Coverage Analysis
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  ACCIDENTS OR OCCURRENCES
 

  Absent a separate definition in the policy, the Iowa Supreme Court has declared in Purcell Construction, Inc. v. Hawkeye-Security Insurance Company, 596 N.W.2d 67, 70 (Iowa 1999) that an “accident” means “an undesigned, sudden and unexpected event, usually of an afflictive or unfortunate character, and often accompanied by a manifestation of force.  The term clearly implies a misfortune with concomitant damage to a victim, and not the negligence which eventually results in that misfortune.”   See also Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Farmland Mutual Ins. Co., 568 N.W.2d 815, 818 (Iowa 1997)(An "accident" is an "unexpected and unintended event”).

  In order to preclude coverage, the Insured must have both intended to cause the act and some injury.  First Newton Nat'l Bank v. General Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988); West Bend Mut. Ins. Co. v. Iowa Iron Works, Inc., 503 N.W.2d 596 (Iowa 1993).  The necessary inquiry focuses on whether the actor knew or should have known that there was a substantial probability that certain consequences will result from his actions. City of Farragut v. Hartford Acc. & Indem. Co., 837 F.2d 480 (8th Cir. 1987).  An insured "expected" harm if the "actor knew or should have known that there was a substantial probability that certain consequences will result from his actions."  Weber v. IMT Ins. Co., 462 N.W.2d 283, 287 (Iowa 1990).  "Substantial probability" requires the indicators to be "strong enough to alert a reasonably prudent [person] not only to the possibility of the results occurring but the indications also must be sufficient to forewarn [that person] that the results are likely to occur."  Id.
  
  Earlier, the Iowa Supreme Court had seemingly adopted the minority view that the insured must have a specific intent to cause the specific injuries suffered.   Altena v. United Fire & Casualty Co., 422 N.W.2d 485, 488 (Iowa 1988). 

  An intent to injure may be inferred by the nature of the act, the accompanying reasonable foreseeability of harm and public policy.  Altena v. United Fire & Casualty Co., 422 N.W.2d 485, 488 (Iowa 1988).  Whether intent will be inferred depends, however, on the specific facts and circumstances of a given case.  Whereas intent was inferred in Altena in a case involving sexual abuse, the court reached a contrary result in Amco Ins. Co. v. Haht, 490 N.W.2d 843 (Iowa 1992), finding that an incident in which an eleven year old child struck another with a thrown baseball did not mandate an inference of intent.  By contrast, the court recently ruled in American Family Mutual Ins. Co. v. De Groot, 543 N.W.2d 870 (Iowa 1996) that intent would be inferred where a teenage baby sitter killed an infant child by striking its head against the floor three times in an effort to silence its crying.  See also American Family Mutual Ins. Co. v. Wubbena, 496 N.W.2d 783, 785 (Iowa App. 1992) (teenager's shooting of playmate with BB gun was excluded since harm is inherent in and inevitably results from the shooting of a gun).  

  Intent may be avoided if the insured lacks the capacity to intend harm, however. Haht, supra (12 year old child) and Smithway Motor Xpress, Inc. v. Liberty Mut. Ins. Co., 484 N.W.2d 192 (Iowa 1992)(no coverage for wrongful termination claims). 

  However, the Iowa Supreme Court has declined to find that an insured's voluntary intoxication formed a basis for finding coverage for assault claims.  Dolan v. State Farm Fire & Cas. Co., 1998 WL 17973 (Iowa January 21, 1998).

  The Iowa Supreme Court has ruled in several recent cases that an insured’s failure to perform under a contract  was not an “occurrence.” See Purcell Construction, Inc. v. Hawkeye-Security Insurance Company, 596 N.W.2d 67, 70 (Iowa 1999); Stine Seed Farm, Inc. v. Farm Bureau Mutual Ins. Co., 591 N.W.2d 17 (Iowa 1999).  Thus, a claim for defective workmanship “resulting in damages only to the work product itself” is not caused by an “occurrence.”  See also Norwalk Ready Mixed Concrete v. Travelers Insurance Companies, No. 00-1437 (8th Cir. April 19, 2001)(“Defective workmanship, regardless of who is responsible for the defect, cannot be characterized as an accident under Ohio law.”).

