TRAVIS FUHRMANN, Plaintiff - Appellee, vs. ROYCE M. MAJORS, Defendant, AMERICAN FAMILY INSURANCE COMPANY, Defendant - Appellant.
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IN THE COURT OF APPEALS OF IOWA
No. 8-253 / 07-1531
Filed July 16, 2008
TRAVIS FUHRMANN,
Plaintiff-Appellee,
vs.
ROYCE M. MAJORS,
Defendant,
AMERICAN FAMILY INSURANCE COMPANY,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Douglas S. Russell,
Judge.
Insurance company appeals the district court’s award of $100,000 under
policy’s underinsured motorist endorsement. REVERSED AND REMANDED.
Ted J. Wallace, Davenport, for appellant.
Matthew G. Novak and Thad J. Collins of Pickens, Barnes & Abernathy,
Cedar Rapids, for appellee.
Heard by Miller, P.J., and Vaitheswaran and Eisenhauer, JJ.
2
EISENHAUER, J.
American Family Insurance Company appeals the district court’s judgment
requiring it to pay $100,000 in underinsured motorist coverage (UIM) to Travis
Furhmann under Iowa law. We reverse and remand.
I.
BACKGROUND FACTS AND PROCEEDINGS.
The case was submitted to the court without hearing based on the parties’
stipulated factual record and trial briefs.
Previously, a motion for summary
judgment filed by American Family had been overruled with the court finding
“Iowa law should apply to determine the amount of damages.” The issue at trial
was: “Is Plaintiff entitled to recover underinsured motorist coverage under the
terms of the American Family Insurance Policy that was issued to his parents,
Jayme and Debbie Fuhrmann?”1
In 2004, Furhmann lived with his parents in South Dakota, held a South
Dakota driver’s license, was attending school in South Dakota, was working parttime at his father’s company, and was covered by his parents’ South Dakota
family car policy. Furhmann’s parents purchased the insurance policy in South
Dakota from an agent licensed to sell insurance only in South Dakota.
The
insured car was licensed in South Dakota and was principally garaged in South
Dakota.
On October 1, 2004, Furhmann was driving the insured car in Iowa and
was injured in an accident caused by Royce Majors, an Iowa resident. Majors
1
American Family summarily argues the tortfeasor’s vehicle does not meet the UIM
endorsement’s definition of “underinsured motor vehicle.” Because this issue of contract
interpretation was not ruled on by the trial court, it has not been preserved for our
review. See Meier v. Senecaut, 641 N.W.2d 532, 540 (Iowa 2002).
3
had $100,000 in liability insurance which was paid to Furhmann to settle Majors’
liability.2 American Family consented to the settlement. American Family agrees
Fuhrmann’s damages exceed $200,000 and agrees the accident was Majors’
fault. The district court awarded Furhmann $100,000, the policy’s UIM limit.
II.
STANDARD OF REVIEW.
Our standard of review is for correction of errors at law. Iowa R. App. P.
6.4. We will not set aside a bench trial decision unless “it was induced by an
error at law.” Evans v. Benson, 731 N.W.2d 395, 397 (Iowa 2007).
III.
MERITS.
The Furhmann American Family policy provided for $100,000 in UIM
coverage in an endorsement. American Family argues South Dakota law applies
and under South Dakota law Furhmann is not entitled to UIM proceeds. South
Dakota statutory law states underinsured coverage is limited to underinsured
benefits “less the amount paid by [the tortfeasor’s] liability insurer.” See S.D.
Codified Laws § 58-11-9.5 (2004). South Dakota considers this a “difference of
limits” statute. 3 See Gloe v. Union Ins. Co., 694 N.W.2d 252, 257 (S.D. 2005).
The American Family endorsement’s provisions track the statutory law. Because
the tortfeasor’s [Majors] policy provided liability benefits in an amount identical to
the UIM coverage purchased by Furhmann, under South Dakota law Furhmann
is not entitled to UIM proceeds.
