IN THE SUPREME COURT OF IOWA

No. 07–0101

Filed July 31, 2009

JAMES B. WILSON,

Appellant,

vs.

FARM BUREAU MUTUAL INSURANCE COMPANY,

Appellee.

Appeal from the Iowa District Court for Muscatine County, David H. 

Sivright, Jr., Judge.

Appeal and cross-appeal of district court calculation of judgment and 

interest. AFFIRMED AS MODIFIED; REMANDED WITH INSTRUCTIONS.

Sara L. Riley of Tom Riley Law Firm, Cedar Rapids, for appellant.

Brian C. Ivers, Patrick L. Woodward, and Heather L. Carlson of 

McDonald, Woodward & Ivers, P.C., Davenport, for appellee.
2

CADY, Justice.

This is the second appeal in the second lawsuit to arise from a motor 

vehicle accident in which an automobile struck and killed a pedestrian. In 

the first lawsuit, the pedestrian’s estate sued the driver of the automobile 

and a jury awarded damages. In this second lawsuit, the estate is seeking 

underinsured motorist benefits from the decedent’s insurer. Our decision in 

the first appeal in this second lawsuit determined the decedent’s 

underinsured motorist insurer could not relitigate the issue of damages in 

this second lawsuit, and we remanded for proceedings consistent with our 

opinion. On remand, the district court entered a judgment reflecting an 

offset for previous payments by the decedent’s insurer and awarded interest. 

Both parties appealed. We affirm the judgment but remand for modification 

of both the offset and the interest award.

I. Background Facts and Proceedings.

Lily Wilson was struck by a car while walking across a road to collect 

mail from her mailbox. Tragically, she died later the same day from injuries 

suffered in the accident.

Wilson’s estate sued the driver of the motor vehicle, and a jury 

awarded the estate $159,795.31 in the lawsuit against the driver. The award 

included $7906.81 for interest on reasonable burial expenses, $6888.50 for 

medical expenses, and $145,000 for loss of parental consortium. The jury 

found Wilson to be twenty percent at fault for the accident. The jury 

instructions, given by the trial court without objection, informed the jury 

Wilson’s damages would not be reduced by her fault. Despite the 

instructions, the district court reduced a portion of the jury’s award by 

twenty percent and entered judgment for $127,836.24.

The estate moved to amend the judgment based on the unchallenged 

jury instruction. Prior to a ruling, the tortfeasor’s insurer paid its policy 
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limits of $100,000 in exchange for satisfaction of the judgment. The district 

court, realizing its error and attempting to correct it, subsequently granted 

the motion and amended the judgment to $156,836.25.1

Wilson’s estate then demanded payment of $56,836.25 along with 

prejudgment and postjudgment interest from Farm Bureau Mutual 

Insurance Company, Wilson’s insurer, under the underinsured motorist 

provision of the policy of insurance. Farm Bureau offered $22,000 in full 

settlement, which the estate rejected.

 

As a result, the estate sued Farm Bureau for breach of the insurance 

contract. Cross-motions for summary judgment were directed to the issue of 

whether Farm Bureau was precluded from relitigating the issue of damages. 

Ultimately, we held in a previous appeal that Farm Bureau was bound by the 

original judgment of $127,836.24, and we remanded. See Wilson v. Farm 

Bureau Mut. Ins. Co., 714 N.W.2d 250, 263 (Iowa 2006).

On remand, the estate requested the district court to enter judgment. 

The district court entered a judgment against Farm Bureau for $27,836.24 

“together with interest as allowed by law” and costs on July 3, 2006. After 

Farm Bureau objected to the judgment, the district court amended the 

judgment on December 19, 2006. The amended judgment is the basis of the 

present appeal. The district court explained the judgment in a seven-page 

ruling filed December 19, 2006, addressing two primary issues affecting 

calculation of the judgment.

