Opinion ID: 1855218
Heading Depth: 1
Heading Rank: 4

Heading: Simpson's Compliance With Policy Conditions.

Text: Simpson also argues he is entitled to coverage and summary judgment because he substantially complied with all of USF & G's relevant policy conditions. In the alternative, he argues that any failure to comply was excused or waived by the insurer or was not prejudicial to the insurer. We disagree. USF & G's policy stated the following business auto conditions: 2. Duties In The Event Of Accident, Claim, Suit Or Loss .... a. In the event of accident, claim, suit, or loss, you must give us or our authorized representative prompt notice of the accident or loss. .... b. Additionally, you and any other involved insured must: .... (3) Cooperate with us in the investigation, settlement or defense of the claim or suit. .... 3. Legal Action Against Us No one may bring a legal action against us under this Coverage Form until: a. There has been full compliance with all the terms of this Coverage Form.... In its ruling, the district court stated that even if Simpson was an insured under the USF & G policy, he would be denied coverage for failing to comply with all the conditions precedent to bringing suit. The court concluded that Simpson's unilateral acts entitled USF & G to a summary judgment as a matter of law. Whenever policy provisions are conditions precedent to coverage under an insurance contract, an insured must show substantial compliance with such conditions. Fireman's Fund Ins. Co. v. ACC Chem. Co., 538 N.W.2d 259, 264 (Iowa 1995); Met-Coil Sys. Corp. v. Columbia Cas. Co., 524 N.W.2d 650, 654 (Iowa 1994). If an insured cannot prove substantial compliance, he or she must show that (1) failure to comply was excused, (2) the requirements of the condition were waived, or (3) failure to comply was not prejudicial to the insurer. Id. If an insured fails to prove substantial compliance, excuse, or waiver, prejudice to the insurer is presumed. Met-Coil Sys. Corp., 524 N.W.2d at 654. Although this presumption is rebuttable, it will defeat an insured's recovery unless it is overcome by a satisfactory showing of lack of prejudice. Id. The burden to show actual prejudice does not shift to the insurer until the insured has satisfactorily shown excuse or legal justification, such as reasonable mistake or trivial occurrence. Id. A. We conclude as a matter of law that Simpson failed to meet his burden of showing substantial compliance with the cooperation provision. The purpose of a cooperation clause is to protect insurers and prevent collusion. American Guarantee & Liab. Ins. Co. v. Chandler Mfg. Co., 467 N.W.2d 226, 229 (Iowa 1991). Clearly, Simpson did not cooperate with USF & G in the investigation, settlement or defense of the lawsuit. USF & G was not a party in Simpson's lawsuit against the Warrens, and it did not appear or intervene in the litigation. Further, USF & G did not receive notice of the Warrens' offer to confess judgment or Simpson's acceptance of the Warrens' $600,000 confession of judgment until after they were filed in district court. USF & G was never involved in any of the negotiations, and it never consented to any judgment or settlement. Simply stated, Simpson failed to cooperate with USF & G, in violation of the policy's explicit language. B. Simpson argues that his failure to include USF & G in the settlement discussions should be excused because his attorney was unaware, at the time of the offer and acceptance of the confession of judgment, that USF & G had an uninsured motorist policy that would cover him. An insured's mistaken belief or lack of knowledge regarding coverage may be a justifiable excuse for noncompliance with an insurance policy's provision. Met-Coil Sys. Corp., 524 N.W.2d at 657. However, mistaken belief or lack of knowledge regarding coverage does not rise to the level of a legal excuse for noncompliance with the ... conditions of an insurance policy unless the [insured] exercised due diligence. Id. To satisfy the due diligence requirement, the insured must not have been negligent and must have at least made a reasonable effort to discover the existence of coverage. Id. We conclude Simpson did not show he made a reasonable effort to determine the existence of coverage. At the time of the negotiations with the Warrens, Simpson knew that they were uninsured and that he would have difficulty collecting on any judgment. Despite this, however, apparently no inquiry was made as to what coverage Simpson had through his employer, Des Moines Waterworks. In Fireman's Fund, we held it is the responsibility of the insured, not the insurance company, to keep track of which carriers have provided him with liability insurance. Fireman's Fund Ins. Co., 538 N.W.2d at 265 (quoting Olin Corp. v. Insurance Co. of N. Am., 966 F.2d 718, 725 (2d Cir.1992)). As a matter of law, Simpson's noncompliance with the cooperation provision is not excused. C. Simpson also argues that USF & G waived the cooperation provision by denying his claim. This argument has no merit as a matter of law. Even if USF & G improperly denied Simpson's claim based on his status as an insured, there is no evidence in the record that USF & G waived the cooperation provision or any other policy provision. D. Finally, Simpson claims that USF & G was not prejudiced by his actions. As noted earlier, in order to rebut the presumption of prejudice to the insurer, the insured must show lack of prejudice by satisfactory evidence. Met-Coil Sys. Corp., 524 N.W.2d at 658. Even though the question of prejudice is usually for the jury, if the facts are undisputed and the only question concerns the breach of the policy, it may become a question of law for the court. Fireman's Fund Ins. Co., 538 N.W.2d at 265. It is not necessary that we conclude the insurer was prejudiced as a matter of law. Met-Coil Sys. Corp., 524 N.W.2d at 659. We need only conclude that the insured failed to show lack of prejudice as a matter of law. Id. Simpson has not presented satisfactory evidence to rebut the evidence of substantial prejudice to USF & G in this case. Here, USF & G had no opportunity to participate in, control, or monitor the litigation between Simpson and the Warrens. USF & G also had no opportunity to investigate the claim or assess its potential liability and damages. Without Simpson's cooperation, USF & G was not able to participate in the settlement discussions. Under these circumstances, we conclude the district court correctly granted USF & G's motion for summary judgment on this issue.