Court Opinion

ID: 4375216
Source: CourtListenerOpinion
Date Created: 2019-03-08 15:02:52.304518+00
Date Added: 2024-06-11T12:03:47.503709
License: Public Domain

IN THE SUPREME COURT OF IOWA
                               No. 18–0129

                           Filed March 8, 2019

METROPOLITAN PROPERTY AND CASUALTY INSURANCE COMPANY
d/b/a METLIFE AUTO & HOME and ECONOMY PREMIER
ASSURANCE COMPANY,

      Appellees,

vs.

AUTO-OWNERS MUTUAL INSURANCE COMPANY,

      Appellant.

      Appeal from the Iowa District Court for Polk County, Jeanie K.

Vaudt and Jeffrey D. Farrell, Judges.

      Business insurer appeals judgment in favor of homeowners’

insurer for indemnification for half the cost of a settlement of tort claims

arising from an accidental shooting death on the insured property.

AFFIRMED.

      Matthew T. Nelson of Warner Norcross & Judd, Grand Rapids,

Michigan; John J. Bursch of Bursch Law PLLC, Caledonia, Michigan;

and Timothy W. Hamann and Joshua L. Christensen of Clark, Butler,

Walsh & Hamann, Waterloo, for appellant.

      Michael S. Jones of Patterson Law Firm, L.L.P., Des Moines, for

appellees.
                                          2

WATERMAN, Justice.

       In this appeal, we must resolve a dispute between insurance

companies over liability coverage for a fatal accident. A dentist and his

wife formed a limited liability company (LLC) that held title to investment

properties,     including   a   farmhouse     where     an   accidental     shooting

occurred.       The dentist had purchased personal (homeowners) liability

insurance and commercial general liability (CGL) insurance from

separate insurers. The CGL insurer denied coverage. The homeowners’

insurer and insured settled the death claim for $900,000 and sued the

CGL insurer for reimbursement. The case proceeded to a bench trial,

and the district court entered judgment against the CGL insurer for

$450,000, rejecting various coverage defenses.                 The CGL insurer

appealed, and we retained the appeal.

       The principal fighting issue is whether the LLC, as owner of the

farmhouse, had potential liability under a premises liability theory for a

dangerous condition (the loaded, unsecured rifle left on a bed for several

months).        On our review, we conclude the district court correctly

interpreted the CGL insurance contract, and its factual findings on

potential liability and the reasonableness of the settlement are supported

by substantial evidence. For the reasons explained below, we affirm the

district court judgment.

       I. Background Facts and Proceedings.

       Jay and Lorrie Lala, husband and wife, live in Mason City, Iowa.1

The Lalas have been married for twenty-seven years and have two

children, Nick and Sam. Jay is a dentist with a practice in Mason City.

       1There  are multiple members of the Lala family referenced in this opinion, and
for that reason, we will refer to them by their first names when necessary.
                                     3

      In 1997, Jay and Lorrie organized Parker House Properties, L.L.C.

(Parker House), as a limited liability company to hold property. Jay and

Lorrie each own fifty percent of Parker House. That entity owns various

investment properties, including the building that houses Jay’s dental

practice.   Parker House also owns apartment buildings, land in

Mason City, a house in Cedar Rapids where Jay’s mother lives, and land

in Floyd County, Iowa, with a farmhouse at 1545 Foothill Avenue.

      The Lalas purchased the Foothill Avenue property for investment

purposes. The farmhouse is furnished, but no one lives there. Jay hosts

occasional business and public service events there. The Lalas also use

the house and farmland for recreation, including hunting, fishing, target

shooting, riding all-terrain vehicles (ATV) and dirt bikes, running their

dogs, and swimming.

      A. The Accidental Shooting. On April 22, 2012, Nick, his friend,

seventeen-year-old Hunter True, and Nick’s girlfriend, Hayley, went to

the Foothill Avenue property to ride dirt bikes and ATVs. Jay had also

been at the property that day.      Jay left shortly before the teenagers

departed. Before leaving, Jay told Nick to lock up the house.

