LEONARD T. STRAND, District Judge.
Attached to this order is my preliminary set of jury instructions. These instructions are a combination of the parties' proposed instructions and my standard civil jury instructions. Also incorporated into the preliminary set of jury instructions is my ruling on the parties' choice of law dispute, which is addressed below.
This case involves a boat insurance policy. It is undisputed that the plaintiff, an Iowa resident, had a boat and that the defendant provided an insurance policy for the boat. Plaintiff alleges that in April 2014, the boat was damaged in an accident in Missouri. Plaintiff filed a claim with defendant. Defendant denied coverage, finding that the damage occurred due to normal wear and tear, which is not covered, rather than an accident.
On May 26, 2015, plaintiff filed this case in the Circuit Court for Camden County, Missouri (the location of the alleged accident). In his two-count petition, plaintiff alleged breach of contract and vexatious refusal to pay an insurance claim. Doc. No. 1-2 at 3-5. On July 13, 2015, defendant removed the case to the United States District Court for the Western District of Missouri. Doc. No. 1.
Plaintiff then retained Iowa counsel. Doc. No. 26. On November 19, 2015, plaintiff filed a motion to transfer venue back to Missouri. Doc. No. 32. Plaintiff argued that his previous counsel had erred in failing to resist the motion to transfer venue and that several factors weighed in favor of returning this case to Missouri. Doc. No. 32-1 at 2-5. Chief Judge Linda R. Reade, to whom this case was initially assigned upon its arrival, denied the motion on January 4, 2016. Doc. No. 36 at 4-5. Judge Reade stated:
Doc. No. 36 at 4-5.
The parties dispute whether Iowa or Missouri substantive law applies to this case. The parties agree that the insurance contract does not contain a choice of law clause. Doc. No. 42 at 4; Doc. No. 41 at 3. Plaintiff argues the court should apply Missouri law, stating:
Doc. No. 41 at 3. Defendant advocates for the application of Iowa law, stating:
Doc. No. 42 at 4-5.
A court makes four analytical steps in resolving a choice-of-law issue: (1) characterize the nature of the cause of action; (2) decide if a conflict of law exists; (3) identify the law that applies based on the forum state's choice-of-law principles; and (4) determine which state's substantive law applies based on the application of the forum state's choice-of-law principles. See Jackson v. Travelers Insurance Co., 26 F.Supp.2d 1153, 1156-57 (S.D. Iowa 1998).
Weitz Co., LLC v. Lexington Ins. Co., 982 F.Supp.2d 975, 982 (S.D. Iowa 2013), aff'd, 786 F.3d 641 (8th Cir. 2015).
Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320 (8th Cir. 1991).
The first question is the character of the case. As set out above, this case presents two basic issues: (1) did defendant breach the insurance contract by failing to pay plaintiff's claim, and, if so, (2) was the breach vexatious? Second, I must I decide if a conflict of law actually exists. Under Missouri law:
Smith Flooring, Inc. v. Pennsylvania Lumbermens Mut. Ins. Co., 713 F.3d 933, 941 (8th Cir. 2013). An insured can recover for vexatious denial if:
Axis Specialty Ins. Co. v. New Hampshire Ins. Co., 2016 WL 4257369, at *3 (W.D. Mo. 2016).
Under Iowa Law:
Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa 2010). Iowa does not have an exact analog to Mo. Rev. Stat. § 375.420. Instead, under Iowa common law, an insured may recover additional damages if the insurer denies a claim in bad faith:
Liberty Mut. Ins. Co. v. Pella Corp., 753 F.Supp.2d 798, 801 (S.D. Iowa 2009), aff'd, 650 F.3d 1161 (8th Cir. 2011).
Thus, while Missouri law concerning breach of contract is substantially similar to Iowa law, there is a significant difference between the claim of vexatious refusal to pay under Missouri law and the claim of bad faith failure to pay under Iowa law. Missouri's law, Mo. Rev. Stat. § 375.420, has only one element — that the insurance provider did not have reasonable cause to deny coverage. Under Iowa law a plaintiff must prove two elements to show bad faith: (1) that the insurance provider had no reasonable basis to deny coverage; and (2) the insurance provider either knew of the lack of a reasonable basis, or recklessly disregarded that knowledge. See Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 475 (Iowa 2005). Because Iowa's law of bad faith has an additional element not contained in Mo. Rev. Stat. § 375.420, there is a true conflict such that further analysis is required.
