Court Opinion

ID: 2687999
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:45:21.348266+00
Date Added: 2024-06-11T13:17:12.575455
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                            No. 3-1181 / 13-0952
                             Filed April 30, 2014

B & F JACOBSON LUMBER &
HARDWARE, L.L.P.,
      Plaintiff-Appellant,

vs.

ACUITY, a Mutual Insurance
Company,
     Defendant-Appellee.
________________________________________________________________

      Appeal from the Iowa District Court for Monona County, Jeffrey L.

Poulson, Judge.

      An insured appeals the district court’s grant of summary judgment to the

insurer. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

      Travis J. Burk and Shannon M. Henson of the Hope Law Firm, West Des

Moines, for appellant.

      Stephen J. Powell and Dustin T. Zeschke of Swisher & Cohrt, P.L.C.,

Waterloo, for appellee.

      Heard by Danilson, C.J., and Vaitheswaran and Mullins, JJ.
                                        2

MULLINS, J.

      B & F Jacobson Lumber & Hardware, L.L.P. (B & F Jacobson) appeals the

district court’s grant of summary judgment in favor of Acuity Insurance. B & F

Jacobson asserts there is a question of fact as to whether it complied with the

conditions precedent in the insurance policy, and if not, there is a question as to

whether Acuity was prejudiced by its failure to comply with the conditions

precedent. B & F Jacobson also asserts Acuity had no objectively reasonable

basis to deny its claim for additional insurance proceeds and the court should not

have dismissed its punitive damages claim. For the reasons stated below, we

affirm denial of summary judgment on the issue of accord and satisfaction, we

reverse the grant of summary judgment on the issues of compliance with the

notice provision and whether Acuity was prejudiced, we reverse the grant of

summary judgment on the bad faith claim, and we remand this case for further

proceedings.

I. BACKGROUND FACTS AND PROCEEDINGS.

      B & F Jacobson’s buildings were damaged in April 2011 after a tornado

tore through the town of Mapleton. Approximately three days after the tornado,

Acuity sent an adjuster, Brad Werger, to meet with Bruce Jacobson, B & F

Jacobson’s owner, to assess the damage. After reviewing the damage, Werger

prepared a proof of loss and an estimate to repair the damage. Werger claimed

he discussed the estimate and proof of loss with Jacobson and adjusted his

figures according to their discussion. Jacobson endorsed the proof of loss, and
                                       3

Werger issued Jacobson a check for the damage.          On the check it stated

“Settlement in Full-ACV.” Jacobson cashed the check.

      However, at some point after the check was cashed, Jacobson’s brother

informed him of additional damage to the buildings, specifically the roof on two

buildings and a displaced wall on one building. Jacobson claimed it took several

months to clean up the property because he and his employees were busy with

helping other residents in the town rebuild, and the property had sustained much

more damage than was reflected in the estimate and proof of loss prepared by

Werger.

      Jacobson hired an independent adjuster, James Pierce, in August 2011 to

represent his interests.   In February 2012, Pierce had a conversation with

Werger during which he mentioned B & F Jacobson had hired him as its public

adjuster. When Pierce did not hear back from Werger, Pierce followed up with

an email in August 2012, which sought a copy of the documents Jacobson

signed. Werger replied by email that the policyholders signed a release so he

would not be opening up the claim and that he was on vacation at the time but

would send the release to Pierce when he got back. Based on this information,

Pierce believed Acuity would not be willing to consider a claim for additional

damage and advised Jacobson to seek legal representation.

      B & F Jacobson filed suit against Acuity in August 2012, asserting claims

for breach of contract, unjust enrichment, reasonable expectations, and bad faith

and seeking punitive damages.       Acuity, in its answer, asserted affirmative

defenses of accord and satisfaction and failure to comply with contractual
                                           4

obligations, along with asserting the punitive damage claim was barred as the

claim was fairly debatable.

          Acuity filed a motion for summary judgment in January 2013, asserting it

was entitled to summary judgment on all of B & F Jacobson’s claims because of

accord and satisfaction and because B & F Jacobson failed to comply with

conditions precedent before filing suit. B & F Jacobson resisted the motion, and

the district court granted Acuity’s motion in May 2013 after an unreported

hearing.

