January 11, 2017
SCHULZ FARM ENTERPRISES, INC., Appellant,
IMT INSURANCE, Appellee.
from the Iowa District Court for Polk County, Arthur E.
Gamble, Judge. Schulz Farm Enterprises, Inc. appeals a grant
of summary judgment to IMT Insurance. AFFIRMED.
McAffee and Julie Vyskocil of Brick Gentry, P.C., West Des
Moines, for appellant.
Caroline K. Bettis and Scott Wormsley of Bradshaw, Fowler,
Proctor & Fairgrave, P.C., Des Moines, for appellee.
by Vaitheswaran, P.J., and Potterfield and Bower, JJ.
Farm Enterprises, Inc. (Schulz) appeals the district
court's grant of summary judgment to IMT Insurance. We
hold the district court properly found there were no genuine
issues of material fact and IMT was entitled to judgment as a
matter of law. We affirm the district court's grant of
summary judgment in favor of IMT.
Background Facts and Proceedings
is a farming operation based in New Hampton, Iowa. Schulz
contracted with Clark Swine Technology, Inc. (Clark) to
custom feed hogs owned by Schulz at a site owned by Wilson
Agriculture. The contract required Clark to take delivery of
hogs weighing fifty pounds and raise them until they attained
the market weight of approximately 275 pounds. The hogs were
owned by Schulz but were under the care and control of Clark.
contacted his independent insurance agent, Melanie Umble,
regarding the custom feeding operation. Umble had previously
provided Clark with homeowners, renters, health, and life
insurance, as well as some farm liability insurance for
buildings he owned in other locations. Umble, as an
independent agent, does not work for IMT. Clark told Umble he
owned neither the hogs nor the building but was responsible
for utilities, his own insurance, labor, repairs, feed, and
medicine. Based on this information, Umble recommended Clark
purchase an IMT Insurance Farmers Personal Liability Coverage
policy (Policy). Clark also purchased a Custom Feeding
Endorsement (Endorsement) for an annual premium of $118. The
relevant portions of the insurance policy are set forth
A. In this policy, "you" and
"your" refer to the "named insured" shown
in the Declarations and the spouse if a resident of the same
household. "We", "us" and "our"
refer to the Company providing this insurance.
B. In addition, certain words and phrases
are defined as follows:
. . . .
5. "Custom feeding" means the raising or care of
"livestock" or "poultry", performed by an
"insured" for others for a charge under a written
or oral contract or agreement.
. . . .
19. "Property damage" means the physical injury to
or destruction of tangible property. "Property
damage" does not include the loss of use, unless the
property has been physically damaged or destroyed.
. . . .
26. "Your work" means:
a. Work or operations performed by you or on your behalf; or
b. Materials, parts or equipment furnished in connection with
such work or operations.
A. Coverage L- Liability
If a claim is made or a suit is brought against an
"insured" for damages because of "bodily
injury" or "property damage" caused by an
"occurrence" to which the insurance applies, we
1. Pay up to our limit of liability for the damages for which
an "insured" is legally liable. Damages include
prejudgment interest awarded against an "insured";
2. Provide a defense at our expense by counsel of our choice,
even if the suit is groundless, false or fraudulent. We may
investigate and settle any claim or suit that we decide is
appropriate. Our duty to settle or defend ends when our limit
of liability for the "occurrence" has been
exhausted by payment of a judgment or settlement.
Exclusions (applying to coverage L and M)
Coverages L and M do not apply to the following:
"Bodily injury" or "property damage"
arising out of the "insured's" performance of,
or failure to perform, "custom feeding" operation.
But this exclusion will apply only when your receipts from
"custom feeding" operations exceed $2, 000 for the
12 months before the beginning of the policy period;
23. Damage to Your Work "Property damage" to:
a. "Your work", arising out of it or any part of
b. That particular part of any property that must be
restored, repaired, or replaced because "your work"
was incorrectly performed on it.
Exclusions (applying to coverage L only)
4. "Property damage" to property rented to,
occupied or used by or in the care of an "insured",
except for the "property damage" to the
"insured locations" that is caused by fire, smoke
Endorsement stated "Coverage L - Liability and Coverage
M -Medical Payments to Others is extended to apply to
'custom feeding' operations performed by you. The
exclusions under Coverage L and Coverage M pertaining to
'custom feeding' are deleted. All other provisions of
the policy apply."
November 4, 2012, a breaker tripped at the building where 837
hogs were kept, resulting in their deaths. Clark contacted
Umble to report the loss and the claim was submitted on
February 15, 2013, to IMT. The claim was denied and on April
15, 2014, Clark assigned his claim to Schulz, who proceeded
to file suit against IMT in April 2014. The parties filed
cross-motions for summary judgment that were heard on August
18, 2015. The district court granted summary judgment to IMT
on October 20, 2015. Schulz now appeals.
