COUNTRY MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, vs. PAMELA MCNELLY and SHAWN MCNELLY, Defendants-Appellants.
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IN THE COURT OF APPEALS OF IOWA
No. 9-459 / 08-1880
Filed July 22, 2009
COUNTRY MUTUAL INSURANCE COMPANY,
Plaintiff-Appellee,
vs.
PAMELA MCNELLY and SHAWN MCNELLY,
Defendants-Appellants.
_____________________________________________________________
Appeal from the Iowa District Court for Polk County, Joel D. Novak, Judge.
Defendants appeal the district court’s grant of summary judgment to
plaintiff, and denial of their motion for summary judgment, in this action seeking a
declaratory judgment concerning uninsured motorist coverage. AFFIRMED.
Gail E. Boliver of Boliver & Bidwell Law Firm, Marshalltown, for appellants.
Wendy D. Boka and Barbara A. Hering of Hopkins & Huebner, P.C., Des
Moines, for appellee.
Considered by Sackett, C.J., and Vogel, J., and Robinson, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206 (2009).
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ROBINSON, S.J.
I.
Background Facts & Proceedings
Pamela McNelly, a resident of Iowa, insured a motorcycle through Country
Mutual Insurance Company. The headquarters for Country Mutual are in Illinois.
The insurance policy was issued by an Iowa agent. The decision to approve
Pamela’s application was made by an insurance agent in Iowa. Country Mutual
insures drivers in Iowa and Colorado, as well as other states.
On September 1, 2006, in El Paso County, Colorado, Pamela permitted
Shawn McNelly to drive the motorcycle. She was the passenger. The McNellys
claim that another driver made a sharp and erratic lane change in front of them,
and this caused them to lose control of the motorcycle and suffer injuries. The
other driver was never identified, and they characterize this as a “miss and run”
accident.
The McNellys sought coverage for their injuries under the uninsured
motorist provisions of the Country Mutual policy. They rely on a provision which
states the company “will pay damages which an insured is legally entitled to
recover from the owner or operator of an uninsured or underinsured motor
vehicle because of bodily injury sustained by an insured and caused by an
accident.” The company denied coverage based on a policy provision stating an
uninsured motor vehicle “is a hit and run vehicle” which hits the insured or the
insured’s vehicle.
On December 6, 2007, Country Mutual filed a petition for declaratory
judgment, claiming there was no coverage under Iowa law because there was no
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physical contact between the McNellys’ motorcycle and the other vehicle. 1 On
May 2, 2008, the district court determined Iowa law should apply in this case.
The court found Iowa had the most significant relationship to the transaction in
dispute. The court stated, “Iowa, as the place of contracting and negotiation, has
a significant interest in regulating the agreed upon exchange between the
parties, and in protecting their justified expectations under the contract.” The
court found the parties had agreed, under the terms of the contract, that physical
contact was necessary to invoke the provisions of the uninsured motorist
coverage.2
The McNellys filed a motion for summary judgment, claiming “a denial of
coverage based on an accident involving a miss-and-run instead of a required
hit-and-run is contrary to public policy.” They cited cases from several other
states, including Colorado, which had found that uninsured motorist coverage
could be available based on a “miss and run” accident. See e.g., Farmers Ins.
Exch. v. McDermott, 527 P.2d 918, 920 (Colo. Ct. App. 1976) (holding “the
physical contact restriction in the policy is an impermissible restriction upon the
broad coverage required under the uninsured motorist statute”). Country Mutual
resisted the McNellys’ motion for summary judgment, and filed its own motion for
summary judgment. Country Mutual asserted that under Iowa law, and based on
the terms of the policy, it had no obligation to the McNellys.
The McNellys
resisted Country Mutual’s motion for summary judgment.
1
The McNellys filed an action on the same matter in Colorado on December 12, 2007,
claiming Colorado law should apply. The district court denied the McNellys’ motion to
dismiss the Iowa petition.
2
The McNellys appealed the May 2, 2008 decision. The Iowa Supreme Court
dismissed the appeal as interlocutory. See Iowa R. App. P. 6.2(1).