  The Iowa Supreme Court has declared that the insured's contamination of its production well and soil as the result of manufacturing procedures and dust control occurring over a long period of time were not "occurrences" triggering coverage.  Dico, Inc. v. Employers Ins. of Wausau, 581 N.W.2d 607 (Iowa 1998).

  Allegations of negligent misrepresentation were held covered in First Newton, despite the insurer's argument that these claims arose out of conduct that was expected or intended and which had resulted in property damage and personal injury to the plaintiffs.

  The Iowa Supreme Court has held that claims for negligent supervision or hiring "arose out of" the employee's attack on the plaintiff and therefore were subject to an assault and battery exclusion. Essex Ins. Co. v. Fieldhouse, 506 N.W.2d 772 (Iowa 1993).

  An insured that pleaded guilty to criminal charges, thereby waiving the ability to contest his guilt was collaterally estopped to claim in a later insurance coverage proceeding that he was innocent of second degree murder.  Ideal Mutual Ins.  Co.  v.  Winker, 319 N.W.2d 289, 296 (Iowa 1982).  

  The Iowa Supreme Court has ruled that soil contamination that occurred as a consequence of coal gas manufacturing by-products (coal tar, coke, etc.)  being spread because of rain and snow melt over the years was “the result of a deliberate waste disposal policy coupled with with the forces of nature” and therefore was not based upon an “accident” under general liability policies issued by INA prior to 1961.  Nevertheless, the  court ruled in Interstate Power Co.  v.  INA, 603 N.W.2d 751 (Iowa 1999) that the trial court had erred in also precluding coverage under “occurrence” policies issued after 1961 as INA had not established as a matter of law that the utility had expected or intended that pollution would occur.  The court declined to liken these claims, in which some of the disposal activity had been carried out by third parties and the insured’s predecessors, to assault and battery cases where intent may be inferred as a matter of law since both the act and the immediate consequences of the act are foreseeable to the insured.

  ALLOCATION AND SCOPE ISSUES

  The Iowa Supreme Court has ruled that an insured has a reasonable expectation that an insurer will provide a defense to the entire case, not just part of it, even if some of the claims are not covered.  First Newton Nat'l Bank v. General Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988).
 

  APPELLATE PROCEDURES

   Iowa has both an intermediate appellate court and a state Supreme Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Iowa Code Ann. § 714.16 (West 1979).  Unfair claims handling by insurers is regulated under Iowa Code § 507B.4 (1981).  The Iowa Unfair Claims Practices statute has been held not to create a separate private right of action for policyholders to sue for an insurer's failure to effectuate a prompt settlement or to provide a reasonable explanation for its denial of the claim.  Such rights are reserved to the Insurance Commissioner, not private parties.  Terra Industries, Inc. v. Commonwealth Ins. Co. of America, 1997 WL 797757 (N.D. Iowa December 23, 1997).  

  An insurer is not liable for bad faith if it had an "objectively reasonable" basis for disputing coverage.  Reuter v. State Farm Mut. Auto Ins. Co., 469 N.W.2d 250, 253 (Iowa 1991).  Thus, claims for bad faith and breach of implied covenants were dismissed in Fireman's Fund Ins. Co. v. ACC Chemical Co., Clinton County District Court No. CL 14219 (Iowa April 19, 1993), aff'd on other grounds, 538 N.W.2d 259 (Iowa 1995) based upon the court's conclusion that the insurers' position was at least "fairly debatable."   There can be no bad faith in the absence of coverage.  Johnson v. Farm Bureau Mut. Ins. Co., 533 N.W.2d 203 (Iowa 1995).  

  Although an insurer may not be held liable in bad faith where it has denied coverage on a reasonable basis, the lack of any diligent investigation to support the denial may undermine the insurer's assertion that its position was reasonable.  Rueter v. State Farm Mutual Auto Ins. Co., 469 N.W.2d 250, 254 (Iowa 1991).  

  Where an insurer has the right to control the defense of the underlying suit, it has an obligation to exercise good faith and  settlement negotiations.  Kooyman v. Farm Bureau Mutual Ins. Co., 315 N.W.2d 30, 32-34 (Iowa 1982).  Further, where there is a probability that an adverse verdict could exceed its policy limits, the boundaries of good faith "become compressed in favor of the insured."  Id. at 34.  In such cases, the insurer's conduct will be assessed as if the policy limits did not exist.  