First, the district court considered the effect of a pretrial $5000 

payment for medical expenses by Farm Bureau to Wilson’s estate. The 

payment represented the policy limits of the “medical payment coverage” 

 1The amended judgment reflected the district court’s belief that the interest on 

reasonable burial expenses and medical expenses should be reduced by Wilson’s fault, but 

the loss-of-consortium damages should not be reduced.
4

provision of Wilson’s insurance contract with Farm Bureau. The medical 

payment coverage provision provided that any medical payment coverage 

paid would be applied to reduce any payment later owed under the 

underinsured motorist provision of the insurance contract. The district 

court held Farm Bureau’s argument that the judgment must be offset by the 

$5000 medical coverage payment was a claim for subrogation. As a result, 

the district court held Iowa Code section 668.5(3) (2001) required the 

“subrogation” claim to be reduced by the twenty percent comparative fault 

assigned to Wilson by the jury. Nonetheless, the district court held Farm 

Bureau was entitled to a $5000 offset because the reduction of Wilson’s 

$6888.50 in medical expenses by her twenty percent fault still exceeded 

$5000. The district court further held Farm Bureau was responsible, as a 

subrogee, to pay the estate a prorated share of the attorney fees and 

expenses incurred in obtaining the jury verdict against the underinsured 

motorist. The district court held Farm Bureau’s share of attorney fees was 

$1666.67, with expenses of $121.47.

Second, the district court calculated the interest owed by Farm 

Bureau. The court held Farm Bureau was responsible for all interest the 

estate could have recovered from the tortfeasor. The court held interest 

began to accrue on the date the underlying tort lawsuit was filed against the 

tortfeasor according to Iowa Code section 668.13, and the “aggregated 

award” (presumably the jury award plus interest from the date of the 

underlying tort suit) in turn accumulated interest from the date of judgment 

in the tort suit according to Iowa Code section 535.3(1). Finally, the district 

court suspended the accrual of interest during the pendency of the first 

appeal of this second lawsuit, resuming on the date of our ruling in the first 

appeal.
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Both parties appealed from the judgment. The estate argues the 

district court erroneously failed to reduce Farm Bureau’s offset for medical 

payment coverage below $5000, erred in its method of deducting the offset, 

and incorrectly suspended postjudgment interest. Farm Bureau argues the 

offset for the payment of $5000 under the medical payments coverage 

provision is a contractual offset, not subject to subrogation principles, and it 

should not have been reduced by comparative fault or by a pro rata share of 

attorney fees and expenses. Farm Bureau also argues the district court 

erred in its award of interest. 

II. Standard of Review.

The parties agree these legal issues should be reviewed for errors of 

law. Iowa R. App. P. 6.907 (2009). We have previously reviewed interest 

issues for errors of law. Opperman v. Allied Mut. Ins. Co., 652 N.W.2d 139, 

142 (Iowa 2002); Wilson v. IBP, Inc., 589 N.W.2d 729, 730 (Iowa 1999).

III. Subrogation and Offsets. 

Farm Bureau acknowledges it is responsible for the amount of 

damages not recovered by Wilson’s estate from the driver of the automobile 

that struck and killed Wilson. The estate concedes Farm Bureau is entitled 

to offset from that amount some portion of the $5000 previously paid by 

Farm Bureau under the medical payment coverage provision of the 

insurance contract. The estate maintains, however, the $5000 offset is a 

subrogation interest and should be reduced according to two different 

principles applicable to subrogation interests.

The estate first points to the axiom “that the rights of a subrogee are 

the same as, but no greater than, those of the person for whom the subrogee 

is substituted.” Employers Mut. Cas. Co. v. Chicago & N.W. Transp. Co., 521 

N.W.2d 692, 696 (Iowa 1994). Relying on that principle, the estate argues 

Farm Bureau’s rights as a subrogee can be no greater than Wilson’s rights,
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for whom it is substituted. Consequently, as the argument goes, Farm 

Bureau’s subrogation interest must be reduced by Wilson’s twenty percent 

comparative fault.

Second, the estate argues the offset should be reduced by a pro rata 

share of attorney fees and expenses attributable to Farm Bureau. The estate 

points to Iowa Code section 668.5(3), which is part of our comparative fault 

statute and requires, in comparative fault cases, “contractual or statutory 

subrogated persons shall be responsible for a pro rata share of the legal and 

administrative expenses incurred in obtaining the judgment or verdict.” The 

principle is also an equitable one applicable in all subrogation contexts. 

