CIPRIANI v. SUN LIFE INS. CO. OF AMERICA

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Docket Number

No. 84-1210.

Attorney(S)

Murray S. Levin, Pepper, Hamilton Scheetz, Philadelphia, Pa., for appellant. Richard C. Osterhout, Trevose, Pa., for Cipriani.

Judges

Aloyisus Leon Higginbotham

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Smart Summary

Factual and Procedural Background

Marie Cipriani filed a complaint against Sun Life Insurance Company of America ("Sun Life") alleging she was the designated beneficiary on her ex-husband Edward Cipriani's life insurance policy and thus entitled to the proceeds. The policy, issued in 1976, originally named Marie as beneficiary. After Edward and Marie divorced, Edward allegedly changed the beneficiary to his mother, Margaret Cipriani. However, the change of beneficiary form was never recorded at Sun Life’s Home Office and was lost. Following Edward’s death in 1982, Sun Life initially recognized Marie as beneficiary but later paid the proceeds to Margaret based on information from its Cornwells Heights office. Marie sued Sun Life, and the case was removed to the federal district court. The district court found in favor of Marie Cipriani, excluding certain testimony from Sun Life under the Pennsylvania Dead Man's Act and concluding the insured had not substantially complied with the policy’s change of beneficiary requirements. Sun Life appealed this decision.

Legal Issues Presented

Whether the insured, Edward Cipriani, substantially complied with the policy provisions to change the beneficiary from Marie Cipriani to Margaret Cipriani despite the absence of formal recording by Sun Life.
Whether the district court erred in excluding testimony offered by Sun Life under the Pennsylvania Dead Man's Act, 42 PA. CONS. STAT. § 5930.

Arguments of the Parties

Appellant's Arguments (Sun Life Insurance Company of America)

Edward Cipriani substantially complied with the change of beneficiary provision by completing and signing the proper form, which was witnessed and submitted to Sun Life.
Although the original form was lost, testimony from Sun Life employees familiar with the insured’s signature and the change process, as well as their prior reports, corroborate the change.
Sun Life contends the insured’s intent and actions amounted to substantial compliance even though the change was never recorded at the Home Office due to internal error.
Sun Life argues the district court improperly excluded testimony under the Pennsylvania Dead Man's Act, as the statute does not bar testimony from agents or employees of a surviving party.

Appellee's Arguments (Marie Cipriani)

The opinion does not contain a detailed account of Marie Cipriani’s specific legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Provident Mutual Life Insurance Co. v. Ehrlich, 508 F.2d 129 (3d Cir. 1975)	Equitable doctrine of substantial compliance with insurance policy change provisions.	Used to establish that Pennsylvania courts give effect to an insured’s intent to change beneficiary when there is substantial compliance.
Gannon v. Gannon, 88 Pa. Super. 239 (1926)	Doctrine of substantial compliance.	Supports the principle that reasonable efforts to comply with policy provisions suffice.
Skamoricus v. Konagiskie, 318 Pa. 128, 177 A. 809 (1935)	Substantial compliance with insurance policy requirements.	Reinforces the court’s equitable approach to insured’s intent.
Ruggeri v. Griffiths, 315 Pa. 455, 173 A. 396 (1934)	Substantial compliance doctrine.	Supports giving effect to insured’s clear intent despite minor procedural defects.
Riley v. Wirth, 313 Pa. 362, 169 A. 139 (1933)	Substantial compliance with insurance policy changes.	Used as precedent for equitable enforcement of beneficiary changes.
Prudential Insurance Company of America v. Bannister, 448 F. Supp. 807 (W.D. Pa. 1978)	Essential inquiry is whether insured intended to execute the change.	Clarifies focus on insured’s intent in substantial compliance analysis.
Provident Indemnity Life Insurance Company v. Durbin, 541 F. Supp. 4 (E.D. Pa. 1981)	Equitable power to effectuate insured’s manifested intent.	Supports court’s holding that equitable principles override strict procedural defects.
Visscher v. O'Brien, 274 Pa. Super. 375, 418 A.2d 454 (1980)	Purpose of Pennsylvania Dead Man’s Act to prevent adverse testimony against deceased parties.	Used to explain the scope and intent of the statute.
Gritz v. Gritz, 336 Pa. 161, 7 A.2d 1 (1939)	Interpretation of Dead Man’s Act regarding representation of interests.	Supports holding that Marie Cipriani did not represent the deceased’s interest under the statute.
Grasso v. John Hancock Mutual Life Insurance Company, 206 Pa. Super. 562, 214 A.2d 261 (1965)	Application of Dead Man’s Act.	Supports exclusion of the statute in this context.
Sargeant v. National Life Insurance Company, 189 Pa. 341, 41 A. 351 (1899)	Agents and employees of surviving parties are competent witnesses under Dead Man’s Act.	Supports reversal of district court’s exclusion of testimony from Sun Life employees.

