IN THE COURT OF APPEALS OF IOWA
No. 23-1308 Filed October 30, 2024
JOHN DOSTART and DEENA DOSTART, Plaintiffs-Appellees,
vs.
COLUMBIA INSURANCE GROUP, Defendant-Appellant. ________________________________________________________________
Appeal from the Iowa District Court for Polk County, Coleman McAllister,
Judge.
An insurance company appeals an interlocutory order of the district court
denying its motion for summary judgment on judgment creditors’ claim for payment
of an unsatisfied judgment against one of the company’s insureds under Iowa
Code section 516.1 (2022). AFFIRMED.
Michael A. Carmoney and Allison J. Frederick of Carmoney Law Firm,
PLLC, Des Moines, for appellant.
Billy J. Mallory and Trevor A. Jordison of Mallory Law, West Des Moines,
for appellees.
Heard by Badding, P.J., Langholz, J., and Doyle, S.J.*
*Senior judge assigned by order pursuant to Iowa Code section 602.9206
(2024). 2
LANGHOLZ, Judge.
This insurance coverage dispute under Iowa Code section 516.1 (2022)
presents many interesting legal questions. But we cannot resolve most of them
yet in this interlocutory appeal because we generally must apply law to facts. And
at bottom, this summary-judgment record lacks sufficient evidence to hold, as
Columbia Insurance Group urges us to, that the insurance policy it issued does not
cover the consumer-fraud judgment entered in favor of John and Deena Dostart.
The necessary factual findings of an unsatisfied judgment alone may sometimes
be enough to resolve a coverage dispute at summary judgment. But not this
consumer-fraud judgment nor this insurance policy. And especially not when
Columbia disclaims any argument that consumer fraud could never be covered by
the policy. We thus affirm the district court’s denial of summary judgment.
I.
The Unsatisfied Judgment. In April 2022, a jury awarded the Dostarts
$200,000 in compensatory and statutory damages on their claims of consumer
fraud against a construction company (and its owner) that built them a new home.
The jury returned a general verdict on the claims, agreeing that “the Dostarts
prove[d] their consumer fraud claim against” each defendant. And it found that
each defendant’s “consumer fraud constitutes a willful and wanton disregard for
the rights or safety of another.” So it found each defendant liable for $8,795.85 in
statutory damages.1 And it split the award of compensatory damages between the
two defendants roughly two to one—finding the company caused $118,808.30 in
1 The jury instructions and verdict form used the term “Exemplary Damages,” rather
than the term in the Iowa Code: “statutory damages” See Iowa Code § 714H.5(4). 3
actual damages for “[t]he reasonable cost of completing the home” and its owner
caused $63,600 in damages for “[c]osts associated with temporary living, moving
expenses, and loan extension.”2 The district court later also awarded the Dostarts
$88,166.52 of attorney fees, assessed costs to the defendants, and entered
judgment in the Dostarts’ favor.
Throughout this consumer-fraud proceeding, the company’s insurance
provider, Columbia, defended the company and its owner under their commercial-
general-liability insurance policy, subject to a reservation of rights that Columbia
might withdraw its defense or decline to indemnify them. Shortly after the verdict,
Columbia informed them that the verdict was not covered by the policy. So
Columbia declined to indemnify the judgment and withdrew its defense.
This Suit. Despite their win in court, the Dostarts were unable to collect on
their judgment from the construction company or its owner. So 180 days after the
entry of judgment, they sued Columbia, seeking payment of the unsatisfied
judgment under Iowa Code section 516.1. That statute lets a judgment creditor,
like the Dostarts, stand in the shoes of the insured to bring a direct action against
the insurer. See Iowa Code § 516.1.
Columbia moved for summary judgment on the Dostarts’ claim. It argued
that four provisions in the 154-page insurance policy precluded coverage for their
unsatisfied judgment. First, noting that the policy only covers damages “caused
by an ‘occurrence,’” which is defined in the policy as “an accident,” Columbia
argued that the “fraud” causing the Dostarts’ damages was not accidental and thus
2 The jury also rejected the Dostarts’ breach-of-contract and breach-of-express-
warranty claims against the construction company. 4
not a covered “occurrence.” Second, it argued that the damages were not
“because of ‘bodily injury’ or ‘property damage’” as also required by the policy.
Third, it argued that the fraud falls within the policy’s exclusion “for loss which
results from an act committed by or at the direction of an insured with the intent to
cause loss.” And fourth, it argued that the statutory-damage awards fell within the
policy’s exclusion for “punitive or exemplary damages.”
