Full opinion text
OPINION OF THE COURT BECKER, Circuit Judge. These consolidated appeals in a diversity case involving Pennsylvania law arise from a bitter dispute concerning the obligations of Presbyterian Medical Center of Philadelphia (“Presbyterian”) and Monarch Life Insurance Corporation (“Monarch”) to pay disability benefits to Dr. Terry Langer. Presbyterian had lured Langer, a leading cardiologist, away from the Hospital of the University of Pennsylvania (HUP) with a lucrative contractual package, an important part of which, in view of Langer’s medical history, was disability benefits. Although Langer and Presbyterian had sought disability insurance from Monarch, Langer was stricken with a disabling stroke before Monarch acted with finality on Langer’s application, and Monarch subsequently denied coverage. Langer sued both Monarch and Presbyterian for disability payments, but subsequently settled with Monarch under a loan receipt agreement entitling Monarch to reimbursement if Langer obtains a sufficient recovery from Presbyterian. After that settlement, Presbyterian claimed, in a companion case, that if it is found liable to Langer, then Monarch is liable over to it under various equitable and legal theories. Presbyterian appeals from a judgment of the district court for the Eastern District of Pennsylvania entered on a jury verdict finding Presbyterian contractually liable to pay Langer disability benefits. Presbyterian contends, among other things, that the district court erred in taking from the jury an important defense, namely that Presbyterian satisfied all or most of its obligations to Langer when Langer obtained, and Presbyterian paid for, disability insurance from Monarch. Presbyterian also asserts that the district court erred in granting summary judgment to Monarch in the companion case. The district court there held that Presbyterian’s responses to requests for admissions under Federal Rule of Civil Procedure 36 destroyed the predicate for two of the hospital’s claims against Monarch, that one claim was factually insupportable, and that another was moot in light of the jury verdict. Langer and Monarch have also appealed. Langer contends that the district court erred in not molding the jury verdict to award him future disability benefits. Monarch asserts that the district court erred in failing to award it sanctions under Federal Rule of Civil Procedure 11 against Presbyterian’s counsel. According to Monarch, the district court recognized that Presbyterian’s counsel violated Rule 11 by filing procedurally improper cross-claims that resulted in a later-lifted default judgment against Monarch, but the court abused its discretion by not assessing any sanctions. We conclude that the district court erred in taking the issue of Langer’s insurance with Monarch, and Presbyterian’s theory that it was, at most, a “back-up insurer,” from the jury. We will therefore vacate the judgment for Langer and remand for a new trial. We also hold that Presbyterian’s judicial admissions did not justify the district court’s award of summary judgment to Monarch against Presbyterian. We will therefore vacate the judgment for Monarch and remand for further proceedings on all but one of Presbyterian’s liability-over claims. Finally, we conclude that the district court did not abuse its discretion in its handling of the Rule 11 motion, and will affirm its ruling on that issue. In view of these dispositions, we need not reach some of the subsidiary issues raised in these appeals, although we do dispose of a number that are likely to recur on remand. I. FACTS AND PROCEDURAL HISTORY In the spring of 1985, Presbyterian’s Chief of Medicine, Dr. Richard H. Helfant, approached Langer, a 45-year-old cardiologist with a national reputation, and suggested that Langer leave his staff position at the Hospital of the University of Pennsylvania (“HUP”) and bring his lucrative clinical practice to nearby Presbyterian (then known as the Presbyterian-University of Pennsylvania Medical Center). Lan-ger had suffered a heart attack in the summer of 1983, and although he had recovered by 1985, he remained particularly concerned about his disability benefits. Accordingly, disability benefits were an important part of the offering put together by Robert Bauer, Presbyterian’s Vice President for Finance. By July 1985, Presbyterian had agreed in principle to double the $135,000 annual disability coverage that Langer was then receiving under two policies at HUP. • That offer appeared in letters dated July 23 and July 30, 1985, and in an attachment to an August 14, 1985 letter that outlined the benefits that Presbyterian would provide Langer. The August 14, 1985 offer letter was the most important because it served as the basis for discussions at an August 15, 1985 meeting at which Langer and Presbyterian tried to hammer out a final agreement. The relevant portion of Presbyterian’s August 14, 1985 letter read: 2. Disability Double your present coverage. We understand this will result in coverage of approximately $270,000 per year. At the August 15, 1985 meeting, however, Presbyterian’s benefits expert, Frank Raiti (of the accounting firm Coopers & Lybrand), noted that Presbyterian’s existing group disability policy would not be sufficient to provide $270,000 in annual coverage, and that structuring the benefits that way would be disadvantageous tax-wise in any event. He therefore suggested' that a better course would be for Langer to purchase disability insurance, and for Presbyterian to reimburse him for that amount plus an additional sum to cover the income taxes he would have to pay on the premium reimbursement. The parties agreed — or so they thought. Bauer recalls that at the August 15, 1985 meeting he stated that he did not want Presbyterian “to be an insurance company.” He further testified that he thought that Presbyterian was committing itself only to make premium payments, although he concedes that he never explicitly stated that if Langer was unable to obtain insurance he would be without coverage. Raiti and Langer’s lawyer, Phillip Weiss, recalled no manifestation of Bauer’s qualms, however, and Langer apparently believed that Presbyterian was unconditionally offering to provide disability benefits. At all events, in a letter dated August 21, 1985, Helfant outlined Presbyterian’s revised offer to Langer, including salary, responsibilities, title, and benefits. The benefits were listed in a special Attachment I. The provision for disability benefits was identical to that contained in the August 14, 1985 letter, except that a crucial third sentence was added. Captioned “Disability,” the paragraph read: Double your present coverage. We understand this will result in coverage of approximately $270,000 per year. We agree to “gross-up” payments to provide you with sufficient after tax dollars to purchase this coverage (the “gross-up” will be calculated on the basis of your marginal federal tax rate plus applicable state and city income taxes). On August 23, 1985, Langer accepted Presbyterian’s offer, and Attachment I became part of the contract between them. Some time in late September 1985, Hel-fant asked Robert Hardin, Administrator of Presbyterian’s Department of Medicine and Division of Cardiology, to meet with Finance Vice President Bauer to facilitate Langer’s transition to Presbyterian. Although Hardin had not been involved in