author: CADY, Justice.

text:
    AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellee, v. Dawn S. PETERSEN, Appellant.
    No. 02-1400.
    Supreme Court of Iowa.
    Feb. 25, 2004.
    As Amended on Denial of Rehearing May 6, 2004.

      Timothy M. Sweet of Beard & Sweet, P.L.C., Reinbeck, for appellant.
    Ken A. Winjum, West Des Moines, for appellee.
   CADY, Justice.

This appeal from a declaratory judgment primarily requires us to decide within the context of a claim for uninsured motorist benefits by an injured insured whether a tortfeasor’s intentional conduct may constitute an “accident” within the meaning of the uninsured motor vehicle provision of an insurance contract and whether the conduct giving rise to the injuries to the insured arose from the use of a motor vehicle. We also consider the binding effect of a judgment against the uninsured tortfeasor. The district court entered judgment for the insurer. It held the injuries to the insured arose from the use of a motor vehicle but the uninsured motor vehicle clause did not extend coverage to the insured for injuries caused by the intentional acts of a third-party tort-feasor. On our review, we affirm the judgment of the district court in part and reverse in part.

I. Background Facts and Proceedings.

Dawn Petersen (Petersen) was injured on July 29, 1999, after she was assaulted by her former live-in boyfriend, David Ad-cock (Adcock), in his Chevrolet Blazer. Petersen was a passenger in the vehicle and Adcock was the driver. The most serious injuries occurred when Petersen jumped from the moving Blazer in an effort to escape the assaultive conduct by Adcock.

Petersen and Adcock lived together for several years and had a five-year-old son. Their relationship was marked by years of abuse, and Petersen had recently moved from the home they shared. Sadly, not unlike many other women who attempt to leave an abusive relationship, Petersen was stalked and terrorized by Adcock after she left, culminating in the events of July 29.

On that fateful day, Petersen met Ad-cock at a restaurant in the early evening hours to discuss issues involving their son. During the conversation in the restaurant, Adcock convinced Petersen to go with him to his Blazer parked outside of the restaurant under the ruse that he had a card to give her. Petersen entered the Blazer and sat in the front passenger seat. Adcock entered and sat in the driver’s seat. He started the car and rolled its windows down. Within minutes, Adcock began shocking Petersen with a stun gun. He also grabbed her around the neck. Ad-cock then drove from the restaurant as he continued to shock her with the stun gun.

After unsuccessfully attempting to grab the steering wheel from Adcock, Petersen climbed out of the window of the Blazer and eventually released her grip on the moving vehicle. She felt her life was in greater danger if she remained with the vehicle. Petersen sustained numerous injuries to her body when she struck the pavement of the street. The vehicle was traveling approximately forty miles per hour at the time. She also sustained injuries from the stun gun.

American Family Mutual Insurance Company (American Family) insured the Blazer by a policy of insurance in Adcock’s name. The liability provisions of the policy excluded coverage for “[bjodily injury ... caused by an intentional act of ... an insured person.” Petersen had a separate insurance policy with American Family covering her vehicle. This policy included uninsured motorist coverage. The provision provided:

We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle. The bodily injury must be sustained by an insured person and must be caused by accident and arise out of the use of the uninsured motor vehicle.

Petersen sued Adcock on March 3, 2000, for the injuries she received from the incident on July 29, 1999. Adcock promptly filed a pro se answer denying the claim. However, after Adcock failed to respond to discovery requests and failed to appear for a hearing on sanctions, the district court entered a default against him on November 14, 2000. Following a hearing on damages on February 8, 2001, the district court entered judgment against Adcock for $52,133.14 in compensatory damages and $35,000 in punitive damages.

American Family was not informed of the lawsuit against Adcock until December 13, 2000, and was not notified of the hearing on damages until February 1, 2001, one week prior to the hearing. American Family denied coverage under both insurance policies and elected not to seek intervention in the lawsuit to participate in the damage hearing. After the final judgment was entered, Petersen requested American Family pay her damages pursuant to the uninsured motorist clause of her insurance policy.

American Family filed a petition for declaratory relief. It claimed there was no coverage for any damages sustained by Petersen under either American Family policy. It also claimed it was not bound by the judgment obtained by Petersen against Adcock. Petersen asked that the court declare coverage under both policies and find the default judgment binding on American Family.

The district court considered the petition on stipulated facts. It determined there was no coverage under the American Family policies. It first found that the intentional act exclusion precluded coverage under Adcock’s policy. It then found there was no coverage under the uninsured motorist provision of Petersen’s policy because Petersen’s injuries were not “caused by accident.” It did not address the question whether the judgment was binding on American Family. The district court later denied Petersen’s motion to enlarge the ruling to fully address all issues.

Petersen appeals and raises two issues. First, she asserts that the question whether an “accident” occurred under the uninsured motor vehicle provision should be considered from the viewpoint of the injured insured, not the uninsured tortfea-sor. From her viewpoint, Petersen claims the incident was unexpected and unintended, which makes her injuries accidental. Second, she argues American Family must be bound by the prior judgment against Adcock in a claim under the uninsured motorist clause of her insurance policy because American Family failed to intervene in the action after receiving notice of the damage hearing. American Family responds that both grounds it asserted at trial can support the decision of the district court. It also argues that the doctrines of res judicata and collateral estop-pel preclude enforcement of the judgment against it in the event coverage exists under the uninsured motorist clause.

