Opinion ID: 1816290
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Heading: Is our direct action statute exclusive?

Text: The pertinent parts of the statute are §§ 516.1 and 516.3, Code, 1966: All policies insuring the legal liability of the insured, issued in this state by any company, association or reciprocal exchange shall, notwithstanding any other provision of the statutes, contain a provision providing that, in event an execution on a judgment against the insured be returned unsatisfied in an action by a person who is injured or whose property is damaged, the judgment creditor shall have a right of action against the insurer to the same extent that such insured could have enforced his claim against such insurer had such insured paid such judgment. Said action may be brought against said insurer within one hundred eighty days from the entry of judgment in case no appeal is taken, and, in case of appeal, within one hundred eighty days after the judgment is affirmed on appeal, anything in the policy or statutes to the contrary notwithstanding. Strictly, a direct action statute allows the third party to sue the insured and insurer together at the outset or even to sue the insurer alone. Vance, Insurance, § 178 (3rd ed.); Note, 15 Iowa L.Rev. 73; Note, 74 Harv.L.Rev. 357. The Iowa version of direct action statute (sometimes called an inurement statute) requires the third party first to obtain judgment against the insured and hold an unsatisfied execution after levy. If the third party's action against the insurer is under the Iowa direct action statute, it must indeed be brought within 180 days. Pries v. M. F. A. Mut. Ins. Co., 255 Iowa 442, 122 N.W. 2d 925. Since the present action was not brought under the direct action statute, the question is whether that statute preempted the field so that an action under the statute is plaintiff's only remedy. What was the reason for enactment of our direct action statute? It was not enacted to cut down the rights of third persons. Neither was it enacted because third persons were without a remedy in the liability insurance situation, for they could reach the insurer by use of the procedural tools already enumerated. Rather, it was enacted to provide relief to the third person in the indemnity insurance situation. There, if the insured could not pay the third person, the insured could not recover from the insurer, and so the hapless third person could not recover either. Vance, Insurance, § 178 (3rd ed.). Our legislature enacted the direct action statute in present form in 1935. 46 G.A. ch. 97, §§ 1-3. Nothing in the act indicates that the third party's traditional remedies under liability policies are abrogated. Had the General Assembly intended the direct action to supplant existing remedies, likely it would have said so. Section 1 of the act merely requires insurers to incorporate a direct action clause in their policies; but a provision requiring a direct action clause is not a provision nullifying other remedies. Section 3 contains the limitation of 180 days. But this section does not say the direct action is the only remedy the third party has, nor does it say the direct action must or shall be brought. It says a direct action may be brought. As stated in Pries v. M. F. A. Mut. Ins. Co., 255 Iowa 442, 444, 122 N. W.2d 925, 927, The word `may' as used in this section gives the judgment creditor permission to bring the action, if he desires. Use of the word `must' in place of `may' in this particular statute would make it mandatory to bring the action. The closing words of § 3 provide that the limitation of 180 days applies, anything in the policy or statutes to the contrary notwithstanding. But the quoted words have to do with the direct action brought under the statute, not to actions not brought under the statute. Actions brought under the direct action statute may be brought within 180 days despite any provisions of the policy or statutesthe period of 180 days for the direct action is not to be cut down by any such provision. Authorities who have considered the problem have concluded that direct action statutes do not supplant existing remedies of third parties against insurers. The court stated in Pogline v. Central Mut. Ins. Co., 280 Ill.App. 5, 8: We do not believe it was the intention of the legislature or of appellant or the insured in this policy to restrict the owner of the judgment in the pursuit of any remedies that might be open to him, nor is there any reason suggested why the word `may' as used in the statute and in the policy should be construed to mean `shall.' To same effect, see Bartkowski for Use of Block v. Commercial Cas. Ins. Co., 275 Ill.App. 497. After holding the Missouri direct action statute to be only cumulative, the court said, regarding the preexisting statutory remedies, in Lajoie v. Central West Cas. Co., 228 Mo.App. 701, 710, 71 S.W.2d 803, 809: The right given by our statutes to enforce the payment of a judgment by reaching and applying to the satisfaction thereof, through execution and garnishment, any indebtedness found to be due the judgment defendant in the hands of third parties has existed for many years.    See also State ex rel. Anderson v. Dinwiddie, 359 Mo. 980, 984, 224 S.W.2d 985, 987 (But it is held in several cases that the remedy is cumulative, and that recovery may also be had by garnishment of the insurer under the judgment against the insured.); People ex rel. Palmer v. Ft. Dearborn Ins. Co., 307 Ill. App. 194, 30 N.E.2d 139 (applying Missouri law). This court itself, in applying Missouri law, had this to say in Eggermont v. Central Surety & Ins. Corp., 236 Iowa 197, 200, 17 N.W.2d 840, 841-842: The nature of the remedy provided by section 6010 [the Missouri direct action statute] is essentially that of a creditor's bill or equitable garnishment.    The remedy provided by section 6010 is not exclusive. See similar holdings in Pennsylvania Cas. Co. v. Phoenix, 139 F.2d 823 (10th Cir.); Poole v. Travelers Ins. Co., 130 Fla. 806, 179 So. 138. See also Morehouse v. Employers' Liability Assurance Corp., 119 Conn. 416, 177 A. 568; Ferguson v. Manufacturers' Cas. Ins. Co., 129 Pa.Super. 276, 195 A. 661. The commentators hold the same view. This is said in 22 Appleman, Insurance Law & Practice, § 14565 at 608 (1947): After recovering a judgment against one insured under a liability policy, an injured third person may collect such judgment by instituting garnishment proceedings against the liability insurer. The amount of the policy to the extent of liability incurred by the insured is deemed to be an asset of the insured. Nor is this result altered by the enactment of statutes giving such person a direct cause of action against the insurer where such a judgment is unpaid.  (Italics added.) And this is stated in 2 Long, Law of Liability Insurance, § 20.05 at 20-17 (1970): Aside from direct action on the policy, the remedies available to a judgment creditor will be found in the code of civil procedure adopted by the particular state where collection of the judgment is sought. See also 38 C.J.S. Garnishment § 110 at 319 (The fact that the policy expressly authorizes the creditor to sue insurer, or that the creditor has other remedies, such as a creditor's bill, does not preclude garnishment.). We conclude that our direct action law is not the exclusive remedy of a third person. We do not say that plaintiff is entitled to recover from defendants. Plaintiff occupies Proehl's shoes. Whether defendants have defenses against Proehl is not before us. All we now hold is that plaintiff's amended petition is good against the motions to dismiss. Reversed.