Wilson v. Farm Bureau Mutual Insurance Co.

Summary

The Iowa Supreme Court considered whether an insurer was bound by an original or amended judgment entered in an underlying tort action for purposes of underinsured motorist benefits. The court held that the policy’s consent-to-be-bound provision was valid and enforceable, that the insurer was bound by the original judgment but not the amended judgment because the amendment prejudiced the insurer, and that the insurer had not acted in bad faith in denying the insured’s demand. The court affirmed in part, reversed in part, and remanded for further proceedings.

Holdings

1. A consent-to-be-bound provision in a UIM policy is valid and enforceable, provided the insurer does not withhold or refuse consent without a reasonable basis.
2. Farm Bureau was not bound by the amended judgment because the estate obtained it without Farm Bureau's written consent through an undefended motion supported by an insubstantial defense, and Farm Bureau proved prejudice.
3. Farm Bureau was bound by the original judgment because the estate provided notice, the tort action was defended, the original judgment reflected the legally required reduction of consortium damages, and the estate proved Carter's liability and damages.
4. Farm Bureau was not liable for bad faith because it had a reasonable basis to deny the estate's demand based on the amended judgment.

Questions Presented

1. Whether Farm Bureau was bound by the amended judgment entered in the underlying tort action despite the policy's consent-to-be-bound provision.
2. Whether Farm Bureau was bound by the original judgment entered in the underlying tort action.
3. Whether the consent-to-be-bound provision in the UIM policy was valid and enforceable.
4. Whether Farm Bureau acted in bad faith by denying the estate's demand for UIM benefits based on the amended judgment.

Disposition

reversed_and_remanded