      While Nick was locking up, he noticed that one of the Lalas’

firearms, a .22 caliber Ithaca lever action rifle, had been left on a bed in

one of the bedrooms. Jay had purchased the rifle when he was about ten

years old and kept it at the farm for hunting and target shooting. The

rifle had been left on the bed after Sam and Nick last used it in January

or February.

      Jay expected Nick to secure each firearm in a soft gun case in one

of the bedrooms after ensuring it was unloaded. When Nick was about

twelve years old, he took a hunter safety class in which he learned how

to store firearms properly.   Jay had also talked to Nick about how to
                                      4

handle firearms safely and to treat every gun as if it was loaded.

Nevertheless, on this April day, Nick picked up the rifle and the weapon

accidentally discharged.      The bullet struck Hunter in the abdomen.

Hunter was taken by ambulance to the hospital in Mason City, where he

died from the gunshot wound.

       B. The Insurance Policies. The Lalas had a personal insurance

policy through Metropolitan Property and Casualty Insurance Company

(Metropolitan) that covered Jay and Lorrie, as well as Nick and Sam.

This policy provided liability defense and indemnity coverage.           The

Metropolitan policy specifically insured the Lalas’ primary home,

personal vehicles, and the Foothill Avenue property.

       Parker   House    separately   purchased   a   “Tailored   Protection”

insurance policy from Auto-Owners Mutual Insurance Company (Auto-

Owners).    The policy included CGL coverage with a $1,000,000 each

occurrence liability limit.

       In September 2006, the CGL policy was amended with an

endorsement insuring the 116.78 acres of farmland in Floyd County.

After Parker House purchased the Foothill Avenue home, Jay’s insurance

agent inspected the farm and then added the property to the Auto-

Owners’ policy. The CGL policy described the unoccupied farmhouse as

a “Storage Building” and the remaining property as “Vacant Land (for-

profit).”

       “Insureds” under the Auto-Owners’ CGL policy are described as

follows:

       SECTION II—WHO IS AN INSURED . . . .
       1. If you are designated in the Declarations as:
             ....
             c. A limited liability company, you are an insured. Your
             members are also insureds, but only with respect to the
                                      5
              conduct of your business. Your managers are insureds, but
              only with respect to their duties as your managers.
              ....
      2. Each of the following is also an insured:
              a. Your “employees”, other than either your “executive
              officers” (if you are an organization other than a partnership,
              joint venture or limited liability company) or your managers
              (if you are a limited liability company), but only for acts
              within the scope of their employment by you or while
              performing duties related to the conduct of your business, or
              your “volunteer workers” only while performing duties
              related to the conduct of your business. . . .

      C. The Insurance Settlement and Litigation. In January 2014,

Metropolitan reached a settlement with Michael and Hillary Carpenter,

Hunter’s parents, whereby Metropolitan agreed to pay $900,000 in

exchange for a release of all claims and potential claims against the

Lalas, Parker House, Metropolitan, and Auto-Owners.

      Jay and Parker House also made a coverage claim with Auto-

Owners.      Auto-Owners denied coverage, stating that its policy only

covered individuals with respect to the “conduct of a business,” and any

claims resulting from Hunter’s death were not business-related. Auto-

Owners also stated that the policy only covered Parker House, not the

Lalas personally.

      In   June      2014, Metropolitan   filed    this   civil   action seeking

subrogation from Auto-Owners. Metropolitan later amended its petition

to include Parker House as a defendant and to allege indemnity and

contribution claims.      Auto-Owners denied liability, asserting that its

policy only provided business coverage.           Auto-Owners’ pleadings also

disputed Metropolitan’s right to recover contribution, subrogation, or

indemnity.     Auto-Owners amended its answer multiple times to add

additional affirmative defenses.     At the time of trial, Auto-Owners had

asserted ten affirmative defenses.
                                    6

         Auto-Owners filed a motion for summary judgment, arguing its

policy did not cover the shooting because it was unrelated to Parker

House’s business.      Auto-Owners later filed two motions for partial

summary judgment, one seeking to prevent Metropolitan from asserting

a contribution claim and the other seeking a ruling that comparative

fault principles apply to the subrogation claim. The district court denied

the motions. Auto-Owners filed an application for interlocutory appeal,

which we denied.

