IN THE SUPREME COURT OF IOWA

No. 18–0129

Filed March 8, 2019

METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY 

d/b/a METLIFE AUTO & HOME and ECONOMY PREMIER 

ASSURANCE COMPANY,

Appellees,

vs.

AUTO-OWNERS MUTUAL INSURANCE COMPANY,

Appellant.

Appeal from the Iowa District Court for Polk County, Jeanie K. 

Vaudt and Jeffrey D. Farrell, Judges.

Business insurer appeals judgment in favor of homeowners’

insurer for indemnification for half the cost of a settlement of tort claims 

arising from an accidental shooting death on the insured property. 

AFFIRMED.

Matthew T. Nelson of Warner Norcross & Judd, Grand Rapids, 

Michigan; John J. Bursch of Bursch Law PLLC, Caledonia, Michigan;

and Timothy W. Hamann and Joshua L. Christensen of Clark, Butler, 

Walsh & Hamann, Waterloo, for appellant.

Michael S. Jones of Patterson Law Firm, L.L.P., Des Moines, for 

appellees.
2

WATERMAN, Justice.

In this appeal, we must resolve a dispute between insurance 

companies over liability coverage for a fatal accident. A dentist and his 

wife formed a limited liability company (LLC) that held title to investment 

properties, including a farmhouse where an accidental shooting 

occurred. The dentist had purchased personal (homeowners) liability 

insurance and commercial general liability (CGL) insurance from 

separate insurers. The CGL insurer denied coverage. The homeowners’

insurer and insured settled the death claim for $900,000 and sued the 

CGL insurer for reimbursement. The case proceeded to a bench trial, 

and the district court entered judgment against the CGL insurer for 

$450,000, rejecting various coverage defenses. The CGL insurer 

appealed, and we retained the appeal.

The principal fighting issue is whether the LLC, as owner of the 

farmhouse, had potential liability under a premises liability theory for a 

dangerous condition (the loaded, unsecured rifle left on a bed for several 

months). On our review, we conclude the district court correctly 

interpreted the CGL insurance contract, and its factual findings on 

potential liability and the reasonableness of the settlement are supported 

by substantial evidence. For the reasons explained below, we affirm the 

district court judgment.

I. Background Facts and Proceedings.

Jay and Lorrie Lala, husband and wife, live in Mason City, Iowa.1 

The Lalas have been married for twenty-seven years and have two 

children, Nick and Sam. Jay is a dentist with a practice in Mason City.

 1There are multiple members of the Lala family referenced in this opinion, and 

for that reason, we will refer to them by their first names when necessary.
3

In 1997, Jay and Lorrie organized Parker House Properties, L.L.C.

(Parker House), as a limited liability company to hold property. Jay and 

Lorrie each own fifty percent of Parker House. That entity owns various 

investment properties, including the building that houses Jay’s dental 

practice. Parker House also owns apartment buildings, land in 

Mason City, a house in Cedar Rapids where Jay’s mother lives, and land 

in Floyd County, Iowa, with a farmhouse at 1545 Foothill Avenue.

The Lalas purchased the Foothill Avenue property for investment 

purposes. The farmhouse is furnished, but no one lives there. Jay hosts

occasional business and public service events there. The Lalas also use

the house and farmland for recreation, including hunting, fishing, target 

shooting, riding all-terrain vehicles (ATV) and dirt bikes, running their 

dogs, and swimming.

A. The Accidental Shooting. On April 22, 2012, Nick, his friend, 

seventeen-year-old Hunter True, and Nick’s girlfriend, Hayley, went to 

the Foothill Avenue property to ride dirt bikes and ATVs. Jay had also 

been at the property that day. Jay left shortly before the teenagers 

departed. Before leaving, Jay told Nick to lock up the house.

While Nick was locking up, he noticed that one of the Lalas’ 

firearms, a .22 caliber Ithaca lever action rifle, had been left on a bed in 

one of the bedrooms. Jay had purchased the rifle when he was about ten 

years old and kept it at the farm for hunting and target shooting. The 

rifle had been left on the bed after Sam and Nick last used it in January 

or February.

