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What Is The Time for Responding to a Defense Tender?

Insurers must acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies, Iowa Code § 507B.4 (9), but there are no regulations, statutes or case law defining “reasonably promptly.”

Insurers must affirm or deny coverage of claims in writing within 30 days of an insurer’s receipt of proofs of loss.  Iowa Admin. Code r. 191-15.41(507B).

Does Reserving Rights Create a Conflict of Interest? 

An insurer does not breach its contract with its insured when it decides to defend under a reservation of rights. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 642 (Iowa 2000).

Does a Reservation of Rights Create Additional Duties?

No cases found.

What Must Be Done If A Conflict of Interest Exists?

Where an “inherent conflict of interest” exists, the insurer may allow the insured to retain its own counsel at the insurer’s expense. First Newton Nat. Bank v. General Cas. Co. of Wisconsin, 426 N.W.2d 618, 630 (Iowa 1988).

Who Is Responsible for Fees of Independent Counsel?

See above.

What Are Independent Counsel’s Obligations?

No cases found.

What Settlement Duties Exist?

An insured cannot settle without the insurer’s consent if the insurer is defending under a reservation of rights. First Newton Nat. Bank v. General Cas. Co. of Wisconsin, 426 N.W.2d 618 (Iowa 1988).

What Actions May Result in a Claim for Bad Faith?

Iowa recognizes a first-party bad faith cause of action in tort by an insured against an insurer. Dolan v. Aid Ins. Co., 431 N.W.2d 790 (Iowa 1994)(en banc). An insured must prove that: (1) That the insurer had no reasonable basis for denying benefits under the policy, and (2) That the insurer knew, or had reason to know, that its denial was without basis. Sampson v. American Standard Ins. Co., 582 N.W.2d 146, 149 (Iowa 1998). 

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

An insurer which wrongfully refuses to defend is liable for reasonable attorney’s fees incurred by its insured in the defense of the action. United Fire & Cas. Co. v. Shelly Funeral Home, 642 N.W.2d 648, 658 (Iowa 2002).

Attorney’s fees may also be awarded upon a showing that the insurer acted in “bad faith or fraudulently or was stubbornly litigious.” Clark-Peterson Co., Inc., v. Indep. Ins. Assoc., LTD., 514 N.W.2d 912, 915 (Iowa 1994)

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

Punitive damages may be awarded if an insured can establish, by a preponderance of clear, convincing, and satisfactory evidence, that the conduct of the insurer constituted a willful and wanton disregard for the rights or safety of another.  Iowa Code § 668A.1(a).

Alternative Coverage Options

If the totality of the facts fail to disclose potential coverage, the insured can either initiate a declaratory judgment against the insured or do nothing and take the chance that the insured may later seek indemnity if coverage is established at trial.  Kelly v. Iowa Mut.Ins. Co., 620 N.W.2d 637, 642 (Iowa 2000).

Relevant Statutes

Declaratory Judgment – Iowa Civ. P. 1.1101.

“Courts of record within their respective jurisdictions shall declare rights, status, and other legal relations whether or not further relief is or could be claimed.  It shall be no objection that a declaratory judgment or decree is prayed for.  The declaration may be either affirmative or negative in form or effect, and such declarations shall have the force and effect of a final decree.  The existence of another remedy does not preclude a judgment for declaratory relief in cases where it is appropriate.”

Unfair or Deceptive Consumer Practices Act  –  Iowa Code § 714.16.

Unfair Claims Handling Act  –  Iowa Code § 507B.4.

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