Background
Craig Roberts was injured in a November 2022 collision with an underinsured driver whose liability insurer tendered its $300,000 limits. Craig and Kristin Roberts then sought benefits under a Grinnell Select auto policy and a Grinnell Mutual umbrella policy providing combined underinsured-motorist limits of $1.25 million.
After the Robertses sent a policy-limits demand supported by medical records and estimates of future medical expenses and wage loss, Grinnell requested a physical examination, an examination under oath, authorizations, and employment and medical information. The Robertses’ attorney acknowledged the request and said suit would soon be filed but did not address the requested items. After suit was filed, Grinnell did not renew its requests or pursue the information through discovery. It instead obtained summary judgment on the theory that the Robertses had breached conditions precedent and that prejudice to Grinnell should be presumed.
The Court’s Holding
The Iowa Court of Appeals reversed. The auto policy stated that Grinnell had no duty to provide coverage if an insured’s failure to perform listed post-accident duties was “prejudicial to us.” The majority held that this language made prejudice—not noncompliance alone—the trigger for releasing Grinnell from its coverage obligation and placed the burden on Grinnell to show actual prejudice.
The court held that Grinnell could not invoke the common-law presumption of prejudice applicable when a policy is silent on the issue. It remanded for the district court to determine, based only on arguments made before the appeal, whether the summary-judgment record established actual prejudice without a presumption. Because the umbrella claim had been dismissed solely based on the loss of underlying auto coverage, and the bad-faith claim solely based on the asserted policy breach, the court conditionally reversed those dismissals as well.
Key Takeaways
- When an insurance policy expressly conditions the loss of coverage on prejudice to the insurer, the insurer must prove actual prejudice from the insured’s noncompliance.
- A common-law presumption of prejudice cannot override policy language allocating the prejudice burden to the insurer.
- The court did not decide whether Grinnell actually suffered prejudice or whether the Robertses ultimately prevail on their coverage and bad-faith claims; those issues return to the district court.
Why It Matters
The decision emphasizes that Iowa courts must enforce an insurer’s chosen policy language rather than treat an express prejudice provision as surplusage. Insurers seeking summary judgment based on an insured’s failure to cooperate may therefore need evidence of concrete prejudice when their policies expressly make prejudice a condition of denying coverage.
The ruling also revives the Robertses’ umbrella-coverage and bad-faith claims, but only conditionally. Their viability will depend on the district court’s actual-prejudice analysis and further proceedings on the elements of bad faith.