Jay expected Nick to secure each firearm in a soft gun case in one 

of the bedrooms after ensuring it was unloaded. When Nick was about 

twelve years old, he took a hunter safety class in which he learned how 

to store firearms properly. Jay had also talked to Nick about how to 
4

handle firearms safely and to treat every gun as if it was loaded. 

Nevertheless, on this April day, Nick picked up the rifle and the weapon

accidentally discharged. The bullet struck Hunter in the abdomen. 

Hunter was taken by ambulance to the hospital in Mason City, where he 

died from the gunshot wound.

B. The Insurance Policies. The Lalas had a personal insurance 

policy through Metropolitan Property and Casualty Insurance Company 

(Metropolitan) that covered Jay and Lorrie, as well as Nick and Sam. 

This policy provided liability defense and indemnity coverage. The 

Metropolitan policy specifically insured the Lalas’ primary home, 

personal vehicles, and the Foothill Avenue property.

Parker House separately purchased a “Tailored Protection”

insurance policy from Auto-Owners Mutual Insurance Company (AutoOwners). The policy included CGL coverage with a $1,000,000 each 

occurrence liability limit.

In September 2006, the CGL policy was amended with an 

endorsement insuring the 116.78 acres of farmland in Floyd County. 

After Parker House purchased the Foothill Avenue home, Jay’s insurance 

agent inspected the farm and then added the property to the AutoOwners’ policy. The CGL policy described the unoccupied farmhouse as 

a “Storage Building” and the remaining property as “Vacant Land (forprofit).”

“Insureds” under the Auto-Owners’ CGL policy are described as 

follows:

SECTION II—WHO IS AN INSURED . . . .

1. If you are designated in the Declarations as:

. . . . 

c. A limited liability company, you are an insured. Your 

members are also insureds, but only with respect to the 
5

conduct of your business. Your managers are insureds, but 

only with respect to their duties as your managers. 

. . . .

2. Each of the following is also an insured:

a. Your “employees”, other than either your “executive 

officers” (if you are an organization other than a partnership, 

joint venture or limited liability company) or your managers 

(if you are a limited liability company), but only for acts 

within the scope of their employment by you or while 

performing duties related to the conduct of your business, or 

your “volunteer workers” only while performing duties 

related to the conduct of your business. . . .

C. The Insurance Settlement and Litigation. In January 2014, 

Metropolitan reached a settlement with Michael and Hillary Carpenter, 

Hunter’s parents, whereby Metropolitan agreed to pay $900,000 in 

exchange for a release of all claims and potential claims against the 

Lalas, Parker House, Metropolitan, and Auto-Owners.

Jay and Parker House also made a coverage claim with AutoOwners. Auto-Owners denied coverage, stating that its policy only 

covered individuals with respect to the “conduct of a business,” and any 

claims resulting from Hunter’s death were not business-related. AutoOwners also stated that the policy only covered Parker House, not the 

Lalas personally.

In June 2014, Metropolitan filed this civil action seeking 

subrogation from Auto-Owners. Metropolitan later amended its petition 

to include Parker House as a defendant and to allege indemnity and 

contribution claims. Auto-Owners denied liability, asserting that its 

policy only provided business coverage. Auto-Owners’ pleadings also 

disputed Metropolitan’s right to recover contribution, subrogation, or

indemnity. Auto-Owners amended its answer multiple times to add 

additional affirmative defenses. At the time of trial, Auto-Owners had 

asserted ten affirmative defenses. 
6

Auto-Owners filed a motion for summary judgment, arguing its 

policy did not cover the shooting because it was unrelated to Parker 

House’s business. Auto-Owners later filed two motions for partial 

summary judgment, one seeking to prevent Metropolitan from asserting 

a contribution claim and the other seeking a ruling that comparative 

fault principles apply to the subrogation claim. The district court denied 

the motions. Auto-Owners filed an application for interlocutory appeal, 

which we denied. 

On November 23, 2016, Parker House filed a motion for summary 

judgment on Metropolitan’s indemnity and contribution claims. AutoOwners renewed its motion for summary judgment and motions for 

partial summary judgment.

