* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### JUL 31 1997 

### PATRICK FISHER Clerk 

### UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

STEVEN E. FORD, C. LYNN FORD, MICHAEL G. FORD, a minor, and BEATRICE MEIERSTEIN, Plaintiffs-Appellees,

v. ALLIED MUTUAL INSURANCE COMPANY, an Iowa corporation, Defendant-Appellant. No. 96-8096 (D.C. No. 93-CV-201) (D. Wyo.)



### ORDER AND JUDGMENT *

Before SEYMOUR , Chief Judge, PORFILIO and TACHA, Circuit Judges.

The issue in this case is the effect of an underins ured motorist insurance carrier’s approval of a settlement between its insu red and the tortfeasor, where additional primary insurance for the tortfeasor is subsequently discovered. We have described the facts of this case in our earlie r published opinion. Ford v.-2-

Allied Mutual Ins. Co. , 72 F.3d 836 (10th Cir. 1996). In 1989, Steven Fo rd and his family sustained serious injuries when their car was struck by the trailer of a truck negligently driven by Leland Blatter. The Fo rds’ total damages were later determined to be $670,000. Mr. Blatter and his lia bility insurer, Truck Insurance Exchange (TIE), a.k.a. Farmers’ Insurance Group, of fered the policy limits of $300,000 in exchange for a release from all liabili ty. The Fords carried underinsured motorist (UIM) coverage with Allied Mutual Insurance Company (Allied). Mr. Ford revised a form release provide by TIE, and sent a copy of the release to Allied requesting that it approve the se ttlement and release of Mr. Blatter. On August 16, 1990, Allied wrote to Mr. F ord, stating “Allied Mutual Insurance Company has obtained an assets check on M r. Blatter and have determined that there [are] no funds from which to collect any subrogation claim against him. Therefore, you have Allied’s permissi on to enter into a release with Mr. Blatter and Farmer’s Insurance for your [family ’s] claim[s].” Aplt.’s app., vol. II at 81. The trailer to Mr. Blatter’s rig was owned by Rolli ns Leasing Company, which leased the trailer to Darigold, which in turn leased the trailer to Mr. Blatter. The Fords released Mr. Blatter, reserving their right to “pursue claims against any and all other parties responsible for [their] injuries , including, but not limited to, Rollins Leasing.” Aplt.’s app., vo l. II at 38, 41, 44 (emphasis-3-

added). However, the release did not reserve the r ight to recover from additional sources of liability insurance available to Mr. Blatter. Subsequent to the execution of the release, Mr. Ford and Allied disco vered that Darigold had a $1,000,000 policy for which Mr. Blatter was an insu red. In a trial to the jury, the jury found that Allied had waived its rights to and was estopped from asserting the Darigold policy as a defense to Allied’s UIM co verage. Allied appeals, asserting that waiver and estoppel do not apply under Iowa law, and if they do apply, the elements are not sat isfied as a matter of law; that the district court erred in refusing to instruct th e jury that the Fords were in an “arms length relationship” with Allied; and that th e district court erred in refusing to allow testimony regarding mutual mistake in the release. The parties agree Iowa law applies. Allied argues, quite simply, that the UIM coverage does not apply because Mr. Blatter, as it turned out, was not an underinsured motorist. As a general rule, under Io wa law the UIM carrier may require the insured to pursue the tortfeasor’s avai lable primary policy limits and assets before liability for UIM coverage attaches. An insured may not unilaterally sign away the UIM insurer’s subrogation rights withrespect to the tortfeasor’s assets or other applicable insurance policies. Gri nnell Mutual Reins. Co. v. Recker , 561 N.W.2d 63, 68-69 (Iowa 1997). Thus, if an in sured settles with a tortfeasor for less than available policy limits without the consent of the UIM-4-

carrier , the UIM carrier will be credited for the amount o f the policy limits, rather than the amount of the settlement. Rucker v. National General Ins. Co. , 442 N.W.2d 113, 117 (Iowa 1989) (en banc). However , Ruckerdoes not resolve the issue before us: whether the UIM insurer, by it s explicit written consent to the settlement entered into by its insured, may waive i ts right to subrogate against any additional assets of the tortfeasor and thereby wai ve its right to be credited for the full policy limits of additional, unknown primary c overage. Under the UIM policy, the Fords could not settle any claims without the consent of Allied. The necessary converse is that the Fords must be able to rely on such consent once procured in good faith. Rucke ritself, upon which Allied relies so heavily, discusses the policy considerati ons which “favor allowing injured parties the flexibility of entering into a settlement with the tortfeasor’s liability carrier for less than the full amount of coverage.” 442 N.W.2d at 115-16. The same policy considerations counsel that a UIM c arrier, when it approves such a settlement, ought to be bound by the terms of its approval. Allied contends that waiver does not apply in the i nstant case because “the doctrines of implied waiver and of estoppel, b ased upon the conduct or action of the insurer, are not available to bring within the coverage of a policy risks not covered by its terms , or risks expressly excluded therefrom, and the application of the doct rine in this respect is therefore to be distinguished from the waiver of , or estoppel to assert, grounds of forfeiture.” Randolph v. Fireman’s Fund Ins. Co. , 124 N.W.2d 528, 531-32 (Iowa 1963)-5-

