AMCO Ins. Co. v. Stammer

• Decision Date: 24 June 1987
• Docket Number: No. 86-19,86-19
• Citation: 411 N.W.2d 709
• Parties: AMCO INSURANCE COMPANY, Plaintiff-Appellee, v. Randy A. STAMMER and Rhonda Stammer, Defendants-Appellants.
• Court: Iowa Court of Appeals

Page 709

411 N.W.2d 709

AMCO INSURANCE COMPANY, Plaintiff-Appellee, v. Randy A. STAMMER and Rhonda Stammer, Defendants-Appellants.

No. 86-19.

Court of Appeals of Iowa.

June 24, 1987.

Mark S. Soldat, Algona, for defendants-appellants.

Kirke C. Quinn of Doran, Courter, Quinn & Doran, Boone, for plaintiff-appellee.

Heard by SNELL, P.J., and SCHLEGEL and SACKETT, JJ.

SNELL, Presiding Judge.

The plaintiff in this declaratory judgment action, AMCO Insurance Company, is the insurer on a casualty policy covering the home of defendants, Randy and Rhonda Stammer. The policy extends to fire loss but does "not provide coverage for any insured who has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance." Both Randy and Rhonda qualify as an "insured" within the policy. On June 12, 1983, fire extensively damaged the Stammers' home and its contents. All parties agree that the fire was the result of arson. On October 25, 1983, AMCO initiated this action for declaratory relief alleging that both Randy and Rhonda were responsible, either directly or indirectly, for the arson and that both Randy and Rhonda had falsified statements and acted fraudulently in connection with their claim against AMCO. The declaratory judgment petition requested the district court to declare that AMCO had no remaining duties under the insurance contract to the Stammers and that the Stammers had no rights enforceable against AMCO. On November 21, 1983, the Stammers filed their answer.

Subsequently, the Stammers filed both a motion for leave to amend their answer and a motion for partial summary judgment. The district court granted the former motion, and the Stammers amended their answer so as to add a breach of contract claim on behalf of Randy and Rhonda and three tort claims on behalf of Rhonda alone. The motion for summary judgment alleged that AMCO had a duty under the policy to pay Rhonda for any property losses, expenses, or costs she incurred because of the fire. This motion was denied on September 10, 1984. On November 26, 1984, AMCO filed a motion for summary judgment with respect to the three tort counterclaims raised in the Stammers' answer. This motion was granted on January 28, 1985.

Trial to a jury commenced on September 27, 1985. A verdict in favor of AMCO was returned on October 3. Following an unsuccessful motion for new trial, the Stammers filed their notice of appeal. In this appeal, the Stammers challenge the summary judgment rulings made by the district court and allege several errors made during the course of trial. Our review is limited to the correction of errors at law. Iowa R.App.P. 4.

I.

The Stammers contend the district court erred in denying their summary judgment motion on the question of AMCO's contractual duty to Rhonda. In her affidavit given in support of the summary judgment motion, Rhonda denied all allegations made against her in AMCO's petition. The Stammers' argument on this point is essentially limited to an attack on the sufficiency of an affidavit offered in support of AMCO's resistance to the summary judgment motion. We think this argument places the cart far ahead of the horse.

The purpose of a summary judgment is to avoid a trial where no genuine issue of material fact exists. Neoco, Inc. v. Christenson, 312 N.W.2d 559, 560 (Iowa 1981). In reviewing the grant of summary judgment under Iowa Rule of Civil Procedure 237, the question is whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. Suss v. Schammel, 375 N.W.2d 252, 254 (Iowa 1985); Brown v. Monticello State Bank of Monticello, 360 N.W.2d 81, 83-84 (Iowa 1984). The resisting party must set forth specific facts showing there is a genuine issue for trial. Iowa Civil Rights Comm'n v. Massey-Ferguson, Inc., 207 N.W.2d 5, 8 (Iowa 1973); Iowa R.Civ.P. 237(e). The resisting party may not rely solely on legal conclusions to show there is a genuine issue of material fact justifying denial of summary judgment. Byker v. Rice, 360 N.W.2d 572, 575 (Iowa App.1984). Our task on appeal is to determine only whether a genuine issue of material fact exists and whether the law was correctly applied. Adam v. Mt. Pleasant Bank & Trust Co., 355 N.W.2d 868, 872 (Iowa 1984). We examine the record in a light most favorable to the party opposing the motion for summary judgment to determine if movant met his or her burden. Matherly v. Hanson, 359 N.W.2d 450, 453 (Iowa 1984).

