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26 ORDER - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT TACOMA

MARGO J. LLOYD, individually,

Plaintiff,

v.

VALLEY FORGE LIFE INSURANCE

COMPANY, a foreign insurance company

doing business in Washington,

Defendant.

Case No. C06-5325 FDB

ORDER DENYING MOTION TO 

 AMEND COMPLAINT

This matter comes before the Court on Plaintiff’s motion to amend her complaint to add new

causes of action. After reviewing all materials submitted by the parties and relied upon for authority,

the Court is fully informed and hereby denies the motion to amend.

INTRODUCTION AND BACKGROUND

This is an action for declaratory judgment wherein the Plaintiff, Margo Lloyd, seeks a

judgment holding she is entitled to the benefits of her late-husband’s life insurance policy. The

defendant insurer, Valley Forge Life Insurance Company, denied the request for benefits based on

the suicide provision of the policy. The dispute is over whether or not the suicide provision applies

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26 ORDER - 2

to Plaintiff’s claim under her late-husband’s life insurance policy.

Upon notification of the insured’s death and the claim for life insurance benefits, Valley Forge

advised Plaintiff that because Mr. Lloyd died within two years of the policy date, it would conduct a

routine inquiry concerning Mr. Lloyd’s past health history and cause of death. The investigation

revealed (1) a certified and uncontested death certificate stating that Mr. Lloyd had committed

suicide, (2) reports from the King County Medical Examiner’s Office ruling that Mr. Lloyd had

committed suicide, (3) reports from the Bellevue Police concluding that Mr. Lloyd had committed

suicide, (4) evidence of two prior suicide attempts by Mr. Lloyd, and (5) evidence of a motive to

commit suicide, i.e., significant financial difficulties. 

The Plaintiff subsequently met with the investigators working on behalf of Valley Forge and

disputed these findings. Plaintiff raised questions regarding the adequacy of the police investigation.

Subsequently, the insurance investigators interviewed the lead police detective, who confirmed that

Mr. Lloyd had died by suicide.

Valley Forge then sent Plaintiff a letter explaining the results of their investigation and their

determination that death was by suicide. Valley Forge stated it was willing to consider any additional

information. None was provided, and Valley Forge paid to Plaintiff the benefits due under the

suicide provision, i.e., premiums paid on the policy plus interest. Plaintiff then instituted this

declaratory judgment action.

Plaintiff now moves the Court for an order permitting the Plaintiff to amend her complaint to

add causes of action for breach of contract, bad faith, violation of Washington’s Fair Claims

Practices regulations, and violation of Washington’s Consumer Protection Act. Plaintiff seeks the

amendment of the complaint based on the preliminary report of her purported expert witness. This

preliminary report concludes that Defendant Valley Forge failed to conduct a reasonable

investigation as to the cause of Mr. Lloyd’s death.

Defendant opposes the amendment on the basis it would be futile due to the reliance of the

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26 ORDER - 3

insurer’s investigation on official findings that Mr. Lloyd committed suicide. Defendant also argues

that the claim for violation of Washington Fair Practices regulations is futile, as the regulations do

not provide an independent cause of action. Finally, Defendant contends that the proposed

amendment would cause unfair prejudice to Valley Forge and undue delay in these proceedings.

LEAVE TO AMEND

Federal Rule of Civil Procedure 15(a) deals with amendments to pleadings. Once a

responsive pleading has been filed, “a party may amend the party's pleading only by leave of court or

by written consent of the adverse party; and leave shall be freely given when justice so requires.” Id. 

“In exercising this discretion, a court must be guided by the underlying purpose of Rule 15 to

facilitate decision on the merits, rather than on the pleadings or technicalities.” Roth v. Garcia

Marquez, 942 F.2d 617, 628 (9th Cir. 1991); United States v. Webb, 655 F.2d 977, 979 (9th Cir.

1981). Further, the policy of favoring amendments to pleadings should be applied with ‘extreme

liberality. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). That is not to say,

however, that it should be given automatically. Jackson v. Bank of Hawaii, 902 F.2d 1385, 1837 (9th

Cir. 1990). Whether justice requires granting a party leave to amend is generally determined by

reference to four factors: (1) undue delay; (2) bad faith; (3) futility of amendment; and (4) prejudice

to the opposing party. United States v. Pend Oreille Public Utility Dist. No. 1, 926 F.2d 1502, 1511

(9th Cir. 1991).

Defendant asserts that the proposed amendment is futile. Futile amendments should not be

permitted. Roth v. Garcia Marquez, 942 F.2d 617, 628 (9th Cir. 1991); DCD Programs, Ltd v.

Leighton, 833 F.2d 183, 188 (9th Cir. 1987); Klamath-Lake Pharmaceutical Ass'n v. Klamath

Medical Service Bureau, 701 F.2d 1276, 1293 (9th Cir. 1983). Futility alone, or together with delay,

is a sufficient basis upon which to deny a motion for leave to amend. Roth at 628 (affirming district

court's order denying motion for leave to amend on grounds of futility of amendment); Klamath-Lake

at 1293 (affirming district court's order denying motion based on delay and futility).