On February 21, 2017, Parker House filed an offer to confess 

judgment in the amount of $450,000, to assign its rights against AutoOwners to Metropolitan, and to pay $1000 of the judgment in exchange 

for Metropolitan agreeing not to execute on the offer to confess judgment. 

On February 24, Metropolitan accepted the offer. Three days later, 

Metropolitan acknowledged it had received the $1000 payment.

On March 7, the district court granted Auto-Owners’ second 

motion for partial summary judgment, finding that comparative fault 

would be considered at trial. The court denied Auto-Owners’ other 

motions. The case proceeded to a bench trial.

Auto-Owners filed pretrial motions in limine to exclude expert 

testimony of attorneys Craig Stanovich and Marsha Ternus, a former 

chief justice of this court. Auto-Owners argued Stanovich’s opinion on 

contract interpretation was inadmissible because that issue was for the 

court. Auto-Owners argued Ternus’s testimony was inadmissible 

because she failed to offer a factual opinion as to the reasonableness of 
7

the settlement between Metropolitan and Parker House. The court 

denied both motions.

At trial, Auto-Owners introduced expert testimony from Max Kirk 

and David Riley, two lawyers with decades of jury trial experience. These 

experts testified that the Metropolitan settlement was unreasonable 

because, if the case of Hunter’s estate had been tried to a jury, most of 

the fault probably would have been allocated to Nick, with Jay 

secondarily liable as the gun owner. Neither believed a jury would 

apportion fault to Parker House on a premises liability theory.

Metropolitan introduced the testimony of Ternus and Ron Pogge, 

another experienced attorney. Pogge testified that he believed a jury 

would have apportioned a significant amount of fault to Parker House 

under a premises liability theory. Pogge believed a jury would determine 

Nick and Jay were agents of Parker House. Ternus testified that the gun 

on the bed created a dangerous condition in the home and Parker House 

faced substantial exposure under a premises liability theory. Ternus 

agreed that Nick could be considered an agent of Parker House.

After a bench trial, the district court entered judgment against 

Auto-Owners and in favor of Metropolitan for $450,000. The district 

court found that Parker House was insured under the Auto-Owners’ 

policies because its ownership of the farm was for investment purposes, 

which the court concluded was a business purpose. The court found 

that a jury could determine that Nick was also covered under the AutoOwners’ policies as either an employee or volunteer worker when he was

securing the rifle and locking the house. The court also determined that 

a jury could conclude Parker House was liable under a premises liability 

theory. The court found that the settlement between Metropolitan and 

Parker House was reasonable and Metropolitan was entitled to 
8

contribution from Auto-Owners. The court rejected Auto-Owners’ 

affirmative defenses.

Auto-Owners filed a motion to amend or enlarge the district court’s 

ruling, requesting the court grant a $1000 credit for the amount 

Metropolitan had already received through its settlement with 

Parker House. Auto-Owners also asked for specific written rulings on its 

motions in limine regarding the testimony of Stanovich and Ternus. The 

court denied the motion to amend or enlarge.

Auto-Owners appealed, and we retained its appeal.

II. Standard of Review. 

We are reviewing a judgment entered after a bench trial. The 

parties agree that our standard of review is for correction of errors at law. 

Chrysler Fin. Co. v. Bergstrom, 703 N.W.2d 415, 418 (Iowa 2005). “We 

review a district court’s interpretation of an insurance policy for 

correction of errors at law.” Walnut Creek Townhome Ass’n v. Depositors 

Ins., 913 N.W.2d 80, 87 (Iowa 2018). The district court’s factual findings 

have the effect of a special verdict and are binding on us if supported by 

substantial evidence. Id.

Auto-Owners seeks review of the district court’s denial of its 

motion for summary judgment. “The denial of a motion for summary 

judgment is no longer appealable once the matter proceeds to a trial on 

the merits.” Lindsay v. Cottingham & Butler Ins. Servs., Inc., 763 N.W.2d 

568, 572 (Iowa 2009). Regardless, the issue raised in Auto-Owners’

motion for summary judgment—whether the Auto-Owners policy

provided liability coverage for the accidental shooting at a Parker House

property—was adjudicated at trial. For that reason, our review is for 

correction of errors at law. See Walnut Creek Townhome Ass’n, 913 

N.W.2d at 87.
9

We review rulings on the admissibility of expert testimony during a 

bench trial for an abuse of discretion. Heinz v. Heinz, 653 N.W.2d 334, 

341 (Iowa 2002).

