John Dostart and Deena Dostart v. Columbia Insurance Group

IN THE COURT OF APPEALS OF IOWA

No. 23-1308
Filed October 30, 2024

JOHN DOSTART and DEENA DOSTART,
Plaintiffs-Appellees,

vs.

COLUMBIA INSURANCE GROUP,
Defendant-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Polk County, Coleman McAllister,

Judge.

An insurance company appeals an interlocutory order of the district court

denying its motion for summary judgment on judgment creditors’ claim for payment

of an unsatisfied judgment against one of the company’s insureds under Iowa

Code section 516.1 (2022). AFFIRMED.

Michael A. Carmoney and Allison J. Frederick of Carmoney Law Firm,

PLLC, Des Moines, for appellant.

Billy J. Mallory and Trevor A. Jordison of Mallory Law, West Des Moines,

for appellees.

Heard by Badding, P.J., Langholz, J., and Doyle, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206

(2024).
2

LANGHOLZ, Judge.

This insurance coverage dispute under Iowa Code section 516.1 (2022)

presents many interesting legal questions. But we cannot resolve most of them

yet in this interlocutory appeal because we generally must apply law to facts. And

at bottom, this summary-judgment record lacks sufficient evidence to hold, as

Columbia Insurance Group urges us to, that the insurance policy it issued does not

cover the consumer-fraud judgment entered in favor of John and Deena Dostart.

The necessary factual findings of an unsatisfied judgment alone may sometimes

be enough to resolve a coverage dispute at summary judgment. But not this

consumer-fraud judgment nor this insurance policy. And especially not when

Columbia disclaims any argument that consumer fraud could never be covered by

the policy. We thus affirm the district court’s denial of summary judgment.

I.

The Unsatisfied Judgment. In April 2022, a jury awarded the Dostarts

$200,000 in compensatory and statutory damages on their claims of consumer

fraud against a construction company (and its owner) that built them a new home.

The jury returned a general verdict on the claims, agreeing that “the Dostarts

prove[d] their consumer fraud claim against” each defendant. And it found that

each defendant’s “consumer fraud constitutes a willful and wanton disregard for

the rights or safety of another.” So it found each defendant liable for $8,795.85 in

statutory damages.1 And it split the award of compensatory damages between the

two defendants roughly two to one—finding the company caused $118,808.30 in

1 The jury instructions and verdict form used the term “Exemplary Damages,” rather

than the term in the Iowa Code: “statutory damages” See Iowa Code § 714H.5(4).
3

actual damages for “[t]he reasonable cost of completing the home” and its owner

caused $63,600 in damages for “[c]osts associated with temporary living, moving

expenses, and loan extension.”2 The district court later also awarded the Dostarts

$88,166.52 of attorney fees, assessed costs to the defendants, and entered

judgment in the Dostarts’ favor.

Throughout this consumer-fraud proceeding, the company’s insurance

provider, Columbia, defended the company and its owner under their commercial-

general-liability insurance policy, subject to a reservation of rights that Columbia

might withdraw its defense or decline to indemnify them. Shortly after the verdict,

Columbia informed them that the verdict was not covered by the policy. So

Columbia declined to indemnify the judgment and withdrew its defense.

This Suit. Despite their win in court, the Dostarts were unable to collect on

their judgment from the construction company or its owner. So 180 days after the

entry of judgment, they sued Columbia, seeking payment of the unsatisfied

judgment under Iowa Code section 516.1. That statute lets a judgment creditor,

like the Dostarts, stand in the shoes of the insured to bring a direct action against

the insurer. See Iowa Code § 516.1.

Columbia moved for summary judgment on the Dostarts’ claim. It argued

that four provisions in the 154-page insurance policy precluded coverage for their

unsatisfied judgment. First, noting that the policy only covers damages “caused

by an ‘occurrence,’” which is defined in the policy as “an accident,” Columbia

argued that the “fraud” causing the Dostarts’ damages was not accidental and thus

2 The jury also rejected the Dostarts’ breach-of-contract and breach-of-express-

warranty claims against the construction company.
4

not a covered “occurrence.” Second, it argued that the damages were not

“because of ‘bodily injury’ or ‘property damage’” as also required by the policy.

Third, it argued that the fraud falls within the policy’s exclusion “for loss which

results from an act committed by or at the direction of an insured with the intent to

cause loss.” And fourth, it argued that the statutory-damage awards fell within the

policy’s exclusion for “punitive or exemplary damages.”

