North Star Mutual Insurance Co. v. Schley

IN THE COURT OF APPEALS OF IOWA

No. 21-0918
Filed July 20, 2022

NORTH STAR MUTUAL INSURANCE COMPANY,
Plaintiff-Appellee,

vs.

GARY SCHLEY,
Defendant,

JULIE HANSEN SCHLEY,
Intervenor-Appellant.
________________________________________________________________

Appeal from the Iowa District Court for Sioux County, Duane E. Hoffmeyer,

Judge.

Intervenor appeals the grant of summary judgment for an insurance

company on its declaratory judgment actions. AFFIRMED.

Michael J. Jacobsma of Jacobsma Law Firm, P.C., Orange City, for

appellant.

Jonathan M. Brown and Brad Entwistle of Walentine O’Toole, L.L.P.,

Omaha, Nebraska, for appellee.

Heard by Tabor, P.J., and Schumacher and Ahlers, JJ.
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TABOR, Presiding Judge.

North Star Mutual Insurance Company filed this declaratory judgment action

to determine its obligation to defend or indemnify Gary Schley against claims

raised in a separate lawsuit filed by his ex-wife, Julie Schley. After granting Julie’s

motion to intervene, the district court decided Gary was not covered by the

insurance policy issued to Gary’s parents, Donald and Margery Schley. Finding

no error in the court’s interpretation of the policy, we affirm.

I. Facts and Prior Proceedings

In January 2018, Julie Schley was caring for her show horses at the Sioux

County farm owned by her former in-laws, Donald and Margery. Although she had

a lease with them to board her horses there, the farm was mainly devoted to raising

hogs. Julie’s ex-husband, Gary, oversaw the hog business and lived on the

property.

Around 6:00 p.m., Julie finished her daily chores, returned to her car, and

drove toward the acreage’s exit. There she encountered Lisa Scheele, Gary’s new

girlfriend, who had stepped outside the house. Because Lisa had a no-contact

order against Julie, Julie kept driving toward the gravel road. And when Lisa waved

at Julie, Julie did not respond. Inside the house, Lisa and Gary had been repainting

his living room, though Gary admitted he was “doing more watching football than

painting.” After Lisa came back in, she and Gary discussed the encounter with

Julie. Just then, Julie texted Gary. The incoming message disparaged Lisa. Gary

shared the text with Lisa, prompting a call to the sheriff.

Later that day, Julie received a phone call from Deputy Stan Oostra, inviting

her to the Sioux County Sheriff’s Office for questioning. Before the day was done,
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Oostra arrested Julie for violating the no-contact order. Julie spent the night in jail.

A magistrate judge eventually dismissed the charge. But Julie was later fired from

her position as a middle school principal.

Come November, Julie sued Gary and Lisa. She alleged (1) false arrest;

(2) malicious prosecution; (3) tortious infliction of emotional distress; (4) tortious

interference with contract; (5) civil conspiracy; and (6) defamation of character.

Julie later alleged negligence against Gary in an amended petition. Julie also sued

the landowners, Donald and Margery.1 Donald, Margery, and Gary sought

coverage for their defense from North Star under the insurance policy.

In March 2020, North Star brought this declaratory judgment action, seeking

a determination whether Gary is covered under his parents’ insurance policy. The

following November, the district court granted Julie’s motion to intervene. In early

February 2021, Julie moved for summary judgment, contending both Gary and

Lisa were covered by the policy.2 A few days later, North Star also moved for

summary judgment, taking the opposite position. And later that month, Gary

resisted North Star’s motion and joined Julie’s motion. After examining the

relevant terms of the insurance policy, the district court determined neither Gary

nor Lisa were covered. Contending the district court misinterpreted the contract

terms, Julie appeals.

1 Julie’s petition also raised several counts against arresting-officer Oostra and
Sioux County.
2 Lisa was not a named defendant in North Star’s declaratory judgment action.
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II. Scope and Standards of Review

We review the interpretation of insurance policies for errors at law. See

Jones v. State Farm Mut. Auto. Ins. Co., 760 N.W.2d 186, 188 (Iowa 2008). We

do so because construction of an insurance policy is a question of law. A.Y.

McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991).

Our guiding principle is the intent of the parties. Id. Unless there is a “genuine

uncertainty” in the language, the policy is unambiguous and the words control. Id.

But when ambiguity does exist, we adopt the interpretation favoring the insured.

Id. at 619.

Similarly, we review grants of summary judgment for errors at law. Boelman

v. Grinnell Mut. Reinsurance Co., 826 N.W.2d 494, 500 (Iowa 2013). Summary

judgment is particularly appropriate where only the legal consequences of

undisputed facts are at stake. Id. at 501.

III. Analysis

A. Theories of Coverage for Gary

Julie contends that Gary was covered under his parents’ insurance policy.

In urging this contention, she points to three provisions. First, she notes that Gary

is listed as an “additional insured” on the policy’s declaration statement. Second

and third, she highlights the definitions of “insured” in the policy and asserts that

Gary qualifies under two subparagraphs. We consider Julie’s arguments in turn.

1. Additional insured

The North Star policy lists Donald as the insured. But, because Gary “is

listed as an additional insured on the declaration statement,” Julie believes Gary

is protected under the entire policy. Countering, North Star notes that Gary’s
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designation as an “additional insured” only appears in connection with “three Hog

Buildings at location 2 in Dunnell, MN.” The insurer insists that Gary’s name

appearing at that location does not mean he qualifies as “an additional insured” in

connection with the Sioux County property where the incident occurred.

As the district court observed, Iowa law affords limited coverage for

“additional insureds,” according to how they are listed in the policy. See Emps.