III. Analysis.

We are reviewing Auto-Owners’ challenges to the judgment 

imposing liability for half of the settlement of the tort claims arising out 

of Nick Lala’s accidental, fatal shooting of Hunter True. Auto-Owners 

denied coverage and refused to provide a defense to Parker House on the 

tort claims ultimately settled by Metropolitan. The district court ruled 

that Auto-Owners is bound by that settlement because (1) a jury could 

conclude the claim was covered by its CGL policy and (2) the settlement 

was “reasonable and prudent.” Red Giant Oil Co. v. Lawlor, 528 N.W.2d 

524, 535 (Iowa 1995). We address each issue in turn. 

A. Whether the Liability Claims Arising Out of the Accidental 

Shooting Were Covered by the Auto-Owners’ CGL Policy. AutoOwners argues that Parker House’s claim was not covered under its CGL 

policy for two reasons: (1) Nick was not acting on behalf of Parker House

and was therefore not an insured under Auto-Owners’ policy at the time 

of the accident, and (2) Parker House itself lacked potential liability

under a premises liability theory. We begin our analysis with the policy 

language.

“Construction of an insurance policy and the interpretation of its 

language are matters of law for the court to decide, when as here, neither 

party offers extrinsic evidence about the meaning of the policy’s 

language.” Am. Family Mut. Ins. v. Corrigan, 697 N.W.2d 108, 111 (Iowa 

2005) (quoting Grinnell Mut. Reins. v. Emp’rs Mut. Cas. Co., 494 N.W.2d 

690, 692 (Iowa 1993)). Our principles governing the interpretation and 

construction of insurance policies are well established.
10

The cardinal principle in the construction and interpretation 

of insurance policies is that the intent of the parties at the 

time the policy was sold must control. Except in cases of 

ambiguity, the intent of the parties is determined by the 

language of the policy. “An ambiguity exists if, after the 

application of pertinent rules of interpretation to the policy, a 

genuine uncertainty results as to which one of two or more 

meanings is the proper one.” 

Id. (quoting LeMars Mut. Ins. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998)). 

“Because insurance policies are contracts of adhesion, an insurer 

assumes a duty to define in clear and explicit terms any limitations or 

exclusions to the scope of coverage a policy affords.” Nat’l Sur. Corp. v. 

Westlake Invs., LLC, 880 N.W.2d 724, 734 (Iowa 2016). “Nevertheless, 

where no ambiguity exists, we will not write a new policy to impose 

liability on the insurer.” Id. 

It is undisputed that Parker House is the named insured under the 

policy and the farmhouse is an insured location. The Auto-Owners 

policy has language we italicize below that limits liability coverage for 

individual members, employees and volunteer workers of a limited 

liability company to their business conduct, but the policy has no such 

limitation for Parker House as an entity. 

SECTION II—WHO IS AN INSURED . . . . 

1. If you are designated in the Declarations as:

. . . . 

c. A limited liability company, you are an insured. 

Your members are also insureds, but only with respect 

to the conduct of your business. Your managers are 

insureds, but only with respect to their duties as your 

managers. 

. . . . 

2. Each of the following is also an insured:

a. Your “employees”, other than either your “executive 

officers” (if you are an organization other than a 

partnership, joint venture or limited liability company) 

or your managers (if you are a limited liability 

company), but only for acts within the scope of their 
11

employment by you or while performing duties related 

to the conduct of your business, or your “volunteer 

workers” only while performing duties related to the 

conduct of your business. However, none of these 

“employees” or “volunteer workers” are insureds for 

“bodily injury”, “personal injury” or “advertising injury”

(1) To you, to your partners or members (if you are a 

partnership or joint venture), to your members (if you 

are a limited liability company), to a co-“employee” 

while in the course of his or her employment or 

performing duties related to the conduct of your 

business, or to your other “volunteer workers” while 

performing duties related to the conduct of your 

business;

(2) To the spouse, child, parent, brother or sister of 

that co-“employee” or “volunteer worker” as a 

consequence.