  An insurer shall not be held liable for failing to settle within policy limits where there was no possibility of doing so.  Wierck v. Grinnell Mutual Ins. Co., 456 N.W.2d 191, 193 (Iowa 1990) (insurer unable to settle claim despite offer to tender full policy limits).  But see Berglund v. St. Farm Mutual Automobile Ins. Co., 121 F.3d 1225 (8th Cir. 1997) (primary insurer liable for excess verdict where it refused to tender its limits despite probability of excess adverse verdict).  In such cases, the fact that the plaintiff never offered to settle within policy limits is not dispositive of the issue.  

  Damages for emotional distress may be awarded in cases where an insurer has acted in bad faith by failing to pay an insured's claim.  Nassen v. National States Ins. Co., 494 N.W.2d 231, 237 (Iowa 1992).  In Berglund, the Eighth Circuit extended this rule to third-party liability cases, stating that it saw no distinction between a failure to pay a claim and a failure to exercise good faith in representing an insured against a third party.  

  The Iowa Supreme Court has declined to recognize a private right of action based on claimed violations of unfair trade practice statutes.  Seeman v. Liberty Mut. Ins. Co., 322 N.W.2d 35 (Iowa 1982).

  A third-party tort claimant has no right to assert bad faith claims against the tortfeasor’s liability insurer.    Mong v.  McAllister, 319 N.W.2d 256 (Iowa 1982). 

  Under Iowa law, a first-party insurer may not be held liable in bad faith unless the policyholder can show that there was no reasonable basis for the insurer to deny the claim and the insurer knew or should have known that no reasonable basis existed.  Brown v. Danish Mutual Ins. Association, 550 N.W.2d 171 (Iowa App. 1996).  

  Further, a trial court should only grant a directed verdict for an insurer in a bad faith case if the insured has failed to come forward with "substantial evidence" that the insurer's coverage decision was not based on a "fairly debatable" basis.  In Tompson v. USF&G, 1997 WL 66179 (Iowa February 19, 1997), the Iowa Supreme Court further found that a trial court might grant a directed verdict for the insurer, without letting the issue go to a jury, unless the insured had come forward with substantial evidence to support its assertion that the insurer had lacked a reasonable basis for denial and that it knew or should have known that it lacked such a basis.  

  The Iowa Supreme Court has refused to recognize a cause of action for "reverse bad faith."  Johnson v. Farm Bureau Mut. Ins. Co., 533 N.W.2d 203, 208 (Iowa 1995).  The court ruled that an insurer could not make a claim for "reverse bad faith" based upon a policyholder's frivolous assertions of bad faith in an effort to obtain payment from the insurer.  Under such circumstances, the insurer's remedy is limited to a claim for sanctions and fees for having to respond to frivolous pleadings.

  Suit limitation periods for actions “on the policy” have been held to also include bad faith claims.Stahl v. Preston Mutual Insurance Association, 517 N.W.2d 201, 202 (Iowa 1994) and Ingrim v. State Farm Mutual Automobile Ins. Co., No. 00-2115 (8th Cir. May 3, 2001).
 

  "BODILY INJURY"

  Held not to encompass claims for mental distress in Dahlke v. State Farm Mut. Auto Ins. Co., 451 N.W.2d 813, 815 (Iowa 1990); Bituminous Fire & Marine Ins. Co. v. Izzy Rosen's Inc., 493 F.2d 257, 260 (6th Cir. 1974)(slander and false arrest).

  BREACH OF POLICY CONDITIONS

  Compliance with policy conditions requiring notice is a condition precedent to coverage.  Met-Coil Systems Corp. v. Columbia Cas. Co., 524 N.W.2d 650, 655 (Iowa 1994).  Accordingly, an insured must show substantial compliance with notice requirements. Fireman's Fund Ins. Co. v. ACC Chemical Co., 538 N.W.2d 259 (Iowa 1995)(five year delay in notifying insurers of underlying pollution claim barred coverage).  

