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Grinnell Mutual Reinsurance Co. v. Jungling12/18/2002
constitutes a loss compensable under the personal excess policy even though the funds were routed through Jungling Farms, Inc.
For reasons that follow, we disagree with this reasoning and legal conclusion. Jungling paid the funds into Jungling Farms, Inc. on the advice of his accountant to obtain a tax benefit. As Grinnell points out, on the one hand Jungling represented to tax authorities that the settlement was paid by Jungling Farms, Inc. On the other hand, Jungling asserted in this proceeding that he personally paid the settlement. We agree with Grinnell that he cannot have it both ways. When Jungling paid the funds into Jungling Farms, Inc., the funds became the property of the corporation. Therefore, Jungling Farms, Inc. suffered the loss when it paid the settlement, not Jungling. There was no coverage as far as Jungling Farms, Inc. was concerned. Grinnell was therefore not obligated to indemnify Jungling Farms, Inc. for any loss it incurred.
The district court erred in relying on the joint and several liability rule when it concluded that Grinnell was obligated to indemnify Jungling for the full amount of the demand. It is true that according to the joint and several liability rule, each defendant was liable for the total amount of the judgment. Slager v. HWA Corp., 435 N.W.2d 349, 351 (Iowa 1989) (common-law rule of joint and several liability permits recovery of the total judgment against any one defendant). The joint and several liability rule is a tort principle inuring to the benefit of the plaintiff. The rule has nothing to do with Grinnell's obligation under the policy to pay only for a loss sustained by an insured. Nevertheless, because Grinnell is only asking to have its liability limited to fifty percent of the demand, we have no alternative but to abide by that request. Cf. State ex rel. Miller v. Midwest Pork, L.C., 625 N.W.2d 694, 701 (Iowa 2001) ("Although the statute as we have interpreted it would permit broader injunctive relief, the district court, in fashioning its order, should restrict the injunction to that requested by the State."); Douglass v. Iowa City, 218 N.W.2d 908, 914 (Iowa 1974).
VIII. Disposition
In sum, the district court correctly concluded that (1) the policy language provided coverage, (2) public policy did not bar coverage, and (3) Jungling's noncompliance with the notice provision of the policy was legally excused. The court, however, erred in concluding that Grinnell was obligated under the policy to reimburse Jungling for the demand it made to Grinnell, that is $344,400. However, because Grinnell only asks that its liability be limited to fifty percent of the demand, we reverse and remand for an entry of judgment that Grinnell is obligated to reimburse Jungling for $172,200. We affirm the district court's judgment in all other respects.
COURT OF APPEALS DECISION VACATED; DISTRICT COURT JUDGMENT AFFIRMED IN PART AND REVERSED IN PART; CASE REMANDED WITH DIRECTIONS.
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