Third, I must apply the forum state's choice-of-law principles. In this case, the forum is Iowa. See Stults v. Symrise, Inc., 989 F.Supp.2d 735, 756 (N.D. Iowa 2013) ("I]n a diversity action such as this, to determine what state's law applies to the [plaintiffs'] claims, I must use the choice-of-law rules of the forum state, in this case, Iowa."). In that case, Judge Bennett set out Iowa's choice-of-law standard for torts:
Id., at 756-757. However, the choice-of-law standard in the context of a contract is articulated differently:
Moad v. Dakota Truck Underwriters, 831 N.W.2d 111, 118 (Iowa 2013). Section 188 states:
Restatement (Second) Conflict of Laws § 188.
Thus, the final question I must consider is which state, Iowa or Missouri, has the most "significant relationship" to the action based on the factors set out in Section 188. Each side makes a rather perfunctory argument as to why that party's preferred state has the most significant relationship. Plaintiff relies on the fact that the alleged accident occurred in Missouri, which is where the boat was used. Defendant argues that Iowa law should apply because the plaintiff resides in Iowa, the policy was issued in Iowa and the issuing agent is in Iowa.
In determining which state has the most significant relationship, I first consider the places where the contract was negotiated and consummated. Here, the contractual relationship between these two parties is defined by the insurance policy. The title of policy is "
Next, I must consider the place of the performance and the location of the subject matter of the contract. Plaintiff states that the boat was docked in Missouri and the alleged accident occurred in Missouri, so Missouri is the place of performance and the location of the subject matter. In support of his argument, plaintiff cites Gabe's Const. Co. v. United Capitol Ins. Co., 539 N.W.2d 144 (Iowa 1995). In that case, a Minnesota business purchased an insurance policy in Minnesota to cover a venture in Iowa. After an accident occurred, the Iowa Supreme Court affirmed the application of Iowa law to the dispute. However, the policy at issue in that case was purchased specifically to cover the activity that was occurring in Iowa. The Iowa Supreme Court stated:
Gabe's Const. Co., 539 N.W.2d at 146-47.
Here, by contrast, there is no evidence that the parties intended or expected Missouri to be the "the principal location of the insured risk during the term of the policy." Defendant issued an Iowa insurance policy to an Iowa resident to cover an Iowa boat. While plaintiff certainly retained the right to use the boat outside of Iowa,
Finally, I must consider the location of the parties. Plaintiff resides in Iowa and the covered boat is in Iowa for at least half of every year. Defendant is a Delaware corporation headquartered in Ohio, but sold and served the policy through an Iowa agent. No party or agent in Missouri has any relationship to the insurance contract at issue.
Based on the forgoing, I find that Iowa has, by far, the most significant relationship to this case. Thus, and in accordance with Iowa's choice-of-law principles, Iowa contract law will apply.
Because Iowa law applies to this case, I have made several changes to the parties' proposed jury instructions (Doc. No. 43). Specifically, I have adopted language substantially similar to defendant's proposed instructions regarding breach of contract and bad faith. I have not adopted plaintiff's proposed instructions regarding vexatious refusal to pay because they are not consistent with Iowa law.
Additionally, I have not included an instruction regarding evidence offered for a limited purpose because neither party has indicated what such evidence may be. If either party seeks to admit evidence that should be used for a limited purpose, the party should so notify me at the time so I can make an appropriate ruling and, if necessary, instruct the jury accordingly.
I have not included the parties' proposed "Impeachment" instruction, as I believe it would unnecessarily complicate the case and confuse the jury. My Instruction No. 6, regarding weight of the evidence, adequately instructs the jury regarding the evaluation of witness testimony. Also, I have included only a portion of the "Corporations Bound" instruction. The parties have not made me aware of any dispute as to whether the defendant's agents were acting on its behalf. Absent such a dispute, additional explanation about the relationship between a corporation and its employees would only confuse the jury. Thus, I agree with defendant's objection to much of Proposed Instruction No. 11A. I have condensed the parties' proposed instructions regarding corporations into one "Agency" instruction. If plaintiff believes further clarification is necessary after the evidence has been received, he may raise the issue before the jury deliberates.
