American Family Mut. Ins. Co. v. Allied Mut. Ins. Co.

• Citation: 562 N.W.2d 159
• Decision Date: 23 April 1997
• Docket Number: No. 95-1554,95-1554
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant, v. ALLIED MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 159

562 N.W.2d 159

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant, v. ALLIED MUTUAL INSURANCE COMPANY, Appellee.

No. 95-1554.

Supreme Court of Iowa.

April 23, 1997.

William K. Klinker of Smith, Grigg, Shea & Klinker, Primghar, for appellant.

Richard J. Barry of Montgomery, Barry & Bovee, Spencer, for appellee.

Considered by HARRIS, P.J., and LARSON, NEUMAN, SNELL, and ANDREASEN, JJ.

HARRIS, Justice.

Two insurance companies were potentially responsible for the coverage for injuries sustained by an automobile passenger who suffered a gunshot wound during a hunting outing. After both companies pointed to the other as responsible, one of them assumed the defense and settled the claims. It then brought this action to recoup against the other insurer. The suit was later dismissed by way of summary judgment. We reverse and remand, vacating a contrary decision by the court of appeals.

We subscribe to the factual summary in the decision of the court of appeals. With minor editorial changes, we quote and adopt it as our own.

Mark Van Otterloo was operating an automobile owned by his father. Present with him were Calvin Bakker, Brent Maassen, and Leon Van Beek. The four young men planned to hunt in a local field which was posted against hunting. Van Otterloo and Bakker left the vehicle and began hunting in the field. Van Beek and Maassen remained in the car. While sitting there they were approached by the owner of the field who protested that Van Otterloo and Bakker were hunting without permission. Van Beek and Maassen then called to the two hunters and backed the vehicle down the road to pick them up. As Van Otterloo was preparing to place his gun in the trunk of the car, the shotgun accidentally discharged, causing projectiles to pass through the open space of the trunk and into the back seat of the car, injuring Maassen.

The marriage between Van Otterloo's parents, Sherwin and Linda Van Otterloo, had been dissolved. At the time of the accident, Mark was residing with Linda. Sherwin had the car insured under a personal automobile policy by defendant Allied Mutual Insurance Company (Allied). ¹ Linda had a homeowners policy with plaintiff American Family Mutual Insurance Company (American Family). ²

Maassen sued Mark Van Otterloo, alleging he was negligent in discharging his shotgun at the rear of the automobile. American Family undertook Van Otterloo's defense under Linda's homeowners policy, despite a dispute with Allied concerning coverage, and specifically reserved its right to bring a declaratory judgment action against Allied. Allied then intervened seeking to recoup $5000 it had paid to Maassen under the medical pay provision of the policy issued to Sherwin. Allied apparently paid these benefits because Maassen was the "occupant" of the vehicle under the policy. American Family settled all claims in the Maassen lawsuit. It agreed to pay Allied, Maassen, and Maassen's attorney $5000 for Allied's medical pay benefits and Maassen $125,000.

Maassen moved for summary judgment against Allied in an effort to establish Maassen's attorney fees in the recovery of Allied's $5000. Allied resisted and argued that Maassen's attorney was not entitled to one-third of the $5000. Allied then moved to compel payment of the $5000 from Maassen. The trial court ordered [order of November 15, 1993] Allied to pay attorney fees and costs in the amount of $1766.37 and Maassen to pay $3233.33 to Allied. Maassen then dismissed the cause with prejudice.

American Family then brought this declaratory judgment action seeking repayment of the $5000 in medical pay benefits, the monies paid to Maassen and attorney fees. Both American Family and Allied moved for summary judgment. The district court denied American Family's motion for summary judgment but granted Allied's. American Family appeals.

I. We review a district court's ruling granting summary judgment for errors of law. Iowa R.App. P. 4; Lihs v. Lihs, 504 N.W.2d 890, 892 (Iowa 1993). We uphold a summary judgment when the moving party shows there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. Iowa R. Civ. P. 237(c); see C-Thru Container Corp. v. Midland Mfg. Co., 533 N.W.2d 542, 544 (Iowa 1995). On review we determine whether a genuine issue of material fact exists and whether the law was correctly applied. Gerst v. Marshall, 549 N.W.2d 810, 811-12 (Iowa 1996). The record is reviewed in a light most favorable to the nonmoving party. Id.