Principal Cas. Ins. Co. v. Norwood, 463 N.W.2d 66, 68 (Iowa 1990) 

(recognizing the insurer should pay pro rata attorney fees and expenses 

because it “ ‘should not be entitled to enjoy the fruits of the assured’s 

judgment against a tortfeasor without contributing in any way to the costs or 

burdens of litigating that claim’ ” (quoting Hedgebeth v. Medford, 378 A.2d 

226, 230 (N.J. 1977))). Farm Bureau argues both of those principles are 

inapplicable because Farm Bureau is not a subrogee; in other words, the 

offset is not a subrogation interest but a contractual one. 

Our cases have previously discussed subrogation rights, including in 

the insurance context. “Subrogation is a doctrine that originated in equity to 

give relief to a person or entity that pays a legal obligation that should have, 

in good conscience, been satisfied by another.” Allied Mut. Ins. Co. v. Heiken, 

675 N.W.2d 820, 824 (Iowa 2004). “Subrogation refers to both a legal right 

and a legal action.” Id. at 824 n.1. “The term comes from the Latin 

‘subrogare,’ which means to substitute or put in place of another.” Id. The 

subrogee’s rights are derivative of the rights held by the insured against the 

tortfeasor. Id. at 824. In the insurance context, the doctrine permits “an

insurer who has paid a loss to an insured to become ‘subrogated in a 
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corresponding amount to the insured’s right of action against any other 

person responsible for the loss.’ ” Id. (quoting 6A John A. Appleman & Jean 

Appleman, Insurance Law and Practice § 4051, at 103 (rev. ed. 1972)). 

Subrogation rights often arise by contract, but even when the insurance 

contract does not explicitly provide for them, “[t]he insurer’s right to 

subrogation attaches by operation of law upon payment of the loss based on 

principles of equity.” Id. at 824–25 n.2.

Because the subrogated insurer is being substituted for the insured 

for reasons of contract or equity, the subrogated insurer’s rights are “subject 

to all defenses the tortfeasor could assert against the insured.” Id. at 825. 

The estate relies on this principle to argue Farm Bureau’s right to set off the 

previously paid medical expenses should be reduced by Wilson’s twenty 

percent fault. Apparently, the argument is that the estate would have no 

right to the entire $5000 in medical expenses against the tortfeasor because 

Wilson was twenty percent at fault.

The argument asserted by the estate ignores the basis for the offset in 

this case. This case does not arise from any of the typical subrogation 

contexts. This is not a case in which the insurer pays its insured then seeks 

to assert contractual or equitable subrogation rights against the responsible 

tortfeasor. Nor is this a case in which the insurer pays its insured some 

amount, then the insured sues the tortfeasor to collect more damages. In 

this latter case, the insurer is subrogated to the portion of its insured’s claim 

that it paid. Id. at 824. However, the subrogation interest—being derived 

from the insured’s interest—is subject to any defenses available against the 

insured. Id. at 824–25.

In this case, Farm Bureau asserts a contractual offset. The pertinent 

contract of insurance at issue provides: “Any payment [under the medical 

payment coverage provision] shall be applied toward . . . the payment of a 
8

money judgment of bodily injury for any insured under . . . Part IV 

[underinsured motorist coverage provision].” While underinsured motorist 

coverage is mandatory in Iowa, see Iowa Code § 516A.1, offsets and other 

limitations are permissible for the purpose of avoiding duplication of 

coverage. See Iowa Code § 516A.2 (providing underinsured “forms of 

coverage may include terms, exclusions, limitations, conditions, and offsets 

which are designed to avoid duplication of insurance or other benefits”); 

Leuchtenmacher v. Farm Bureau Mut. Ins. Co., 461 N.W.2d 291, 295 (Iowa 

1990) (approving an identical offset). The offset sought by Farm Bureau is 

not an attempt to claim its subrogation interest in money paid to the estate 

by the tortfeasor. Instead, Farm Bureau is seeking to enforce a bargainedfor contract provision allowing it to avoid paying duplicative benefits by 

reducing its underinsured-motorist-coverage payment by the amount already 

paid pursuant to the medical-payment-coverage section of the policy. 

Because the interest asserted is not a subrogation interest, the typical 

equitable reductions are not applicable.