1. For the reasons set forth herein, the substantive law of the state of Iowa will apply to this case.
2. Each party shall file a response to the attached preliminary jury instructions by no later than 3:00 p.m. on Tuesday, September 13, 2016. The responses shall include reference to any typographical errors as well as any substantive suggestions and objections.
Congratulations on your selection as a juror!
I give you these instructions now to help you better understand the trial and your role in it. I may give you additional instructions during the trial, and I will give you additional instructions at the end of the trial before you begin your deliberations.
Consider these instructions, together with any oral or written instructions I give you during the trial or at the end of the trial, and apply them as a whole to the facts of the case. In considering these instructions, the order in which they are given is not important.
As I explained during jury selection, this is a civil case brought by the Plaintiff, Brett Waterbury, against the Defendant, Progressive Northern Insurance Company. Brett Waterbury claims a breach of contract and bad faith refusal to pay an insurance claim. Specifically, he claims that his boat was damaged during an accident and that he is entitled to compensation under an insurance policy provided by Progressive Northern Insurance Company. Progressive Northern Insurance Company denies the damage was covered by the insurance contract. Progressive contends the damage was caused by normal wear and tear. It will be your duty to decide from the evidence if the Plaintiff, Brett Waterbury, is entitled to a verdict against the Defendant, Progressive Northern Insurance Company.
It will be your duty to decide from the evidence what the facts are. You, and you alone, are the judges of the facts. You will hear the evidence, decide what the facts are and then apply those facts to the law that I will give you in these preliminary instructions, any instruction given during the trial and in the final instructions at the conclusion of the case. You will then deliberate and reach your verdict. You are the sole judges of the facts, but you must follow the law as stated in my instructions, whether you agree with it or not.
This case must be considered and decided by you as an action between persons of equal standing in the community, of equal worth, and holding the same or similar stations in life. All persons are equal before the law. Corporations are entitled to the same fair and conscientious consideration by you as any other person.
You should not take anything I may say or do during the trial as indicating what I think of the evidence or what I think your verdict should be.
The trial will proceed as follows:
After I finish reading these instructions, the attorneys may make opening statements. An opening statement is not evidence. It is simply a summary of what the parties expect the evidence to be.
The Plaintiff then will present evidence. The Defendants may cross-examine the Plaintiff's witnesses. Following the Plaintiff's case, the Defendants may present evidence. The Plaintiff may cross-examine the Defendants' witnesses. Following the Defendants' case, the parties may present additional evidence.
After all evidence has been presented, I may give additional instructions to you. The attorneys will then make arguments summarizing and interpreting the evidence for you. As with opening statements, these arguments are not evidence. Then I will give you a final instruction on deliberations, and you will retire to deliberate on your verdict.
Your verdict will depend upon whether or not you find certain facts have been proved. The obligation to prove a fact, or "the burden of proof," is upon the party whose claim depends upon that fact. The party with the burden of proving a fact must prove the fact by "the greater weight of the evidence," which is proof that the fact is more likely true than not true. This is also called "the preponderance of the evidence."
To determine whether a fact has been proved by the greater weight of the evidence, you must consider the evidence in the case, decide which evidence is more believable, and then determine whether the fact is more likely true than not true. If you find a fact is more likely true than not true, then the fact has been proved by the greater weight of the evidence. If you find a fact is more likely not true than true, or you find the evidence on the fact is equally balanced, then the fact has not been proved by the greater weight of the evidence. The greater weight of the evidence is not determined by the number of witnesses or exhibits a party presents, but by your judgment as to the weight of all of the evidence.
You may have heard of the term "proof beyond a reasonable doubt." That is a stricter standard which applies in criminal cases. It does not apply in civil cases such as this one.
You shall base your verdict only upon the evidence, these instructions and other instructions that I may give you during trial.
Evidence is:
Evidence may be direct or circumstantial. The law makes no distinction between the weight to be given to direct and circumstantial evidence. The weight to be given any evidence is for you to decide. Consider the evidence using your observations, common sense and experience. You must try to reconcile any conflicts in the evidence; but, if you cannot, you will accept the evidence you find more believable.
Sometimes during a trial references are made to pre-trial statements and reports, witnesses' depositions, or other miscellaneous items. Only those things formally offered and received by the court are available to you during your deliberations. Documents or items read from or referred to which were not offered and received into evidence, are not available to you.