  Absent substantial compliance, an insured must prove either that its breach was waived or justified or that said breach did not prejudice the insurers in any respect.  See also Henschel v. Hawkeye-Security Ins. Co., 178 N.W.2d 409 (Iowa 1970); Estate of Wade v. Continental Ins. Co., 514 F.2d 304 (8th Cir. 1975).  Only if the insured has met this burden does the burden shift to the insurer to prove prejudice.  In Met-Coil, the court ruled that a trial court properly granted summary judgment for various insurers on the basis of the policyholder's untimely notice where the insured did not give notice until the first of two underlying patent infringement suits had gone to trial, resulting in an adverse judgment against the insured.

  Prejudice was deemed to arise as a matter of law in a pollution case where the insured's delay eliminated any opportunity for the insurer to investigate the claim or involve itself in remedial alternative discussions with the EPA.  In Dico, Inc. v. Employers Ins. of Wausau, Polk No. CL 60744 (Iowa Dist. Ct. July 18, 1996), rev'd,  581 N.W.2d 607 (Iowa 1998), the state trial court ruled that the fact that Wausau did not carry out any investigation when it finally did receive notice did not mean that it would not have investigated had it received timely notice. However, these findings were reversed on appeal by the Iowa Supreme Court on the grounds that neither the polluting incidents or the subsequent notice by the EPA that the insured's site was to be designated as a waste site to be cleaned up were "occurrences" or "claims" triggering the insured's notice obligations.

  The Iowa Supreme Court required coverage for a wrongful discharge claim, notwithstanding the "occurrence" limitation in the policy, finding ambiguity between the grant of coverage for certain intentional torts and the "occurrence" limitation.  Clark Peterson Co. v. Independent Ins. Associates, LTD., 492 N.W.2d 675, 676 (Iowa 1992).  

  Iowa courts have refused to find that "constructive notice" is sufficient to meet this policy requirement.  American Cas. Co. v. FDIC, 944 F.2d 455, 460 (8th Cir. 1993)(notice must be specific and in writing) and Hasbrouck v. St. Paul Fire & Marine Ins. Co., 511 N.W.2d 364, 369 (Iowa 1993).
 

  "BROAD FORM COVERAGES"

  The Iowa Supreme Court has ruled that allegations that the plaintiff was evicted as a consequence of his partner’s parents failure to pay the office rent did not state a claim for “personal injury” even though it expressly sought recovery for “wrongful eviction.”  In Continental Ins. Co. v. Bones, 596 N.W.2d 522 (Iowa 1999), the court refused to find “personal injury” coverage inasmuch as the claim against the insureds was based on their failure to comply with their contractual undertaking to pay the rent and not because they had evicted the plaintiff.
  Pollution on claimant's property has been held not to constitute "wrongful eviction" where owner was not dispossessed or forced to quit premises.  Fireman's Fund Ins. Co. v. ACC Chemical Co., Clinton County District Court No. CL 14219 (Iowa April 19, 1993), aff'd on other grounds, 538 N.W.2d 259 (Iowa 1995).
 

  BURDEN OF PROOF

  The burden of proving coverage is on the party seeking coverage.  American Universal Ins. Co. v. Dykhouse, 326 F.2d 694 (8th Cir. 1964).  Insurer has the burden of proving the applicability of a policy exclusion.   Farm & City Insurance Company v. Gilmore, 539 N.W. 2d 154, 157 (Iowa 1995) and  First Newton Nat'l Bank v. General Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988).  No case law on exceptions to exclusions.
 

  CHOICE OF LAWS

  Iowa has adopted the "most significant relationship" rule as set forth in the Restatement (Second) of Conflict of Laws. Lindstrom v. Aetna Life Ins. Co., 203 N.W.2d 623 (1973) (Contract law); Berghammer v. Smith, 185 N.W.2d 226 (1971) (Tort law).
  

  "DAMAGES"

  Iowa Supreme Court ruled in A.Y. McDonald Industries, Inc.  v. Ins. Co. of North America, 475 N.W.2d 607 (Iowa 1991) that "damages" encompasses Superfund "response costs."  Coverage is not required for civil fines and penalties or for purely prophylactic measures.
 