To support its argument about the conduct leading to the consumer-fraud
judgment, Columbia attached only the jury’s verdict form, excerpts from the jury
instructions, the court’s entry of judgment, and the pleadings. The only facts
admitted in the pleadings were the identity, location, and relationship of the two
defendants. Columbia presented no affidavits or other direct evidence of the
construction company or its owner’s interactions with the Dostarts during the
construction of their home.
The Dostarts conceded that the statutory-damage awards were excluded
under the policy. But they otherwise resisted summary judgment. They responded
that Columbia’s arguments about the definition of occurrence and the intentional-
act exclusion were off-base because their judgment was under the consumer-fraud
statute. See Iowa Code §§ 714H.3(1), 714H.5. That statute—unlike common-law
fraud—they contended, does not require an intent to deceive or even knowledge
of a misrepresentation or omission. They also argued that their compensatory
damages were indeed because of property damage and submitted an expert report
documenting property damage to their home that they contended creates a fact
dispute on that question. 5
Given the Dostarts’ concession on statutory damages, the district court
granted summary judgment on the part of their claim seeking to recover on those
awards. The court denied the rest of Columbia’s motion. The court reasoned that
it could not “conclude, based on the record presented, that [the Dostarts’] recovery
against Columbia’s insured was based on what was the functional equivalent of a
common law fraud claim.” The court noted that “liability may be imposed under
the consumer fraud statute without the need to establish the same degree of proof
as is necessary to recover under a common law fraud claim” and that “a knowing
violation of the consumer fraud statute is not necessarily the functional equivalent
of the commission of an intentional tort.” So the court held that it could not say as
a matter of law that “the insured’s actions in this case did not fit within the definition
of an ‘occurrence’” under the policy or that “the intentional act exclusion applies.”
The court also decided that a fact dispute remained about whether the insured’s
actions caused property damage, reasoning that the verdict form’s categories of
damages were not defined and that the Dostarts had submitted “an expert witness
report that, when taken in the light most favorable to [them], supports a conclusion
that property damage did result from the actions of Columbia’s insured.”
The supreme court granted Columbia’s application for interlocutory review
of this ruling and eventually transferred the appeal to our court.
II.
Under Iowa Code section 516.1, successful plaintiffs who were “injured or
whose property [was] damaged” by an insured defendant may seek payment on
their judgment from the insurer if execution on the judgment (trying to recover from
the insured defendant) is “returned unsatisfied.” Iowa Code § 516.1. In such a 6
suit against the insurer, the plaintiffs have the same right to enforce “the insured’s
claim against such insurer” that the insured would have if the insured had paid the
judgment. Id. So a suit under section 516.1 is essentially an insurance coverage
dispute litigated by the parties with the most skin in the game—the successful
plaintiffs in the underlying tort suit—rather than the judgment-proof-but-insured
tort-suit defendant. See Pries v. M.F.A. Mut. Ins., 122 N.W.2d 925, 927
(Iowa 1963) (noting that section 516.1 “is designed to correct an injustice which
might occur should an insolvent insured refuse to sue his insurance company to
force payment under the terms of the policy”).
Resolving the coverage dispute requires deciding the factual issues of what
conduct the insured defendants engaged in that led to liability in the unsatisfied
judgment. Sometimes, a party in the section 516.1 proceeding may be able to rely
on issue preclusion to prove a fact that was necessarily decided in the underlying
tort suit. See Schneberger v. U.S. Fid. & Guar. Co., 213 N.W.2d 913, 916–18
(Iowa 1973) (holding that issue preclusion applied to a section 516.1 claim under
one policy because the original suit decided a fact question of a car owner’s
consent but that it did not apply to a claim under the second policy where the
dispositive question of that insured’s consent was not decided in the original suit).
But when the issue was not decided—for example, because the basis of liability in
the underlying suit is broad enough to include both conduct that would be covered
and excluded by the policy—then the conduct must be proven with evidence in the
section 516.1 proceeding. See Dolan v. State Farm Fire & Cas. Co., 573
N.W.2d 254, 257 (Iowa 1998) (holding that a negligence verdict did not preclude
the insurer from raising intentional-tort exclusion because “[n]egligence and 7
intentional torts are not mutually exclusive concepts” and finding defendant’s
conduct was intentional based on evidence of the conduct submitted at the bench
trial on the section 516.1 claim); Schneberger, 213 N.W.2d at 919 (reversing grant
of summary judgment that improperly relied on a prior suit that did not decide
dispositive factual issue and remanding for further proceedings).
