Opinion ID: 3154926
Heading Depth: 2
Heading Rank: 1

Heading: Governing Iowa Law

Text: [¶17] The parties agree that the Purchase Agreement and the CWIC insurance policies are to be interpreted applying Iowa law. 1 The Iowa Supreme Court has outlined its governing principles for interpreting a contract: The cardinal rule of contract interpretation is to determine what the intent of the parties was at the time they entered into the contract. Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001). “Words and other conduct are interpreted in the light of all the circumstances, and if the principal 1 Although Mr. Black’s accident occurred in Wyoming, the Purchase Agreement entered into between Keizer and Mr. Black specifies that the agreement will be interpreted according to the laws of Iowa/Nebraska. Additionally, Mr. Black is a resident of Iowa and his business is organized under the laws of Iowa, with its principal place of business located in Iowa, and CWIC is a corporation organized under the laws of Iowa, with its principal place of business located in Iowa. Keizer is a corporation organized under the laws of South Dakota, with its principal place of business located in South Dakota, but based on its address as shown on its CWIC policies, Keizer also appears to have some presence in Iowa. 6 purpose of the parties is ascertainable it is given great weight.” Fausel v. JRJ Enters., Inc., 603 N.W.2d 612, 618 (Iowa 1999) (quoting Restatement (Second) of Contracts § 202(1) (1979)). Another relevant rule of contract interpretation requires that “[w]herever reasonable, the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance, course of dealing, or usage of trade.” Restatement (Second) of Contracts § 202(5) (1979). These rules of interpretation are general in character and only serve as guides in the process of interpretation. Restatement (Second) of Contracts § 202 cmt. a (1979). The rules do not depend on a determination that there is an ambiguity, but we use them to determine “what meanings are reasonably possible as well as in choosing among possible meanings.” Fausel, 603 N.W.2d at 618 (quoting Restatement (Second) of Contracts § 202 cmt. a (1979)). Long ago we abandoned the rule that extrinsic evidence cannot change the plain meaning of a contract. Hamilton v. Wosepka, 261 Iowa 299, 313, 154 N.W.2d 164, 171–72 (1967). We now recognize the rule in the Restatement (Second) of Contracts that states the meaning of a contract “can almost never be plain except in a context.” Id.; Restatement (Second) of Contracts § 212 cmt. b (1979). Accordingly, “[a]ny determination of meaning or ambiguity should only be made in the light of relevant evidence of the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties. But after the transaction has been shown in all its length and breadth, the words of an integrated agreement remain the most important evidence of intention.” Fausel, 603 N.W.2d at 618 (quoting Restatement (Second) of Contracts § 212 cmt. b (1979)) (emphasis in original). 7 In other words, although we allow extrinsic evidence to aid in the process of interpretation, the words of the agreement are still the most important evidence of the party’s intentions at the time they entered into the contract. Pillsbury Co., Inc. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008) (emphasis added). [¶18] Regarding the interpretation of insurance policies in particular, the Iowa Supreme Court has explained: Our rules governing the construction and interpretation of insurance policies are well-settled. “The cardinal principle ... is that the intent of the parties at the time the policy was sold must control.” LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998). Except in cases of ambiguity, we determine “the intent of the parties by looking at what the policy itself says.” Boelman, 826 N.W.2d at 501. If a term is not defined in the policy, we give the words their ordinary meaning. Id. “We will not strain the words or phrases of the policy in order to find liability that the policy did not intend and the insured did not purchase.” Id. “[A] policy is ambiguous if the language is susceptible to two reasonable interpretations” when the contract is read as a whole. Id. “If the policy is ambiguous, we adopt the construction most favorable to the insured.” Id. at 502. “An insurance policy is not ambiguous, however, just because the parties disagree as to the meaning of its terms.” Id. Moreover, “‘[a]mbiguity is not present merely because the provision “could have been worded more clearly or precisely than it in fact was.”’” Am. Family Mut. Ins. Co. v. Corrigan, 697 N.W.2d 108, 114 (Iowa 2005) (quoting Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821, 824 (Iowa 1987)). “If an insurance policy and its exclusions are clear, the court ‘will not “write a new contract of insurance”’ for the parties.” Boelman, 826 N.W.2d at 502 (quoting Thomas v. Progressive Cas. Ins. Co., 749 N.W.2d 678, 682 (Iowa 2008)). We construe exclusions strictly against the insurer. Id. Nevertheless, “we must enforce unambiguous exclusions as written.” Bituminous Cas. Corp. v. Sand Livestock Sys., Inc., 728 N.W.2d 216, 222 (Iowa 2007). 8 Amish Connection Co.. v. State Farm Fire & Cas. Co., 861 N.W.2d 230, 236 (Iowa 2015); see also State Farm Auto. Ins. Co. v. Malcolm, 259 N.W.2d 833, 836 (Iowa 1977) (“An insurance policy is a contract of adhesion and therefore its provisions will be construed in a light most favorable to the insured.”). [¶19] The Iowa Supreme Court has further held that “[w]hen an insurer has ‘affirmatively expressed coverage through broad promises, [it] assumes a duty to define any limitations or exclusionary clause in clear and explicit terms.’” Farm Bureau Life Ins. Co. v. Chubb Custom Ins. Co., 780 N.W.2d 735, 742 (Iowa 2010) (quoting Malcolm, 259 N.W.2d at 835). When such definitions are not provided, Iowa courts find the ordinary meaning of the controlling terms using the following approach: When words are left undefined in a policy, we give them their ordinary meanings—meanings which a reasonable person would give them. A.Y. McDonald, 475 N.W.2d at 619. We do not typically give them meanings only specialists or experts would understand. City of Spencer v. Hawkeye Sec. Ins. Co., 216 N.W.2d 406, 408–09 (Iowa 1974). In searching for the ordinary meanings of undefined terms in insurance policies we commonly refer to dictionaries. See, e.g., Witcraft v. Sundstrand Health & Disability Grp. Benefit Plan, 420 N.W.2d 785, 788 (Iowa 1988) (meaning of “illness”); N. Star Mut. Ins. Co. v. Holty, 402 N.W.2d 452, 455 (Iowa 1987) (meaning of “apparatus”). If a word is susceptible to two interpretations, typically we adopt an interpretation favoring the insured. A.Y. McDonald, 475 N.W.2d at 619. Farm Bureau Life Ins. Co. v. Holmes Murphy & Assoc., 831 N.W.2d 129, 134 (Iowa 2013); see also Boelman v. Grinnell Mut. Reinsurance Co., 826 N.W.2d 494, 502 (Iowa 2013) (citing Steel Prods. Co. v. Millers Nat’l Ins. Co., 209 N.W.2d 32, 36 (Iowa 1973)) (“[W]e interpret the policy language from a reasonable rather than a hypertechnical viewpoint.”).