  DECLARATORY RELIEF

  Iowa Code Annotated Section 515.138 creates a one year limitation period for all actions “on the policy.”  See also Stahl v. Preston Mutual Insurance Association, 517 N.W.2d 201, 202 (Iowa 1994).  This has been held to include claims for bad faith.  Ingrim v. State Farm Mutual Automobile Ins. Co., No. 00-2115 (8th Cir. May 3, 2001).
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims

   --Reinsurance Information
 

   --Reserves
 
 

  DUTY TO DEFEND

  Under Iowa law, an insurer has a duty to defend whenever there is a potential or possible liability to indemnify the insured based upon the facts appearing at the outset of the case.  First Newton National Bank v. General Casualty Co. of Wisconsin, 426 N.W.2d 618, 622 (1988) and McAndrews v. Farm Bureau Mutual Ins. Co., 349 N.W.2d 117, 119 (Iowa 1984).  In considering whether it has a duty to defend, an insurer should consider both the allegations in the underlying complaint and those facts that are known to it concerning the claim.  First Newton Nat'l Bank v. General Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988).  Extrinsic facts may also be relied on to defeat coverage.

  Whether a duty to defend exists depends of the substance of the underlying allegations, rather than any specific theory of liability expressed.  As stated by the Iowa Supreme Court in Employers Mutual Casualty Co. v. Cedar Rapids Television Co., 552 N.W.2d 639 (Iowa 1996):

It would be inequitable to allow the plaintiff to determine whether the defendant is or is not insured simply by the choice of legal theories under which he brings suit.  Insurance coverage is predicated on the assessment of the risk involved should the insured participate in a particular type of conduct and not the risk of the plaintiff’s choice of legal theories.

  In interpreting whether an insurer has a duty to defend, a court should consider the factual allegations.  Chipokas v. Travelers Indemnity Co., 267 N.W.2d 393, 395 (Iowa 1978).  “When contrasted with the factual allegations, the legal nomenclature chosen by  a plaintiff is relatively unimportant.”  Stine Seed Farm, Inc. v. Farm Bureau Mutual Ins. Co., 591 N.W.2d 17 (Iowa 1999), citing Employers Mutual Ins. Co. v. Cedar Rapids Television Co., 552 N.W.2d 639, 642 (Iowa 1996). 

  Even if the plaintiff was injured through an excluded cause, coverage may still arise if the insured's liability is premised on separate acts of negligence that are not excluded.  Kalell v. Mutual Fire & Automobile Ins. Co., 471 N.W.2d 865 (Iowa 1991).  

  Iowa Supreme Court ruled that "suit" is ambiguous and encompasses PRP claims in A.Y. McDonald Industries, Inc.  v. Ins. Co. of North America, 475 N.W.2d 607 (Iowa 1991).  However, the Supreme Court explained in Dico, Inc. v. Employers Ins. of Wausau, 581 N.W.2d 607 (Iowa 1998) that there was a difference between such adversarial communications as were involved in A.Y. McDonald and a mere notice to the insured that its site was going to listed as a hazardous waste site.
  An insurer that wrongfully refuses to defend a suit has the burden of showing that any settlement that its policyholder subsequently enters into is collusive or unreasonable.  Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524 (Iowa 1995)(rejecting challenge to pre-judgment assignment of insured's claim to plaintiff).  However, while a plaintiff may pursue a claim based upon a covenant not to execute, the court has also ruled that such claims may not be based upon an actual release of the policyholder, since such a release also extinguishes any rights that could be assigned against the insurer.   Clock v. Larson, No. 141, 96-29 (Iowa June 18, 1997).
 

  KNOWN LOSS

  In City of Carter Lake v. Aetna Cas. and Surety Co., 604 F.2d 1052 (8th Cir. 1979), the 8th Circuit ruled that sewage backup from first equipment malfunction was an "occurrence" but subsequent overflows from identical cause were foreseeable and thus not "occurrences."