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The district court granted Country Mutual’s motion for summary judgment,
and denied the McNellys’ motion. The court found that under Iowa law, as stated
in Claude v. Guarantee National Insurance Co., 679 N.W.2d 659, 666 (Iowa
2004), physical contact is required for recovery of uninsured motorist benefits.
The court rejected the McNellys’ public policy arguments. The court concluded
Country Mutual had no obligation to the McNellys’ under the insurance policy for
the accident that occurred in Colorado on September 1, 2006. The McNellys
appealed the district court’s decision.
II.
Standard of Review
We review the district court’s ruling on a motion for summary judgment for
the corrections of errors at law. See Iowa R. App. P. 6.4. Summary judgment is
appropriate only when there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 1.981(3);
Kistler v. City of Perry, 719 N.W.2d 804, 805 (Iowa 2006). A court should view
the record in the light most favorable to the non-moving party. Kern v. Palmer
Coll. of Chiropractic, 757 N.W.2d 651, 657 (Iowa 2008). In determining whether
there is a genuine issue of material fact, the court affords the non-moving party
every legitimate inference the record will bear. Id.
III.
Merits
A.
The McNellys contend the district court should have applied the
case of Hall v. Allied Mutual Insurance. Co., 261 Iowa 1258, 158 N.W.2d 107
(1968). In Hall, the parties agreed there was uninsured motorist coverage for
Iowa plaintiffs who had been injured by a Texas driver in Oklahoma. Hall, 261
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Iowa at 1261, 158 N.W.2d at 109. The only question before the court was the
extent of that coverage. Since recoverable damages were different in Iowa and
Oklahoma, the court had to determine which law applied.
Id. at 1262, 158
N.W.2d at 109. The Iowa Supreme Court concluded that in a tort action, the law
of the place of the tort must be used to determine the rights of the parties, and
this was Oklahoma law. Id. at 1263, 158 N.W.2d at 110.
The district court noted that Hall involved questions of tort law, while “the
question as to the effect to be given to a coverage provision or definition within
an insurance contract is an altogether different question” that involved contract
law.
The court specifically rejected the McNellys’ assertion that Hall was
dispositive to this case. The court stated:
In the present case, Defendants’ entitlement to underinsured
motorist benefits is not contingent upon any theory of tort liability,
nor does the question presented in Plaintiff’s action for declaratory
judgment concern an issue relating to the proper measure or award
of damages as determined by an applicable state’s tort laws. The
present dispute concerns only a question of whether coverage for
an accident is mandated by the express terms of the parties’
contract, a question incidentally affected by both Iowa and
Colorado law pertaining to insurance contracts, not tort actions.
This is a question of contract law.
The issue in this case is not the extent of coverage, but whether there is
coverage at all. To determine whether the uninsured motorist provisions of the
policy apply requires the examination of the terms of the insurance policy.
Wetherbee v. Economy Fire & Cas. Co., 508 N.W.2d 657, 659 (Iowa 1993)
(“[W]hen seeking uninsured motorist benefits the insured is not in fact suing the
uninsured motorist but rather is seeking contract benefits under the insurance
policy.”). The issue in this case is therefore a question of contract law. See id.
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(noting a claim for uninsured motorist benefits is a contract claim). We find no
error in the district court’s conclusion that Hall, which involved tort law, was not
applicable in this case.
B.
The McNellys claim the district court improperly applied a conflict of
laws analysis for contracts. They assert that a conflict of laws analysis for torts
should have been used. They claim that if the case is analyzed as a tort, the law
of Colorado should be applied.
The distinction is important because in Iowa there must be physical
contact before a party may recover under an uninsured motorist policy for a hitand-run accident. Iowa Code § 516A.1 (2007); Claude, 679 N.W.2d at 666. In
Colorado, however, the uninsured motorist statute contains no physical contact
restriction. Farmers Ins. Exch., 527 P.2d at 920. The Colorado Court of Appeals
has concluded a physical contact requirement is not a reasonable restriction on
uninsured motorist coverage. Id.