the recruiting, he soon became the liason between Langer and Presbyterian. Hardin and Bauer apparently recognized that Lan-ger’s earlier heart attack might make securing-disability coverage for him a difficult task. Hardin therefore contacted an insurance agent, Gabriel Agins, who knew of Langer’s medical history and had arranged one of Langer’s existing disability policies. Hardin hoped that Agins might be able to arrange an insurance package for Langer.. Agins agreed that it might be difficult to secure coverage for Langer. Agins suggested, however, that'he might be able to arrange coverage for an amount less than $270,000 or for a short term (five years) rather than a longer term, and that in any case the coverage would probably depend on the results of a current medical examination. Agins later informed Hardin that two insurance carriers had rebuffed Agins’s inquiries on behalf of Langer, although Hardin apparently did not pass this information on to Langer. Agins eventually notified Hardin that Monarch would be willing to consider an application for long-term disability insurance, although only for a maximum annual benefit of $204,000. Langer underwent a physical examination, was reported to be an excellent risk, and signed an application for insurance from Monarch. Presbyterian thereupon sent a check to Monarch for the premium down payment, which Monarch deposited. About this time (late October 1985), Hardin and Agins discussed Langer’s application and the effect of the premium deposit, which Agins apparently described as a “binder.” Based on his conversations with Agins, Hardin thought that the premium deposit covered Langer with a temporary insurance policy until Monarch acted on the application, although Hardin does not recall whether Agins explained what the term “binder” meant. According to Langer’s original complaint, Langer believed at that time that he was covered by insurance with Monarch. On November 1, 1985, Langer formally left HUP and began working at Presbyterian. Unfortunately, on December 13, 1985, he suffered a major right parietal lobe stroke, which left him partially paralyzed on the left side. His speech and vision were impaired, and his mobility and strength were reduced. He remained hospitalized until February 1986. Although he has apparently not recovered fully, he has since resumed his medical practice. At the time that Langer suffered the stroke, his insurance application with Monarch was still pending, apparently because Monarch had not yet received a chest x-ray required for approval of the application. Agins was notified of Langer’s stroke, although the record is unclear whether those at Monarch who were to consider Langer’s application were made aware of the stroke. What is clear (and undisputed) is that in early January 1986, Agins informed Presbyterian that Monarch had rejected Lan-ger’s application. On January 15, 1986, Monarch returned the premium deposit to Langer, who deposited the check but reimbursed Presbyterian. Monarch took the position that Langer had no insurance when he was disabled, and therefore refused to pay him disability benefits. On January 20, 1986, Hardin wrote to Weiss, Langer’s lawyer, informing him that Monarch had denied Langer’s application “and therefore the disability coverage will be provided via the Medical Center itself,” commencing after a 90-day waiting period. On February 10, 1986, Hardin advised Bauer and Presbyterian’s controller, Richard Bennett, that the payments to Langer should be treated as “self insured disability payments,” in order to ensure that Lan-ger’s other disability policy would not become void. On April 15, 1986, Hardin wrote Bennett that “the guaranteed disability income to Dr. Langer (per agreement with Presbyterian) was $270,000 per year,” and that Langer was owed payments for the period beginning March 13, 1986, the expiration date of the 90-day waiting period. Two days later, Bennett wrote Langer that “[i]n accordance with our agreement dated August 21, 1985,” disability payments would commence. Presbyterian continued monthly payments from April 1986 through June 1987. During this time, Langer’s recovery had progressed to the point where he began going to the office and seeing patients on a limited basis. In March 1987, however, I. Donald Snook, Presbyterian’s President and CEO, told Langer that he considered their contract null and void because Langer was not fulfilling his duties. Snook also threatened to cut off the disability payments. The parties’ continued discussions proved unfruitful, and on June 18, 1987, Snook wrote to Langer, notifying him that unless they could reach an agreement by June 30, 1987, the Medical Center would terminate his appointment. Snook also informed Langer that Presbyterian would phase out over three months the “financial support payments” that it had been making, although it would not seek recovery of past “support payments” at that time. On June 29, 1987, Langer filed suit against Presbyterian. He claimed that Presbyterian had anticipatorily breached their contract and sought an order for continuation of the disability payments. In that lawsuit (“the Langer action”), Langer also joined Monarch as a defendant. Lan-ger alleged that Monarch’s acceptance of his insurance application and initial premium payment had created a temporary contract of insurance that covered him while Monarch was considering his application. Therefore, he claimed, Monarch had acted in bad faith by refusing to provide disability payments under the policy after proper request, and that it must begin current disability payments and make back payments. On July 17,1987, Snook wrote to Langer, stating that Langer’s employment was terminated and that Presbyterian would discontinue all payments to him, including not only the “support” payments, but also salary, Langer’s rent at the hospital, and educational benefits for his children. Additionally, Presbyterian sought repayment of a $100,000 loan and return of all disability payments made since March 15, 1986. On August 7, 1987, Presbyterian filed a counterclaim against Langer for those amounts; it did not, however, assert a cross-claim against Monarch at that time. In the interim, on July 30, 1987, Langer had amended his complaint to seek damages from Presbyterian for wrongful discharge and intentional infliction of emotional harm. An October 15, 1987 amendment added Langer's wife as a co-plaintiff and included an additional claim for loss of consortium. In November 1987, without advance notice to Presbyterian, Langer settled his claims against Monarch and moved, over Presbyterian’s objection, to dismiss his complaint against Monarch. Under the terms of the settlement, Monarch “loaned” the Langers $10,000 per month, the “loans” to continue until Langer reached age 65 or died, or the Langers obtained a judgment from or a settlement with Presbyterian. Under the settlement, the Langers would only be obligated to repay the loans out of proceeds from the recovery from Presbyterian, if any; if the recovery was worth less than $2,000,000, the Langers would owe nothing and Monarch would continue to make payments to the Langers, but in lesser amounts. Consistent with this settlement, Langer and Monarch became allies against Presbyterian in this litigation, although they hid the fact of settlement from Presbyterian during several crucial depositions of Langer in mid-November 