
made a false representation; (2) the insured
knew the representation was false when it
was made or the insured made the
representation in bad faith; and (3) the
representation was material to the risk
being insured. Coolspring Stone Supply,
Inc. v Am. States Life Ins. Co., 10 F.3d
144, 148 (3d Cir. 1993) (citing Shafer v.
John Hancock M ut. Life Ins. Co., 189 A.2d
234, 236 (Pa. 1963)). The insurer has the
burden to prove all three elements by clear
and convincing evidence. Batka v. Liberty
Mut. Fire Ins. Co., 704 F.2d 684, 687 (3d
Cir. 1983) (“Pennsylvania requires that an
insurer establish the defense of fraud in the
application by ‘clear, precise and
indubitable’ evidence . . . [and] that the
factfinder be satisfied of the elements of
the defense by clear and convincing
evidence.”) (citations omitted).
This heightened burden of proof
should be taken into account in ruling on
summary judgment. Anderson, 477 U.S. at
255 (“[T]he determination of whether a
given factual dispute requires submission
to a jury must be guided by the substantive
evidentiary standards that apply to the
case.”). Consequently, where the clear and
convincing evidence standard applies, the
trial judge must inquire whether the
evidence presented is such that a jury
applying that evidentiary standard could
find only for one side. In this case, if the
evidence in the record reasonably supports
the inescapable conclusion that MetLife
has shown all three elements to void the
policy by clear and convincing evidence,
we shall affirm the summary judgment.
But if the evidence is such that a
reasonable jury could find that MetLife
has not shown all the elements by clear
and convincing evidence, we shall reverse.
(a) Did Loretta make false
representations?
In this context, we first decide
whether a rational jury must find that
MetLife has shown that Loretta made
false representations. The District Court
found that her failure to list Dr. Justofin’s
treatment, along with his prescription of
Prednisone, in her 1999 application so
qualified.
In Penns y lv a n i a , a f alse
representation includes omission of an
insured’s medical information. See
Grimes v. Prudential Ins. Co. of Am., 585
A.2d 29, 31-32 (Pa. Super. Ct. 1991)
(using the term “a misstatement of fact” to
refer to an insured’s failure to disclose
fully her medical history). The Justofins
correctly point out that their mother indeed
disclosed in her initial 1994 application
that Dr. Justofin was her personal
physician.9 But Loretta failed to inform
MetLife about her son’s prescription of
Prednisone. Although the Justofins claim
that Loretta disclosed that she took
Prednisone for her arthritis, the record
9We agree with the Justofins that the
1994 and 1999 applications must be read
together for the purpose of this litigation
because the 1999 application was
completed only for the purpose of
increasing the face amount of the 1994
policy.

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shows that she listed only her self-
medication of Prednisone in 1969 but not
her more recent use of the drug between
1994 and 1998. Because there is no
evidence to contradict that Loretta failed to
disclose this information, no genuine
dispute exists as to whether her
representations were false.
(b) Did Loretta know that
her representations were false or did she
make them in bad faith?
Next, MetLife must show that
Loretta knew her representations were
false or she made them in bad faith. While
both involve state of mind, our discussion
focuses primarily on bad faith, which was
also the focus of the District Court.
The Justofins assert that a genuine
issue of material fact exists whether
Loretta’s omissions were innocent,
inadvertent mistakes rather than bad faith
misrepresentations. If so, the District
Court erred in determining Loretta’s bad
faith as a matter of law.
MetLife argues that we should
adopt the summary judgment standard that
Pennsylvania courts apply to insurance
fraud cases. It contends that this case falls
into one of the rare instances in which
Pennsylvania courts would infer bad faith
as a matter of law when considering
summary judgment, and therefore we must
also do so. We disagree for the following
reasons.
A federal court sitting in diversity
jurisdiction follows a Federal Rule of Civil
Procedure when one of the Federal Rules
is controlling the point in dispute. Hanna
v. Plumer, 380 U.S. 460, 473-74 (1965).