II. Scope of Review.

A declaratory judgment action tried at law limits our review to correction of errors at law. United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 651 (Iowa 2002). We are bound by well-supported findings of fact, but are not bound by the legal conclusions of the district court. Id. Moreover, the construction and interpretation of a contract of insurance are matters of law for the court, and we are not bound by the interpretation and ruling of the district court. III. Nat’l Ins. Co. v. Farm Bureau Mut. Ins. Co., 578 N.W.2d 670, 671 (Iowa 1998).

III. Uninsured Motorist Coverage.

The uninsured motorist (UM) coverage of an insurance policy typically applies when four requirements are satisfied. Two such requirements are that the bodily injury be caused by “accident” and that the bodily injury arise out of the “use” of the uninsured vehicle. These two requirements form the foundation for this appeal and require us to decide the meaning of each phrase within the context of UM coverage.

Before separately addressing each requirement, we recognize that our fundamental task at hand is to interpret the language of the insurance policy. See Gen. Cas. Co. of Wis. v. Hines, 261 Iowa 738, 745, 156 N.W.2d 118, 122 (Iowa 1968) (an automobile insurance policy is a contract and is governed by rules applicable to contracts). In doing so, “we strive to ascertain the intent of the parties at the time the policy was sold.” Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 299 (Iowa 1994). “We ordinarily determine [this] intent from the language of the policy itself unless the policy is ambiguous.” Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Farmland Mut. Ins. Co., 568 N.W.2d 815, 818 (Iowa 1997). An ambiguity exists when, after application of our relevant rules of interpretation, a genuine uncertainty results as to which of two or more meanings is proper. LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998). When two reasonable interpretations exist, the policy is construed most favorably to the insured. United Fire & Cas. Co. v. Victoria, 576 N.W.2d 118, 120-21 (Iowa 1998); see also State Auto. & Cas. Underwriters v. Hartford Accident & Indem. Co., 166 N.W.2d 761, 763 (Iowa 1969) (when policy is susceptible to two interpretations, one that sustains coverage and one that does not, we favor the construction that provides coverage). With these concepts in mind, we separately address each requirement.

IY. “Caused by Accident” Requirement.

The meaning of the term “accident” within the context of UM coverage and, in particular, whether the term can include intentional acts of an uninsured tortfeasor,

is an issue of first impression in Iowa. Other jurisdictions have answered the question differently depending upon whether an “accident” is viewed from the perspective of the injured insured or the uninsured tortfeasor. A majority of jurisdictions consider the question from the perspective of the injured insured, and conclude an intentional act of an uninsured tortfeasor may nevertheless be an “accident” under a UM provision as long as it was unprovoked by the injured insured. See State Farm Mut. Auto. Ins. Co. v. McMillan, 925 P.2d 785, 793 (Colo.1996) (collecting cases); Wendell v. State Farm Mut. Auto. Ins. Co., 293 Mont. 140, 974 P.2d 623, 629-30 (1999) (same); see also 2 Irvin E. Schermer, Automobile Liability Insurance § 42.03[8], at 42-23 (3d ed.1995). The rationale for viewing the incident causing the injury from the standpoint of the victim has been summarized in one well-known treatise as follows:

First ... unless the tortious conduct of the uninsured or unidentified motorist was provoked by the injured person, the events and the injuries resulting from intentional acts are indistinguishable from those that result from negligent acts. In other words, when injuries are viewed from the vantage point of an injured person, the cause of the injuries is no less fortuitous than the situation in which a person is injured as a result of the negligent operation of an uninsured vehicle.
Second, since uninsured motorist insurance is a first party coverage, the insurance provides no benefits — directly or indirectly — to the tortfeasor. Indeed, if the tortfeasor is financially responsible, the insurer which has paid uninsured motorist insurance benefits may seek reimbursement for payments made to a claimant. Therefore, the claim for indemnification under uninsured motorist insurance is readily distinguished from situations involving a question about whether liability insurance covers claims for damages that result from intentional torts.
Third, the justifications for not indemnifying the insured who intentionally commits a tortious act relate to deterrence or punishment: considerations that do not apply to the payment of first party, uninsured motorist insurance claims. Uninsured motorist insurance benefits paid to an injured person do not reduce the possibility that the tort system or the criminal law system will operate either (a) to punish the tortfeasor or (b) to influence the conduct of the tortfeasor who caused the loss which is indemnified by the insurance or of other potential tortfeasors.
Fourth, the enactment of uninsured motorist insurance statutes throughout the country, which mandate either that the insurance be offered to all motor vehicle insurance purchasers or included in all motor vehicle insurance policies, reflects the importance attached to providing indemnification for innocent traffic victims who are injured by financially irresponsible or unidentified motorists.

1 Alan I. Widiss, Uninsured and Underin-sured Motorist Insurance § 10.2, at 655-56 (rev.2d ed.1999) (footnote omitted) [hereinafter Widiss].