(Emphasis added.) 

We agree with the district court’s interpretation that Nick is 

covered under the Auto-Owners policy only if he was acting for Parker 

House, while the limited liability company itself is covered for premises 

liability. Auto-Owners argues Nick was engaged in his own personal 

recreation and not engaged in business conduct for Parker House when 

he accidentally shot Hunter. The CGL insurer further argues Parker 

House lacked exposure under a premises liability theory.

Auto-Owners relies on unpublished cases from other jurisdictions. 

See, e.g., Transcon. Ins. v. Edwards, Civil No. 96-5099, 1996 WL 814532, 

at *7 (W.D. Ark. Dec. 23, 1996) (holding that an insured’s actions of 

assault and kidnapping did not fall within the conduct of the insured’s 

business); Farm Bureau Gen. Ins. Co. of Mich. v. Estate of Stormzand, No. 

325326, 2016 WL 1688883, at *2–3 (Mich. Ct. App. Apr. 26, 2016)

(per curiam) (holding that an insurance company had no duty to 

indemnify a business owner who loaned his son the company’s off-road 

vehicle for a recreational event, at which the son’s friend sustained 

serious injury, because the loan was not business conduct covered under 
12

the insurance policy); Simonsen v. Lumber Co. Brew Pub & Eatery, LLC, 

No. 2012AP594, 2013 WL 500395, at *3 (Wis. Ct. App. Feb. 12, 2013) 

(per curiam) (holding a bar was not liable for an off-duty bartender’s 

assault of another bartender at the bar). The closest case cited by AutoOwners is Sebastiano v. Bishop, No. OT-97-003, 1997 WL 587138, at *3–

4 (Ohio Ct. App. Sept. 19, 1997) (holding that a general liability policy did 

not cover a construction company owner’s son’s accidental shooting of a 

friend with a gun kept in a company truck). These cases are not 

controlling. Under our standard of review, we must focus on the trial 

record. 

1. Whether Nick was engaged in business conduct for

Parker House. The district court found that Parker House had 

purchased the Foothill Avenue property as an investment, a business 

purpose. The district court found that Nick was acting for Parker House 

or its manager, Jay, when he was told to secure the farmhouse when the 

accidental shooting occurred. Whether an agency relationship exists 

under these circumstances is a question of fact. See Peak v. Adams, 799 

N.W.2d 535, 546 (Iowa 2011) (“Agency is generally a question of fact.”). 

“Agency . . . results from (1) manifestation of consent by one person, the 

principal, that another, the agent, shall act on the former’s behalf and 

subject to the former’s control[,] and[] (2) consent by the latter to so act.” 

Id. at 546 n.2 (alteration in original) (quoting Pillsbury Co. v. Ward, 250 

N.W.2d 35, 38 (Iowa 1977)).

We must determine whether substantial evidence supports the 

district court’s findings. Parker House, as an LLC, can only act through 

its members, managers, employees, and agents. Nick was asked by Jay, 

the LLC’s manager, to secure the house. Securing the property is a 

business purpose—to protect the unoccupied farmhouse against vandals 
13

and burglars. Securing the property is more than just locking the 

outside doors but also includes unloading and properly storing firearms.

That business purpose is not defeated by the fact the farmhouse was 

also used for recreation. Nick can wear two hats, and his acts at the 

farmhouse may be undertaken for both business and personal reasons. 

We determine that substantial evidence supports the district court’s 

finding that Nick was engaged in conduct for the business of 

Parker House at the time he accidentally shot Hunter.

2. Whether Parker House had premises liability exposure. 

Parker House is the named insured under the Auto-Owners policy, which

provides premises liability coverage. Jay made a coverage claim on 

behalf of Parker House. Auto-Owners denied coverage on grounds the 

accidental shooting was unrelated to the business activities of the limited 

liability company. Importantly, the CGL policy language quoted above 

provides coverage to the limited liability company (Parker House) as the 

named insured without language limiting coverage to acts taken “in the 

conduct of [its] business.” That coverage limitation expressly applies to 

the LLC’s members individually or its employees individually, not the 

entity itself. We agree with the district court’s interpretation that the 

Auto-Owners policy covers a premises liability claim against the LLC 

without regard to whether the accidental injury on the insured property 

occurred during business activities.