When “the [Federal] Rule speaks to the
point in dispute and is valid, it is
controlling,” and we need not pay any
regard to state provisions, regardless
whether they are in conflict with the
Federal Rule. 19 Charles Alan Wright,
Arthur R. Miller, & Edward H. Cooper,
Federal Practice and Procedure § 4508 (2d
ed. 1996). Only if there is no Federal Rule
covering the point in dispute, or the scope
of the Federal Rule is not sufficiently
broad to control the issue before us, do we
ask whether to apply the state law. Walker
v. Armco Steel Corp., 446 U.S. 740, 750-
53 (1980); see also McEwen v. Delta Air
Lines, Inc., 919 F.2d 58, 60 (7th Cir.
1990) (“Only when the federal rules are
silent need the federal court ask whether to
use state rules as templates.” (citing
Walker)). Even then, a federal court
“must apply the federal rule within its
sphere of coverage.” Wright, Miller &
Cooper, supra, § 4508.
Rule 56(c) directly speaks to and
thus controls the process pertaining to
Loretta’s intent in this case. MetLife in
fact concedes that Rule 56(c) is
sufficiently broad enough to cover the
point in dispute. Appellee’s Letter Brief at
6. Nevertheless, it argues that we are
compelled to adopt the Pennsylvania law
because, it claims, there is no conflict
between the federal and state law in this
case. Contrary to MetLife’s argument,
however, when a Federal Rule is clearly
applicable (as is the case here), the
absence of conflicting state law is all the
more reason to adopt the controlling

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Federal Rule. Walker, 446 U.S. at 747.
Accordingly, by applying Pennsylvania’s
substantive law, we do not impress a
different procedural requirement on Rule
56.10
Generally an insured’s state of mind
is an issue of fact for the jury. Coolspring,
10 F.3d at 148. The issue of intent is
“particularly inappropriate for resolution
by summary judgment” because evaluating
10In contending that Pennsylvania law
compels us to find bad faith as a matter of
law, the dissent relies on a Pennsylvania
Supreme Court case from 1941 that
entered judgment for the insurance
company notwithstanding a contrary
verdict. Freedman v. Mutual Life Ins. Co.
of New York, 21 A.2d 81 (Pa. 1941). We
note that we would still reverse the District
Court on this issue even under Freedman.
There, the insured flatly denied having
consulted any physician or having had any
kind of treatment for any ailment in his
insurance application form. Id. at 83. To
the contrary, the insured consulted or
visited five physicians more than twenty
times over the period. Id. He also
complained of pains in his chest, a nervous
disorder, and dizziness to his physician,
was prescribed a heart stimulant, and had
his heart examined by three different
physicians (all of whom spotted heart
irregularities). Id. The only (and
decidedly weak) evidence the plaintiff
offered in rebuttal was the testimony of the
insured’s secretary that she thought he was
in good health and had no knowledge of
his visits to physicians. Id. The Court
concluded that, under the circumstances,
“[t]he only reasonable assumption that can
be drawn . . . is that the insured knowingly
and fraudulently gave false answers.” Id.
at 85. We believe Freedman’s finding of
bad faith as a matter of law must be
confined to the cases where “the insured
[falsely] denies in his answer that any
physician has been consulted, or any
medical or surgical treatment has been
received during the period of inquiry.” Id.
at 84. In this case, Loretta did inform
MetLife that: (a) she had arthritis; (b) Dr.
Justofin treated her for this condition at
some point; (c) she had surgery on her foot
for arthritis; (d) she suffered noticeable
hand swelling because of her arthritis; and
(e) she tried different types of drugs to
alleviate this ailment. Whether Loretta’s
failure to provide further details (such as
the use of a particular drug) establishes her
bad faith is an issue for the jury.
Moreover, we do not believe that our
Court in Burket v. Equitable Life
Assurance Society of America, 287 F.3d
293 (3d Cir. 2002), adopted a rule that
infers bad faith as a matter of law under
Freedman. The Burket panel merely cited
the dicta portion of Grimes, a
Pennsylvania Superior Court case.