The minority view generally defines the term “accident” from the perspective of the uninsured tortfeasor. See McMillan, 925 P.2d at 793 (collecting cases); Wendell, 974 P.2d at 630 (same). The courts following this position point out that the purpose of the UM coverage is to provide the injured insured with the same protection that liability insurance coverage would have provided if the uninsured motorist had been insured. See Roller v. Stonewall Ins. Co., 115 Wash.2d 679, 801 P.2d 207, 210-11 (1990). Accordingly, it is argued that UM provisions should not be interpreted to cover intentional acts of an uninsured tortfeasor because liability policies do not cover injuries caused by intentional conduct of an insured. Id. In other words, an injured insured should not be put in a better position by virtue of being injured by an uninsured motorist than if injured by an insured motorist. Id. at 210. Some of the courts following the minority view also express concern that utilizing the perspective of the victim to determine whether an incident is accidental would essentially write the term “accident” out of the policy and render the requirement ineffectual because most all incidents involving injuries would be “accidents.” State Farm Mut. Ins. Co. v. Pitman, 148 N.H. 499, 809 A.2d 1280, 1282-83 (N.H.2002) (finding minority view reasonable but following majority view). Another way the minority courts resolve the question is to refrain from utilizing either perspective, and consider the existence of an “accident” by applying its commonly understood meaning. Roller, 801 P.2d at 210. Under this approach, an “accident” is not a subjective term and the perspective of the insured or tortfeasor is irrelevant. Id. “Either an incident is an accident or it is not.” Id.

In interpreting the “caused by accident” language of the UM provision in this case, we first observe that the insurance policy fails to define the word “accident.” When a word is left undefined in a policy, we give it the ordinary meaning a reasonable person would understand the word to mean. Farm & City Ins. Co. v. Potter, 330 N.W.2d 263, 265 (Iowa 1983). If two reasonable interpretations exist, we adopt the one favoring the insured. Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd., 568 N.W.2d at 818. However, the mere disagreement by the parties over the meaning of a term, or perhaps even a disagreement among courts, does not by itself establish an ambiguity, although we view the disagreement of courts in this matter as a strong indication of an ambiguity. See Morgan v. Am. Family Mut Ins. Co., 534 N.W.2d 92, 99 (Iowa 1995) (disagreement by parties does not, standing alone, establish an ambiguity), overruled, on other grounds by Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775, 784 (Iowa 2000).

To determine the existence of an ambiguity, we begin by examining the purpose and intent of our UM statute. Although the intent of the parties controls the resolution of the issue, it is recognized that our UM statute forms' “a basic part of the policy” and must be considered to effectuate the parties’ intent. Hollingsworth v. Schminkey, 553 N.W.2d 591, 595 (Iowa 1996); see also Lee v. Grinnell Mut. Reinsurance Co., 646 N.W.2d 403, 406 (Iowa 2002) (“The terms of the policy are to be construed in light of the purposes and intent of the applicable statute.”); Veach v. Fanners Ins. Co., 460 N.W.2d 845, 847 (Iowa 1990) (same). Where a statute closely guides the contract between the parties, as in UM coverage as well as many other provisions in insurance policies, “it is to be presumed that the parties contracted with the intention of executing a policy satisfying the statutory requirements, and intended to make the contract to carry out its purpose.” 7 Lee R. Russ, Couch on Insurance § 109:17, at 109-29 (3d ed.1995) (footnotes omitted) [hereinafter Couch]; see also Mortensen v. Heritage Mut. Ins. Co., 590 N.W.2d 35, 39 (Iowa 1999) (provisions of Iowa Code chapter 516A are read into, insurance policies).

The language of the UM clause of the insurance policy closely tracks the language of our uninsured motorist statute found in Iowa Code section 516A.1 (2001). This section requires all motor vehicle insurance policies that insure “against liability for bodily injury or death arising out of the ownership, maintenance, or use of a motor vehicle” to provide coverage:

for the protection of persons insured under such policy who are legally entitled to recover damages from the owner or operator of an uninsured motor vehicle ... because of bodily injury ... caused by accident and arising out of the ownership, maintenance, or use of such uninsured ... motor vehicle.

Id.

We have previously traced the concept of UM coverage back to a standard endorsement promulgated by the National Bureau of Casualty Underwriters in 1956, initiated as a response to the growing trend among the states to require liability insurance. Douglass v. Am. Family Mut. Ins. Co., 508 N.W.2d 665, 666 (Iowa 1993) (citing Dag E. Ytreberg, Annotation, Insured’s Right to Bring Direct Action Against Insurer for Uninsured Motorist Benefits, 73 A.L.R.3d 632, 636-37 (1976)), overruled on other grounds by Hamm, 612 N.W.2d at 784. The idea was not only to require all motorists to carry liability insurance, but to further close the gap between motor vehicle financial responsibility and compulsory insurance by providing financial compensation to innocent persons injured by the wrongful acts of those motorists who were uninsured. See Ytreberg, 73 A.L.R.3d at 636-37. In Douglass, we indicated that the purpose of a UM provision was “to provide to the victim of an accident the same protection that the victim would have had if the negligent tortfeasor had had minimum insurance coverage.” 508 N.W.2d at 667.

