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Iowa appeals court rules insurer must prove prejudice to deny UIM claim
The decision revives an underinsured-motorist suit after the Court of Appeals of Iowa said the insurer could not use a contract shortcut to shift the prejudice burden.
Insurance Business reports the Court of Appeals of Iowa reversed a summary judgment for Grinnell Select Insurance Company and Grinnell Mutual Reinsurance Company, holding the carriers could not avoid proving prejudice to deny an underinsured-motorist claim.
The case followed a November 2022 crash in which an underinsured driver ran a stop sign, leaving the policyholder hurt and triggering a $300,000 payment from the at-fault driver’s insurer. The policyholder and spouse then sought benefits under their own Grinnell Select auto policy and Grinnell Mutual umbrella policy, which together provided $1.25 million in underinsured-motorist limits.
Insurance Business says the couple’s lawyer sent a 22-page settlement demand in March 2024 seeking the full limits, including a $500,000 estimate for future medical costs and a $300,000 estimate tied to past and future wage loss from an early retirement. After the insurer requested a physical exam, an examination under oath, and records waivers, the insureds’ attorney said a lawsuit was coming but did not address the requests, and the insurer later moved to dismiss based on the alleged noncompliance.
The appeals court focused on wording inside the auto policy, citing a clause stating the insurer has no duty to provide coverage if the failure to comply with specified duties is prejudicial to it. According to Insurance Business, the court ruled that because the carrier wrote prejudice into its own contract, the carrier had to prove prejudice rather than relying on a presumption that can apply when policyholders ignore conditions.
The decision sends the dispute back to proceed on the revived underinsured-motorist claim. Insurance Business also notes a Florida ruling that similarly required proof of prejudice, after an American Coastal delay issue came before that court.