A motion for summary judgment is not supported as required by rule 237 unless the movant meets his or her burden to show there is no genuine fact issue. Daboll v. Hoden, 222 N.W.2d 727, 731 (Iowa 1974). Unless the movant's showing is sufficient, there is no burden on the opposing party to file affidavits showing that he or she has a cause of action or even to file counteraffidavits at all. 73 Am.Jur.2d, Summary Judgment § 15 at 735-37 (1974). We think Rhonda's blanket denial of the allegations made by AMCO falls short of a successful showing that no factual issue remains for trial. Her burden as movant is to demonstrate affirmatively that no factual issue exists, not that her version of the disputed factual issues is, in fact, the correct one. To allow Rhonda to satisfy her summary judgment burden by proffering a simple denial of AMCO's allegations would place the district court in the position of summary judgment fact-finder. That is a position the district court is prohibited from assuming. Daboll, 222 N.W.2d at 731. Moreover, a summary judgment disposition should be granted only on evidence which a jury would not be at liberty to disbelieve and which would require a directed verdict for the moving party. Id. at 735; see also Cowman v. Hornaday, 329 N.W.2d 422, 424 (Iowa 1983). In the present case, a jury would be free to disbelieve Rhonda's denials of culpability even were they uncontradicted. Daboll, 222 N.W.2d at 736. Even the most unsophisticated appreciation of this case would disclose that her denials are, in fact, anything but uncontradicted. The purpose of a summary judgment is to avoid useless trials. Id. at 731. As Rhonda's summary judgment motion did not establish this to be such a trial, the district court did not err in denying her motion.

II.

The appellants next maintain the district court erred in eliminating, by way of summary judgment, the three tort counterclaims made by Rhonda in appellants' amended answer. Those counterclaims alleged causes of action based upon three theories: (1) a first-party bad faith tort; (2) ex delicto tort; and (3) abuse of process. These claims by Rhonda are all grounded in Rhonda's contention that she is an innocent co-insured, that no credible evidence to the contrary exists, and that AMCO's failure to pay benefits to her constitutes a tort.

A.

The courts of this state have never recognized the first-party bad faith tort alleged by Rhonda here. E.g., Hoekstra v. Farm Bureau Mut. Ins. Co., 382 N.W.2d 100, 111 (Iowa 1986). Neither, however, have our courts definitively stated that such a cause of action will never, under any set of circumstances, be found to exist. See, e.g., Pirkl v. Northwestern Mut. Ins. Bureau, 348 N.W.2d 633, 634-36 (Iowa 1984). Rather, "our law has been shaped on the basis of identifying the type of situation which does not permit recovery" under that theory. Id. at 635. Recovery under this theory is not permitted in situations where the claim which the insurer has failed to pay is as a matter of law "fairly debatable." Id. As our supreme court stated in M-Z Enters., Inc. v. Hawkeye-Security Ins. Co., 318 N.W.2d 408, 415 (Iowa 1982), "[w]hen a claim is 'fairly debatable' the insurer is entitled to debate it, whether the debate concerns a matter of fact or law." Our cases acknowledge that those jurisdictions which have recognized such a cause of action require an insured to demonstrate the absence of a reasonable basis for denying policy benefits and the insurer's knowledge or reckless disregard of the lack of reasonable basis for denying the claim. Hoekstra, 382 N.W.2d at 111; M-Z Enterprises, 318 N.W.2d at 414-15.

Whatever the precise parameters of a first-party bad faith cause of action, assuming our supreme court chooses eventually to recognize such a tort, situations presenting a "fairly debatable" claim lie unequivocally outside the theory's ambit. E.g., Pirkl, 348 N.W.2d at 635. As applied to the summary judgment context, this places the burden on AMCO to demonstrate "with or without supporting affidavits," Iowa R.Civ.P. 237(b), that Rhonda's claim is "fairly debatable." Pirkl, 348 N.W.2d at 635. If they do so, they are entitled, as a matter of law, to debate it. We think AMCO has done so. Although much of the evidence against her is circumstantial, the cases recognize that in arson situations "this is ordinarily the only evidence available." Koontz v. Farmers Mut. Ins. Ass'n, 235 Iowa 87, 94, 16 N.W.2d 20, 24 (1944) ("One could scarcely be expected to set fire to his property in the presence of others...."); Natalini v. Northwestern Fire and Marine Ins. Co., 219 Iowa 806, 812, 259 N.W. 577, 579-80 (1935). In addition, it appears that the issue of whether an innocent co-insured, even assuming that to be the case, may recover under a policy in situations such as this has not yet been decided in this state. AMCO was entitled to debate this legal issue as well as the factual issue of Rhonda's culpability. Compare Short v. Oklahoma Farmers Union Ins. Co., 619 P.2d 588 (Okl.1980) (recovery denied innocent co-insured) with Steigler v. Insurance Co. of North America, 384 A.2d 398 (Del.1978) (recovery allowed innocent co-insured). We think that, as a matter of law, Rhonda's claim is fairly debatable and that AMCO is entitled to debate it. Consequently, the district court was correct in granting AMCO summary judgment on Rhonda's first-party bad faith tort claim.

B.

The...