The specific purpose of UM coverage identified in Douglass could be viewed to support the notion that an accident in the context of UM coverage excludes intentional acts of the uninsured tortfeasor. See Ytreberg, 73 A.L.R.3d at 636-37. This is based on the concept that the intentional act would have prevented the insured from recovering from the tortfeasor insurer if the tortfeasor had maintained the required minimum insurance coverage. See Dolan v. State Farm Fire & Cas. Co., 573 N.W.2d 254, 257 (Iowa 1998) (assault victim had no recovery from homeowner’s insurer because of exclusion for insured homeowner’s intentional acts). This view appears compatible with the position of the minority of the courts who find injuries caused by intentional acts of the tortfeasor to be outside the scope of the term “accident” because the injured insured would not have been protected under the tortfeasor’s liability policy.

However, we have also viewed our UM statute to be more than a mere substitution for a tortfeasor’s noncompliance with the financial responsibility laws. We have previously explained “ ‘[t]he purpose of uninsured motorist coverage is to ensure minimum compensation to victims of uninsured motorists.’ ” Hamm, 612 N.W.2d at 779 (citation omitted). We have also said that our “legislature intended to assure protection to an insured against motorists whose liability to the insured is not covered.” Rodman v. State Farm Mut. Auto. Ins. Co., 208 N.W.2d 903, 909 (Iowa 1973). Neither of these purposes necessarily suggests that UM coverage is limited, as liability coverage is limited, to claims involving unintentional acts of the uninsured tortfeasor.

We acknowledge our prior cases have adopted a “narrow coverage” view of uninsured-motorist coverage, in contrast with a “broad coverage” view of underinsured-motorist coverage. Veach, 460 N.W.2d at 848; see also McClure v. Northland Ins. Co., 424 N.W.2d 448, 449-50 (Iowa 1988). However, our narrow-coverage view applies to the duplication of benefits from other sources. Veach, 460 N.W.2d at 848; McClure, 424 N.W.2d at 449. It means we traditionally subtract “from the policy limit any recovery from other sources” in awarding UM coverage. McClure, 424 N.W.2d at 449; see also McClure v. Employers Mut. Cas. Co., 238 N.W.2d 321, 329-30 (Iowa 1976) (insurer would be allowed to deduct workers’ compensation benefits from UM policy limits to avoid duplicative award). The objective of the statute is to restrict the “maximum recovery to the minimum required amount.” Lemrick v. Grinnell Mut. Reins. Co., 263 N.W.2d 714, 719 (Iowa 1978). This case, however, is not about duplication of benefits, and the “narrow coverage” approach taken in our prior cases does not restrict our consideration of the meaning of an “accident” in determining whether coverage exists in the first place. Accordingly, our stated purposes of UM coverage are generally consistent with the view recognized in other jurisdictions that UM coverage essentially exists to protect insureds “who have been injured by financially irresponsible motorists, so that such coverage resembles an accident policy for the victim.” Annotation, Coverage Under Uninsured Motorist Clause of Injury Inflicted Intentionally, 72 A.L.R.3d 1161, 1164 (1976); accord Wendell, 974 P.2d at 629.

We next turn to consider the insurance policy as a whole, including other terms of UM coverage. See Morgan, 534 N.W.2d at 99; Bates v. United Sec. Ins. Co., 163 N.W.2d 390, 397 (Iowa 1968) (courts consider contract as a whole). The intention of the parties to a contract must be derived from the language of the entire contract. Schlotter v. Leudt, 255 Iowa 640, 645, 123 N.W.2d 434, 438 (1963).

The policy defines a “uninsured motor vehicle” to include not only an uninsured vehicle, but also a motor vehicle that is “insured by a bodily injury liability ... policy at the time of the accident but the company denies coverage.” This definition reveals that UM coverage applies not only when the tortfeasor’s motor vehicle is “not insured by a bodily injury liability ... policy” but also when, as in this case, the motor vehicle is insured but the insurer denies coverage. Clearly, the UM provisions contemplate coverage to include situations, like this case, when the victim could not recover under the tortfeasor’s liability policy due to an exclusion. Moreover, the policy identifies the circumstances when a vehicle will not be considered an uninsured motor vehicle. These circumstances did not include denial of coverage for intentional conduct. See Iowa Comprehensive Petroleum Underground, Storage Tank Fund Bd., 568 N.W.2d at 817 (insurer has duty to define limitations in clear and explicit terms). The exclusions from the coverage section of the policy also did not identify intentional conduct of the tortfea-sor. See Wendell, 974 P.2d at 630-31 (noting that some cases denying coverage are distinguishable based on the fact the policies being construed contained express exclusions for intentional conduct). There is nothing in the policy that specifically distinguishes between intentional acts and negligent acts within the UM provisions relating to the phrase “caused by accident.” See McMillan, 925 P.2d at 792-93 (construing similar policy language).