Though the Court in Grimes referred to
Freedman, it did not deem Freedman to
apply to the facts in Grimes, where the
insured had disclosed her medical history
but omitted material facts. 585 A.2d at 33.
Grimes therefore held that the insured’s
intent and bad faith were for a jury to
decide. Id.

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state of mind often requires the drawing of
inferences from the conduct of parties
about which reasonable persons might
differ. Riehl v. Travelers Ins. Co., 772
F.2d 19, 24 (3d Cir. 1985) (citing Ness v.
Marshall, 660 F.2d 517, 519 (3d Cir.
1981)).
Contrary to the District Co urt’s
finding, we are not satisfied that Dr.
Justofin’s testimony and Loretta’s answers
in her policy applications incontrovertibly
established her bad faith. Dr. Justofin
merely testified that she suffered from
arthritis of an unknown type, which she
disclosed. The testimony also showed that
Loretta saw her son on a weekly basis for
a few years and he prescribed Prednisone
for her during that period. She did not
disclose this information in her 1999
application. With respect to Dr. Justofin’s
treatment, the District Court noted
Loretta’s disclosure of Dr. Justofin’s
treatment of her arthritis in her initial 1994
application. This shows, the Court
concluded, that Loretta in bad faith did not
disclose Dr. Justofin’s treatment in the
1999 application. The District Court also
referred to Loretta’s omission of Dr.
Justofin’s prescription of Prednisone and
contrasted it with her disclosure of taking
self-medicated Prednisone from many
years before.
It is possible that a jury could find
it suspicious that Loretta somehow thought
it unnecessary to reveal this information.
But we do not believe that the only
reasonable inference from this evidence is
that Loretta must have had (or, at least,
must have believed that she had)
rheumatoid arthritis and in bad faith
concealed this information from MetLife
by omitting her son’s treatment visits and
prescription of Prednisone. As this case
came to us on summary judgment, all
permissible inferences are to be drawn in
the Justofins’ favor. Anderson, 477 U.S.
at 255. A jury might conclude that Loretta
did not think that her son’s casual visits
were so important to report in her new
application in great detail, especially when
she had already disclosed that he was her
personal physician and treating her for
arthritis in her initial application, and when
he had discontinued his weekly visits a
year or two before the time of her new
application. Furthermore, a jury might
determine that Loretta not only was
unaware of the type of arthritis she was
suffering but also believed that further
detail on the application, such as taking a
particular drug, was unnecessary when she
already stated that she had arthritis that
was treated, inter alia, by a surgery.
We again emphasize that MetLife
has the burden to prove Loretta’s state of
mind, a difficult task nearly always and
especially when she is dead. In the context
of this case, Loretta’s knowledge of
misrepresentations and bad faith may not
be inferred as a matter of law, as they are
genuine issues of material fact to be
decided by a jury.
( c ) W e r e t h e
misrepresentations material?
The third issue we consider is
whether the information Loretta failed to
disclose was material. Information is
material if it would have influenced the

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judgment of the insurer in making the
contract or in fixing a premium. Piccinini
v. Teachers Protective Mut. Life Ins. Co.,
463 A.2d 1017, 1024 (Pa. Super. Ct.
1983). The District Court found that
Loretta was treated for rheumatoid arthritis
and that as a matter of law the information
was material since MetLife’s guidelines
showed that rheumatoid arthritis, a more
serious type of arthritis than osteoarthritis,
was an important factor in determining the
insurance risk. But it is not at all obvious
from the record that MetLife would have
cancelled the policy (or even demanded a
higher premium) had it known that Dr.
Justofin was prescribing Prednisone. This
is because MetLife adjusts its premiums
based on the severity of an insured’s
rheumatoid arthritis, not the type of
prescription drugs involved. MetLife
argues that had Loretta disclosed her use
of Prednisone for either moderate or
severe rheumatoid arthritis, there could
have been a decline of the increase in
coverage. The record before us, however,
does not clearly establish that Loretta even
had rheumatoid arthritis or that her use of
Prednisone was to treat her presumably
rheumatoid condition.11 Therefore, a jury
must determine whether the undisclosed
information was material.
