from the Iowa District Court for Monona County, Jeffrey L.
Jacobson Lumber & Hardware, L.L.P. appeals from a jury
verdict in favor of Acuity, A Mutual Insurance Company, on
B&F's claim for bad faith in the adjustment of a
property-damage claim. AFFIRMED IN PART, REVERSED IN
PART, AND REMANDED.
Stoltze of Stoltze & Stoltze, P.L.C., Des Moines, Travis
J. Burk of Hope Law Firm, P.L.C., and Jeffrey S. Carter of
Jeff Carter Law Office, P.C., Des Moines, for appellant.
T. Zeschke and Stephen J. Powell of Swisher & Cohrt,
P.L.C., Waterloo, for appellee.
Danilson, C.J., and Doyle and Mullins, JJ.
DANILSON, Chief Judge
Jacobson Lumber & Hardware, L.L.P. (B&F) appeals from
a jury verdict in favor of Acuity, A Mutual Insurance Company
(Acuity), on B&F's claim for bad faith in the
adjustment of a property-damage claim. B&F contends the
district court improperly (1) denied B&F's motion to
compel evidence of post-filing-of-litigation claim adjustment
decisions on the basis it is protected by the attorney-client
privilege, (2) determined other evidence of
post-filing-of-litigation conduct was inadmissible, and (3)
precluded B&F from presenting evidence as to damages for
loss of peace of mind. We conclude the district court abused
its discretion in denying B&F's motion to compel and
in making a blanket decision that all evidence of
post-filing-of-litigation conduct was inadmissible. The court
also erred in denying the admission of two damage estimates.
We reverse and remand for further proceedings and a new
trial. We affirm the court's ruling that B&F may not
present evidence as to loss of peace of mind or prejudgment
Background Facts & Proceedings.
matter arose on April 9, 2011, when a tornado caused
significant damage to the two buildings located on
B&F's business premises in Mapleton, Iowa.
B&F's insurer, Acuity, sent an adjuster, Brad Werger,
to Mapleton on April 12, 2011, to assess the damage. On April
13, the owner of B&F, Bruce Jacobson, discussed the
damage estimate with Werger and signed the proof of loss. A
check was issued to B&F in the amount of $60, 464.75 for
the actual cash value of loss to B&F's buildings. The
check included a notation stating, "Settlement in
later realized the damage was more extensive and could not be
remedied with only $60, 464.75. In August 2011, Jacobson
hired a public adjuster, James Pierce, to review the claim
including the damages. While working together on an unrelated
claim in February 2012, Pierce mentioned to Werger that he
had been hired by B&F to serve as its public adjuster. In
his second affidavit, Werger explained, "We had a
conversation in which Mr. Pierce stated it appeared we would
be working another claim together, the lumber yard claim. I
believed Mr. Pierce was mistaken and informed him that the
claim had been settled back in April of 2011." Pierce
again contacted Werger by email on August 6, 2012, stating,
"I have another possible claim with you. The B[&]F
Jacobs[o]n lumber yard. You and I had talked about it
previously and you had mentioned that the client signed off
on something. Could you send me that form please at your
convenience." Werger replied, "On vacation until
the 13th. Policyholders release so we are not opening up the
claim. I can send when I get back."
the email exchange, B&F filed its petition on August 17,
2012, asserting claims for breach of contract, unjust
enrichment, reasonable expectations, bad faith, and seeking
punitive damages. On October 23, 2012, counsel for B&F
made a written request for appraisal as permitted by
B&F's insurance policy if the parties "disagree
on the value of the property or the amount of the loss."
