Opinion
No. 1-1008 / 00-1938, 2-162 / 01-1431.
Filed March 12, 2003.
Appeal from the Iowa District Court for Polk County, GARY KIMES, Judge.
Plaintiffs appeal from an adverse judgment in their negligence action against the City of Des Moines. They appeal separately from the district court's ruling denying their post-trial motion to vacate the judgment. AFFIRMED.
Steven Brick and Mark Schuling of Brick, Gentry, Bowers, Swartz, Stolze, Schuling and Levis, Des Moines, for appellant Merchants White Line Warehousing, Inc., Ward Rouse, Des Moines, for appellant Ackerman Auto Parts Co., Inc., and Chip Lowe, of Urbandale, for appellant William Milliman of Keystone Electrical Manufacturing Co.
Roy Irish, of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker and Ordway, Des Moines, and Mark Godwin, City of Des Moines Legal Department, for appellee.
Considered by HUITINK, P.J., and ZIMMER and VAITHESWARAN, JJ.
Plaintiffs sued the City of Des Moines (City) claiming the City was negligent in failing to fill an opening in a levy prior to and during a flood. During trial, the City argued it is immune from liability under Iowa Code section 670.4(11) (1993), which relates to the acts and omissions of a municipality in connection with an emergency response. Following trial, the jury determined the City's fault was a proximate cause of the damages suffered by the plaintiff businesses as a result of flooding, but excused the City from liability based on the "emergency response" doctrine.
Plaintiffs appealed from the jury's verdict. They contend the district court erred in submitting the emergency response issue to the jury because the City waived immunity by procuring insurance coverage. Plaintiffs also filed a post-trial motion to vacate and modify the judgment. Their motion addressed the issue of whether the City procured a general liability policy which would provide coverage for the plaintiffs' claims. The district court denied the motion on the basis that the court lacked jurisdiction because an appeal had already been taken. The court further found the plaintiffs failed to show that an insurance policy produced by the City following trial was newly discovered evidence which could not, with reasonable diligence, have been discovered earlier. The plaintiffs filed a separate appeal of this ruling.
We consolidated the two appeals and concluded the merits of plaintiffs' motion should be addressed by the district court in the interest of judicial economy before the appeals were adjudicated. We remanded to the district court for adjudication of the merits of the motion to vacate and retained jurisdiction. Following hearing on remand, the district court denied the motion to vacate. The court concluded the insurance policy at issue does not provide coverage for the plaintiffs' claims. The appeals were resubmitted to this court for decision following additional briefing. For the reasons which follow, we affirm the judgment and the district court's denial of plaintiffs' motion to vacate.
I. Background Facts and Proceedings.
This action stems from the massive floods experienced in the Des Moines area during the summer of 1993. According to the provisions of the local flood plan, adopted in 1967, the City was responsible for the operation and maintenance of facilities, such as levees and embankments, created for flood protection. The City was also responsible for developing and implementing an "emergency flood plan" in coordination with the Army Corps of Engineers.
The four plaintiff businesses were located in an industrial park near the Raccoon River in Des Moines. The industrial park was protected from a rising Raccoon River by an embankment constructed by the Army Corps of Engineers. One section of the embankment was left open for railroad tracks. The Des Moines area experienced significant rainfall between July 4 and July 9, 1993, and the river overflowed its banks. The open section of the embankment allowed the overflowing river to flood the plaintiffs' businesses causing extensive damage.
The plaintiffs filed suit against the City alleging it was negligent in failing to provide adequate protection from the flood by filling in the opening left in the embankment. During the discovery process after their lawsuit was filed, the plaintiffs made a motion to require the City to provide evidence regarding the terms and conditions of its insurance coverage. The City responded by offering the affidavit of the City attorney responsible for the oversight of its insurance coverage. In his October 15, 1996 affidavit, the attorney stated, "I have determined that the City of Des Moines does not have any insurance whatsoever for the causes of action arising out of the City's response to an emergency situation including, but not limited to, the City's response to a flood." The plaintiffs made no additional request for the production of insurance documents. Trial of plaintiffs' lawsuit was delayed by an interlocutory appeal to our supreme court regarding a ruling on a motion for summary judgment. See Merchants White Line Warehousing, Inc. v. City of Des Moines, 586 N.W.2d 340 (Iowa 1998).
