City of West Branch v. Miller, 95-305

• Decision Date: 17 April 1996
• Docket Number: No. 95-305,95-305
• Citation: 546 N.W.2d 598
• Parties: CITY OF WEST BRANCH, Appellant, v. Debra MILLER, Cedar County Assessor, and Patricia Meixner, Cedar County Auditor, Appellees.
• Court: Iowa Supreme Court

Page 598

546 N.W.2d 598

CITY OF WEST BRANCH, Appellant, v. Debra MILLER, Cedar County Assessor, and Patricia Meixner, Cedar County Auditor, Appellees.

No. 95-305.

Supreme Court of Iowa.

April 17, 1996.

Bruce D. Goddard, Iowa City, for appellant.

Carlton G. Salmons of Austin, Gaudineer, Austin, Salmons & Swanson, Des Moines, for appellees.

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

LAVORATO, Justice.

A county purchased a public official's errors and omissions insurance policy through a local government risk pool. A city sued the county's assessor and auditor for allegedly failing to assess and collect taxes on newly annexed city property. The principle issue is whether purchase of the insurance policy waived the two officials' governmental immunity under Iowa Code section 670.7 (1993). The district court thought not and granted the two officials' joint motion for summary judgment. We disagree and reverse and remand for further proceedings.

I. Background Facts.

The parties agree the following facts are undisputed. On November 3, 1987, the voters of the city of West Branch approved the involuntary annexation of certain real property into the city. The Cedar County Board of Supervisors certified the election results. The following week the Cedar County Auditor, as election commissioner, delivered a certification of those results to the city's Development Board. On January 6, 1988, the board issued its final order certifying the annexation of the property to the city as of December 24, 1987.

The auditor and the county's assessor failed to add the annexed property to the property tax base for the city. The city first discovered the omission during an informal conversation between county and city officials in 1994. The omission resulted in reduced property tax revenues to the city over a four-year period between 1989 and 1993.

In January 1988 the county joined the Heartland Insurance Risk Pool. Only Iowa counties were allowed to be members of the pool. The pool existed for member counties to self-fund certain insurance coverages or to have the pool acquire for its members those coverages that were not economically feasible to self-fund. The pool members decided to self-fund certain risks and have the pool purchase through private carriers insurance coverages for other risks. The public official's errors and omissions insurance was one type of private insurance the pool acquired for its members.

The pool acquired the private insurance on a group basis. The group basis purchase resulted in (1) lower costs for the private insurance, (2) better coverage terms, and (3) access to insurance that might not have been available if an individual county sought to purchase the insurance.

The pool purchased the public official's errors and omissions insurance from American Public Slip Entity. Any pool member had the choice of buying that particular policy. The county decided to do so and paid $10,798 in premiums for that policy. The county paid this premium to the pool, which in turn remitted that amount to Entity. Entity then issued the policy to the county.

II. Background Proceedings.

In its suit against the assessor and auditor, the city made two allegations. First, the assessor and auditor failed--through omission, act of neglect, or breach of duty--to correctly assess and collect taxes for the city. Second, the assessor and auditor waived any immunity for their actions through the county's purchase of public official's errors and omissions liability insurance. The city asked for damages against the assessor and auditor equal to the amount of lost revenue.

The assessor and auditor answered, denying liability and asserting as an affirmative defense the immunity provisions of Iowa Code section 670.4(2). Later, the two officials moved for summary judgment, asserting they had not waived immunity because of the county's purchase of the liability insurance. The district court agreed and sustained the motion over the city's resistance.

The city appeals from the summary judgment ruling.

III. Scope of Review.

Summary judgment is appropriate under Iowa Rule of Civil Procedure 237 only when the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law. No fact question exists if the only dispute concerns the legal consequences flowing from undisputed facts. In such circumstances, summary judgment is proper. On appeal of a summary judgment ruling, then, we must decide (1) whether a genuine issue of material fact exists, and (2) if the law was correctly applied.

Ottumwa Hous. Auth. v. State Farm Fire & Cas. Co., 495 N.W.2d 723, 726 (Iowa 1993) (citations omitted). Here the facts are undisputed and the only dispute concerns the legal consequences flowing from those facts. Our question, then, is to determine whether the district court correctly applied the law.