  An insured's awareness of environmental investigations at a landfill to which its waste had been shipped prior to 1979 precluded coverage under subsequent policies under the theory of "known loss" or "loss in progress." Vogel Paint and Wax Company, Inc. v. Travelers Ins. Co., Sioux No. 17448 (Iowa Dist. Ct. November 22, 1993). See also Dico, Inc. v. Employers Ins. of Wausau, Polk No. CL 60744 (Iowa Dist. Ct. July 18, 1996), rev'd on other grounds, 581 N.W.2d 607 (Iowa 1998)(suggesting that insured might also have been barred from seeking coverage under "known loss" and "loss in progress" doctrines, which the court defined as "a known loss is one which has already occurred and which the insured knows about prior to the inception of an insurance policy.  A loss in progress differs from a known loss in that a loss in progress involves a cumulative, progressive or ongoing loss"). 
 

  NUMBER OF OCCURRENCES

  Diverse claims arising out of 17 failed loan transactions were each held to constitute a separate "occurrence" in McCuen v. American Cas. Co., 946 F.2d 1401 (8th Cir. 1991).

  On-going pollution resulting from use of landfill held to constitute a "single" occurrence by jury in Fireman's Fund Ins. Co. v. ACC Chemical Co., Clinton County District Court No. CL 14219 (Iowa September 3, 1993), aff'd on other grounds, 538 N.W.2d 259 (Iowa 1995) as involving a "continuous exposure to the same conditions."
 

  “OTHER INSURANCE”

  The Iowa Supreme Court has ruled that competing "other insurance" clauses in liability policies should be construed based upon the wording of the policies and not based upon which policy is "closer to the risk."  In Illinois National Insurance Company v. Farm Bureau Mutual Ins. Co., No. 103 (Iowa May 28, 1998), the court declared that a "pro rata" policy must pay before an "excess" policy, noting that it was an easy rule to apply whereas the "closer to the risk" doctrine was a "tricky business" that might lead to considerable litigation.  
 

  POLLUTION EXCLUSION

  "Sudden and accidental" exclusion held unambiguous in Weber v. IMT Ins. Co., 462 N.W.2d 283 (Iowa 1990), wherein Iowa Supreme Court found that repeated, known discharges were not "accidental" even if resulting pollution was unintended. Accord A.Y. McDonald Industries, Inc.  v. INA, 842 F.Supp. 1166 (D. Iowa 1993); Fireman's Fund Ins. Co. v. ACC Chemical Co., Clinton County District Court No. CL 14219 (Iowa 1992), aff'd on other grounds, 538 N.W.2d 259 (Iowa 1995).  Further, in A.Y. McDonald, the U.S. District Court ruled that the insured's discharge of waste materials was not "accidental" whether or not the insured had any knowledge concerning the toxic content of the discharged material.

  Having upheld the "accidental" aspect of the standard pollution exclusion in Weber, the Iowa Supreme Court further ruled in Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Farmland Mutual Ins. Co., 568 N.W.2d 815, 818 (Iowa 1997) that gradual leakage from an underground tank at the insured's service station was not "sudden."  the court ruled that "sudden" must be given a temporal meaning when used in conjunction with "accidental", refusing to find ambiguity based on the diverse dictionary definitions of this term for the conflicting case law around the country.  Further, the court refused to consider the insured's claimed drafting history of the exclusion in the absence of any evidence that the insured had an understanding as to the meaning of "sudden" at the time the policies were contracted for.  

  A liability insurer was held to owe a duty to defend, despite an "absolute" pollution exclusion, in a case involving the disposal of "spent" foundry sand.  The Iowa Supreme Court ruled in West Bend Mut. Ins. Co. v. Iowa Iron Works, Inc., 503 N.W.2d 596 (Iowa 1993) that the sand was "waste" but that the exclusion should not be interpreted as applying to "innocuous rubbish" and should only apply to "wastes" that are "irritants or contaminants." 
 

  PROPERTY DAMAGE

  A suit by homeowners against a contractor for the cost of labor, material and supplies required to complete the construction of the residence to their satisfaction and for concomitant disruption of their lives and emotional distress was held not to allege a claim for "property damage" under a policy which defines that term "physical injury to tangible property."  In such circumstances, the court held that all that was claimed were intangible economic losses which were not covered under the policy as "property damage."  Yegge v. Integrity Mutual Ins. Co., 534 N.W.2d 100 (Iowa 1995).  More recently, the same court has ruled in Ide v. Farm Bureau Mutual Ins. Co., 545 N.E.2d 853 (Iowa 1996), that lost profits resulting from an ice storm in which sheep under the insured's care perished failed to allege a claim for "property damage" since the damages were calculated on the basis of economic loss.