1987, and concealed the details of the settlement from Presbyterian until February 1988. On December 7, 1987, in response to the Langer-Monarch settlement, Presbyterian filed what it styled as a “cross-claim” against Monarch for subrogation, indemnity, and breach of contract. Presbyterian did not purport to amend its recent answer and counterclaims to Langer’s amended complaint, nor did it seek leave of the court or the written consent of Langer or Monarch to file the “cross-claim.” At a status conference before the court that day, counsel for Monarch orally (and correctly) informed counsel for Presbyterian that the “cross-claims” violated the Federal Rules of Civil Procedure, although Monarch did not formally respond to them. On December 31, 1987, Presbyterian caused a default judgment to be entered against Monarch on the “cross-claims.” Only then did Monarch move to strike the “cross-claims” and to open the default. Not until March 3, 1988 did Presbyterian seek leave to amend its answer and include cross-claims. The district court addressed the Presbyterian-Monareh procedural tempest on April 5, 1988. It denied Presbyterian’s motion to amend, lifted the default, and struck the “cross-claims.” It noted that Presbyterian’s conduct “prima facie” called for Rule 11 sanctions but deferred a final ruling. On the same day, the court granted Langer’s motion to dismiss Monarch from the action pursuant to their settlement. In the meantime, on February 10, 1988, Monarch had filed a separate suit against Presbyterian. That suit (“the Monarch action”) sought a declaratory judgment that Presbyterian had no valid claims against Monarch. Presbyterian then asserted its erstwhile “cross-claims” in the Langer action as counterclaims in the Monarch action. Presbyterian essentially averred that if it was liable to Langer, Monarch was “liable over” to it under equitable principles and because Presbyterian was a third party beneficiary of the insurance contract that Langer had with Monarch. The district court consolidated the Langer and Monarch actions for discovery and trial. In June 1988, the parties filed various motions for summary judgment. On August 1, 1988, the district court ruled in the Langer action that Presbyterian was not responsible for further disability payments, although Presbyterian could not recover payments already made. The court reasoned that the contractual provision regarding disability payments unambiguously provided that Presbyterian’s only obligation was to pay Langer sufficient after-tax dollars for him to purchase insurance. The court dismissed the Monarch action as moot in light of that reasoning, but it left the other claims and counterclaims (including Langer’s claims for wrongful discharge and intentional infliction of emotional distress and Presbyterian’s counterclaim for repayment of loans) for trial. That trial resulted in a hung jury, but Langer and Presbyterian later settled those claims. As part of the district court’s January 5, 1989 order approving the settlement, however, Langer’s right to appeal the summary judgment in favor of Presbyterian on the disability payments claim was preserved. Langer appealed, and on July 6, 1989, this court reversed, concluding that the employment contract was ambiguous as to who would bear the loss if insurance coverage was not obtained. Langer v. Monarch Life Insurance Co., 879 F.2d 75 (3d Cir. 1989) (“Langer I ”). In light of the reversal in the Langer action, this court reinstated the Monarch action with instructions to consider Monarch’s pending motion for summary judgment. Discovery closed on December 15, 1989, and trial was scheduled for January 1990. Trial was delayed, however, and in the interim, on March 9,1990, the district court revisited Monarch’s pending motion for Rule 11 sanctions (including attorneys’ fees) regarding the “cross-claim” controversy. Although the court again criticized Presbyterian’s counsel for “questionable” conduct in filing a document that “probably had no legal basis under the Federal Rules of Civil Procedure” and for not rectifying the error upon notice by opposing counsel, it declined to order sanctions. The court ruled that Monarch’s attorneys’ fees were not reasonable expenses because Monarch, by moving to strike instead of “awaiting the inevitable” entry of the default judgment, could have avoided its expenses. Concluding its ruling, the court admonished the parties that “the time ha[d] come to get on to the substance of this case.” On April 24, 1990, before trial, the district court granted Monarch’s motion for summary judgment in the Monarch action, basing its ruling on various judicial admissions by Presbyterian.' Presbyterian moved for reconsideration, but the district court held that motion in abeyance. Trial in the Langer action began on. May 14, 1990, The trial, like the rest of the litigation, proved fractious. Citing Langer’s discovery defaults (particularly his failure to provide certain documents until trial and his failure identify an expert witness until the eve of trial), the district court felt it necessary to recess the trial for two weeks in the middle. Eventually the trial was completed, and on June 15, 1990, the jury returned a unanimous verdict for Langer and against Presbyterian. Specifically, the jury verdict found that the “letter agreement between Dr. Langer and Presbyterian obligated Presbyterian to pay disability income to Dr. Langer in the event he became disabled,” and that Presbyterian was “obligated to pay disability income to Dr. Lan-ger beyond the date the Dr. Langer returned to work full time.” The jury awarded Langer the full $855,000 that he sought — $270,000 per year for the period July 1987 through July 1990, plus $3,000 per month withheld during the April 1986 to June 1987 period. Because the jury awarded Langer his full request on his primary breach of contract theory, it did not reach his alternative theories based on fraud and detrimental reliance. On June 19, 1990, judgment was entered on the verdict. In an opinion dated October 31, 1990, the district court denied Presbyterian’s post-trial motions for judgment notwithstanding the verdict or for a new trial. It also granted Langer’s motion for prejudgment interest, but it denied his motion to amend the judgment or mold the verdict to declare him permanently disabled and give him the same annual benefits in the future. Finally, the court reaffirmed its summary judgment against Presbyterian in the Monarch action by denying Presbyterian’s motion for reconsideration. These appeals followed. Presbyterian appeals from the district court’s rulings in both the Langer and Monarch actions. Langer cross-appeals from the district court’s refusal to award him future damages against Presbyterian. Monarch cross-appeals from the district court’s denial of Rule 11 sanctions against Presbyterian. The district court had diversity jurisdiction under 28 U.S.C. § 1332 (1988). We have jurisdiction over the district court’s final judgments and orders under 28 U.S.C. § 1291 (1988). II. PRESBYTERIAN’S APPEAL IN THE LANGER ACTION A. Overview of the Issues In Langer I, both Presbyterian and Lan-ger argued to this court that the contract was unambiguous and that they were entitled to summary judgment. Presbyterian argued that the contract unambiguously required it to do no more than provide funds for Langer to purchase his own insurance (taking