To support its argument about the conduct leading to the consumer-fraud

judgment, Columbia attached only the jury’s verdict form, excerpts from the jury

instructions, the court’s entry of judgment, and the pleadings. The only facts

admitted in the pleadings were the identity, location, and relationship of the two

defendants. Columbia presented no affidavits or other direct evidence of the

construction company or its owner’s interactions with the Dostarts during the

construction of their home.

The Dostarts conceded that the statutory-damage awards were excluded

under the policy. But they otherwise resisted summary judgment. They responded

that Columbia’s arguments about the definition of occurrence and the intentional-

act exclusion were off-base because their judgment was under the consumer-fraud

statute. See Iowa Code §§ 714H.3(1), 714H.5. That statute—unlike common-law

fraud—they contended, does not require an intent to deceive or even knowledge

of a misrepresentation or omission. They also argued that their compensatory

damages were indeed because of property damage and submitted an expert report

documenting property damage to their home that they contended creates a fact

dispute on that question.
5

Given the Dostarts’ concession on statutory damages, the district court

granted summary judgment on the part of their claim seeking to recover on those

awards. The court denied the rest of Columbia’s motion. The court reasoned that

it could not “conclude, based on the record presented, that [the Dostarts’] recovery

against Columbia’s insured was based on what was the functional equivalent of a

common law fraud claim.” The court noted that “liability may be imposed under

the consumer fraud statute without the need to establish the same degree of proof

as is necessary to recover under a common law fraud claim” and that “a knowing

violation of the consumer fraud statute is not necessarily the functional equivalent

of the commission of an intentional tort.” So the court held that it could not say as

a matter of law that “the insured’s actions in this case did not fit within the definition

of an ‘occurrence’” under the policy or that “the intentional act exclusion applies.”

The court also decided that a fact dispute remained about whether the insured’s

actions caused property damage, reasoning that the verdict form’s categories of

damages were not defined and that the Dostarts had submitted “an expert witness

report that, when taken in the light most favorable to [them], supports a conclusion

that property damage did result from the actions of Columbia’s insured.”

The supreme court granted Columbia’s application for interlocutory review

of this ruling and eventually transferred the appeal to our court.

II.

Under Iowa Code section 516.1, successful plaintiffs who were “injured or

whose property [was] damaged” by an insured defendant may seek payment on

their judgment from the insurer if execution on the judgment (trying to recover from

the insured defendant) is “returned unsatisfied.” Iowa Code § 516.1. In such a
6

suit against the insurer, the plaintiffs have the same right to enforce “the insured’s

claim against such insurer” that the insured would have if the insured had paid the

judgment. Id. So a suit under section 516.1 is essentially an insurance coverage

dispute litigated by the parties with the most skin in the game—the successful

plaintiffs in the underlying tort suit—rather than the judgment-proof-but-insured

tort-suit defendant. See Pries v. M.F.A. Mut. Ins., 122 N.W.2d 925, 927

(Iowa 1963) (noting that section 516.1 “is designed to correct an injustice which

might occur should an insolvent insured refuse to sue his insurance company to

force payment under the terms of the policy”).

Resolving the coverage dispute requires deciding the factual issues of what

conduct the insured defendants engaged in that led to liability in the unsatisfied

judgment. Sometimes, a party in the section 516.1 proceeding may be able to rely

on issue preclusion to prove a fact that was necessarily decided in the underlying

tort suit. See Schneberger v. U.S. Fid. & Guar. Co., 213 N.W.2d 913, 916–18

(Iowa 1973) (holding that issue preclusion applied to a section 516.1 claim under

one policy because the original suit decided a fact question of a car owner’s

consent but that it did not apply to a claim under the second policy where the

dispositive question of that insured’s consent was not decided in the original suit).

But when the issue was not decided—for example, because the basis of liability in

the underlying suit is broad enough to include both conduct that would be covered

and excluded by the policy—then the conduct must be proven with evidence in the

section 516.1 proceeding. See Dolan v. State Farm Fire & Cas. Co., 573

N.W.2d 254, 257 (Iowa 1998) (holding that a negligence verdict did not preclude

the insurer from raising intentional-tort exclusion because “[n]egligence and
7

intentional torts are not mutually exclusive concepts” and finding defendant’s

conduct was intentional based on evidence of the conduct submitted at the bench

trial on the section 516.1 claim); Schneberger, 213 N.W.2d at 919 (reversing grant

of summary judgment that improperly relied on a prior suit that did not decide

dispositive factual issue and remanding for further proceedings).

