Opinion ID: 1733805
Heading Depth: 1
Heading Rank: 4

Heading: Israel's Equitable Principles Theory.

Text: Finally Israel cites Hunt v. Ernzen, 252 N.W.2d 445, 447-48 (Iowa 1977), for the proposition that indemnity is founded on equitable principles, placing responsibility where equity would lay the ultimate burden. Conceding that the facts here do not fall neatly within what he calls the classic reasons for permitting indemnity, Israel urges that we find him entitled to indemnity in this equity case because FMI would have accepted the risk of upset had that coverage been requested. He argues that FMI's only loss resulting from Israel's error was the difference in policy premiums paid by Crane. Israel cites as his primary authorities the early Iowa case of State Insurance Co. v. Richmond, 71 Iowa 519, 32 N.W. 496 (1887), and similar cases from other states. See, e.g., Pennsylvania Millers Mutual Insurance Co. v. Walton, 236 Ark. 336, 365 S.W.2d 859 (1963); United Pacific Insurance Co. v. Price, 39 Or.App. 705, 593 P.2d 1214 (1979). The Richmond case is distinguishable on its facts. There, the defendant insurance agent had the plaintiff insurer issue an insurance policy on an unoccupied hotel being constructed by the insured; the agent erroneously described it as occupied. After the insured suffered a fire loss and recovered from the insurer on the policy, the insurer sought recovery from the agent in a separate action. The opinion in Richmond discloses facts distinguishing that case from this one; there the risk sought to be insured was not greater than that described in the agent's application and the premium paid was greater than if the risk had properly been described. 71 Iowa at 523, 32 N.W. at 498. Moreover, in the Richmond case only the insurer was initially held liable to the insured, and that liability arose directly from the policy itself, not from a finding of negligence. The similar cases Israel cites from other states are likewise distinguishable as actions in which the insurer seeking indemnity or contribution from its agent was held liable in an action on the policy (usually one reformed by the court). We recognize that our Richmond case contains language suggesting that only the insurer and not the agent should bear the loss occasioned by an agent's error whenever the undisclosed risk was one the insurer would have accepted for an appropriate premium. 71 Iowa at 524, 32 N.W. at 498-99. We decline to extend the holding or language of that case beyond the facts there involved and do not follow it here. It seems basically unfair and inequitable to require an insurer to bear the entire loss resulting from a risk that an agent erroneously understates or fails to disclose. Casualty insurance involves the spreading of risks by collecting premiums paid by the many who are insured, then reimbursing later the losses some sustain. See 1 G. Couch, Cyclopedia of Insurance Law § 1:3 (2d ed. 1959). When risks are unknown, premiums on the risks cannot be collected in advance from all who are insured; the only premiums collected would be those paid after a loss by the persons who have first sustained a loss. The amounts paid in losses would necessarily far exceed the few post-loss premiums collected, a result extremely inequitable and contrary to sound and sensible insurance underwriting principles. We have reviewed the record de novo and conclude, as did the trial court, that Israel has not established either a legal or equitable basis for obtaining indemnity from FMI. More equitable than the theories suggested by Israel is the result of the first trial under which both Israel and FMI paid Crane one-half of the loss which the insured had sustained. AFFIRMED.