The matter came before the district court for trial on September 13, 2000. On September 15, the issue of the City's insurance coverage resurfaced during a hearing outside the presence of the jury. The City attorney who had offered the previous affidavit stated the City did have a general liability insurance policy in effect at the time of the flood, but explained that the City had contacted the insurer regarding the plaintiffs' claims, and that coverage was denied. In reference to his previous affidavit, the City attorney clarified, "I didn't say it [the insurance policy] didn't cover floods. It didn't cover these Plaintiff's claims." During the hearing, the plaintiffs requested a copy of the City's insurance policy to verify the nature and extent of general liability coverage. Plaintiffs informed the court that if insurance did exist, then the City's claim of immunity under Iowa Code section 670.4(11) was waived. Based on the statements of the City's counsel, the trial court concluded the City had no insurance coverage for the damages claimed by the plaintiffs.
Trial resumed and the case was submitted to the jury. In Instructions 24 and 25, the trial court explained the emergency response defense offered by the City to the jury. In a special verdict the jury found the City's fault was a proximate cause of the damage to the plaintiffs' property, but excused the City from liability based on the emergency response doctrine. As a result, the jury did not consider the issue of damages. The plaintiffs appealed contending the City is not immune from liability under chapter 670 of the Code. Their appeal alleged the district court erred by (1) failing to consider whether the City's acquisition of insurance constituted a waiver of immunity, (2) prohibiting the plaintiffs from discovering the extent of the City's insurance coverage, and (3) submitting the emergency response exception to the jury where the City had acquired insurance.
Eleven days after the jury returned its verdict in the City's favor, the plaintiffs requested a copy of the liability policy which covered the City of Des Moines in 1993. The request was made pursuant to Iowa's public records law. See Iowa Code ch. 22 (1999). About a week later, the City produced a special excess liability policy covering the relevant policy period. The plaintiffs then moved to vacate the judgment entered following the jury's verdict contending that the City's procurement of a liability policy that covers claims specified in section 670.4 constitutes a waiver of governmental immunity as to those claims. The trial court ruled that it lacked subject matter jurisdiction to consider the motion because the plaintiffs had filed an appeal. Additionally, the court ruled the plaintiffs failed to meet their burden to establish the information regarding the City's insurance coverage could not have been discovered and filed as an Iowa Rule of Civil Procedure 1.1004 motion for new trial. The plaintiffs filed a separate appeal of the district court's post-trial rulings.
Plaintiffs filed a motion to consolidate the two appeals pending before this court. Because the appeals concerned identical parties and arose from the same civil action, we consolidated them in an order entered September 30, 2002. In that same order, we found that the plaintiffs satisfied the "newly discovered evidence" ground for filing a motion to vacate and modify judgment under Iowa Rule of Civil Procedure 1.1012. We concluded, "the plaintiffs satisfied their burden of establishing that the city's insurance policy was newly discovered evidence which could not with reasonable diligence have been discovered earlier." We remanded to the district court for adjudication of the merits of plaintiffs' motion to vacate. Specifically, we remanded for the court's determination of whether the policy at issue provided coverage for plaintiffs' claims. On November 27, 2002, the district court denied plaintiffs' motion after concluding the insurance policy did not provide coverage. The consolidated appeals are again before this court following supplemental briefing.
II. Scope of Review.
Our standard of review on motions to vacate under Iowa Rule of Civil Procedure 1.1012 is for abuse of discretion. In re Adoption of B.J.H., 564 N.W.2d 387, 391 (Iowa 1997). We grant the district court wide discretion in ruling on motions to vacate and uphold factual findings supported by substantial evidence in the record. Id. (citations omitted). "We are more reluctant to find an abuse of discretion where the judgment has been vacated than when relief has been denied." Id. (citations omitted).
Plaintiffs have expressed concern that the district court adopted the City's thirteen-page proposed findings of fact and conclusions of law verbatim in ruling on their motion to vacate. "We view this practice with disfavor because it obscures the independent and disinterested insight of the trial judge whose decision is on review." In the Matter of Integrated Resources Life Ins. Co., 562 N.W.2d 179, 181 (Iowa 1997). However, we do not apply a separate standard of review when the trial court adopts findings and conclusions prepared by counsel. Care Initiatives v. Board of Review, 500 N.W.2d 14, 16 (Iowa 1993).
The parties filed simultaneous proposed findings of fact and conclusions of law following the hearing on remand.
III. Merits.
The jury determined the City's fault was a proximate cause of the flood damage incurred by the plaintiff businesses, but concluded the emergency response doctrine afforded the City immunity from any liability for damages. On appeal, there is no dispute that an "emergency" situation existed under the facts of this case because of flooding. The plaintiffs assert the City waived its statutory immunity and assumed potential liability for its actions through the procurement of general liability insurance. For that reason, they contend the trial court erred in submitting the emergency response doctrine to the jury and should have granted their post-trial motion to vacate the judgment entered following the jury's verdict.