Disputes about the facts material to an insurance coverage claim under

section 516.1—as with any claim—are resolved at trial. But the district court must

grant a party’s motion for summary judgment when the evidence in the record

“show[s] that there is no genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law.” Iowa R. Civ. P. 1.981(3). In

resisting summary judgment, the nonmoving “party may not rest upon the mere

allegations or denials in the pleadings, but the response . . . must set forth specific

facts showing that there is a genuine issue for trial.” Iowa R. Civ. P. 1.981(5). Still,

“[t]he burden of showing undisputed facts entitling the moving party to summary

judgment . . . remains with the moving party at all times”—it “cannot shift the

burden to the other party through a conclusory motion . . . not supported by

undisputed facts.” Morris v. Steffes Grp., Inc., 924 N.W.2d 491, 496 (Iowa 2019).

We review a district court’s denial of summary judgment for corrections of errors

at law. Hagenow v. Am. Fam. Mut. Ins., 846 N.W.2d 373, 376 (Iowa 2014).

Columbia seeks to cut off the Dostarts’ suit by arguing that it is entitled to

summary judgment because we can decide as a matter of law that the insurance

policy does not cover the Dostarts’ consumer-fraud judgment. As in the district

court, Columbia offers three arguments that would independently defeat coverage

for the judgment: (1) the consumer fraud was not a covered “occurrence” under
8

the policy; (2) the consumer fraud fell within the intentional-act exclusion of the

policy; and (3) the judgment was not because of “property damage.” Because

Columbia’s arguments based on the definition of a covered “occurrence” and the

intentional-act exclusion are closely related—and are the focus of Columbia’s

appeal—we address them together at the start.

Covered “Occurrence” and Intentional-Act Exclusion. The commercial-

general-liability policy issued by Columbia to the construction company found liable

to the Dostarts only covers damages “caused by an ‘occurrence.’” And the policy

defines “occurrence” as “an accident, including continuous or repeated exposure

to substantially the same general harmful conditions.” Similarly, the policy’s

intentional-act exclusion excludes from coverage “loss which results from an act

committed by or at the direction of an insured and with the intent to cause loss.”

These are standard policy terms that are thus often interpreted and applied by the

courts. See Nat’l Sur. Corp. v. Westlake Invs., LLC, 880 N.W.2d 724, 733 (Iowa

2016). And so, Columbia relies heavily on a previous case, Yegge v. Integrity Mut.

Ins., 534 N.W.2d 100 (Iowa 1995), that it contends is “extraordinarily similar.”

Yegge indeed also involved a suit by homeowners to recover on an

unsatisfied judgment against their construction company from the company’s

insurer under section 516.1. See Yegge, 534 N.W.2d at 101–02. The underlying

conduct there “giving rise to [the] Yegges’ claim included breach of contract,

breach of express warranty, breach of implied warranty and fraud.” Id. at 103. And

applying the same policy term here, the supreme court held that the conduct “did

not constitute an ‘occurrence’” because it did not “involve accidental conduct.” Id.

at 102–03. So Columbia contends that based on Yegge, we must hold that the
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consumer-fraud conduct here was not accidental and thus is not a covered

“occurrence” and likewise is excluded as an intentional act. But Yegge cannot

support the weight Columbia places on it for two reasons.

First, the court in Yegge held only that common-law fraud is not accidental

and thus cannot be an occurrence under the standard policy term. See Yegge,

534 N.W.2d at 102. It did not consider a private consumer-fraud claim—nor could

it since that statute was not enacted until more than a decade later. See 2009

Iowa Acts ch. 167. And the elements of a common-law fraud claim and a private

consumer-fraud claim are not the same. Common-law fraud requires, among other

elements, an intent “to deceive” and knowledge that “the representation was false.”

Dier v. Peters, 815 N.W.2d 1, 7 (Iowa 2012) (cleaned up).

