Court Opinion

ID: 804201
Source: CourtListenerOpinion
Date Created: 2012-07-12 17:24:31+00
Date Added: 2024-06-11T18:00:11.382976
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

GAIL MICHELMAN, an individual,          
                Plaintiff-Appellant,
                v.                             No. 11-35393
LINCOLN NATIONAL LIFE INSURANCE
COMPANY, a foreign insurance                    D.C. No.
                                            2:10-cv-00271-RSL
company; JOHN AND JANE DOES, 1-
                                                 OPINION
10 and the marital communities
comprised thereof,
            Defendants-Appellees.
                                        
        Appeal from the United States District Court
          for the Western District of Washington
         Robert S. Lasnik, District Judge, Presiding

                    Argued and Submitted
              June 4, 2012—Seattle, Washington

                      Filed July 12, 2012

     Before: Barry G. Silverman and Mary H. Murguia,
     Circuit Judges, and Dolly M. Gee,* District Judge.

                     Opinion by Judge Gee

  *The Honorable Dolly M. Gee, United States District Judge for the
Central District of California, sitting by designation.

                               8023
8026        MICHELMAN v. LINCOLN NATIONAL LIFE

                       COUNSEL

Dan’L Bridges, McGaughey Bridges Dunlap, PLLC, Belle-
vue, Washington, for the plaintiff-appellant.

Walter E. Barton, Johanna M. Coolbaugh, Medora A.
Marisseau (argued), Karr Tuttle Campbell, Seattle, Washing-
ton, for the defendants-appellees.
             MICHELMAN v. LINCOLN NATIONAL LIFE            8027
                          OPINION

GEE, District Judge:

   We are asked to decide whether an adverse claim to a stake
may be so lacking in substance that a neutral stakeholder can-
not interplead in good faith. Interpleader is proper when a
stakeholder has at least a good faith belief that there are con-
flicting colorable claims. We conclude that Appellee met this
requirement.

                    I.   BACKGROUND

   Gail and Irwin Michelman submitted a life insurance appli-
cation to Lincoln National Life Insurance Company in 1999
to obtain coverage for their minor daughter, Elizabeth. At the
time, Gail and Irwin were married. The application listed Gail
and Irwin as the primary beneficiaries and their other daugh-
ter, Jessica, as a contingent beneficiary. The application des-
ignated Gail as the policy owner, with policy ownership
passing to Elizabeth upon her 21st birthday. Lincoln subse-
quently issued the policy memorializing this.

   Whether Irwin also had an ownership interest in Elizabeth’s
life insurance policy is less certain. The insurance contract
unhelpfully defined the policy “Owner”—in the singular—as
“the Owner identified in the application or a successor.”
Although Irwin’s name was written on the line of the applica-
tion designated for the “Contingent owner,” the Michelmans
may have intended for Irwin to be a primary rather than a con-
tingent owner. The application form did not provide a space
for more than one primary owner. Nonetheless, in the space
to be completed “[i]f two or more Primary owners are
named,” the Michelmans checked the box indicating that they
were to be joint owners with a right of survivorship between
them.

  The Michelmans themselves dispute what their intent was.
Irwin testified at his deposition that he and Gail intended for
8028            MICHELMAN v. LINCOLN NATIONAL LIFE
both of them to be primary owners of the policy, but that his
name was listed on the line for “Contingent owner” because
there was no space on the form to insert the name of the sec-
ond primary owner. At Gail’s deposition, she expressed her
belief that Irwin was only a contingent owner. For its part,
Lincoln was inconsistent on the ownership issue. Its records
reflected that Gail was the policy’s primary owner and Irwin
was the contingent owner, but its claims examiner stated in a
declaration that the insurance application names Gail and
Irwin as joint owners.

   Gail and Irwin divorced in 2001. The divorce decree did
not include Elizabeth’s life insurance policy among the assets
that it catalogued. In 2002, when Elizabeth had not yet
reached the age of 21, Gail submitted a change-of-beneficiary
form to Lincoln purporting to remove Irwin as a beneficiary
and leave herself as the sole primary beneficiary and Jessica
as the contingent beneficiary. Lincoln acknowledged this
change a few days later in a letter to Gail.1

   Elizabeth died on August 10, 2009 at the age of 22.
Although the autopsy revealed no clear cause of death, the
medical examiner found that Elizabeth’s multiple sclerosis
and the high level of oxycodone in her blood were contribut-
ing factors. Elizabeth’s parents raised concerns about what
they considered to be suspicious circumstances surrounding
their daughter’s death,2 but the sheriff’s department found no
evidence that another person was involved. Gail, who was out
of state at the time of Elizabeth’s death, was never suspected
of foul play.
  1
     The letter indicates that Lincoln sent a copy to Irwin, as the insurance
agent who sold the policy, at The Michelman Agency, Inc. Irwin alleged
in his cross- and counterclaim that he did not receive proper notice of the
change in beneficiary, but never produced evidence to support this allega-
tion.
   2
     Elizabeth’s two cell phones were missing, as was the key to her trailer.
In addition, her bed was uncharacteristically neat.
             MICHELMAN v. LINCOLN NATIONAL LIFE                8029
   On August 17, 2009, Irwin called Lincoln and stated that
Lincoln should look for fraud in the beneficiary information
for Elizabeth’s life insurance policy. Irwin told Lincoln that
he and his wife were originally equal beneficiaries under the
policy and that their divorce decree prohibited any changes.

  On September 21, 2009, Irwin’s attorney wrote a letter to
Lincoln requesting that it not pay any benefits on Elizabeth’s
policy before certain issues were resolved:

      Please be advised that Elizabeth Ann Michelman
    has died under suspicious circumstances and that her
    death is currently being investigated by the police as
    a possible homicide.

       When questioned upon Elizabeth’s death Gail S.
    Michelman claimed that Elizabeth’s life insurance
    policy with Lincoln Financial Group had lapsed sev-
    eral years ago when in fact it was in full force. Eliza-
    beth’s life insurance policy is a community property
    asset of the Michelman’s marriage that was not
    awarded to either party in their divorce. It has also
    come to Irwin Michelman[’s] attention that Gail
    Michelman[,] in violation of an agreement that she
    had with Mr. Michelman[,] changed the beneficiary
    on Elizabeth’s life policy without his knowledge or
    permission. It also appears that Lincoln Financial
    Group failed to contact Elizabeth Michelman about
    naming a new beneficiary upon reaching adulthood.