We next review the definition of the term “accident” in an effort to ascertain its reasonable meaning. We have previously considered the definition of “accident” in the context of the liability provisions of an automobile insurance policy. In Potter, we held a collision that occurred after the insured driver was unable to stop her vehicle was an “accident” under the terms of a liability policy, even though the insured intentionally severed the brake lines of the vehicle. We reached this conclusion because the insured nevertheless attempted to avoid the collision after the brakes failed. See Potter, 330 N.W.2d at 267. In reaching this holding, we recognized that the meaning of an “accident” in a liability policy should normally be viewed “from the viewpoint of the tortfeasor” because the liability policy insures the tortfeasor, not the victim. Id. at 265. We also acknowledged the existence of authority supporting an interpretation of an “accident” from the standpoint of the injured victim, but found it unnecessary to resolve the split of authority. Id. We also found it unnecessary to determine if the word “accident” excluded an event in which the acts of the tortfeasor intended to harm others or the property of others. Id. at 266. These questions went unanswered because, despite the evidence that the tortfeasor intended to set in motion the events that caused the harm, the tortfeasor never intended to cause damage to anyone, but instead attempted to avoid the collision. Id. at 266-67. Notwithstanding, we quoted with approval from Comfort v. Continental Casualty Co., 239 Iowa 1206, 1207-08, 34 N.W.2d 588, 588-89 (1948):

[A]n ‘accident’ is an event which, under the circumstances, is unusual and unexpected by a person to whom it happens; the happening of an event without the concurrence of the will of the person by whose agency it is caused.

We also considered the definition of an “accident” in the context of a premise liability policy in Central Bearings Co. v. Wolverine Insurance Co., 179 N.W.2d 443 (Iowa 1970). In this case, we recognized “the futility of attempting an all-inclusive definition and underline[d] the necessity of interpreting the term within the context of the document in which it is used.” Id. at 448. In the context of premises liability insurance, we held that the common, reasonable meaning of an “accident” was “a misfortune with concomitant damage to a victim.” Id. This approach was based on the accepted view that an accident referred to “ ‘an undesigned, sudden, and unexpected event, usually of an afflictive or unfortunate character.’ ” Id. As in Potter, we rejected the notion that an accident merely meant “the negligence which eventually results in [the] misfortune.” Id.

Most recently, we considered the definition of an “accident” in Austin v. CUNA Mutual Life Insurance Co., 608 N.W.2d 577 (Iowa 1999). In Austin, we held that an “accident” in the context of an accidental injury and death policy did not include death from surgery for a medical condition not itself the result of an underlying acci.dent. 603 N.W.2d at 580. We indicated the term “accident” generally encompassed a sudden and unexpected event, but ultimately excluded injuries from the treatment of a medical condition from the definition of an accident by considering the question from the viewpoint of a “person on the street.” Id. at 578-80. As in Central Bearings Co., we found the definition of an “accident” was tied to the context of the situation. See id.

Two important points emerge from our prior cases. First, no single common definition of an “accident” applies to all types of insurance. Second, while we consider an “accident” to be an unusual and unexpected event, we have indicated that the event can be viewed through the lens of the tortfeasor, victim, and even a fictitious third party. Thus, these cases help expose the ambiguity that can arise from the use of the word “accident.” Nevertheless, none of our prior cases have accepted the position argued in this case that an “accident” takes place when the tortfeasor intended to harm the person or property damaged. See Potter, 330 N.W.2d at 266 (suggesting the situation would not be an accident in the context of a liability policy). Thus, it may be reasonable to define the term to exclude such a situation. On the other hand, it is also reasonable to include such a situation based on our recognition that the term must be interpreted in the context of the type of insurance at issue and our willingness to consider the viewpoint of the victim in determining the existence of an “accident.” Moreover, the rationale for our general tendency to view an accident from the viewpoint of the tortfea-sor in the case of a liability policy is found in the fact that liability policies provide insurance for the tortfeasor, not the victim. To the contrary, UM coverage provides insurance to the victim, not the tortfeasor. Thus, we find no reason to reject the viewpoint of the victim to define an “accident” for purposes of UM coverage.

Liability coverage involves third-party coverage and exists as a form of indemnification to protect the insured from paying for damages the insured causes to others. In contrast, UM coverage is first-party coverage that serves not to indemnify, but to compensate the insured for injuries by uninsured motorists. See Wendell, 974 P.2d at 633 (discussing generally the nature of UM insurance in the context of the insurer’s claim of non-compensability). Clearly, the social policy of preventing an injured insured from obtaining indemnification based upon intentional wrongs is not implicated in the context of UM coverage. Redden v. Doe, 357 So.2d 632, 633-34 (La.Ct.App.1978). Thus, this policy should not be used to help justify the denial of UM coverage for intentional acts. It simply does not apply to first-party coverage and innocent victims. See Abraham v. Raso, 183 F.3d 279, 298 (3d Cir.1999); Wendell, 974 P.2d at 631; Shaw v. City of Jersey City, 174 N.J. 567, 811 A.2d 404, 409 (2002).