         On November 23, 2016, Parker House filed a motion for summary

judgment on Metropolitan’s indemnity and contribution claims.       Auto-

Owners renewed its motion for summary judgment and motions for

partial summary judgment.

         On February 21, 2017, Parker House filed an offer to confess

judgment in the amount of $450,000, to assign its rights against Auto-

Owners to Metropolitan, and to pay $1000 of the judgment in exchange

for Metropolitan agreeing not to execute on the offer to confess judgment.

On February 24, Metropolitan accepted the offer.       Three days later,

Metropolitan acknowledged it had received the $1000 payment.

         On March 7, the district court granted Auto-Owners’ second

motion for partial summary judgment, finding that comparative fault

would be considered at trial.     The court denied Auto-Owners’ other

motions. The case proceeded to a bench trial.

         Auto-Owners filed pretrial motions in limine to exclude expert

testimony of attorneys Craig Stanovich and Marsha Ternus, a former

chief justice of this court. Auto-Owners argued Stanovich’s opinion on

contract interpretation was inadmissible because that issue was for the

court.      Auto-Owners argued Ternus’s testimony was inadmissible

because she failed to offer a factual opinion as to the reasonableness of
                                    7

the settlement between Metropolitan and Parker House.              The court

denied both motions.

      At trial, Auto-Owners introduced expert testimony from Max Kirk

and David Riley, two lawyers with decades of jury trial experience. These

experts testified that the Metropolitan settlement was unreasonable

because, if the case of Hunter’s estate had been tried to a jury, most of

the fault probably would have been allocated to Nick, with Jay

secondarily liable as the gun owner.      Neither believed a jury would

apportion fault to Parker House on a premises liability theory.

      Metropolitan introduced the testimony of Ternus and Ron Pogge,

another experienced attorney.    Pogge testified that he believed a jury

would have apportioned a significant amount of fault to Parker House

under a premises liability theory. Pogge believed a jury would determine

Nick and Jay were agents of Parker House. Ternus testified that the gun

on the bed created a dangerous condition in the home and Parker House

faced substantial exposure under a premises liability theory.         Ternus

agreed that Nick could be considered an agent of Parker House.

      After a bench trial, the district court entered judgment against

Auto-Owners and in favor of Metropolitan for $450,000.        The district

court found that Parker House was insured under the Auto-Owners’

policies because its ownership of the farm was for investment purposes,

which the court concluded was a business purpose.        The court found

that a jury could determine that Nick was also covered under the Auto-

Owners’ policies as either an employee or volunteer worker when he was

securing the rifle and locking the house. The court also determined that

a jury could conclude Parker House was liable under a premises liability

theory. The court found that the settlement between Metropolitan and

Parker House was       reasonable and     Metropolitan was        entitled to
                                       8

contribution from Auto-Owners.             The court rejected Auto-Owners’

affirmative defenses.

      Auto-Owners filed a motion to amend or enlarge the district court’s

ruling, requesting the court grant a $1000 credit for the amount

Metropolitan    had     already   received    through    its   settlement    with

Parker House. Auto-Owners also asked for specific written rulings on its

motions in limine regarding the testimony of Stanovich and Ternus. The

court denied the motion to amend or enlarge.

      Auto-Owners appealed, and we retained its appeal.

      II. Standard of Review.

      We are reviewing a judgment entered after a bench trial.                The

parties agree that our standard of review is for correction of errors at law.

Chrysler Fin. Co. v. Bergstrom, 703 N.W.2d 415, 418 (Iowa 2005). “We

review a district court’s interpretation of an insurance policy for

correction of errors at law.” Walnut Creek Townhome Ass’n v. Depositors

Ins., 913 N.W.2d 80, 87 (Iowa 2018). The district court’s factual findings

have the effect of a special verdict and are binding on us if supported by

substantial evidence. Id.

      Auto-Owners seeks review of the district court’s denial of its

motion for summary judgment.         “The denial of a motion for summary

judgment is no longer appealable once the matter proceeds to a trial on

the merits.” Lindsay v. Cottingham & Butler Ins. Servs., Inc., 763 N.W.2d
568, 572 (Iowa 2009).       Regardless, the issue raised in Auto-Owners’

motion   for    summary     judgment—whether       the    Auto-Owners       policy

provided liability coverage for the accidental shooting at a Parker House

property—was adjudicated at trial.         For that reason, our review is for

correction of errors at law.      See Walnut Creek Townhome Ass’n, 913
N.W.2d at 87.
                                     9

      We review rulings on the admissibility of expert testimony during a

bench trial for an abuse of discretion. Heinz v. Heinz, 653 N.W.2d 334,

341 (Iowa 2002).