On September 30, 2009, Irwin submitted a completed claim
form to Lincoln requesting the policy proceeds.

  Lincoln wrote to Gail and Irwin on October 12, 2009. Lin-
coln informed them that its records showed Gail to be the
beneficiary but acknowledged that Irwin had made a conflict-
ing claim. Admitting that the policy proceeds were due and
payable, Lincoln explained that by paying one party it faced
8030          MICHELMAN v. LINCOLN NATIONAL LIFE
the risk of being sued by the other. The solution, Lincoln con-
cluded, was to file an interpleader action unless Gail and
Irwin could agree how to distribute the proceeds. Although
Gail and Irwin subsequently exchanged letters regarding set-
tlement proposals, some of which they shared with Lincoln,
they failed to reach an accord.

   Gail submitted a claim form on October 22, 2009. In the
accompanying letter, she stated that Irwin had no valid claim
and that an action in interpleader would be “frivolous.” Gail
asserted that Lincoln bore the responsibility of resolving any
dispute between her and Irwin. She asked Lincoln what proof
Irwin had offered in support of his claim.

   Over the next three months, Gail and Irwin exchanged a
series of letters and telephone calls. Gail repeatedly pressed
her position that she was the beneficiary, Irwin had no legiti-
mate claim to the insurance proceeds, and Lincoln was obli-
gated to pay her rather than force her to litigate against her ex-
husband. Lincoln maintained that the policy proceeds were
due and payable, Gail was the current beneficiary according
to its records, but it could not pay Gail while Irwin disputed
the validity of the 2002 change removing him as a benefi-
ciary. Lincoln reiterated its plan to file an interpleader action
unless Gail and Irwin resolved their conflicting claims within
30 days. Other than requesting that Irwin provide proof of his
claim, Lincoln never conducted any further investigation into
the truth of Irwin’s allegations.

   On January 15, 2010, Gail filed suit in state court to
recover the insurance proceeds, asserting claims against Lin-
coln for bad faith, violation of Washington’s Consumer Pro-
tection Act (“CPA”), Wash. Rev. Code § 19.86, and breach of
contract. Lincoln removed the action to federal court on the
basis of diversity of citizenship. Seeking to interplead the
insurance funds, Lincoln filed a counterclaim against Gail and
a third party complaint against Irwin.
             MICHELMAN v. LINCOLN NATIONAL LIFE           8031
   Before discovery had commenced, Lincoln moved for sum-
mary judgment on all of Gail’s claims. In its August 10, 2010
order, the district court denied Gail’s request for a continu-
ance and granted Lincoln’s summary judgment motion in
part. The court found that interpleader was appropriate and
dismissed Gail’s claim for breach of contract but denied sum-
mary judgment as to Gail’s bad faith and CPA claims, finding
that they were independent of Lincoln’s ultimate coverage
decision.

  After discovery concluded, Gail moved the district court to
vacate its August 10 summary judgment order and, when that
motion was denied, moved the court to reconsider its denial
of the motion to vacate. The district court denied Gail’s
motion for reconsideration.

  Gail and Lincoln each moved for summary judgment on
Gail’s remaining claims and Irwin’s cross- and counterclaims.
The district court granted summary judgment in favor of Gail
and Lincoln on Irwin’s claims and determined that Gail was
entitled to all of the proceeds from Elizabeth’s life insurance
policy. Irwin has not appealed those decisions. On March 2,
2011, the district court granted summary judgment in favor of
Lincoln on Gail’s extracontractual claims, finding that Lin-
coln acted in compliance with state insurance regulations.
Gail now appeals that order, the August 10, 2010 summary
judgment order, and the orders denying her motion to vacate
and motion for reconsideration.

II.   JURISDICTION AND STANDARDS OF REVIEW

   The district court had jurisdiction under 28 U.S.C.
§§ 1332(a) and 1446. We have jurisdiction under 28 U.S.C.
§ 1291.

  Review of the district court’s summary judgment rulings is
de novo. Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105,
1110 (9th Cir. 2012) (citing Fortune Dynamic, Inc. v. Victo-
8032         MICHELMAN v. LINCOLN NATIONAL LIFE
ria’s Secret Stores Brand Mgmt., 618 F.3d 1025, 1031 (9th
Cir. 2010)). “[W]e must determine, viewing the evidence in
the light most favorable to the non-moving party, whether
there are any genuine issues of material fact and whether the
district court correctly applied the substantive law.” Cruz v.
Int’l Collection Corp., 673 F.3d 991, 996 (9th Cir. 2012)
(quoting Baccei v. United States, 632 F.3d 1140, 1145 (9th
Cir. 2011)) (internal quotation marks omitted).

   The denial of a request for a continuance of summary judg-
ment pending further discovery is reviewed for an abuse of
discretion. Asset Mktg. Sys., Inc. v. Gagnon, 542 F.3d 748,
754 (9th Cir. 2008) (citing Volk v. D.A. Davidson & Co., 816
F.2d 1406, 1417 (9th Cir. 1987)). A district court abuses its
discretion only if the party requesting a continuance can show
that allowing additional discovery would have precluded sum-
mary judgment. Johnson v. Neilson (In re Slatkin), 525 F.3d
805, 810 (9th Cir. 2008) (quoting Bank of Am., NT & SA v.
PENGWIN, 175 F.3d 1109, 1118 (9th Cir. 1999)).

  The district court’s refusal to reconsider or vacate summary
judgment is also reviewed for an abuse of discretion. See
Goodstein v. Cont’l Cas. Co., 509 F.3d 1042, 1051 (9th Cir.
2007) (quoting M2 Software, Inc. v. Madacy Entm’t, 421 F.3d
1073, 1086 (9th Cir. 2005)).

