In 1997, Jay and Lorrie Lala, husband and wife, created a limited liability company, Parker House, to hold various investment and personal properties, including a farmhouse that was purchased for investment purposes. The farmhouse was kept furnished although no one lived there. The Lalas occasionally used it to host business and public events. They also used the farmhouse and farmland for reactional activities.
On April 22, 2012, the Lalas’ teenage son, Nick, and two of his friends went to the farmhouse to ride dirt bikes and ATVs. Jay, who was also at the farmhouse that day, left shortly before the teenagers and told Nick to lock up. While he was locking up, Nick saw a firearm on one of the beds and picked it up. The firearm accidentally discharged and struck Nick’s friend, Hunter, who died from his wound.
The Lalas had a homeowners’ insurance policy through Metropolitan Property and Casualty Insurance Company (Metropolitan) that covered the family and farmhouse. Their company, Parker House, also had a commercial general liability (CGL) policy through Auto-Owners Mutual Insurance Company (Auto-Owners) that covered the farmhouse and included CGL coverage of up to $1,000,000 per occurrence.
In 2014, Metropolitan settled with Hunter’s parents for $900,000 and Hunter’s parents agreed to a release of all claims against the Lalas, Parker House, Metropolitan, and Auto-Owners. The Lalas and Parker House also sought coverage under the Auto-Owners policy but Auto-Owners denied coverage. Auto-Owners asserted that its policy only provided business coverage.
Metropolitan filed suit against Auto-Owners in 2014 for subrogation and later added Parker House as a defendant alleging indemnity and contribution claims. Auto-Owners denied liability and disputed Metropolitan’s claim for contribution, subrogation, and/or indemnity. In 2017, Parker House filed an offer to confess judgment for $450,000 and assigned its rights against Auto-Owners to Metropolitan.
A bench trial was held and the court entered judgment against Auto-Owners concluding that it should indemnify Metropolitan for $450,000. The court found Parker House was insured under the Auto-Owners’ policy because the farmhouse was purchased as an investment, which was a business purpose. The court concluded that Nick was acting on behalf of Parker House or its manager, Jay, when locking up the farmhouse and the accidental shooting occurred. Therefore, Nick was engaged in conduct for business when he accidentally shot Hunter. The Supreme Court agreed with the district court’s judgment and found the settlement and indemnification amounts were reasonable.
Metro. Prop. & Cas. Ins. Co. v. Auto-Owners Mut. Ins. Co., No. 18-1029 (Iowa Mar. 8, 2019).