Opinion
No. 04-1624
Filed September 14, 2005
Appeal from the Iowa District Court for Woodbury County, Gary A. Wenell, Judge.
IMT Insurance Company appeals the district court's decision to affirm the Workers' Compensation Commissioner's reformation of IMT's insurance contract with West River Farms, Inc. AFFIRMED.
Timothy Clausen of Klass Law Firm, L.L.P., Sioux City, for appellant.
Alice Horneber of Horneber Law Firm, Sioux City, for appellee.
Considered by Sackett, C.J., and Mahan and Miller, JJ.
IMT Insurance Company appeals the district court's decision to affirm the Workers' Compensation Commission's reformation of IMT's insurance contract with West River Farms, Inc. Specifically, IMT argues that (1) Zomer did not properly raise the issue of contract reformation; (2) the commissioner abused his discretion when he denied IMT's motion for an evidentiary hearing on the issue of mutual mistake; (3) the district court applied an improper standard of review in affirming the commissioner's decision; and (4) the district court erred in affirming the commissioner's decision. We affirm.
I. Background Facts and Proceedings
Mark Zomer was injured on November 8, 1995, at his job at West River Farms, Inc. West River Farms was insured by a workers' compensation insurance policy from IMT Insurance. Gertrude Blom, West River Farms' president and Zomer's mother-in-law, had been purchasing workers' compensation insurance form IMT through her local agent for over ten years. It was her intent and belief that the insurance would cover family-member employees, including Zomer. Evidence indicates that her local insurance agent also believed Zomer was covered by West River Farms' policy. On December 4, 1995, IMT Insurance refused to make payment on Zomer's hospital expenses. IMT claimed that West River Farms had no family-member coverage under its policy.
Zomer filed a petition with the Iowa Workers' Compensation Commissioner. On August 23, 1999, the commissioner's final decision held that there had been a mutual mistake between the parties as to West River Farms' policy coverage. The commissioner reformed the insurance contract, providing coverage for Zomer's injury. The district court reversed the commissioner's decision, holding the commissioner lacked the jurisdiction to reform a contract. The court of appeals affirmed the district court. On further review, the supreme court vacated the court of appeals decision and reversed and remanded the district court ruling. The supreme court found that under Iowa Code chapter 85 (1997), the commission had the power to reform the workers' compensation policy to cover Zomer. Zomer v. West River Farms, Inc., 666 N.W.2d 130, 135 (Iowa 2003).
On remand, IMT filed a motion for an evidentiary hearing on the mutual mistake issue. The commissioner denied the motion. The commissioner then adopted the original commissioners' decision from August 23, 1999. The district court affirmed both the denial of the evidentiary hearing and the adoption of the original agency decision. IMT appeals.
II. Standard of Review
We review agency decisions pursuant to Iowa Code section 17A.19 (1999). IBP, Inc. v. Harpole, 621 N.W.2d 410, 414 (Iowa 2001). We may affirm, remand, reverse, modify, or grant other appropriate relief if the agency action is (a) in violation of constitutional or statutory provisions; (b) in excess of the statutory authority of the agency; (c) in violation of an agency rule; (d) made upon unlawful procedure; (e) affected by other error of law; (f) in a contested case, unsupported by substantial evidence in the record made before the agency when that record is viewed as a whole; or (g) unreasonable, arbitrary or capricious or characterized by an abuse of discretion or a clearly unwarranted exercise of discretion. Iowa Code § 17A.19(8)(a)-(g).
We are bound by the agency's findings if they are "supported by substantial evidence when the record is reviewed as a whole." Simonson v. Snap-On Tools, Corp., 588 N.W.2d 430, 434 (Iowa 1999). Evidence is substantial if a reasonable person would find it adequate to reach a conclusion. Id. Substantial evidence need not amount to a preponderance, but must be more than a scintilla. Elliot v. Iowa Dep't of Transp., Motor Vehicle Div., 377 N.W.2d 250, 256 (Iowa Ct.App. 1985). Further, we are to give deference to the fact-finding of the agency as we would a jury verdict. Harpole, 621 N.W.2d at 418. This deference includes the agency's credibility determinations. Clark v. Iowa Dep't of Revenue Fin., 644 N.W.2d 310, 315 (Iowa 2002). If there is enough evidence to support the findings, we must affirm the agency's decision even if we might have found otherwise. Harpole, 621 N.W.2d at 420.
An abuse of discretion occurs when the agency action is based on untenable grounds or is clearly erroneous. IBP, Inc, v. Al-Gharib, 604 N.W.2d 621, 630 (Iowa 2000). Such abuse is "synonymous with unreasonableness," and is "clearly against reason and evidence." Dico, Inc. v. Iowa Employment Appeal Bd., 576 N.W.2d 352, 355 (Iowa 1998) ( quoting Stephenson v. Furnas Elec. Co., 522 N.W.2d 828, 831 (Iowa 1994)). "Arbitrary" or "capricious" means the agency acted without regard to the law or facts. Bernau v. Iowa Dep't of Transp., 580 N.W.2d 757, 764 (Iowa 1998). We therefore concentrate on whether the agency's decision is both rational and based in law and fact. Dico, 576 N.W.2d at 355.