                    III.   DISCUSSION

                     A.    Interpleader

   Although Gail challenges several aspects of the district
court’s rulings, her core contention below and on appeal is
that Lincoln should incur liability for its decision to inter-
plead. She concedes that Lincoln had no obligation to deter-
mine the ultimate truth of Irwin’s competing claim but
maintains that Irwin’s arguments were not cognizable claims
against the policy and, even if they were, Lincoln lacked a
              MICHELMAN v. LINCOLN NATIONAL LIFE              8033
sufficient factual basis to evaluate whether Irwin’s claims
were colorable.

                                1.

   [1] Federal Rule of Civil Procedure 22 authorizes a stake-
holder to join “[p]ersons with claims that may expose [the
stakeholder] to double or multiple liability” and requires such
persons to interplead. Fed. R. Civ. P. 22(a)(1). Here, the dis-
trict court stated that “the bald assertion of a claim against the
policy, without any colorable support, is probably not enough
to warrant an interpleader action.” The court did not consider
the issue further, however, because it found that Lincoln had
a good faith belief that it faced the potential of multiple liabil-
ities. Gail challenges that finding.

   Beginning in 1917, the first three federal interpleader stat-
utes required claimants to be “bona fide” for jurisdictional
purposes. See Act of Feb. 22, 1917, Pub. L. No. 64-346, 39
Stat. 929; Act of Feb. 25, 1925, Pub. L. No. 68-465, 43 Stat.
976; Act of May 8, 1926, Pub. L. No. 69-203, 44 Stat. 416.
This requirement was formally dropped from the statute in
1936, see Act of Jan. 20, 1936, Pub. L. No. 74-422, 49 Stat.
1096, and was not adopted the following year in Federal Rule
of Civil Procedure 22, under which the interpleader here
arises. Nonetheless, courts continue to hold interpleading
stakeholders to a good faith standard. See, e.g., Aaron v.
Mahl, 550 F.3d 659, 663 (7th Cir. 2008); CNA Ins. Cos. v.
Waters, 926 F.2d 247, 251 (3d Cir. 1991).

   [2] This Circuit has never squarely held that a stakeholder
must have a good faith belief about the existence of compet-
ing claims in order to initiate an interpleader action. Gail
directs us to dictum in New York Life Insurance Co. v. Lee,
232 F.2d 811 (9th Cir. 1956). Like the instant case, Lee
involved an insurance beneficiary’s assertion that the insurer
had no right to interplead because it was obvious that the pur-
8034            MICHELMAN v. LINCOLN NATIONAL LIFE
ported adverse claim was sham and frivolous.3 Relying on
out-of-circuit authority, we opined that “[t]here is no doubt
. . . that an asserted adverse claim may be so wanting in sub-
stance that interpleader under the statute may not be justi-
fied.” Id. at 813 (citing John Hancock Mut. Life Ins. Co. v.
Beardslee, 216 F.2d 457, 460 (7th Cir. 1954)). The district
court did not reach the issue, however, and our decision rested
on alternative grounds. See id. at 814 (“[W]e find no occasion
for inquiring whether the alleged [competing] claim was lack-
ing in sufficient substance to warrant interpleader under the
rule applied in [Beardslee].”).

   [3] In other cases, we have implicitly assumed that a good
faith standard applies to interpleader actions. For example, in
Palomas Land & Cattle Co. v. Baldwin, 189 F.2d 936 (9th
Cir. 1951), a claimant argued that the stakeholder had inter-
pleaded in bad faith. We did not question that such a claim
was cognizable, but noted only that the evidence did not war-
rant such a finding. Id. at 938. More recently, in Minnesota
Mutual Life Insurance Co. v. Ensley, 174 F.3d 977 (9th Cir.
  3
    Lee differed from this case in that the propriety of interpleader was
jurisdictional rather than the basis for substantive liability against the
interpleading party. There is no reason why the good faith standard should
depend on whether interpleader is commenced under Rule 22, which
requires an independent basis for subject matter jurisdiction, or under the
interpleader statutes, 28 U.S.C. §§ 1335, 1397, and 2361. The remedy of
interpleader “developed in equity and is governed by equitable principles.”
Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033-34 (9th Cir. 2000)
(quoting Lummis v. White, 629 F.2d 397, 399 (5th Cir. 1980), rev’d on
other grounds by Cory v. White, 457 U.S. 85, 102 S.Ct. 2325, 72 L.Ed.2d
694 (1982)) (internal quotation marks omitted). It is the remedy’s equita-
ble origin—rather than any of the minor differences between statutory and
Rule-based interpleader—that gives rise to the requirement that parties
invoke it in good faith. See Indianapolis Colts v. Mayor of Balt., 741 F.2d
954, 957 (7th Cir. 1984) (citations omitted); see also Texas v. Florida, 306
U.S. 398, 410, 59 S.Ct. 563, 83 L.Ed. 817 (1939) (“The equity jurisdiction
being founded on avoidance of the risk of loss resulting from the threat-
ened prosecution of multiple claims, the risk must be appraised in the light
of the circumstances as they are in good faith alleged and shown to exist
at the time when the suit was brought.” (citations omitted)).
              MICHELMAN v. LINCOLN NATIONAL LIFE             8035
1999), we held that an insurer’s “good faith belief that it faced
the possibility of multiple claims” foreclosed a claimant’s
breach of contract claim because the insurer had “satisfied its
obligation under the contract by instituting the interpleader
action.” Id. at 981. This Circuit has also held that courts may
impose the costs of suit on a stakeholder who interpleads in
bad faith. See Gelfgren v. Republic Nat’l Life Ins. Co., 680
F.2d 79, 81 (9th Cir. 1982) (citing Murphy v. Travelers Ins.
Co., 534 F.2d 1155, 1164 (5th Cir. 1976)). All of these deci-
sions presuppose a good faith requirement.

   [4] Therefore, we agree with the principle articulated in
Lee and now expressly hold that in order to avail itself of the
interpleader remedy, a stakeholder must have a good faith
belief that there are or may be colorable competing claims to
the stake. This is not an onerous requirement. See 4 James
Wm. Moore, Moore’s Federal Practice § 22.03[1][c] (3d ed.
1997) (“In most cases, it is not difficult for the stakeholder to
meet the requirement of a reasonable or good faith fear of
multiple litigation, and courts appear to require merely that
the stakeholder’s concern in this regard be more than conjec-
tural.”).

