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Estate of Naeve v. FBL Financial Group, Inc.

Court of Appeals of Iowa

July 3, 2019

ESTATE OF JOSHUA NAEVE, BY ITS ADMINISTRATORS, THAD NAEVE and NANCYE NAEVE, THAD NAEVE, INDIVIDUALLY, and NANCYE NAEVE, INDIVIDUALLY, Plaintiff-Appellants,
v.
FBL FINANCIAL GROUP, INC., Defendant-Appellee.

          Appeal from the Iowa District Court for Polk County, Jeanie K. Vaudt, Judge.

         Appellants appeal a district court order granting FBL Financial Group, Inc.'s motion to dismiss appellants' civil petition at law.

          Bruce H. Stoltze of Stoltze & Stoltze, PLC, Des Moines, for appellants.

          S. Luke Craven, David L. Phipps, and Stephen E. Doohen of Whitfield & Eddy, P.L.C., Des Moines, for appellee.

          Heard by Doyle, P.J., and Tabor and Mullins, JJ.

          Mullins, Judge.

         Appellants appeal a district court order granting FBL Financial Group, Inc.'s (FBL) motion to dismiss appellants' civil petition at law forwarding claims of bad faith, interference with contract, and conspiracy or aiding and abetting bad faith.

         I. Background Facts and Proceedings

         The petition alleged the following facts. Joshua Naeve died in August 2013 as a result of a motor-vehicle accident involving a vehicle in which he was a passenger; he was nineteen years of age. Joshua's parents, Thad and Nancy Naeve, were appointed as administrators of Joshua's estate in September. The driver of the vehicle was insured by an automobile liability insurance policy up to $1.5 million. Several parties, including the Naeves, made demands for damages alleged to have been incurred as a result of the driver's negligence. The entirety of the coverage available under the policy was used to settle multiple claims, which ultimately included remittance of $500, 000 to the Naeves in return for a release from liability.

         The Naeves had an insurance policy with Farm Bureau Property & Casualty Insurance Company (Farm Bureau), which included underinsured motor-vehicle coverage providing the named insureds-Thad, Nancy, and Joshua-with insurance benefits covering damages exceeding the amount paid by the driver's policy up to the policy limit under the Farm Bureau policy. FBL is the "corporate parent" of Farm Bureau. In return for a management fee, FBL manages all aspects of Farm Bureau's operations, including the management of all claims made under underinsured policies made by insureds of Farm Bureau. Under the circumstances, the Farm Bureau policy provided the Naeves with insurance benefits up to $250, 000.

         The Naeves filed an underinsurance claim with Farm Bureau in June 2014. The petition alleged Farm Bureau, under the management and at the direction of FBL, rejected the claim asserting it could not evaluate it until it received information regarding the settlement received from the driver of the vehicle. Although Farm Bureau was made aware the Naeves' claim exceeded the limits of the driver's policy, Farm Bureau refused to pay the Naeves underinsurance benefits. The Naeves hired an attorney and, on April 29, 2015, filed a breach-of-contract lawsuit against Farm Bureau. Farm Bureau, under the management and direction of FBL, continued to contest the Naeves' entitlement to proceeds under the underinsurance policy. The matter proceeded to a jury trial. The jury returned a verdict against Farm Bureau and in favor of the Naeves, and the court entered judgment against Farm Bureau in the amount of $250, 000, the amount to which the Naeves were entitled under the circumstances, plus court costs and interest until paid, which Farm Bureau satisfied in June 2016.

         In September 2017, appellants filed a petition at law against FBL forwarding claims of bad faith, interference with contract, and conspiracy or aiding and abetting bad faith. Generally, appellants' claims were based on FBL's conduct as manager of Farm Bureau in relation to the underinsurance claim and resulting litigation. FBL moved to dismiss the petition for failure to state a claim upon which any relief may be granted. See Iowa R. Civ. P. 1.421(1)(f). Specifically, FBL argued appellants' claims were barred by the doctrine of claim preclusion, stating "all facts alleged by Plaintiffs giving rise to their . . . claims against FBL . . . occurred before Plaintiff's initial suit against Farm Bureau under the policy," Farm Bureau and FBL are in privity, and the claims were therefore required to be forwarded "at the same time as claims for contractual damages arising out of the same transaction." FBL alternatively argued appellants' claims stemming from the Farm Bureau policy do not extend to FBL, because FBL was not a party to the contractual relationship. Appellants filed a resistance.

         Following an unreported hearing, the district court entered an order granting FBL's motion to dismiss. As to count one, bad faith, the court concluded: "Because there was a valid and final judgment previously rendered and Farm Bureau was in privity with FBL, the Naeves' bad faith claim against FBL is barred by the doctrine of claim preclusion" because "bad faith claims against an insurer must be brought at the same time as claims for contractual damages arising out of the same transaction." As to count two, interference with contract, the court determined the claim does not apply to FBL due to the relationship among the parties. As to count three, conspiracy or aiding and abetting bad faith, the court essentially repeated the conclusion it reached under count one and additionally concluded the claim does not extend to FBL. As noted, the appellants appeal.

         II. Standard of Review

         Appellate review of a district court ruling granting a motion to dismiss is for correction of errors at law. Ackerman v. State, 913 N.W.2d 610, 614 (Iowa 2018). "A motion to dismiss should only be granted if the allegations in the petition, taken as true, could not entitle the plaintiff to any relief." King v. State, 818 N.W.2d 1, 9 (Iowa 2012) (quoting Sanchez v. State, 692 N.W.2d 812, 816 (Iowa 2005)). Denying a motion to dismiss is appropriate unless the petition "on its face shows no right of recovery under any state of facts." Ritz v. Wappello Cty. Bd. of Supervisors, 595 N.W.2d 786, 789 (Iowa 1999) (quoting Schaffer v. Frank Moyer Constr., Inc., 563 N.W.2d 605, 607 (Iowa 1997)). "[W]e view the petition in the light most favorable to the plaintiff, and will uphold dismissal only if the plaintiff's claim could not be sustained under any state of facts provable under the petition." Ackerman, 913 N.W.2d at 614 (quoting Berry v. Liberty Holdings, Inc., 803 N.W.2d 106, 108 (Iowa 2011)). We accept as true ...


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