          The district court concluded there was a question of fact with regard to the

affirmative defense of accord and satisfaction, precluding summary judgment on

this ground.      However, the court found no question of fact regarding B & F

Jacobson’s failure to satisfy the conditions precedent under the insurance policy

prior to filing suit. The court found the ten-month delay in B & F Jacobson’s

notification to Acuity of the additional damage claim was, as a matter of law, a

failure to substantially comply with the terms of the policy. The court concluded

as a matter of law that the condition precedent was not excused by any conduct

of Acuity, and B & F Jacobson failed to rebut the presumption of prejudice to

Acuity. The court also rejected B & F Jacobson’s bad faith claim, along with its

claim for punitive damages, by finding as a matter of law Acuity had a reasonable

basis to deny the claim and the facts did not support the assertion that Acuity’s

failure to reinvestigate resulted in the loss of its reasonable basis.

          B & F Jacobson appeals the district court’s grant of summary judgment to

Acuity.
                                           5

II. SCOPE AND STANDARD OF REVIEW.

         Our review of the district court’s ruling on a motion for summary judgment

is for correction of errors at law. Otterberg v. Farm Bureau Mut. Ins. Co., 696

N.W.2d 24, 27 (Iowa 2005). The district court should grant summary judgment if

“the pleadings, depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” Iowa R. Civ. P. 1.981(3). We view the record in the light most favorable to

the nonmoving party and permit all reasonable inferences that can be drawn from

the record. McCormick v. Nikkel & Assocs., Inc., 819 N.W.2d 368, 371 (Iowa

2012).

III. CONDITION PRECEDENT.

         The insurance policy at issue in this case contained the following

conditions that had to be completed in the event of loss or damage to covered

property:

                (2) Give us prompt notice of the loss or damage. Include a
         description of the property involved.
                (3) As soon as possible, give use a description of how, when
         and where the loss or damage occurred.
                ....
                (5) At our request, give us complete inventories of the
         damaged and undamaged property. Include quantities, costs,
         values and amount of loss claimed.
                ....
                (7) Send us a signed, sworn proof of loss containing the
         information we request to investigate the claim. You must do this
         within 60 days after our request. We will supply you with the
         necessary forms.
                (8) Cooperate with us in the investigation or settlement of the
         claim.
                                         6

If the terms were not satisfied, the policy provided that no legal action could be

brought against Acuity. Acuity asserts B & F Jacobson failed to comply with the

condition precedent by failing to give notice of its claim for additional damages as

a result of the tornado and should be precluded from maintaining this action.

       “When a notice provision is written as a condition precedent to policy

coverage, substantial compliance with such a condition must be shown by the

insured.” Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756 (Iowa

1999). “Ordinarily, the question of whether a notice has been reasonably given is

one of fact for the jury.” Fireman’s Fund Ins. Co. v. ACC Chem. Co., 538 N.W.2d

259, 262 (Iowa 1995). However, where the facts are not in dispute and the

inferences are certain, the question of whether timely notice was given is a

question of law for the court. Met-Coil Sys. Corp. v. Columbia Cas. Co., 524

N.W.2d 650, 656 (Iowa 1994) (citation omitted). If the notice provisions of the

policy are ambiguous or susceptible of different interpretations, such terms are

construed against the insurer. See American Family Mut. Ins. Co. v. Corrigan,

697 N.W.2d 108, 111 (Iowa 2005) (“Due to the adhesive nature of insurance

contracts, ambiguous policy provisions are interpreted in the light most favorable

to the insured.”).

       Here, there is no question B & F Jacobson provided Acuity with timely

notice of the damage following the tornado and complied with each required

condition of the policy. In fact, Acuity paid on the loss at that time. There is also

no question that B & F Jacobson accepted the insurance proceeds and a

minimum of ten months elapsed before it contacted any representative of Acuity
                                       7

to report additional damage.    The tornado occurred in April 2011.      B & F

Jacobson hired James Pierce to be its public adjuster in August 2011, and Pierce

first had a conversation with the Acuity adjuster, Brad Werger, in February of

2012—ten months after the tornado.      The extent of this first conversation is

unknown, though Pierce in his affidavit asserts he informed Werger he had been

hired by B & F Jacobson and he “understood” that Werger “understood” B & F

Jacobson was disputing the amount of its claim. The next contact between the

two adjusters did not occur until August 2012—six months after the first contact

and sixteen months after the tornado—when Pierce followed up with Werger by

email seeking a copy of whatever Bruce Jacobson signed.