   The threshold to establish good faith is necessarily low so
as not to conflict with interpleader’s pragmatic purpose,
which is “for the stakeholder to ‘protect itself against the
problems posed by multiple claimants to a single fund.’ ”
Mack v. Kuckenmeister, 619 F.3d 1010, 1024 (9th Cir. 2010)
(quoting Ensley, 174 F.3d at 980). The possibility of double
liability is only one such problem; another is the cost of litiga-
tion, which does not depend on the merits of adverse claims.
Id. (citing Trs. of Dirs. Guild of Am.–Producer Pension Bene-
fits Plans v. Tise, 234 F.3d 415, 426 (9th Cir. 2000)); see also
N.Y. Life Ins. Co. v. Welch, 297 F.2d 787, 790 (D.C. Cir.
1961) (“A stakeholder, acting in good faith, may maintain a
suit in interpleader to avoid the vexation and expense of
resisting adverse claims, even though he believes only one of
them is meritorious.”).
8036          MICHELMAN v. LINCOLN NATIONAL LIFE
   [5] Although an interpleading stakeholder need not sort out
the merits of conflicting claims as a prerequisite to inter-
pleader, good faith requires a real and reasonable fear of
exposure to double liability or the vexation of conflicting
claims. See Union Cent. Life Ins. Co. v. Hamilton Steel
Prods., Inc., 448 F.2d 501, 504 (7th Cir. 1971) (“[S]o long as
there exists a real and reasonable fear of exposure to double
liability or the vexation of conflicting claims . . . , jurisdiction
in interpleader is not dependent upon the merits of the claims
of the parties interpleaded . . . .” (internal quotation marks
omitted)); accord Wash. Elec. Co-op., Inc. v. Paterson, Walke
& Pratt, P.C., 985 F.2d 677, 679 (2d Cir. 1993).

   [6] A “real and reasonable fear” does not mean that the
interpleading party must show that the purported adverse
claimant might eventually prevail. Aaron, 550 F.3d at 663.

    Of course, the claims of some interpleaded parties
    will ultimately be determined to be without merit.
    That, however, is the very purpose of the proceeding
    and it would make little sense in terms either of pro-
    tecting the stakeholder or of doing justice expedi-
    tiously to dismiss one possible claimant because
    another possible claimant asserts the claim of the
    first is without merit.

Id. (quoting Hamilton Steel Prods., 448 F.2d at 504) (internal
quotation marks omitted) (citing Beardslee, 216 F.2d at 460).
Rather, the stakeholder is required to demonstrate that the
adverse claim has a “minimal threshold level of substantiali-
ty.” Id. (quoting Indianapolis Colts, 741 F.2d at 958); accord
Equitable Life Assurance Soc’y of the United States v. Porter-
Englehart, 867 F.2d 79, 84 (1st Cir. 1989) (“[T]o support an
interpleader action, the adverse claims need attain only ‘a
minimal threshold level of substantiality.’ ” (quoting 7
Charles Alan Wright et al., Federal Practice & Procedure
§ 1704 (2d ed. 1986))). The adverse claim—whether actual or
potential—must be at least colorable. See Fonseca v. Regan,
             MICHELMAN v. LINCOLN NATIONAL LIFE             8037
734 F.2d 944, 948-50 (2d Cir. 1984); Dunbar v. United
States, 502 F.2d 506, 511 (5th Cir. 1974); cf. Bauer v.
Uniroyal Tire Co., 630 F.2d 1287, 1292 (8th Cir. 1980)
(describing interpleader claimants as having “a colorable
interest in the fund”).

   This rule is consistent with our prior decisions. In Ensley,
there was doubt as to whether the insured’s brother or wife
was the beneficiary of his life insurance policy. The insured
originally owned the policy. The policy named his wife as the
beneficiary. A document that the wife may or may not have
forged purported to transfer ownership to her. After an inves-
tigation, the insured contacted the insurance company, which
restored the policy ownership to him. He then designated his
brother as the sole beneficiary. The insured and his wife sub-
mitted a stipulated decree to dissolve their marriage, but the
insured died five days before the state court entered it and
thus was legally married at the time of his death. Ensley, 174
F.3d at 979-80.

   Although the insured’s brother was the only person to file
a claim to the insurance proceeds, we held that interpleader
was proper because the insurer faced potential liability to both
the wife and the brother. Id. at 981. As we explained, inter-
pleader “extends to potential, as well as actual, claims.” Id. at
980 (citing 28 U.S.C. § 1335(a); Dakota Livestock Co. v.
Keim, 552 F.2d 1302, 1308 (8th Cir. 1977)).

   Mack also illustrates the minimal threshold of substantiality
required for interpleader. The owner of a 401(k) plan was in
the process of divorcing his wife and had stipulated to a court
order naming her as an alternate plan payee. Before the order
could be entered, however, the plan owner murdered his wife
and shot the state court judge presiding over their divorce.
The state court entered an order nunc pro tunc transferring the
plan payment to the wife as of a date prior to her death. While
this decision was being appealed, the plan trustee filed an
interpleader action to resolve the competing claims between
8038         MICHELMAN v. LINCOLN NATIONAL LIFE
the plan owner and the deceased wife’s estate. Mack, 619
F.3d at 1014-15.

   We held that interpleader was proper even though the state
court’s order had been affirmed by the state supreme court
and the state court’s judgment was not preempted by federal
law as the plan owner had argued. That the district court ulti-
mately disposed of the plan owner’s adverse claim to the plan
proceeds did not render interpleader improper because the dis-
trict court could not have made that determination without
first addressing the claim’s merits. Id. at 1023-24. We
explained that evaluating a claim’s merits before determining
that interpleader is appropriate “is backwards of the usual
order, and would defeat the resource-conservation purposes of
interpleader.” Id. at 1024 (citing John Hancock Mut. Life Ins.
Co. v. Kraft, 200 F.2d 952, 954 (2d Cir. 1953)).

