Jerry Donnell v. American Family Mutual Insurance Company

IN THE COURT OF APPEALS OF IOWA
No. 3-1225 / 13-0940
Filed March 12, 2014
JERRY DONNELL,
Plaintiff-Appellant,
vs.
AMERICAN FAMILY MUTUAL
INSURANCE COMPANY,
Defendant-Appellee.
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Appeal from the Iowa District Court for Benton County, Sean W.
McPartland, Judge.
Jerry Donnell appeals the district court ruling granting defendant American
Family Mutual Insurance Company’s motion for summary judgment. AFFIRMED.
Matt J. Reilly of Eells & Tronvold Law Offices P.L.C., Cedar Rapids, for
appellant.
Scott K. Green, West Des Moines, for appellee.
Considered by Doyle, P.J., and Tabor and Bower, JJ.
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BOWER, J.
Jerry Donnell appeals the district court ruling granting defendant American
Family Mutual Insurance Company’s motion for summary judgment. Donnell
claims the one-year limitations provision found in the insurance contract is
inapplicable as it is contrary to Iowa law; and the limitations provision is
unenforceable as it is unreasonable, unconscionable, and contrary to his
reasonable expectations. We find the provision is not contrary to Iowa law as it is
identical to the standard statute of limitations for fire insurance contracts required
by Iowa law. We also find the one-year limitations period is enforceable. We
affirm.
I. Background Facts and Proceedings
American Family Mutual Insurance Company (American Family) issued an
insurance policy to Jerry Donnell (Donnell) to cover his personal and real
property from loss. More than sixteen months after a June 20, 2011 lightning
strike to his home, Donnell filed suit against American Family.
American Family moved for summary judgment claiming the suit was
barred by the one-year limitations period found within the insurance contract.
Donnell resisted the motion by claiming the suit was not barred because a
“conformity to state law” provision in the policy reformed the one-year limitations
period to comply with Iowa’s ten-year limitations period on contract claims.
Donnell also claimed the provision was unconscionable, unreasonable, and
contrary to his reasonable expectations. Disagreeing, the district court granted
American Family’s motion.
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II. Standard of Review
We review both the interpretation of insurance contracts and a district
court’s grant of summary judgment for correction of errors at law. Boelman v.
Grinnell Mut. Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013). We review the
record in the light most favorable to the non-moving party, granting every
legitimate inference that can be reasonably deduced from the evidence. Id. at
500–01. Summary judgment is granted when there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Id.III. Discussion
A. Conformity with State Law
Donnell admits the limitations provision in the insurance contract requires
all suits under the contract be instituted within one year of the loss. He claims,
however, a “conformity with state law” provision requires the contract be
reformed to comply with Iowa’s ten-year statute of limitations for written
contracts. The facts are not in dispute. The issue is one of statutory and
contractual interpretation.
The insurance contract’s conformity to state law provision reads as
follows:
4. Conformity to State Law. If any part of this policy is
contrary to a law of the state in which the described property is
located, we agree to alter that part of our policy and make it
conform with that state law. However, all other parts of this policy
will remain in force and unaltered.
While the typical conformity provision might require conformity with “the” law of
the state generally, Donnell interprets this provision to require conformity with “a”
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law of the state, meaning the policy must be reformed to follow any individual
code section with which it does not comply.
Iowa Code section 614.1(5) (2011) establishes a ten-year limitations
period for all written contracts. Donnell contends this is “a” law of the state and
the policy should be conformed to comply with it. American Family points out
their policy conforms with, and may even be required by, Iowa Code section
515.109(6), which standardizes a twelve-month limitations period for all fire
insurance contracts.
Private agreements are allowed to vary the otherwise applicable general
statutes of limitation. See Thomas v. United Fire & Cas. Co., 426 N.W.2d 396,
397–98 (Iowa 1988). Fire insurance contracts are reviewed in a particularized
and unique way. Id. at 399. “We long ago applied this principle to allow a
shortened limitation provided in a fire insurance policy.” Id. at 397–98. One-year
limitations provisions have been upheld for fire insurance contracts despite
longer periods provided for by statute. Id.The issue here is complicated by the conformity to state law provision.
Donnell claims the conformity provision eliminates the permissible shortening of
the limitations period and imposes the longer, ten-year period found in Iowa
Code section 614.1(5). The policy matches the limitation found in Iowa Code
section 515.109(6); accordingly, when the conformity provision speaks of the
policy being contrary to a state law, the only possible conflict is with section
614.1(5). We do not interpret the policy to be in conflict with state law. As we
have previously explained, parties are free to create a shorter limitations period.