      One of the questions becomes whether the notice provisions once fully

met must subsequently be satisfied again if additional damage is discovered that

arose out of the same loss event which Acuity investigated and for which it paid

what both parties mistakenly believed was all the loss.         If under these

circumstances an additional pre-lawsuit notice is required, the next question is

whether a ten- or sixteen-month delay in notifying Acuity of the additional

damages caused by a previously investigated loss substantially complied with

the “prompt” notice requirement of the policy. The district court concluded in

effect that an additional notice was required and that B & F Jacobson did not

substantially comply with such requirement, citing Dico, Inc. v. Employers

Insurance of Wausau, 581 N.W.2d 607, 614 (Iowa 1998), for the proposition that

“an insured’s lack of compliance with notice requirements can be determined as

a matter of law when the delay is measured in terms of months and years.” The
                                         8

district court also noted in Henderson v. Hawkeye-Security Insurance Co., 106

N.W.2d 86, 91 (Iowa 1960), a delay of thirteen months was considered to be a

failure to substantially comply with the notice requirement under the policy as a

matter of law.

       The extent of B & F Jacobson’s contact with Acuity after it discovered

additional damage was the two conversations between Pierce and Werger, which

indicated that B & F Jacobson was “disputing the amount of its claim.” What is

unclear from this record is whether the policy notice provisions apply to situations

such as this where the insurer is made aware of, investigated, and paid out

insurance proceeds for a loss but then the insured discovers what it thinks is

additional damage related to the same loss. The summary judgment record we

have on appeal does not contain the insurance policy at issue but only contains

block quoted portions of the notice provisions. It is not clear whether the insured

must provide the same notice to the insurer where the insurer is already aware of

the loss, its cause, and has surveyed the damage.

       This case varies substantially from the cases cited by the district court in

support of its decision that the ten- or sixteen-month delay in providing Acuity

information about the additional loss was a failure to comply with the notice

provision as a matter of law. The proposition stated by the district court that an

insured’s lack of compliance with notice requirements can be determined as a

matter of law when the delay is measured in terms of months and years comes

from the supreme court’s decision in Dico, Inc., 581 N.W.2d at 614, which cites

as support Fireman’s Fund, 538 N.W.2d at 265. In the Fireman’s Fund case, the
                                          9

insured failed to provide notice to the insurers until five years after it entered into

an EPA consent decree. 538 N.W.2d at 262. The supreme court concluded as a

matter of law that the five-year delay in serving direct notice was not substantial

compliance with the notice requirements of the policies at issue. Id. at 265.

        The district court also cited Henderson, 106 N.W.2d at 91, and Bruns v.

Hartford Accident and Indemnity Co., 407 N.W.2d 576, 579–80 (Iowa 1987), to

support its conclusion that the insured’s ten-month delay in this case failed to

substantially comply with the notice provisions. In Bruns, the insured did not

provide any notice to the insurers of the automobile accident he had been

involved in until twenty-eight months after the accident and after he had been

served with a lawsuit by the injured party. 407 N.W.2d at 578. Likewise in

Henderson, the injured party did not give the insurer any notice of the automobile

accident until thirteen months after the occurrence. 106 N.W.2d at 91. In both of

these cases and in Fireman’s Fund, the insurer had no knowledge whatsoever

about any loss for months or years after the loss occurred. This is simply not

factually similar to the case at hand.

        Acuity clearly had notice of the tornado damage loss, inspected the

property, and issued a check to B & F Jacobson within days of the storm. The

insurer was present at the loss site inspecting the damage and estimating the

loss.   There is clearly an unanswered question regarding whether the notice

provision in the policy applies to situations where the insurer already knows of

the claim, investigates it, and makes payment, but the insured later seeks

additional money under the policy for damage it claimed was not previously
                                            10

discovered; and there is clearly a factual question as to whether a ten-month

delay in providing such notice—if it were required—failed to substantially comply

with the notice provisions in the policy.