   In contrast, the Seventh Circuit’s decision in Beardslee,
which we cited approvingly in Lee, addressed a situation
where the facts did not justify interpleader. The designated
beneficiary of a life insurance policy had changed back and
forth several times between the insured’s daughter and wife.
Beardslee, 216 F.2d at 458. While the wife was the desig-
nated beneficiary, the insured and his daughter discussed
changing the policy again to designate the daughter as the
beneficiary, but the insurer falsely told them that the benefi-
ciary could not be changed. Id. at 458, 460.

   After the insured’s death, the daughter sent a letter to the
insurer in which she explained the situation and expressed her
hope that the insurer would be able to help her cover the
insured’s medical and burial expenses. She noted that the
insurance proceeds would have been just enough to cover
those expenses and added that her letter would have been
unnecessary if, before her father’s death, the insurer had been
honest about his ability to change the beneficiary. Id. at 460-
61.
             MICHELMAN v. LINCOLN NATIONAL LIFE            8039
   The Seventh Circuit found that the insurer was unreason-
able in filing the interpleader action because the daughter had
no actual or potential claim against the policy. The only possi-
ble legal claim by the daughter to any money from the insurer
would have been a tort action based on the alleged misinfor-
mation given to her by the insurer about the possibility of
changing the policy. This potential claim was not a basis for
interpleader because it did not suggest the daughter’s entitle-
ment to the policy proceeds. Id. at 461.

   [7] As these cases illustrate, a stakeholder must interplead
in good faith, but the threshold showing is not exacting. Inter-
pleader is appropriate where the stakeholder reasonably fears
that there may be multiple parties with colorable adverse
claims to the stake. We now consider whether Lincoln met
this standard.

                               2.

   Irwin submitted a claim form to Lincoln requesting that it
pay him the proceeds of Elizabeth’s life insurance policy.
While this conduct evinces Irwin’s claim to the policy pro-
ceeds, this does not end the inquiry as to whether Irwin’s
claim was colorable. At the time Lincoln decided to inter-
plead, its only clues as to Irwin’s grounds for entitlement to
the policy proceeds were its own records of the policy,
Irwin’s phone call, and his attorney’s subsequent letter in
which he asked Lincoln to refrain from paying Gail the pro-
ceeds of Elizabeth’s life insurance policy until several issues
were resolved.

                               a.

   First, Irwin intimated that Gail may have played a role in
Elizabeth’s death. The district court felt that the ongoing
investigation into Elizabeth’s cause of death raised the possi-
bility that the designated beneficiary could be legally barred
from recovering.
8040         MICHELMAN v. LINCOLN NATIONAL LIFE
   Washington’s slayer statute prohibits recovery of life insur-
ance proceeds by a beneficiary complicit in the insured’s
death. See Wash. Rev. Code § 11.84.100(1). If the slayer stat-
ute had precluded Gail from recovering the insurance pro-
ceeds, these funds would have been payable to Jessica, the
contingent beneficiary. Such an eventuality would not have
supported a claim by Irwin.

   [8] Furthermore, by the time Lincoln actually filed its
counterclaim in interpleader, it had become evident from the
final autopsy report that Gail had no involvement in Eliza-
beth’s death. Therefore, Irwin’s allegations of “suspicious cir-
cumstances” surrounding Elizabeth’s death did not support
Lincoln’s decision to interplead.

                              b.

   [9] Next, Irwin claimed that Gail was questioned about
Elizabeth’s life insurance policy after Elizabeth’s death and
Gail falsely stated that the policy had lapsed. Irwin did not
explain who questioned Gail or how this alleged misrepresen-
tation, without more, would support his claim against the pol-
icy. Much like the innuendo relating to the suspicious
circumstances of Elizabeth’s death, this assertion appears to
be aimed more at undermining Gail’s credibility than bolster-
ing Irwin’s contractual entitlement to the policy proceeds.
This claim, if it can be described as such, did not constitute
a colorable claim that would justify interpleader.

                               c.

   [10] In addition, Irwin claimed to have a side agreement
with Gail that precluded her from removing him as a benefi-
ciary without his knowledge or permission. Even if this were
true, the fact that Gail violated an agreement with Irwin to
which Lincoln was not a party would not invalidate the
change in beneficiary. See Wash. Rev. Code § 48.18.190 (“No
agreement in conflict with, modifying, or extending any con-
              MICHELMAN v. LINCOLN NATIONAL LIFE           8041
tract of insurance shall be valid unless in writing and made a
part of the policy.”). Such a claim supplied no basis for inter-
pleader.

                                     d.

   [11] Irwin also asserted in his letter that Lincoln did not
contact Elizabeth when she turned 21 about naming a new
beneficiary. This fact could not serve as the basis for a claim
against the policy because it does not call into question Gail’s
status as the sole beneficiary. Assuming Lincoln had an obli-
gation to contact Elizabeth about naming a new beneficiary—
Irwin provided no hint as to the source of such an obligation
—Lincoln’s apparent failure to meet it would not support a
colorable claim against the policy. As in Beardslee, any
recovery to which Irwin might be entitled would come from
Lincoln individually rather than from Elizabeth’s policy. See
216 F.2d at 461.

                                     e.

   Lastly, Irwin informed Lincoln that Elizabeth’s life insur-
ance policy was a community property asset of his marriage
to Gail that was not awarded to either party in their divorce.
This was true. See Wash. Rev. Code § 48.18.440(1) (“[T]he
beneficial interest of a spouse in a policy upon the life of a
child of the spouses, however such interest is created, shall be
deemed to be a community interest and not a separate interest,
unless expressly otherwise provided by the policy.”). We have
previously upheld the validity of interpleader based on a
claimant’s “possible community property interest in [insur-
ance] proceeds.” Bayona, 223 F.3d at 1034 n.3.