(quoting 29A A M
. J UR ., Insurance , § 1135, at 289). We note that this case, and the others relied upon by Allied, address only the limits of implied waiver by the insurer’s conduct, not the type of express waiver b y Allied’s written approval of the release present in this case. Moreover, under Iowa law it is clear that an insurer may waive many of its defenses to coverage. Scheetz v. IMT Ins. Co. (Mut.) , 324 N.W.2d 302, 304-05 (Iowa 1982) (en banc). Aninsured may show that the insurer waived the requirements of policy provisions which are conditions precedent to coverage. Simpson v. United States Fi delity & Guar. Co. , 562 N.W.2d 627, 631 (Iowa 1997). Allied has pointed to no caselaw indicating that Allied may not expresslywaive either its right to require its insured to e xhaust the tortfeasor’s liability limits, or its right to subr ogate against the tortfeasor’s assets. In order to establish waiver, the evidence must sho w that Allied had a right under the policy, that it had actual or constructiv e knowledge of the right, and that it intended to relinquish that right. Scheetz , 324 N.W.2d at 304. Because it is uncontroverted that Allied did not know about th e Darigold insurance policy when it approved the release of Mr. Blatter, Allied claims it could not have intended to relinquish its right to that primary co verage. We are not persuaded. Allied’s right under the policy was the right to re quire its insured to exhaust all assets of the tortfeasor, both known and unknown, o r in the alternative, to subrogate against all assets of the tortfeasor, bot h known and unknown. At the-6-

time the injury was incurred, Allied possessed a “c ontingent subrogation right.”
See Grinnell Mutual Reins. , 561 N.W.2d at 69. Allied’s right under the polic y was to set off from the insured’s damages all appli cable insurance coverage and non-exempt assets which might be identified. Allie d has pointed to no authority suggesting that its ability to waive this right dep ends on its knowledge of the exact source and dollar amount of the tortfeasor’s assets. The issue of waiver was properly submitted to the jury. Because the jury was properly instructed on waiver, it was also proper for the district court to instruct the jury on the elem ents of estoppel. “The term estoppel is broader than that of waiver, and may em brace it within its scope, in certain instances, since an insurer, after waiving certain rights, would be estopped thereafter to insist upon them.” 16B J OHN A LAN A PPLEMAN & J EAN A PPLEMAN , I NSURANCE L AW & P RACTICE § 9081, at 497 (rev. 1981). Evidence in the recor d shows that the Fords changed their position in reli ance on the waiver given by Allied: they signed the release of Mr. Blatter. Al lied must have intended that the Fords so rely, because the Fords were prohibited bytheir policy from settling without Allied’s consent. Allied’s arguments on es toppel are misconceived: it argues that because the Fords and Allied were in an “arms length” relationship, the Fords could not rely on Allied’s representation s about the availability of additional insurance coverage on Mr. Blatter. The facts underpinning Allied’s-7-

decision to waive its subrogation rights by consent ing to the release are simply irrelevant to the question of whether the Fords mayrely on the waiver itself. The Fords have no duty to investigate the factual bases of Allied’s waiver, “arms length” relationship or no. Finally, Allied contends that the district judge er red in refusing to allow evidence of mutual mistake regarding the release ex ecuted by the Fords and Mr. Blatter. Allied claims that if the release may be voided or reformed due to mutual mistake, Allied should not be liable because other insurance is available to Mr. Blatter. As an initial matter, it is questionable whether ignorance of the Darigold policy is the type of mistake about the existence, nature, or value of the objects of the contract, to which the doctrine of mutual mista ke applies. See 3 A RTHUR L INTON C ORBIN , C ORBIN O N C ONTRACTS § 605 (1960). Allied does not contend that Mr. Blatter and the Fords misunderstood the extent of the Fords’ injuries, cf. Thomas v. Sheehan , 149 N.W.2d 842 (Iowa 1967) (mutual mistake as to nature and extent of injuries for which release of liabili ty was given is question for the jury), or the scope of the release given to Mr. Blatter. All parties were aware that Allied was giving up its contingent subrogation rig hts. Under the circumstances of this case, mutual mistake with respect to the re lease is simply irrelevant to a determination of the scope of the waiver given by A llied. If Allied’s approval of the release given to Mr. Blatter constitutes a waiv er, as the jury found, then-8-

Allied is estopped from asserting against the Fords any defense based on defects in that release. Although mutual mistake in the re lease may provide a basis upon which Allied could contest the validity of the rele ase with Mr. Blatter, Allied’s approval of the release waives any right to contestthe release with its own insured. In sum, we find Allied’s arguments unpersuasive andsomewhat disingenuous. Under its policy, Allied had the rig ht to withhold consent from the proposed release, to condition its consent on a ref ormulated release, to insist that its insured file a lawsuit to discover the relevantinsurance information, or to pay its insured and file the lawsuit itself pursuant to its subrogation rights. Instead, Allied approved the release which preserved its rig hts only with respect to other tortfeasors, but not its rights with respect to the n-unknown assets available to the released tortfeasor, Mr. Blatter. It now seeks to impose all risk of its error on its insured, without even a hint that the insured has d one other than fully cooperate with the demands made by Allied in the handling of the claim.
We AFFIRM

. ENTERED FOR THE COURT
Stephanie K. Seymour Chief Judge