Counsel for Acuity replied and refused appraisal. Acuity
filed both a motion for summary judgment and a motion to stay
discovery and appraisal requests on January 11, 2013. B&F
filed a motion to compel appraisal on February 7. The
district court granted the motion for summary judgment in May
2013 but did not address the motion to stay or the motion to
compel appraisal. B&F appealed. See B&F Jacobsen
Lumber & Hardware, L.L.P. v. Acuity, No. 13-0952,
2014 WL 1714968, at *1 (Iowa Ct. App. Apr. 30, 2014). On
appeal, this court concluded questions of fact existed as to
a number of issues raised regarding the notice provision and
the bad-faith claim, reversed the summary-judgment ruling,
and remanded the case back to the district court.
Id. at *9-10.
August 5, 2014, B&F filed a second motion to compel
appraisal, which Acuity again resisted. The court entered an
order compelling appraisal on October 13. The appraisal was
completed on February 17, 2015, resulting in an award
requiring Acuity to pay B&F an additional $83, 000 in
damages. After the appraisal was complete and payment was
made, only B&F's bad-faith claim remained.
4, 2015, a deposition was taken of Acuity's
property-claims manager, Marty Jaeger. During the deposition,
Acuity's counsel asserted attorney-client privilege in
declining to allow Jaeger to answer a number of questions
respecting Acuity's reliance on the "settled in
full" language on the check and the reasoning for its
decision to refuse B&F's requests for additional
payment and appraisal after the litigation was commenced.
Acuity's counsel stated any decision made after the
filing of the petition was on advice of counsel and
maintained the reasoning for Acuity's decisions was
therefore protected by attorney-client privilege.
October 12, 2015, B&F filed a third motion to compel. The
third motion requested an order to compel Jaeger to answer
the questions avoided during his deposition. On November 19,
pursuant to Iowa Rule of Evidence 5.104(a), Acuity filed a
motion to determine the admissibility of evidence requesting
that the court determine certain evidence inadmissible at
trial including evidence of post-filing-of-litigation conduct
and evidence as to emotional damages or-as B&F described
it-loss of peace of mind from the purchase of property
insurance. The court entered an order ruling on both the
motion to compel and the motion to determine admissibility of
evidence on February 5, 2016. The court held counsel for
Acuity's assertion of attorney-client privilege during
Jaeger's deposition was proper, and denied B&F's
motion to compel. The court also determined evidence of
Acuity's post-filing-of-litigation actions were not
March 4, B&F filed a motion regarding emotional-distress
damages for bad faith, asserting B&F was not claiming
damages for emotional distress and requesting B&F be
permitted to seek damages for loss of peace of mind. The
court held B&F, being a limited liability partnership,
could not experience a loss of peace of mind, and thus
evidence as to loss of peace of mind would not be admitted.
matter proceeded to jury trial, and on March 14, the jury
rendered a verdict finding Acuity had not acted in bad faith.
B&F filed a motion for new trial on April 27, which was
denied. B&F now appeals, maintaining the district court
erred in (1) denying B&F's motion to compel answers
previously omitted from Jaeger's deposition, (2) limiting
evidence as to Acuity's post-filing-of-litigation
conduct, and (3) determining evidence as to loss of peace of
mind was inadmissible.
Standards of Review.
review a district court's ruling on a discovery matter
for abuse of discretion." Mediacom Iowa, L.L.C. v.
Inc. City of Spencer, 682 N.W.2d 62, 66 (Iowa 2004).
"[W]e afford the district court wide latitude. We will
reverse a ruling on a discovery matter only for an abuse of
discretion." Exotica Botanicals, Inc. v.
Terra Int'l, Inc., 612 N.W.2d 801, 804 (Iowa
2000) (citation omitted). "There is such an abuse when
the grounds underlying a district court are clearly untenable
or unreasonable." Mediacom Iowa, 682 N.W.2d at
66. There must also be a showing that the alleged error
resulted in prejudice to provide grounds for reversal.