But private consumer fraud contains no such requirements. It requires only

“intent that others rely upon” the conduct. Iowa Code § 714H.3(1). It requires not

knowledge of falsity but merely negligence. See id. (prohibiting conduct “the

person knows or reasonably should know is an unfair practice, deception, fraud,

false pretense, or false promise, or the misrepresentation, concealment,

suppression, or omission of a material fact” (emphasis added)). And the conduct

sweeps more broadly than the false representations of common-law fraud.3 For

3 The jury instructions submitted in the summary-judgment record show that the

Dostarts relied only on conduct that was “a deception, fraud, false pretense, a false
promise, a misrepresentation, or a concealment, suppression, or omission of
facts.” But if the jury had not been instructed that narrowly, the scope of conduct
that could be a consumer-fraud violation sweeps even more broadly to include
unfair practices and a laundry list of other assorted statutory violations. See Iowa
Code § 714.16(1)(i) (defining “unfair practice” to mean “an act or practice which
causes substantial, unavoidable injury to consumers that is not outweighed by any
consumer or competitive benefits which the practice produces”); id. § 714H.3(2).
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example, a deception includes “an act or practice that is likely to mislead a

substantial number of consumers as to a material fact or facts.” Id. § 714H.2(5).

Given the breadth of conduct that could lead to a consumer-fraud judgment

compared to common-law fraud, the holding in Yegge that common-law fraud is

not accidental conduct does not control here. We cannot say as a matter of law

that a consumer-fraud judgment is intentional rather than accidental.

Columbia does not contest the broad scope of the consumer-fraud statute.

Indeed, in its briefing to us, it disclaims taking the position that “consumer fraud

can never be an occurrence under the policy.” (Cleaned up.) Columbia instead

argues that we do “not need to decide whether, hypothetically, consumer fraud can

ever be ‘an occurrence’” because “under the specific circumstances of this case,

[the insured defendants’] consumer fraud is not an ‘occurrence’ covered by” the

policy.

But that brings us to the second difference between this case and Yegge—

we have no evidence about the specific facts giving rise to the unsatisfied

consumer-fraud judgment. The claim for payment on the judgment in Yegge was

decided after a bench trial on stipulated facts.4 See Yegge, 534 N.W.2d at 102.

Yet here, Columbia asks for a decision in its favor on summary judgment. And

despite making a facts-of-this-case-specific argument, Columbia presents no

evidence of the underlying facts in support of its summary-judgment motion. The

closest it comes is submitting the jury verdict, jury instructions, and entry of

judgment. True, that evidence shows the Dostarts got a judgment against

4 The district court in Yegge only decided separate claims for bad-faith and punitive

damages on summary judgment. See Yegge, 534 N.W.2d at 102.
11

Columbia’s insured for consumer fraud. But it tells us nothing specific about the

conduct giving rise to that judgment—such as whether that conduct was

intentional.5 And Columbia presented no witness testimony, exhibits, or other

evidence from which a factfinder could find that the conduct was intentional rather

than accidental.

Columbia tries to work around this absence of facts by contending that we

can conclude as a matter of law that the consumer fraud here was intentional rather

than accidental because the jury awarded statutory damages after finding that the

insured defendants’ “consumer fraud constitutes a willful and wanton disregard for

the rights or safety of another.” But “persistent reckless conduct”—not just

intentional conduct—can satisfy this willful-and-wanton-disregard standard for

statutory damages. Bradshaw Renovations, LLC v. Graham, No. 22-1721, 2024

WL 4368669, at *7–8 (Iowa Ct. App. Oct. 2, 2024) (cleaned up); cf. Miranda v.

Said, 836 N.W.2d 8, 34 (Iowa 2013) (holding, under the general punitive damages

statute with nearly identical text, that substantial evidence in the record to infer

recklessness supported the punitive-damages award). So without more facts, we

cannot say as a matter of law that the consumer-fraud conduct here was intentional

merely because the jury awarded statutory damages.

5 Columbia never expressly relied on issue preclusion, nor argued that its
requirements were met, to prove any facts underlying the unsatisfied judgment.
Cf. Dolan, 573 N.W.2d at 256. But even assuming Columbia was implicitly seeking
to prove some facts through issue preclusion with the judgment, as discussed
above, given the scope of the consumer-fraud claim submitted to the jury, we
cannot say the jury necessarily decided the conduct was intentional. See id. at
256–57; Schneberger, 213 N.W.2d at 916–18.
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In sum, Columbia has failed to meet its summary-judgment burden to “show

that there is no genuine issue as to any material fact and that [Columbia] is entitled

to a judgment as a matter of law.” Iowa R. Civ. P. 1.981(3); see also Interstate

Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756 (Iowa 1999) (holding in an

insurance-coverage dispute it was the insurer’s burden at summary judgment to

“negate the policy provision requiring unexpected and unintended injury”). We lack

any basis in the record to hold that the unsatisfied consumer-fraud judgment did

not involve accidental conduct. And so, the district court properly denied summary

judgment on the grounds that the consumer-fraud conduct was not a covered

occurrence or was excluded as an intentional act.6

Property Damage. Columbia’s final argument for lack of coverage also

suffers from a lack of undisputed facts. Under the policy, damages are covered

only when “because of ‘bodily injury’ or ‘property damage.’” No one contends the

consumer-fraud judgment involved bodily injury. And the policy defines property

damage as “[p]hysical injury to tangible property, including all resulting loss of use

of that property” or “[l]oss of use of tangible property that is not physically injured.”

