                                                                         F I L E D
                                                                  United States Court of Appeals
                                                                          Tenth Circuit
                 UNITED STATES COURT OF APPEALS                           JUL 31 1997

                                  TENTH CIRCUIT                      PATRICK FISHER
                                                                              Clerk



 STEVEN E. FORD, C. LYNN FORD,
 MICHAEL G. FORD, a minor, and
 BEATRICE MEIERSTEIN,

          Plaintiffs-Appellees,
                                                       No. 96-8096
                                                   (D.C. No. 93-CV-201)
 v.
                                                         (D. Wyo.)
 ALLIED MUTUAL INSURANCE
 COMPANY, an Iowa corporation,

          Defendant-Appellant.




                          ORDER AND JUDGMENT *


Before SEYMOUR, Chief Judge, PORFILIO and TACHA, Circuit Judges.


      The issue in this case is the effect of an underinsured motorist insurance

carrier’s approval of a settlement between its insured and the tortfeasor, where

additional primary insurance for the tortfeasor is subsequently discovered. We

have described the facts of this case in our earlier published opinion. Ford v.


      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Allied Mutual Ins. Co., 72 F.3d 836 (10th Cir. 1996). In 1989, Steven Ford and

his family sustained serious injuries when their car was struck by the trailer of a

truck negligently driven by Leland Blatter. The Fords’ total damages were later

determined to be $670,000. Mr. Blatter and his liability insurer, Truck Insurance

Exchange (TIE), a.k.a. Farmers’ Insurance Group, offered the policy limits of

$300,000 in exchange for a release from all liability. The Fords carried

underinsured motorist (UIM) coverage with Allied Mutual Insurance Company

(Allied). Mr. Ford revised a form release provide by TIE, and sent a copy of the

release to Allied requesting that it approve the settlement and release of Mr.

Blatter. On August 16, 1990, Allied wrote to Mr. Ford, stating “Allied Mutual

Insurance Company has obtained an assets check on Mr. Blatter and have

determined that there [are] no funds from which to collect any subrogation claim

against him. Therefore, you have Allied’s permission to enter into a release with

Mr. Blatter and Farmer’s Insurance for your [family’s] claim[s].” Aplt.’s app.,

vol. II at 81.

       The trailer to Mr. Blatter’s rig was owned by Rollins Leasing Company,

which leased the trailer to Darigold, which in turn leased the trailer to Mr.

Blatter. The Fords released Mr. Blatter, reserving their right to “pursue claims

against any and all other parties responsible for [their] injuries, including, but

not limited to, Rollins Leasing.” Aplt.’s app., vol. II at 38, 41, 44 (emphasis


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added). However, the release did not reserve the right to recover from additional

sources of liability insurance available to Mr. Blatter. Subsequent to the

execution of the release, Mr. Ford and Allied discovered that Darigold had a

$1,000,000 policy for which Mr. Blatter was an insured. In a trial to the jury, the

jury found that Allied had waived its rights to and was estopped from asserting

the Darigold policy as a defense to Allied’s UIM coverage.

      Allied appeals, asserting that waiver and estoppel do not apply under Iowa

law, and if they do apply, the elements are not satisfied as a matter of law; that

the district court erred in refusing to instruct the jury that the Fords were in an

“arms length relationship” with Allied; and that the district court erred in refusing

to allow testimony regarding mutual mistake in the release.

      The parties agree Iowa law applies. Allied argues, quite simply, that the

UIM coverage does not apply because Mr. Blatter, as it turned out, was not an

underinsured motorist. As a general rule, under Iowa law the UIM carrier may

require the insured to pursue the tortfeasor’s available primary policy limits and

assets before liability for UIM coverage attaches. An insured may not unilaterally

sign away the UIM insurer’s subrogation rights with respect to the tortfeasor’s

assets or other applicable insurance policies. Grinnell Mutual Reins. Co. v.

Recker, 561 N.W.2d 63, 68-69 (Iowa 1997). Thus, if an insured settles with a

tortfeasor for less than available policy limits without the consent of the UIM


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carrier, the UIM carrier will be credited for the amount of the policy limits,

rather than the amount of the settlement. Rucker v. National General Ins. Co.,

442 N.W.2d 113, 117 (Iowa 1989) (en banc). However, Rucker does not resolve

the issue before us: whether the UIM insurer, by its explicit written consent to the

settlement entered into by its insured, may waive its right to subrogate against any

additional assets of the tortfeasor and thereby waive its right to be credited for the

full policy limits of additional, unknown primary coverage.

      Under the UIM policy, the Fords could not settle any claims without the

consent of Allied. The necessary converse is that the Fords must be able to rely

on such consent once procured in good faith. Rucker itself, upon which Allied

relies so heavily, discusses the policy considerations which “favor allowing

injured parties the flexibility of entering into a settlement with the tortfeasor’s

liability carrier for less than the full amount of coverage.” 442 N.W.2d at 115-16.

The same policy considerations counsel that a UIM carrier, when it approves such

a settlement, ought to be bound by the terms of its approval.

      Allied contends that waiver does not apply in the instant case because

      “the doctrines of implied waiver and of estoppel, based upon the
      conduct or action of the insurer, are not available to bring within the
      coverage of a policy risks not covered by its terms, or risks expressly
      excluded therefrom, and the application of the doctrine in this respect
      is therefore to be distinguished from the waiver of, or estoppel to
      assert, grounds of forfeiture.”