      III. Analysis.

      We are reviewing Auto-Owners’ challenges to the judgment

imposing liability for half of the settlement of the tort claims arising out

of Nick Lala’s accidental, fatal shooting of Hunter True.     Auto-Owners

denied coverage and refused to provide a defense to Parker House on the

tort claims ultimately settled by Metropolitan. The district court ruled

that Auto-Owners is bound by that settlement because (1) a jury could

conclude the claim was covered by its CGL policy and (2) the settlement

was “reasonable and prudent.” Red Giant Oil Co. v. Lawlor, 528 N.W.2d
524, 535 (Iowa 1995). We address each issue in turn.

      A. Whether the Liability Claims Arising Out of the Accidental

Shooting Were Covered by the Auto-Owners’ CGL Policy.                 Auto-

Owners argues that Parker House’s claim was not covered under its CGL

policy for two reasons: (1) Nick was not acting on behalf of Parker House

and was therefore not an insured under Auto-Owners’ policy at the time

of the accident, and (2) Parker House itself lacked potential liability

under a premises liability theory. We begin our analysis with the policy

language.

      “Construction of an insurance policy and the interpretation of its

language are matters of law for the court to decide, when as here, neither

party offers extrinsic evidence about the meaning of the policy’s

language.” Am. Family Mut. Ins. v. Corrigan, 697 N.W.2d 108, 111 (Iowa

2005) (quoting Grinnell Mut. Reins. v. Emp’rs Mut. Cas. Co., 494 N.W.2d
690, 692 (Iowa 1993)). Our principles governing the interpretation and

construction of insurance policies are well established.
                                     10
      The cardinal principle in the construction and interpretation
      of insurance policies is that the intent of the parties at the
      time the policy was sold must control. Except in cases of
      ambiguity, the intent of the parties is determined by the
      language of the policy. “An ambiguity exists if, after the
      application of pertinent rules of interpretation to the policy, a
      genuine uncertainty results as to which one of two or more
      meanings is the proper one.”

Id. (quoting LeMars Mut. Ins. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998)).

      “Because insurance policies are contracts of adhesion, an insurer

assumes a duty to define in clear and explicit terms any limitations or

exclusions to the scope of coverage a policy affords.” Nat’l Sur. Corp. v.

Westlake Invs., LLC, 880 N.W.2d 724, 734 (Iowa 2016). “Nevertheless,

where no ambiguity exists, we will not write a new policy to impose

liability on the insurer.” Id.

      It is undisputed that Parker House is the named insured under the

policy and the farmhouse is an insured location.          The Auto-Owners

policy has language we italicize below that limits liability coverage for

individual members, employees and volunteer workers of a limited

liability company to their business conduct, but the policy has no such

limitation for Parker House as an entity.

      SECTION II—WHO IS AN INSURED . . . .
      1. If you are designated in the Declarations as:
             ....
             c. A limited liability company, you are an insured.
             Your members are also insureds, but only with respect
             to the conduct of your business. Your managers are
             insureds, but only with respect to their duties as your
             managers.
             ....
      2. Each of the following is also an insured:
             a. Your “employees”, other than either your “executive
             officers” (if you are an organization other than a
             partnership, joint venture or limited liability company)
             or your managers (if you are a limited liability
             company), but only for acts within the scope of their
                                      11
              employment by you or while performing duties related
              to the conduct of your business, or your “volunteer
              workers” only while performing duties related to the
              conduct of your business. However, none of these
              “employees” or “volunteer workers” are insureds for
              “bodily injury”, “personal injury” or “advertising injury”
              (1) To you, to your partners or members (if you are a
              partnership or joint venture), to your members (if you
              are a limited liability company), to a co-“employee”
              while in the course of his or her employment or
              performing duties related to the conduct of your
              business, or to your other “volunteer workers” while
              performing duties related to the conduct of your
              business;
              (2) To the spouse, child, parent, brother or sister of
              that co-“employee” or “volunteer worker” as a
              consequence.