The reductions of subrogation interests provided for in Iowa Code 

section 668.5(3) are treated the same. The estate argues Iowa Code section 

668.5(3) requires the offset to be reduced by Wilson’s fault and a pro rata 

share of attorney fees and expenses attributable to Farm Bureau. Iowa Code 

section 668.5(3) applies to subrogation rights.2

 2Iowa Code section 668.5(3) provides: 

 Again, there is no 

3. Contractual or statutory rights of persons not enumerated in 

section 668.2 for subrogation for losses recovered in proceedings pursuant to 

this chapter shall not exceed that portion of the judgment or verdict 

specifically related to such losses, as shown by the itemization of the 

judgment or verdict returned under section 668.3, subsection 8, and 

according to the findings made pursuant to section 668.14, subsection 3, and 

such contractual or statutory subrogated persons shall be responsible for a 

pro rata share of the legal and administrative expenses incurred in obtaining 

the judgment or verdict.
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subrogation right involved here, so section 668.5(3) should not be applied to 

reduce the contractual offset.

Additionally, Farm Bureau points to our past precedent holding 

chapter 668 does not apply to underinsured motorist claims based on 

contract. Indeed, we addressed the question of whether chapter 668 applies 

to lawsuits if an injured party sues its insurer for underinsured motorist 

claims. In Vasquez v. LeMars Mutual Insurance Co., 477 N.W.2d 404 (Iowa 

1991), we confronted the issue of whether the interest provision of section 

668.13 governs in such a lawsuit. In Vasquez, we based our holding on the 

section 668.13(1) provision that the subsection applied only to “ ‘actions 

brought pursuant to’ ” chapter 668. 477 N.W.2d at 408–10 (emphasis 

omitted) (quoting Iowa Code § 668.13). We recognized that chapter 668, 

which governs comparative fault, applies only to claims “ ‘involving the fault 

of more than one party to the claim.’ ” Id. at 409 (quoting Iowa Code 

§ 668.3(2)). We held the underinsured motorist claim was a contractual one, 

and consequently did not involve “the fault of more than one party to the 

claim.” Id. “Simply put, the underinsured motorist claim did not trigger 

chapter 668 because the requirements of section 668.3(2) were not met.” Id.

at 410. The underinsured motorist claim here was similarly not brought 

pursuant to chapter 668.

Still further, the equitable principle underlying the requirement of the 

insurer to pay a pro rata portion of the attorney fees and expenses is 

inapposite to the facts of this case. Farm Bureau is not seeking a free ride 

on the coattails of the estate’s counsel. With regard to Farm Bureau’s 

demand to reduce the judgment by the $5000 it paid pursuant to the 

medical payment coverage provision, Farm Bureau is not benefiting from the 

estate’s efforts to recover money from the tortfeasor. Instead, Farm Bureau

is seeking to enforce the contract clause allowing the insurer to set off the 
10

$5000 of medical payment coverage Farm Bureau itself paid voluntarily from 

a subsequent payment under the underinsured motorist coverage provision. 

Thus, we refuse to read section 668.5(3) and our past cases dealing with 

equitable subrogation to require an insurer to pay for the insured’s 

attorneys’ efforts to recover the medical payments the very same insurer paid 

voluntarily. See Crabtree ex rel. Kemp v. Estate of Crabtree, 837 N.E.2d 135, 

142 (Ind. 2005) (refusing to hold “the legislature intended the Subrogation 

Statute to compel an insurer to pay attorney’s fees to recover the amount of 

its medical payments from itself”). Farm Bureau is entitled to a full $5000 

offset of the amount it owes under the underinsured motorist coverage 

provision. That amount will be influenced by our review of the district 

court’s award of interest, from which both parties have appealed, and to 

which we now turn.

IV. Interest.

The district court judgment, as amended, provided for interest from 

February 7, 2000, when the estate filed the underlying tort lawsuit. The 

court suspended interest on the judgment during the first appeal of this 

second lawsuit until May 12, 2006, the day we filed our first opinion in this 

second lawsuit. Both parties appealed the district court’s calculation of 

interest. The estate argues the district court improperly credited certain 

payments to principal rather than interest and also erred in suspending 

interest during the first appeal of this second lawsuit. Farm Bureau does 

not dispute the district court holding that interest began to run when the 

underlying tort lawsuit was filed, but argues no interest should have 

accumulated from March 19, 2002, when the tortfeasor’s insurer paid its 

policy limits until December 19, 2006, when the district court amended its 

July 3, 2006 judgment in this lawsuit.
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In order to begin on firm ground, we begin where the district court, the 

parties, and precedent of this court unanimously agree. As an underinsured 

motorist carrier, Farm Bureau “bound itself under its insurance policy to pay 

its insured what the insured would have recovered against a third party if 

that party had been adequately insured.” Opperman, 652 N.W.2d at 142. 