taxes into account), a duty that Presbyterian had undoubtedly fulfilled. The district court had adopted this interpretation. Langer, in contrast, contended that the contract contained Presbyterian’s unconditional promise to provide disability benefits, whether or not Langer was able to obtain insurance. On this view, Presbyterian was primarily liable to provide Langer with disability benefits, not just money to pay insurance premiums, although Presbyterian was permitted to fulfill its duties by buying insurance from a third party insurer which would actually disburse the benefits. As noted above, this court held that the clause of Langer’s employment contract covering disability benefits was ambiguous, and that neither party was entitled to summary judgment. In so holding, we noted that, because the contract made no statement as to who would bear the loss if no coverage were obtained, a third interpretation was possible: that Presbyterian would pay for premiums, but would also be an insurer, although only of last resort. That is, Langer may have had the duty to attempt to obtain insurance, but Presbyterian would be responsible to make disability payments if Langer was unable to obtain insurance. 879 F.2d at 81 n. 7. Under this interpretation, Presbyterian was only liable in the absence of coverage by Monarch. At trial after remand, Presbyterian accordingly sought to adduce evidence that Langer had obtained insurance from Monarch. The district court, however, ruled that the question of primary versus secondary liability (including whether Langer had insurance with Monarch) was a question of law for the court, and should not be argued to the jury. At the close of evidence, Presbyterian moved for a directed verdict that it had performed its' obligation, at least to the extent of the $204,000 in annual coverage that Langer allegedly had with Monarch. That motion was denied, as was Presbyterian’s post-trial motion for judgment notwithstanding the (adverse) verdict. Presbyterian now reiterates its argument that the district court should have decided as a matter of law that Langer did have interim insurance with Monarch, and that, as a result, its liability must be reduced by $204,000 per year. In the alternative, Presbyterian suggests that the question whether insurance existed depénded on disputed factual issues which should have been submitted to the jury, and that the district court erred by refusing to give Presbyterian’s proposed jury instruction on that question. Our review of the district court’s legal decision to withhold this issue is plenary. The parties agree that Pennsylvania substantive law governs in this diversity case. B. Langer’s Alleged Interim Insurance With Monarch 1. The Collister Issue (Introduction) Presbyterian contends that Langer had an interim insurance contract with Monarch under the principles of Collister v. Nationwide Life Insurance Co., 479 Pa. 579, 388 A.2d 1346 (1978). In Collister, the plaintiff’s husband had applied for life insurance from the defendant insurance company, and the insurance company had accepted a two-month premium as a “conditional receipt.” At the time that the plaintiff’s husband died, the insurance company had neither issued the policy nor rejected the application. The insurance company subsequently denied liability, asserting that the applicant had failed to take a medical examination as required. The Pennsylvania Supreme Court in Col-lister held that the insurance company’s acceptance of the application form and the first premium payment created a temporary insurance contract extending from the acceptance of the deposit until the insurance company either accepted or rejected the application. 388 A.2d at 1348. The court based its decision on the reasonable expectations of the insured, holding 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. at 1353. The court concluded that an insurance company could meet its burden by informing the prospective applicant, in a manner calculated to attract the applicant’s attention and before money changes hands, that no immediate coverage would be provided. Id. at 1355. Nevertheless, fojnly after such an unequivocal showing that the consumer is to be given no immediate benefits in return for his or her cash payment can a court say that the insurer has sustained its burden of establishing by clear and convincing evidence that the consumer could not reasonably have expected to receive immediate coverage in return for the payment of the required premium. Id. In this case, the district court refused to charge on Collister and, after trial, ruled that Collister did not apply. Therefore, in the district court's view, Langer had no insurance coverage with Monarch, and the third (backup insurer) interpretation of the contract could not help Presbyterian, even if correct. We could uphold the district court’s ruling on either of two grounds. First, we could rule, as did the district court, that Presbyterian had no standing to raise the Collister issue when Langer, the putative insured, no longer wishes to. Second, even if Collister applies, if no reasonable jury could have found that Langer had a reasonable expectation of interim coverage, then the district court’s holding was correct, although this was not its stated rationale. 2. Presbyterian’s Standing to Raise Langer’s Rights Under Collister We first turn to Presbyterian’s standing to raise this defense. Unfortunately, Collister and its progeny do not make clear whether only insureds and their successors have standing to assert Collister claims, so we must predict the position of the Pennsylvania Supreme Court. Presbyterian asserts that it has standing be- . cause it has a legal interest in proving that Langer had insurance. Presbyterian clearly meets that minimum requirement for standing, for there was certainly sufficient evidence for the jury to adopt the third interpretation. For example, one can read the testimony of Langer and his attorney, Weiss, to say that they expected that Presbyterian would be the insurer of last resort. If the jury did adopt that interpretation, Langer’s lack of coverage with Monarch would have been, in effect, a condition precedent to Presbyterian’s liability to pay disability benefits. But Presbyterian’s argument is too facile, because it fails to confront the question whether the purposes of Collister would be served by extending it to third party claimants, and if so, which ones. Pennsylvania courts must inquire whether a party’s claim is within the “zone of interests” of a statute. See Upper Bucks County Vocational-Technical School Education Association v. Upper Bucks County Vocational Technical School Joint Committee, 504 Pa. 418, 423, 474 A.2d 1120, 1122-23 (1984). Similarly, we should inquire if Presbyterian’s claim is within the zone of interests protected by Collister, which is as binding as a statute. Moreover, we must decide whether Presbyterian has the right to raise Langer’s Collister claim against Langer himself, which is an issue of third party standing. We consider these two issues in turn. The district court concluded, albeit without citation or further discussion, that “Collister does not apply ... where a third party attempts to take advantage of a presumption of insurance coverage available from a collateral source.” That view has some support in Collister: the Pennsylvania Supreme Court’s primary concern was to protect the reasonable expectations of the consumer applicant. 