The following are not evidence.
1. Opening statements, closing arguments and questions are not evidence.
2. Objections and rulings on objections are not evidence.
3. Testimony that I strike from the record, or tell you to disregard is evidence and must not be considered.
4. Anything you see or hear about this case outside the courtroom is not evidence.
Furthermore, a particular item of evidence is sometimes received for a limited purpose only. That is, it can be used by you only for one particular purpose, and not for any other purpose. I will tell you when that occurs, and instruct you on the purposes for which the item can and cannot be used.
In deciding what the facts are, you may have to decide what testimony you believe and what testimony you do not believe. You may believe all of what a witness says or only part of it or none of it.
In deciding what testimony to believe, consider the witnesses' intelligence, their opportunity to have seen or heard the things they testify about, their memories, any motives they may have for testifying a certain way, their manner while testifying, whether they said something different at an earlier time, the general reasonableness of their testimony and the extent to which their testimony is consistent with other evidence that you believe.
The parties may agree to certain facts and reduce them to written or oral stipulations. You should treat stipulated facts as having been proved.
During the trial, you may hear the word "interrogatory." An interrogatory is a written question one party can send to the other which the other party then must answer under oath and in writing. Consider interrogatories and the answers to them as if they were, respectively, questions asked and answered under oath here in court.
A deposition is testimony taken under oath before the trial and preserved in writing or electronically. Testimony from a deposition may be read into evidence or replayed from a video recording. Consider such testimony as if it had been given under oath here in court.
You will hear testimony from witnesses described as experts. "Experts" are persons who may be knowledgeable in a field because of their education, experience, or both. They are permitted to give their opinions on matters in that field and the reasons for their opinions.
You may accept or reject expert testimony just like any other testimony. After considering the witness' education and experience, the reasons given for the opinion, and all the other evidence in the case, you may give an expert witness' testimony whatever weight, if any, you think it deserves.
An expert witness may be asked to assume certain facts are true, and to give an opinion based on that assumption. This is called a hypothetical question. When deciding the weight, if any, to give to an expert witness's testimony, if a fact assumed in a hypothetical question has not been proved by the evidence, you should consider the extent to which the falsely assumed fact affects the value of the opinion.
During the trial, the parties may make objections. You should not hold it against the parties when they do this. A party may object when the other party offers testimony or other evidence the party believes is not admissible. If I sustain an objection to a question, you should not pay any attention to the question itself. Also, when I rule or comment on an objection or motion, you should not think I have any opinions about the case, favoring one side or the other.
During the trial, it may be necessary for me to talk with the attorneys out of your hearing, either by having a bench conference here, while you are present in the courtroom, or by calling a recess. Please understand that while you are waiting, we are working. The purpose of these conferences is to decide how certain evidence is to be treated under the rules of evidence and to avoid wasting your time. We will do what we can to keep the number and length of these conferences to a minimum.
You may take notes during the trial if you wish. After the parties' opening statements, you will be given note pads and pens for this purpose.
If you choose to take notes, be sure it does not interfere with your ability to listen to the evidence. It is the responsibility of all jurors to listen carefully to the evidence. You cannot give this responsibility to another juror who may be taking notes. We depend on all members of the jury to remember and consider the evidence. Do not discuss your notes with anyone until you begin your deliberations.
A juror's notes are not evidence. They are no more reliable than the memory of a juror who chooses to listen carefully to the evidence without taking notes.
Do not take your notes with you when you leave the courtroom. Leave them on your chair in the courtroom, with only your name on the front page, and the Court Security Officer will safeguard them for you. Your notes will remain confidential throughout the trial and will be destroyed when the trial is over.
You will notice that we have an official court reporter making a record of the trial. However, we will not have a typewritten transcript of the record available for your use in reaching your decision.
A corporation acts only through its agents or employees and any agent or employee of a corporation may bind the corporation by acts and statements made while acting within the scope of the authority delegated to the agent by the corporation, or within the scope of his or her duties as an employee of the corporation.
The fact that the defendant is a corporation should not affect your decision. All persons are equal before the law, and corporations, whether large or small, are entitled to the same fair and conscientious consideration by you as any other person.
A breach of the contract occurs when a party fails to perform a term of the contract.