Standard of Review
review a district court's grant of summary judgement for
correction of errors at law. Iowa R. Civ. P. 6.907. Summary
judgment is properly granted when the moving party
demonstrates there is no genuine issue of material fact and
is entitled to judgment as a matter of law. W. Bend Mut.
Ins. Co. v. Iowa Iron Works, Inc., 503 N.W.2d 596, 598
(Iowa 1993). We also review the record in the light most
favorable to the nonmoving party. Minor v. State,
819 N.W.2d 383, 393 (Iowa 2012).
Extent of Coverage
claims that under the language of the policy and endorsement,
the loss of the hogs in Clark's care is covered by IMT.
Schulz relies on the language of the endorsement stating
"[t]he exclusions under Coverage L and Coverage M
pertaining to 'custom feeding' are deleted"
focusing especially on the words "exclusions" and
"pertaining to." Schulz claims this language
removes not only exclusion twenty, entitled custom feeding,
but also the sections excluding coverage of property "in
the care of" the insured, as well as property damage for
property damage arising out of Clark's work.
supreme court has held a similar policy and endorsement did
not function to cover the death of the hogs because the
endorsement only removed the language in explicitly
referencing the custom feeding. See Boelman v. Grinnell
Mut. Reinsurance Co., 826 N.W.2d 494, 505 (Iowa 2013).
Schulz claims the policy and exemption in Boelman
are significantly different, and that Boelman should
not apply here. In Boelman, the custom feeding
endorsement states, "The endorsement operates to modify
the general exclusion under section 6(a) regarding custom
farming." Id. at 499 (emphasis omitted). The
endorsement in the policy at issue states, "The
exclusions under Coverage L and Coverage M
pertaining to 'custom feeding' are
deleted." (Emphasis added.)
unconvinced by Schulz's argument and find
Boelman does control the disposition of this case.
The plural form, exclusions, is used because the exclusion
for custom farming is removed under both L and M, not because
there is more than one exclusion which is deleted.
Additionally, construing "pertaining to" so far as
to remove all exclusions touching the custom feeding
operation would force us to "[engage] in a strained
analysis and would be stretching the endorsement's terms
beyond the bounds of reasonability." See id. at
the Boelman analysis, we find the endorsement
functions only to remove the discrete custom feeding
exclusion found in exclusion twenty. Removing this exclusion
insures Clark against damages caused by the hogs, but not
damage done to the hogs. All other exclusions still apply and
those exclusions eliminate coverage here, as the loss arose
out of Clark's work to property in his care or control,
both of which are not covered under the language of the
the court in Boelman noted, "The fact Grinnell
Mutual only charged $27 in annual premiums for the added
protection under the endorsement does not correlate with the
substantially elevated risk they would have assumed if they
had removed all exclusions touching upon the Boelmans'
custom farming operation." Id. at 505. In the
present case, Clark was charged an additional $118 in
premiums for the endorsement. While somewhat more expensive
than the policy in Boelman, we find this additional
premium does not correspond with the additional risk of
insuring the health of the hogs, but does correspond with the
additional risk of damage caused by the hogs.
IV. Doctrine of Reasonable Expectations
also argues the doctrine of the insured's reasonable
expectations should be invoked in this case. "The
reasonable expectations doctrine is a recognition that
insurance policies are sold on the basis of the coverage they
promise. When later exclusions work to eat up all, or even
substantially all, of a vital coverage, they cannot rest on
technical wording, obscure to the average insurance
purchaser." Clark-Peterson Co. v. Indep. Ins. Assoc,
Ltd., 492 N.W.2d 675, 679 (Iowa 1992). "The
doctrine is carefully circumscribed; it can only be invoked
where an exclusion '(1) is bizarre or oppressive, (2)
eviscerates terms explicitly agreed to, or (3) eliminates the
dominant purpose of the transaction.'" Id.
at 677. In order to trigger application of the doctrine of
reasonable expectations, the insured must prove
"circumstances attributable to the insurer that fostered
coverage expectations, or the policy is such that an ordinary
layperson would misunderstand its coverage."
Benavides v. J.C. Penney Life Ins. Co., 539 N.W.2d
352, 357 (Iowa 1995).
claims an ordinary person in Clark's situation would have
expected coverage for the hogs based on the wording of the
endorsement. However, Schulz did not provide evidence that
Clark understood the policy's dominate purpose to be for
insuring the hogs as property. Instead the evidence presented
showed all parties understood the limitations of the policy.
At her deposition, Clark's insurance agent, Umble, stated
she discussed the policy and its purpose with Clark before he
purchased it, and Clark understood and agreed the policy
would only cover claims from the custom feeding operation,
such as the hogs causing property damage or biting a visitor
to the operation. Umble also stated Clark understood there
was no coverage at the time of loss. Clark owns other
properties on which he operates similar custom feeding
operations and has purchased insurance. We agree with the
district court that "given Clark's experience in
custom feeding operations and previous relationships with
insurance companies . . . it [is] unlikely that Clark
reasonably believed the hogs were covered." Therefore,
we hold the doctrine of reasonable expectations is not