       Assuming such notice was required and B & J Jacobson failed to

substantially comply with the notice requirement, then “the insured must show

that failure to comply was excused, or that the requirements of the condition were

waived, or that failure to comply was not prejudicial to the insurer.” Interstate

Power, 603 N.W.2d at 757; see also Fireman’s Fund, 538 N.W.2d at 264. B & F

Jacobson does not contend on appeal that its noncompliance was excused or

that Acuity waived the notice requirement; however, it does assert that there is a

factual question as to whether Acuity was prejudiced by the failure to provide

notice of the additional damage.

       B & F Jacobson claims that after being contacted by Pierce, Acuity,

through its adjuster Werger, refused to re-evaluate the claim due to the alleged

policyholder release. B & F Jacobson also asserts that Acuity did in fact get a

chance to inspect the damage caused by the tornado, unlike the insurers in the

cases cited above. In those cases, the insurers did not get any notice of a claim

at all and were unable to inspect the premises or document the loss. All of those

things were done by Acuity when it initially inspected the damage and paid for

damages that were observed at that time. Also, B & F Jacobson claims that

repairs for the additional damage on one building were not completed until

December 2012, well after the suit here was filed, and no work has been done to

the other building that had a displaced wall. Thus, after notice by suit, Acuity still
                                         11

had an opportunity to further evaluate all the claimed damage, and even to this

day has had the opportunity to examine at least some of the remaining claimed

damage. Acuity has refused to reinvestigate the claim, and B & F Jacobson

claims there is no evidence that if it had notified Acuity earlier of the additional

damages that it would have re-evaluated its claim. In fact, Werger made it clear

in his email to Pierce in August 2012 that, based on what Acuity claimed to be a

release, it would not reopen the file.

       “An insured’s substantial breach of a condition precedent which is not

excused or waived must be presumed prejudicial to the insurer. In order to rebut

this presumption, the insured must show lack of prejudice by satisfactory

evidence.” Met-Coil Sys., 524 N.W.2d at 658 (internal citations omitted). “The

question of prejudice is usually for the jury, but if the facts are undisputed and the

only question concerns the breach of the policy, it may become a question of law

for the court. . . . The burden of proof to show a lack of prejudice is on the

insured.” Fireman’s Fund, 538 N.W.2d at 265 (internal citations omitted).

       The district court concluded B & F Jacobson failed to rebut the

presumption of prejudice finding some of the repair work, as well as the clean-up,

had been done by the time Pierce first contacted Werger ten months after the

tornado. Because the scene had changed, the district court concluded Acuity

was deprived of the ability to assess the additional damage in the new claim and

found as a matter of law that B & F Jacobson failed to rebut the presumption of

prejudice.
                                          12

       Acuity had an adjuster at the scene of the loss within days of the tornado.

It inspected the damage, prepared a proof of loss, and negotiated the values of

the items damaged with Jacobson. This is not a situation where Acuity had no

notice and no ability to inspect the damaged premises for months or years after

the loss occurred. It is clear Acuity, through its adjuster, took the position that the

policyholder’s release and the settlement check, which contained the words

“Settlement in Full-ACV,” completely covered the damage caused by the tornado.

B & F Jacobson refrained from completing repairs to one of its buildings until

after the lawsuit had been filed. It has yet to repair the damage to another

building it claims was caused by the tornado. We conclude there is a factual

question regarding whether or not Acuity was prejudiced by the ten-month delay

in receiving notice of the additional damage claim, assuming the fact finder

determines the notice provision is applicable in this factual situation as detailed

above.

       We conclude the district court erred in finding as a matter of law that the

notice provision in the policy was applicable to this case, that B & F Jacobson

failed to substantially comply with the notice provision, and that B & F Jacobson

failed to rebut the presumption of prejudice.       We reverse the district court’s

decision on this issue and remand for a trial on the merits.

IV. ACCORD AND SATISFACTION.

       As an alternative ground to affirm the district court’s summary judgment

decision, Acuity asserts B & F Jacobson’s contract claims are barred by accord
                                         13

and satisfaction.1 “Accord and satisfaction is a method of discharging a claim

whereby the parties agree to give and accept something in settlement of the

claim and perform the agreement.” Robinson v. Norwest Bank, Cedar Falls,

N.A., 434 N.W.2d 128, 130 (Iowa Ct. App. 1988).