Randolph v. Fireman’s Fund Ins. Co., 124 N.W.2d 528, 531-32 (Iowa 1963)

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(quoting 29A A M . J UR ., Insurance, § 1135, at 289). We note that this case, and

the others relied upon by Allied, address only the limits of implied waiver by the

insurer’s conduct, not the type of express waiver by Allied’s written approval of

the release present in this case. Moreover, under Iowa law it is clear that an

insurer may waive many of its defenses to coverage. Scheetz v. IMT Ins. Co.

(Mut.), 324 N.W.2d 302, 304-05 (Iowa 1982) (en banc). An insured may show

that the insurer waived the requirements of policy provisions which are conditions

precedent to coverage. Simpson v. United States Fidelity & Guar. Co., 562

N.W.2d 627, 631 (Iowa 1997). Allied has pointed to no caselaw indicating that

Allied may not expressly waive either its right to require its insured to exhaust the

tortfeasor’s liability limits, or its right to subrogate against the tortfeasor’s assets.

      In order to establish waiver, the evidence must show that Allied had a right

under the policy, that it had actual or constructive knowledge of the right, and

that it intended to relinquish that right. Scheetz, 324 N.W.2d at 304. Because it

is uncontroverted that Allied did not know about the Darigold insurance policy

when it approved the release of Mr. Blatter, Allied claims it could not have

intended to relinquish its right to that primary coverage. We are not persuaded.

Allied’s right under the policy was the right to require its insured to exhaust all

assets of the tortfeasor, both known and unknown, or in the alternative, to

subrogate against all assets of the tortfeasor, both known and unknown. At the


                                           -5-
time the injury was incurred, Allied possessed a “contingent subrogation right.”

See Grinnell Mutual Reins., 561 N.W.2d at 69. Allied’s right under the policy

was to set off from the insured’s damages all applicable insurance coverage and

non-exempt assets which might be identified. Allied has pointed to no authority

suggesting that its ability to waive this right depends on its knowledge of the

exact source and dollar amount of the tortfeasor’s assets. The issue of waiver was

properly submitted to the jury.

      Because the jury was properly instructed on waiver, it was also proper for

the district court to instruct the jury on the elements of estoppel. “The term

estoppel is broader than that of waiver, and may embrace it within its scope, in

certain instances, since an insurer, after waiving certain rights, would be estopped

thereafter to insist upon them.” 16B J OHN A LAN A PPLEMAN & J EAN A PPLEMAN ,

I NSURANCE L AW & P RACTICE § 9081, at 497 (rev. 1981). Evidence in the record

shows that the Fords changed their position in reliance on the waiver given by

Allied: they signed the release of Mr. Blatter. Allied must have intended that the

Fords so rely, because the Fords were prohibited by their policy from settling

without Allied’s consent. Allied’s arguments on estoppel are misconceived: it

argues that because the Fords and Allied were in an “arms length” relationship,

the Fords could not rely on Allied’s representations about the availability of

additional insurance coverage on Mr. Blatter. The facts underpinning Allied’s


                                         -6-
decision to waive its subrogation rights by consenting to the release are simply

irrelevant to the question of whether the Fords may rely on the waiver itself. The

Fords have no duty to investigate the factual bases of Allied’s waiver, “arms

length” relationship or no.

      Finally, Allied contends that the district judge erred in refusing to allow

evidence of mutual mistake regarding the release executed by the Fords and Mr.

Blatter. Allied claims that if the release may be voided or reformed due to mutual

mistake, Allied should not be liable because other insurance is available to Mr.

Blatter. As an initial matter, it is questionable whether ignorance of the Darigold

policy is the type of mistake about the existence, nature, or value of the objects of

the contract, to which the doctrine of mutual mistake applies. See 3 A RTHUR

L INTON C ORBIN , C ORBIN O N C ONTRACTS § 605 (1960). Allied does not contend

that Mr. Blatter and the Fords misunderstood the extent of the Fords’ injuries, cf.

Thomas v. Sheehan, 149 N.W.2d 842 (Iowa 1967) (mutual mistake as to nature

and extent of injuries for which release of liability was given is question for the

jury), or the scope of the release given to Mr. Blatter. All parties were aware that

Allied was giving up its contingent subrogation rights. Under the circumstances

of this case, mutual mistake with respect to the release is simply irrelevant to a

determination of the scope of the waiver given by Allied. If Allied’s approval of

the release given to Mr. Blatter constitutes a waiver, as the jury found, then


                                          -7-
Allied is estopped from asserting against the Fords any defense based on defects

in that release. Although mutual mistake in the release may provide a basis upon

which Allied could contest the validity of the release with Mr. Blatter, Allied’s

approval of the release waives any right to contest the release with its own

insured.

      In sum, we find Allied’s arguments unpersuasive and somewhat

disingenuous. Under its policy, Allied had the right to withhold consent from the

proposed release, to condition its consent on a reformulated release, to insist that

its insured file a lawsuit to discover the relevant insurance information, or to pay

its insured and file the lawsuit itself pursuant to its subrogation rights. Instead,

Allied approved the release which preserved its rights only with respect to other

tortfeasors, but not its rights with respect to then-unknown assets available to the

released tortfeasor, Mr. Blatter. It now seeks to impose all risk of its error on its

insured, without even a hint that the insured has done other than fully cooperate

with the demands made by Allied in the handling of the claim.

      We AFFIRM.

                                                ENTERED FOR THE COURT


                                                Stephanie K. Seymour
                                                Chief Judge




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