(Emphasis added.)

       We agree with the district court’s interpretation that Nick is

covered under the Auto-Owners policy only if he was acting for Parker

House, while the limited liability company itself is covered for premises

liability.   Auto-Owners argues Nick was engaged in his own personal

recreation and not engaged in business conduct for Parker House when

he accidentally shot Hunter.      The CGL insurer further argues Parker

House lacked exposure under a premises liability theory.

       Auto-Owners relies on unpublished cases from other jurisdictions.

See, e.g., Transcon. Ins. v. Edwards, Civil No. 96-5099, 1996 WL 814532,

at *7 (W.D. Ark. Dec. 23, 1996) (holding that an insured’s actions of

assault and kidnapping did not fall within the conduct of the insured’s

business); Farm Bureau Gen. Ins. Co. of Mich. v. Estate of Stormzand, No.

325326, 2016 WL 1688883, at *2–3 (Mich. Ct. App. Apr. 26, 2016)

(per curiam) (holding that an insurance company had no duty to

indemnify a business owner who loaned his son the company’s off-road

vehicle for a recreational event, at which the son’s friend sustained

serious injury, because the loan was not business conduct covered under
                                     12

the insurance policy); Simonsen v. Lumber Co. Brew Pub & Eatery, LLC,

No. 2012AP594, 2013 WL 500395, at *3 (Wis. Ct. App. Feb. 12, 2013)

(per curiam) (holding a bar was not liable for an off-duty bartender’s

assault of another bartender at the bar). The closest case cited by Auto-

Owners is Sebastiano v. Bishop, No. OT-97-003, 1997 WL 587138, at *3–

4 (Ohio Ct. App. Sept. 19, 1997) (holding that a general liability policy did

not cover a construction company owner’s son’s accidental shooting of a

friend with a gun kept in a company truck).           These cases are not

controlling. Under our standard of review, we must focus on the trial

record.

      1. Whether     Nick   was    engaged     in   business    conduct    for

Parker House.      The district court found that Parker House had

purchased the Foothill Avenue property as an investment, a business

purpose. The district court found that Nick was acting for Parker House

or its manager, Jay, when he was told to secure the farmhouse when the

accidental shooting occurred.      Whether an agency relationship exists

under these circumstances is a question of fact. See Peak v. Adams, 799
N.W.2d 535, 546 (Iowa 2011) (“Agency is generally a question of fact.”).

“Agency . . . results from (1) manifestation of consent by one person, the

principal, that another, the agent, shall act on the former’s behalf and

subject to the former’s control[,] and[] (2) consent by the latter to so act.”

Id. at 546 n.2 (alteration in original) (quoting Pillsbury Co. v. Ward, 250
N.W.2d 35, 38 (Iowa 1977)).

      We must determine whether substantial evidence supports the

district court’s findings. Parker House, as an LLC, can only act through

its members, managers, employees, and agents. Nick was asked by Jay,

the LLC’s manager, to secure the house.         Securing the property is a

business purpose—to protect the unoccupied farmhouse against vandals
                                       13

and burglars.      Securing the property is more than just locking the

outside doors but also includes unloading and properly storing firearms.

That business purpose is not defeated by the fact the farmhouse was

also used for recreation. Nick can wear two hats, and his acts at the

farmhouse may be undertaken for both business and personal reasons.

We determine that substantial evidence supports the district court’s

finding that Nick was engaged in conduct for the business of

Parker House at the time he accidentally shot Hunter.

       2. Whether     Parker   House    had   premises   liability   exposure.

Parker House is the named insured under the Auto-Owners policy, which

provides premises liability coverage.       Jay made a coverage claim on

behalf of Parker House. Auto-Owners denied coverage on grounds the

accidental shooting was unrelated to the business activities of the limited

liability company.    Importantly, the CGL policy language quoted above

provides coverage to the limited liability company (Parker House) as the

named insured without language limiting coverage to acts taken “in the

conduct of [its] business.” That coverage limitation expressly applies to

the LLC’s members individually or its employees individually, not the

entity itself.   We agree with the district court’s interpretation that the

Auto-Owners policy covers a premises liability claim against the LLC

without regard to whether the accidental injury on the insured property

occurred during business activities.