Iowa Code chapter 670 contains our provision for governmental immunity. Iowa Code section 670.2 subjects municipalities to liability for their own torts, and the torts of their employees. It states in pertinent part:
Except as otherwise provided in this chapter, every municipality is subject to liability for its torts and those of its officers and employees, acting within the scope of their employment or duties, whether arising out of a governmental or proprietary function.
Section 670.4 immunizes municipalities from tort liability arising in several enumerated circumstances. At issue here is section 670.4(11), which provides immunity where a claim is "based upon or arising out of an act or omission in connection with an emergency response including but not limited to acts or omissions in connection with emergency response communication services."
The emergency response doctrine provided in section 670.4(11) does not provide municipalities with categorical immunity. Section 670.7 enables municipalities to purchase liability insurance to cover liability related to the torts specified in section 670.4. The consequences of purchasing such a policy of liability insurance are also addressed in section 670.7. In relevant part, it provides:
The procurement of this insurance constitutes a waiver of the defense of governmental immunity as to those exceptions listed in section 670.4 to the extent stated in the policy but shall have no further effect on the liability of the municipality beyond the scope of this chapter. . . .
Our supreme court has previously examined the effect of section 670.7. In City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996), the court stated, "Municipalities waive section 670.4 immunities when they purchase liability insurance under the conditions specified in Iowa Code section 670.7." However, in passing section 670.7, the legislature did not intend to obliterate the common law rule that a municipality's mere purchase of insurance would not constitute a waiver of its immunity. Id. at 603. Section 670.4 governmental immunities are not waived to the extent that tort liability is not covered under an insurance policy purchased by a municipality. See Fettkether v. City of Readlyn, 595 N.W.2d 807, 813 (Iowa Ct.App. 1999). The terms of the insurance policy at issue are key. See id.
The parties agree that the City's purchase of general liability insurance waived governmental immunity otherwise provided by section 670.4(11), provided the policy at issue covered plaintiffs' claims.
The interpretation and construction of an insurance contract is a matter of law to be determined by the court. Pudil v. State Farm Mut. Auto. Ins. Co., 633 N.W.2d 809, 811 (Iowa 2001). The cardinal principle in the construction and interpretation of insurance policies is that the intent of the parties at the time the policy was sold must control. Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994). Except in cases of ambiguity, the intent of the parties is determined by the language of the policy. A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991) (citation omitted). Policy language excluding coverage is given a more narrow meaning than if the same were coverage language. Tacker v. American Family Mut. Ins. Co., 530 N.W.2d 674, 677 (Iowa 1995); Grinnell Mut. Reinsurance Co. v. Employers Mut. Cas. Co., 494 N.W.2d 690, 693 (Iowa 1993); Kalell v. Mutual Fire Auto. Ins. Co., 471 N.W.2d 865, 867 (Iowa 1991). Conversely, language providing coverage is given a more liberal, broad, and general meaning. Kalell, 471 N.W.2d at 867.
However, when an insurance policy fails to reflect the parties' intent, the court may allow reformation of the contract. Johnston Equip. Corp. v. Industrial Indem., 489 N.W.2d 13, 17-18 (Iowa 1992). In Johnston our supreme court quoted with approval the following statement by the California Court of Appeals:
It is fundamental that a written contract may be reformed by a court of equity where, due to mutual mistake on the part of the parties, it fails to express their true intentions. Moreover, it is settled that an insurance policy may be reformed to limit or exclude coverage if such was the intention of the parties, even where the rights of third party claimants who are not parties to the insurance contract are adversely affected.Id. (quoting Truck Ins. Exchange v. Wilshire Ins. Co., 8 Cal.App.3d 553, 556-57, 87 Cal.Rptr. 604, 606 (1970)). The party seeking to reform must introduce clear and convincing evidence to establish the intent of the parties. Id. at 18 (citation omitted). In Johnston overwhelming evidence supported the insurer's claim that there was never any intent by either it or the insurer to provide coverage. Id. at 16. Acting on knowledge that there was no coverage despite the language of the policy which provided coverage, the insured obtained coverage from another insurance company at a cost of $23,558.09. Id. Thus, the court, recognizing the policy language provided coverage, reformed the policy to reflect the parties' intent to exclude that coverage. Id. at 18. With these principles in mind, we address the plaintiffs' contention that the district court erred in determining the City's policy did not provide coverage for their claims.