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26 ORDER - 4

 A proposed amendment to a complaint is futile only if no set of facts can be proved under

the amendment that would constitute a valid and sufficient claim. Sweaney v. Ada County, Idaho,

119 F.3d 1385, 1393 (9th Cir.1997). A party should be afforded an opportunity to test his claim on

the merits rather than on a motion to amend unless it appears beyond doubt that the proposed

amended pleading would be subject to dismissal. Thus, it is futile to permit amendment to a

complaint to add claims subject to dismissal on a motion for summary judgment. Roth at 629. See

also Johnson v. American Airlines, Inc., 834 F.2d 721,724 (9th Cir. 1987)(Courts have discretion to

deny leave to amend a complaint for ‘futility,’ and futility includes the inevitability of a claim's defeat

on summary judgment.); Gabrielson v. Montgomery Ward & Co., 785 F.2d 762, 766 (9th Cir.

1986)(Any amendment would have been futile in that it could be defeated on a motion for summary

judgment.).

Thus, the question becomes whether Plaintiff’s proposed amendments would be subject to

dismissal, and thus futile.

INSURERS’ INVESTIGATION OF SUICIDE AND BAD FAITH

Plaintiff’s proposed new claims of breach of contract, bad faith, and statutory/regulatory

violations arise out of Valley Forge’s alleged failure to conduct a reasonable investigation into the

cause of death of Mr. Lloyd.

An insurer must make a good faith investigation of the facts before denying coverage and may

not deny coverage based on a supposed defense which a reasonable investigation would have proved

to be without merit. RCW 48.01.030; Indus. Indem. Co. of the N.W., Inc. v. Kallevig, 114 Wn.2d

907, 916-917 (1990). A breach of the insurer's duty may lead to a Consumer Protection Act claim by

the insured. James E. Torina Fine Homes, Inc. v. Mut. of Enumclaw Ins. Co., 118 Wn.App. 12, 20

(2003). When a CPA claim is based upon an insurer's denial of coverage, an insured must show more

than an incorrect denial of coverage. The insured must also establish that the insurer acted “without

reasonable justification” in denying coverage. The test is not whether the insurer's interpretation is

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26 ORDER - 5

correct, but whether the insurer's conduct was reasonable. James E. Torina Fine Homes, at 21;

Kallevig, at 917. What is determinative is the reasonableness of the insurer's action in light of all the

facts and circumstances of the case. Kallevig, at 920. Whether an insurer acted in bad faith is a

question of fact. However, questions of fact may be determined as a matter of law if reasonable

minds could reach but one conclusion. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 484-85 (2003). 

This includes the determination that an investigation was reasonable. See Rizzuti v. Basin Travel

Service of Othello, Inc., 125 Wn.App. 602, 618 (2005). 

Washington law permits an insurer in any life insurance policy to limit its liability to a

determinable amount not less than the full reserve of the policy and of dividend additions thereto in

the event of death occurring as a result of the suicide of the insured, whether sane or insane, within

two years from the date of the policy. RCW 48.23.260. It is undisputed that the Valley Forge life

insurance policy issued to Mr. Lloyd contained such a limitation on coverage. It is also undisputed

that Mr. Lloyd’s death occurred within two years of issuance of the policy.

Washington common law provides for a presumption against suicide in ordinary life insurance

policy cases. The presumption requires the plaintiff to prove a valid life insurance contract and the

death of the insured. It is then the burden of the insurer to prove suicide by a preponderance of the

evidence. Gould v. Mutual Life Ins. Co. of New York, 95 Wn.2d 722, 725 (1981). The insurer may

overcome the presumption against suicide by preponderance of evidence. Trotland v. New England

Mut. Life Ins. Co., 1 Wn.App. 303 (1969). Here the insurer’s investigation revealed government

documentation of death by suicide. These consist of the records of police department, medical

examiner, and the death certificate, which all conclude Mr. Lloyd died as a result of suicide. 

Additionally, the investigation revealed Mr. Lloyd had attempted suicide twice in the past and was

presently in serious financial difficulties.

Here, a reasonable investigation supports Valley Forge’s application of the suicide provision. 

A reasonable inquiry showed that the suicide exclusion defense has considerable merit. This Circuit

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held in Gould v. Mutual Life Ins. Co. of New York, 735 F.2d 1165, 1166-67 (9th Cir. 1984) that in

the face of a debatable question of suicide, the insurer did not commit bad faith or violate the CPA in

denying coverage. The insurer’s investigation provided a reasonable and valid ground on which to

oppose payment of the proceeds. The denial of benefits due to a debatable question of coverage did

not demonstrate bad faith.

Similarly, although affirming a verdict of coverage, the Tenth Circuit held that an insurer did

not act in bad faith during its investigation of insured death in concluding, in conformity with accident

and medical examiner reports, that insured had committed suicide. Sims v. Great American Life Ins.

Co., 469 F.3d 870, 875-76,891-92 (10th Cir. 2006).

The Court finds that Valley Forge’s investigation was reasonable and the claims based on an

unreasonable investigation are futile as they would be subject to dismissal.

CONCLUSION

For the above stated reasons, Plaintiff’s motion to amend complaint will be denied as futile.

ACCORDINGLY;

IT IS HEREBY ORDERED:

Plaintiff’s Motion to Amend Complaint [Dkt #23 ] is DENIED.

DATED this 30th day of March, 2007.

 

FRANKLIN D. BURGESS

UNITED STATES DISTRICT JUDGE

A

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