Court's Reasoning and Analysis

The court analyzed the evidence under Pennsylvania’s equitable doctrine of substantial compliance, which allows a beneficiary change to be effective if the insured made every reasonable effort to comply with policy requirements, even if strict procedural steps were not completed. The insured, Edward Cipriani, submitted a written change of beneficiary form through his insurance agent, which was signed and witnessed. Although the form was never recorded at Sun Life’s Home Office due to administrative error and was lost, Sun Life’s employees corroborated the change through their testimony and prior reports. The district court’s concern about witness credibility was noted, but the appellate court found the corroboration sufficient.

The court rejected the district court’s conclusion that the evidence was insufficient for substantial compliance, emphasizing that the insured’s intent and attempted compliance were clear and that Sun Life’s failure to record the change was outside the insured’s control. The court held that equitable principles require giving effect to the insured’s manifested intent.

Regarding the exclusion of testimony under the Pennsylvania Dead Man’s Act, the court explained that the statute prohibits adverse testimony by surviving parties but does not bar testimony from agents or employees of a surviving party. Since Marie Cipriani did not represent the deceased’s interest, and the witnesses were Sun Life employees, the district court erred in excluding their testimony. The appellate court remanded the case for further proceedings consistent with this ruling and left other evidentiary questions to the district court’s discretion.

Holding and Implications

The court REVERSED the district court’s judgment in favor of Marie Cipriani and remanded the case for further proceedings consistent with the opinion.

The direct effect of this decision is to permit Sun Life to present evidence of the insured’s substantial compliance with the beneficiary change requirements and to allow testimony previously excluded under the Pennsylvania Dead Man’s Act. The opinion does not establish new precedent beyond clarifying the application of substantial compliance and evidentiary rules in this context.

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CIPRIANI, MARIE v. SUN LIFE INSURANCE CO. OF AMERICA

OPINION OF THE COURT

A. LEON HIGGINBOTHAM, Jr., Circuit Judge.

Sun Life Insurance Company of America ("Sun Life") appeals from the district judge's Opinion and Order, finding in favor of plaintiff, Marie Cipriani, and entering judgment against defendant and third-party plaintiff, Sun Life. 581 F. Supp. 1222. The district judge excluded certain evidence offered by Sun Life under the Pennsylvania Dead Man's Act, 42 PA. CONS. STAT. § 5930 (1978), and found that the admissible evidence in this case did not show that the insured decedent, Edward Cipriani, had substantially complied with the requirements to change the beneficiary on his insurance policy, No. D764120, from his former wife, Marie Cipriani, to his mother, Margaret Cipriani. We will reverse the district court and remand for proceedings consistent with this opinion.

On July 13, 1983, Marie Cipriani filed a complaint in equity and in assumpsit against Sun Life in the Court of Common Pleas, Bucks County, Pennsylvania. She alleged that she was the designated beneficiary on her ex-husband's insurance policy, No. D764120, and that Sun Life was therefore obligated to pay her the proceeds from the policy. On the basis of diversity of citizenship, the case was removed to the United States District Court for the Eastern District of Pennsylvania. Sun Life filed a third-party complaint against Margaret Cipriani, to whom it had paid the policy proceeds, on October 5, 1983. The district judge bifurcated the case for trial and first heard Marie Cipriani's claim against Sun Life. At the non-jury trial, held February 13, 1984, the parties presented the following evidence.

On July 27, 1976, Sun Life issued the life insurance policy, which is in dispute here, to Edward Cipriani. He was the owner of, and insured on, the policy. He named Marie Cipriani, his wife at the time, as the beneficiary. Edward and Marie separated on April 6, 1980, and subsequently received a divorce. This policy was still in effect on the date Mr. Cipriani died, June 19, 1982.

The general provisions of the policy include the following:

CHANGE OF BENEFICIARY While the insured is living and while this Policy continues in force, the Owner may change the beneficiary from time to time by written notice in form satisfactory to the Company; provided, however, that when a beneficiary has been designated irrevocably such designation cannot be changed or revoked without such beneficiary's written consent. No change of beneficiary will take effect unless recorded by the Company at its Home Office. However, upon being so recorded any such change shall take effect as of the date the notice was signed, whether or not the Insured is living when the change is recorded, subject to any payment made or any action taken by the Company before such recording.

