Garry Slife, Carol Slife, Brian Slife and Megan Slife, All Individually and Doing Business as Pleasant Valley Dairy v. Farmers Mutual Hail Insurance Company of Iowa

IN THE COURT OF APPEALS OF IOWA

No. 3-1099 / 13-0111
Filed February 5, 2014

GARRY SLIFE, CAROL SLIFE, BRIAN
SLIFE and MEGAN SLIFE, All Individually
and doing business as PLEASANT
VALLEY DAIRY,
Plaintiffs-Appellants,

vs.

FARMERS MUTUAL HAIL INSURANCE
COMPANY OF IOWA,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Buchanan County, Michael

Shubatt, Judge.

An insured appeals from summary judgment of a claim on an insurance

contract. AFFIRMED.

Larry F. Woods, Oelwein, for appellants.

Sean M. O’Brien and Catherine M. Chargo of Bradshaw, Fowler, Proctor &

Fairgrave, P.C., for appellee.

Heard by Danilson, C.J., and Vaitheswaran and Mullins, JJ.
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MULLINS, J.

I. Background Facts and Proceedings.

The plaintiffs, Garry, Carole, and Brian Slife (the Slifes), operate Pleasant

Valley Dairy in Buchanan County. For several years, they purchased insurance

from Central Iowa Mutual Insurance Association (CIMIA). Each year, they

renewed their policy for a one-year duration. In 2011, CIMIA merged with and

now does business as Farmers Mutual Hail Insurance Company (Farmers

Mutual).

On November 11, 2009, the Slifes renewed their insurance policy, as they

had done for the previous several years. The policy covered the period of

November 11, 2009, to November 11, 2010, (the 2009/2010 policy) and

contained a term requiring the Slifes to bring any cause of action within one year

of the damage. On November 11, 2010, the Slifes again renewed their policy

(the 2010/2011 policy). This policy contained a term giving the Slifes two years

for the bringing of a cause of action. Both the 2009/2010 policy and 2010/2011

policy displayed a page header stating:

STANDARD FARM POLICY

DUPLICATE
CONTINUOUS POLICY

On January 7, 2010, a collapsed roof caused damage to a farm service

building on the insured property. Farmers Mutual conducted two inspections of

the damage and determined the policy excluded coverage for the loss. Farmers

Mutual denied payment of the damage to the building. The Slifes requested

reconsideration, and Farmers Mutual again denied coverage.
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Almost two years after the damage occurred, on January 5, 2012, the

Slifes filed a petition for breach of contract against Farmers Mutual and for

negligence in procuring insurance against the insurance agent and the insurance

broker. On June 21, 2012, Farmers Mutual filed a motion for summary judgment

arguing the Slifes’ petition was barred as a matter of law by failure to comply with

the contractual limitation requiring filing suit within one year of the loss. The

motion came on for hearing August 21, 2012. On October 12, 2012, the court

granted summary judgment, agreeing that the action was time-barred.

On October 26, 2012, the Slifes filed a motion to amend and enlarge

pursuant to Iowa Rule of Civil Procedure 1.904. The district court denied the

motion by a ruling filed December 24, 2012. The Slifes voluntarily dismissed all

defendants other than Farmers Mutual, leaving the ruling on the motion for

summary judgment dispositive of the only remaining issues between the parties.

They appeal from the grant of summary judgment.

II. Standard of Review.

Appellate review of a summary judgment ruling is for correction of errors

of law. Shriver v. City of Okoboji, 567 N.W.2d 397, 400 (Iowa 1988). Summary

judgment is appropriate when no genuine issue of material fact exists and the

moving party is entitled to judgment as a matter of law. Id. The burden is upon

the moving party to show the nonexistence of material facts and to prove the

party is entitled to judgment as matter of law. Knapp v. Simmons, 345 N.W.2d

118, 121 (Iowa 1984). A genuine issue of material fact exists if evidence is such

that a reasonable jury could return a verdict in favor of the nonmoving party.
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Fees v. Mut. Fire & Auto. Ins. Co., 490 N.W.2d 55, 57 (Iowa 1992). To uphold

the district court’s summary judgment rulings, we must confirm that no disputed

issues of material fact existed to render summary judgment inappropriate, and

the district court correctly applied the law to those undisputed facts. Royce v.

