Neely v. American Family Mut. Ins. Co.

• Decision Date: 29 May 1996
• Docket Number: No. C 94-4120 MWB.,C 94-4120 MWB.
• Citation: 930 F. Supp. 360
• Parties: Walter NEELY and Loretta Neely, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of West Virginia

930 F. Supp. 360

Walter NEELY and Loretta Neely, Plaintiffs, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.

No. C 94-4120 MWB.

United States District Court, N.D. Iowa, Western Division.

May 29, 1996.

Robert Darling of Sommers, Schwartz, Silver & Schwartz, P.C., Southfield, Michigan, and by William J. Giles, III, Giles Law Office, Sioux City, Iowa, for Plaintiffs Walter and Loretta Neely.

Michael R. Hellige of Shull, Cosgrove, Hellige & Lundberg, Sioux City, Iowa, for Defendant American Family Mutual Insurance Company.

ORDER REGARDING DEFENDANT'S MOTION PURSUANT TO F.R.C.P. 50(b) AND MOTION FOR NEW TRIAL PURSUANT TO F.R.C.P. 59 AND PLAINTIFFS' MOTION, IN THE ALTERNATIVE, FOR NEW TRIAL

BENNETT, District Judge.

                                           TABLE OF CONTENTS
                 I. INTRODUCTION AND BACKGROUND ............................................... 362
                    A. Factual Background ..................................................... 362
                       1. Walter's status with the Church ..................................... 362
                       2. The accident and the Church's insurance coverage .................... 363
                       3. The Neelys' suit against the Church ................................. 364
                    B. Procedural History ..................................................... 364
                       1. The present lawsuit ................................................. 364
                       2. The cross-motions for summary judgment .............................. 365
                       3. Jury trial .......................................................... 365
                       4. Post-trial motions .................................................. 366
                II. LEGAL ANALYSIS ............................................................ 366
                    A. American Family's Post-Trial Motion Pursuant to Fed.R.Civ.P. 50(b) ..... 366
                       1. Applicable standards ................................................ 366
                          a. Procedural requirements .......................................... 367
                          b. Evidentiary standard ............................................. 368
                

                       2. The Neelys' promissory estoppel claim under Iowa law ................ 369
                          a. The "clear and definite agreement" requirement ................... 371
                          b. Evidence of the agreement here ................................... 373
                             i. Clarity ....................................................... 374
                            ii. Inducement .................................................... 375
                       3. Summary ............................................................. 375
                    B. American Family's Post-Trial Motion Pursuant to Fed.R.Civ.P. 59 ........ 376
                    C. The Neelys' Motion For New Trial ....................................... 376
                III. CONCLUSION................................................................ 377
                

Perhaps just as important as the right of trial by jury to the just disposition of disputes between parties in civil litigation is the right of the parties to seek post-trial scrutiny of the jury's verdict by the court. The Federal Rules of Civil Procedure provide, in proper circumstances, for relief from the jury's verdict, either by judicial entry of judgment as a matter of law or by order for new trial. In this case, both parties have availed themselves of the court's power of post-trial scrutiny of the jury's verdict. The defendant insurance company, disappointed by a jury verdict finding that promissory estoppel precluded its assertion of policy exclusions to deny coverage, seeks either judgment as a matter of law or a new trial. The plaintiffs, a former pastor injured in a church boiler explosion and his wife, also seek a new trial in the event the court decides to grant the insurance company's post-trial motions. The court must, in the first instance, determine whether sufficient evidence supports the jury's verdict and, in the second, whether the jury's verdict is against the greater weight of the evidence.

