Opinion ID: 1570678
Heading Depth: 1
Heading Rank: 4

Heading: The Reduction of Damages Based on Third-Party Payment.

Text: In response to Iowa Code section 668.14, the district court submitted interrogatories requiring the jury to find whether there had been third-party payment of medical expenses by Trang's medical and hospital insurer that was included in the damages awarded and the amount of such third-party payment. As a result of the jury's answers to these interrogatories, the district court reduced the damages awarded by the amount of the third-party payment. Plaintiffs argue that the district court lacked authority to make this reduction of the jury's award because there has been no finding that the insurance carrier making the third-party payment is not subrogated to plaintiffs' recovery. The appellees urge that plaintiffs have failed to preserve error on this issue because they failed to object to the interrogatories that were given to the jury. In considering the matter of error preservation, we take some guidance from the situation that was presented in Six v. American Family Mutual Insurance Co., 558 N.W.2d 205 (Iowa 1997). That case involved a tortfeasor's attempt to recover from a liability insurer that was alleged to have wrongly refused to defend and indemnify the tortfeasor against a personal injury claim. The jury found that the insurer's liability coverage required it to indemnify the tortfeasor. A dispute was presented as to whether a settlement that had been negotiated by the tortfeasor was reasonable. An interrogatory was submitted to the jury asking it to determine if the settlement was reasonable, which it answered in the negative. No verdict form was given the jury to determine what a reasonable settlement amount would have been. The insured tortfeasor in the Six case had not objected to the interrogatories submitted to the jury, but we concluded that he adequately preserved the issue of an incomplete verdict by means of a posttrial motion. In ruling on that posttrial motion, the district court in Six concluded that the jury's response had resolved the case in a manner that denied any recovery to the plaintiff. In our review of this ruling, we stated, We are convinced that, if coverage exists, an insurer that declines to defend a claim continues to be liable to hold its insured harmless for that portion of the stipulated judgment that represents a reasonable and prudent settlement. Six, 558 N.W.2d at 207. We then referred to the provisions of Iowa Rule of Civil Procedure 205 (now Iowa R. Civ. P. 1.933), which provides that, if the special verdicts submitted to the jury are incomplete as to an essential element, the trial court, following the jury's discharge, may render any essential factual finding that has been omitted. Six, 558 N.W.2d at 207 (citing P.H.C.C.C., Inc. v. Johnston, 340 N.W.2d 774, 777 (Iowa 1983)). Based on the provisions of that rule, we remanded the case to the district court to make a factual finding, as in a jury-waived adjudication, as to what a reasonable settlement amount would have been. Id. Plaintiffs' situation in the present case is similar to that presented in Six because an essential factual issue was not included in the special verdicts presented to the jury. Our cases applying Iowa Code section 668.14 make it clear that plaintiffs are to be protected against a double reduction of their award that would result from a reduction based on third-party payments when the third-party payor remains subrogated to the remaining recovery. Kuta v. Newberg, 600 N.W.2d 280, 290 (Iowa 1999); Schonberger v. Roberts, 456 N.W.2d 201, 203 (Iowa 1990). To prevent this from occurring in the present case, the jury should have been required to render a finding as to whether the third-party payor had a subrogation right. Because the issue was not submitted to the jury, an essential factual issue was missing from the special verdicts that the jury returned. Rule 1.933 provides a method to remedy that omission by having the court render a finding of fact on the subrogation issue based on the existing record. To accomplish that result, we vacate the judgment against Vaknin and remand the case to the district court with instructions to render a finding as to whether a subrogation right existed in the third-party payor. The court shall then enter a new judgment based on the jury's special verdicts as supplemented by its own finding on the subrogation issue. The judgment in favor of American Family is affirmed. The judgment against Vaknin is vacated and the case remanded for further proceedings in accordance with our instructions Costs are assessed seventy-five percent to appellants and twenty-five percent to Vaknin. AFFIRMED IN PART; VACATED IN PART; AND REMANDED.