Farm Bureau Life Insurance Company v. Holmes Murphy & Associates, Inc.
831 N.W.2d 129
| Iowa | 2013Background
- Husbands and wife applied for Farm Bureau life insurance; HIV-positive status discovered via blood testing and applications denied.
- Smiths sued Farm Bureau in Wyoming for negligent notification of HIV status; Farm Bureau settled and later sought indemnity from insurers and sued broker Holmes Murphy for contract and negligence.
- Wyoming federal court granted Farm Bureau summary judgment; Wyoming Circuit reversed regarding duty to disclose (Pehle v. Farm Bureau) but case proceeded in Iowa on ICPL policy issues.
- Farm Bureau sought indemnity under an Insurance Company Professional Liability policy (ICPL) with Federal; notice requirement was 90 days after policy period, which Farm Bureau allegedly violated.
- Farm Bureau notified Holmes Murphy (broker) of Smiths’ claims in 2003; Federal denied coverage in 2005 for untimely notice and for underwriting/other exclusions.
- Iowa district court granted summary judgment for Holmes Murphy; the Iowa Supreme Court affirmed, holding the underwriting exclusion of the ICPL policy precluded coverage for the Smiths’ claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does underwriting exclusion preclude coverage here? | Farm Bureau: underwriting exclusion should not apply to non-underwriting claims. | Holmes Murphy: underwriting exclusion covers claims arising from underwriting activities and the Smiths’ claims fall within that scope. | Yes; underwriting exclusion precludes coverage. |
| Are the Smiths’ claims within the exclusion's scope as arising from underwriting? | Farm Bureau: claims are not tied to underwriting decisions or activities. | Holmes Murphy: claims arose from Farm Bureau’s eligibility investigation and underwriting. | Claims arose from underwriting activity; exclusion applies. |
| Is the ICPL policy illusory if the exclusion is read literally? | Farm Bureau contends illusory coverage results if exclusion is read strictly. | Holmes Murphy argues some coverage remains for other claims under the policy. | No; the policy terms are unambiguous and not illusory. |
Key Cases Cited
- Farm Bureau Life Ins. Co. v. Chubb Custom Ins. Co., 780 N.W.2d 735 (Iowa 2010) (timely notice required; prior ruling affirmed district court)
- Pehle v. Farm Bureau Life Ins. Co., 397 F.3d 897 (10th Cir. 2005) (duty to disclose HIV status arising from eligibility investigation)
- First Newton Nat’l Bank v. Gen. Cas. Co. of Wis., 426 N.W.2d 618 (Iowa 1988) (interpretation of policy terms; avoid illusory coverage)
- A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607 (Iowa 1991) (determine intent from policy language; ambiguity defined)
- Thomas v. Progressive Cas. Ins. Co., 749 N.W.2d 678 (Iowa 2008) (interpretation of insurance policy provisions; ordinary meaning)
- Tacker v. Am. Family Mut. Ins. Co., 530 N.W.2d 674 (Iowa 1995) (arising out of language; broad vs narrow scope in exclusions)
- Vincent v. Safeco Ins. Co. of Am., 29 P.3d 943 (Idaho 2001) (underwriting scope and coverage implications)