We have already determined the case should be considered as a contract
dispute. See Wetherbee, 508 N.W.2d at 659. We conclude the district court
properly analyzed the case under the rules for a conflict of laws in a contract
case.
C.
In an alternative argument, the McNellys assert that even if conflict
of laws analysis for contract disputes is applied, the district court should have
found that Colorado law, and not Iowa law should be applied in this case.
“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., Inc. v.
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United Capitol Ins. Co., 539 N.W.2d 144, 146 (Iowa 1995). The parties to a
contract can determine the law which will control the contract. Cole v. State
Auto. & Cas. Underwriters, 296 N.W.2d 779, 781 (Iowa 1980) (citing
Restatement (Second) of Conflict of Laws § 187, at 561 (1971)).
If the
contracting parties have not determined which state’s laws will apply, the court
applies the laws of the state with the “most significant relationship” to the dispute.
Id. (citing Restatement (Second) of Conflict of Laws § 188, at 575).
The McNellys claim that two provisions of the insurance policy, read
together, show that the parties agreed that the tort law of a state where an
accident occurred would govern their contractual rights and duties.
In the
uninsured-underinsured motorists portion of the insurance policy it states “we will
pay damages which an insured is legally entitled to recover from the owner or
operator of an uninsured or underinsured motor vehicle because of bodily injury
sustained by an insured and caused by an accident.” Also, the general liability
portion of the policy provides:
If you have liability insurance under this policy and if you are
traveling in a state or province which has a compulsory insurance
or similar law affecting nonresidents, we will automatically provide
the required minimum amounts and types of coverage. However,
the required coverage will be excess over any other collectible
insurance.
We determine there is no explicit provision in the insurance contract that
the terms of the insurance contract would be determined by the law of a state
where an accident had occurred. The provisions highlighted by the McNellys do
not amount to an agreement that the law of Colorado should apply in this case.
The provision concerning out-of-state coverage applies to liability insurance and
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not to uninsured motorist coverage.
See State Farm Mut. Auto. Ins. Co. v.
Mendiola, 865 P.2d 909, 911 (Colo. Ct. App. 1993) (finding the out-of-state
coverage provision of a policy applied only to the liability section of the policy and
not the uninsured/underinsured motorist section). Also, Colorado does not have
a compulsory law requiring uninsured motorist coverage.3 See Colo. Rev. Stat. §
10-4-609 (2007).
Therefore, the McNellys have not shown Colorado has a
“compulsory insurance or similar law affecting nonresidents” that would require
the coverage sought in this case.
D.
Finally, the McNellys assert that the “physical contact” requirement
for uninsured motorist coverage in Iowa is inconsistent with public policy. They
cite case law from several other states that have found uninsured motorist
coverage for “miss and run” accidents comports with public policy.
This issue has already been addressed in Iowa in Claude v. Guarantee
National Insurance Co., 679 N.W.2d 659, 666 (Iowa 2004). The court found,
“The provision at issue here does not violate public policy because it was
specifically authorized by the general assembly in section 516A.1.” Claude, 679
N.W.2d at 663.
The court stated, “contrary to the plaintiff’s contention, the
physical-contact requirement reflects and is consistent with the public policy of
this state.” Id. The court concluded that the provision of the insurance policy
requiring actual physical contact between an unknown motorist’s vehicle and the
insured’s vehicle was enforceable. Id. at 666.
3
The Colorado law only requires insurers to offer uninsured motorist coverage. Colo.
Rev. Stat. § 10-4-609(1)(a); see also Cruz v. Farmers Ins. Exch., 12 P.3d 307, 312
(Colo. Ct. App. 2000) (“[U]ninsured motorist coverage is not mandatory, and individual
insureds are free to decline such coverage.”).
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We decline the McNellys’ invitation to reconsider this issue. The Iowa
legislature and the Iowa Supreme Court have determined that in Iowa uninsured
motorist coverage is not available in a hit-and-run accident unless the hit-and-run
vehicle hits the insured or the insured’s vehicle.
See Iowa Code § 516A.1;
Claude, 679 N.W.2d at 666.
After considering all of the issues raised by the parties we affirm the
decision of the district court.
AFFIRMED.
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