Opinion ID: 1879737
Heading Depth: 1
Heading Rank: 4

Heading: The Negligent Misrepresentation Issue.

Text: The appellants next contend the district court erred when it concluded that the negligent misrepresentation theory constituted an occurrence under the policies. They maintain that a cause of action for negligent misrepresentation does not arise from an occurrence that is neither expected nor intended. In short, the appellants argue the actions of the bank were not accidental but were of an intentional nature and, therefore, not included in the definition of occurrence under the policies. The multi-peril policy defines occurrence as an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.  (Emphasis added.) The umbrella policy's definition of occurrence is slightly different: an accident or a happening or event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally results in a personal injury.  (Emphasis added.) Recently we interpreted similar language in homeowner and umbrella policies. See Altena v. United Fire & Casualty Co., 422 N.W.2d 485, 486 (Iowa 1988). The homeowner policy excluded coverage for bodily injury which is expected or intended by the insured. The umbrella policy excluded from its coverage any act committed by ... the insured with intent to cause personal injury. With respect to such exclusions of intentional acts, we adopted the majority view, which does not allow these exclusions to be applied unless there is proof that the insured both intended the act and intended to cause some injury. Altena, 422 N.W.2d at 490. We think the same requirement applies to the definition of occurrence in the policies here. An accident, happening, event, or exposure to conditions is an unexpected and unintended occurrence so long as the insured does not expect or intend both it and some injury. The petition here falls short of alleging any intention to cause injury to the Iskes and the Nearmyers. Although the petition alleges some fraudulent conduct on the part of First Newton, in the main it alleges negligent conduct by the bank and alleges that its negligence, rather than any intentional conduct by it, was the proximate cause of the Iskes' and the Nearmyers' damages. These are allegations of negligent misrepresentation. The very definition of negligent misrepresentation connotes negligent rather than intentional conduct: [o]ne, who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Beeck v. Kapalis, 302 N.W.2d 90, 97 (Iowa 1981) (quoting Restatement (Second) of Torts § 552 (1977) (emphasis added)); accord Pahre v. Auditor of State, 422 N.W.2d 178, 179-80 (Iowa 1988); Larsen v. United Fed. Sav. & Loan Ass'n, 300 N.W.2d 281, 287 (Iowa 1981); Ryan v. Kanne, 170 N.W.2d 395, 402 (Iowa 1969). Comments a and e to Restatement section 552 buttress this connotation. Comment a points out that liability for negligent misrepresentation is more restricted than that for fraudulent misrepresentation because there is no intent to deceive but only good faith coupled with negligence. Comment e significantly states that [s]ince the rule of liability [for negligent misrepresentation] is based upon negligence, the defendant is subject to liability if, but only if, he has failed to exercise the care or competence of a reasonable man in obtaining or communicating the information. In a similar vein, one court said: Knowing a reckless falsity is an essential element of fraud. It is the absence of this element which distinguishes fraud from mere negligent misrepresentations, and has been recognized as a sufficient basis for the recovery of actual damage. Since the policy expressly covers negligence and the facts alleged in the complaint create the reasonable possibility of recovery under that theory, we hold the trial court did not err in concluding appellant had a duty to defend. Gordon-Gallup Realtors, Inc. v. Cincinnati Ins. Co., 274 S.C. 468, 471, 265 S.E.2d 38, 40 (1980) (citations omitted). We think the petition alleges negligent rather than intentional conduct on the part of First Newton. Cf. Larsen, 300 N.W.2d at 285 (plaintiff's claim that financial institution supplied misinformation was grounded on a theory of negligence). Under these circumstances, [w]here a complaint is framed in terms of an insured's negligence and not in terms of a cause of action or risk excluded by the policy, there is a duty to defend. 7C Appleman § 4683.01, at 65.