Pirkl v. Northwestern Mut. Ins. Ass'n
| Decision Date | 16 May 1984 |
| Docket Number | No. 83-271,83-271 |
| Parties | Donald F. PIRKL, Appellant, v. NORTHWESTERN MUTUAL INSURANCE ASSOCIATION, Appellee. |
| Court | Iowa Supreme Court |
John T. Nolan and Marc B. Moen of Rate, Nolan, Bohanan, Moen & Lucas, Iowa City, for appellant.
Robert N. Downer of Meardon, Sueppel, Downer & Hayes, Iowa City, and F.W. Tomasek of Tomasek, Vogel & Charnetski, Grinnell, for appellee.
Considered by REYNOLDSON, C.J., and UHLENHOPP, HARRIS, LARSON, and CARTER, JJ.
Both the insured and the insurer appeal from the judgment of the district court following a jury trial to recover actual and punitive damages based on the insurer's failure to pay a theft loss claim.
The case involves the claim of plaintiff, Donald F. Pirkl, a Johnson County farmer, who contends that the defendant Northwestern Mutual Insurance Association breached its contract of insurance and acted in bad faith when it failed to pay his claim for a reported theft of approximately sixty-nine feeder pigs. After hearing the evidence, the jury awarded plaintiff $1228.20 in compensatory damages and $12,282.00 in punitive damages. Upon defendant's motion for judgment notwithstanding the verdict, the trial court set aside the award of punitive damages and entered judgment for the amount of compensatory damages only.
On appeal, the plaintiff asserts that (1) this court should recognize the existence of an independent claim in tort by an insured against an insurer for bad faith failure to pay a first party claim; and (2) that there was substantial evidence offered in support of all the elements of such a claim in the present case thereby rendering the trial court's ruling on defendant's motion for judgment notwithstanding the verdict erroneous. On its cross-appeal, the defendant insurer asserts that (1) the untimeliness of plaintiff's notice of loss should preclude any recovery under the policy, and (2) the district court erred in its instructions to the jury concerning the effect of lack of prejudice upon its affirmative defense of untimely notice of claim.
The record discloses that on or about July 22, 1980, the plaintiff believed that some of his feeder pigs were missing from a field where they had been kept. He notified the Johnson County Sheriff's Office, and a deputy was soon dispatched to investigate the disappearance. There were few visible signs that a theft had occurred. The ground was hard packed and did not show tire tracks. A gate to the enclosed area where the pigs had been located was closed, but plaintiff believed that the latch was attached differently (locked from the outside rather than the inside) from the way he had last fastened it. It also appeared that a strand of electric fencing was missing from the top of the gate.
The particular field is located in close proximity to an entrance to Interstate 80, a circumstance claimed to provide easy access to plaintiff's field while at the same time attracting minimal attention to cars and trucks because of a usually high amount of traffic in the area. Although he could locate no direct evidence of theft, the deputy sheriff concluded that the pigs had been stolen. This conclusion was based largely on the fact that several other livestock thefts had occurred recently in Johnson, Washington and Iowa Counties.
The plaintiff had been insured by the defendant mutual insurance association for over twenty years at the time of this incident. His policy contained a provision requiring that a claim of theft loss be filed within 24 hours of the underlying occurrence. It also required that on theft claims there should be "substantial proof" that a loss was caused by theft. Inventory shortages and other mysterious disappearances were not embraced within the coverage of the policy absent independent evidence of theft.
Plaintiff did not notify the defendant association of his theft claim until July 28, 1980. By this time, he had sold the remaining feeder pigs and believed he had ascertained with reasonable certainty the number of pigs which were missing. Upon being presented with the claim, the defendant association sent an adjuster to visit the farm who advised the plaintiff that in the absence of physical evidence that a theft had occurred the company must disallow the claim.
After plaintiff's attorney had written the association and received a reply reaffirming the denial of the claim, plaintiff initiated this action seeking compensatory damages for a theft loss alleged to be covered by defendant's policy and for punitive damages based upon an alleged bad faith refusal to pay the claim. Trial resulted in the aforementioned verdicts, motions and ruling of the district court. We consider the claims presented on appeal separately. Additional facts which are deemed necessary to our decision are considered in connection with the legal issues presented.
At the outset, plaintiff urges us to clarify the matter of whether this jurisdiction recognizes an independent tort based upon an insurer's bad faith in failing to settle a casualty loss claim with its own insured. The defendant association contends that we unequivocally rejected such a theory of liability in Brown Township Mutual Insurance Association v. Kress, 330 N.W.2d 291, 298 (Iowa 1983). We do not believe our holding in Kress is that clearly defined with respect to this issue.
While we noted in Kress that we had in other cases declined to recognize such a theory of recovery, it appears that in those cases in which the issue had previously been considered, the claims which the insurer failed to pay were as a matter of law "fairly debatable." See, e.g., Higgins v. Blue Cross of Western Iowa and South Dakota, 319 N.W.2d 232, 236 (Iowa 1982); M-Z Enterprises, Inc. v. Hawkeye Security Insurance Co., 318 N.W.2d 408, 414 (Iowa 1982). 1 We also inferred that this was the situation in Kress in denying the right to recover punitive damages in that case.
As a result of our previous approach to claims of this nature, our law has been shaped on the basis of identifying the type of situation which does not permit recovery on an independent tort theory rather than identifying the type of situations, if any, which would support recovery on such a theory. Because of the apparent frequency with which this type of claim is being asserted, we conclude that some effort should be made to clarify its status under our law.
The plaintiff urges that there is no logical basis for recognizing a cause of action in tort for acts of a liability insurer which cause harm to its insured as a result of the insurer's bad faith in representing the insured's interests against a third party claim 2 and in not also recognizing a similar cause of action against a casualty insurer who causes harm to its insured through the bad faith handling of a property loss claim. He cites Anderson v. Continental Insurance Co., 85 Wis.2d 675, 687, 271 N.W.2d 368, 374-75 (1978) as supporting the analogy between the two types of insurance claims.
We are not nearly as persuaded as the Wisconsin court in Anderson that the rationale which recognizes an ancillary duty of a liability insurer to exercise good faith in the settlement of third party claims is equally applicable and of equal importance when an insured seeks payment of a claim for a property loss from his own casualty insurer.
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