I. INTRODUCTION AND BACKGROUND

This post-trial opinion follows a jury verdict for the plaintiffs, Walter and Loretta Neely, on the Neelys' claim of promissory estoppel against the defendant, American Family Mutual Insurance Company ("American Family"). The Neelys' lawsuit stems from an accident on May 4, 1991, in which Walter Neely sustained serious and permanent injuries while attempting to light the boiler in the basement of the Christian Life Fellowship Church ("the Church"). American Family was the liability insurer for the Church, but it refused to defend the Church in the Neelys' lawsuit against the Church ("the underlying lawsuit"), alleging that an exclusion in the Church's insurance policy precluded coverage for Walter Neely, because he was an executive officer or director of the Church at the time of the accident, performing an act within the scope of his duties as an executive officer or director in lighting the boiler at the Church. The Neelys ultimately obtained a default judgment against the Church which established that the Church is liable to the Neelys for the injuries they sustained as a result of the boiler explosion. Subsequently, the Neelys sued American Family for recovery of the default judgment, contending that American Family is estopped to assert the exclusion in the policy upon which its denial of coverage to the Church depended. To gain a better understanding of the nature of the Neelys' claims against American Family, it is helpful to discuss in greater detail the factual background of this litigation, including the Neelys' relationship with the Church, the Church's acquisition of its insurance policy from American Family ("the policy"), Walter Neely's accident at the Church, and the litigation that ensued as a consequence of the accident.

A. Factual Background

1. Walter's status with the Church

Walter and Loretta Neely were two of three incorporators and directors of the Church and also worked as pastors at the Church. Until January 1990, Walter and Loretta each received a salary for their work as pastors and together received a housing allowance, along with payment for maintenance expenses, utility bills, telephone bills, and real estate taxes on their parsonage. On March 20, 1990, at Walter's request, the Church stopped paying Walter his salary. In a letter to the "Church Board of Christian Life Fellowship," dated February 13, 1991, Walter explained the change in circumstances that led to the relinquishment of his salary.¹ In this letter, Walter conveyed to the Church board that although he was relinquishing his salary as pastor, he was not resigning as "Senior Pastor" or "Chairman of this local body." Likewise, the Church's minutes for the Church board meeting on March 24, 1991, reflect that Walter was not resigning as pastor or "corporate head" but was merely giving up his pastoral salary and housing benefits.

From March 20, 1990, to May of 1991, Walter Neely went to the Church every day, attended all Church services, and preached a total of three times. On days when no services were scheduled, Walter did paperwork for the Bible school of which Loretta was the director and did chores around the Church building.

2. The accident and the Church's insurance coverage

On May 4, 1991, Walter went to the Church at the request of Loretta in order to heat the Church building for services the following day. Walter found the building thermostats indicated a temperature of fifty degrees. Lighting the boiler was the only way to heat the Church, and Pastor Fred Moore, a director at the Church, had advised Walter that the boiler could be lit by manipulating the switches on the thermostats. Accordingly, Walter adjusted the thermostats to a setting of seventy degrees in order to start the building's boiler. The boiler subsequently exploded, severely injuring Walter.

At the time of this accident, the Church had a business liability policy with American Family. The insurance policy, policy number 14-X086686, contained an effective date from January 29, 1991, to January 28, 1992. However, Pastor Fred Moore, the individual who obtained the policy for the Church, contended that he never received the policy in its entirety. The policy Moore claims he received also bears the number 14-X086686; however, it covers the time period from December 10, 1986, to December 10, 1988, and consists of nothing more than a declarations page, a schedule of positions covered, and two endorsements which modified any insurance policy coverage then in place. The entire text of the body of the actual insurance policy is missing. Section II of the policy,² which Moore alleges was missing from the policy that he received, provided, in part:

This section of the policy protects you and your business against claims that result from injury to others, or damage to others' property. Some words and phrases in this section appear in bold type. They have special meaning and are explained under Definitions. The word insured means any person or organization qualifying as such under WHO IS AN INSURED.

The policy subsequently defines an insured as follows:

1. If you are shown in the declarations as:

. . . . .

c. an organization other than a partnership or joint venture, you are an insured. Your executive officers and directors are insureds, but only with respect to their duties as your officers and directors. Your stockholders are also insureds but only with respect to their liability as stockholders.

2. Each of the following is also an insured:

a. your employees, other than your executive officers, but only for acts within the scope of their employment by you. However, none of these employees is an insured for:

(1) bodily injury or personal injury to you or to a co-employee while in the course of his or her employment, or....

Section II of the policy also contains medical payments coverage of $5,000, but with the following exclusion:

We will not pay expenses for bodily injury:

a. To any insured.

3. The Neelys' suit against the Church

On May 23, 1993, the Neelys...