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Making such a decision cannot be in conflict with a state law when the parties are
not required to strictly adhere to that law, and we do not read the conformity
provision to prohibit the parties to accept or reject limitation provisions upon
which they have agreed. Our supreme court has specifically held parties are free
to reduce the ten-year standard written contract limitations period to a shorter
term. See Faeth v. State Farm Mut. Ins. Co., 707 N.W.2d 328, 334 n.3 (Iowa
2005). We cannot say it is a violation of state law to do what is clearly permitted.
We are influenced by the fact a one-year limitations period is standard for
fire contracts. Read strictly, Iowa Code sections 515.109 and 614.1 are in
conflict. Section 515.109, creates a standard provision for a fire contract and a
special limitations period, which differs from the general statute of limitations for
all contracts found in section 614.1. The general rule, that a specific statute
supersedes a general one, clearly elevates the one-year limitations period in
section 515.109(6) over any found in the general statute, section 614.1. See
Olson Enters., Inc. v. Citizens Ins. Co. of N.J., 121 N.W.2d 510, 512 (Iowa 1963).
Even assuming the provision violates section 614.1, and the conformity provision
evidences an intent to waive the right to choose a shorter limitations period, the
general section is inferior to the more specific limitations period found in section
515.109. We find the conformity provision does not dictate application of a
longer limitations period than is found in the policy.
B. Enforceability of the Limitations Clause
Donnell also claims the limitations period contained within the policy is
unenforceable as unreasonable, unconscionable, and contrary to his reasonable
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expectations. Donnell relies upon Robinson v. Allied Property & Casualty
Insurance Co., 816 N.W.2d 398, 402 (Iowa 2012), to claim any shortening of the
statutory limitations period must allow the insured a reasonable time to sue for
enforcement of the policy.
In Robinson, an insured settled against a tortfeasor for the tortfeasor’s
policy limits. 816 N.W.2d at 400. The insured then filed suit against their own
insurer to cover the remainder of the damages. Id. The district court granted
summary judgment as the suit was filed after the two-year limitations period
contained within the policy. Id. Examining the argument concerning
reasonableness of the limitations provision similar to Donnell’s, our supreme
court found the two-year limitations provision to be per se reasonable as it
matched the two-year statute of limitations enacted by our legislature for all
personal injury claims. Id. at 404–05. In the present matter, our legislature has
made a similar, arguably more directly applicable, policy determination for
commencement of actions on a fire claim. As time goes on, evidence of a fire
grows increasingly stale. The shorter limitations period gives insurers confidence
claims will be litigated while evidence remains as fresh and available as possible,
and protects against suits concerning fire losses where the necessary forensic
evidence has been lost. Our supreme court has repeatedly approved of the
twelve-month limitation period for fire policies. See, e.g., Thomas, 426 N.W.2d at
399 (equal protection grounds); Stahl v. Preston Mut. Ins. Ass’n., 517 N.W.2d
201, 203 (Iowa 1994). Donnell has failed to show, based upon the unique and
specific facts of this case, the one-year limitation period is unreasonable.
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We also fail to find the policy limitation is unconscionable. “In considering
claims of contractual unconscionability, we examine the factors of assent, unfair
surprise, notice, disparity of bargaining power, and substantive unfairness.” In re
Marriage of Shanks, 758 N.W.2d 506, 515 (Iowa 2008). It is not enough to show
the insured made a bad deal. See id. As explained in Shanks, there are
procedural and substantive elements to unconscionability. Id. Neither applies
here. Substantively, we first ask whether the terms of the contract are so
oppressive that no reasonable person would enter into such a bargain. Id.Considering the presence of the same limitations period in state law, we cannot
agree the terms are oppressive or unreasonable. Nor is the language buried in
fine print or convoluted.
Finally, we find no merit in Donnell’s claim the limitations provision is
counter to reasonable expectations. An insured should reasonably expect policy
provisions established and justified by state law.
Having found the one-year limitations clause enforceable despite the
conformity provision, and having found the limitations provision not to be
unreasonable, unconscionable, or contrary to Donnell’s expectations, we
determine the district court was correct in granting American Family’s motion for
summary judgment.
AFFIRMED.