Augsburger v. Navy Mut. Aid Ass'n, CASE NO. 2:17-cv-01817-BAT

CourtUnited States District Courts. 9th Circuit. United States District Court (Western District of Washington)
Writing for the CourtBRIAN A. TSUCHIDA Chief United States Magistrate Judge
Docket NumberCASE NO. 2:17-cv-01817-BAT
Decision Date28 January 2019


CASE NO. 2:17-cv-01817-BAT


January 28, 2019


Plaintiff Rebecca Augsburger sues Defendant Navy Mutual Aid Association ("Navy Mutual") for refusing payment under a life insurance contract after the death of her husband, John Augsburger. She alleges Navy Mutual's conduct constitutes a breach of the insurance contract, bad faith, violation of Washington's Consumer Protection Act ("CPA") and Insurance Fair Conduct Act ("IFCA"), negligence, mutual mistake, and that Navy Mutual should be estopped from refusing to pay under the contract. Dkt. 31. Plaintiff seeks reformation of the contract, declaratory judgment, and monetary damages. Id.

Navy Mutual moves for summary judgment dismissal of Plaintiff's claims. Dkt. 35. The motion was originally noted for October 19, 2018 and was fully briefed (see Dkts. 39, 40, and 43), but the noting date was stricken and discovery was extended so that the parties could take the deposition of Jennifer Arnic, a former Navy Mutual employee. Dkt. 46. On December 9,

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2019, Plaintiff filed a "Notice of Supplemental Information," with portions of Ms. Arnic's testimony. Dkt. 47. On December 10, 2018, the Court re-noted Defendant's motion for January 4, 2019, and set deadlines for additional briefing (limited to issues raised by Ms. Arnic's testimony). Id. Navy Mutual filed its response on December 31, 2018 (Dkt. 50) and Plaintiff filed her reply on January 3, 2019 (Dkt. 52).

On December 27, 2018, Plaintiff filed a motion for partial summary judgment, requesting that the Court find that Navy Mutual "wrongfully denied coverage for the death of John Augsburger, as a matter of law." Dkt. 49. Navy Mutual filed its response on January 14, 2019 (Dkt. 54) and Plaintiff filed her reply on January 18, 2019. Dkt. 55.

The Court finds Navy Mutual is entitled to summary judgment on all of Plaintiff's claims.


Rebecca Augsburger was married to John David Augsburger for nearly 27 years before he died on April 13, 2017. Dkt. 38, Declaration of Emilia L. Sweeney, Ex. B, Rebecca Augsburger Deposition, 9:17-23. In September 2006, the Augburgers purchased a Decreasing Term Life Insurance Family Plan (Policy #200613863) ("Family Plan") through Navy Mutual. Id., Ex. C.

Navy Mutual

All active duty, reserve, and retired United States military service members are eligible to apply for coverage with Navy Mutual. Dkt. 37, Declaration of Sangeeta Jacob, Senior Vice President of Operations, Information Technology and Insurance Solutions, ¶ 2. Military members who purchase insurance through Navy Mutual become members of the association and policyowners. Id. Navy Mutual Owner's Manual, a copy of which was given to Mrs.

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Augsburger, details the duties of Navy Mutual, and of the Member, and provides information about the insurance products it offers, as well as what can be found on its website. The Owner's Manual notes that there is a Members Only Site that allows members to fill out and submit applications on-line. Dkt. 36, Declaration of Emilia Sweeney, Ex. A, p. 5. There is no other site on the website that allows an individual to fill out and submit an on-line application. Dkt. 37, Jacob Dec., ¶ 3. To access the Members Only Site, a member is required to enter his or her username and a password. Id.; Dkt. 36, Sweeney Dec., p. 5. Members may apply for life insurance on their lives or on the lives of their spouses at any time prior to the insured reaching age 75. Id., Ex. A, p. 9. Usually, the member is the owner of the life insurance plan, though nonmember owner applications are available and the Member can also assign ownership to eligible individuals. Id., Ex. A, p. 9. Widows and widowers who were married to the Member at the time of the Member's death, and who are covered by any benefit plan on their own life automatically become Associate Members. Id., p. 15.

2006 Family Plan

Mrs. Augsburger filled out the application for the Family Plan by hand and signed it by hand. Dkt. 36, Sweeney Dec., Ex. B, Augsburger Dep., 11:23-12:15. She understood that it was a decreasing term life insurance policy, but the Augsburgers chose that plan because it was the most cost-effective plan and she was not working at the time. Id. at 14:10-15. She also understood that when they were both getting to the age of about 50, they would need to do things to convert their policy. Id. Mrs. Augsburger testified that she handled all of the financial and insurance paperwork in their household. Dkt. 36, Ex. A., R. Augsburger Dep., 14:2-3; Dkt. 39-1, Augsburger Dec., ¶ 4.