2. Did MetLife waive its right to
contest the validity of the amended
policy by failing to investigate?
We do not agree with the Justofins,
however, that MetLife waived its right to
contest the validity of the amended policy
by failing to investigate. True, “the law of
Pennsylvania is . . . that when a policy is
issued on an application containing an
ambiguous, unresponsive or incomplete
answer[,] the insurer waives the right to
assert the falseness or materiality of the
question and answer.” Franklin Life Ins.
Co. v. Bieniek, 312 F.2d 365, 373 (3d Cir.
1962). From this, the Justofins argue that
when their mother mentioned that she had
an “unknown type arthritis,” her answer
was ambiguous on its face and, therefore,
MetLife should have investigated further.
We need not decide here whether
“unknown type arthritis” was ambiguous
on its face for, even if so, an insurer
waives only the right to contest the validity
of those particular responses while
retaining the right to contest the validity of
any other misrepresentations (such as, in
this case, Loretta’s omission of her son’s
treatment and drug prescription). Id. at
375.
B. Bad Faith Claim
The Justofins argue that finding the
amended policy void should not have
resulted in the summary disposition of
their bad faith claim against MetLife.
Case law treats contract and bad faith
claims as separate in insurance cases.
Margolies v. State Farm Fire & Cas. Co.,
810 F. Supp. 637, 641-42 (E.D. Pa. 1992)
(rejecting the insurer’s contention that bad
11Again we emphasize that no record
evidence indicates that Loretta’s death was
related to any form of arthritic condition or
the medication for it. Indeed, as noted
above, MetLife initially asserted that
Loretta used Prednisone to treat her Lupus.

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faith assertion was contingent to a contract
claim because the bad faith claim was
essentially a claim on the policy itself).12
The Justofins have not pointed to much (if
any) evidence in support of their bad faith
claim. But because the claim survived the
first summary judgment motion, the
District Court should have given a reason
why it failed the second time. On remand,
the District Court should treat the bad faith
claim against MetLife separately from the
contract claim, though we note that we
voice no opinion whether the bad faith
claim should yet again survive summary
judgment.
C. Leave to Amend MetLife’s Pleading
The Justofins argue that the District
Court abused its discretion when it granted
MetLife leave to amend its pleading to add
a counterclaim. See Fed. R. Civ. P.
15(a).13 They assert that the District Court
should have denied the amendment
because MetLife’s claims are meritless and
in bad faith. We disagree. First, we have
concluded that the merit of the parties’
claims relating to the policy amendment
should be decided by a jury. Moreover,
the case the Justofins rely on, Heyl &
Patterson Int’l, Inc. v. F.D. Rich Housing
of the Virgin Islands, Inc., 663 F.2d 419
(3d Cir. 1981), does not help their
position.
[L]eave to amend “shall be
freely given when justice so
requires”; this mandate is to
be heeded . . . . Of course,
the grant or denial of an
opportunity to amend is
within the discretion of the
District Court, but outright
refusal to grant the leave
without an y justifying
reason appearing for the
denial is not an exercise of
discretion; it is merely abuse
of that discretion and
inconsistent with the spirit
of the Federal Rules. The
trial court’s discretion under
Rule 15, however, must be
tempered by considerations
of prejudice to the non-
moving party, for undue
prejudice is “the touchstone
for the denial of leave to
amend.” In the absence of
s u b s t a n t i a l o r u n d u e
prejudice, denial must be
grounded in bad faith or
dilatory motives, truly
12Although Pennsylvania’s statute under
which the plaintiff in Margolies brought a
bad faith claim was later preempted, that
does not change that a bad faith claim is a
separate and independent cause of action.
13 The Rule provides:
A party may amend the party’s pleading
once as a matter of course at any time
before a responsive pleading is served . . .
. Otherwise a party may amend the party’s
pleading only by leave of court or by
written consent of the adverse party; and
leave shall be freely given when justice so
requires.

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u n d u e o r
unexplained delay,
repeated failure to
cure deficiency by
a m e n d m e n t s
previously allowed
o r f u t i l i t y o f
amendment.