       There can be no accord and satisfaction unless the creditor, or
       party receiving the thing or promise offered, understands, or from
       the circumstances of the offer, or the acts or declarations with
       which it is accompanied, is bound to understand, that he takes it in
       full satisfaction of his claim.

Id. “The question of intent is ordinarily a jury question.” Hengesteg v. Northern

Eng’g, Inc., 478 N.W.2d 307, 309 (Iowa 1991). The common law elements of

accord and satisfaction have been codified in Iowa Code section 554.3311(1)

(2011)—“(i) that person in good faith tendered an instrument to the claimant as

full satisfaction of a claim, (ii) the amount of the claim was unliquidated or subject

to a bona fide dispute, and (iii) the claimant obtained payment of the instrument.”

       The district court found a factual issue prevented it from deciding this

issue as a matter of law. Specifically, it concluded there was a question of fact

regarding whether there was a bona fide dispute and whether Acuity acted in

good faith in issuing the check with “Settlement in Full-ACV” written on it. The

court noted the differing accounts of the interaction between Werger and

Jacobson when the check was issued.           Werger asserted he discussed the

estimate with Jacobson and agreed on a final figure, while Jacobson asserts

1
  While Acuity did not cross-appeal the district court’s summary judgment ruling, we
conclude it did not have to in order to assert this alternative ground as it was the
prevailing party at the district court. See Duck Creek Tire Serv., Inc. v. Goodyear
Corners, L.C., 796 N.W.2d 886, 892–93 (Iowa 2011) (finding Goodyear did not have to
cross-appeal an adverse ruling from the district court in order to raise the issue on
appeal as an alternative ground for relief because it was a prevailing party).
                                         14

Werger came up with the estimate on his own and Jacobson only signed it. The

court also noted that Acuity’s intention and state of mind at the time it issued the

check to B & F Jacobson must be resolved by the fact finder.

       Acuity asserts on appeal that the district court erred in concluding there

was a factual issue on whether there was bona fide dispute because the rule

requires there to be a bona fide dispute or the claim must be unliquidated. Acuity

claims the record is clear that the claim was unliquidated, therefore it does not

matter if there was a bona fide dispute or not. Acuity asserts that insurance

claims such as those caused by a tornado are ordinarily unliquidated because

the amount cannot be determined by a simple mathematical equation.              See

Kellogg v. Iowa State Traveling Men’s Ass’n, 29 N.W.2d 559, 569 (Iowa 1947)

(stating “a claim for debt or damages is liquidated in law when the precise

amount thereof is fixed or has been agreed upon” and defining an “unliquidated

claim” as “one, the amount of which has not been fixed by agreement or cannot

be exactly determined by the application of rules of arithmetic or of law”).

       In response B & F Jacobson claims that what Acuity paid in those first few

days after the tornado was the amount of damage that was undisputed, which it

was required to do under Iowa law. See Iowa Admin. Code r. 191-15.41(6) (“The

insurer shall affirm or deny liability on claims within a reasonable time and shall

tender payment within 30 days of affirmation of liability, if the amount of the claim

is determined and not in dispute.”). B & F Jacobson claims that Acuity paid only

the undisputed portion of the claim when it tendered the check days after the

tornado, and thus, there was no consideration for an accord and satisfaction.
                                        15

       With respect to the good faith issue, Acuity claims the district court failed

to indicate what evidence in the record showed Acuity did not issue the

settlement check in good faith. It claims speculation is not sufficient to generate

a question of fact even where the state of mind or bad faith of a party is at issue.

B & F Jacobson claims that Acuity’s violation of Iowa Administrative Code rule

191-15.41(10) when it wrote “Settlement in Full-ACV” on the check shows its lack

of good faith. This rule provides,

              No insurer shall indicate to a first-party claimant on a
       payment draft, check or in any accompanying letter that said
       payment is “final” or “a release” of any claim unless the policy limit
       has been paid or there has been a compromise settlement agreed
       to by the first-party claimant and the insurer as to coverage and
       amount payable under the contract.