388 A.2d at 1353-54. On the other hand, the case also emphasized that insurance companies were gaining the use of a premium without giving comparable benefits: Courts must also keep in mind the obvious advantages gained by the insurer when the premium is paid at the time of application. An insurer should not be permitted to enjoy such benefits without giving comparable benefit in return • to the insured. Id. at 1354. We think it follows that the payor of those premiums normally ■ has standing to raise the insured’s Collister claim, as long as that payor has suffered injury as a result of the denial of coverage. Usually, of course, the payor is the applicant, but in this case, Presbyterian paid Langer’s initial premium, and hence had interests with which the Pennsylvania Supreme Court was concerned in Collister. We reach this conclusion even though here Presbyterian asserts the existence of Langer’s insurance coverage under Collis-ter against Langer himself. Ordinarily courts decline to accord third-party standing because the right-holder normally has no obstacles to suing and will likely be the better proponent of its views. See, for example, Amato v. Wilentz, 952 F.2d 742 (3d Cir.1991); 1000 Grandview Association v. Mt. Washington Associates, 290 Pa.Super. 365, 434 A.2d 796 (1981); Harrisburg School District v. Harrisburg Education Association, 32 Pa.Comm. 348, 379 A.2d 893 (1977). The case against finding standing would seem especially strong when, as here, the third-party claimant asserts the right-holder’s right against that same right-holder. But this is a special case. Here, Langer himself raised the Collister question in his complaint. He subsequently obtained a very valuable settlement, approved by the district court, on the basis of that claim. We need not decide whether Langer is now estopped from denying the existence of insurance coverage with Monarch altogether, for that broader question was not properly raised before us. We do conclude, however, that application of the usual prudential rule against third-party standing is inappropriate here. Langer raised his rights under Collister — an issue that affects all the parties — before the court, and thereby forfeited any objection to the litigation of that question by these parties in this case. 3. Langer’s Reasonable Expectations Turning to the merits of the Col-lister claim, the undisputed evidence shows that Monarch accepted Langer’s application for disability insurance, that Monarch accepted the initial premium for such insurance, and that Langer believed that he was covered by Monarch. Presbyterian suggests that this is enough to establish, as a matter of law, that Langer did have insurance with Monarch. But the Collister claim depends on the reasonable expectations of the insured. Correspondingly, Langer’s subjective expectations do not control; rather we must consider what a reasonable person in Langer’s shoes would have expected. Langer, of course, is a physician (and therefore arguably more likely to know of problems of medical insurability than the average person). Moreover, he knew his own medical history, including his heart attack two years earlier. On the other hand, Langer had passed his medical examination with flying colors, which he knew, and he knew that Monarch had accepted Presbyterian’s initial premium payment (made on his behalf). Moreover, one might impute to Langer the knowledge of Presbyterian’s Hardin, who was arguably acting as Langer’s agent in obtaining coverage. Agins, the insurance broker, had told Hardin that two companies would not even consider disability insurance for Langer, and that if a company did write a policy for someone with Langer’s medical history, it would be for a limited amount of money and conditioned on a physical examination. Hardin, however, apparently believed that the premium deposit that Monarch accepted was a binder that covered Langer during the interim before a final decision was made. Again, however, that was a subjective belief. At all events, under Collister, the burden is on the insurer to prove by clear and convincing evidence that the insured had no reasonable expectation of coverage. Given this legal standard and the foregoing factual matrix, we believe that this close question, which might involve witness credibility determinations, was for the jury. We cannot say as a matter of law that Langer did or did not have a reasonable belief that he was insured. See Blair v. Manhattan Life Ins. Co., 692 F.2d 296 (3d Cir.1982) (question of physician’s reasonable basis for believing that he was purchasing interim insurance coverage was properly for the jury; jury verdict for defendant insurance company upheld). The district court therefore erred in keeping the Collister question from the jury. In sum, the jury could have adopted the third interpretation of the contract and could have concluded that Presbyterian was only liable as an insurer of last resort. Preventing the jury from considering that question was reversible error because the jury could have concluded that Langer had $204,000 in annual disability insurance with Monarch, and therefore that Presbyterian’s potential liability as a backup insurer was only approximately $66,000 per year (the difference between the approximately $270,000 promised in total and the $204,000 in insurance with Monarch). Accordingly, we must vacate the judgment for Langer and remand for a new trial. C. Other Issues Presbyterian alleges a host of additional errors by the district court. Some of those arguments are moot in light of our decision to remand for a new trial. Others are meritless or are better left to the district court to decide on remand. Still others are essential to resolve for the guidance of the district court on remand. We will briefly consider each of them. 1. Effect of Langer’s Release of Monarch on Presbyterian’s Subrogation Rights Presbyterian argues that Langer’s release of Monarch destroyed Presbyterian’s subrogation rights against Monarch, and thereby released Presbyterian. That theory depends in part on the characterization of Presbyterian as a backup insurer or guarantor, which we cannot decide as a matter of law. We therefore do not reach this issue. 2. Langer’s Settlement as a Breach of His Duty to Cooperate in Good Faith to Obtain Insurance Presbyterian argues that, by settling with Monarch, Langer breached his duty to cooperate in good faith to obtain insurance, again under the backup insurer interpretation of the contract. We reach this issue because even if we assume that the jury would find that Langer had such a duty, we think it plain that he fulfilled his duty. Surely Langer attempted in good faith to secure insurance before he settled: he underwent his physical examination and even brought suit against Monarch. Nor did he breach any duty by settling. Even if we assume that Langer’s duty to Presbyterian to attempt to secure insurance continued after Presbyterian terminated the contract, we do not believe that a reasonable jury could conclude that it was bad faith to settle an uncertain claim against Monarch at a time when Langer was not receiving disability benefits from either defendant. 