Id. at 425 (citations omitted). In this case
the Justofins do not show that they are
unduly prejudiced by the District Court’s
grant of the amendment. Hence the
District Court did not abuse its discretion
in doing so.
D. Motions for Sanctions and Additional
Discovery
The Justofins also argue that the
District Court abused its discretion when it
did not rule on their motions for sanctions
and additional discovery before it entered
a summary judgment. We leave to the
District Court’s discretion to address them
on remand.
IV. Conclusion
Contrary to the decision of the
District Court, we conclude that the 1999
amendment to Loretta Justofin’s life
insurance policy was not void as a matter
of law, as it is for a jury to decide whether
the misrepresentations in the application
for the policy amendment were made
knowingly or in bad faith and whether they
were material. As to the other issues
appealed: MetLife did not waive its right
to contest the amended policy’s validity by
failing to investigate Loretta’s statements
pertaining to her arthritis; the District
Court, while it may have good reasons to
deny summarily the Justofins’ claim of bad
faith against Metlife, needs to set out these
reasons; the District Court did not abuse its
discretion in granting MetLife’s motion to
amend its pleadings to add a counterclaim;
and, on remand, the District Court retains
discretion to address the Justofins’
allegations of discovery abuse and motions
for sanctions and additional discovery. In
this context, we vacate the District Court’s
grant of summary judgment and remand
for further proceedings consistent with this
opinion.

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12
Justofin v. Metropolitan Life Insurance
Company, No. 02-4264
NYGAARD, J., dissenting.
I believe that Pennsylvania’s bad
faith inference, as explained in Freedman
v. Mut. Life Ins. Co. of N.Y., 21 A.2d 81,
84 (Pa. 1941), is not in conflict with Rule
56 of the Federal Rules of Civil Procedure
and, therefore, should be applied by this
Court to analyze MetLife’s motion for
summary judgment. Under that analysis, I
believe Loretta Justofin’s failure to
disclose her weekly medical examinations
with her son and the Prednisone
prescriptions she received as a result of
those examinations were ma terial
omissions from which bad faith must be
inferred. Accordingly, I do not believe the
District Court erred by granting MetLife’s
motion for summary judgment on the
Appellants’ breach of contract claim, and
so dissent from the majority on this point.
Pennsylvania courts will infer bad
faith as a matter of law when an insured
fails, in the face of a direct and pointed
question, to disclose medical treatment that
a person of reasonable intelligence could
not have forgotten. Id.; Grimes v.
Prudential Ins. Co. of Am., 585 A.2d 29,
31-33 (Pa. Super. Ct. 1991) (applying this
bad faith inference in the summary
judgment context). The majority,
however, does not apply the inference and,
instead, decides this issue under Rule
56(c), regardless whether Pennsylvania
courts would infer in certain instances bad
faith as a matter of law when considering
summary judgment. I disagree.
Federal courts must apply the
properly enacted Federal Rules of Civil
Procedure in place of any state rule that
directly collides with those rules.
Chamberlain v. Giampapa, 210 F.3d 154,
159 (3d Cir. 2000) (citing Hanna v.
Plumer, 380 U.S. 460, 470-74 (1965)). I
do not believe that Pennsylvania’s bad
faith inference directly collides with Rule
56(c). In Anderson v. Liberty Lobby, Inc.,
the Supreme Court stated that under Rule
56(c), “the substantive law will identify
which facts are material.” 477 U.S. 242,
248 (1986). Further, “only disputes over
facts that might affect the outcome of the
suit under the governing law will properly
preclude the entry of summary judgment.”
Id. As the majority acknowledges, there is
no dispute that Pennsylvania’s substantive
law applies to this case. Under Anderson,
I see no conflict between Pennsylvania’s
bad faith inference and Rule 56(c);
Pennsylvania’s law simply identifies what
is and is not material under the Federal
Rule. Specifically, if Loretta Justofin
failed to disclose medical treatment on her
insurance application that “a person of
ordinary intelligence could not have
forgotten,” then facts about whether or not
she actually knew about that treatment or
actually engaged in bad faith conduct are
immaterial, because judgment can be
entered in favor of MetLife on this issue
even in the face of a contrary conclusion
by the jury. Freedman, 21 A.2d at 84-85

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13
(affirming the trial court’s decision to set
aside a jury verdict in favor of the plaintiff
where the uncontradicted evidence
established that the plaintiff’s history of
medical treatments was such that no
person of ordinary intelligence could have
forgotten those treatments).
