In what has become somewhat of a theme over the past couple of legislative sessions, the Iowa legislature, during its 2014 session, has overturned more Iowa Supreme Court opinions with legislation. Last year the both the Iowa House and the Iowa Senate unanimously passed legislation that had the effect of vacating an Iowa Supreme Court decision which had eliminated the liability protection of the state’s recreational use statute. In a stunning display of how upset Iowans were with the Court’s decision, the legislation passed the legislature within three months of the Court’s opinion and was signed into law.
This year, the Iowa legislature took action to negate two recent Iowa Supreme Court opinions that broadened liability for insurance agents and financial advisors. In the first case, decided in 2012, the Court allowed purported beneficiaries of life insurance to sue a decedent’s insurance agent for the agent’s alleged failure to ensure that a verbal statement that the decedent made indicating a desire to change a beneficiary designation of an insurance policy is carried out. The Court said this was the rule even if the decedent failed to follow through and make the written change even when the decedent made no written request to change the beneficiary. That required an agent to determine an insured’s actual intent, and face liability if the agent guessed incorrectly. You can read our summary of the Court’s decision here: http://www.calt.iastate.edu/article/your-insurance-agent-your-beneficiary%E2%80%99s-keeper
In the second case, decided in late 2013, the Court extended the intended beneficiary duty rule to financial advisors. You can read our summary of the Court’s decision here: http://www.calt.iastate.edu/article/iowa-supreme-court-extends-intended-beneficiary-duty-rule-financial-advisors
However, in its 2014 session, the Iowa legislature passed HF 398. The bill was signed into law on May 23 and became effective on July 1, 2014. The bill clearly states that an insurance agent “has no duty to change the beneficiary of an insurance policy or contract unless clear written evidence of the policy owner’s intent to name an intended beneficiary as a beneficiary of the policy or contract is presented to the insurance producer or insurer in the manner required by the policy or contract, prior to the payment of any insurance benefits under the policy or contract.” The legislative history of the bill specifically notes that it was the intent of the legislature to abrogate the holdings of the two cases noted above to the extent that the holdings in those cases imposed greater duties and responsibilities on insurance agents than those set forth in the bill. This time, the votes in the legislature were closer, passing the House 55-42 (with one Democrat voting for the bill and no Republicans voting against it) and passing the Senate 26-21 (with six Democrats supporting passage) and one Republican voting against it.