Iowa Dangerous Religion Legislation—Can Iowa Policyholders Maintain Insurers Accountable for Wrongful Claims Conduct?

First-party dangerous religion is a well-established widespread regulation reason behind motion in Iowa that enables insureds to carry their insurance coverage firms accountable for unreasonable declare denials or delays. Iowa has acknowledged first-party dangerous religion claims in opposition to insurers for the reason that 1988 case of Dolan v. Support Insurance coverage Firm. ¹ To show a first-party dangerous religion declare in Iowa, the policyholder should present:

1. The insurer had no cheap foundation for denying advantages underneath the coverage, and
2. The insurer’s data or reckless disregard of the dearth of an inexpensive foundation for denying the declare.

The Iowa Supreme Courtroom commented on the rationale and want for a nasty religion reason behind motion:

We discovered it was ‘applicable to acknowledge the first-party dangerous religion tort to offer the insured an sufficient treatment for an insurer’s wrongful conduct’ as a result of conventional breach of contract damages wouldn’t at all times be sufficient to compensate for dangerous religion and the choice treatment of intentional infliction of emotional misery was insufficient resulting from its restricted applicability. …We additionally discovered that recognition of the tort was justified by the character of the contractual relationship between the insurer and insured.’…

We defined,

Though we don’t imagine this relationship includes the identical fiduciary duties as within the third-party conditions, . . . we have now regularly famous that insurance coverage insurance policies are contracts of adhesion. That is as a result of inherently unequal bargaining energy between the insurer and insured, which persists all through the events’ relationship and turns into significantly acute when the insured sustains a bodily damage or financial loss for which protection is sought. Recognition of the first-party dangerous religion tort redresses this inequality. ²

The place a declare is “pretty debatable,” the insurer is entitled to debate it, whether or not the controversy considerations a matter of reality or regulation. “This take a look at creates an goal normal and makes clear the intentional nature of the tort” of dangerous religion. Additional, “[i]t is suitable, in making use of the take a look at, to find out whether or not a declare was correctly investigated and whether or not the outcomes of the investigation have been subjected to an inexpensive analysis and overview.” ³

Iowa doesn’t acknowledge a statutory foundation for dangerous religion. In Bigfoot Co-op A Inc v Nationwide Mutual Insurance coverage Firm, ⁴ a court docket just lately dismissed the policyholder’s declare of unfair settlement practices underneath the Iowa Insurance coverage Code Part 507B.4(3)(j). fn The rationale was based mostly on the interpretation that Chapter 507B of the Iowa Code doesn’t create a non-public reason behind motion. The court docket referenced Iowa Supreme Courtroom precedent, which held that the Iowa Code was supposed to be regulatory in nature, offering the state insurance coverage commissioner with administrative enforcement powers relatively than creating a non-public proper of motion for policyholders. The court docket emphasised that a number of state choices and prior federal court docket rulings constantly upheld the interpretation that Chapter 507B doesn’t create a non-public reason behind motion for insureds in opposition to insurers.

Consequently, the court docket granted the defendant’s movement to dismiss the unfair settlement practices declare.

The underside line is that dangerous religion is acknowledged in Iowa at widespread regulation however not underneath Iowa statutory regulation. Iowa first-party dangerous religion claims can come up when an insurer unreasonably denies or delays cost on a legitimate declare by its personal insured. Examples could embrace denying a declare and not using a cheap foundation, failing to correctly alter or examine a declare, or just delaying cost of coverage advantages on a legitimate declare and not using a cheap foundation.

Thought For The Day

“Is that this heaven?”
“No, it’s Iowa.”
—Shoeless Joe Jackson, as portrayed by Ray Liotta and Ray Kinsella, performed by Kevin Costner within the film, Area of Goals

¹ Dolan v. Support Ins. Co., 431 N.W.2nd 790 (Iowa 1988).
² De Dios v. Indem. Ins. Co. of N. Am., 927 N.W.2nd 611, 616 (Iowa 2019).
³ Dolan, 431 N.W.2nd 790.
⁴ Bigfoot Co-op A Inc v Nationwide Mut. Ins. Co., No. 23-CV-1016 (N.D. Iowa July 16, 2024).