IN THE COURT OF APPEALS OF IOWA
No. 13-2086
Filed April 8, 2015
SALEM UNITED METHODIST CHURCH
OF CEDAR RAPIDS, IOWA,
Plaintiff-Appellee,
vs.
CHURCH MUTUAL INSURANCE COMPANY,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Ian K. Thornhill,
Judge.
An insurer contends the district court improperly construed clear and
unambiguous exclusions in the policy and erred in attempting to harmonize the
jury’s answers to the special verdict form. REVERSED AND REMANDED.
Robert B. McMonagle of Lane & Waterman, L.L.P., Davenport, for
appellant.
William H. Roemerman and Stephanie A. Legislador of Crawford, Sullivan,
Read & Roemerman, P.C., Cedar Rapids, for appellee.
Considered by Danilson, C.J., and Potterfield and Bower, JJ.
2
DANILSON, C.J.
Salem United Methodist Church of Cedar Rapids, Iowa, sought coverage
from its insurer, Church Mutual Insurance Company, for damage sustained
during a flood. Following a jury trial, Salem prevailed. On appeal, Church Mutual
contends the district court improperly construed clear and unambiguous
exclusions in the policy and awarded damages in an amount contrary to the
terms of the policy and the jury’s answers to special interrogatories. Because we
find the court erred in construction of the insurance policy and we are unable to
harmonize the answers under the evidence and the law, we reverse the district
court’s judgment and remand for a new trial.
I. Background Facts and Proceedings.
Salem had property insurance, but not flood insurance, through Church
Mutual. In 2008, the Cedar River overflowed its banks and inundated the City of
Cedar Rapids.
Salem sought coverage from Church Mutual for losses resulting from
sewer backup. When the insurer denied coverage, Salem sued for breach of
contract. The case proceeded to jury trial. The jury completed a special verdict
form, as follows:
Question No. 1: Did Salem prove that there was sewer back up that
invaded its property through sewers or drains?
Answer “yes” or “no”
ANSWER: YES
[If your answer is “no” do not answer Question No. 2, but proceed
to Question 3]
Question No. 2: Did Salem prove that the sewer back up was
caused by an event away from its property?
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Answer “yes” or “no”
ANSWER: YES
Question No. 3: Did Salem prove that water or other liquids leaked
or flowed from plumping equipment?
ANSWER: YES
[If your answer to eithers Questions 1 or 2, and Question 3 were
“no”, do not answer any further questions].
Question No. 4: With respect to the claim of sewer back up
damage, did Church Mutual prove that the sole cause of the
damage to Salem’s property was flood?
Answer “yes” or “no.”
ANSWER: NO
Question No. 5: Did Church Mutual prove that the leakage or
flowing of water or other liquids from plumbing equipment was
directly or indirectly caused by flood?
ANSWER: NO.
[If you answer to both Questions 4 and 5 were “yes,” do not answer
any further questions.]
Question No. 6: State the total amount of loss sustained by Salem
in the basement of their facility as a result of the events of June 11
& 12, 2008.
TOTAL: $705,765.07
Question No. 7: [Answer this question only if you answered “yes” to
Questions 1 and 2, and “no” to Question 4] What amount of the
total amount of loss sustained by Salem in the basement of their
facility as a result of the events of June 11 & 12, 2008, was caused
by the back up of the sewer?
TOTAL: $0
Question 8: [Answer this question only if you answered “yes” to
Question 3 and “no” to Question 5] What amount of the total
amount of loss sustained by Salem in the basement of their facility
4
as a result of the events of June 11 & 12, 2008, was caused solely
by the leakage or flowing of water or other liquids from plumbing
equipment?
TOTAL: $0
The district court accepted the verdict form, and the jury was dismissed.
The district court concluded “that if a covered peril combines with any
other peril to cause the loss, there is coverage for the loss. The jury’s answers
do not require speculation on the part of the Court, and it is clear the jury’s
damages award was based on the combination of the two causes of [Salem’s]
loss.” (Internal citation excluded.) Additionally, the court found “the issues of
ambiguity and reasonable expectations are moot under these facts.” The court
entered judgment for Salem in the amount of $705,765.07. Church Mutual
appeals.
II. Standard of Review.
We review the district court’s construction of an insurance policy for
corrections of error at law. Postell v. Am. Family Mut. Ins. Co., 823 N.W.2d 35,
41 (Iowa 2012).