  Allegations that the plaintiff was evicted as a consequence of his partner’s parents failure to pay the office rent did not state a claim for “property damage” under a policy that lacked the second sub-part of the 1973 definition of “property damage,” a claim for loss of use will only be covered if the property has been physically injured or destroyed.”  Continental Ins. Co. v. Bones, 596 N.W.2d 522 (Iowa 1999).
 

  PUBLIC POLICY

  "A court should not enforce a contract which tends to be injurious to the public or contrary to the public good."  Walker v. American Family Mut. Ins. Co., 340 N.W.2d 599, 601 (Iowa 1983), cited in Principal Cas. Ins. Co. v. Blair, 500 N.W.2d 67 (Iowa 1993)(family member exclusion not against public policy).
 

  PUNITIVE DAMAGES

  Section 668A.1, enacted in 1986, provides for the award of punitive damages under Iowa law when a defendant acts with "willful and wanton disregard for the rights or safety of another."  The Iowa Supreme Court has defined "willful and wanton" in Section 668A.1 as "an intentional act of an unreasonable character in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow.  Vlotho v. Harden County, 509 N.W.2d 350, 356 (Iowa 1993).  Such damages may be awarded in bad faith claims against insurers.  Berglund v. State Farm Mutual Automobile Ins. Co., 1997 WL 519668 (8th Cir. August 26, 1997).  

  Iowa Supreme Court refused to bar coverage on the basis of public policy in Skyline Harvestore Sys. v. Centennial Ins. Co., 331 N.W.2d 106, 108-09 (Iowa 1983).
 

  STANDARDS FOR POLICY INTERPRETATION

  Under Iowa law, the meaning of a policy is to be interpreted by the intent of the parties at the time the policy was issued.  Ferguson v. Allied Mutual Insurance Co., 512 N.W. 2nd 296, 299 (Iowa 1994).  Further, a policy is to be interpreted in order to give effect to the intent of the parties.  Pierce v. Farm Bureau Mutual Ins. Co., 548 N.W.2d 551, 555 (Iowa 1996).  That intent is to be derived from the policy itself unless the terms are ambiguous.  Kibbee v. State Farm Fire & Casualty Co., 525 N.W.2d 866, 868 (Iowa 1994).  

  Where words for phrases are undefined in the policy, they will not be given a technical or legal meaning.  Lamars Mutual Insurance Co. v. Joffer, 574 N.W.2d 303  (Iowa 1998).  However, a mere disagreement between the parties regarding the meaning of an undefined term does not automatically establish an ambiguity.  A.Y. McDonald, 475 N.W. 2nd at 619.  However, such agreements may be resolved by resort to dictionaries.  Id. at 619-620 and Pierce, 545 N.W.2d at 555.  However, conflicting dictionary definitions will not create ambiguity where none is evident in the policy term itself.  Iowa Comprehensive Petroleum Underground Storage Tank Fund Board v. Farmland Mutual Ins. Co., 568 N.W.2d 815 (Iowa 1997).  An interpretation is not reasonable where it creates a redundancy or makes a policy term mere surplusage.  Id.

The cardinal principle in the construction and interpretation of insurance policies is that the intent of the parties at the time the policy was sold must control.  Except in cases of ambiguity, the intent of the parties is determined by the language of the policy.  An ambiguity exists if, after the application of pertinent rules of interpretation to the policy, a genuine uncertainty results as to which one of two or more meanings is the proper one.  Because of the adhesive nature of insurance policies, their provisions are construed in the light most favorable to the insured.  Exclusions from coverage are construed strictly against the insurer.

Iowa Comprehensive Petroleum Underground Storage Tank v. Federated Mutual Insurance Company, 596 N.W.2d 546, 550 (Iowa 1999).  The court will not indulge in a “strained or unnatural interpretation merely to find ambiguity.”  Continental Insurance Company v. Bones, 596 N.W.2d 552, 556 (Iowa 1999).  