2
Majors is no longer a party in this case.
Under South Dakota statutory law a policy holder buying underinsured motorist
coverage in South Dakota cannot know whether it has any value until after an injury.
Only after a comparison is made to the tortfeasor’s policy limits will the insured be able
to determine whether the purchased UIM coverage adds any value.
3
4
Under Iowa law, no deduction of the tortfeasor’s liability payment is
required, therefore, there is a conflict of laws:
South Dakota would bar
Furmann’s claim and Iowa law would award UIM proceeds.
See Veach v.
Farmers Ins. Co., 460 N.W.2d 845, 848 (Iowa 1990) (holding goal of UIM
coverage is full compensation to the extent of injury).
Furhmann argues Iowa law applies because Iowa has the most significant
relationships.
Furhmann points out the accident occurred in Iowa and was
caused by an Iowa driver. Additionally, the accident witnesses are Iowans and
the initial medical care occurred in Iowa.4
The district court agreed and
concluded Iowa law required American Family to pay UIM proceeds to
Furhmann.
The district court decision utilized the tort significant relationship test found
in Restatement (Second) Conflict of Laws section 145 (1971). This is an error of
law because “a claim for . . . UIM benefits is essentially a contractual one.”
Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775, 779 (Iowa 2000). “We determine
choice-of-law issues in insurance policy cases by the intent of the parties or the
most significant relationship test.” Gabe’s Constr. Co. v. United Capitol Ins. Co.,
539 N.W.2d 144, 146 (Iowa 1995) (citing Cole v. State Auto & Cas. Underwriters,
296 N.W.2d 779, 781 (Iowa 1980)). Where, as here, the UIM endorsement lacks
a specific choice of law clause, we look to the significant relationship factors
4
Furhmann also argues a conflict of laws analysis is unnecessary under Hall v. Allied
Mut. Ins. Co., 261 Iowa 1258, 158 N.W.2d 107 (Iowa 1968). We disagree. Hall was
decided before the Iowa Supreme Court adopted the Restatement (Second) of Conflict
of Laws (1971), in Joseph L. Wilmotte & Co. v. Rosenman Bros., 258 N.W.2d 317, 32526 (Iowa 1977). The Iowa Supreme Court has not utilized the Hall analysis in any
subsequent opinion.
5
listed in section 188 of the second Restatement. See Gabe’s, 539 N.W.2d at
146. The contacts to be considered are:
(a)
the place of contracting,
(b)
the place of negotiation of the contract,
(c)
the place of performance,
(d)
the location of the subject matter of the contract, and
(e)
the domicile, residence, nationality, place of incorporation
and place of business of the parties.
Restatement (Second) of Conflict of Laws § 188(2), 575.
Applying the contract significant relationship factors leads to the
conclusion South Dakota law should apply. The insured vehicle was licensed
and garaged in South Dakota. While American Family conducts business in
Iowa, the policy was sold in a South Dakota transaction to South Dakota
residents by a South Dakota agent in order to establish an insurer-insured
relationship in South Dakota.
See Cole, 296 N.W.2d at 782 (holding under
section 188, Minnesota law applies where the insurance “policy was sold in a
Minnesota transaction to a Minnesota resident by a Minnesota agent in order to
establish an insurer-insured relationship in Minnesota”).
Because we conclude South Dakota law applies and because South
Dakota requires a deduction for the tortfeasor’s liability payment, we reverse.5
The case is remanded for entry of a ruling in conformance with this opinion.
REVERSED AND REMANDED.
5
We find unpersuasive Furmann’s argument Iowa law applies because it has the “better
rule of law.” Furmann cites no Iowa authority and the Minnesota authority relied upon is
not current. See Nodak Mut. Ins. Co. v. American Family Mut. Ins. Co., 604 N.W.2d 91,
96 (Minn. 2000) (holding Minnesota has not placed any emphasis on “application of the
better rule of law” in nearly twenty years).
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