III. Discussion.
Our supreme court has recently summarized our well-settled rules
governing the construction and interpretation of insurance policies as follows:
The cardinal principle . . . is that the intent of the parties at
the time the policy was sold must control. Except in cases of
ambiguity, we determine the intent of the parties by looking at what
the policy itself says. If a term is not defined in the policy, we give
the words their ordinary meaning. We will not strain the words or
phrases of the policy in order to find liability that the policy did not
intend and the insured did not purchase.
[A] policy is ambiguous if the language is susceptible to two
reasonable interpretations when the contract is read as a whole. If
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the policy is ambiguous, we adopt the construction most favorable
to the insured. An insurance policy is not ambiguous, however, just
because the parties disagree as to the meaning of its terms.
Moreover, ambiguity is not present merely because the provision
could have been worded more clearly or precisely than it in fact
was. If an insurance policy and its exclusions are clear, the court
will not write a new contract of insurance for the parties. We
construe exclusions strictly against the insurer. Nevertheless, we
must enforce unambiguous exclusions as written.
Amish Connection, Inc. v. State Farm Fire and Cas. Co., ___ N.W.2d ___, 2015
WL 1260085, at *10 (Iowa 2015) (internal quotation marks and citations omitted).
Here, the relevant policy language is as follows:
EXCLUSIONS
We will not pay for loss or damage caused directly or indirectly by
any of the following. Such loss or damage is excluded regardless of
any other cause or event that contributes concurrently or in any
sequence to the loss.
....
7. Water.
a. Flood, surface water, waves, tides, tidal waves, overflow of any
body of water, or their spray, all whether driven by wind or not;
....
ADDITIONAL COVERAGE—BACK UP THROUGH SEWERS
AND DRAINS
Subject to all other terms and conditions of this policy, we will pay
for direct physical loss or damage to Covered Property caused by
back up of water or sewage through sewers or drains only if caused
by an event away from the described buildings and when the
damage is not caused by flood, surface water, waves, tides, tidal
waves, overflow of any body of water, or their spray, all whether
driven by wind or not, and which did not enter the building through
foundations, walls, floors, windows, cracks, roofs, or through other
opening of the building.
Sewer or water damage occurring as a result of, either before or
after, the excluded flood, surface water, waves, tides, tidal waves,
overflow of any body of water, or their spray, all whether driven by
wind or not, and entering the building through foundations, walls,
floors, windows, cracks, roofs, or through other openings of the
building is not covered.
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(Emphasis added.) Church Mutual first contends the policy clearly and
unambiguously provides that there is no coverage for damages arising from
concurrent causes when one of the causes is excluded and the district erred in
ruling otherwise.1 Secondly, Church Mutual contends even if the anti-concurrent
cause language is not given effect under these facts, the district court erred as
the jury’s answers to the special verdict are inconsistent and may not be
harmonized to support a verdict for Salem.
A. Policy Coverage for Concurrent Causes.
The exclusion for flood damage is clear. The policy also unambiguously
excludes coverage for damages that are concurrently caused by a covered
cause—such as sewer back up—and an uncovered cause—such as flooding by
its language, “Such loss or damage is excluded regardless of any other cause or
event that contributes concurrently or in any sequence to the loss.” “If an
insurance policy and its exclusions are clear, the court will not write a new
contract of insurance for the parties.” Boelman v. Grinnell Mut. Reinsurance Co.,
826 N.W.2d 494, 502 (Iowa 2013). “Insurance coverage is a contractual matter
and is ultimately based on policy provision.” Jones v. State Farm Mut. Auto. Ins.
Co., 760 N.W.2d 186, 188 (Iowa 2008). And in a similar claim with identical
policy language, we concluded in Lifeline Ministries Church v. Church Mutual
Insurance Co., No. 12–1181, 2013 WL 2107408, at *3 (Iowa Ct. App. May 15,
2013):
1
Salem contends this alleged error is not preserved for our review. Church Mutual
argued that the policy “does not cover concurrent loss events where one cause is
excluded” in its post-trial brief, and the district court found there was coverage in spite of
this contention. Thus, the issue is preserved for review.
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The policy plainly covers “damage to Covered Property caused by
back up of water or sewage through sewers or drains only . . . when
the damage is not caused by flood.” The policy reiterates “[s]ewer
or water damage occurring as a result of, either before or after, the
excluded flood . . . is not covered.” And, in its general exclusion
section, the policy separately excludes “loss or damage caused
directly or indirectly by . . . flood.”
The district court relied on Kalell v. Mutual Fire and Auto Insurance Co.,
471 N.W.2d 865, 867 (Iowa 1991) for the proposition, “[I]f a covered peril
combines with any other peril to cause the loss, there is coverage for the loss.”