(Appendix at 120).

After Mr. Cipriani's death, Sun Life employees at its Home Office and its Cornwells Heights district office, which serviced the area where Mr. Cipriani lived, took steps to pay the proceeds of the policy to the beneficiary designated at the time of his death.

Records at the Home Office indicated that Marie Cipriani was the designated beneficiary on the policy. Although she did not file a claim with Sun Life, employees at that office notified her on August 24, September 23, and October 16 and 25, 1982, as to the status of the claim to the policy. They also issued a voucher to Marie Cipriani on January 7, 1983, for $34,589.72.

Although Sun Life issued a voucher to Marie Cipriani, she did not receive payment of the policy proceeds. As stated in the text infra, Sun Life paid the proceeds of the policy to Margaret Cipriani on January 17, 1983.

Investigations at the Cornwells Heights office, however, revealed that Mr. Cipriani had changed the beneficiary on the policy to his mother. After meeting with Mr. Cipriani in January 1982, Elwood Schneider, his insurance agent, filled out a Sun Life change of beneficiary form. The form required Mr. Cipriani's witnessed signature. Mr. Schneider left the form next door with Margaret Cipriani because Mr. Cipriani was not at home.

Two days later, Mr. Schneider, who was familiar with Mr. Cipriani's signature, picked up the signed and witnessed form and submitted it to Regina Richardson, a cashier at the Cornwells Heights office. Ms. Richardson returned the form to Mr. Schneider because it lacked Margaret Cipriani's age and her relationship to Mr. Cipriani. Mr. Schneider obtained this information and resubmitted the form. Ms. Richardson did not see the form after it was resubmitted, however, because she had received a promotion and moved back and forth between the two jobs. The change of beneficiary form was never recorded at the Home Office and apparently was lost by Sun Life. At an April, 1982 meeting, Mr. Schneider nevertheless told Mr. Cipriani and Robert Myers, General Manager of the Cornwells Heights office, that the beneficiary had been changed. Mr. Cipriani died two months later.

Upon receipt of Margaret Cipriani's claim to the policy, the Sun Life Home Office, having no record of the change, initially wrote to her attorney that Mr. Cipriani's ex-wife, and not the mother, was the designated beneficiary on the policy. After evaluating the information from the Cornwells Heights office, however, Sun Life paid the proceeds of the policy to Margaret Cipriani on January 17, 1983.

On March 14, 1984, the district judge filed an Opinion and Order, and entered a final judgment in favor of Marie Cipriani. Pursuant to the parties' stipulation, the district judge also dismissed without prejudice the third-party complaint against Margaret Cipriani on April 12, 1984. Sun Life filed a notice of appeal on April 13, 1984.

II. A.

Pennsylvania follows the equitable doctrine of "substantial compliance". Provident Mutual Life Insurance Co. v. Ehrlich, 508 F.2d 129, 132-33 (3d Cir. 1975); Gannon v. Gannon, 88 Pa. Super. 239, 243-44 (1926). Thus Pennsylvania courts will give effect to an insured's intention to change the beneficiary on an insurance policy where, even in the absence of strict compliance with the policy provisions, the insured has made every reasonable effort under the circumstances to comply with those provisions. Skamoricus v. Konagiskie, 318 Pa. 128, 177 A. 809 (1935); Ruggeri v. Griffiths, 315 Pa. 455, 173 A. 396 (1934); Riley v. Wirth, 313 Pa. 362, 169 A. 139 (1933). "The essential inquiry is whether . . . [it has been] . . . shown that the insured intended to execute a change to such an extent that effect should be given it." Prudential Insurance Company of America v. Bannister, 448 F. Supp. 807 (W.D.Pa. 1978) (citation omitted).

Sun Life contends that the evidence which it presented at trial demonstrates that Mr. Cipriani substantially complied with the change of beneficiary provision of the policy. Although Sun Life did not produce the form which Mr. Cipriani signed, the parties stipulated that Sun Life lost the form. Mr. Schneider, Ms. Richardson, and Mr. Myers also testified as to the change pursuant to FED.R.EVID. 1004(1). Mr. Cipriani used the proper Sun Life form. Mr. Schneider testified that he was familiar with Mr. Cipriani's signature and recognized it on that form. Ms. Richardson also testified that she saw the signed form naming Margaret Cipriani as the new beneficiary, but she returned it to Mr. Schneider to obtain additional information. Moreover, both Mr. Schneider and Mr. Myers testified that, in April, 1982, Mr. Schneider told Mr. Cipriani that Sun Life had made the change of beneficiaries.

