Yegge v. Integrity Mut. Ins. Co., 94-1135

• Decision Date: 19 July 1995
• Docket Number: No. 94-1135,94-1135
• Citation: 534 N.W.2d 100
• Parties: Alan L. YEGGE and Janice L. Yegge, Appellants, v. INTEGRITY MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 100

534 N.W.2d 100

Alan L. YEGGE and Janice L. Yegge, Appellants, v. INTEGRITY MUTUAL INSURANCE COMPANY, Appellee.

No. 94-1135.

Supreme Court of Iowa.

July 19, 1995.

David L. Leitner, Johnston, for appellants.

Gregory A. Witke, Barbara A. Hering, and Elizabeth A. Raymond of Bradshaw, Fowler, Proctor & Fairgrave, Des Moines, for appellee.

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

HARRIS, Justice.

An insurer, having provided a business liability policy to a building contractor, denied coverage when the contractor was sued by homeowners in a dispute arising from construction of a residence. The homeowners, successful in the litigation but unsuccessful in their attempts to collect on the judgment against the insured contractor, then brought this suit against the insurer pursuant to a statute that allows them to enforce a judgment by "stepping into the shoes of" the judgment debtor.

Partly by way of summary judgment, but largely on the basis of a trial on stipulated facts, the trial court determined that the policy provided no duty to indemnify the insured under these circumstances and hence there was no duty to defend. We agree.

Plaintiffs Alan L. Yegge and Janice L. Yegge, who are husband and wife, hired New Way Construction Co., Inc. (New Way) to build a residence. New Way, which had purchased a general business liability insurance policy from defendant Integrity Mutual Insurance Company (Integrity), asked for a defense and for indemnity under that policy. Integrity however determined the policy provided no duty to indemnify on the Yegges' claim and, because the duty to defend is coterminous with the duty to indemnify, refused to do either.

The Yegges won their lawsuit against New Way, recovering a judgment for $18,000 in compensatory damages and for $40,000 in punitive damages. The judgment remains unsatisfied. The Yegges then filed this suit under Iowa Code section 516.1 (1993), ¹ seeking payment of the unsatisfied judgment against New Way from Integrity. The Yegges also sought bad faith and punitive damages against Integrity.

Both parties filed motions for summary judgment. The trial court denied the Yegges' motion for summary judgment and granted summary judgment to Integrity on the bad faith and punitive damages claims. The parties then submitted the remainder of the case on stipulated facts, after which the trial court entered judgment for Integrity. The matter is before us on the Yegges' appeal from the trial court judgment.

Our review is for correction of errors at law. Iowa R.App.P. 4.

The Yegges brought their suit against New Way in five counts: (1) breach of contract; (2) breach of express warranty of fitness for a particular purpose; (3) breach of implied warranty; (4) negligence; and (5) fraud. They sought damages for cost of labor, material, and supplies necessary to complete the residence to their satisfaction; disruption of their lives; impairment of their business; increased expenses; diminished investment value; and emotional distress.

Claiming a failure on the part of Integrity, the Yegges point to the rule that specifies an insurer's duty to investigate. McAndrews v. Farm Bureau Mut. Ins. Co., 349 N.W.2d 117, 119 (Iowa 1984) (inquiry must sometimes be expanded beyond scope of petition). They also point to the rule that raises a duty to defend whenever there is potential or possible liability to indemnify based on facts appearing at the outset of the case. Id. These rules do not alter a more controlling one that precisely equates the duty to defend with the duty to indemnify. The two duties are clearly coextensive; Iowa law is well-settled that there is no duty to defend unless there is a duty to indemnify. West Bend Mut. Ins. Co. v. Iowa Iron Works, 503 N.W.2d 596, 601 (Iowa 1993); First Newton Nat'l Bank v. General Casualty Co. of Wis., 426 N.W.2d 618, 623 (Iowa 1988).

I. The general business liability policy provided coverage for "bodily injury" or "property damage" caused by an "occurrence" and for "personal injury" or "advertising injury" resulting from certain specifically mentioned causes. Not one of the Yegges' five counts sought recovery for anything covered by the policy. The subject of the counts did not qualify as property damage within the policy's definition ² because they...