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The Family Plan became effective September 6, 2006, and insured John and Rebecca Augsburger at $400,000 each. Dkt. 38, Sweeney Dec., Ex. B (Family Plan Certificate No. 200613863), Augsburger Dep. Ex. 55; Dkt. 38, Sweeney Dec., Ex. C. Under the terms of the Family Plan, the benefits payable decreased significantly after age 50. Id. For example, had the Augsburgers maintained the Family Plan, and paid the premiums due, the benefits payable on the life of John Augsburger would have been but $108,000 as he was 53 years old at the time of his death. Dkt. 37, Declaration of Sangeeta Jacob, ¶ 5. The Family Plan also provided that the policy could be converted:

Conversion Privileges

This plan may be converted to any currently offered life insurance benefit plan, at standard rates and at attained age, without further evidence of insurability, provided conversion is applied for prior to 0001 hours on the Term Coverage Conversion Date. The coverage amount will be based on the applicable amount available for the new plan type chosen and will not exceed the coverage that would be in effect two years following the date of conversion.

Dkt. 38, Sweeney Dec., Ex. C. Conversion is "only a matter of signing a piece of paper, because there is no medical exam." Dkt. 47, Ex. A, Deposition of Jennifer Arnic, 20:12-13.

The Certificate detailed the "Provisions of Benefit Coverage," including the terms used, schedule of benefits, premium due dates/grace period, automatic renewal, conversion privileges, and termination/common disaster or simultaneous death, among other things. Dkt. 36, Sweeney Dec., Ex. C at AUG00008. The Premium Due Date/Grace Period section explained, in pertinent part:

All premiums are due in advance on the premium due date prior to the Term Coverage Termination Date. The premium due date is the anniversary date of the Effective Date. Premiums may be paid monthly, quarterly, semi-annually or annually. A grace period of 30 days from the premium due date will be allowed for the payment of the minimum amount (as notified by the Association) needed to continue the plan in effect. Payment of the minimum amount of premium

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within that grace period will be needed to continue the coverage in effect. The benefit plan will terminate without value at the end of the grace period if the minimum premium payment is not made. ...

Id. The Termination/Common Disaster or Simultaneous Death section states:

Membership in the Association terminates automatically on the date that neither the Association member nor any family member is covered by a benefit plan. You may terminate this benefit plan at any time upon written notification to the Association. As a Family Benefit plan, the termination of either member or spouse coverage terminates all coverage. ... (Emphasis in original.)

2009 Withdrawn Application for $1,000,000 in Coverage

In 2009, the Augsburgers sought to increase the amount of insurance they had with Navy Mutual to $1,000,000 after John Augsburger retired from the Marine Corps and his income had increased to "$250- plus per year." Dkt. 36, Sweeney Dec., Exhibit B, Augsburger Dep., 15:9-16:23. Again, Mrs. Augsburger filled out the application by hand, and both she and her husband signed the application. Id. They didn't go forward with that application because it was a daunting task gathering all the medical information that underwriting wanted when they had an eight year-old, a ten year-old, and an 11 year-old at the time. Id., 16:10-17:17. Mrs. Augsburger decided she didn't have the time to complete the application and would "just let it ride" at the time, which is "one of [her] biggest regrets." Id.

Purchase of Level II 'Plus' Plan

Navy Mutual reminded John Augsburger that he could convert the Family Plan before benefits began to decrease by letter dated September 13, 2010. Dkt. 36, Sweeney Decl, Ex. D. The letter noted that coverage would begin to decrease soon, and that by electing conversion prior to "your" birthday, the full coverage amount could be converted without further proof of insurability. Id. The letter outlined three potential options: 1) do nothing, and maintain the Family Plan until it expires or; 2) convert [John Augsburger's] Family Plan coverage to one of

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several individual products offered by Navy Mutual and 3) convert [Rebecca Augsburger's] Family Plan coverage to one of several individual products offered by Navy Mutual. Id. The letter also stated that the "total amount of coverage must not exceed [the] current Family Plan coverage amount." Id.

On December 10, 2010, Navy Mutual employee Jennifer Arnic sent the following email to an account shared by "JD and Becky Augsburger":

Did you get the letter we sent out in the mail about the conversion capability of your policy prior to your next birthday? We offer this because of the decrease in death benefit of your current policy.

I'm happy to discuss your options with you and answer any questions you might have. Feel free to call or email me at your convenience.

Dkt. 36, Sweeney Dec., Ex. E (Exhibit 60 to Augsburger's Dep. (AUG000049)) (emphasis in original). On December 13, 2010, Plaintiff and Ms. Arnic exchanged the following emails:

[Plaintiff]: I

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