    Reasonable expectations doctrine applied in Grinnell Mut. Reinsurance Co. v. Voeltz, 431 N.W.2d 783 (Iowa 1988); see also Cairns v. Grinnell Mut. Reinsurance Co., 398 N.W.2d 821 (Iowa 1987)("[r]easonable expectations... may be established by evidence of the underlying negotiations or may be inferred from the circumstances under which the policy was provided and issued").

  However, the reasonable expectations doctrine will only be applied where the insurer has done something to foster reasonable coverage expectations.  Clark-Peterson Co. v. Independent Ins. Associates, Ltd., 492 N.W.2d 675, 677 (Iowa 1992).  The doctrine of “reasonable expectations” “will not be applied to cases in which an ordinary layman would not understand the extent of the coverage provided from a readings of the policy and there are no circumstances attributable to the insurer that would foster coverage expectations beyond that which is provided.”  Rodman v. State Farm Mutual Automobile Insurance Company, 208 N.W.2d 903, 906 (Iowa 1973), quoted in Monroe County v. International Insurance Company, 609 N.W.2d 522 (Iowa 2000).  The Iowa Supreme Court has ruled that reasonable expectations “is a narrow doctrine that is primarily employed when the insurance coverage provided eviscerates terms explicitly agreed to or is manifestly inconsistent with the purpose of the transaction for which the insurance was purchased.”  Farm Bureau Mutual Insurance Company v. Sandbulte, 302 N.W.2d 104, 112 (Iowa 1981).

  
  Words in any insurance policy are to be interpreted in accordance with the common and ordinary meaning that a reasonable person would use.  Undefined terms may be interpreted by reference to dictionary meanings.  Hofco, Inc. v. National Union Fire Ins. Co., 482 N.W.2d 397, 401 (1992); Ottumwa Housing Authority v. State Farm, 495 N.W.2d 723 (Iowa 1993).

  The Iowa Supreme Court has ruled that an insured may be bound by the terms of a policy, even if it does not physically receive a copy of the policy until after a loss has already occurred.  In such circumstances, however, the insurer may only rely on such policy terms and provisions as are usually contained in policies written for like risks.  Ide v. Farm Bureau Mutual Ins. Co., 545 N.E.2d 853 (Iowa 1996).  

  THEORIES OF ALTERNATIVE LIABILITY

  Market share liability has been rejected for DES claims.  Mulcahy v. Eli Lilly and Company, 386 N.W. 2d 67, 75 (Iowa 1986)
 

  TRIGGER OF COVERAGE

  Iowa has adopted the majority rule that the time of an "occurrence" is when the claimant sustains actual damage and not when the act or omission that caused such damage was committed.  First Newton Nat'l Bank v. General Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988)(sale of property).  In First Newton, the Iowa Supreme Court declared that "actual injury" occurred at the time that a bank foreclosed on the plaintiff's farm properties during the policy period.  See also Nielson v. Travelers Indemn. Co., 174 F.Supp. 648 (D. Iowa 1959), aff'd, 277 F.2d 455 (8th Cir. 1960)(holding that coverage for gas explosion arose at time of accident not when insured negligently installed gas main).

  In Interstate Power Co. v. Home Ins. Co., Clinton No. LA21793 (Iowa Dist. Ct. April 8, 1997), a trial court dismissed an insured's claim for coverage for the cost of cleaning up pollution from a manufactured gas plant on the basis that the 1967-73 policies were issued years after the plants had been shut down and therefore fell outside the policies' "event" coverage The Home policies defined an "occurrence" as a happening or series of happenings arising out of or due to one "event taking place during the term of this contract."   Interpreting this language, Judge Nahra ruled on April 4, 1997, that for coverage to exist "there must be a causative event during the policy period which gives rise to a happening or series of happenings."  "The mere persistence and migration of pre-existing contamination does not constitute an event within the meaning of this occurrence provision."  Whereas the leaching of wastes into the groundwater that the insured was relying on might constitute a "happening or series of happenings," the court held that it did not constitute the original causative event itself.  Judge Nahra further ruled that there was no coverage under the 1961-64 policies since the plants in question had already been closed and decommissioned.   On appeal, however, the Iowa Supreme Court ruled in Interstate Power Co v.  INA, 603 N.W.2d 751 (Iowa 1999) that the insurer had not proven the absence of pollution during these periods.

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