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Grinnell Mutual Reinsurance Company v. Jungling6/19/2002
es of a misrepresentation is unenforceable on grounds of public policy); 43 Am. Jur. 2d Insurance § 260, p. 334 (1982) (A person may "insure himself from all losses from any peril not occasioned by his own personal fraud."); 4 Eric Mills Holmes, Holmes' Appleman on Insurance 2d § 23.4, p. 504 (1998) ("Insurance may not indemnify an insured from fraud or intentional misrepresentation.").
"Where an insured is alleged to have willfully violated the law, knowing it will obtain financial gain therefrom at another's expense, the insured may not, as a matter of public policy, contractually exempt itself from responsibility for its actions." USX Corp. v. Adriatic Ins. Co., 99 F. Supp. 2d 593, 635 (W.D. Pa. 2000). Our supreme court has also held "the general rule that insurance to indemnify an insured against his or her own violation of criminal statutes is against public policy." Altena, 422 N.W.2d at 490; see also 44 C.J.S. Insurance § 288(b), p. 540 (1993) ("In general, an insurance policy is against public policy and void if its purpose and intent are to indemnify insured against a violation of law by him . . ."). One authority has stated:
It has historically been held to be contrary to public policy to insure against liability arising directly against the insured from intentional or willful wrongs, including the results and penalties of the insured's own criminal acts, which itself includes nonpayment of corporate taxes. 7 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 101.22, p. 101-79 - 101-81 (1997).
It is not necessary that the insured actually be prosecuted in criminal proceedings for this public policy bar to apply. Id. ("were the allegations against [the insured] proven in a criminal prosecution, he would be guilty of sexual abuse."). See also USX Corp., 99 F. Supp. 2d at 630 (discussing situation "where the underlying conduct merely is capable of being construed as a criminal act . . ."); Western Nat'l Assurance Co. v. Hecker, 719 P.2d 954, 960 (Wash. Ct. App. 1986).
Jungling's conduct has been outlined above. In this case, were the allegations against Jungling proven in a criminal prosecution, his actions would constitute a consumer fraud under Iowa Code section 714.16(2) (1999). Under the Iowa Consumer Fraud Act, it is sufficient to show a misrepresentation of any material fact with the intent that others rely on the misrepresentation. Rosen v. Bd. of Med. Exam'rs, 539 N.W.2d 345, 349 (Iowa 1995). A material misrepresentation is any untruthful statement that is likely to affect a consumer's conduct or decision with regard to a product or service. State ex rel. Miller v. Rahmani, 472 N.W.2d 254, 258 (Iowa 1991). The Iowa Consumer Fraud Act, section 714.16, is part of chapter 714, the portion of the criminal code dealing with theft, fraud, and related offenses. Consumer fraud is punishable as a simple misdemeanor. Iowa Code § 701.8.
Jungling intentionally misrepresented the condition of his farm and its suitability for a dairy herd, and this affected the Steckels' decision to buy the farm. We determine Jungling, by perpetrating a fraud upon the Steckels, committed a criminal act. We therefore conclude it is contrary to public policy to provide insurance coverage for losses caused by Jungling's fraudulent misrepresentations.
Based on our decision on the public policy issue, we do not address the other issues raised in this appeal. We conclude Grinnell is not obligated to reimburse Jungling for $344,4000, which he owes to the Steckels under the settlement agreement. We reverse the decision of the district court.
REVERSED.
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