Following our remand to the district court, the parties provided the trial court with affidavits, depositions, and documents regarding the insurance coverage issue. The record reveals the City procured an excess liability insurance policy, effective from July 7, 1993, to July 7, 1994, through the assistance of insurance broker Kirke Van Orsdel, Inc. (KVI). The policy provided $15 million in liability coverage above a $3 million self-insured retention. This required the City to pay the first $3 million in liability with United National Insurance Company (United National) covering the next $5 million in liability. United National acted as the form carrier of the policy which was reinsured by American Re-Insurance Company (Am-Re). The remaining $10 million in liability coverage was provided by Lexington Insurance Company (Lexington). The fighting issue on appeal is whether the United National policy provides coverage for the damages suffered by the plaintiffs. The answer to this question determines whether the City has waived its section 670.4 immunities including the emergency response exception.
The Des Moines City Council approved purchase of the policy at issue based on a report prepared by its risk manager, Eric Larson. The report was presented to the council on July 6, 1993. It indicated the City had received a proposal for excess liability coverage including "automobile, general, law enforcement, and public officials' liability." The report does not mention that governmental immunities were to be excluded from the proposed coverage; however, we also note that none of the exclusions actually included in the policy were mentioned in the report. The binder notification pertaining to the policy is dated July 7, 1993. The binder does not make reference to any exclusion barring coverage of governmental immunities.
Evangeline Hartje, an underwriter with United National, described how the policy was created. KVI was the original contact with the City. KVI solicited Am-Grip's assistance in finding a carrier for placement of the City's insurance. Am-Grip then contacted Am-Re. Am-Re underwrote the coverage and determined the terms and conditions of the policy. Am-Re used United National's name in providing a policy to the City. According to Hartje she prepared and issued the policy as directed by Am-Re. The policy was entered into United National's computers on October 1, 1993; however, the City did not receive the policy until November 12, 1993. The original policy contained three endorsements. None related to excluding governmental immunity from coverage pursuant to section 670.4.
The record describes Am-Grip as a producer/wholesaler.
In his deposition testimony, Eric Larson indicated that the City's legal department gave him sample wording for a governmental immunity exclusion which was to be included in the insurance contract. According to Larson, he forwarded this language to KVI and impressed upon them the need for the endorsement. At some point, Larson noticed the governmental immunity endorsement was not part of the policy. He contacted KVI. On January 4, 1994, Evangeline Hartje received a fax from Am-Re directing her to endorse the policy to exclude coverage for governmental immunity claims. She prepared an endorsement and stapled it to the declarations page of the policy. The endorsement, which was designated "Endorsement #1," was made effective retroactive to July 7, 1993. Hartje's assistant mailed copies of the endorsement to Am-Re and Am-Grip on January 13, 1994.
Gerard Durkin, second vice-president of claims for United National, provided an affidavit stating the front page of the City's policy should have made reference to four endorsements instead of three. Durkin asserts that due to clerical error, the endorsements were misnumbered. He stated that the governmental immunity endorsement should have been designated as "#1" and the original three designated as "#2," "#3," and "#4" respectively.
The actions of the City Council when renewing the United National excess liability policy for the period July 7, 1994, to July 7, 1995, are consistent with an intention to have a governmental immunity endorsement for the prior year. In 1994, the City Council renewed the policy with the same basic terms and conditions of the policy providing excess liability coverage for the period from July 7, 1993, to July 7, 1994. It is undisputed that the 1994 policy includes a governmental immunity endorsement.
Based on the record before us, we conclude the district court appropriately exercised its discretion in denying the plaintiffs' motion to vacate the judgment entered following the jury's verdict. Substantial evidence supports the court's finding that the omission of the governmental immunity endorsement from the original policy was due to mutual mistake and clerical error. The record reveals clear and convincing evidence that the City and its insurers intended to include a governmental immunity exclusion endorsement in the City's policy effective July 7, 1993. When the omission was discovered, an endorsement was added to the policy which reflected the parties' intent. We conclude the district court was correct in determining that the City's policy does not provide coverage for plaintiffs' claims. Therefore, the City has not waived those immunities granted it under section 670.4. See Iowa Code § 670.7. Accordingly, we affirm the trial court's denial of the plaintiff's motion to vacate judgment. We also affirm the judgment entered based on the jury's special verdict granting the City immunity under the emergency response doctrine.