We also think a distinction between intentional and negligent acts of an uninsured tortfeasor within thq context of UM coverage would lead to rather absurd and unintended results for blameless injured insureds. See McMillan, 925 P.2d at 794 n. 12. It would be unfair for an insured who has suddenly and unexpectedly been injured by an uninsured motorist to be denied UM coverage 'simply because the conduct of the uninsured motorist happened to be intentional. Instead, it would be logical for insured motorists to expect UM coverage without regard to negligence or intentional conduct of the tortfeasor. See Pitman, 809 A.2d at 1282. Viewed from the eyes of an innocent, victimized insured, injuries sustained from negligent acts of another are no less fortuitous than injuries resulting from intentional acts. See Wendell, 974 P.2d at 630.

We conclude the term “accident” under a UM provision of an insurance policy can include the situation in which the injuries are caused by intentional conduct of an uninsured tortfeasor. The term is ambiguous due to the variant viewpoints of the participants to the event, and we consequently construe ambiguous terms in favor of coverage. Accordingly, we believe the term can properly be viewed from the perspective of a blameless insured. We think the important aspect of the definition is found in the element of surprise and misfortune, and these aspects of an event are still present when one party to the event had no intent to harm another or property of 'another, even though another party had such an intent. This approach is not inconsistent with our prior cases, but simply recognizes that an “accident” can occur when only one party to the event had the intent to harm the other, just as when neither party had any intent. This is consistent with our approach that an accident is “ ‘[a]n event which, under the circumstances, is unusual and unexpected by a person to whom it happens.’ ” Comfort, 239 Iowa at 1207, 34 N.W.2d at 588; accord Weber v. IMT Ins. Co., 462 N.W.2d 283, 287 (Iowa 1990). This approach is also consistent with the nature and purpose of UM coverage in this state, as well as the language of the UM provision at issue. Additionally, it is compatible with the other doctrines governing insurance policies, and the reasonable expectations of the insured. Similarly, this approach falls in line with the majority rule in other jurisdictions.

Based on the undisputed facts and arguments of the parties, Petersen did not' intend or provoke the injuries caused by Adcock’s sudden and unexpected assault. Accordingly, the incident causing injuries to Petersen was an “accident” under the UM provision of the policy.

V. “Arising Out of the ... Use of an Uninsured Motor Vehicle.”

We have previously considered the meaning of the phrase “arising out of’ in the context of UM provisions of an insurance policy substantially identical to the UM provision at issue in this case. In Hollingsworth, we indicated the phrase should be broadly construed and that it only requires “some causal relationship between injury and risk for which coverage is provided.” 553 N.W.2d at 595 (quoting Kalell v. Mut. Fire & Auto. Ins. Co., 471 N.W.2d 865, 867 (Iowa 1991)). While this standard requires something less than the traditional concept of “proximate cause” in the context of UM coverage, it requires something more- than the mere fact that the vehicle was the situs of the injury. Id. at 595-96.

From an analytical standpoint, we observe that the “arising out of’ phrase is tied directly to the phrase “use of the vehicle.” Nevertheless, these two phrases actually require separate inquiries. See 8 Couch § 119:37, at 119-57 (“[T]he concepts of use and legal cause should be analyzed separately, avoiding the traditional proximate cause concepts.”). This means the use of the vehicle at the time of the injury must not only be a contemplated use and inherent in the purpose and nature of vehicles, but the use must be causally related to the injury. See Johnson v. State Farm, Mut. Auto. Ins. Co., 190 W.Va. 526, 438 S.E.2d 869, 872-73 (1993) (“Use” “must be foreseeably identifiable with the normal use of the vehicle” as a vehicle.); see also Detroit Auto. Inter-Insurance Exch. v. Higginbotham, 95 Mich.App. 213, 290 N.W.2d 414, 418-19 (Mich.Ct.App.1980). Like the “arising out of’ phrase, the term “use” is broad, but not so broad as to embrace acts independent of the operation of a vehicle. See 1 No Fault and Uninsured Motorist Automobile Insurance § 9.10[2], at 9-20 to -22 (MB 2000). The vehicle must be more than the site of the tortious conduct. Widiss § 11.5, at 687.

The district court found UM coverage applied because Petersen was a passenger in the uninsured vehicle being driven by Adcock, and she was injured while attempting to escape from the vehicle to avoid the assaultive actions of Adcock. American Family asserts the vehicle served as nothing more than the situs of a crime, and the cause of Petersen’s injuries was the criminal acts of Adcock and the contact of her body with the pavement of the street after she jumped from the vehicle.

We agree with American Family that the vehicle was merely the situs of the initial assault perpetrated on Petersen while it was in the parking lot. See U.S. Fidelity & Guar. Co. v. Lehman, 579 So.2d 585, 586 (Ala.1990) (stabbing of passenger did not arise out of “use” of vehicle under uninsured motorist provision of policy even though the injury occurred while vehicle was moving). However, during the course of the efforts by Petersen to extract herself from the subsequent assaults, the vehicle was used as a means of transportation, clearly a contemplated use. Thus, the use of the vehicle was causally related to the injuries she sustained when she jumped from the vehicle. Under these circumstances, the use of the vehicle became a causal factor of her injuries.

