Waddoups v. Nationwide Life Insurance Co.

• Decision Date: 15 March 2016
• Docket Number: 33257-8-III
• Court: Washington Court of Appeals
• Parties: GARY WADDOUPS, as Personal Representative for The Estate of H. Marr Waddoups, Appellant, v. NATIONWIDE LIFE INSURANCE COMPANY, an Ohio Corporation, FINANCIAL MANAGEMENT, INC., a Washington Corporation, and CLARK L. PERMANN and JANE DOE PERMANN, husband and wife, Respondents.

GARY WADDOUPS, as Personal Representative for The Estate of H. Marr Waddoups, Appellant, v. NATIONWIDE LIFE INSURANCE COMPANY, an Ohio Corporation, FINANCIAL MANAGEMENT, INC., a Washington Corporation, and CLARK L. PERMANN and JANE DOE PERMANN, husband and wife, Respondents.

No. 33257-8-III

Court of Appeals of Washington, Division 3

March 15, 2016

UNPUBLISHED OPINION

FEARING, J.

We apply established principles in an area of law untouched by Washington appellate courts-the duty of a financial planner when selling an annuity. Gary Waddoups claims financial planner Clark Permann violated fiduciary duties when Permann sold an annuity and allegedly failed to warn Gary's father, Marr Waddoups, that the annuity lacked a death benefit. In short, Gary Waddoups claims Permann sold an unsuitable annuity. Marr Waddoups was eighty-five-years-old and in poor health at the time of sale. Gary Waddoups appeals from a summary judgment order dismissing his claims with prejudice. We reverse the summary dismissal. In addition to addressing the merits of the suit, the appealed issues require a review of standing, waiver of the dead man statute limitations to expert testimony, and summary judgment motion rules.

FACTS

Appellant Gary Waddoups is the son of H. Marr Waddoups. He sues as the personal representative of the Estate of Marr Waddoups. The subject of the lawsuit is a Nationwide Life Insurance Company single premium immediate annuity policy sold by respondent Clark Permann to Marr Waddoups. "Single premium" means the annuitant pays one large premium at the onset of the annuity. "Immediate" means annuity payments begin almost immediately. Nationwide and Clark Permann's company, Financial Management, Inc. are also respondents. The respondents present the same evidence and forward the identical summary judgment arguments.

The trial court granted all respondents dismissal of the case on summary judgment. Since Gary Waddoups was the nonmoving party, we focus on his version of the facts in our later analysis. Nevertheless, in this factual section, we also outline the defense version of the facts.

Marr Waddoups was a successful agronomist for nearly sixty years in the lower Columbia Basin. He earned a master's degree in agronomy from Utah State University. After working for various companies in the 1960s, he opened and operated his own agriculture consulting services firm. He fathered four children from his first marriage that ended in 1978 and three stepchildren from his second marriage to Elizabeth Waddoups.

In October 2003, Elizabeth Waddoups showed signs of dementia. In 2004, Elizabeth suffered a seizure and in 2005 her cognitive abilities markedly declined. From at least February 2005 until his death in 2011, Marr Waddoups suffered from diabetes, vasculitis-arteriosclerosis obliterans, and peripheral vascular disease. Arteriosclerosis involves the deposition of cholesterol plaques and other material on the inside of artery walls. Arteriosclerosis obliterans results in the narrowing and gradual blockage of the artery. Peripheral vascular disease entails the narrowing of arteries other than those that supply the heart and brain with blood. In July 2007, Marr Waddoups experienced chronic renal failure. Beginning in 2008, Waddoups suffered from weakness and a loss of muscle tone. He encountered difficulty walking.

Clark Permann works as a credentialed financial planner and registered investment advisor. Through the company, Financial Management, Inc., Permann provided financial advice to clients in the Tri-Cities. On Financial Management's website, the company advertised that a "credentialed planner is important because they are bound by a 'Code of Ethics' to do what's in the best interest of the client." Clerk's Papers (CP) at 579. The website also declared that a registered investment advisor:

means that they [sic] are registered with their [sic] state or the Securities Exchange Commission (SEC), and can legally call themselves a financial planner, as well as they [sic] are treated as a fiduciary, and must give you advice that is in your best interest[, ] not just sell you a suitable product.

CP at 580.

Beginning in April 2008, Clark Permann assisted Mart Waddoups with financial planning. Between April 30 and December 24, 2008 Permann met with Waddoups several times to discuss his objectives and needs based on his personal and family circumstances.