The fighting issue is whether Parker House faced potential 

exposure under a premises liability theory for this accidental shooting at 

the insured farmhouse. We use a general negligence standard to 

evaluate a possessor of land’s premises liability to licensees and invitees. 

Ludman v. Davenport Assumption High Sch., 895 N.W.2d 902, 909 (Iowa 

2017). We use the following multifactor approach:
14

We impose upon owners and occupiers only the duty to 

exercise reasonable care in the maintenance of their 

premises for the protection of lawful visitors. Among the 

factors to be considered in evaluating whether a landowner 

or occupier has exercised reasonable care for the protection 

of lawful visitors will be: (1) the foreseeability or possibility of 

harm; (2) the purpose for which the entrant entered the 

premises; (3) the time, manner, and circumstances under 

which the entrant entered the premises; (4) the use to which 

the premises are put or are expected to be put; (5) the 

reasonableness of the inspection, repair, or warning; (6) the 

opportunity and ease of repair or correction or giving of the 

warning; and (7) the burden on the land occupier and/or 

community in terms of inconvenience or cost in providing 

adequate protection. 

Id. at 910 (quoting Koenig v. Koenig, 766 N.W.2d 635, 645–46 (Iowa 

2009)).

The Restatement (Third) of Torts: Liability for Physical and 

Emotional Harm has adopted the same approach for evaluating premises 

liability claims. § 51, at 242 (Am. Law Inst. 2012) [hereinafter 

Restatement (Third)]. The duty of a possessor of land is as follows:

Subject to § 52, a land possessor owes a duty of 

reasonable care to entrants on the land with regard to:

(a) conduct by the land possessor that creates risks to 

entrants on the land;

(b) artificial conditions on the land that pose risks to 

entrants on the land;

(c) natural conditions on the land that pose risks to 

entrants on the land; and 

(d) other risks to entrants on the land when any of the 

affirmative duties provided in Chapter 7 is applicable. 

Ludman, 895 N.W.2d at 910 (quoting Restatement (Third) § 51, at 242); 

see also Restatement (Third) § 51, cmt. i, at 248 (adopting the same 

multifactor approach as Koenig).

The bench trial included a battle of experts. The district court 

heard testimony from four attorneys: Marsha Ternus and Ron Pogge for 

Metropolitan, and Max Kirk and David Riley for Auto-Owners.
15

In Ternus’s opinion, Parker House would have been liable for its 

own negligence and vicariously liable for Nick’s negligence. In her view, 

the loaded gun was a dangerous condition on the land that Parker House 

could have warned entrants about or unloaded and securely stored the 

weapon. Parker House, if it were exercising reasonable care, would 

inspect the house periodically and determine if any unsafe conditions 

existed. If there were any unsafe conditions, a property owner exercising 

reasonable care would take steps to ameliorate the dangerous condition. 

In her expert report, Ternus concluded, “Here, the shooting would not 

have occurred absent Parker House’s failure to inspect the premises and 

remove the cocked and loaded gun.” According to Ternus, “That failure 

was one in a chain of events culminating in Hunter’s death.” 

Parker House’s negligence was a factual cause of Hunter’s death, 

“notwithstanding the subsequent negligence of Nick in mishandling the 

loaded gun.” Regardless, in Ternus’s opinion, Nick was acting as an 

agent of Parker House when the shooting occurred “so as to give rise to 

vicarious liability for his actions on the part of Parker House.” Ternus 

concluded,

I understand that Auto-Owners contends Nick was not 

acting within the scope of his agency when he picked up the 

loaded gun and accidentally shot Hunter. Again, I disagree 

with this conclusion. Common sense would indicate that 

“locking up” the house included more than simply locking 

the door. No doubt Nick shut off the lights when he left the 

premises. No doubt it would be expected that he would 

remedy any other condition he saw that might present a 

danger. For example, if someone had left the water running 

when the boys were there in January or February, one would 

infer from the circumstances and common sense that Nick 

would be expected to shut off the water. A jury would likely 

also reasonably infer that if Nick observed a gun that had 

not been properly stored, he would be expected to secure the 

gun as part of his securing of the house. This action was a 

benefit to Parker House because it removed a weapon that 

vandals and other transients might use to shoot up the 
16

house (or another person in the process), and it removed a 

condition that might pose a danger to lawful entrants onto 

the property who would be unaware, as was Nick, that the 

gun was loaded and cocked. Moreover, as the district court 

stated in its ruling on Auto-Owners’ motion for summary 

judgment, “[t]he storage and use of guns on this particular 

property is not outside the conduct of the business of 

holding such property for future sale as recreational 

property.”