The district court began from this understanding, and Farm Bureau does 

not contest it.

The district court relied on Iowa Code section 668.13 to hold the estate 

was entitled to recover from the tortfeasor the judgment in the underlying 

tort lawsuit together with interest from the date of the commencement of the 

action. The provision of prejudgment interest in section 668.13 “is based on 

the realization that the loss caused by tortious conduct results in the loss of 

use of compensatory damages, and to make the plaintiff whole, prejudgment 

interest should be allowed.” Id. at 142–43. Neither party argues interest 

started to run on the tort damages at any other time, so we will not review 

that portion of the district court’s holding.3

 3At common law, Iowa courts applied the general rule that interest does not run until 

money becomes due and payable, “and in the case of unliquidated claims this is the date 

they become liquidated, ordinarily the date of the judgment.” Mrowka v. Crouse Cartage Co., 

296 N.W.2d 782, 783 (Iowa 1980). We recognized an exception to this rule “ ‘in cases in 

which the entire damage for which recovery is demanded was complete at a definite time 

before the action was begun.’ ” Id. (quoting Bridenstine v. Iowa City Elec. Ry., 181 Iowa 

1124, 1136, 165 N.W. 435, 439 (1917), overruled in part on other grounds by Menke v. 

Peterschmidt, 246 Iowa 722, 727, 69 N.W.2d 65, 69 (1955)). We have noted that actions for 

wrongful death fall within that exception. Id. In addressing the apparent inconsistency 

between the common-law rule and section 668.13, we recently held section 668.13 “does not 

govern in those situations in which our case law has provided that interest may be allowed 

from a date prior to the filing of a petition” such as “when it has been shown that the 

damage was complete at a particular time.” Gosch v. Juelfs, 701 N.W.2d 90, 92 (Iowa 2005). 

Although these rules seem to apply to this wrongful death action, the parties have not 

preserved and briefed the issue. Additionally, it seems dubious to say the loss of 

consortium damages at issue in this case were “fixed in amount and time of accrual” prior 

to the judgment in the tort lawsuit. See id. (endorsing prefiling interest on “fixed” or 

“certain” elements of damages but not future damages); Horak v. Argosy Gaming Co., 648 

N.W.2d 137, 150 (Iowa 2002) (noting parental consortium damages may be enormous “and 

will arguably extend into [children’s] adulthood.”). As such, we forego consideration of that 

 Thus, interest began to run on 

February 7, 2000, the date the underlying tort lawsuit was commenced.
12

On the date of judgment in the tort lawsuit, the interest was 

aggregated with the damages and began to draw interest as calculated by 

Iowa Code section 535.3, in the same way as any civil money judgment. The 

tortfeasor was insured for only $100,000 and provided proof of her inability 

to pay the excess judgment. Wilson, 714 N.W.2d at 254. According to 

Opperman, Farm Bureau was contractually bound to pay the estate what it 

would have recovered from the tortfeasor if the tortfeasor had been fully 

insured. 652 N.W.2d at 142. Thus, Farm Bureau was contractually 

responsible for the portion of the aggregated tort judgment (damages plus 

prejudgment interest) and postjudgment interest that the tortfeasor and her 

insurer did not pay.

Farm Bureau did not pay the portion of the aggregated tort judgment 

and postjudgment interest that the tortfeasor and her insurer had not paid. 

It also did not pay any uncontested portion of the excess judgment, plus 

interest. Instead, Farm Bureau offered a lower amount in exchange for full 

satisfaction of its liability under the insurance contract.

As a result, the estate sued Farm Bureau under the underinsured 

motorist coverage provision of the insurance contract. In a prior appeal, we 

held Farm Bureau was bound by the first judgment entry in the tort lawsuit. 

The district court entered a judgment in favor of the estate in the contract

action, based on the first judgment in the tort action. Again, Farm Bureau 

did not pay the judgment, or any portion thereof, but asked the district court 

for a hearing to review the offset and interest issues. Eventually, the district 

court amended the judgment on December 19, 2006, and both parties 

appealed.