B & F Jacobson contends that an insurer cannot violate this administrative rule

on one hand and then claim to be in good faith on the other hand based on

accord and satisfaction.

       B & F Jacobson has established a factual question regarding the

application of accord and satisfaction. As the district court found, there is a

question of whether there was a bona fide dispute between the parties when the

check was issued. In addition, we find there is a fact question regarding whether

the amount Acuity paid to B & F Jacobson was liquidated or unliquidated. We

decline Acuity’s invitation to find all losses such as this always have unliquidated

damages. We also agree with the district court that there is factual question

regarding whether Acuity acted in good faith in putting “Settlement in Full-ACV”

on the check it issued days after the tornado.       The district court’s decision

regarding Acuity’s affirmative defense of accord and satisfaction is affirmed.
                                            16

V. BAD FAITH AND PUNITIVE DAMAGES.

         Next, B & F Jacobson claims the district court erred in dismissing its bad

faith claim against Acuity and thereby eliminating its claim for punitive damages.

It claims Acuity had no reasonable basis to deny its claim for additional damages.

It also claims Acuity violated an administrative rule by placing “settlement in full”

on the check when the policy limits had not been paid and no compromise

settlement had been reached. See Iowa Admin. Code r. 191–15.41(10).2 B & F

Jacobson also asserts Acuity had no subjectively reasonable basis to deny its

claim.

         Our supreme court first recognized a bad faith claim against insurance

carriers in Dolan v. Aid Insurance Co., 431 N.W.2d 790 (Iowa 1988). In order to

prove bad faith, an insured must show “the absence of a reasonable basis for

denying benefits of the policy, and the [insurer’s] knowledge or reckless

disregard of the lack of a reasonable basis for denying the claim.” Reuter v.

State Farm Mut. Auto. Ins. Co., 469 N.W.2d 250, 253 (Iowa 1991). The test has

been described as both objective and subjective because there must be an

absence of a reasonable basis for the denial—objective—and the insurer needs

to know or have reason to know of the absence of a reasonable basis—

2
  While it acknowledges that this administrative rule, along with other rules found in the
Iowa Unfair Trade Practices Act, does not create a private cause of action, B & F
Jacobson assert that a violation of the act by an insurance carrier may support a claim
for punitive damages under its bad faith claim. See Terra Indust., Inc. v. Commonwealth
Ins. Co., 990 F. Supp. 679, 688 (N.D. Iowa 1997) (finding a violation of Iowa Code
section 507B.4 was pertinent to the plaintiff’s prayer for punitive damages on its bad faith
claim). However, in order to resolve the issues on appeal, we need not decide whether
a violation of the Unfair Trade Practices Act could support an award of punitive damages
in this case.
                                           17

subjective. Id. (“It is sufficient in Iowa to show that the insurer denies a claim

knowing or having reason to know that its denial is without basis.”).              A

reasonable basis exists to deny policy benefits if the insured’s claim is “fairly

debatable either as a matter of fact or law.” Bellville v. Farm Bureau Mut. Ins.

Co., 702 N.W.2d 468, 473 (Iowa 2005). “A claim is ‘fairly debatable’ when it is

open to dispute on any logical basis” or “if reasonable minds can differ on the

coverage-determining facts or law.” Id. “Whether a claim is fairly debatable can

generally be decided as a matter of law by the court.” Id. “[W]here an objectively

reasonable basis for denial of a claim actually exists, the insurer cannot be held

liable for bad faith as a matter of law.” Id. (citation omitted).

       The district court found Acuity did not act in bad faith initially after the

tornado as it sent its adjuster out to review the damage and issued a check within

four days of the disaster. The court found B & F Jacobson failed to provide any

evidence that Acuity did not include in this first estimate all the tornado damage it

then believed had occurred. Because Acuity had not denied the claim at this

stage, we agree without further comment as to the district court’s conclusion on

this point.

       Next, the court concluded B & F Jacobson failed to prove that Acuity’s

failure to reinvestigate the claim resulted in the loss of its reasonable basis

because it never received substantial information from B & F Jacobson that

indicated further investigation was necessary.         The court found that B & F

Jacobson failed to provide the court with enough evidence to negate Acuity’s
                                             18

reasonable basis for the denial.            We turn now to the issues concerning

reinvestigation and subsequent denial.