Disputes about the facts material to an insurance coverage claim under
section 516.1—as with any claim—are resolved at trial. But the district court must
grant a party’s motion for summary judgment when the evidence in the record
“show[s] 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). In
resisting summary judgment, the nonmoving “party may not rest upon the mere
allegations or denials in the pleadings, but the response . . . must set forth specific
facts showing that there is a genuine issue for trial.” Iowa R. Civ. P. 1.981(5). Still,
“[t]he burden of showing undisputed facts entitling the moving party to summary
judgment . . . remains with the moving party at all times”—it “cannot shift the
burden to the other party through a conclusory motion . . . not supported by
undisputed facts.” Morris v. Steffes Grp., Inc., 924 N.W.2d 491, 496 (Iowa 2019).
We review a district court’s denial of summary judgment for corrections of errors
at law. Hagenow v. Am. Fam. Mut. Ins., 846 N.W.2d 373, 376 (Iowa 2014).
Columbia seeks to cut off the Dostarts’ suit by arguing that it is entitled to
summary judgment because we can decide as a matter of law that the insurance
policy does not cover the Dostarts’ consumer-fraud judgment. As in the district
court, Columbia offers three arguments that would independently defeat coverage
for the judgment: (1) the consumer fraud was not a covered “occurrence” under 8
the policy; (2) the consumer fraud fell within the intentional-act exclusion of the
policy; and (3) the judgment was not because of “property damage.” Because
Columbia’s arguments based on the definition of a covered “occurrence” and the
intentional-act exclusion are closely related—and are the focus of Columbia’s
appeal—we address them together at the start.
Covered “Occurrence” and Intentional-Act Exclusion. The commercial-
general-liability policy issued by Columbia to the construction company found liable
to the Dostarts only covers damages “caused by an ‘occurrence.’” And the policy
defines “occurrence” as “an accident, including continuous or repeated exposure
to substantially the same general harmful conditions.” Similarly, the policy’s
intentional-act exclusion excludes from coverage “loss which results from an act
committed by or at the direction of an insured and with the intent to cause loss.”
These are standard policy terms that are thus often interpreted and applied by the
courts. See Nat’l Sur. Corp. v. Westlake Invs., LLC, 880 N.W.2d 724, 733 (Iowa
2016). And so, Columbia relies heavily on a previous case, Yegge v. Integrity Mut.
Ins., 534 N.W.2d 100 (Iowa 1995), that it contends is “extraordinarily similar.”
Yegge indeed also involved a suit by homeowners to recover on an
unsatisfied judgment against their construction company from the company’s
insurer under section 516.1. See Yegge, 534 N.W.2d at 101–02. The underlying
conduct there “giving rise to [the] Yegges’ claim included breach of contract,
breach of express warranty, breach of implied warranty and fraud.” Id. at 103. And
applying the same policy term here, the supreme court held that the conduct “did
not constitute an ‘occurrence’” because it did not “involve accidental conduct.” Id.
at 102–03. So Columbia contends that based on Yegge, we must hold that the 9
consumer-fraud conduct here was not accidental and thus is not a covered
“occurrence” and likewise is excluded as an intentional act. But Yegge cannot
support the weight Columbia places on it for two reasons.
First, the court in Yegge held only that common-law fraud is not accidental
and thus cannot be an occurrence under the standard policy term. See Yegge,
534 N.W.2d at 102. It did not consider a private consumer-fraud claim—nor could
it since that statute was not enacted until more than a decade later. See 2009
Iowa Acts ch. 167. And the elements of a common-law fraud claim and a private
consumer-fraud claim are not the same. Common-law fraud requires, among other
elements, an intent “to deceive” and knowledge that “the representation was false.”
Dier v. Peters, 815 N.W.2d 1, 7 (Iowa 2012) (cleaned up).
