Insurance companies make money by paying out less in claims than they receive in premiums. That result is achieved by careful drafting of language in the insurance policy by the company’s lawyers, and artful lawyering over the finer points of the meaning of that language. This case is a clear illustration of both of those points.
Here, a cattle owner placed his cattle with another farmer for that farmer to feed and care for the cattle until they were marketed. The cattle were counted as they came off the delivery trucks and again when they were shipped out. The cattle owner had an insurance policy in place that provided coverage for “theft” of the cattle (if there was evidence that the cattle were stolen), but provided no coverage if the loss was discovered upon taking inventory. In other words, if the insured actually saw the cattle being stolen the loss would be covered, but if the insured discovered the theft by counting the cattle and coming up short the loss would not be covered – even if there was substantial evidence that the cattle had been stolen.
In the spring, the farmer called the cattle owner to tell him that he thought there were insufficient cattle on the farm to fill the trucks that would be coming to ship the cattle to market. The cattle buyer went to the farm to investigate and noted even before counting the cattle that the pen of fat cattle was short. A subsequent count indicated that fifty-three fat cattle were missing. While there wasn’t any direct evidence that a theft had occurred, there also wasn’t any evidence that they hadn’t been stolen.
The insurance company (Nationwide Mutual Insurance Co.) moved for directed verdict, but the trial court denied the motion and the jury determined that the cattle owner had coverage under the policy – the evidence pointed to a theft of fifty-three cattle and the policy exclusion for inventory-discovered thefts did not apply. The insurance company appealed, claiming that the trial court erred in (1) not instructing the jury on the definition of “inventory”; (2) instructing the jury as to only one inference that could be supported by the evidence; (3) determining that there was not sufficient evidence to create a jury question that a theft of fat cattle occurred; and (4) not finding that the cattle owner discovered the missing cattle by taking an inventory.
On the definition of “inventory” issue, the appellate court noted that the policy did not define “inventory,” and that it was appropriate to submit the issue to the jury. In addition, the appellate court determined that even using the insurance company’s definition, the trial court correctly concluded that the record did not support the insurance company’s claim that the loss of the cattle was discovered upon taking an inventory – the farmer had noticed that there was a shortage of cattle before counting them. As for the insurance company’s claim that the jury was given a misleading instruction on the inference of theft, the appellate court noted that the trial court had properly stated the law concerning establishing theft by circumstantial evidence and that the jury should consider any theory based on the evidence. The appellate court also upheld the trial court’s finding of sufficient evidence that a theft of fat cattle had occurred.
The bottom line is this – an insurance policy is a contract and the party that writes the contract will write the contract in their in best interest. Always read and understand all terms in an insurance policy before signing, and attempt to negotiate any unfavorable terms. Simon v. Krogmann, et al., No. 8-611/07-1956, 2008 Iowa App. LEXIS 1271 (Iowa Ct. App. Dec. 17, 2008).