       The fighting issue is whether Parker House faced potential

exposure under a premises liability theory for this accidental shooting at

the insured farmhouse.         We use a general negligence standard to

evaluate a possessor of land’s premises liability to licensees and invitees.

Ludman v. Davenport Assumption High Sch., 895 N.W.2d 902, 909 (Iowa

2017). We use the following multifactor approach:
                                      14
      We impose upon owners and occupiers only the duty to
      exercise reasonable care in the maintenance of their
      premises for the protection of lawful visitors. Among the
      factors to be considered in evaluating whether a landowner
      or occupier has exercised reasonable care for the protection
      of lawful visitors will be: (1) the foreseeability or possibility of
      harm; (2) the purpose for which the entrant entered the
      premises; (3) the time, manner, and circumstances under
      which the entrant entered the premises; (4) the use to which
      the premises are put or are expected to be put; (5) the
      reasonableness of the inspection, repair, or warning; (6) the
      opportunity and ease of repair or correction or giving of the
      warning; and (7) the burden on the land occupier and/or
      community in terms of inconvenience or cost in providing
      adequate protection.

Id. at 910 (quoting Koenig v. Koenig, 766 N.W.2d 635, 645–46 (Iowa

2009)).

      The Restatement (Third) of Torts: Liability for Physical and

Emotional Harm has adopted the same approach for evaluating premises

liability claims.    § 51, at 242 (Am. Law Inst. 2012) [hereinafter

Restatement (Third)]. The duty of a possessor of land is as follows:

            Subject to § 52, a land possessor owes a duty of
      reasonable care to entrants on the land with regard to:
            (a) conduct by the land possessor that creates risks to
      entrants on the land;
            (b) artificial conditions on the land that pose risks to
      entrants on the land;
            (c) natural conditions on the land that pose risks to
      entrants on the land; and
            (d) other risks to entrants on the land when any of the
      affirmative duties provided in Chapter 7 is applicable.

Ludman, 895 N.W.2d at 910 (quoting Restatement (Third) § 51, at 242);

see also Restatement (Third) § 51, cmt. i, at 248 (adopting the same

multifactor approach as Koenig).

      The bench trial included a battle of experts.         The district court

heard testimony from four attorneys: Marsha Ternus and Ron Pogge for

Metropolitan, and Max Kirk and David Riley for Auto-Owners.
                                   15

      In Ternus’s opinion, Parker House would have been liable for its

own negligence and vicariously liable for Nick’s negligence. In her view,

the loaded gun was a dangerous condition on the land that Parker House

could have warned entrants about or unloaded and securely stored the

weapon.   Parker House, if it were exercising reasonable care, would

inspect the house periodically and determine if any unsafe conditions

existed. If there were any unsafe conditions, a property owner exercising

reasonable care would take steps to ameliorate the dangerous condition.

In her expert report, Ternus concluded, “Here, the shooting would not

have occurred absent Parker House’s failure to inspect the premises and

remove the cocked and loaded gun.” According to Ternus, “That failure

was one in a chain of events culminating in Hunter’s death.”

Parker House’s negligence was a factual cause of Hunter’s death,

“notwithstanding the subsequent negligence of Nick in mishandling the

loaded gun.”   Regardless, in Ternus’s opinion, Nick was acting as an

agent of Parker House when the shooting occurred “so as to give rise to

vicarious liability for his actions on the part of Parker House.” Ternus

concluded,

             I understand that Auto-Owners contends Nick was not
      acting within the scope of his agency when he picked up the
      loaded gun and accidentally shot Hunter. Again, I disagree
      with this conclusion. Common sense would indicate that
      “locking up” the house included more than simply locking
      the door. No doubt Nick shut off the lights when he left the
      premises. No doubt it would be expected that he would
      remedy any other condition he saw that might present a
      danger. For example, if someone had left the water running
      when the boys were there in January or February, one would
      infer from the circumstances and common sense that Nick
      would be expected to shut off the water. A jury would likely
      also reasonably infer that if Nick observed a gun that had
      not been properly stored, he would be expected to secure the
      gun as part of his securing of the house. This action was a
      benefit to Parker House because it removed a weapon that
      vandals and other transients might use to shoot up the
                                      16
          house (or another person in the process), and it removed a
          condition that might pose a danger to lawful entrants onto
          the property who would be unaware, as was Nick, that the
          gun was loaded and cocked. Moreover, as the district court
          stated in its ruling on Auto-Owners’ motion for summary
          judgment, “[t]he storage and use of guns on this particular
          property is not outside the conduct of the business of
          holding such property for future sale as recreational
          property.”