 

issue until a case where it has been passed on by the district court and fully briefed by the 

parties.
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During this entire time, the estate has been deprived of money to 

which it was entitled under the underinsured motorist contract. The 

amount of money to which the estate was entitled under the contract is 

equal to the amount the tortfeasor would have been obligated to pay. This 

amount is the excess of the aggregated tort judgment, plus interest on the 

tort judgment according to Iowa Code section 535.3. Farm Bureau has not 

highlighted any principle that would stop the accrual of interest on the tort 

judgment. Likewise, Farm Bureau has failed to explain why interest is not 

payable as an element of damages under the underinsured motorist coverage 

provision of the contract. 

Farm Bureau’s argument that Iowa Code section 668.13 governs the 

award of interest in the tort lawsuit and section 535.3 governs the contract 

lawsuit is not technically incorrect. Yet, the argument ignores our rule in 

Opperman, that Farm Bureau has a contractual duty to pay the estate the 

damages, including interest, the estate would have received had the 

tortfeasor been financially solvent. 

While this case is factually distinct from Opperman in one way, we do 

not believe the distinction makes a legal difference. Here, the estate 

proceeded against the tortfeasor and the decedent’s insurer in successive

lawsuits. In Opperman, the plaintiffs were injured in an automobile 

accident, sued the alleged tortfeasors, and later amended their petition to 

add their underinsured motorist insurance carrier as a defendant in the 

same action. Id. at 140. Farm Bureau seizes on this distinction to suggest 

interest does not run on the contract lawsuit until a judgment is entered. 

Again, Farm Bureau is technically correct. Iowa Code section 535.3 does not 

start the accrual of interest on the contract judgment until the date of the 

judgment. Id. at 143 n.1 (citing Schimmelpfennig v. Eagle Nat’l Assurance 

Corp., 641 N.W.2d 814, 815 (Iowa 2002)). Yet, Farm Bureau fails to explain 
14

why the Opperman holding does not make the company responsible for the 

interest accruing on the tort judgment as damages under the contract.

In Opperman, we held the plaintiffs were entitled to interest from the 

date of the original tort lawsuit until judgment was entered on the contract 

claim against the underinsured motorist carrier. Id. at 143. When judgment 

was entered on the contract action, we held the underlying damages award 

and the prejudgment interest should be aggregated and then draw interest 

under Iowa Code section 535.3, just like any civil judgment. Id. We noted 

that the prejudgment interest is part of the plaintiff’s damages in the 

contract action. Id. We also rejected an argument that the award of interest 

should turn on whether the plaintiff sued the tortfeasor and the 

underinsured motorist carrier in the same lawsuit or in successive lawsuits. 

Id. at 142.

While that procedural distinction does require a slightly different 

calculation in this case, we do not believe it prevents the fundamental 

holding of Opperman from applying to the facts here. The purpose of 

allowing interest on the aggregated tort judgment is “to encourage prompt 

payment and to compensate the plaintiff for another’s use of his or her 

money.” 44B Am. Jur. 2d Interest & Usury § 40, at 63–64 (2007). Thus, 

Iowa Code section 535.3, like any other postjudgment interest statute, is 

“designed to eliminate the financial incentive or disincentive to appeal and to 

ensure that a judgment creditor whose satisfaction is delayed because of an 

unsuccessful appeal receives the time value of the money judgment.” Id. at 

64.

This rationale for section 535.3 and our holding in Opperman combine 

to support a conclusion that Farm Bureau owed the excess of the aggregated 

tort judgment along with interest on that judgment until a judgment was 

entered in this contract case. A contrary holding would amount to a windfall 
15

to Farm Bureau, would deprive the estate of the time value of the tort 

judgment, and would provide an incentive for underinsured motorist 

insurance carriers to delay payment of money owed by engaging in 

protracted litigation. On the date judgment was entered in this contract 

action, the damages due under the insurance contract—i.e., the excess of 

the aggregated tort judgment and postjudgment interest—were converted 

into a judgment on the contract and interest began to accumulate on the 

contract judgment according to section 535.3.