But private consumer fraud contains no such requirements. It requires only
“intent that others rely upon” the conduct. Iowa Code § 714H.3(1). It requires not
knowledge of falsity but merely negligence. See id. (prohibiting conduct “the
person knows or reasonably should know is an unfair practice, deception, fraud,
false pretense, or false promise, or the misrepresentation, concealment,
suppression, or omission of a material fact” (emphasis added)). And the conduct
sweeps more broadly than the false representations of common-law fraud.3 For
3 The jury instructions submitted in the summary-judgment record show that the
Dostarts relied only on conduct that was “a deception, fraud, false pretense, a false promise, a misrepresentation, or a concealment, suppression, or omission of facts.” But if the jury had not been instructed that narrowly, the scope of conduct that could be a consumer-fraud violation sweeps even more broadly to include unfair practices and a laundry list of other assorted statutory violations. See Iowa Code § 714.16(1)(i) (defining “unfair practice” to mean “an act or practice which causes substantial, unavoidable injury to consumers that is not outweighed by any consumer or competitive benefits which the practice produces”); id. § 714H.3(2). 10
example, a deception includes “an act or practice that is likely to mislead a
substantial number of consumers as to a material fact or facts.” Id. § 714H.2(5).
Given the breadth of conduct that could lead to a consumer-fraud judgment
compared to common-law fraud, the holding in Yegge that common-law fraud is
not accidental conduct does not control here. We cannot say as a matter of law
that a consumer-fraud judgment is intentional rather than accidental.
Columbia does not contest the broad scope of the consumer-fraud statute.
Indeed, in its briefing to us, it disclaims taking the position that “consumer fraud
can never be an occurrence under the policy.” (Cleaned up.) Columbia instead
argues that we do “not need to decide whether, hypothetically, consumer fraud can
ever be ‘an occurrence’” because “under the specific circumstances of this case,
[the insured defendants’] consumer fraud is not an ‘occurrence’ covered by” the
policy.
But that brings us to the second difference between this case and Yegge—
we have no evidence about the specific facts giving rise to the unsatisfied
consumer-fraud judgment. The claim for payment on the judgment in Yegge was
decided after a bench trial on stipulated facts.4 See Yegge, 534 N.W.2d at 102.
Yet here, Columbia asks for a decision in its favor on summary judgment. And
despite making a facts-of-this-case-specific argument, Columbia presents no
evidence of the underlying facts in support of its summary-judgment motion. The
closest it comes is submitting the jury verdict, jury instructions, and entry of
judgment. True, that evidence shows the Dostarts got a judgment against
4 The district court in Yegge only decided separate claims for bad-faith and punitive
damages on summary judgment. See Yegge, 534 N.W.2d at 102. 11
Columbia’s insured for consumer fraud. But it tells us nothing specific about the
conduct giving rise to that judgment—such as whether that conduct was
intentional.5 And Columbia presented no witness testimony, exhibits, or other
evidence from which a factfinder could find that the conduct was intentional rather
than accidental.
Columbia tries to work around this absence of facts by contending that we
can conclude as a matter of law that the consumer fraud here was intentional rather
than accidental because the jury awarded statutory damages after finding that the
insured defendants’ “consumer fraud constitutes a willful and wanton disregard for
the rights or safety of another.” But “persistent reckless conduct”—not just
intentional conduct—can satisfy this willful-and-wanton-disregard standard for
statutory damages. Bradshaw Renovations, LLC v. Graham, No. 22-1721, 2024
WL 4368669, at *7–8 (Iowa Ct. App. Oct. 2, 2024) (cleaned up); cf. Miranda v.
Said, 836 N.W.2d 8, 34 (Iowa 2013) (holding, under the general punitive damages
statute with nearly identical text, that substantial evidence in the record to infer
recklessness supported the punitive-damages award). So without more facts, we
cannot say as a matter of law that the consumer-fraud conduct here was intentional
merely because the jury awarded statutory damages.
5 Columbia never expressly relied on issue preclusion, nor argued that its requirements were met, to prove any facts underlying the unsatisfied judgment. Cf. Dolan, 573 N.W.2d at 256. But even assuming Columbia was implicitly seeking to prove some facts through issue preclusion with the judgment, as discussed above, given the scope of the consumer-fraud claim submitted to the jury, we cannot say the jury necessarily decided the conduct was intentional. See id. at 256–57; Schneberger, 213 N.W.2d at 916–18. 12
In sum, Columbia has failed to meet its summary-judgment burden to “show
that there is no genuine issue as to any material fact and that [Columbia] is entitled
to a judgment as a matter of law.” Iowa R. Civ. P. 1.981(3); see also Interstate
Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756 (Iowa 1999) (holding in an
insurance-coverage dispute it was the insurer’s burden at summary judgment to
“negate the policy provision requiring unexpected and unintended injury”). We lack
any basis in the record to hold that the unsatisfied consumer-fraud judgment did
not involve accidental conduct. And so, the district court properly denied summary
judgment on the grounds that the consumer-fraud conduct was not a covered
occurrence or was excluded as an intentional act.6
Property Damage. Columbia’s final argument for lack of coverage also
suffers from a lack of undisputed facts. Under the policy, damages are covered
only when “because of ‘bodily injury’ or ‘property damage.’” No one contends the
consumer-fraud judgment involved bodily injury. And the policy defines property
damage as “[p]hysical injury to tangible property, including all resulting loss of use
of that property” or “[l]oss of use of tangible property that is not physically injured.”
