Court of Appeals Affirms Summary Judgment Involving Breach of Contract Claim Against Insurance Company

Posted on: December 7th, 2018

Plaintiffs purchased a home in Council Bluffs, Iowa in June 2015. They purchased insurance coverage for the home through Defendant. In September 2015, Plaintiffs’ newly purchased home developed serious foundational deficiencies. After Plaintiffs informed Defendant of the damage, Defendant sent representatives to the home to conduct an investigation. Upon completion of their investigation, Defendant sent Plaintiffs correspondence informing them that “a combination of the heavy rains and the plumbing leak caused portions of the foundation of [their] home to crack and settle into the ground.” As a result, Defendant denied coverage, citing a portion of the insurance policy that excluded coverage for “damage caused by earth movement (sinking, rising or shifting), caused by any human force or act of nature . . . regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

In August 2016, Plaintiffs filed suit against Defendant, alleging breach of contract and coverage based upon the doctrine of reasonable expectations. In July 2017, Defendant filed for summary judgment alleging the reasonable expectations doctrine had no application because there was evidence it did anything to create coverage expectations related to the coverage for the incident at issue. The district court granted Defendant’s motion for summary judgment. Plaintiffs appealed.

On December 5, 2018, the Court of Appeals affirmed the district court’s ruling in favor of Defendant. In support of the decision, the Court held that, in order to recover under the doctrine of reasonable expectations, Plaintiffs must show “circumstances attributable to the [Defendant] that fostered coverage expectations or show that the policy is such that an ordinary layperson would misunderstand the coverage.” The Court stated that, because Plaintiffs did not read the policy prior to purchasing coverage or produce evidence to support the claim that an ordinary person could not understand the exclusion language, Defendant was entitled to judgment as a matter of law on Plaintiffs’ reasonable expectations claim.

Steeve v. IMT Insurance Company, No. 17-1607 (Iowa App. Dec. 5, 2018).

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