       A reasonable fact finder could conclude Werger’s email response in

August of 2012 that “we are not opening up the claim,”3 indicated that, in reliance

on the purported release, Acuity would not consider any additional information

and implied any additional claim—if one were submitted—would be denied.4

This response could be interpreted as an attempt to stop B & F Jacobson from

submitting additional damage information.                If that is true, then Acuity

preemptively denied the additional damage claim of B & F Jacobson before

additional information could be submitted by B & F Jacobson. This is the denial

that is the focus of the bad faith claim.

       The question for us at this point is whether Acuity’s reliance on the

purported release to preemptively deny the additional damage claim was

“objectively reasonable.” Id. “[I]f reasonable minds can differ on the coverage-

determining facts or law” then the claim is considered “fairly debatable,” and the

insurer cannot be held liable for bad faith as a matter of law. Id. B & F Jacobson

contends it was not reasonable for Acuity to rely on the policy holder’s release to

refuse to reinvestigate the additional damage claim because the release was

provided to B & F Jacobson within four days of the tornado before it had the time

and ability to assess its own damages. B & F Jacobson asserts the check issued

3
  The complete email said: “On vacation until the 13th. Policyholders release so we are
not opening up the claim. I can send when I get back”
4
  It is significant to note that Werger did not reply that Acuity would reopen the claim if it
was provided additional information. We also note that Werger did not mention any
failure of to satisfy a condition precedent such as notice, nor did he mention accord and
satisfaction as a reason for refusing to reopen the claim.
                                          19

by Acuity represented only the “undisputed” part of the insurance claim, and it

had no intention to fully and finally settle its claim with Acuity at that point. These

claims implicate the provisions of Iowa Administrative Code rule 191-15.41(10).

We should be clear that we need not reach the question as to whether a violation

of that regulation could by itself support a bad faith claim. We do, however,

conclude that the regulation establishes a standard of conduct, the violation of

which could—together with other evidence—form the basis of a conclusion that

the conduct was not objectively reasonable.

       We decide that this is one of those rare circumstances in which we cannot

say as a matter of law or a matter of fact whether the claim is fairly debatable. A

fact finder must determine whether the preemptive denial of the claim was

objectively reasonable. A fact finder must also determine whether Acuity knew

that reliance on the release was not a reasonable basis for preemptively denying

the claim or acted with reckless disregard as to whether such reliance was

reasonable—subjective reasonableness.

       Accordingly, we find that there are genuine issues of material fact such

that summary judgment on the bad faith claim and the accompanying claim for

punitive damages cannot be determined at this time as a matter of law.

VI. CONCLUSION.

       In conclusion, we find there is clearly an unanswered question regarding

whether the notice provision in the policy applies to the additional damage claim

in this case. In addition, there is a factual question as to whether a ten-month

delay in providing the additional damage notice—if it were required—failed to
                                          20

substantially comply with the notice provisions in the policy.        We also find a

factual question regarding whether or not Acuity was prejudiced by the ten-month

delay in receiving notice of the additional damage claim, assuming the fact finder

determines the notice provision is applicable in this factual situation as detailed

above. We agree with the district court that B & F Jacobson has established a

factual question regarding the application of accord and satisfaction. There is a

question of whether there was a bona fide dispute between the parties when the

check was issued and a question regarding whether the amount Acuity paid to B

& F Jacobson was liquidated or unliquidated. We also agree with the district

court that there is factual question regarding whether Acuity acted in good faith in

putting “Settlement in Full-ACV” on the check it issued days after the tornado.

Finally, we decide that this is one of those rare circumstances in which we cannot

say as a matter of law or a matter of fact whether the claim is fairly debatable. A

fact finder must determine whether the preemptive denial of the additional

damage claim was objectively reasonable and must determine whether Acuity’s

reliance on the release provided a reasonable basis to preemptively deny the

claim.

         We therefore affirm the summary judgment decision of the district court

with respect to its accord and satisfaction ruling, we reverse the decision with

respect to the notice provision and the bad faith claim, and we remand the case

to the district court for further proceedings consistent with this opinion.

         AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.