Mut. Cas. Co. v. Rinderknecht Assocs., Inc., No. 05-1057, 2007 WL 108344, at *7

(Iowa Ct. App. Jan. 18, 2007) (noting “Iowa courts have taken a narrow view of the

scope of liability coverage for additional insureds” in commercial general liability

policies); see also Regent Ins. Co. v. Estes Co., 564 N.W.2d 846, 848 (Iowa 1997)

(interpreting coverage for additional insured to be limited to policy provision

requiring the liability to arise out of subcontractor’s work for general contractor).

True, Gary is listed as an additional insured:

But as seen above, that coverage is limited to his co-ownership of three livestock

buildings in Minnesota. To adopt Julie’s position, and treat Gary like a named

insured, would render that limiting language surplusage. See Fashion Fabrics of

Iowa, Inc., v. Retail Invs. Corp., 226 N.W.2d 22, 26 (Iowa 1978) (“Courts must

strive to give effect to all the language of a contract.”).

What’s more, we cannot read this section of the contract in isolation. See

id. (“[A]n agreement is to be interpreted as a whole.”). And taking a broader look,

we note that the first page of the declaration lists Donald Schley—and only Donald
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Schley—as the insured. Unlike Gary, there are no qualifiers related to Donald.

That is, he is neither “additional” nor is his status as the insured limited to certain

locations. Simply put, Julie’s interpretation is unsupported by the contract

language.

2. Real estate manager

If not an additional insured, Julie contends Gary falls under the policy’s

definitions of who is insured because he was a “real estate manager” for his

parents’ property. Neither the contract nor Iowa case law defines the term “real

estate manager.” So, not surprisingly, Julie and North Star propose differing

definitions. Julie lobbies for a plain-language reading. See, e.g., QBE Ins. Corp.

v. Creston Ct. Condo. Inc., 58 F. Supp. 3d 1137, 1150 (D. Or. 2014) (defining

phrase as “one who conducts, directs, or supervises another’s real estate). But

North Star asserts this “industry term” requires buying and selling land. See Moon

v. Cincinnati Ins. Co., 920 F. Supp. s2d 1301, 1308 (N.D. Ga. 2013), aff’d, 592 F.

App’x 757 (11th Cir. 2014) (determining “the term ‘real estate manager’ implicates

real estate transactions rather than routine maintenance”).

But we need not settle on a definition. Whatever the true meaning, this

provision does not protect Gary under these facts. The policy requires more than

the title of real estate manager. Instead, for coverage to kick in, the injury-causing

actions must have occurred “in the course of acting” as a real estate manager.

Julie cannot show that Gary’s conduct that allegedly caused her harm—calling the

sheriff after her text message—fell within the scope of those duties.

When Lisa and Julie crossed paths, Gary was inside the house, watching

football and repainting his living room because his “sons hated the colors of the
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house.” After Gary received the text insulting Lisa, they called the sheriff. Gary’s

participation in contacting authorities did not occur “in the course of” real estate

management. It did not involve buying and selling land. It did not involve

supervising the property. Because Gary was simply redecorating his home with

help from his girlfriend, he was not covered by the real-estate-manager provision.

3. Domestic duties

As a final argument, Julie points to the policy’s coverage for individuals “in

the course of performing domestic duties that related to the ‘insured premises.’”

Because he was painting, Julie contends Gary was performing domestic duties

and thus is covered by his parents’ policy.3 But as with the real-estate-manager

provision, the “in the course of” requirement foils Julie’s argument. As the district

court noted, “there is no indication that the call [to the sheriff] was a necessary

condition . . . to perform the painting.” Even assuming Gary’s decision to repaint

qualified as a domestic duty, Julie provides no nexus between painting and

reporting a possible no-contact-order violation.4

B. Theory of Coverage for Lisa

Finally, Julie argues that Lisa was insured because, like Gary, she was

performing “domestic duties.” But we decline to consider this argument because

any claim for coverage involving Lisa is not ripe. “A case is ripe for adjudication

3 As with “real estate manager,” the policy leaves “domestic duties” undefined. But
relying on a different provision of the contract, Julie suggests that “domestic duties”
are those “that relate to the use and care of the premises.”
4 Julie seeks to overcome this reality by emphasizing her negligence claim against

Gary, arguing he “failed to properly supervise Lisa” despite knowing she and Julie
would be at the property at the same time and being aware of the no-contact order.
But the record shows that Julie’s text message, not the chance encounter, was the
reason police were called.
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when it presents an actual, present controversy, as opposed to one that is merely

hypothetical or speculative.” See State v. Wade, 757 N.W.2d 618, 627 (Iowa

2008); accord Greenbriar Grp., L.L.C. v. Haines, 854 N.W.2d 46, 50 (Iowa Ct. App.

2014) (“If a claim is not ripe for adjudication, a court is without jurisdiction to hear

the claim and must dismiss it.” (citations omitted)).

Ripeness “is particularly difficult in the declaratory judgment context.” See

Greenbriar Grp., 854 N.W.2d at 51. Still, we look for “an antagonistic assertion

and a denial of right.” Id. And, as to Lisa, that element is missing. When North

Star sought declaratory judgment, it named Gary alone because “nobody . . . had

ever considered that any party would argue that Lisa Scheele was covered under

the policy.” Indeed, at the time of Julie’s intervention, Lisa, unlike Gary, had not

submitted an insurance claim. Just as a “declaratory judgment action does not, in

and of itself, create a justiciable controversy,” Julie cannot use her intervention to

manufacture a dispute between Lisa and North Star. See id. at 50; accord Iowa

R. Civ. P. 1.407(1)(b) (limiting the right of intervention to “subject of the action”).

Finding no error in the court’s summary judgment decisions, we affirm.

AFFIRMED.