Your verdict must be for the Plaintiff on the Plaintiff's breach of contract claim if all the following elements have been proved:
If Plaintiff has proved all of these elements, the Plaintiff is entitled to damages in some amount as set out in Instruction No. 21. If the Plaintiff has failed to prove any of the above elements, your verdict must be for the Defendant.
If you found in favor of the Plaintiff in Instruction No. 17, you may consider whether the Defendant acted in bad faith in refusing to pay the Plaintiff's claim. To prove bad faith refusal to pay, the Plaintiff must prove all of the following elements:
If the Plaintiff has failed to prove any of these propositions, the Plaintiff is not entitled to damages. If the Plaintiff has proved all of these propositions, the Plaintiff is entitled to damages in some amount.
In determining the terms of the contract you may consider the following:
1. The intent of the parties along with a reasonable application of the surrounding circumstances.
2. The intent expressed in the language used prevails over any secret intention of either party.
3. The intent may be shown by the practical construction of a contract by the parties and by the surrounding circumstances.
4. You must attempt to give meaning to all language of a contract. Because an agreement is to be interpreted as a whole, assume that all of the language is necessary. An interpretation which gives a reasonable, effective meaning to all terms is preferred to an interpretation which leaves a part of the contract unreasonable or meaningless.
5. The meaning of a contract is the interpretation a reasonable person would give it if they were acquainted with the circumstances both before and at the time the contract was made.
6. Ambiguous language in a written contract is interpreted against the party who selected it.
7. Where general and specific terms in the contract refer to the same subject, the specific terms control.
If you find the Plaintiff has proven a breach of contract as set out in Instruction No. 17, the Plaintiff is entitled to damages. The measure of damages for the Plaintiff is the lowest of:
1) The amount necessary to replace the damaged property;
2) The amount necessary to repair the damaged property to its pre-loss condition; or
3) The agreed value for the "covered watercraft."
If you find in favor of the Plaintiff on his bad faith claim as set out in Instruction No. 18, you must award the Plaintiff such sum as you find by the greater weight of the evidence that will fairly and justly compensate the Plaintiff for damages, if any, that you find were proximately caused by the Defendant.
You must decide this case solely on the evidence and your own observations, experiences, reason, common sense and the law in these instructions. You must also keep to yourself any information that you learn in court until it is time to discuss this case with your fellow jurors during deliberations.
To ensure fairness, you must obey the following rules:
I will read additional instruction(s) at the end of the evidence.
In conducting your deliberations and returning your verdict, there are certain rules you must follow.
First, when you go to the jury room, you must select one of your members as your foreperson. That person will preside over your discussions and speak for you here in court.
Second, it is your duty, as jurors, to discuss this case with one another in the jury room. You should try to reach agreement if you can do so without violence to individual judgment. Each of you must make your own conscientious decision, but only after you have considered all the evidence, discussed it fully with your fellow jurors, and listened to the views of your fellow jurors. Do not be afraid to change your opinions if the discussion persuades you that you should, but do not come to a decision simply because other jurors think it is right, or simply to reach a verdict. Remember at all times that you are not partisans. You are judges — judges of the facts. Your sole interest is to seek the truth from the evidence in this case.
Third, if you need to communicate with me during your deliberations, you may send a note to me through the Court Security Officer, signed by one or more jurors. I will respond as soon as possible either in writing or orally in open court. Remember that you should not tell anyone — including me — how your votes stand numerically.
Fourth, your verdict must be based solely on the evidence and on the law which I have given to you in my Instructions. Nothing I have said or done is intended to suggest what your verdict should be — that is entirely for you to decide.
Finally, I am giving you the Verdict Form. A verdict form is simply the written notice of the decision that you reach in this case. You will take this form to the jury room, and complete it when you have reached a verdict. Your decision must be unanimous. If you all agree, the verdict form must be signed by your foreperson and all members of the jury.
We, the jury in the above-entitled case, return the following verdict:
This has been the position of the Iowa state courts for over 40 years. See Berghammer v. Smith, 185 N.W.2d 226, 231 (Iowa 1971) (applying Minnesota law to a loss of consortium claim arising out of an auto accident that occurred in Iowa between a Minnesota driver/plaintiff and an Illinois driver/defendant). Thus, while the alleged accident here occurred in Missouri, that fact would be of little significance to the choice-of-law analysis, even in a tort case.