Jones v. Univ. of Iowa, 836 N.W.2d 127, 140 (Iowa
2013). In Jones, our supreme court summarized the
It is well-settled that nonprejudicial error is never ground
for reversal on appeal. See Bengford v. Carlem
Corp., 156 N.W.2d 855, 867 (Iowa 1968). Furthermore, we
do not presume the existence of prejudice based on an
erroneous discovery ruling. See James v. Hyatt Regency
Chi., 707 F.3d 775, 784 (7th Cir. 2013) ("We shall
not reverse the district court's ruling [on a motion to
compel] absent a clear showing that the denial of discovery
resulted in actual and substantial prejudice . . . .");
Team Cent., Inc. v. Teamco, Inc., 271 N.W.2d 914,
922 (Iowa 1978) (noting that an erroneous discovery ruling on
privilege must be "of sufficient importance to justify a
reversal"); Schroedl v. McTague, 169 N.W.2d
860, 865 (Iowa 1969) (holding that even if trial court's
discovery ruling on party's request for admissions was
erroneous, there was "no ground for a reversal as no
prejudice therefrom appear[ed] in the record").
"[T]he burden rests upon the appellant not only to
establish error but to further show that prejudice
resulted." In re Behrend's Will, 10 N.W.2d
651, 655 (1943).
and third alterations in original.)
review the district court's evidentiary rulings for an
abuse of discretion. State v. Olutunde, 878 N.W.2d
264, 266 (Iowa 2016). The same abuse-of-discretion standard
applies-we reverse if the district court exercised its
discretion on clearly untenable or unreasonable grounds.
Ranes v. Adams Labs., Inc., 778 N.W.2d 677,
685 (Iowa 2010). "A ground or reason is untenable when
it is not supported by substantial evidence or when it is
based on an erroneous application of the law."
Id. (quoting Graber v. City of Ankeny, 616
N.W.2d 633, 638 (Iowa 2000)).
Motion to Compel-Deposition.
first contends the district court erred in refusing to compel
those portions of Jaeger's deposition he declined to
answer by asserting attorney-client privilege. Acuity argues
the privilege was properly invoked because the actions taken
by Acuity after the litigation commenced were all on the
advice of counsel.
argued Acuity acted in bad faith because it had no reasonable
basis to deny B&F's claim for additional damages.
See Reuter v. State Farm Mut. Auto. Ins. Co., Inc.,
469 N.W.2d 250, 253 (Iowa 1991) (stating that to establish
the insurer acted in bad faith, the insured must "show
the absence of a reasonable basis for denying benefits of the
policy and the [insurer's] knowledge or reckless
disregard of the lack of a reasonable basis for denying the
also asserted Acuity's bad faith was evidenced in part by
Acuity's issuance of a check to B&F four days after
the tornado, which indicated the claim was "settled in
full, " in violation of Iowa Administrative Code rule
denied the allegations of bad faith, and, specifically with
respect to the "settled in full" language, Acuity
maintained the language was harmless because Acuity never
intended the language to be binding. To rebut these
arguments, B&F sought to obtain answers from Jaeger
during his deposition respecting Acuity's reasoning for
denying B&F's requests for additional payment and
appraisal and Acuity's true position on the "settled
in full" language. For example:
Q. Mr. Jaeger, who has been the person in charge of adjusting
the claim of BF Jacobson on this property loss since the time
of the filing of this lawsuit? A. Mr. Werger and I.
. . . .
Q. Okay. Did you at any time become aware of a request for
appraisal by Mr. Jacobson on or about October 23, of 2012? A.
As part of the litigation, yes. I-my attorney shared a letter
Q. All right. What is the reason Acuity refused to agree to
the appraisal in October of 2012?
COUNSEL FOR ACUITY: Do not answer that question. I'm
invoking the attorney-client privilege, and I'm advising
my client not to answer this or any other question that you
pose to him about what the reasons were for Acuity to do
anything in response to litigation. And that's exactly
what you're doing, and I am not going to let him answer
that or any other question that's directed toward
decisions that were made while the litigation was pending.
. . . .
Q. Mr. Jaeger, would you tell me the reason that Acuity
refused to conduct an appraisal when the request was made for
one by ...