Ron Pogge also testified on behalf of Metropolitan. In Pogge’s 

opinion, Parker House could have been held liable under a premises 

liability theory and a jury could determine that Nick was acting as an 

agent of Parker House at the time of the shooting. Even a cursory 

inspection of the property would have revealed the dangerous condition. 

In his report, Pogge concluded that “the fact finder would apportion a 

significant portion of the fault for this occurrence upon Parker House.” 

Pogge believed that it was reasonable to settle the claim to avoid potential 

liability and that $450,000 was a reasonable settlement amount.

Max Kirk testified on behalf of Auto-Owners. In his opinion, the 

settlement was not reasonable because Nick Lala’s “fault would come 

very close to being the sole cause of the injuries sustained by Hunter 

True.” Kirk believed that a jury would not have found Parker House 

liable. Kirk concluded in his expert report that “a reasonable and 

prudent person in the position of Parker House would not pay anything 

beyond nominal damages to settle the claims of [Metropolitan].” Kirk 

believed a premises liability theory would fail because all Nick was 

required to do when locking up the house was secure the doors. Locking 

up the house would not have required handling the gun. Kirk testified 

that a reasonable settlement amount would have been the anticipated 

defense costs of $50,000–$75,000. Kirk believed Nick would have ninety 

percent of the fault and Jay would have ten percent, and Parker House 

would have received a directed verdict or defense verdict. 
17

David Riley also testified on behalf of Auto-Owners. In his view, 

Parker House was not liable and would have received a directed verdict,

or any assessment of fault would be negligible. Riley believed there was 

no agency relationship between Nick and Parker House, there was no 

business purpose for Nick’s visit to the house that day, and any duty to 

maintain the weapon was an obligation personal to Jay. Riley 

differentiated between Jay’s obligation to maintain the gun and 

Parker House’s duty to maintain the property. In his report, Riley 

concluded,

In my opinion, had the case been tried to a jury, the jury 

would have put 75% to 100% of the fault on Nick Lala, and 

the remainder of the fault, if any, on Jay Lala, individually. 

No fault would have been assessed to Parker House 

Properties, LLC.

Riley believed this case could have been a negligent entrustment of 

a chattel case, but even under that theory Parker House would not be 

liable. Riley believed there was a defense cost for Parker House of about 

$45,000–$50,000.

The district court was the trier of fact. The court could find the 

testimony of Metropolitan’s experts more credible than Auto-Owners’

experts. The district court made these findings:

Parker House faced exposure under the standard [for 

premises liability]. Hunter True was at the Farm at the 

invitation of Nick and with the consent of Jay and Lorrie, the 

only two members of Parker House. Hunter went into the 

house with Nick to lock up. The loaded rifle created a risk of 

harm that was foreseeable—Jay had talked to the boys about 

the need to unload and store away guns after using them. 

The boys had taken hunter safety courses and been around 

guns for years. They understood the risk of harm. There 

was no real burden to unloading and securing the rifle after 

using it, it is just a matter of taking a little time to do so. As 

Nick testified in his deposition when asked why a loaded 

weapon might have been left on the bed, he speculated that 

either Sam or he had just been lazy. The dangerous 

condition was easily correctable. Under these facts, the 
18

issue of reasonable care would clearly create a jury question 

and serve as grounds for a verdict against Parker House. 

We determine that substantial evidence in the record supports the 

district court’s factual finding that Parker House was potentially liable for 

Hunter’s death under a premises liability theory. The dangerous 

condition, the loaded rifle left on the bed, had been there several months. 