We acknowledge the causal link between the use of the vehicle and the injuries suffered can be difficult to establish when intentional acts or crimes are involved. See generally Larry D. Scheafer, Annotation, Automobile Liability Insurance: What Are Accidents or Injuries “Arising Out of Ownership, Maintenance, or Use” of Insured Vehicles, 15 A.L.R.4th 10, 17 (1982) (noting prefatorily the general difficulty in determining whether the required causal relationship can be established in various case settings). However, intentional acts and crimes do not necessarily preclude recovery. See id. Additionally, this case involved more than a crime, and included conduct of the passenger in reacting to the crime. We conclude the evidence supported the finding of the district court.

VI. Binding Effect of the Judgment.

The final issue on appeal is whether American Family may relitigate the issue of tort liability and damages. The district court passed upon the issue after finding there was no UM coverage under the policy. Because we determine there was coverage, we address the issue presented and preserved by American Family at trial.

We begin by turning to the language of the insurance policy. Under the uninsured motorist provision, American Family was obligated to pay damages for bodily injury which the insured “is legally entitled to recover” from the uninsured motorist or owner. Petersen argues the prior default judgment obtained against Adcock establishes her legal entitlement to recover and requires American Family to pay the damages specified in the judgment pursuant to the terms of the policy. American Family attempts to avoid the policy language by relying upon the doctrines of res judicata and collateral estoppel. It argues the pri- or judgment obtained by Petersen against Adcock cannot be used against it because it was not a party to the action and had no duty to defend Adcock, had inadequate notice of the proceedings, and the judgment did not constitute an actual litigation of the same issues that would be presented in an uninsured motorist claim. American Family relies secondarily on the policy provision requiring the insured to give notice of any suit against the uninsured motorist and to obtain the insurer’s “written consent to be bound by any resulting judgment.”

In considering the binding effect of the judgment, we are mindful that the issue is presented only in the context of an action to enforce the UM provisions of an insurance policy requiring the insurer to pay the insured damages which the insured “is legally entitled to recover” from the uninsured motorist. Consequently, the binding effect of the tort judgment at issue in this case is not necessarily governed by the doctrine of res judicata and collateral estoppel; the language of the contract between the parties is the primary source of the parties’ respective rights. See generally 2 Widiss § 28.12, at 553-54. If an insured establishes legal entitlement to damages against an uninsured motorist, then the insurer is contractually obligated to pay the insured the damages as specified in the insurance policy. An insured generally satisfies the “legally entitled to recover” condition of UM coverage when a valid judgment has been entered against the uninsured motorist. See Mizer v. State Auto. & Cas. Underwriters, 195 N.W.2d 367, 371 (Iowa 1972); see also Handley v. Farm Bureau Mut. Ins. Co., 467 N.W.2d 247, 250 (Iowa 1991) (stating in dicta that an insurer may be bound by a determination of damages in a trial against a tortfeasor).

Although a valid judgment can establish a legal entitlement to recover for the purposes of UM coverage, the UM coverage provisions impose other conditions that could require relitigation of the issues of liability and damage in a claim for UM benefits. First, the policy in this case limits recovery to bodily injury caused by accident and “arising] out of the use” of the uninsured vehicle. Second, the policy requires the insured to “notify” the insurer of a suit against an uninsured motorist to determine liability or damages, and further provides that the insurer is not bound by any judgment without its “consent” to the suit.

Initially, we recognize that some of the damages awarded under the judgment represent bodily injuries suffered by Petersen that were not covered under the policy. Although the most serious injuries arose from the use of the vehicle, the initial injuries from the assault did not arise from the use of the vehicle. Thus, the damages awarded under the judgment cannot be used to establish the damages under the policy. The remaining question is whether the issue of liability must also be relitigated based on the claim by American Family of inadequate notice. (Because we find this issue dispositive, we do not consider the effect of the policy’s consent-to-sue provision.)

It is generally recognized that a notice-of-suit clause in a UM policy of insurance is enforceable by the insurer and that the insurer is not bound by a judgment in a tort action against an uninsured motorist if the insurer did not receive adequate notice of the suit. See generally 2 Widiss § 28.12, at 545-58. Notice to the insurer is needed to give the insurer the opportunity to seek intervention in the tort action so that it can protect its potential interests and prevent any collusive judgments. It would also make it more likely for the parties to reach a resolution of all issues in a single proceeding.

The parties in this case agree that notice was given, but dispute whether it was timely and adequate under the circumstances. The district court made no findings on the issue and the stipulated facts and other documents submitted to the district court did not address the circumstances bearing on the adequacy or inadequacy of the notice provided. Moreover, there was no evidence concerning the issue of prejudice to the insurer. When provisions of an insurance policy establish conditions precedent to coverage, “an insured must show substantial compliance with [those] conditions.” Simpson v. United States Fid. & Guar. Co., 562 N.W.2d 627, 631 (Iowa 1997). However, the failure to comply with the condition can be excused if it does not result in prejudice to the insurer. Id. at 631-32.

The record in this case is insufficient to establish substantial compliance with the notice provision. Notice to an insurer of a pending lawsuit against an uninsured tort-feasor after entry of judgment on liability would ordinarily be inadequate to fully protect the interests of the insurer, and the minimal record in this case does not allow a contrary conclusion or a conclusion that the insurer was not prejudiced by the notice provided. Accordingly, American Family is entitled to a declaratory judgment that the default judgment entered against Adcock is not binding on American Family.

