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CENTRAL NAT. INS. CO. OF OMAHA v. INA3/23/1994
[513 NW2d Page 752]
Central National Insurance Company of Omaha (CNI) obtained a default judgment against parties insured by Insurance Company of North America (INA) and Employers Reinsurance Corporation (Employers). When the judgment was not satisfied, CNI sued INA and Employers to recover on their policies under Iowa Code chapter 516. Employers answered within the time allowed by the rules; INA did not. In due time, CNI obtained a default judgment against INA. Shortly thereafter, INA moved to set aside the default. The district court granted INA's motion, finding that CNI had obtained the default in violation of local custom and practice.
Ultimately, the district court granted INA's motion for summary judgment. The court concluded there was no coverage for the acts that led to the judgment against INA's insureds.
The claim against Employers was tried to the court which found against CNI. The court determined there was no coverage because no notice of the claims against Employers' insureds was given to Employers during the policy period as allegedly required by Employers' claims made policy.
CNI appealed from the default and summary judgment rulings in favor of INA. CNI also appealed from the judgment in favor of Employers.
At oral arguments, CNI's counsel conceded that our recent decision in Hasbrouck v. St. Paul Fire & Marine Ins. Co., 511 N.W.2d 364, 367 (Iowa 1993), disposes of CNI's appeal from the judgment in favor of Employers. According to Hasbrouck, a prerequisite to coverage under a claims made policy is that the insured report a claim to the insurer while the policy is in effect. Hasbrouck, 511 N.W.2d at 367. So we give no further consideration to the appeal involving Employers and affirm the judgment in its favor.
Because we conclude the district court abused its discretion in setting aside the default against INA, we reverse the ruling on the default. For reasons stated later in this opinion, we remand for further proceedings on the default issue.
Frank E. Duncan and Gary Bailey were the sole shareholders, directors, and owners of four different corporations: (1) Church Insurance Consultants, Inc. (Church), (2) Action Insurance Agency (Action), (3) Insurance Marketing Service, Inc. (Insurance Marketing), and (4) Iowa Underwriters, Inc. In early 1984 Church entered into an agreement with CNI. Under the agreement, Church agreed to (1) sell and write insurance for CNI to religious institutions and organizations, (2) collect premiums, and (3) provide certain services to policyholders.
On February 1, 1984, INA issued a "Comprehensive Crime Policy" to Church. The policy period was from February 1, 1984, to February 1, 1985. Among the riders attached to the policy was one adding Action, Insurance Marketing, and Iowa Underwriters, Inc. as insureds.
Church and the other three corporations — Action, Insurance Marketing, and Iowa Underwriters, Inc. — went out of business before June of 1985. In June 1985 CNI filed a [513 NW2d Page 753]
petition against Duncan and Bailey individually, and the four corporations just mentioned. The petition alleged claims for, among other things, (1) negligence, (2) breach of contract, and (3) fraud. The petition sought compensatory damages for (1) premiums allegedly not remitted by Church, and (2) losses allegedly paid on risks underwritten in violation of underwriting guidelines established by an underwriter who was the administrator for CNI of the agreement with Church. The petition also sought punitive damages. Because Church and the other three corporations were by now defunct, only Duncan and Bailey defended.
CNI ultimate
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