Auto-Owners Insurance Company vs. Iowa Insurance Division

IN THE SUPREME COURT OF IOWA
No. 15–0714
Filed November 18, 2016
AUTO-OWNERS INSURANCE COMPANY,
Appellant,
vs.
IOWA INSURANCE DIVISION,
Appellee.
Appeal from the Iowa District Court for Polk County, Robert B.
Hanson, Judge.
Insurer appealed insurance commissioner’s decision to decline to
consider the merits of an insured’s complaint and the district court
dismissed for lack of standing. APPEAL DISMISSED.
CeCelia C. Ibson of Ibson Law Firm, Des Moines, for appellant.
Thomas J. Miller, Attorney General, Jordan G. Esbrook, Assistant
Attorney General, for appellee.

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APPEL, Justice.
In this case, we are asked to consider whether an insurer may
bring an appeal under the Iowa Administrative Procedures Act of an
action by the insurance commissioner when the commissioner declined
to consider the merits of an insured’s complaint challenging the insurer’s
termination of workers’ compensation insurance on the ground that the
complaint raised factual issues that could not be resolved by the agency.
For the reasons expressed below, we conclude the appeal is moot and
thus dismiss the appeal.
I. Factual and Procedural Background.
Subject to exceptions not relevant to this case, Iowa employers are
required by law to obtain insurance covering their liability for workers’
compensation benefits. Iowa Code § 87.1 (2015). When an employer in
good faith is entitled to insurance but is unable to procure it in the open
market, Iowa’s assigned risk plan provides a mechanism by which
coverage is available. Iowa Code § 515A.15. Auto-Owners Insurance
Company (Auto-Owners) is a participant in Iowa’s assigned risk plan.
The National Council on Compensation Insurance (NCCI) is a
rating organization operating in Iowa and is administrator of the
assigned risk plan. As we noted in Travelers Indemnity Co. v.
Commissioner of Insurance, NCCI “adopted rules for the administration,
management, and enforcement of the assigned risk plan in Iowa.” 767
N.W.2d 646, 647–48 (Iowa 2009).
On February 28, 2014, Health Dimensions Rehabilitations, Inc.
(Health Dimensions) submitted an application for workers’ compensation
insurance to the assigned risk plan. Health Dimensions has its home
office in Minnesota. It conducts business in Minnesota, Iowa, South
Dakota, and Wisconsin. Pursuant to the assigned risk plan, NCCI

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assigned Auto-Owners as Health Dimensions workers’ compensation
insurance carrier.
On assignment from Auto-Owners, Travelers Indemnity Company
issued a workers’ compensation policy. The policy provided coverage
only for Health Dimensions’ Iowa workers engaged in its Iowa operations.
Carolina Casualty Insurance Company provided coverage for Health
Dimensions’ Minnesota employees.
A dispute arose between Health Dimensions and Carolina Casualty
regarding the proper premium for coverage of its Minnesota employees.
The dispute led to NCCI sending a letter to Auto-Owners on June 17,
which stated that Health Dimensions had been identified as ineligible for
assigned risk coverage because the company was “identified as having an
undisputed premium or other monetary obligation on a prior/current
workers compensation policy.” The NCCI instructed Auto-Owners to
verify that the policy with Health Dimensions was an assigned risk policy
and, if so, Auto-Owners was instructed to initiate cancellation of the
policy.
On June 19, Auto-Owners issued a notice of cancellation to Health
Dimensions, effective July 4. The notice indicated that Health
Dimensions’ workers compensation policy was “cancelled by underwriter
and/or plan admin.”
Health Dimensions responded to the notice of cancellation in two
ways. First, in August, Heath Dimensions filed an action in Minnesota
state court against Auto-Owners claiming breach of contract. In the
lawsuit, Health Dimensions sought a declaratory judgment as well as
punitive damages.
Second, on September 11, Health Dimensions sent a letter to the
Iowa insurance commissioner complaining about the cancellation of its

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Iowa policy and claiming the cancellation violated Iowa law. On October
10, Auto-Owners submitted its response. In its response, Auto-Owners
provided an extensive history of the dispute.
On October 28, John Leonhart, an enforcement attorney for the
Iowa Insurance Division, wrote Health Dimensions regarding its
September 11 complaint. In the letter, Leonhart stated,
It appears from the matters raised in your letters, the
response from Auto-Owners and the complaint filed in the
District Court for the County of Isanti, State of Minnesota
that you have a factual dispute with Auto-Owners and NCCI.
The Division as a state administrative agency does not have
the authority to resolve such a factual dispute. The proper
forum for this is a court of law and that is where this matter
now resides. The Division cannot intervene in a matter that
is currently being litigated before a judicial tribunal.
Auto-Owners filed a petition for judicial review in Polk County
District Court on November 20. The petition sought a declaration that
the insurance commission should have exercised jurisdiction over the
dispute between Health Dimensions and Auto-Owners. The
commissioner filed a motion to dismiss the petition, arguing that Auto-
Owners was not “a person aggrieved by the application of a rating
system” under Iowa Code section 515A.9. In an amended filing, the
commissioner argued that Auto-Owners had no standing to challenge the
commissioner’s action under Iowa Code section 17A.19.
The district court entered its ruling on March 31, 2015. In its
ruling, the district court held that Auto-Owners lacked standing to
litigate the issues. The district court stated that the only requirement of
standing at issue in the case was whether Auto-Owners is “aggrieved or
adversely affected” by the commissioner’s decision under Iowa Code
section 17A.19(1).

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The district court applied the test developed by this court in Polk
County v. Iowa State Appeal Board, 330 N.W.2d 267, 273 (Iowa 1983). In
Polk County, we applied a two-prong test to standing under the Iowa
Administrative Procedure Act. Id. The first Polk County standing
requirement, the interest prong, required a party to show a “specific,
personal and legal interest in the subject matter” of the agency action.
Id. The second Polk County standing requirement, the prejudice prong,
required an appealing party to demonstrate the agency action has a
specific or injurious effect on the appealing party’s interest. Id. The
district court concluded that while Auto-Owners met the interest prong
of the Polk County test, it failed to meet the prejudice prong. The district
court granted the motion to dismiss.
Auto-Owners appealed the district court decision. For the reasons
expressed below, we dismiss the appeal as moot.
II. Discussion.
At oral argument in this matter, we were advised by counsel that
Health Dimensions had accepted a refund check from Auto-Owners
related to the cancelled insurance policy and did not appear at a hearing
in state court in Minnesota dealing with questions related to cancellation
of the Health Dimensions’ policy with Auto-Owners. The dispute
regarding cancellation of the insurance policy which was presented to the
insurance commissioner thus appears to be moot. See Electra Ad Sign
Co. v. Cedar Rapids Truck Ctr., 316 N.W.2d 876, 879 (Iowa 1982) (holding
that an obligation is discharged when valid consideration is offered,
intended, and accepted as full satisfaction of the original claim); Kissner
v. Brown, 487 N.W.2d 97, 98 (Iowa Ct. App. 1992) (per curiam) (stating
plaintiff accepting and cashing check for judgment without reservation or
protest rendered plaintiff’s appeal moot). Under the circumstances

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presented and applying our established caselaw, we dismiss the appeal
as moot.
III. Conclusion.
For the above reasons, the appeal is now moot and must be
dismissed.
APPEAL DISMISSED.

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