Hoening, 423 N.W.2d 198, 200 (Iowa 1988). We “view the facts in the light most

favorable to the party opposing the motion for summary judgment.” Shriver, 567

N.W.2d at 400. Every legitimate inference that reasonably can be deduced from

the evidence is afforded the nonmoving party. Northup v. Farmland Indus., Inc.,

372 N.W.2d 193, 195 (Iowa 1985). In ruling on a motion for summary judgment,

the court considers the record as it then exists. Prior v. Rathjen, 199 N.W.2d

327, 331 (Iowa 1972).

III. Analysis.

The Slifes allege three grounds of error in the district court’s rulings. First,

they contend the district court erred in finding the one-year contractual limitation

in the 2009/2010 policy was the applicable provision. If the one-year limitation

applies, they contend the district court erred in finding the limitation was not

unconscionable.

A. The Applicable Policy.

The interpretation and construction of contracts are two distinct exercises.

LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 306 (Iowa 1998).

Interpretation requires a court to determine the meaning of
contractual words. This is a question of law for the court unless the
meaning of the language depends on extrinsic evidence or a choice
among reasonable inferences to be drawn. Construction of an
insurance policy requires the court to determine its legal effect.
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The proper construction of an insurance contract is always an issue
of law for the court.

Id. (internal citations and quotations omitted). The cardinal principle of

construction and interpretation of insurance policies is that the intent of the

parties controls. Id. The intent of the parties is determined by the language of

the policy, unless the language is ambiguous. Id. A policy is ambiguous if the

language is susceptible to two reasonable interpretations. Boelman v. Grinnell

Mut. Reinsurance Co., 826 N.W.2d 494, 501 (Iowa 2013). “We read the policy

as a whole when determining whether the contract has two equally plausible

interpretations.” Id.

The Slifes argue the district court should not have found the one-year

limitation in the 2009/2010 policy was the applicable provision. They argue the

limitation term is made ambiguous by the words “continuous policy” in the header

of the renewal form. Any ambiguity, they argue, should be resolved in their favor.

They assert the inclusion of the word “continuous” indicates the actual agreement

between the parties was an overarching “contract” spanning all the years the

Slifes renewed their policy with Farmers Mutual and is predecessor, CIMIA.

Each individual policy, they argue, was a modification of the “contract.” The two-

year limitation in the 2010/2011 policy modified the “contract” such that damage

incurred during the 2009/2010 policy period would be subject to a two-year

limitation. This, they argue, creates a genuine issue of material fact regarding

which policy term was applicable.

Farmers Mutual acknowledges the header contained the words

“continuous policy,” but argues that each yearly renewal formed a distinct,
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individual contract with terms applicable during the coverage period. By affidavit,

their vice president stated the “continuous policy” label signified the 2009/2010

policy was a renewal of a previous policy and a continuation of an existing policy

number. Farmers Mutual also argues the policy language is not ambiguous.

The limitation provision of the 2009/2010 policy states, “No suit may be

brought against us unless all the terms of this policy have been complied with

and the suit is brought within one year after the loss.” It further provides, “This

policy only covers losses that occur during the policy period.” The policy header

states: “Period From: 11/11/09 To 11/11/10 Effective: 11/11/09[.]”

Nothing in the record or language of the policies supports the Slifes’

contention that the presence of the word “continuous” generates a genuine issue

of fact in support of concluding that the two-year limitation of the 2010/2011

policy applies to the 2009/2010 policy where the express contractual language

provides for a one-year limitation. The mere presence of the word “continuous”

in the header does not create ambiguity about the applicable limitation. The

language of the policy is clear and susceptible to only one reasonable

interpretation. We agree with the district court that the Slifes have failed to

generate a genuine issue of material fact as to this issue. The district court

correctly held as a matter of law the one-year limitation in the 2009/2010 policy

was the applicable provision at the time of the damage.