Clark Permann testified by declaration that, in December 2008, Marr Waddoups met with Permann to discuss purchasing an annuity. Waddoups brought to the meeting a quote through New York Life for a life-only annuity with a $100, 000 premium that paid $1, 500 in monthly income. The quoted policy contained no death benefit. Waddoups told Permann, in that meeting, that he wanted an investment that provided a guaranteed fixed income for the rest of his life to supplement his substantial variable income from stocks and bonds he already owned. The 2008 economic downturn impacted his income from the other investments. According to Permann, single life only annuities offer the highest monthly payout, a feature desired by Waddoups.

Clark Permann testified in his declaration that he procured, at Marr Waddoups' request, a single life annuity offered by Nationwide Life Insurance Company, which provided higher monthly payments than the New York Life annuity. This statement must be challenged since the Nationwide policy only paid $1, 417.43 per month and Permann testified the New York Life would pay $1, 500.00 per month. Regardless, Permann insists he explained to Waddoups that the annuity provided no death benefit and he elucidated the advantages and disadvantages of the annuity. According to Permann, Waddoups concluded that the Nationwide single premium immediate annuity fit his needs and Waddoups decided to purchase the annuity.

All single premium immediate annuities provide an annual semiannual, quarterly, or monthly income for a specified period or for life. Some single premium immediate annuities provide an income stream for a specified period of time regardless of whether the annuitant survives that period. If the annuitant does not survive the period, the insurance company pays the income stream to the annuity's beneficiary for the remainder of the specified period. Other single premium immediate annuities, often called "life-only" annuities, pay only during the life of the annuitant. Insurance companies also issue single life and joint life annuities and various combinations of life-only and specific period annuities, whereby a nominal amount is paid to the beneficiary upon the death of the annuitant rather than a continuing income stream.

Clark Permann averred in his declaration that, when Marr Waddoups purchased the annuity, "he was cogent and knowledgeable of his health, his overall financial situation, and the specific investment he was making." CP at 674. Waddoups informed Permann that he had diabetes, but Waddoups expressed no concern that diabetes would shorten his life. Permann does not identify any other ailments, from which Waddoups suffered, about which he knew. According to Permann, Waddoups told him on a number of occasions that he believed he would live another ten years. Permann testified:

Mr. Waddoups decided that the investment was suitable and expressed an unequivocal desire to purchase the Annuity whether it was through me or another representative. It was clear to me, and Mr. Waddoups verbally expressed to me, that he understood the nature of the purchase he was making and the fact that the Annuity would result in his receiving $1 418.00 per month for the rest of his life and that neither he nor his beneficiaries would receive anything upon his death.

CP at 674.

Marr Waddoups does not live to dispute the testimony of Clark Permann concerning the conversations between the two. Gary Waddoups denies that Permann warned his father of the lack of a death benefit in the Nationwide annuity and denies that his father made comments to Permann about living another ten years. Gary lacks any direct evidence to contradict Permann's testimony, however.

On December 18, 2008, Marr Waddoups completed an application to purchase a single premium immediate annuity from Nationwide. The annuity required payment of a $100, 000 premium and paid $1, 417.43 in monthly income beginning January 17, 2009. The application form included a space for the applicant to designate a beneficiary. Marr Waddoups designated his wife Elizabeth Waddoups, as the primary and sole beneficiary of the annuity. The application did not mention that the annuity required no beneficiary because the annuity afforded no death benefit.

On February 24, 2009, Clark Permann completed and signed a Crump Suitability Form for Fixed Annuities where he stated:

I acknowledge that I have made a reasonable effort to obtain information from the Owner concerning the Owner(s)' financial status, tax status, investment objectives and other information considered reasonable. It is my belief that based on: 1) The information the Owner provided, 2) All the circumstances known to me at the time the recommendation was made, the annuity being applied for, based on my recommendation is suitable for the Owner(s)' insurance needs and/or financial objectives.

CP at 729. The form listed Marr Waddoups' worth as exceeding $3 million.

On December 20, 2008, Marr Waddoups paid the $100, 000 premium for the Nationwide single premium immediate annuity policy #01-6062588 with a check written on the account of the Waddoups Living Trust, of which Elizabeth Waddoups and he were trustees. Despite the check being issued by the trust the annuity application designated Marr Waddoups as the owner of the annuity. Marr Waddoups, as trustor of the Waddoups...