Opinion ID: 2090985
Heading Depth: 1
Heading Rank: 1

Heading: Interpretation of the Exclusions.

Text: In discussing the role of a prior litigation exclusion in claims made liability insurance policies, one court has stated: Claims made insurance policies, as opposed to occurrence-based policies, are intended by insurers to avoid the hazard of an indefinite future: Once the policy period has expired, the book can be closed on everything except then-pending claims. On the other hand, an insurer incurs a risk with this kind of policy: liability for a claim that has been brewing and was ripe to erupt before the policy period, but is asserted only after the policy period begins. For this reason, claims made policies generally include a number of endorsements and exclusions intended to limit this front-end risk by cutting off liability for claims ready, but not yet made, at the start of the policy period. Ameriwood Indus. Int'l Corp. v. American Cas. Co., 840 F.Supp. 1143, 1148-49 (W.D.Mich. 1993) (citations omitted). Construction of an insurance policy the process of determining its legal effectis a question of law for the court unless it depends on extrinsic evidence or a choice among more than one reasonable inference. A.Y. McDonald Indus., Inc. v. Insurance Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991); Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 107-08 (Iowa 1981). In the construction of insurance policies, the cardinal principle is that the intention of the parties must prevail. If the language of the policy is unambiguous, as the parties concede it is in the present case, that intent is determined by what the policy itself says. A.Y. McDonald, 475 N.W.2d at 618. When words in a policy are left undefined, we give them the meaning that a reasonable person would understand them to mean. Farm & City Ins. Co. v. Potter, 330 N.W.2d 263, 265 (Iowa 1983). In applying these principles, we believe that phrases like in any way involving and any fact, circumstance, or situation underlying or alleged must be applied in the same comprehensive manner as they are written. We discern nothing in the language of the exclusions relied on by the district court that requires that a claim, in order to be excluded, must involve the same legal theory, wrongful acts, or requests for relief. On the contrary, these exclusions are phrased in the disjunctive. A claim is excluded if it is based upon or in any way involves any fact, circumstance, or situation underlying or alleged in litigation pending on January 1, 1992, or pursued prior thereto. The foundation for the tort recovery in Iowa Coal II was a contract that the plaintiffs in that action had with a company known as Metro Waste to transport the latter's incinerated sewage sludge ash to a landfill site controlled by those plaintiffs. Evidence was presented that, if the county had not sought to block this arrangement by improper means, the transaction would have produced an $850,000 profit to the entities controlling the landfill site. The jury's verdict for the plaintiffs in Iowa Coal II was exactly $850,000. In an amendment to the petition against Monroe County in Iowa Coal I, filed on October 25, 1988, it was alleged in paragraph (14) of Count I: By reason of the actions taken by Monroe County, Plaintiffs have sustained damages in the following respects and particulars, to-wit: A. Plaintiffs incurred significant out-of-pocket expenses in preparing for a particular use of their land which is no longer authorized under the Monroe County Zoning Ordinance. B. Plaintiffs will be unable to proceed with the planned use of their property in Monroe County, and will sustain future loss of profits and business value. It was further alleged in paragraph (3) of Count II: By reason of the actions taken by Monroe County, Plaintiffs have sustained damages in the following respects and particulars, to-wit: A. Plaintiffs incurred significant out-of-pocket expenses in preparing for a particular use of their land which is no longer authorized under the Monroe County Zoning Ordinance. B. Plaintiffs will be unable to proceed with the planned use of their property in Monroe County, and will sustain future loss of profits and business value. Based on these allegations, the plaintiffs sought money damages from the county in both counts of the amended petition. During the litigation, evidence was presented that showed that the planned use of the plaintiffs' property included the contract with Metro Waste on which the tortious interference claim in Iowa Coal II was based. Moreover, part of the future loss of profits and business value sought to be recovered in Iowa Coal I were tied to the loss of the Metro Waste contract. Although the damages claimed in Iowa Coal I were based on a different legal theory than the claim on which plaintiffs prevailed in Iowa Coal II, it seems inescapable that the latter involved facts, circumstances, and situations underlying or alleged in the former. We expressly acknowledged this in our Iowa Coal II opinion in which we stated: [Although] [n]one of these issues [the tortious interference claim] were litigated in Iowa Coal I ... there was evidence before the district court in the first action from which the court could find the County interfered with this prospective contractual relationship. Iowa Coal II, 555 N.W.2d at 443.