3.Langer’s Settlement as a Failure to Mitigate Damages Presbyterian argues that the district court erred in taking from the jury the issue of Langer’s failure to mitigate damages. Presbyterian now concedes that the district court charged the jury on Langer’s duty to mitigate damages. Instead, it premises its argument on the district court’s exclusion of evidence of the Lan-ger-Monarch settlement agreement, which, says Presbyterian, shows that Langer committed himself to maximizing his damages against Presbyterian. Because this issue is likely to resurface on remand, we will reach it. The district court heard lengthy argument on whether to admit evidence of the settlement. It eventually concluded, under Federal Rule of Evidence 403, that this evidence would have confused the jury and misplaced their focus onto the minor subsidiary issue whether the settlement was a good deal rather on than the major issues in the case. The district court may, of course, revisit this issue on remand, but we cannot say that the court abused its discretion in excluding this evidence at the last trial. 4. The District Court’s Failure to Mold the Jury Verdict to Set Off Langer’s Settlement Payments from Monarch Presbyterian submits that the district court erred in refusing to mold Langer’s jury verdict by reducing it by the amount of the “loan” payments that Monarch has made to Langer pursuant to their settlement. Because Langer’s verdict has been set aside, Presbyterian’s request for molding is moot. 5. Failure to Cure Langer’s Eve-of-Trial Discovery Defaults Presbyterian contends that Langer’s delay in producing documents important to damages questions until the first day of trial and his late identification of his expert witness on damages, Bruce Dominick, deprived it of a fair trial. The district court agreed that Langer’s conduct was inexcusable and granted a mid-trial recess, but Presbyterian argues that the recess was an insufficient cure. Because damages issues will be retried along with the rest of the case, we need not decide the moot question of prejudice from Langer’s default. 6. Admission of Dominick’s Testimony Based on Internal Guidelines at UNUM At trial, the parties disputed the valuation of Langer’s damages. Langer argued that his benefits should be measured as $270,000 per year no matter what the extent of Langer’s disability. Presbyterian contended that Langer was entitled only to double the benefits that he would have had at HUP, and that the clinical practice policy that had covered him there would have given him only partial payment in case of partial disability. Langer therefore called Dominick, an employee of UNUM, the carrier that issued the HUP clinical practice policy, to testify as to the amount of benefits to which Langer would have been entitled at HUP. Over objection, Dominick testified, based in part on internal guidelines at UNUM, that Langer would have been entitled to receive the maximum disability benefit rather than a partial benefit. Presbyterian now asserts that the district court erred in allowing Dominick to testify based on the administrative policies of UNUM. Presbyterian objects that the UNUM guidelines controverted the plain language of the UNUM policy and therefore were not incorporated into the Presbyterian-Langer contract. Because the same issue will probably arise on retrial, we will comment briefly- We agree with Presbyterian that the Langer-Presbyterian contract is unclear on the valuation question, but the very valuation that Presbyterian proposed was double Langer’s previous coverage. To determine Langer’s previous coverage, the district court properly admitted testimony on what that coverage would have been — even if Langer and Presbyterian did not know of each of the specific provisions. Presbyterian argues (and Langer does not seem to contest) that under the clinical practice policy, Langer would have been entitled to the maximum benefit only if his earnings loss exceeded eighty percent of pre-disability earnings, and the benefit would have been pro-rated for losses of twenty to eighty percent. Based on the tax returns of Langer’s professional corporation, Presbyterian contends that Langer’s loss in overall earnings after his stroke was far less than eighty percent. But, as far as we can tell from the limited record on appeal, Dominick’s testimony was based on a narrower definition of income — income that Langer himself derived from his clinical practice, rather than all income earned by the professional corporation. Presbyterian offers no citation to the record for how that definition, based on UNUM’s internal guidelines, controverted the unambiguous terms of the clinical practice policy or the booklet der scribing the policy. We therefore find no error in the admission of Dominick’s testimony. 7. Admission of Unauthenticated Tax Returns Finally, Presbyterian argues that the district court should not have admitted documents alleged to be Langer’s tax returns, and therefore Langer had failed to prove his damages. Because this was a matter of the formalities of authenticating evidence, we doubt that the issue will arise on retrial, and therefore will not reach it. III. PRESBYTERIAN’S APPEAL IN THE MONARCH ACTION A. Overview of the Issues Monarch’s complaint in the Monarch action sought a declaratory judgment that Presbyterian had no valid claims for recovery against Monarch. Our analysis must therefore center on Presbyterian’s four counterclaims that Monarch is liable to Presbyterian. Count I alleges that Monarch is liable over to Presbyterian under the equitable principles of indemnity and subrogation, as well as promissory estoppel (detrimental reliance). Count II alleges that Presbyterian is a third-party beneficiary of Lan-ger’s temporary insurance contract with Monarch, and that Monarch is contractually liable to Presbyterian for failure to pay Langer any disability benefits. Count III alleges that if Presbyterian is liable to Lan-ger on either fraud or detrimental reliance theories, then Monarch is liable over to Presbyterian on the same theory or theories. Finally, Count IV asserted that Monarch, by settling with Langer, tortiously interfered with Presbyterian’s employment contract with Langer. All of Presbyterian’s counterclaims are contingent on Presbyterian’s liability to Langer in the Langer action. Before trial in the Langer action, and based on Presbyterian’s responses to Monarch’s requests for admissions under Federal Rule of Civil Procedure 36, the district' court granted summary judgment to Monarch on the first two counts (indemnity, subrogation, detrimental reliance, and promissory estoppel). The district court’s stated rationale for granting summary judgment to Monarch was extremely brief, consisting only of a footnote to its order. After trial, the district court ruled that Count III (liability over based on fraud or detrimental reliance) had no legal basis because the jury had awarded Langer benefits only on a breach of contract theory. Finally, the district court dismissed Count IV on the ground that the Langer-Monarch settlement could not have tortiously interfered with the Langer-Presbyterian employment contract because Presbyterian repudiated that contract in June 1987, months before Langer’s settlement with Monarch. Our review of the district court’s grant of summary judgment is plenary. Presbyterian appeals from the district court’s judgment as to all counts, but our discussion will concentrate on the judicial admissions issue which affects the first two counts. The district court’s ruling on Count III was based solely