6 We recognize that the supreme court has held that a claim for defective construction is not an occurrence under a commercial-general-liability policy because that conduct is not “an undesigned, sudden, and unexpected event.” Pursell Constr., Inc. v. Hawkeye-Sec. Ins., 596 N.W.2d 67, 70 (Iowa 1999) (cleaned up). But see Westlake Invs., 880 N.W.2d at 744 (holding that “defective workmanship by an insured’s subcontractor may constitute an occurrence” under the standard commercial-general-liability policy terms). Yet Columbia did not make a similar argument in the district court. So it is not preserved for our review. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of appellate review that issues must ordinarily be both raised and decided by the district court before we will decide them on appeal.”). And regardless, on this record, we could only say the damages here were necessarily found to be proximately caused by consumer fraud—not defective work. 13
Columbia again relies on Yegge, which interpreted the same language to
hold that “[t]he subject of the” claims there “did not qualify as property damage
within the policy’s definition because they are intangible economic losses.” Yegge,
534 N.W.2d at 102 (cleaned up). But remember, Yegge was decided by trial on
stipulated facts. Here, Columbia seeks to decide the question at summary
judgment with only the jury instructions, verdict form, and judgment entry as
evidence as to whether the damages awarded were “because of” “[p]hysical injury
to tangible property” or “loss of use of that property.” And this limited evidence
fails to meet Columbia’s summary-judgment burden on this policy provision too.
See Interstate Power Co., 603 N.W.2d at 756.
All we can say as a matter of law is that the compensatory damages were
proximately caused by consumer fraud. This, again, is a distinction from Yegge,
where the conduct included breach of contract and breach of express and implied
warranties making it unsurprising that the underlying evidence would likewise
support a finding of only “intangible economic losses.” Yegge, 534 N.W.2d at 102.
And the verdict form here shows the jury awarded some damages for “[t]he
reasonable cost of completing the home” and some for “[c]osts associated with
temporary living, moving expenses, and loan extension.” As those descriptions
are not statutory terms, it is unclear without the underlying evidence of the
consumer-fraud conduct and the Dostarts’ losses what factual conclusions can be
drawn about the cause of the damages. So on this record, we cannot say that
none of the need to “complet[e] the home” may have been because of physical
damage or that none of the living and moving expenses were from “loss of use” of
damaged property. And thus, the district court properly denied summary judgment 14
on the ground that the consumer-fraud judgment was not “because of ‘bodily injury’
or ‘property damage.’”7
* * *
Columbia may ultimately be proved correct that the consumer fraud here
was not accidental, that it was committed “with the intent to cause a loss,” or that
it was not “because of ‘bodily injury’ or ‘property damage.’” It might even succeed
in doing so through summary judgment, if it presents evidence of the underlying
conduct and the Dostarts then fail to meet their summary-judgment burden to
dispute the material facts with their own evidence about the underlying conduct.
But the verdict form, jury-instruction excerpts, and judgment entry from the
unsatisfied consumer-fraud judgment submitted by Columbia here do not show
that Columbia is entitled to judgment as a matter of law. And so, the district court
correctly denied Columbia’s motion for summary judgment.
AFFIRMED.
7 Because Columbia failed to meet its burden to present evidence negating this
policy provision, it matters not whether the Dostarts resisted with evidence showing the underlying property damage. See Interstate Power Co., 603 N.W.2d at 756; Am. Tel. & Tel. Co. v. Dubuque Commc’ns Corp., 231 N.W.2d 12, 14 (Iowa 1975) (“While failure to adequately resist a motion for summary judgment is a dangerous course for defendant[s] to take, it becomes fatal only if the summary judgment movant has met the burden of proof imposed upon it by rule [1.981].”). But the Dostarts did submit an expert report that they allege shows physical damage caused by the consumer fraud—further showing that a material fact dispute remains.