Poor Performance Is Not Covered.


New Way Construction was sued by the Yegges over a dispute arising from the construction of a residence. The Yegges obtained a judgment against New Way.  New Way was insured under a general business liability insurance policy [the edition cannot be determined from the information provided] issued by Integrity Mutual.


The Yegges sued Integrity pursuant to a statute allowing them to enforce a judgment by stepping into the insured’s shoes.  The trial court denied the Yegges’ claim.


On appeal, the court noted that the Yegges had sued the insured for breach of contract, breach of express warranty, fitness for a particular purpose, breach of implied warranty, negligence, and fraud.  They sought damages for (among other claims) labor, materials, and supplies necessary to complete the residence to their satisfaction, disruption of their lives, impairment of their business, diminished investment value, and emotional distress.  The court found that none of these counts sought recovery for “bodily injury” or “property damage” caused by an “occurrence,” “personal injury,” or “advertising injury.”  Citing Kartridge Pak Co. v The Travelers Indem. Co., 425 NW2d 687, 690 (Iowa App 1988) [see summary at (2) 120-13*], the court found that the claims did not qualify as covered property damage because they constituted intangible economic losses.


The court also found that the insureds’ alleged failures did not constitute an “occurrence” under the policy.  The court held that the Yegges’ claim was one for “poor performance in constructing a residence,” which is not covered under a routine business liability policy.


Further, the court held that there was no coverage for the emotional distress claim because the jury awarded no damages for emotional distress.  (The court did not address the issue of the duty to defend.)  Therefore, the court affirmed judgment in favor of Integrity.


Yegge v Integrity Mutual Insurance Co., 534 NW2d 100 (Iowa 1995).