The district court suspended accumulation of interest from the date of 

the first appeal in this suit until our resolution on appeal. The district court 

relied on Muchmore Equipment, Inc. v. Grover, 334 N.W.2d 605 (Iowa 1983). 

There, we noted “[t]he assessment of interest on judgments may be affected 

by an appeal.” Muchmore Equip., Inc., 334 N.W.2d at 610. Yet, we were 

referring to the ability of an appeal of a judgment to affect the accumulation 

of interest on the very same judgment. In this case, the first appeal was 

interlocutory and occurred before the judgment on the contract case was 

first entered on July 3, 2006. Accordingly, the interest suspended by the 

district court was the postjudgment interest on the underlying tort 

judgment. Thus, Muchmore Equipment cannot apply to suspend the 

accumulation of interest on the underlying tort judgment in this contract 

case because the underlying tort judgment was not on appeal. More 

importantly, the district court’s decision to stay or suspend the 

accumulation of postjudgment interest in this case directly contradicts the 

purposes of postjudgment interest we highlighted earlier. 

While postjudgment interest on the tort judgment and contract 

judgment are both calculated pursuant to Iowa Code section 535.3, the rate 

is variable over time, so we must determine the appropriate date to use as 

the date of judgment in the contract case. On remand from our decision in 
16

the first appeal in this contract lawsuit, the district court first entered 

judgment on July 3, 2006. The parties then briefed and argued the issue, 

and the district court amended the judgment on December 19, 2006. 

Thereafter, both parties appealed the judgment. For this reason, our 

decision in Muchmore Equipment is pertinent to the calculation of 

postjudgment interest due on the contract judgment. In Muchmore 

Equipment, we held, 

when a judgment is modified on appeal and the only action 

required in the trial court is compliance with the mandate of the 

appellate court, the interest runs from the date of the original 

judgment; however, when a judgment is reversed the interest is 

not generally computed and accrued during the pendency of the 

appeal.

Id. at 610. Thus, the question is whether our decision here requires a 

modification or a reversal of the contract judgment. 

The district court was correct in entering judgment for the estate, as 

mandated by our previous appellate decision. Indeed, Farm Bureau 

concedes it owes some amount of the excess tort judgment under the 

contract of insurance that is the subject of this lawsuit. Thus, Farm Bureau 

is not actually arguing for vacation of the judgment. Instead, the parties 

only argue over the legal principles applied to calculate the amount of the 

judgment. Consequently, we are merely modifying a judgment correctly 

entered. As such, interest on the contract case should run from, and be 

calculated according to, the date of the original judgment entry, July 3, 

2006.

Finally, the estate takes umbrage with the apparent way in which the 

district court deducted payments made. While the district court’s order does 

not clearly reflect how the district court applied the payments and offsets, 

our Opperman decision dictates how they will be applied on remand: 
17

As each payment . . . was received by the plaintiffs, the amount 

of principal on which interest was computed should be reduced 

by those amounts as of the time the payments were received. All 

payments credited to [the insurer] shall first be credited to the 

interest then due and the balance, if any, to principal.

Opperman, 652 N.W.2d at 143 (citing 47 C.J.S. Interest & Usury § 74, at 164 

(explaining “United States rule” applies payments first to interest)).

V. Conclusion.

Farm Bureau is entitled to set off the entire $5000 medical payment 

coverage benefits it paid from the amount owed under the underinsured 

motorist coverage provision of the insurance policy, as provided in the 

insurance contract. Prejudgment interest began to accumulate on the tort 

damages when the estate filed the tort lawsuit on February 7, 2000. When 

judgment was entered in the underlying tort lawsuit on February 6, 2002, 

the accumulated prejudgment interest was aggregated with the tort 

judgment and the aggregated judgment began to draw postjudgment interest 

under Iowa Code section 535.3, just like any civil judgment. Postjudgment 

interest accumulated on the tort judgment until those sums became the 

measure of damages in this contract lawsuit on July 3, 2006. As of July 3, 

2006, the aggregated tort judgment and accumulated postjudgment interest 

were again aggregated and began to draw interest under Iowa Code section 

535.3. We affirm the district court’s July 3, 2006 judgment and remand for 

modification consistent with this opinion. 

AFFIRMED AS MODIFIED; REMANDED WITH INSTRUCTIONS.