METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY d/b/a METLIFE AUTO & HOME and ECONOMY PREMIER ASSURANCE COMPANY, Appellees,
AUTO-OWNERS MUTUAL INSURANCE COMPANY, Appellant.
from the Iowa District Court for Polk County, Jeanie K. Vaudt
and Jeffrey D. Farrell, Judges.
insurer appeals judgment in favor of homeowners' insurer
for indemnification for half the cost of a settlement of tort
claims arising from an accidental shooting death on the
insured property. AFFIRMED.
Matthew T. Nelson of Warner Norcross & Judd, Grand
Rapids, Michigan; John J. Bursch of Bursch Law PLLC,
Caledonia, Michigan; and Timothy W. Hamann and Joshua L.
Christensen of Clark, Butler, Walsh & Hamann, Waterloo,
Michael S. Jones of Patterson Law Firm, L.L.P., Des Moines,
appeal, we must resolve a dispute between insurance companies
over liability coverage for a fatal accident. A dentist and
his wife formed a limited liability company (LLC) that held
title to investment properties, including a farmhouse where
an accidental shooting occurred. The dentist had purchased
personal (homeowners) liability insurance and commercial
general liability (CGL) insurance from separate insurers. The
CGL insurer denied coverage. The homeowners' insurer and
insured settled the death claim for $900, 000 and sued the
CGL insurer for reimbursement. The case proceeded to a bench
trial, and the district court entered judgment against the
CGL insurer for $450, 000, rejecting various coverage
defenses. The CGL insurer appealed, and we retained the
principal fighting issue is whether the LLC, as owner of the
farmhouse, had potential liability under a premises liability
theory for a dangerous condition (the loaded, unsecured rifle
left on a bed for several months). On our review, we conclude
the district court correctly interpreted the CGL insurance
contract, and its factual findings on potential liability and
the reasonableness of the settlement are supported by
substantial evidence. For the reasons explained below, we
affirm the district court judgment.
Background Facts and Proceedings.
Lorrie Lala, husband and wife, live in Mason City,
Iowa. The Lalas have been married for
twenty-seven years and have two children, Nick and Sam. Jay
is a dentist with a practice in Mason City.
1997, Jay and Lorrie organized Parker House Properties,
L.L.C. (Parker House), as a limited liability company to hold
property. Jay and Lorrie each own fifty percent of Parker
House. That entity owns various investment properties,
including the building that houses Jay's dental practice.
Parker House also owns apartment buildings, land in Mason
City, a house in Cedar Rapids where Jay's mother lives,
and land in Floyd County, Iowa, with a farmhouse at 1545
Lalas purchased the Foothill Avenue property for investment
purposes. The farmhouse is furnished, but no one lives there.
Jay hosts occasional business and public service events
there. The Lalas also use the house and farmland for
recreation, including hunting, fishing, target shooting,
riding all-terrain vehicles (ATV) and dirt bikes, running
their dogs, and swimming.
The Accidental Shooting.
April 22, 2012, Nick, his friend, seventeen-year-old Hunter
True, and Nick's girlfriend, Hayley, went to the Foothill
Avenue property to ride dirt bikes and ATVs. Jay had also
been at the property that day. Jay left shortly before the
teenagers departed. Before leaving, Jay told Nick to lock up
Nick was locking up, he noticed that one of the Lalas'
firearms, a .22 caliber Ithaca lever action rifle, had been
left on a bed in one of the bedrooms. Jay had purchased the
rifle when he was about ten years old and kept it at the farm
for hunting and target shooting. The rifle had been left on
the bed after Sam and Nick last used it in January or
expected Nick to secure each firearm in a soft gun case in
one of the bedrooms after ensuring it was unloaded. When Nick
was about twelve years old, he took a hunter safety class in
which he learned how to store firearms properly. Jay had also
talked to Nick about how to handle firearms safely and to
treat every gun as if it was loaded. Nevertheless, on this
April day, Nick picked up the rifle and the weapon
accidentally discharged. The bullet struck Hunter in the
abdomen. Hunter was taken by ambulance to the hospital in
Mason City, where he died from the gunshot wound.
The Insurance Policies.
Lalas had a personal insurance policy through Metropolitan
Property and Casualty Insurance Company (Metropolitan) that
covered Jay and Lorrie, as well as Nick and Sam. This policy
provided liability defense and indemnity coverage. The
Metropolitan policy specifically insured the Lalas'
primary home, personal vehicles, and the Foothill Avenue
House separately purchased a "Tailored Protection"
insurance policy from Auto-Owners Mutual Insurance Company
(Auto-Owners). The policy included CGL coverage with a $1,
000, 000 each occurrence liability limit.
September 2006, the CGL policy was amended with an
endorsement insuring the 116.78 acres of farmland in Floyd
County. After Parker House purchased the Foothill Avenue
home, Jay's insurance agent inspected the farm and then
added the property to the Auto-Owners' policy. The CGL
policy described the unoccupied farmhouse as a "Storage
Building" and the remaining property as "Vacant
under the Auto-Owners' CGL policy are described as
II-WHO IS AN INSURED . . . .
1. If you are designated in the Declarations as:
. . . .
c. A limited liability company, you are an insured. Your
members are also insureds, but only with respect to the
conduct of your business. Your managers are insureds, but
only with respect to their duties as your managers.
. . . .
2. Each of the following is also an insured:
a. Your "employees", other than either your
"executive officers" (if you are an organization
other than a partnership, joint venture or limited liability
company) or your managers (if you are a limited liability
company), but only for acts within the scope of their
employment by you or while performing duties related to the
conduct of your business, or your "volunteer
workers" only while performing duties related to the
conduct of your business. . . .
The Insurance Settlement and Litigation.
January 2014, Metropolitan reached a settlement with Michael
and Hillary Carpenter, Hunter's parents, whereby
Metropolitan agreed to pay $900, 000 in exchange for a
release of all claims and potential claims against the Lalas,
Parker House, Metropolitan, and Auto-Owners.
Parker House also made a coverage claim with Auto-Owners.
Auto-Owners denied coverage, stating that its policy only
covered individuals with respect to the "conduct of a
business," and any claims resulting from Hunter's
death were not business-related. Auto-Owners also stated that
the policy only covered Parker House, not the Lalas
2014, Metropolitan filed this civil action seeking
subrogation from Auto-Owners. Metropolitan later amended its
petition to include Parker House as a defendant and to allege
indemnity and contribution claims. Auto-Owners denied
liability, asserting that its policy only provided business
coverage. Auto-Owners' pleadings also disputed
Metropolitan's right to recover contribution,
subrogation, or indemnity. Auto-Owners amended its answer
multiple times to add additional affirmative defenses. At the
time of trial, Auto-Owners had asserted ten affirmative
filed a motion for summary judgment, arguing its policy did
not cover the shooting because it was unrelated to Parker
House's business. Auto-Owners later filed two motions for
partial summary judgment, one seeking to prevent Metropolitan
from asserting a contribution claim and the other seeking a
ruling that comparative fault principles apply to the
subrogation claim. The ...