III. Merits
IMT's first two arguments claim that contract reformation was never properly raised or litigated at the hearing. We find several instances in the record addressing whether Blom and the local insurance agents knew or intended family-members to be covered under the policy. Such testimony is directly probative on the issue of mutual mistake. Commissioner Trier also specifically addressed these arguments in his ruling:
This is a case in which the parties failed to file a prehearing conference report. The report refines the issues to be determined at hearing and if one is not filed any and all issues can be raised and pursued. Defendants assert that they did not have notice that reforming the insurance contract was an issue. If that assertion is presumed to be true, their lack of knowledge is attributable to their failure to file a prehearing conference report as required by the agency.
Regardless of whether or not claimant expressly identified contract reformation as an issue while on the record, the issue was obviously present because without reforming the insurance policy contract claimant had no other plausible theory upon which to obtain a recovery. . . . Absent the issue of reforming the contract, the claim could have been dismissed prior to hearing through a simple motion for summary judgment. There was no reason to conduct an evidentiary hearing. The reformation issue was fully litigated. There was no other reason for the evidence at hearing to have included testimony about Gertrude's intent when purchasing the policy or how well she and Mark were known in the community or the history of her long relationship with the insurance agency. There would have been no reason for defendants to introduce evidence of policy audits or the uncompleted "420 endorsement" form. While defendants, through the exercise of hindsight, might wish that they had defended the claim differently, they cannot credibly claim that they did not realize the reformation issue existed or defend against it.
Given the record and the reasons set forth by the commissioner, we find the commissioner's determination that contract reformation was raised and addressed is sufficiently based in law and fact. We therefore uphold the commissioner's denial of a further evidentiary hearing on the issue.
IMT argues third that the commissioner's action reforming the contract was in equity and that the proper standard of review is de novo. We disagree. The commissioner, as an administrative agency, retains only (1) the powers expressly conferred by statute and (2) the powers necessarily inferred from those powers expressly granted. Zomer, 666 N.W.2d at 132. In interpreting the powers granted to the commissioner, the supreme court found that the legislature granted the commissioner the jurisdiction to decide "any issue necessary to a determination of whether a claimant is entitled to workers' compensation benefits." Id. Thus, in the first Zomer, the supreme court concluded that the power to reform a contract was granted to the commissioner by statute. Id. at 135. Contract reformation is a provision in the law within the discretion of the agency. We review findings made within the discretion of the agency for errors at law. Terwilliger v. Snap-On Tools Corp., 529 N.W.2d 267, 271 (Iowa 1995) ("The standard by which we review decisions of administrative agencies is well-settled. We review an agency's decision for errors of law and do not exercise a de novo review.") Because neither the legislature nor the supreme court has expressly specified that contract reformation by an agency is tried in equity or reviewed de novo, we find the district court properly reviewed the issue in accordance with Iowa Code section 17A.19. See Zomer, 666 N.W.2d at 135.
IMT argues fourth and finally that the district court erred in affirming the commissioner's finding of mutual mistake. Specifically, IMT argues Zomer failed to meet the burden of showing both parties were mistaken with regard to West River Farms' policy coverage. IMT claims that the only evidence offered by Zomer and the commissioner was that small-town insurance agents in Iowa must know to whom their insured's daughters are married.
In determining whether the district court erred, we apply the standards of section 17A.19 to the agency action to determine whether our conclusions are the same as the district court. E.N.T. Assocs. v. Collentine, 525 N.W.2d 827, 829 (Iowa 1994). First, the commissioner supported his decision with specific factual findings based on his credibility determinations. We afford great deference to these credibility findings. Second, as noted above, we found several instances in the record referring to the intent of the parties with respect to West River Farms' insurance coverage. Third, the commissioner is not limited to accepting evidence that would be admissible at trial. Al-Gharib, 604 N.W.2d at 630. We think it appropriate that an insurance agent in a small, rural community would know to whom their insured's daughter is married, particularly when the individual to whom the daughter is married is the only person employed by the insured and the only person who could be covered as an employee under the insured's workers' compensation insurance policy. This seems particularly true when the insured has been doing all her insurance business with the same local agency for well over ten years, as Blom did in this case. Because we find the commissioner's decision was supported by substantial evidence, we affirm the district court's decision.
AFFIRMED.
Miller, J., concurs; Sackett, C.J., dissents.
I dissent. The agency is exercising equitable powers. Review by the court should be de novo. Exercising de novo review I would reverse.