  Although Elizabeth’s insurance policy provided that the
owner could change the beneficiary designation,4 the insur-
  4
   The policy provided as follows:
8042           MICHELMAN v. LINCOLN NATIONAL LIFE
ance application—and the policy itself insofar as it incorpo-
rated the application’s ownership designation—was
ambiguous whether Gail was the sole owner or whether she
and Irwin jointly owned it. This difference was material. To
the extent Gail and Irwin were joint owners, they became ten-
ants in common of the policy at the time of their divorce
because the dissolution decree failed to provide for the poli-
cy’s disposition. See Yeats v. Yeats’ Estate, 580 P.2d 617, 620
(Wash. 1978). As a tenant in common, Gail could not have
divested Irwin of his one-half beneficial interest in the policy
without his consent. See generally In re Foreclosure of Liens,
922 P.2d 73, 77-78 (Wash. 1996) (discussing co-tenant’s
rights and circumscriptions).

   [12] Undoubtedly, Gail possessed affirmative defenses
such as laches or ratification of the change by Irwin or Eliza-
beth, but that is beside the point. Interpleader is designed so
that stakeholders do not have to make legal predictions about
the merits of claims without the benefit of civil discovery.
The ambiguity as to primary ownership of the policy appeared
on the face of the insurance application, which Lincoln
already had in its possession. Given the uncertainty about
Irwin’s ownership of the policy, Lincoln had a reasonable fear
that Gail and Irwin would make overlapping claims to the
proceeds.

   Change of Beneficiary. The Owner may change the beneficiary
   designation:
   a.   while the Insured is alive; and
   b.   if the prior designation does not prohibit such a change.
   The request to change the Beneficiary designation must be in
   writing on a form acceptable to Us. We reserve the right to
   require this Policy for endorsement of a change of Beneficiary.
   A change of Beneficiary will revoke any prior Beneficiary desig-
   nation.
                MICHELMAN v. LINCOLN NATIONAL LIFE                      8043
   We reject Gail’s contention that Lincoln should have inves-
tigated further before interpleading. Interpleader proceedings
are pragmatic in nature and should be resolved expeditiously.
See Excess & Cas. Reinsurance Ass’n v. Ins. Comm’r, 656
F.2d 491, 497 (9th Cir. 1981); see also Hunter v. Fed. Life
Ins. Co., 111 F.2d 551, 557 (8th Cir. 1940) (“The remedy of
interpleader should, of course, be a simple, speedy, efficient
and economical remedy.”). It is this ease and efficiency that
makes interpleader a valuable procedural device for insurers
to resolve conflicting claims upon the proceeds of an insur-
ance policy. Cf. Tise, 234 F.3d at 426. Requiring a stake-
holder to investigate further when an adverse claimant has
already asserted a colorable claim against the stake would
diminish interpleader’s purpose of limiting litigation expenses.5
Because Irwin had a colorable claim to the insurance pro-
ceeds, Lincoln need not have expended additional time or
resources trying to assess the merits of his claim.

   The availability of interpleader need not produce a harsh
result for a legitimate claimant who is forced into interpleader
due to a rival claimant’s non-meritorious assertions. Although
judgment in interpleader ordinarily entitles the stakeholder to
an award of attorneys’ fees from the interpleaded funds for
work performed filing the action in interpleader, see Schirmer
Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d
188, 194 (9th Cir. 1962), these fees are normally not high.
Moreover, a district court has great discretion in apportioning
the stakeholder’s fees among the winning and losing claim-
ants, see id. at 194-95, providing a mechanism for vexatious
claimants to incur the costs of their meritless claims. Gail
chose not to seek attorneys’ fees from Irwin.6
  5
     This is not to suggest that a stakeholder never has a duty to investigate
an adverse claim before interpleading. We hold only that, under the facts
of this case, Lincoln had sufficient information in its possession to verify
the existence of a colorable claim when it decided to interplead.
   6
     Although Gail appeals the order granting attorneys’ fees to Lincoln,
she does not challenge the fee order on independent grounds but seeks its
reversal only if the summary judgment orders are reversed.
8044          MICHELMAN v. LINCOLN NATIONAL LIFE
                                 3.

   [13] We conclude that Lincoln interpleaded in good faith.
It knew from Irwin’s phone call that Irwin had a potential
claim arising from his asserted co-ownership of the policy and
Gail’s unilateral change to the beneficiary designation. The
ambiguity of the insurance application showed that Irwin’s
assertion was not frivolous. While this alone sufficed to jus-
tify interpleader, Irwin took additional steps that further indi-
cated his intent to litigate. He had his attorney send Lincoln
a letter requesting that it refrain from paying Gail the policy
proceeds. He filed a claim form demanding the policy pro-
ceeds. Lincoln thus had a real and reasonable fear of colorable
conflicting claims. Consequently, the district court’s judgment
in interpleader was proper.

                    B.   Breach of Contract

   [14] The district court also did not err in granting Lincoln
summary judgment on Gail’s claim that Lincoln breached the
insurance policy. From the beginning, Lincoln admitted that
the policy proceeds were due and payable. It promptly depos-
ited them with the district court. Lincoln’s good faith decision
to interplead entitled it to summary judgment on Gail’s con-
tractual claim. See Ensley, 174 F.3d at 981. Because the dis-
trict court’s summary judgment order was proper, the court
did not abuse its discretion by denying Gail’s subsequent
motion to vacate the order and, thereafter, Gail’s motion for
reconsideration.

   Gail also appeals the district court’s denial of her motion
for a continuance of the summary judgment proceedings. Rule
56(d) offers relief to a litigant who, faced with a summary
judgment motion, shows the court by affidavit or declaration
that “it cannot present facts essential to justify its opposition.”
Fed. R. Civ. P. 56(d).7 The court may “(1) defer considering
  7
   Gail moved under former Rule 56(f), which is substantively the same
as current Rule 56(d).
             MICHELMAN v. LINCOLN NATIONAL LIFE            8045
the motion or deny it; (2) allow time to obtain affidavits or
declarations or to take discovery; or (3) issue any other appro-
priate order.” Id.

  [15] Gail requested time to discover information regarding
Lincoln’s procedures for investigating and resolving disputes
over life insurance proceeds between ex-spouses, the steps it
took to investigate Irwin’s claim, and its underwriting file.
Gail did not submit an affidavit or declaration in support of
her request. More importantly, as the district court correctly
observed, none of Gail’s proposed discovery pertained to her
breach of contract claim. Therefore, the district court did not
abuse its discretion in denying a continuance.

