In my week-long unanticipated blog-vacation, I missed two rounds of Iowa Supreme Court Opinions. The first batch were posted
on Friday the 31st.
BELLVILLE V. FARM BUREAU was an insurance law case:
FACTS
Bellville was on his motorcycle with his wife as a passenger, headed north on Edgewood Road in Cedar Rapids. They were coming up onto the O Avenue NW intersection - the intersection is at the crest of the hill and O Avenue tees into Edgewood from the east. Bellville had been traveling in the outside lane, but in the block before the intersection, the traffic in front of him slowed, so he pulled into the inside lane. He was accelerating as he came up the hill towards the traffic light. He saw the traffic light change to yellow, but he did not think he could stop in time without locking up his brakes so he decided to proceed through the intersection. Meanwhile, Schueler southbound on Edgewood Road, pulling into the left-turn lane on Edgewood Road to turn east onto O Avenue, stopping to let northbound traffic pass before making his turn. When the light changed to yellow, he saw traffic in the northbound, outside lane slow to stop at the intersection, but did not see Bellville’s motorcycle. Schueler started to turn left; Bellville saw Schueler’s car, but was unable to stop his motorcycle. Bellville’s motorcycle struck the right rear quarter panel of the Schueler vehicle just behind the rear tire. The impact occurred in the center of Bellville’s lane of travel. Sue Ellen Bellville died immediately. The investigating officer concluded in his official report that a “contributing circumstance” to the accident was that Roger Bellville “Ran Traffic Signal.” He concluded there were no “apparent” contributing circumstances related to Schueler’s driving or his vehicle.
Schueler's policy had limits of $50,000, which were offered to Bellville in settlement. Bellville notified Farm Bureau, his own insurer, of the offer and his intention to demand payment under his underinsured motorists' coverage, with his policy limit for that coverage being $300,000. Early in 2000, he demanded the $300,000 limits from Farm Bureau, and their consent to take the $50,000 from Schueler's policy and settle that part of the claim. The $300,000 demand was at some point lowered to $270,000, but Farm Bureau refused both the demand and to consent to the settlement. The rationale: it thought the plaintiff’s damages had a potential value of only $300,000. In addition, the defendant attributed 30% of the fault to Bellville, which would diminish Bellville’s projected recovery from Schueler. Farm Bureau also factored in Bellville’s $50,000 recovery from Schueler’s liability insurer to further reduce the potential sum recoverable under the UIM coverage. Bellville sued Farm Bureau first on the contract claim, for the $300,000 he alleged was owed under the policy, and then in a suit alleging bad faith based on two grounds: (1) Farm Bureau’s undervaluation of Bellville’s UIM claim; and (2) Farm Bureau’s refusal to consent to Bellville’s settlement with the underinsured motorist.
ANALYSIS
The key to the bad faith part of the case is in the "fairly debatable" standard. To establish Farm Bureau’s bad faith, the plaintiff was required to prove (1) Farm Bureau had no reasonable basis for denying the plaintiff’s claim or for refusing to consent to settlement, and (2) the defendant knew or had reason to know that its denial or refusal was without reasonable basis. Under Iowa law, a reasonable basis exists for denial or partial denial if the insured’s claim is fairly debatable either on a matter of fact or law. Even if the insurer loses on that issue at a trial on the underlying case, it doesn't mean it acted in bad faith: the issue isn't which party would win the debate, but whether a debate existed at all. Finally, even when the insurer lacks a reasonable basis for its denial of a claim, liability for bad faith will not attach unless the insurer knew or should have known that the basis for denying its insured’s claim was unreasonable - in other words, undebatable.
The court first looked at Farm Bureau's assigning 30% and decided the extent of Bellville's fault was fairly debatable, therefore it was reasonable for Farm Bureau to rely on its assessment of Bellville’s comparative fault to determine its liability under the UIM coverage. It then looked at the issue of value. At trial in the underlying tort claim, the jury had valued the claim at $756,714.95:
"This figure was broken down as follows: (1) loss of accumulation to the estate: $100,000; (2) loss of support: $150,000; (3) loss of consortium: $500,000; and (4) interest on burial expense: $6,714.95. (The jury also found Bellville was 5% at fault.)"
The Court reasoned that since Farm Bureau had not unreasonably placed 30% of the fault on Bellville, the issue was whether the claim at full value was worth more than $415,000:
The sum of $415,000 was calculated as follows. There are three known factors affecting Farm Bureau’s assessment of its liability. As the plaintiff concedes, Farm Bureau would have been entitled to reduce the plaintiff’s total damages by $50,000 for the payment made by Schueler’s liability insurer. In addition, as we have already discussed, Farm Bureau had a reasonable basis to deduct 30% from the damages sustained by Bellville individually to account for his comparative fault. Finally, the highest value Farm Bureau could have been expected to place on the economic damages is $250,000, meaning the balance of any total damage figure must be attributed to loss of consortium, a component subject to reduction for Bellville’s comparative fault. Thus, the calculation of damages required to warrant a UIM payment of $270,000 is: $415,000 (consisting of $100,000 loss of earnings, $150,000 loss of support, and $165,000 loss of consortium) minus $94,500 (30% fault on Bellville’s damages) minus $50,000 (tortfeasor payment) equals $270,500.