We have recently applied this rule
in a case similar to this case. In Burkert v.
Equitable Life Assurance Soc’y of Am.,
287 F.3d 293, 297-98 (3d Cir. 2002), we
had to determine whether summary
judgment was properly entered against an
insured who failed to fully disclose on his
insurance application the extent of his drug
abuse and related treatment. We held that
the District Court acted appropriately by
“ n o t [ i n g ] t h a t c o u r t s a p p l y i n g
Pennsylvania law have routinely held that
misrepresentations regarding alcohol abuse
are deemed to be made in bad faith as a
matter of law and extend[ing] this holding
to include misrepresentations regarding
drug use.” Id. We cited Grimes, among
other cases, for the proposition that fraud
can be properly inferred in these types of
situations. Id. at 298.
I see no material difference between
Pennsylvania’s inference of bad faith for
failing to disclose alcohol abuse and its
same inference for failing to disclose
s u b s t a n ti a l m e d i c a l t r e a t m e n t .
Accordingly, based on Burkert and
Anderson, I believe the District Court
properly applied Pennsylvania’s bad faith
inference.
I also believe the District Court
properly found the medical treatment
omitted by Loretta Justofin was of such a
nature that bad faith was properly inferred.
It is undisputed that she did not disclose on
either of the rele vant insurance
applications that from 1994 until some
point in 1998 she was examined by her
son, Dr. Justofin, on a weekly basis and
that, as part of those examinations, Dr.
Justofin prescribed Prednisone to treat her
arthritis.
There is no question that for
between three and four years Dr. Justofin
examined Loretta Justofin on a weekly
basis and treated her arthritis. He began
that treatment with over-the-counter drugs
and then switched to the prescription drug
Voltran. Finally, he prescribed Prednisone
to treat what he believed to be a
combination of osteoarthritis and
rheumatoid arthritis. In 1994, when
Loretta Justofin initially applied for
insurance with MetLife, she indicated that
she was being seen by her son and was
taking Voltran. However, on her change
of insurance application, she never
indicated that she continued to see her son
after 1994 and that he changed her
treatment to Prednisone.14 Loretta
Justofin was still taking Prednisone when
14It should also be noted that the record
shows that Loretta Justofin was familiar
with Prednisone because she had self-
medicated with it in 1969 to treat her
arthritis.

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14
she completed this change of insurance
application.
The question that must be asked in
order to determine whether an inference of
bad faith arises from Loretta Justofin’s
failure to disclose is whether “a person of
ordinary intelligence could not have
forgotten these [treatments] in answering
a direct and pointed question in an
application for insurance.” Freedman, 21
A.2d at 84. Based on the frequency of Dr.
Justofin’s examinations and the fact that
Loretta Justofin took Prednisone for at
least three years to treat a symptomatic
disease, I do not believe a person of
ordinary intelligence could have forgotten
these treatments when filling out the
relevant insurance application.
This omission was also material.
The unrebutted affidavit of a MetLife
representative establishes that Dr.
Justofin’s treatment of his mother with a
steroid prescription drug for arthritis
would result in MetLife increasing her
premium to take into account moderate
rheumatoid arthritis. See New York Life
Ins. Co. v. Johnson, 923 F.2d 279, 281 (3d
Cir. 1991) (“A misrepresented fact is
material if being disclosed to the insurer it
would have caused it . . . to demand a
higher premium.”). This statement is
supported by MetLife’s underwriting
guidelines.
For these reasons I would not
reverse the District Court’s grant of
summary judgment in favor of MetLife
and respectfully dissent on this point. I
agree with the majority on the remaining
issues addressed in its opinion.

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