But Kalell did not create a maxim that the insurance company must provide
coverage when a covered and an uncovered peril combine to cause a loss. 471
N.W.2d at 868–69. Rather, Kalell holds that “[w]hen insurance policies lack . . .
an anticoncurrent-cause provision, . . . an accident that has two independent
causes, one of which is covered and one excluded, is covered unless the
excluded cause is the sole proximate cause.” Amish Connection, Inc., ___
N.W.2d ___, 2015 WL 1260085, at *10 (discussing the court’s holding in Kalell).
Parties are free, as Salem and Church Mutual did here, to contract otherwise.
See Boelman, 826 N.W.2d at 506 (“[W]e allow insurers to limit coverage to only
specific claims.”); see also Kalell, 471 N.W.2d at 868 (“If [the insurer] intended to
exclude coverage of an incident simply because it involved a motor vehicle, it is
incumbent on it to say so in its policy.”). In this case, the policy in question does
contain an anticoncurrent-cause provision. Both the facts and the policy in
question in Kalell are readily distinguishable from those in the present case. See
471 N.W.2d at 866 (considering a homeowner’s policy and the meaning of
“arising out of” language in exclusion clause). For these reasons, the district
8
court erred in construing the policy and if a flood is a concurrent cause, there is
no coverage.
B. Special Verdict.
In our recent case of Lifeline Ministries, we recited the applicable law to
these proceedings as follows:
“A special verdict consists entirely of questions that elicit
special written answers to resolve the material issues of fact in the
case, and the court then enters judgment based on the findings
made by the jury.” Clinton Physical Therapy Servs., 714 N.W.2d at
610. The answers to the questions “must be internally consistent.”
Id. at 612 (noting that rule 1.933 is read in tandem with rule 1.934
governing special interrogatories supplementing general verdicts,
which specifically addresses inconsistent answers). If they are not
consistent, “the court must either resume deliberations or grant a
new trial.” Id. at 613.
“[T]he process of determining whether answers are
inconsistent focuses on the evidence and the law, and the court
must decide if the two answers at issue can be harmonized in light
of the evidence and the law.” Id. “When, under this analysis, two
answers or findings by the jury would compel the rendition of
different judgments, the answers are inconsistent.” Id. The
“process of determining whether answers are inconsistent by
attempting to harmonize the answers with the evidence and the law
is separate from the process of reconciling two answers determined
to be inconsistent.” Id. at 613–14.
2013 WL 2107408, at *4.
Salem contends Church Mutual did not preserve error on the issue of
inconsistent answers. Although the parties agreed to a sealed verdict, the record
reflects that the district court opened the verdict and informed counsel before
discharging the jury. Because Church Mutual did not object to any inconsistency
in the jury’s answers, Salem contends it did not preserve error as the jury could
have been sent back in for further deliberations to correct any such errors.
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We agree with Salem that there is some case law suggesting failure to
object when the opportunity to correct inconsistencies exists may not preserve
error. However, in Clinton Physical Therapy Services, P.C. v. John Deere Health
Care, Inc., 714 N.W.2d 603, 610 (Iowa 2006), our supreme court noted in cases
of special verdicts:
[T]he jury resolves pertinent factual issues pursuant to the court’s
instructions, and the trial court enters the general verdict by
applying the applicable law to the jury’s factual determinations.
Nevertheless, the rules governing inconsistent answers in a verdict
are the same. Whether the answers are in response to special
interrogatories or are answers to a special verdict, if they are
inconsistent, then the court must either resume deliberations or
grant a new trial.
(Internal citations omitted.) The court also stated, “[A] sealed verdict may
constitute a waiver of the additional-deliberations option, but it would not
constitute a waiver of other remedies.” Id. at 610. Because the remedy of a new
trial remains, Church Mutual has not waived error.2
Notwithstanding, we do not perceive Church Mutual’s arguments on
appeal as contending the jury’s answers were inconsistent. Rather, we construe
Church Mutual’s arguments as contending the district court erred in its attempt to
harmonize the answers with the applicable facts and law. As we have noted
from the principles cited in Clinton Physical Therapy, the process of harmonizing
the answers is a different process than reconciling conflicting answers. 714
N.W.2d at 610. If the answers may be reasonably harmonized under the
2
The court’s comments to the jury indicate counsel was given the opportunity to
complain about any inconsistency in the jury’s answers. But the better practice is to
make a record of the conversations with counsel, so we can be certain the district court
informed counsel that the jury had not yet been discharged and was available to
continue their deliberations if the answers were inconsistent.