  C.   Bad Faith and Consumer Protection Act Claims

   Lastly, Gail challenges the district court’s grant of sum-
mary judgment in favor of Lincoln on her bad faith and CPA
claims. These claims were predicated on alleged violations of
state insurance regulations and Washington’s Insurance Fair
Conduct Act (“IFCA”), Wash. Rev. Code §§ 48.30.010(7),
48.30.015. The district court concluded that, for the most part,
Lincoln had not violated the statutory and regulatory provi-
sions at issue. In the two instances where the district court
found that Lincoln had failed to comply with the insurance
code, it determined that Gail did not suffer any compensable
injury as a result.

  An insurer’s bad faith handling of an insurance claim, like
any other tort, is analyzed according to the principles of duty,
breach, and proximately caused damages. Mut. of Enumclaw
Ins. Co. v. Dan Paulson Constr., Inc., 169 P.3d 1, 8 (Wash.
2007) (quoting Smith v. Safeco Ins. Co., 78 P.3d 1274, 1277
(Wash. 2003)). The insurer commits bad faith if its actions are
unreasonable, frivolous, or unfounded. Id. (quoting Kirk v.
Mt. Airy Ins. Co., 951 P.2d 1124, 1126 (Wash. 1998)).

   Washington regulations define specific acts and practices
that breach an insurer’s duty of good faith. Am. Mfrs. Mut.
8046            MICHELMAN v. LINCOLN NATIONAL LIFE
Ins. Co. v. Osborn, 17 P.3d 1229, 1234 (Wash. Ct. App. 2001)
(citing Wash. Rev. Code § 48.30.010; Wash. Admin. Code
§§ 284-30-300 to -800; Tank v. State Farm Fire & Cas. Co.,
715 P.2d 1133, 1136 (Wash. 1986)). In addition, a breach of
these regulations—in particular any subsection of Washington
Administrative Code (“WAC”) section 284-30-330—
constitutes a per se unfair trade practice violation that is inde-
pendently actionable under the CPA. See Osborn, 17 P.3d at
1234.

                                     1.

   [16] An insurer acts in bad faith by “[f]ailing to adopt and
implement reasonable standards for the prompt investigation
of claims,” Wash. Admin. Code § 284-30-330(3), and
“[r]efusing to pay claims without conducting a reasonable
investigation,” id. § 284-30-330(4). The district court did not
point to any specific policy that Lincoln utilized when investi-
gating claims other than to have its claims adjusters use their
common sense.8 Nonetheless, it decided that any violation of
WAC 284-30-330(3) and (4) was harmless because Irwin had
asserted a colorable claim and any further investigation would
have been irrelevant.

   [17] Lincoln did not refuse to pay a claim. It fully
acknowledged that it owed Elizabeth’s insurance proceeds to
somebody. Lincoln merely refused to pay any particular
claimant until a court determined who was legally entitled to
the proceeds. This was fully consistent with state law. See
Farmers Ins. Co. of Wash. v. Romas, 947 P.2d 754, 759
(Wash. Ct. App. 1997) (concluding that insurer did not act in
bad faith by filing interpleader action because “it was not
unreasonable for [the insurer] to take the position that a find-
  8
   In fact, the record indicates that Lincoln’s policy was to have its claims
adjusters verify that a second party intended to submit a competing claim,
consult with the legal department, and, if necessary, notify the claimants
of Lincoln’s intent to file an interpleader action.
             MICHELMAN v. LINCOLN NATIONAL LIFE             8047
ing first needed to be made as to who was the ‘insured person’
under its policy”). Thus, Gail’s claim under WAC 284-30-
330(4) necessarily fails.

   We agree with the district court that, to the extent Lincoln’s
claims investigation policy was unreasonable, any shortcom-
ings in the policy were harmless. Lincoln’s decision to inter-
plead was sound and it had no duty to investigate thereafter.
The district court properly granted Lincoln summary judg-
ment on Gail’s claim under WAC 284-30-330(3).

                               2.

   WAC 284-30-330(1) prohibits an insurer from
“[m]isrepresenting pertinent facts or insurance policy provi-
sions.” Gail contends that Lincoln violated this subsection
when it (1) implied that Irwin’s claims were being investi-
gated or adjusted in some way; (2) promised to pay the policy
proceeds to the named beneficiary without disclosing an
exception for interpleader; and (3) failed to notify Gail that it
had a policy of not providing information regarding compet-
ing claims.

   [18] The district court correctly rejected Gail’s first argu-
ment because the facts did not support it. As the court
observed, Lincoln “clearly and consistently” informed Gail
that it would file an interpleader action if she and Irwin were
unable to settle their dispute. Lincoln’s only reference to an
adjustment or investigation process was a December 9, 2009
letter acknowledging receipt of a complaint that Gail had filed
with the insurance commissioner and noting that Lincoln’s
compliance department had “requested additional information
for investigation.” The district court did not err in concluding
that this brief statement did not create a triable issue of fact
as to whether Lincoln misrepresented pertinent facts.

   Gail’s second argument—that Lincoln failed to disclose an
interpleader exception to the insurance policy—is also
8048          MICHELMAN v. LINCOLN NATIONAL LIFE
unavailing. Lincoln had no specific policy regarding inter-
pleader. It referred situations involving multiple claims to its
legal department for a determination on a case-by-case basis.
And Lincoln had no duty to disclose the possibility of inter-
pleader generally. “[I]t has long been held to be ‘the universal
law that the statutes and laws governing citizens in a state are
presumed to be incorporated in contracts made by such citi-
zens, because the presumption is that the contracting parties
know the law.’ ” Cornish Coll. of the Arts v. 1000 Va. Ltd.
P’ship, 242 P.3d 1, 12 (Wash. Ct. App. 2010) (quoting
Leiendecker v. Aetna Indem. Co., 101 P. 219, 219 (Wash.
1909)) (citing Fischler v. Nicklin, 319 P.2d 1098, 1100
(Wash. 1958)), review denied, 249 P.3d 1029 (Wash. 2011).