Nick left the loaded rifle on the bed in January or February. His job 

then, and on April 22, the day of the accident, was to secure the 

property. Nick’s knowledge of the dangerous condition is imputed to 

Parker House. Moreover, any reasonable inspection of the property 

during those months would have discovered the loaded firearm. Given 

the potential premises liability, Auto-Owners provided liability coverage 

for this accidental shooting on its insured’s business property.

B. Whether the Settlement Was Reasonable. To determine 

whether a settlement is reasonable, we consider “what a reasonably 

prudent person in the position of the defendant would have settled for on 

the merits of the plaintiff’s claim.” Red Giant Oil Co., 528 N.W.2d at 535. 

The court considers “facts bearing on the liability and damage aspects of 

plaintiff’s claim, as well as the risks of going to trial.” Id. (quoting Miller 

v. Shugart, 316 N.W.2d 729, 735 (Minn. 1982)). The insured need not 

establish actual liability to the party with whom it has settled. Instead, 

the insured need only show a potential liability, as supported by the 

evidence that culminated in a settlement that is reasonable in view of the 

size of the possible recovery and likelihood that liability would be 

established. Id.

The United States District Court for the Northern District of Iowa 

discussed factors for determining the reasonableness of a settlement:

The ultimate issue to be decided is the reasonableness of a 

settlement which avoids a trial. Reasonableness, therefore, 
19

is not determined by conducting the very trial obviated by 

the settlement. Consequently, the decisionmaker receives 

not only the customary evidence on liability and damages 

but also other evidence, such as expert opinion of trial 

lawyers evaluating the “customary” evidence. This “other 

evidence” may include verdicts in comparable cases, the 

likelihood of favorable or unfavorable rulings on legal 

defenses and evidence issues if the tort action had been 

tried, and other factors of forensic significance. The 

evaluation of this kind of proof is best understood and 

weighed by a trial judge. 

Gen. Cas. Ins. Co. of Wis. v. Penn-Co Constr., Inc., No. C03-2031-MWB, 

2005 WL 503927, at *45 (N.D. Iowa Mar. 2, 2005) (quoting Alton M. 

Johnson Co. v. M.A.I. Co., 463 N.W.2d 277, 279 (Minn. 1990)).

Auto-Owners argues that Ternus’s testimony should not have been 

admitted because it could not have assisted the trier of fact in

understanding the evidence or determining a fact in issue. Ternus’s

opinion related to whether a jury would assess liability to Parker House 

for Hunter’s death. We give district courts wide latitude in receiving 

expert testimony during a bench trial. Heinz, 653 N.W.2d at 341. The 

district court did not abuse its discretion in allowing this expert 

testimony.

The district court found that the expert opinions “support[]

Metropolitan’s theory that Parker House’s settlement was reasonable and 

prudent to avoid the risk of a worse outcome.” The district court 

considered Parker House’s exposure to damages. The district court, 

applying Red Giant Oil Co., concluded that Metropolitan’s settlement was 

reasonable, stating,

There is no question that the estate of Hunter True 

would be able to show liability for his death. Neither party to 

this case believes that he had any fault. Neither party to this 

case disputed that the $900,000 settlement for his death 

was reasonable as damages. However, the question of 

assignment of fault between Parker House and the individual 

actors is not readily determinable. It is extremely difficult to 

find whether a jury would have held Parker House wholly 
20

accountable under a premises liability theory, the individual 

actors wholly accountable under a negligence theory, or split 

accountability between or among them. Parker House’s 

settlement took the guesswork from the case and avoided a 

worse outcome. Under the unusual circumstances 

presented in this case, that settlement was reasonable and 

prudent. 

We conclude the district court correctly applied the law, and its 

factual findings on the reasonableness of this settlement are supported 

by substantial evidence. This $900,000 settlement with disputed liability

is a reasonable amount for the accidental death of a healthy seventeenyear-old.

Accordingly, we affirm the district court’s judgment that AutoOwners as a coinsurer of the farmhouse property is obligated to 

indemnify Metropolitan for half of the $900,000 settlement. See Red 

Giant Oil Co., 528 N.W.2d at 535.

IV. Disposition.

For these reasons, we affirm the district court judgment.

AFFIRMED. 

All justices concur except McDonald, J., who takes no part.