B. Unconscionability.

A contract is unconscionable if it is “such as no man in his senses and not

under delusion would make on the one hand, and as no honest and fair man
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would accept on the other.” In re Marriage of Shanks, 758 N.W.2d 506, 514

(Iowa 2008) (internal quotation and citation omitted). Procedural

unconscionability involves employment of “sharp practices,” convoluted

language, and inequality in bargaining power. Id. at 515. The Slifes asserted

they did not have a copy of the 2009/2010 policy in their possession and Farmers

Mutual did not specifically mention the change in the limitation to them. In the

absence of fraud or mistake, ignorance of the contents of a written contract will

not affect the party’s liabilities. Gouge v. McNamara, 586 N.W.2d 710, 713 (Iowa

Ct. App. 1998). The Slifes do not allege fraud or mistake, only lack of knowledge

of the contents of the policy. Accordingly, the Slifes’ assertion does not

demonstrate procedural unconscionability.1

Substantive unconscionability involves harsh, oppressive, and one-sided

contract terms. Shanks, 758 N.W.2d at 514 (internal quotations omitted).

However, “Iowa has long recognized the rights of insurers to limit time for

claims.” Douglass v. Am. Family. Mut. Ins. Co., 508 N.W.2d 665, 667 (Iowa

1993), overruled on other grounds by Hamm v. Allied Mut. Ins. Co., 612 N.W.2d

775 (Iowa 2000). Such limitations must allow the insured a reasonable time to

bring their claim. Id.; Robinson v. Allied Prop. & Cas. Ins. Co., 816 N.W.2d 398,

402 (Iowa 2012). The purpose of the limitation is “to prevent the bringing and

enforcement of stale claims.” Douglass, 508 N.W.2d at 666. “[W]hat constitutes

1
In addition, our supreme court has found, “An insurer does not have the duty to warn its
policyholders that the time period for filing suit against it is running out.” Morgan v. Am.
Family Mut. Ins. Co., 534 N.W.2d 92, 100 (Iowa 1995), overruled on other grounds by
Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775, 784 (Iowa 2000). The supreme court
recently reaffirmed this principle in Osmic v. Nationwide Agribusiness Insurance Co.,
No. 12-1295, 2014 WL 88240, at *7 (Iowa Jan. 10, 2014).
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a reasonable time usually depends upon the circumstances of the particular

case.” Id. “[T]ime allowed should be sufficient to allow the plaintiff to investigate

and file his case within the limitation period[.]” Id. “[P]eriods which are so short

as to amount to a practical abrogation of the right of action, or which would

require plaintiff to bring his action before his loss or damage can be ascertained,

are unreasonable.” Id.

The Slifes assert the one-year limitation is a harsh term when compared

with the general statute of limitations period of ten years for claims on a contract

set out in Iowa Code section 614.1(5) (2011). The Slifes argue, “[T]here is no

person in his or her right sense that would give up 9 additional years to bring

their cause of action . . . . Further, no honest and fair person would be willing to

accept such a radical departure from the norm [of ten years.]” The Slifes,

however, did renew their policy with Farmers Mutual with only a two-year

limitation period.

The damage to the property occurred on January 7, 2010. Farmers

Mutual conducted two investigations and informed the Slifes of their decision not

to extend coverage on February 3, 2010. After the reconsideration request,

Farmers Mutual gave the Slifes their final decision on April 21, 2010. The Slifes

then had over seven months to bring their claim but did not file their petition until

January 2012, almost two years after the damage occurred. The Slifes had

ample time to file their petition within the contractually-limited time. Thus, the

limitation was reasonable. Moreover, Iowa courts previously have found a one-

year contractual limitation to be reasonable in insurances cases. See Thomas v.
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United Fire & Casualty Co., 426 N.W.2d 396, 397-98 (Iowa 1988); Stahl v.

Preston Mut. Ins. Ass’n, 517 N.W.2d 201, 202 (Iowa 1994). Therefore, as a

matter of law, we find the one-year limitation was not unconscionable.

IV. Conclusion.

We find there are no genuine issues of material fact. The district court

correctly determined the 2009/2010 contractual limitation was the applicable

provision and was not unconscionable. Accordingly, Farmers Mutual is entitled

to judgment as a matter of law, and the district court properly granted summary

judgment. We affirm.

AFFIRMED.