          Ron Pogge also testified on behalf of Metropolitan.    In Pogge’s

opinion, Parker House could have been held liable under a premises

liability theory and a jury could determine that Nick was acting as an

agent of Parker House at the time of the shooting.           Even a cursory

inspection of the property would have revealed the dangerous condition.

In his report, Pogge concluded that “the fact finder would apportion a

significant portion of the fault for this occurrence upon Parker House.”

Pogge believed that it was reasonable to settle the claim to avoid potential

liability and that $450,000 was a reasonable settlement amount.

          Max Kirk testified on behalf of Auto-Owners. In his opinion, the

settlement was not reasonable because Nick Lala’s “fault would come

very close to being the sole cause of the injuries sustained by Hunter

True.”      Kirk believed that a jury would not have found Parker House

liable.     Kirk concluded in his expert report that “a reasonable and

prudent person in the position of Parker House would not pay anything

beyond nominal damages to settle the claims of [Metropolitan].”         Kirk

believed a premises liability theory would fail because all Nick was

required to do when locking up the house was secure the doors. Locking

up the house would not have required handling the gun. Kirk testified

that a reasonable settlement amount would have been the anticipated

defense costs of $50,000–$75,000. Kirk believed Nick would have ninety

percent of the fault and Jay would have ten percent, and Parker House

would have received a directed verdict or defense verdict.
                                     17

      David Riley also testified on behalf of Auto-Owners. In his view,

Parker House was not liable and would have received a directed verdict,

or any assessment of fault would be negligible. Riley believed there was

no agency relationship between Nick and Parker House, there was no

business purpose for Nick’s visit to the house that day, and any duty to

maintain the weapon was an obligation personal to Jay.                     Riley

differentiated between Jay’s obligation to maintain the gun and

Parker House’s duty to maintain the property.           In his report, Riley

concluded,

      In my opinion, had the case been tried to a jury, the jury
      would have put 75% to 100% of the fault on Nick Lala, and
      the remainder of the fault, if any, on Jay Lala, individually.
      No fault would have been assessed to Parker House
      Properties, LLC.

      Riley believed this case could have been a negligent entrustment of

a chattel case, but even under that theory Parker House would not be

liable. Riley believed there was a defense cost for Parker House of about

$45,000–$50,000.

      The district court was the trier of fact. The court could find the

testimony of Metropolitan’s experts more credible than Auto-Owners’

experts. The district court made these findings:

             Parker House faced exposure under the standard [for
      premises liability]. Hunter True was at the Farm at the
      invitation of Nick and with the consent of Jay and Lorrie, the
      only two members of Parker House. Hunter went into the
      house with Nick to lock up. The loaded rifle created a risk of
      harm that was foreseeable—Jay had talked to the boys about
      the need to unload and store away guns after using them.
      The boys had taken hunter safety courses and been around
      guns for years. They understood the risk of harm. There
      was no real burden to unloading and securing the rifle after
      using it, it is just a matter of taking a little time to do so. As
      Nick testified in his deposition when asked why a loaded
      weapon might have been left on the bed, he speculated that
      either Sam or he had just been lazy.               The dangerous
      condition was easily correctable. Under these facts, the
                                      18
      issue of reasonable care would clearly create a jury question
      and serve as grounds for a verdict against Parker House.

      We determine that substantial evidence in the record supports the
district court’s factual finding that Parker House was potentially liable for

Hunter’s death under a premises liability theory.             The dangerous

condition, the loaded rifle left on the bed, had been there several months.