II. The district court relied on alternative grounds for entering summary judgment for Allied. One was a determination that American Family had not sought contribution in its declaratory judgment petition, having only pled indemnity. The district court reasoned that because "American Family has not asked for contribution from Allied" it did not have to decide if American Family could recover against Allied under a theory of contribution even if both Allied and American Family insurance policies provided coverage. ³

We think American Family's petition was easily sufficient under Iowa rule of civil procedure 69 to raise the demand for contribution. Under rule 69(a) a party is not required to "identify specific theories of recovery; the petition need only apprise the opposing parties of the incident giving rise to the claim and of the general nature of the action." Pendergast v. Davenport, 375 N.W.2d 684, 689 (Iowa 1985) (citing Soike v. Evan Matthews & Co., 302 N.W.2d 841, 842 (Iowa 1981)).

The petition need not allege ultimate facts that support the elements of the cause of action. However, the petition must allege enough facts to give the defendant "fair notice" of the claim asserted so the defendant can adequately respond. A petition gives "fair notice" if it informs the defendant of the incident giving rise to the claim and of the claim's general nature.

Smith v. Smith, 513 N.W.2d 728, 730 (Iowa 1994) (citations omitted). We reject the contention that summary judgment can be affirmed on the basis of insufficient pleading.

III. The trial court also based its holding on the doctrine of issue preclusion. ⁴ Issue preclusion serves a dual purpose. First it protects litigants from the "vexation of relitigating identical issues with identical parties or those persons with a significant connected interest to the prior litigation." State ex rel. Casas v. Fellmer, 521 N.W.2d 738, 740-41 (Iowa 1994). Second it furthers the interest of judicial economy and efficiency by preventing unnecessary litigation. Id. at 741.

Issue preclusion applies if the following four requirements are met: (1) the issue determined in the prior action is identical to the present issue; (2) the issue was raised and litigated in the prior action; (3) the issue was material and relevant to the disposition in the prior action; and (4) the determination made of the issue in the prior action was necessary and essential to that resulting judgment. General Car & Truck Leasing Sys., Inc. v. Lane & Waterman, 557 N.W.2d 274, 281 (Iowa 1996); Stanley v. Fitzgerald, 509 N.W.2d 454, 457 (Iowa 1993); Hunter v. City of Des Moines, 300 N.W.2d 121, 123 (Iowa 1981).

There is ordinarily a status test to be met before applying these four requirements: "the parties in both actions must be the same," or "there must be privity between the party against whom issue preclusion is invoked and the party against whom the issue was decided in the first litigation." Brown v. Kassouf, 558 N.W.2d 161, 163 (Iowa 1997) (citing Hunter, 300 N.W.2d at 123). The "privity" required for invoking issue preclusion means " 'one who, after rendition of the judgment, has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, or purchase.' " Brown, 558 N.W.2d at 163 (quoting Goolsby v. Derby, 189 N.W.2d 909, 914 (Iowa 1971)).

This status test is relaxed where issue preclusion is offered defensively, that is, as a shield rather than a sword. Neither mutuality of the parties nor privity is required

where issue preclusion is applied defensively if the party against whom issue preclusion is invoked was "so connected in interest with one of the parties in the former action as to have had a full and fair opportunity to litigate the relevant claim or issue and be properly bound by its resolution."

Brown, 558 N.W.2d at 163-64 (quoting Opheim v. American Interinsurance Exch., 430 N.W.2d 118, 120 (Iowa 1988)).

As used in this context, the term "defensive use" means:

a stranger to the judgment in the former action, ordinarily the defendant in the second action, relies upon that judgment as conclusively establishing in his favor an issue which he must prove as an element of his defense.

Brown, 558 N.W.2d at 164. "In other words, defensively a judgment is used as a 'shield.' " Hunter, 300 N.W.2d at 123. In Opheim we found issue preclusion was "being invoked defensively against the stranger to the former judgment," and held this qualified as a defensive use. 430 N.W.2d at 120.

In this case Allied is attempting to use issue preclusion defensively in order to establish that Mark Van Otterloo is not covered under the Allied policy. It attempts to do this by using the prior November 15 judgment as a "shield" against American Family's claim that Van Otterloo is covered by the Allied auto policy. Because we think American Family satisfied the status test, we move on to the four issue preclusion requirements.

We need only consider the second one (the issue was raised and litigated in the prior action) because we think Allied fails to establish this ground. Allied's petition for intervention in the prior action asserted only an unspecified subrogation right to the $5000. ⁵ Van Otterloo denied this bare assertion in his answer to the petition of intervention, but the only disputed issue between the two insurers involved a claim for attorney fees and costs on the $5000 check. Maassen's...