Rule 1004(1) provides that evidence of the contents of a writing, other than the original, is admissible if "[a]ll originals are lost or have been destroyed, unless the proponent lost or destroyed them in bad faith".

See, FED.R.EVID. 901, which provides:

(b) By way of illustration only, and not by way of limitation, the following are examples of authentication or identification conforming with the requirements of this rule:

The district judge was somewhat concerned about the credibility of these witnesses because they were employees of Sun Life, which has a pecuniary interest in the outcome of this case. We find his concern somewhat questionable because their reports to the Sun Life Home Office, which they made during the investigation at the Cornwells Heights office to determine the designated beneficiary, and which the Home Office received prior to Sun Life's payment of the proceeds to Margaret Cipriani, corroborated their testimony at trial. (Appendix at 160-61).

In finding against Sun Life and in favor of Marie Cipriani, the district judge states "[a]ssuming, however, that Sun Life's witnesses are credible, their testimony is not sufficient to show the substantial compliance of the insured". We disagree. Strict compliance with the policy provision requires only "written notice in form satisfactory to the Company" and the change becomes effective when it is "recorded by the Company at its Home office". In this case, Mr. Cipriani gave written notice to his Sun Life agent, who later told him that the change had been made. Sun Life did not record the change at its Home Office due to an error which Mr. Cipriani had no knowledge of or control over; and Sun Life therefore did not inform him that it never acknowledged Margaret Cipriani as the new beneficiary on his policy.

Under these circumstances, Mr. Cipriani did everything possible to implement the change. "When the insured's intent and attempted compliance is clear, a court will exercise its equitable power to carry out the manifested intent and not permit that intent to be frustrated." Provident Indemnity Life Insurance Company v. Durbin, 541 F. Supp. 4, 8 (E.D.Pa. 1981). We find as a matter of law that, if the testimony of Sun Life's witnesses is deemed credible, the evidence it presented was sufficient to establish substantial compliance.

During the course of the trial, the district judge refused to admit testimony of Mr. Schneider and Mr. Myers as to Mr. Cipriani's statements and actions under the Pennsylvania Dead Man's Act, 42 PA. CONS.STAT. § 5930. This proffered testimony further demonstrates Mr. Cipriani's intent to change beneficiaries. The district judge precluded Mr. Schneider from testifying that he took steps to change the beneficiary on the policy in January, 1982, at Mr. Cipriani's request. Mr. Myers was prevented from testifying that Mr. Cipriani did not object at the April, 1982 meeting when Mr. Schneider said that Sun Life had changed the beneficiary to his mother. The district judge also refused to allow Mr. Schneider or Mr. Myers to testify that, at that meeting, Mr. Cipriani stated that he had designated Margaret Cipriani as the new beneficiary on the policy.

The Dead Man's Act provides inter alia: Except as otherwise provided in this subchapter, in any civil action or proceeding, where any party to a thing or contract in action is dead. . . . neither any surviving or remaining party to such thing or contract, nor any other person whose interest shall be adverse to the said right of such deceased . . . party, shall be a competent witness to any matter occurring before the death of said party. . . .

Thus, the purpose of this statute is to prevent adverse testimony as to transactions and communications with a deceased person to the prejudice of such person's legal representatives or heirs. Visscher v. O'Brien, 274 Pa. Super. 375, 418 A.2d 454 (1980). As the alleged beneficiary of the insurance policy here, however, Marie Cipriani does not represent any interest of Mr. Cipriani within the meaning of the statute, and the district judge should not have invoked the statute against Sun Life. Gritz v. Gritz, 336 Pa. 161, 7 A.2d 1 (1939); Grasso v. John Hancock Mutual Life Insurance Company, 206 Pa. Super. 562, 214 A.2d 261 (1965). Moreover, agents and employees of a surviving party to a transaction are not incompetent to testify under the statute. Sargeant v. National Life Insurance Company, 189 Pa. 341, 41 A. 351 (1899).

The act does not exclude agents, but parties, — surviving parties where the other party is dead. But the agent is not a party to the thing or contract in action. It is the principal for whom the agent acted who is the surviving party to the contract.

Id. at 345, 41 A. at 35. We therefore hold that the district judge erred in excluding the above proffered testimony.

We express no opinion as to whether the evidence excluded under the Pennsylvania Dead Man's Act is otherwise admissible. Any other evidentiary questions that may be raised are for the district court to answer in the first instance.

CONCLUSION

For the reasons stated in this opinion we will reverse the district court and remand for proceedings consistent with this opinion.