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IDE v. FARM BUREAU MUT. INS. CO.3/20/1996
A custom sheep owner and custom sheep feeders entered into a custom feeding contract. The owner sued the feeders individually and in partnership for damages sustained by the loss of a large number of sheep due to an ice storm while in the custom feeders' care. In that action, the district court awarded damages to the custom sheep owner.
The owner unsuccessfully attempted to execute judgment against all defendants. At this point the owner entered into an agreement with one of the feeders under our direct action statute. See Iowa Code ch. 516 (1991).
The owner and this feeder then instituted the present declaratory judgment action under the direct action statute against the remaining feeder's insurer. The district court ruled there was coverage under the remaining feeder's underlying and umbrella policies. The court also ruled that the insurer had to provide coverage because the remaining feeder-insured had a reasonable expectation that the losses in the custom feeding operation would be covered under the policies. On the insurer's appeal, we reverse on both issues and remand for judgment in favor of the insurer.
I. Background Facts.
Greg Griffith began farming in the Ringgold County area in 1990. In the process he established a trust for his four daughters which he named the Four K Trust (Trust). The Trust owned the Ringgold County farm, and Griffith operated the farm for the Trust.
Roger Ide is a Union County farmer. Ide has farmed for over thirty years, and his farming operation has always included sheep production. Griffith became acquainted with Ide because Griffith was interested in expanding the Trust's animal operation to include sheep.
In July 1991, Griffith — acting individually and as a trustee of the Trust — and Ide formed a sheep raising partnership (Griffith-Ide). Terms of the agreement contemplated Griffith and Ide feeding and finishing their own sheep. The agreement also contemplated that Griffith and Ide would do custom sheep feeding by agreement with other parties. Ide was to provide the money and advisory input. Griffith was to care for the sheep and manage the sheep operation. Griffith was to feed and raise the sheep on the Trust's farm. Ide and Griffith also agreed that Griffith would make arrangements for insurance coverage on all the sheep.
Sometime in the mid-to-late summer of 1991, Ide first made contact with Miller Lamb, Ltd. (Miller Lamb). Miller Lamb is an Iowa family farm corporation located near Reinbeck. Miller Lamb places its sheep with custom feeders on contract. Ide suggested to Miller Lamb that Griffith and Ide might custom feed some Miller Lamb sheep. The parties entered into no agreement at this time.
On or about September 27, 1991, Griffith met with Merrill Perry, a Farm Bureau Mutual Insurance Co. (Farm Bureau) agent operating out of the Ringgold County office. Farm Bureau has its principal place of business in West Des Moines. At this meeting Griffith acted (1) in his own capacity, (2) as the agent of the Trust, and (3) as representative of the Griffith-Ide partnership.
Griffith met with Perry for the purpose of purchasing Farm Bureau insurance. Griffith described his discussion with Perry this way:
Q. What was it when you first went to see Mr. Perry, what did you advise him as to your operation? A. I told him we had the farms and the farm buildings and farm equipment and livestock and wanted a complete insurance package.
Q. And what [else] did you tell [Mr. Perry]? A. Well, I told him that the Trust owned the farms, the Trust owned the equipment. And that the Trust had sheep of their own and that the Trust was involved in part
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