Bellville argued that 1) The insurers were unreasonable in taking into account the range of prior settlements on similar cases, prior jury verdict ranges should have been the dispositive measure of value; 2) Testimony of an insurance expert that a reasonable insurer would have paid the verdict supports the finding that Farm Bureau acted unreasonably. Given that the proper valuation of the claim is what a jury would award as the damages due to the insured by the tortfeasor, the Court found that while prior verdicts and prior settlements can be looked at, neither is a wholly reasonable basis for valuation standing alone - the insurer is neither entitled to rely wholly upon them without regard to the quirks of the instant claim, neither is the insured obligated to pay a figure found solely on them. Regarding the testimony of the insurance expert, the Court found "is not enough for Bellville to make a showing of unreasonableness. . . . It was incumbent upon him to negate any reasonable basis for the insurance company’s valuation of his claim." Thus, the expert was also not dispositive. Finally, the Court examined the dueling expert opinions regarding the value of the claim:
As one might expect, the plaintiff’s experts opined that Bellville’s claims had a value well over $300,000, while the defendant’s experts testified that a death case of this type in Iowa would be valued at less than $300,000.
The discrepancy among the expert opinions simply illustrates the obvious: it is difficult, if not impossible, to determine with any precision how the jury will value such a claim, particularly the loss-of-consortium component. . . .
We conclude as a matter of law that a bad faith claim cannot rest on Farm Bureau’s failure to value Bellville’s damages at a level of $415,000. . . . Certainly there may be cases in which the UIM limits are so low or the undisputed damage items so high that there would be no reasonable basis to refuse payment notwithstanding the impossibility of accurately predicting the value of the insured’s damages. . . . But this case is not one of those.
STATE V. SEERING discussed the Iowa no-sex-offenders-within-2000-feet-of-a-school rule.
FACTS
Shortly after his arrival in Riverside, Seering went to the county sheriff’s office to register himself as a sex offender at his new address. An officer told Seering that he was 99.99 percent sure that he was going to be within a two thousand-foot radius of at least a day care, if not a school. Iowa Code section 692A.2A prohibits a person who has committed a sexually violent offense or other crime against a minor from residing within two thousand feet of an elementary or secondary school or child care center. Seering informed the officer that he was hoping to find a new home in Johnson County and would soon move from Riverside.
The officer asked a county employee to prepare a map of Washington County showing the areas where Seering or another offender could live without violating the statute, then he met again with Seering and showed him the map. The officer warned Seering that he had one more week to move to an unrestricted area or he would face charges under the statute.
A few weeks later, the officer went to the Riverside address to determine whether Seering had moved. The owner of the residence told the officer that Seering was still living in the home. When confronted with this information, Seering claimed he was actually living out of his car. After finding no evidence to substantiate Seering’s claim, the officer arrested him for violating the residency restriction. The family then tried to move onto some abandoned farm property in Johnson County, but apparently had difficulties when the owner found out about his sex offender status.
Seering filed a motion to dismiss the criminal charge against him relating to the residency restriction. The district court dismissed, determining the residency restriction statute was unconstitutional on substantive and procedural due process, ex post facto, self-incrimination, and cruel and unusual punishment grounds.
ANALYSIS
1) Substantive Due Process: The fighting issue was what "right" was being violated. The Due Process Clause requires strict scrutiny of laws violating a fundamental right - “whether the government action infringing the fundamental right is narrowly tailored to serve a compelling government interest” - but only a rational basis for laws restricting non-fundamental rights - whether there is “a reasonable fit between the government interest and the means utilized to advance that interest.” Seering called this the “right to the privacy and freedom of association in one’s family” and deemed it fundamental. The State called it the "interest in having unrestricted choice in picking where Seering—or any offender—and, in turn, his family, lives" and deemed it a non-fundamental right. The Court found that an alleged infringement on a familial right is unconstitutional only when an infringement has a direct and substantial impact on the familial relationship:
While the residency restriction may impact the Seerings insofar as they cannot choose the precise location where they can establish their home, it does not absolutely prevent them from living together. In fact, the record establishes that the Seerings specifically successfully lived together through much of the proceedings in this case. These facts lie in contrast to other familial rights cases in which the challenged statute substantially and directly impacted the familial interest.
The Court concluded that "Although freedom of choice in residence is of keen interest to any individual, it is not a fundamental interest entitled to the highest constitutional protection." It found the basis for the statute, the threat of recidivism posed by sex offenders, was rationally related to the law. Though it noted that the law didn't create a perfect solution to the problem, perfection is not required to meet a mere rational basis standard.
