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Iowa Supreme Court says insurance liability must be shared in a tragic shooting death

by Rox Laird | March 12, 2019

A couple of teenage boys are out for some dirt-bike and ATV riding at rural retreat when one of the boys is fatally injured in a tragic shooting accident. The farmhouse on the retreat where the shooting occurred is insured by a homeowners’ policy and by a separate commercial general liability policy.

Is the issuer of the commercial policy on the hook for a share of a $900,000 settlement paid to the victim’s family?

Yes, says the Iowa Supreme Court, in Metropolitan Property and Casualty Insurance Co. v. Auto-Owners Mutual Insurance Co., handed down March 8.

The accidental shooting happened when the son of the farmhouse owner was closing up the house at his father’s direction before leaving, and he was putting away a rifle that had been lying on a bed. The rifle accidentally discharged, striking the victim the abdomen, resulting in the boy’s death.

Metropolitan, which insured the owner of the farmhouse, paid a $900,000 settlement to the family of the shooting victim. Metropolitan subsequently filed suit in Polk County District Court seeking a contribution for half the settlement from Auto-Owners, which had issued a commercial general liability insurance policy covering the farmhouse.

Auto-Owners denied liability, arguing that its policy provided only business coverage to the insured, who held a number of commercial and residential properties, including the farmhouse, in a limited liability company. The owner purchased the farmhouse as an investment and uses it for business meetings, public-service events as well as for hunting, fishing and other outdoor recreation.

Auto-Owners argued that the son was not acting on behalf of the limited liability company, and therefore was not covered, and that the limited liability company had no exposure under a premises liability theory.

The District Court ruled that Auto-Owners was bound by the settlement because a jury could conclude the claim was covered by the commercial general liability policy, and that the settlement was “reasonable and prudent.”

Auto-Owners appealed, and the Supreme Court, in a unanimous decision written by Justice Thomas Waterman, affirmed the District Court ruling. The justices held that the son of the farmhouse owner was acting as an agent for his father’s company when he was securing the house at his father’s direction.

“Securing the property is a business purpose — to protect the unoccupied farmhouse against vandals and burglars,” Waterman wrote. “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.”

In addition, the Supreme Court agreed with the trial court that the Auto-Owners policy covered the premises-liability claim against the farmhouse owner’s company, and that the $900,000 settlement was reasonable for the death of the 17-year-old.

Justice Waterman’s opinion was joined by Chief Justice Mark Cady and Justices Edward Mansfield, David Wiggins and Susan Christensen. Justice Christopher McDonald did not participate in the case.

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