IV. Governmental Immunity.

A. Applicable law. Iowa Code section 670.2 subjects municipalities to liability for their torts and those of their officers and employees. It states in pertinent part:

Except as otherwise provided in this chapter, every municipality is subject to liability for its torts and those of its officers and employees, acting within the scope of their employment or duties, whether arising out of a governmental or proprietary function.

For the purposes of section 670.2, a county is a municipality. See Iowa Code § 670.1(2).

Iowa Code section 670.4 immunizes municipalities from tort liability arising in several specific instances. At issue here is Iowa Code section 670.4(2), immunizing municipalities from tort liability for "[a]ny claim in connection with the assessment or collection of taxes."

Iowa Code section 670.12--with several exceptions--immunizes all officers and employees of municipalities from tort liability as to all claims exempted in section 670.4:

All officers and employees of municipalities are not personally liable for claims which are exempted under section 670.4, except claims for punitive damages, and actions permitted under section 85.20. An officer or employee of a municipality is not liable for punitive damages as a result of acts in the performance of a duty, unless actual malice or willful, wanton and reckless misconduct is proven.

Municipalities waive section 670.4 immunities when they purchase liability insurance under the conditions specified in Iowa Code section 670.7.

B. Background. Before considering the issues raised, we think it would aid our analysis to review the state of the law leading up to the enactment of section 670.7. Before enactment of statutes waiving governmental immunity, counties were not as a rule liable for torts committed by them in the exercise of a governmental function. The rule was otherwise if the tort was committed in the exercise of a county's proprietary or private function. Wittmer v. Letts, 248 Iowa 648, 650-52, 80 N.W.2d 561, 562-63 (1957). County employees were still liable for their own torts even though such employees were engaged in a governmental function and even though the county was exempt under governmental immunity. Anderson v. Calamus Community Sch. Dist., 174 N.W.2d 643, 644 (Iowa 1970) (citation omitted).

In addition, if the county purchased liability insurance, such purchase in no way waived the county's right to raise its defense of governmental immunity. McGrath Bldg. Co. v. City of Bettendorf, 248 Iowa 1386, 1392-94, 85 N.W.2d 616, 620-21 (1957). We considered the insurance as protecting against liability and not as creating or increasing liability. Id.

The Iowa Tort Claims Act was enacted in 1965. See 1965 Iowa Acts ch. 79. It allowed claims against the State of Iowa but not against its political subdivisions, such as counties, school districts, cities, and the like. Graham v. Worthington, 259 Iowa 845, 853-55, 146 N.W.2d 626, 632-33 (1966).

In 1967 the legislature passed legislation allowing claims against named governmental subdivisions--including counties--under certain stated conditions. See 1967 Iowa Acts ch. 405. This legislation was first codified in the 1971 Iowa Code as chapter 613A.

Iowa Code section 613A.7 (1971), now section 670.7, pertinently provided:

The governing body of any municipality may purchase a policy of liability insurance insuring against all or any part of liability which might be incurred by such municipality or its officers, employees and agents under the provisions of section 613A.2 [now section 670.2] and may similarly purchase insurance covering torts specified in section 613A.4 [now section 670.4].... The procurement of such insurance constitutes a waiver of the defense of governmental immunity as to those exceptions listed in section 613A.4 [now section 670.4] to the extent stated in such policy but shall have no further effect on the liability of the municipality beyond the scope of this chapter....

See Iowa Code § 613A.1 (defining municipality to include counties).

In 1986 the legislature substantially modified and amended section 613A.7. See 1986 Iowa Acts ch. 1211, § 34. Section 613A.7 with those amendments now appears as section 670.7. This change from chapter 613A to chapter 670 occurred in the 1993 Iowa Code. Section 670.7--with the 1986 amendments italicized--now pertinently provides:

The governing body of a municipality may purchase a policy of liability insurance insuring against all or any part of liability which might be incurred by the municipality or its officers, employees, and agents under section 670.2 [formerly section 613A.2] and section 670.8 [formerly section 613A.8] and may similarly purchase insurance covering torts specified in section 670.4 [formerly section 613A.4]. The governing body of a municipality may adopt a self-insurance program, including but not limited to the investigation and defense of claims, the...