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Vogt v. State Farm Life Insurance Co.

United States District Court, W.D. Missouri, Central Division

April 10, 2018

MICHAEL VOGT, on behalf of himself and all others similarly situated, Plaintiff,



         Plaintiff Michael Vogt claims that defendant State Farm Life Insurance Company's deduction of certain charges from policy owners' “Account Values” was not authorized by the terms of Vogt's policy. State Farm moves for summary judgment on all of Vogt's claims. Doc. 166. For the reasons discussed below, Defendant's motion for summary judgment is denied.


         In 1999, Vogt purchased policy form 94030, a flexible premium adjustable whole life insurance policy, from State Farm. Doc. 200, Statement of Facts (“SOF”), at I, ¶ 1. Unlike standard term life insurance policies, this type of policy provides an investment, savings, or interest-bearing component in addition to the usual death benefit. Under this policy, State Farm maintains an interest-bearing account for the insured, and this account's value, which is owned by the insured, grows over time.

         Each month, State Farm was permitted to make a deduction from the Policy that included “(1) the cost of insurance, (2) the monthly charges for any riders, and (3) the monthly expense charge.” Id. The monthly expense charge was $5.00. Doc. 200, SOF, at II, ¶ 4. With respect to the COI, the policy states:

         Cost of Insurance. This cost is calculated each month. The cost is determined separately for the Initial Basic Amount and each increase in Basic Amount.

         The cost of insurance is the monthly cost of insurance rate times the difference between (1) and (2), where:

(1) is the amount of insurance on the deduction date at the start of the month divided by 1.0032737, and
(2) is the account value on the deduction date at the start of the month before the cost of insurance and the monthly charge for any waiver of monthly deduction benefit rider are deducted.

         Until the account value exceeds the Initial Basic Amount, the account value is part of the Initial Basic Amount. Once the account value exceeds that amount, if there have been any increases in Basic Amount, the excess will be part of the increases in order in which the increases occurred.

Id., at II-III, ¶ 5.

         In a section entitled “Guaranteed Values Provisions, ” the Policy states:

The guaranteed values and maximum cost of insurance rates are based on the Insured's age last birthday and sex. The interest rate is 4% a year. The Commissioners 1980 Standard Ordinary Mortality Table is used. Modifications are made for rate classes other than standard.

Id., at III, ¶ 6. The same section also provides:

Monthly Cost of Insurance Rates. These rates for each Policy year are based on the Insured's age on the Policy anniversary, sex, and applicable rate class. A rate class will be determined for the Initial Basic Amount and for each increase. The rates shown on page 4 are the maximum monthly cost of insurance rates for the Initial Basic Amount. Maximum monthly cost of insurance rates will be provided for each increase in the Basic Amount. We can charge rates lower than those shown. Such rates can be adjusted for projected changes in mortality but cannot exceed the maximum monthly cost of insurance rates. Such adjustments cannot be made more than once a calendar year.

Id., ¶ 7. Expenses and profits are not mentioned in the “Monthly Cost of Insurance Rates” provision. Id., at XV, ¶ 33.

         The maximum COI rates used to determine guaranteed values for standard health rate classes were 98% of each rate listed in the 1980 Commissioners Standard Ordinary mortality tables, which is on an attained age basis. Id., at IV, ¶ 8; id. at XIV-XV, ¶ 32. The maximum rate tables are sorted by attained age, sex, and rate class, such that the maximum rate in the table applicable to any particular Policyholder in a standard health rate class is based on the Policyholder's age and sex. Id., ¶ 10. The Policy shows that the “Maximum Monthly Cost of Insurance Rates” increase as the Insured's age increases and double in less than 10 years. Id., at XIII, ¶ 30.

         There are differences in the mortality expectations associated with policyholders based on the number of years that elapsed since they applied for the policy. Id. at XIV-XV, ¶ 32. Age, sex and rating class are factors used to differentiate policyholders in developing mortality tables. Id. The parties agree that expenses and profits are not mortality factors, meaning that they do not bear on the life expectancy of an insured. Id., at XIX, ¶ 37.

         State Farm developed mortality tables using proprietary data reflecting its mortality experience with its own insureds, including the 88-91 SFL and 93-97 SFL mortality tables. Id., at VI-VII, ¶ 12. The COI rates were not equal to the mortality rates in its proprietary mortality tables. Id. XXXXX Id., at VIII, ¶ 14.

         State Farm modifies the COI rates for rate classes other than the standard rate class. Id., ¶ 16. State Farm created a separate substandard rate table for insureds with certain health conditions. Id., ¶ 17. Vogt was assigned to the Table 4 Rate Class based on his health conditions. Id., at IX, ¶ 18. At all times, the COI rates actually used for Vogt have been less than the maximum COI rates disclosed on page 4 of the Policy. Id., ¶ 19. Since the issuance of Vogt's Policy, State Farm never increased the current COI rate schedule used to determine Vogt's COI deduction. Id., ¶ 20. In fact, in 2002, State Farm elected to reduce COI Rates for insureds at most attained ages in the COI Rates scales. Id., ¶ 21.

         State Farm had the option to “defer paying [Vogt] a withdrawal for up to 6 months” after a request for such. Id., at X-XI, ¶ 24. If Vogt chose to surrender his Policy, State Farm could likewise “defer paying [him] the cash surrender value for up to 6 months after receiving [his] request.” Id.

         Although Vogt did not personally consult an actuarial expert in 2016, his counsel consulted with an actuarial expert on his behalf. Id., at XI, ¶ 26. Between the time that Vogt surrendered his Policy in 2013 and the point at which he consulted counsel in 2016, he received no new information that led to discovery of his claim against State Farm. Id., at XIII, ¶ 29. State Farm does not deny that it did not disclose to policy owners the assumptions underlying the current COI rates. Id., at XII, ¶ 27, and at XXII, ¶¶ 43-44. There is no dispute that a policyholder without knowledge, experience or training likely would not be able to understand, ...

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