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evidence and the instructions, they are not inconsistent. Id. at 613. The
supreme court explained:
The test recognizes that the determination of whether two answers
are inconsistent requires the court to consider how the jury could
have viewed the evidence and how that view of the evidence fits
into the requirements of the instructions or the law applicable to the
case. See 66 C.J.S. New Trial § 82, at 172 (1998) (“In determining
whether findings or answers are inconsistent or irreconcilable so as
to warrant a new trial, the findings or answers are to be construed
in light of the surrounding circumstances and in connection with the
pleadings, instructions and issues submitted.”).
Id.
The district court concluded the answers could be reasonably harmonized,
and both parties agree. However, each contends the answers may only be
harmonized in support of a verdict in its favor. The district court reached the
following conclusions:
The Court finds that when the policy is constructed as
applied to the facts, as determined by the jury, judgment should be
entered in favor of Plaintiff. Plaintiff admits that it has the burden to
show that its loss fell within the general promise of coverage in the
policy. The burden of pleading and proving an exclusion or
exception in a policy of insurance is placed on the insurer. The
jury’s response to Question 4 establishes that the jury did not
believe Defendant met its burden of proof in showing that the sole
cause of the damage to Salem's property was flood. The jury’s
response to Question 5 establishes that the jury did not believe
Defendant met its burden of proof in showing that the leakage or
flowing of water or other liquids from plumbing equipment was
directly or indirectly caused by flood. The fact-finding was
supported by the evidence, particularly the testimony of Mr. Pankey
and Mr. Ransom. The jury’s answers to Questions 1 and 2 show
that Plaintiff carried its burden of proof in establishing that there
was sewer back up that invaded its property through sewers or
drains, and that the sewer back up was caused by an event away
from its property. These answers from the jury provide a factual
basis for concluding that, under the terms of the policy, the loss fell
within the general promise of coverage in the policy in that there
was a covered loss due to leaking plumbing and back up through
sewers and drains.
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Further, the jury’s answers to Questions 7 and 8 show that
the jury did not believe any part of the damages was caused solely
by sewer back up or solely by plumbing leakage, but rather the
damages were caused by a combination of these two causes.
There is authority in Iowa supporting a finding that if a covered peril
combines with any other peril to cause the loss, there is coverage
for the loss. The jury’s answers do not require speculation on the
part of the Court, and it is clear that the jury’s damages award was
based on the combination of the two causes of Plaintiff’s loss.
With respect to the arguments regarding ambiguity and
reasonable expectations, the Court concludes that because the jury
determined that the sewer back up damage and damage from
leaking or flowing pipes is not damage that is excluded from
coverage under the terms of the policy, the issues of ambiguity and
reasonable expectations are moot under these facts. Based on the
post-trial issues briefed by the parties, the Court finds judgment
should be entered in favor of Plaintiff.
(Internal citations and quotation marks omitted.)
Clearly the district court’s conclusions relied upon principles espoused in
Kalell, which we have found distinguishable. We do not know the probable
resolution by the district court had it considered the fact that the policy prohibited
coverage when both a covered peril and an uncovered peril or perils jointly caused
the damage.
We have reviewed the arguments of the parties and have painstakingly
considered the answers provided by the jury. It is our conclusion that we can
only speculate what verdict should have been entered and cannot harmonize the
answers with the evidence and the law.
One concern we have is that the jury was never asked if Salem’s
damages were caused by concurrent causes and if so, whether Church Mutual
proved that the flood was a concurrent cause of Salem’s damages. See Farm
Bureau Life Ins., v. Chubb Custom Ins. Co., 780 N.W.2d 735, 742 (Iowa 2010)
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(“Insurers relying on exclusions from coverage have the burden to prove their
applicability.”).3
Another difficulty we face relates to verdict form questions six, seven, and
eight, which refer to “the events of June 11 & 12, 2008.” The jury was not
instructed upon a definition of the phrase, and we can only surmise what it
means. We are unable to correlate this phrase with terms of the insurance
policy.
Because we are unable to harmonize the answers under the evidence and
the law, we reverse the district court’s judgment and remand for a new trial.
REVERSED AND REMANDED.
3
The jury was only asked if Church Mutual proved the leakage or flowing of liquids from
plumbing equipment was directly or indirectly caused by flood. To this question the jury
answered “no.” However the jury was not asked if the sewer back up was directly or
indirectly caused by the flood. Further, we do not believe Church Mutual has met its
burden of proof by simply proving that neither of Salems’s two claimed causes were the
sole proximate cause for the damages without proving the flood was a concurrent cause.
Although it may be unlikely, the jury could have concluded the leakage and the sewer
back up were the only concurrent causes for Salem’s damages.