on the jury verdict. Presbyterian’s appeal as to that count is dependent on our reversing Lan-ger’s judgment in the Langer action and ordering a new trial wherein Langer could reassert his noncontractual claim of detrimental reliance. We have done so, and therefore need not discuss Count III further. We will affirm the district court’s judgment on Count IV because we find its logic unassailable. Because Presbyterian itself declared its contract with Langer “null and void” well before Monarch settled with Langer, Monarch, by settling, could hardly have interfered with the contract between Langer and Presbyterian or with prospective economic relations between them. The primary question before us is thus whether Presbyterian, by its responses to Monarch’s requests for admission under Rule 36, judicially admitted facts that destroy the legal predicate for its counterclaims. According to Monarch, Presbyterian has admitted that it never had a relationship with Monarch that could be the basis for any claim against it. Monarch asserts that for Presbyterian to establish any liability-over claim against Monarch, two conditions must exist. First, Presbyterian must have had a duty to pay disability benefits to Langer (something that Presbyterian has continuously denied in the Langer action). Second, Presbyterian must have had a legally recognizable interest in the alleged Langer-Monarch insurance contract. As to the former, Monarch contends that Presbyterian’s admissions bound it to its position in the Langer action and prevent it from arguing alternatively in the Monarch action. As to the latter, according to Monarch, Presbyterian has admitted that Lan-ger’s application with Monarch was separate and independent from his employment agreement with Presbyterian, and that Langer had exclusive rights in whatever coverage he might obtain. We will examine these issues separately. Before we do so, however, we must grapple with Presbyterian’s contention that its admissions cannot count because the ordinary rules of judicial admissions do not apply where a party has pled a contingent liability-over claim. B. The Interaction of Rules 8(e)(2) and 36 Rule 8(e)(2) specifically countenances pleading in the alternative: “A party may set forth two or more statements of a claim or defense alternately or hypothetically, either in one count or defense or in separate counts or defenses.... A party may also state as many separate claims or defenses as the party has regardless of consistency ” Presbyterian is certainly correct that it is entitled, under the Federal Rules, to pursue third-party liability-over claims while contesting the underlying claim. This is so even though the Langer and Monarch actions are separate suits that have been consolidated, so that Rule 8(e)(2) does not even technically come into play. Presbyterian goes further, however, and argues that any Rule 36 judicial admissions it may make in the Monarch action do not ripen until it has been found liable in the Langer action, and thus cannot support summary judgment in the Monarch action. Moreover, it argues that if it has admitted facts consistent with its theory in the Lan-ger action (such as that it had no duty to pay benefits to Langer), but the jury in the Langer action has rejected those facts, then the admissions have been superseded, and should not be used to estop it in the Monarch action. Because Presbyterian’s position is fundamentally inconsistent with the rules regarding judicial admissions, we decline to endorse it. Under Rule 36(a), [a] party may serve upon any other party a written request for the admission, for purposes of the pending action only, the truth of any matters within the scope of Rule 26(b) set forth in the request that relate to statements or opinions of fact or of the application of law to fact.... Rule 36(b) describes the effect of an admission: Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission_ Any admission made by a party under this rule is for the purpose of the pending action only and is not an admission for any other purpose nor may it be used against the party in any other proceeding. As the advisory committee notes to the 1970 amendments observed, Rule 36 serves two vital purposes, both of which are designed to reduce trial time. Admissions are sought, first to facilitate proof with respect to issues that cannot be eliminated from the case, and secondly, to narrow the issues by eliminating those that can be. Accordingly, we have held that an admission of facts made under Rule 36 is an “unassailable statement of fact that narrows the triable issues in the case.” Airco Industrial Gases, Inc. v. Teamsters Health & Welfare Pension Fund, 850 F.2d 1028, 1037 (3d Cir.1988). We have also held that Rule 36 admissions are conclusive for purposes of the litigation and are sufficient to support summary judgment. Anchorage Associates v. Virgin Islands Board of Tax Review, 922 F.2d 168, 176 n. 7 (3d Cir.1990). We see no reason why rigorous application of Rule 36 undermines the privilege to plead in the alternative. A party may certainly allege inconsistent facts in its pleadings, but requests for admission typically come late in discovery, or even after discovery has been completed and trial is imminent. If at that point a party is served with a request for admission of a fact that it now knows to be true, it must admit that fact, even if that admission will gut its case and subject it to summary judgment. That is what Rule 36 was intended to do — narrow the issues for trial, or even altogether obviate the need for trial. We also see no reason why application of Rule 36 would thwart the privilege to plead hypothetically. Presbyterian objects that allowing Rule 36 to apply in full force would allow every third-party defendant to force a defendant with a liability-over claim to admit defeat against either the plaintiff or the third-party defendant. We disagree. In this case, suppose (contrary to fact, as we shall explain), that Monarch had asked Presbyterian to admit that the hospital “is not liable” to Langer on any theory. A proper answer to that request would be to object that the statement could not be admitted or denied, because the fact of actual liability would still be undetermined (because not yet litigated to judgment); Presbyterian could admit only that it believed and had taken the legal position that it was not liable to Langer (a legal position that it might win or lose at trial). Summary judgment on the liability-over claim would not follow on the basis of this non-admission, which is why third-party defendants do not bother making such pointless requests for admission. On the other hand, if Presbyterian were asked to admit a specific operative fact about a past event (such as the intent of one of its officers at a particular juncture), it must admit that fact if the fact is known to be true. And that admission could be used to support summary judgment against it, even on a hypothetical, liability-over claim. Third-party defendants do not have to wait for the plaintiff to succeed against the original defendant before filing motions for summary judgment. In sum, Presbyterian’s suggested conflict between the doctrine of judicial admissions and the privilege to assert liability-over claims appears illusory. The purposes of Rule 36 would seem fully served by applying the Rule in this case. Presbyterian’s admissions, such as