The Iowa Supreme Court also issued some opinions on May 12th. One is Sager v. Farm Bureau Mutual Ins. Co.:



THE FACTS

"Robert Sager intentionally set a fire in the basement of a house he shared with his wife Ramona in DeWitt. Angry after Ramona told him she was ending their relationship, Robert torched Ramona’s Christmas decorations in the basement of their house. . . . At a deposition conducted months later, Robert described the scene and his subsequent actions as follows: She had Beanie Babies everywhere and I was sick of them sons of bitches and I decided I was going to barbecue them. I had a big brush pile that I was going to burn outside and I had decided I was going to get all her Beanie Babies and take them out and barbecue the sons of bitches and went to get the charcoal lighter. Christmas has always been another big issue between us just because, you know, she sees it differently than I do, and I went in the basement to get the charcoal lighter and take it upstairs and fry her Beanie Babies and all her Christmas stuff was sitting there and I sprayed some charcoal lighter on her Christmas stuff and threw a couple of matches at it and it flared up a lot faster than I thought it was going to . . . . The fire quickly spread, and portions of the house were soon engulfed in flames. Robert’s pyromaniacal act caused approximately $100,000 damage to the house and its contents. Not surprisingly, Robert and Ramona later divorced."



THE ISSUE

Ramona wanted her insurance company, Farm Bureau, to pay for the damage. When she submitted her claim, they pointed to the “intentional loss” exclusion in her policy, which barred coverage for “any loss arising out of any act committed . . . (1) [b]y or at the direction of an ‘insured’ . . . and (2) [w]ith the intent or expectation of causing a loss.” Farm Bureau contended this exclusion precluded payment to Ramona because Robert, an insured, had purposefully started the fire.



There was a 1990 Iowa Supreme Court case called Vance v. Pekin Insurance Co., 457 N.W.2d 589 (Iowa 1990), which confirmed that the words ‘an insured’ meant just that: if any insured had intentionally caused the damage, there was no coverage for the loss. While it seems harsh to an innocent co-insured, the rationale behind the rule is that it precludes collusion and fraud against the company. In general, the Iowa Courts differ from other states in that they choose interpret simple language in a direct manner, without throwing in convoluted, strained interpretations just to arrive at the desired solution. So long as it isn’t a blatant public policy violation, they will let the simple terms of a contract stand.



However, Iowa Code Section 515.138 Fire insurance contract -- standard policy provisions -- permissible variations, states:



“It shall be unlawful for any insurance company to issue any policy of fire insurance upon any property in this state . . . different from the standard form of fire insurance policy herein set forth . . . . An insurer may issue a [different] policy . . . if such policy includes provisions with respect to the peril of fire which are the substantial equivalent of the minimum provisions of such standard policy . . . .”



General rule: when a policy provision conflicts with a statutory requirement, the policy provision is ineffective and the statute controls. The Standard policy referred to in the statute consistently used the term “the insured,” not “an insured.” Ramona argued the consistent use of the phrase “the insured” showed a legislative intent to apply the exclusions only to the “guilty” insured, and not to the innocent insured. Therefore, whenever a homeowner’s policy denies coverage whenever “an insured” intentionally causes the loss, it conflicts with statute. The Court hadn’t been confronted with this issue before, so it looked at what other states said on the subject. It found the great majority of states make the distinction Ramona was requesting. Therefore, the Court ruled that the provisions of the policy violated Iowa Code and that Ramona could get the money.



THE TWIST

But there is one last twist, for those of you who might still be awake: in 2000 there was a case called City of Waterloo v. Blackhawk Mutual Insurance Assn. , 608 N.W.2d 442 (Iowa 2000). In that case, Blackhawk Mutual had paid it’s insureds, Kerry and Christine Corcoran, $15,750 for fire damage to their home. The City of Waterloo sent a letter to Blackhawk and asked it to set a “demolition reserve” pursuant to Iowa Code Section 515.150 (1993) – a different part of the same code section used in this case. 515.150 states: “An insurer shall reserve ten thousand dollars or ten percent, whichever amount is greater, of the payment for damages to the property excluding personal property on which the insurer has issued a fire and casualty insurance policy as demolition cost. . .” In other words, Waterloo wanted Blackhawk to set aside some of the settlement money for clean-up costs as required under the Iowa Code in section 515.



Blackhawk argued that the provisions of Iowa Code Section 515, which governed "Insurance Other Than Life" didn’t apply to it at all, because it is a county mutual insurance company. It argued it should be governed only by the provisions of Iowa Code Section 518, which governed "County Mutual Insurance Associations." It argued based on the distinctions between the provisions, and the general legal rule is that the more specific statute trumps the more generic one.



The court reviewed the distinctions between the code sections:



". . . [N]either chapter 515 nor chapter 518 suggests that any of their provisions are interchangeable. Chapter 515 is broad in scope, covering all corporations formed for the purpose of providing insurance other than life insurance. Iowa Code § 515.1. Chapter 515 is a much older chapter, first appearing in the 1873 Code, while chapter 518 was first enacted in 1965. See 1965 Iowa Acts ch. 401. Associations under chapter 518 have a more restricted scope of authority. Under section 518.11, they are authorized to insure only against loss or damage by (1) any perils "resulting in physical loss or damage to property," (2) theft of personal property, and (3) "[i]njury, sickness or death of animals and the furnishing of veterinary services." These associations are not authorized to write liability insurance. Also, under chapter 518, the properties that may be insured are limited to (1) farm properties including residences and other buildings; (2) buildings used in agricultural processing; (3) city residences; and (4) churches, schools, and community buildings. Iowa Code § 518.12. Just as the types of insurance and property covered by chapter 518 associations are more abbreviated, so is the scope of the statutory provisions themselves. Approximately seventy sections under chapter 515 have no equivalent provisions under chapter 518. . . . When Iowa Code section 515.150 was adopted in 1988, both chapters 515 and 518 were in existence. Yet, the legislature added the demolition-reserve provision only to chapter 515. See 1988 Iowa Acts ch. 1176, § 1. If the legislature had intended to apply the demolition-reserve requirement to county mutuals under chapter 518, we believe it would have added a similar provision to that chapter."



So apparently Ramona will have different coverage depending on where she buys her fire insurance. Always read the fine print.