6 We recognize that the supreme court has held that a claim for defective
construction is not an occurrence under a commercial-general-liability policy
because that conduct is not “an undesigned, sudden, and unexpected event.”
Pursell Constr., Inc. v. Hawkeye-Sec. Ins., 596 N.W.2d 67, 70 (Iowa 1999)
(cleaned up). But see Westlake Invs., 880 N.W.2d at 744 (holding that “defective
workmanship by an insured’s subcontractor may constitute an occurrence” under
the standard commercial-general-liability policy terms). Yet Columbia did not
make a similar argument in the district court. So it is not preserved for our review.
See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental
doctrine of appellate review that issues must ordinarily be both raised and decided
by the district court before we will decide them on appeal.”). And regardless, on
this record, we could only say the damages here were necessarily found to be
proximately caused by consumer fraud—not defective work.
13

Columbia again relies on Yegge, which interpreted the same language to

hold that “[t]he subject of the” claims there “did not qualify as property damage

within the policy’s definition because they are intangible economic losses.” Yegge,

534 N.W.2d at 102 (cleaned up). But remember, Yegge was decided by trial on

stipulated facts. Here, Columbia seeks to decide the question at summary

judgment with only the jury instructions, verdict form, and judgment entry as

evidence as to whether the damages awarded were “because of” “[p]hysical injury

to tangible property” or “loss of use of that property.” And this limited evidence

fails to meet Columbia’s summary-judgment burden on this policy provision too.

See Interstate Power Co., 603 N.W.2d at 756.

All we can say as a matter of law is that the compensatory damages were

proximately caused by consumer fraud. This, again, is a distinction from Yegge,

where the conduct included breach of contract and breach of express and implied

warranties making it unsurprising that the underlying evidence would likewise

support a finding of only “intangible economic losses.” Yegge, 534 N.W.2d at 102.

And the verdict form here shows the jury awarded some damages for “[t]he

reasonable cost of completing the home” and some for “[c]osts associated with

temporary living, moving expenses, and loan extension.” As those descriptions

are not statutory terms, it is unclear without the underlying evidence of the

consumer-fraud conduct and the Dostarts’ losses what factual conclusions can be

drawn about the cause of the damages. So on this record, we cannot say that

none of the need to “complet[e] the home” may have been because of physical

damage or that none of the living and moving expenses were from “loss of use” of

damaged property. And thus, the district court properly denied summary judgment
14

on the ground that the consumer-fraud judgment was not “because of ‘bodily injury’

or ‘property damage.’”7

* * *

Columbia may ultimately be proved correct that the consumer fraud here

was not accidental, that it was committed “with the intent to cause a loss,” or that

it was not “because of ‘bodily injury’ or ‘property damage.’” It might even succeed

in doing so through summary judgment, if it presents evidence of the underlying

conduct and the Dostarts then fail to meet their summary-judgment burden to

dispute the material facts with their own evidence about the underlying conduct.

But the verdict form, jury-instruction excerpts, and judgment entry from the

unsatisfied consumer-fraud judgment submitted by Columbia here do not show

that Columbia is entitled to judgment as a matter of law. And so, the district court

correctly denied Columbia’s motion for summary judgment.

AFFIRMED.

7 Because Columbia failed to meet its burden to present evidence negating this

policy provision, it matters not whether the Dostarts resisted with evidence showing
the underlying property damage. See Interstate Power Co., 603 N.W.2d at 756;
Am. Tel. & Tel. Co. v. Dubuque Commc’ns Corp., 231 N.W.2d 12, 14 (Iowa 1975)
(“While failure to adequately resist a motion for summary judgment is a dangerous
course for defendant[s] to take, it becomes fatal only if the summary judgment
movant has met the burden of proof imposed upon it by rule [1.981].”). But the
Dostarts did submit an expert report that they allege shows physical damage
caused by the consumer fraud—further showing that a material fact dispute
remains.