## Facts

- Betty Naber fell from an unfinished, unprotected catwalk in a barn on property she rented from Merlin Clock and was rendered a paraplegic.
- At the time of the accident, Clock had $100,000 in liability coverage with IMT Insurance Company, obtained through his agent, L.M. Larson (and Larson’s River City Insurance Agency, Ltd.).
- Naber sued Clock in tort (and contract) for damages arising from the fall, and IMT provided Clock with defense counsel.
- While that tort suit was pending, Clock filed a declaratory-judgment action against IMT, Larson, and Larson’s agency alleging breach of contract and negligence for failing to procure a $1 million umbrella liability policy that Clock claimed he had requested.
- Clock and Naber later settled the underlying tort case: Naber agreed to accept $110,000 ($100,000 paid by IMT and $10,000 paid by Clock) and to release and dismiss her claims against Clock with prejudice, and she agreed not to pursue any further claim against Clock arising from the accident.
- As part of the settlement, Clock assigned to Naber his interest in the declaratory-judgment action against IMT and Larson.
- After the settlement and dismissal of the tort suit, Naber (as assignee, proceeding in Clock’s name) sought a ruling on whether the declaratory-judgment action could continue.
- The district court concluded the settlement fixed and capped any recoverable amount in the assigned action (treated as, at most, Clock’s $10,000 personal contribution) and dismissed the declaratory-judgment action.
- Clock appealed from the dismissal.

## Issues

1. After the insured settles the underlying tort case, obtains a release and dismissal with prejudice, and assigns his coverage-procurement claims to the tort plaintiff, can the assignee maintain the action against the insurer and agent for additional recovery?
2. Does the settlement and release cap any recoverable damages in the assigned failure-to-procure/insufficient-coverage action to the insured’s remaining loss under the settlement, leaving no basis to pursue more?

## Decision

- The Iowa Supreme Court affirmed the district court’s dismissal of the declaratory-judgment action.
- The court held that the settlement and release fixed the limits of any recovery tied to Clock’s exposure from Naber’s claim; once Clock’s liability to Naber was extinguished by the settlement and dismissal with prejudice, the assignee could not pursue the agent/insurer for amounts beyond what Clock himself could claim after settlement.
- Because Naber proceeded only as Clock’s assignee, her rights could rise no higher than Clock’s; with the underlying claim fully resolved against Clock, the assigned action could not be used to obtain additional recovery beyond the settlement structure the parties chose.

## Legal Principles

- An assignee stands in the shoes of the assignor and generally can acquire no greater rights than the assignor possessed at the time of the assignment.
- Claims against an insurer or insurance agent for failure to procure requested coverage seek to compensate the insured for the insured’s actual loss attributable to the absence of the requested coverage; the measure of recovery is tied to the insured’s remaining liability or out-of-pocket loss.
- A settlement that includes a full release and dismissal with prejudice can eliminate the insured’s ongoing exposure to the underlying claimant; when that occurs, the insured’s post-settlement damages tied to the underlying claim are correspondingly limited.
- A declaratory-judgment action requires a real dispute about legal rights or obligations; when the underlying settlement resolves and fixes the insured’s exposure in a way that leaves no further amount at stake, dismissal is appropriate.
- Prior Iowa authority (including Red Giant Oil Co. v. Lawlor) recognizes that settlement of an underlying claim does not always end related coverage/procurement disputes, but the ability to proceed depends on whether the insured still has a compensable loss or exposure after the settlement terms are applied.

## Conclusion

Clock’s settlement with Naber released and dismissed all claims against him and fixed the extent of his remaining exposure arising from the accident; because Naber pursued the agent/insurer action only as Clock’s assignee and could not claim more than Clock could claim, the Iowa Supreme Court affirmed dismissal of the declaratory-judgment action.


Clock v. Larson, 564 N.W.2d 436 (1997)