they were, were binding, and we therefore proceed to decide just what Presbyterian did admit. C. Presbyterian’s Admissions 1. Did Presbyterian Commit Itself to Relying on Only One Theory? We begin with Presbyterian’s Responses to Monarch’s Requests for Admissions Nos. 20, 23, 27, 28, and 29. Monarch asserts that these responses collectively admitted that Presbyterian had no contractual obligation to guarantee any disability payments to Langer, but only to provide Langer with sufficient after-tax dollars for him to buy insurance. It would be surprising if Presbyterian’s responses rejected that interpretation of the contract, for that has been Presbyterian's primary theory of the case all along, one it stands by today even after losing a jury verdict. The real question is whether these admissions show that Presbyterian elected to rely exclusively on that theory, thereby foreclosing reliance on the backup insurer interpretation of the contract. Monarch’s Request for Admission No. 20 read: “After further negotiations the Medical Center offered Dr. Langer, inter alia, double the disability income benefits which he was receiving at HUP.” Presbyterian’s response was: Admitted in part, denied in part. Admitted that, after a period of negotiation, Presbyterian offered to make payments to Langer which would provide him with sufficient after-tax dollars to purchase disability income insurance coverage in an amount that was double the amount Presbyterian believed Langer was receiving from HUP. Denied that Presbyterian ever agreed that it would insure Langer against disability in the event that Langer failed to obtain coverage from a disability income insurer. (emphasis added). Monarch’s Request for Admission No. 23 read: “The Medical Center agreed to provide the guarantee requested by Dr. Lan-ger.” Presbyterian responded: Admitted in part, denied in part. Admitted only that, as a result of negotiations with Langer, Presbyterian agreed to include in its written contract of employment with Langer the following language: “We guarantee the benefits stated above for a ten (10) year period. This guarantee is subject to Dr. Langer maintaining his full-time clinical practice at Presbyterian-University of Pennsylvania Medical Center.” It is denied that this language has or was intended to have the effect of supplementing or altering any of the benefits provisions contained in the contract or any limitations thereon. It is further denied that Presbyterian agreed to guarantee that Langer would receive disability income, as distinct from compensation with which Langer could purchase disability income insurance. (emphasis added). Monarch’s Request for Admission No. 27 read: “At the time the Medical Center extended its ultimate offer of employment to Dr. Langer, it did not intend to be the owner of any disability insurance policy that might thereafter be obtained by or on behalf of Dr. Langer.” Presbyterian responded: Presbyterian objects to this request on the ground that, by reason of its use of the word “owner,” a word susceptible of several interpretations, Presbyterian cannot reasonably be required to admit or deny the request. Without waiving this objection, this request is denied as stated. At the time stated, Presbyterian contemplated that it would be responsible for the cost of premiums of a disability insurance policy to be applied for and obtained by Langer. (emphasis added). Monarch’s Requests for Admission No. 28 and 29 were identical to No. 27, except that they, respectively, substituted the words “beneficiary” and “purchaser” for the word “owner” in No. 27. Presbyterian’s responses to Nos. 28 and 29 were essentially identical to its response to No. 27, including the objection on the ground of ambiguity and the statement that “Presbyterian contemplated that it would be responsible for the cost of premiums” for insurance obtained by Langer. In our view, these responses were merely reassertions of Presbyterian’s primary theory of the case — that Presbyterian agreed only to provide Langer with the cost of insurance premiums. Nothing in these admissions suggests that Presbyterian elected to abjure reliance on the backup insurer theory. In response to Request for Admission No. 20, for example, Presbyterian simply restated that it agreed only to make payments to Langer to provide him with sufficient after-tax dollars for him to buy insurance — something that it has argued since the beginning of this litigation. In that answer, Presbyterian did deny that it agreed to insure Langer if Langer failed to obtain coverage from an insurance company. But in general, a denial of a Rule 36 request for admission simply leaves the denied proposition in dispute for trial. Presbyterian’s response to Request No. 20 left open for trial the issue whether Presbyterian legally bound itself to insure Lan-ger. Response No. 23 was similarly a reassertion of Presbyterian’s primary theory of the case. Its relevant portion is also in the form of a denial, and thus it merely left as a disputed proposition for trial that “Presbyterian agreed to guarantee that Langer would receive disability income, as distinct from compensation with which Langer could purchase disability income insurance.” In our view, if the jury disagreed with Presbyterian, nothing in this response prevented Presbyterian from falling back on its alternative theory that it was only a backup insurer. Finally, in responses to Requests for Admissions Nos. 27 through 29, Presbyterian again merely restated its primary theory, and in no way bound itself to rely exclusively on that theory. These responses were denials of the requests as stated. Perhaps, however, Presbyterian’s affirmative statements as to its “contemplations” could be read as admissions of the facts of what it intended at the time — namely that it would be responsible only to pay Lan-ger’s insurance premiums. Rule 36 would cover an admission by Presbyterian as to what its obligations were as a matter of law, because the text of the rule specifically authorizes requests for admissions of propositions of law as applied to fact. The problem here is that Presbyterian only admitted the fact of its intentions and not what its obligations were as a matter of law. Monarch’s argument ignores a basic tenet of contract law. Presbyterian’s subjective beliefs in entering into its contract with Langer did not necessarily determine the legal meaning of that contract. If Presbyterian and Langer had shared the same subjective interpretation of the contractual provisions and had a “meeting of the minds,” then their joint subjective interpretation would govern. But if, as might be the case here, Presbyterian thought it agreed to different terms than Langer did, Presbyterian’s subjective interpretation would not necessarily control. Instead, Langer, as the promisee, may enforce his objectively reasonable interpretation of Presbyterian’s promise, different though that may be from what Presbyterian thought it was promising. See, for example, Ingrassia Construction Co. v. Walsh, 337 Pa.Super. 58, 486 A.2d 478, 482-83 (1984) (outward, objective manifestations of assent govern, rather than undisclosed, subjective intentions; subjective intent forms basis of contract only if other party knows or should have known of it). See generally 2 E. Allan Farnsworth, Farns-worth on Contracts § 7.9 (Little, Brown, 1990) (objective meaning controls, unless