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Clark-Peterson Co., Inc. v. Independent Ins. Associates, Ltd.

Supreme Court of Iowa

April 20, 1994

CLARK-PETERSON COMPANY, INC., Jerald F. Clark and Jack A. Clark, Appellants,
INDEPENDENT INSURANCE ASSOCIATES, LTD., Dick Wissink, Individually, and The Cincinnati Insurance Company, Appellees.

Page 913

John C. Conger of Wiggins & Anderson, P.C., West Des Moines, for appellants.

Gregory A. Witke of Bradshaw, Fowler, Proctor & Fairgrave, P.C., Des Moines, for appellees Independent Ins. Associates Ltd., and Dick Wissink.

Page 914

Dawn R. Siebert and R. Todd Gaffney of Finley, Alt, Smith, Scharnberg, May & Craig, P.C., Des Moines, for appellee Cincinnati Ins. Co.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, CARTER, and SNELL, JJ.

HARRIS, Justice.

The question here is whether all of plaintiffs' viable claims were subsumed in a prior recovery. Believing they were the trial court entered summary judgment in favor of defendant insurance company. We modify, affirm and remand.

The principal plaintiff, Clark-Peterson Co., purchased a multi-peril policy and a contractor's umbrella liability policy from defendant Cincinnati Insurance Co. (Cincinnati) through its agent defendant Dick Wissink and Independent Insurance Associates (for simplicity we hereinafter refer to Wissink and his agency in the singular as Wissink). The plaintiffs claim the policy was purchased on the basis of representations that it would cover employment discrimination claims.

Plaintiffs were later sued for wrongful discharge in a case based on alcoholism disability. Told there was no coverage under the policy, they obtained private counsel to defend the suit. Cincinnati eventually provided a defense, reserving the right to deny coverage if damages were awarded. The employment discrimination suit was thereafter settled for a substantial amount. Clark-Peterson and Cincinnati agreed to pay fifty percent with each side reserving its right to litigate coverage questions in a declaratory judgment action.

The plaintiffs then sued the defendants for declaratory judgment, claiming coverage. The suit also alleged breach of contract, negligence, breach of fiduciary duty, misrepresentation and intentional infliction of emotional distress based on Cincinnati's refusal to provide insurance coverage on the employment discrimination claim. The request for declaratory judgment was separated from the plaintiffs' other claims for trial.

Upon trial declaratory judgment was entered, declaring that Clark-Peterson had coverage for employment discrimination claims under the policy issued by Cincinnati. Cincinnati appealed and we affirmed, holding Clark-Peterson had coverage, but only under the reasonable expectations doctrine. Clark-Peterson Co. v. Independent Ins. Assocs., 492 N.W.2d 675, 679 (Iowa 1992). Cincinnati promptly reimbursed Clark-Peterson for the fifty percent it previously paid in the discrimination suit.

The district court subsequently granted summary judgment on all other claims and the matter is before us on plaintiffs' appeal from that order. We must determine whether there existed genuine issues of material fact and whether the district court correctly applied the law. KMEG Television, Inc. v. Iowa State Bd. of Regents, 440 N.W.2d 382, 384 (Iowa 1989). The claims against Cincinnati will be discussed in divisions I. through V. that follow. The claim against Wissink will be separately discussed in division VI.

I. The district court's grant of summary judgment was on a finding that all issues remaining after our prior decision were premised on defendant's failure to provide coverage. If all the claims do constitute bad-faith claims, as the district court is accused of finding, the matter could properly be determined as a matter of law. In a bad-faith action, where "an objectively reasonable basis for denial of a claim exists, the insurer, as a matter of law, cannot be held liable for bad faith." Reuter v. State Farm Mut. Ins. Co., 469 N.W.2d 250, 254 (Iowa 1991). That is, where coverage is "reasonably debatable" the insurer is free to debate it. This is true because the insurer has the right to have its rights adjudicated without being subject to tort claims. See Hilde v. United States Fire Ins. Co., 184 Ga.App. 611, 362 S.E.2d 69, 71 (1987).

The plaintiffs primarily argue that the district court misconstrued their claims. Under their interpretation, the district court viewed the entire set of tort and contract claims as constituting a bad-faith denial of insurance coverage suit. The plaintiffs attack this construction and assert instead that they raise their claims with regard to Cincinnati's tortious

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sale of the policy, not the later denial of coverage thereunder.

The plaintiffs' characterization of the district court's order is only half correct. The district court dealt with plaintiffs' bad-faith claims in one way and claims related to the initial sale in another. A successful plaintiff is entitled to one, but only one, full recovery, no matter how many theories support entitlement. Team Cent., Inc. v. Teamco, Inc.,271 N.W.2d 914, 925 (Iowa 1978) (purpose of damages is to restore injured party to position enjoyed before injury; damages should not be duplicative); DeWall v. ...

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