Nick left the loaded rifle on the bed in January or February.          His job

then, and on April 22, the day of the accident, was to secure the

property.   Nick’s knowledge of the dangerous condition is imputed to

Parker House.      Moreover, any reasonable inspection of the property

during those months would have discovered the loaded firearm. Given

the potential premises liability, Auto-Owners provided liability coverage

for this accidental shooting on its insured’s business property.

      B. Whether the Settlement Was Reasonable.                 To determine

whether a settlement is reasonable, we consider “what a reasonably

prudent person in the position of the defendant would have settled for on

the merits of the plaintiff’s claim.” Red Giant Oil Co., 528 N.W.2d at 535.

The court considers “facts bearing on the liability and damage aspects of

plaintiff’s claim, as well as the risks of going to trial.” Id. (quoting Miller

v. Shugart, 316 N.W.2d 729, 735 (Minn. 1982)). The insured need not

establish actual liability to the party with whom it has settled. Instead,

the insured need only show a potential liability, as supported by the

evidence that culminated in a settlement that is reasonable in view of the

size of the possible recovery and likelihood that liability would be

established. Id.

      The United States District Court for the Northern District of Iowa

discussed factors for determining the reasonableness of a settlement:

      The ultimate issue to be decided is the reasonableness of a
      settlement which avoids a trial. Reasonableness, therefore,
                                    19
      is not determined by conducting the very trial obviated by
      the settlement. Consequently, the decisionmaker receives
      not only the customary evidence on liability and damages
      but also other evidence, such as expert opinion of trial
      lawyers evaluating the “customary” evidence. This “other
      evidence” may include verdicts in comparable cases, the
      likelihood of favorable or unfavorable rulings on legal
      defenses and evidence issues if the tort action had been
      tried, and other factors of forensic significance.     The
      evaluation of this kind of proof is best understood and
      weighed by a trial judge.

Gen. Cas. Ins. Co. of Wis. v. Penn-Co Constr., Inc., No. C03-2031-MWB,

2005 WL 503927, at *45 (N.D. Iowa Mar. 2, 2005) (quoting Alton M.

Johnson Co. v. M.A.I. Co., 463 N.W.2d 277, 279 (Minn. 1990)).

      Auto-Owners argues that Ternus’s testimony should not have been

admitted because it could not have assisted the trier of fact in

understanding the evidence or determining a fact in issue.         Ternus’s

opinion related to whether a jury would assess liability to Parker House

for Hunter’s death.    We give district courts wide latitude in receiving

expert testimony during a bench trial. Heinz, 653 N.W.2d at 341. The

district court did not abuse its discretion in allowing this expert

testimony.

      The district court found that the expert opinions “support[]

Metropolitan’s theory that Parker House’s settlement was reasonable and

prudent to avoid the risk of a worse outcome.”          The district court

considered Parker House’s exposure to damages.          The district court,

applying Red Giant Oil Co., concluded that Metropolitan’s settlement was

reasonable, stating,

             There is no question that the estate of Hunter True
      would be able to show liability for his death. Neither party to
      this case believes that he had any fault. Neither party to this
      case disputed that the $900,000 settlement for his death
      was reasonable as damages.          However, the question of
      assignment of fault between Parker House and the individual
      actors is not readily determinable. It is extremely difficult to
      find whether a jury would have held Parker House wholly
                                    20
      accountable under a premises liability theory, the individual
      actors wholly accountable under a negligence theory, or split
      accountability between or among them. Parker House’s
      settlement took the guesswork from the case and avoided a
      worse outcome.       Under the unusual circumstances
      presented in this case, that settlement was reasonable and
      prudent.

      We conclude the district court correctly applied the law, and its

factual findings on the reasonableness of this settlement are supported

by substantial evidence. This $900,000 settlement with disputed liability

is a reasonable amount for the accidental death of a healthy seventeen-

year-old.

      Accordingly, we affirm the district court’s judgment that Auto-

Owners as a coinsurer of the farmhouse property is obligated to

indemnify Metropolitan for half of the $900,000 settlement.       See Red

Giant Oil Co., 528 N.W.2d at 535.

      IV. Disposition.

      For these reasons, we affirm the district court judgment.

      AFFIRMED.

      All justices concur except McDonald, J., who takes no part.