2) Procedural Due Process: When state action threatens to deprive the person of a protected liberty or property interest, procedural due process requires notice and opportunity to be heard in a proceeding that is adequate to safeguard the right for which the constitutional protection is invoked. Seering characterized the statute as failing to provide for any hearing. The Court noted that no hearing was required prior to its application: The restriction imposed is based only on status as a convicted sex offender. States are not barred by principles of ‘procedural due process’ from making classifications between sex offenders and others. Because there are no exemptions in the statute, Seering was not entitled to a hearing before he was charged under the statute to attempt to persuade the court that the statute should not be applied to him. It further noted that Seering had been given ample opportunity to challenge the law through the court system, and so while he was entitled to minimum procedural protections, there had been no showing made how the law deprived him of them.
3) Ex Post Facto: These clauses forbid applying newly-enacted punitive measures or higher punishments to conduct or crimes that had already been committed before the new punishments were in place. However, it applies only to criminal punishments not civil penalties (To illustrate, in an OWI the jail and fine are considered criminal punishments, the license revocation is a civil penalty.) To determine the true nature of this law, the Court balanced the issues of whether it promoted the traditional goals of punishment, imposed an affirmative disability or restraint, had a rational relationship to a nonpunitive purpose, and whether it was excessive in its goal of protecting society. The Court found that, considering all these factors, it could not conclude that the statute imposes criminal punishment under this record. For good measure, it noted that even if it was punitive, the statute didn't punish action that had occurred prior to its enactment or punish a crime after its commission - "An offender such as Seering does not face punishment under the statute simply because he is a convicted offender. Instead, punishment may come based only on a violation of the statute." In other words, it defined the criminal charge of violating the statute as the "punishment," not the restriction on residency. I'm still digesting that one.
4) Fifth Amendment: This was a rather clever argument - Seering contended the residency restriction statute compelled him to incriminate himself by its requirement that he register his home address, which was in a restricted area. The Court disagreed, because Seering wasn't challenging the registration requirement, he was challenging the residency restriction:
It is important to understand that the challenge made by Seering in this case relates to the residency restriction imposed under the statute, not the separate registration requirement under the statute. The residency restriction cannot serve to support a claim of self-incrimination because there is nothing about the restriction that compels sex offenders to be witnesses against themselves. Any constitutional infirmity with the registration requirement would not affect the constitutionality of a substantive law making certain conduct criminal. Moreover, even if we assume Seering was compelled to act in a way that incriminated him, the remedy for such an action likely would be the exclusion of his incriminating statements at a subsequent trial, not the wholesale invalidation of the restriction statute.
5) Cruel and Unusual Punishment: The allegation on this charge was not that the residency restriction was a cruel and unusual punishment for a sex offense, but rather that the potential two-year sentence was a cruel and unusual punishment for living in a restricted zone. The Court found that the proportionality was not so disparate as to violate that clause.
Justice Wiggins dissented on the Ex Post Facto portion of the opinion, finding that the statute was sufficiently punitive to be considered punishment. He discusses the fact it basically banishes the offender and his family, that it does act as a restraint, that it did seem to serve the traditional goals of punishment. He goes on to discuss excessiveness:
Although there is a rational connection to a non-punitive purpose, I do believe it is excessive. Section 692A.2A limits the residency of “a person who has committed a criminal offense against a minor, or an aggravated offense, sexually violent offense, or other relevant offense that involved a minor.” Iowa Code § 692A.2A(1). It applies equally to a person convicted of admitting a minor to a premise where obscene material is exhibited in violation of section 728.3 and to a person convicted of first degree sexual abuse in violation of section 709.2. Id. §§ 692A.1(1)(a), 692A.1(5)(k). Section 692A.2A fails to consider the seriousness of the crime, the relationship between the victim and the offender, or the risk of re-offending. By punishing all these offenders with a residency requirement without considering whether a particular offender is a danger to the general public, exceeds the non-punitive purpose of the statute. This is especially true because a sex offender is subject to the residency restrictions for the rest of the sex offender’s life.
Consequently, my analysis of four of the five factors requires me to find the purpose and effect of section 692A.2A is so punitive that it negates the legislature’s objective to be considered as a civil limitation. Therefore, I would affirm the district court’s ruling.
On August 5th, the Court put out decisions on
Cedar Rapids v. James Properties, a plat-review case regarding the Rock Island Botanical Preserve that I'm not inclined to summarize, and on
State v. Lloyd, an OWI case with an interesting twist. The officer in Lloyd had pulled over his car based on its having no valid plates. However, there was a valid temporary plate sticker in the window, which the officer claimed not to have seen. The issue was whether a stop based on a mistake of fact, not a mistake of law, could form a reasonable basis for stopping a car. (If it could, then the rest of the evidence from the stop was valid. If not, then the evidence needed to be suppressed and good luck in getting that OWI charge.) The Court found that if the mistake was an objectively reasonable one, and it was a mistake of FACT (not law) it could support a reasonable basis for stopping a car. The upshot: It was dark, the mistake was an easy one to make, conviction upheld.
The other criminal law news was in the
denial of certiorari on the James Howard Bentley appeal without comment. The record can be found in the appellate portion of Iowa Courts Online under docket number 05-1023 or by his name look under "docket" for the details. NOTE: There's also a James Lavern Bentley, don't get them confused. We may well hear more about this issue in the future.