   Finally, the district court correctly concluded that Gail had
failed to show either a policy of not disclosing information
about competing claims or a misrepresentation about such a
policy. Gail fails to highlight any facts in the record that
would refute this conclusion.

                                3.

   An insurer must “acknowledge and act reasonably
promptly upon communications with respect to claims,”
Wash. Admin. Code § 284-30-330(2), and “promptly provide
a reasonable explanation of the basis in the insurance policy
. . . for denial of a claim,” id. § 284-30-330(13).

   [19] The district court correctly held that Lincoln largely
complied with subsection (2) by timely responding to most of
Gail’s communications. This subsection requires only a
prompt acknowledgment of and response to communications.
It does not require, as Gail maintains, that an insurer respond
in a manner that is satisfactory to the policyholder. Gail’s reli-
ance on Truck Insurance Exchange v. Vanport Homes, Inc.,
58 P.3d 276, 283-84 (Wash. 2002), which involved subsection
(13), is misplaced. Gail fails to show any harm resulting from
              MICHELMAN v. LINCOLN NATIONAL LIFE             8049
the two instances where Lincoln did not timely respond to her
letters.

   The district court also properly rejected Gail’s claim under
WAC 284-30-330(13). Lincoln admitted payment on the pol-
icy was due and was willing to pay whichever party prevailed
before the court. It neither denied a claim nor offered a com-
promise settlement—a prerequisite for a claim under subsec-
tion (13).

                                4.

   In Sharbono v. Universal Underwriters Insurance Co., 161
P.3d 406, 421-22 (Wash. Ct. App. 2007), the Washington
Court of Appeals held that an insurer acted in bad faith as a
matter of law by refusing to turn over a claim file to its
insured upon request. Sharbono explained that such a refusal
is unreasonable where an insured party explains its reasons
for needing the file and the insurer fails to demonstrate a sig-
nificant need to protect the file’s contents that weighs as heav-
ily as the insured’s interests. Id. at 422.

   Here, the district court found that Lincoln acted reasonably
when it declined to furnish Gail with copies of the correspon-
dence and documents it had received from Irwin. Yet, reason-
ableness is normally a question of fact that the trial court can
resolve only “if reasonable minds could reach but one conclu-
sion.” Id. at 421 (citing Smith, 78 P.3d at 1277); accord West
v. State Farm Fire & Cas. Co., 868 F.2d 348, 351 (9th Cir.
1989) (per curiam).

   The facts relied upon by the district court—that Lincoln
provided “basic information regarding the nature of Irwin’s
most compelling claim” (i.e., his challenge to the change in
beneficiary) and explained how interpleader works—did not
show a significant need to keep the requested information
confidential. As did the insurer in Sharbono, Lincoln eventu-
ally produced the entire claim file during the course of the liti-
8050           MICHELMAN v. LINCOLN NATIONAL LIFE
gation below “without seeking protection for any document in
the file and offered the entire file into evidence.” Sharbono,
161 P.3d at 422.9 At a minimum, Lincoln’s reasonableness in
refusing to turn over the file before litigation was a triable
issue of fact.

  Nonetheless, Lincoln’s failure to turn over the claim file
was harmless for the same reason that the district court did
not err in denying a summary judgment continuance: with
regard to Irwin’s claim that he was a co-owner of the policy
and that Gail improperly removed his name as a beneficiary
without his consent, Gail had all of the information relevant
to Lincoln’s decision to interplead. Therefore, the district
court did not err in granting summary judgment on this issue.

                                   5.

   WAC 284-30-330(6) imposes liability on insurers for
“[n]ot attempting in good faith to effectuate prompt, fair and
equitable settlements of claims in which liability has become
reasonably clear.” Without explanation, the district court held
that this subsection applies only to third-party liability poli-
cies. The regulation’s plain meaning is not so limited. Fur-
thermore, several state courts have considered claims under
this subsection in cases involving first-party policies and none
has suggested that such a limitation exists. See, e.g., Rizzuti
v. Basin Travel Serv. of Othello, Inc., 105 P.3d 1012, 1019-20
(Wash. Ct. App. 2005) (travel insurance); Osborn, 17 P.3d at
1235 (fire insurance); Barry v. USAA, 989 P.2d 1172, 1176-
77 (Wash. Ct. App. 1999) (uninsured motorist benefits).

   [20] Any legal error, however, was harmless. On this
record, it is clear that Lincoln acted in good faith by admitting
liability and interpleading the insurance proceeds. The district
  9
   Lincoln did seek a protective order regarding information pertaining to
unrelated cases, which the court granted.
              MICHELMAN v. LINCOLN NATIONAL LIFE              8051
court appropriately granted summary judgment in favor of
Lincoln on this claim.

                                6.

    The district court granted summary judgment to Lincoln on
Gail’s claim under WAC 284-30-330(7) because Lincoln
never made a settlement offer. This subsection prohibits an
insurer from “[c]ompelling a first party claimant to initiate . . .
litigation . . . to recover amounts due under an insurance pol-
icy by offering substantially less than the amounts ultimately
recovered.” It does not require a settlement offer. Arguably,
by wrongfully denying coverage altogether, an insurer “of-
fers” an insured “substantially less” than the amount that the
insured may ultimately recover. See, e.g., Rizzuti, 105 P.3d at
1019 (classifying claim under subsection (7) with other claims
for “denial of coverage”).

   Lincoln did not violate subsection (7) because it offered the
full amount due under the policy—it merely required that a
court determine the correct beneficiary. State law does not
proscribe such conduct. See Romas, 947 P.2d at 759. There-
fore, Lincoln was entitled to summary judgment on this claim.

                                7.

  Lastly, the district court was correct to grant Lincoln sum-
mary judgment on Gail’s IFCA claim, which alleged that Lin-
coln unreasonably denied a claim for coverage or payment of
benefits. See Wash. Rev. Code § 48.30.015. As discussed
above, Lincoln did not deny Gail’s claim.

                     IV.   CONCLUSION

  For the foregoing reasons, the district court’s judgment is
AFFIRMED. The parties shall bear their own costs on appeal.