VII. Conclusion.

The injury to Petersen was both caused by accident and arose out of the use of an uninsured motor vehicle. The district court erred in concluding the injury was not caused by accident. In addition, the insurer is not bound by the judgment entered in the insured’s suit against the uninsured motorist.

AFFIRMED IN PART AND REVERSED IN PART.

All justices concur except WIGGINS, J., who takes no part.

      . UM coverage is mandated when: (1) the injured person is an insured under the insurance policy provisions; (2) the injured person is "legally entitled to recover damages from the owner or operator of an uninsured motor vehicle;” (3) the injury to the insured was "caused by accident;” and (4) the injury arose "out of the ownership, maintenance, or use” of an uninsured motor vehicle. Iowa Code § 516A.1 (2001). These requirements are found both in our statute and the particular insurance policy at issue in this case.

      . American Family,made no argument that Petersen’s own act ih jumping from the vehicle was an intentional cause of her injuries. See Kirkpatrick v. AIU Ins. Co., 204 F.Supp.2d 850, 855-56 (E.D.Pa.2002) (plaintiffs acted on adrenaline and spontaneously in reaction to carjacking and did not intend to cause harm to themselves).'

      . The “legally entitled to recover” requirement means the insured has the burden to prove the uninsured motorist was liable and the extent of the damages. This burden can be satisfied either in an action against the uninsured motorist or in an action against the insurer. See Leuchtenmacher v. Farm Bureau Mut. Ins. Co., 461 N.W.2d 291, 294 (Iowa 1990) (a lawsuit against the tortfeasor is not a condition precedent to a UIM claim). In fact, it is recognized that an insured with a claim against an uninsured motorist can pursue the matter in four ways. See Allstate Indem. Co. v. Brown, 696 N.E.2d 92, 95 (Ind.Ct.App. 1998); see generally Dag E. Ytreberg, Annotation, Insured’s Right to Bring Direct Action Against Insurer for Uninsured Motorist Benefits, 73 A.L.R.3d 632, 635 (1976) (footnote omitted) (collecting and discussing cases "which deal with the right of an insured under an uninsured motorist provision to bring an action directly against his insurer without first suing and obtaining judgment against the uninsured tortfeasor”). But see Ik Am Jur.2d Automobile Insurance § 602 (1997) (noting that some courts make a prior action against the uninsured motorist a prerequisite for initiating a suit against the insurer for UM benefits).


source: Caselaw Access Project

author: WIGGINS, Justice.

license: Public Domain

text:
    Dave AUEN and Ike Auen Distributing Company, Inc., Duncan Cameron and Bill Wallace and Vanguard Distributing Corporation, Mark Doll and Doll Distributing Company, Scott Doll and Western Iowa Wine, Joanie Heimsoth and Dick Postels and Grinnell Beverage Company, Ron Kirchhoff and Kirchhoff Distributing Company, Inc., Charley Whittenburg Distributing, Inc., Wholesale Beer Distributors Association, and Sheila Douglas, Executive Director, Iowa Wholesale Beer Distributors, Appellants, v. ALCOHOLIC BEVERAGES DIVISION OF THE IOWA DEPARTMENT OF COMMERCE, Appellee.
    No. 02-1762.
    Supreme Court of Iowa.
    May 12, 2004.

      David L. Brown of Hansen, McClintock & Riley, Des Moines, for appellants.
    Thomas J. Miller, Attorney General, Julie Pottorff, Deputy Attorney General, and John R. Lundquist, Assistant Attorney General, for appellee.
   WIGGINS, Justice.

The appellant, Iowa Wholesale Beer Distributors Association, is an association of more than forty beer distributors located in the State of Iowa. Appellant, Sheila Douglas, is Iowa Wholesale Beer Distributors Association’s executive director. The remaining appellants are Iowa wholesale beer distributors. (We will refer to all of the appellants as “Wholesalers.”) The Wholesalers sought judicial review of amended Iowa Administrative Code rule 185 — 16.2(2) (2000) issued by the Alcoholic Beverages Division of the Iowa Department of Commerce (ABD). The purpose of the amended rule was to further define the phrase “directly or indirectly be interested in the ownership” contained in Iowa Code section 123.45 (2001). The Wholesalers claim the ABD did not have authority to issue amended rule 185 — 16.2(2), and if it did, the amended rule is inconsistent with the language and intent of Iowa Code section 123.45. The district court upheld the ABD’s exercise of its rulemaking power. Because we disagree with the district court, we reverse its decision and hold the amended rule is an illogical interpretation of section 123.45.

I. Background Facts and Proceedings.

Iowa Code section 123.45 provides in pertinent part:

A person engaged in the business of manufacturing, bottling, or wholesaling alcoholic beverages, wine, or beer, or any jobber, representative, broker, employee, or agent of such a person, shall not ... directly or indirectly be interested in the ownership, conduct, or operation of the business of another licensee or permittee authorized under this chapter to sell at retail, nor -hold a retail liquor control license or retail wine or beer permit.

Iowa Code § 123.45.

The original rule promulgated by the ABD to implement section 123.45 provided:

185 — 16.2(123) Interest in a retail establishment.
16.2(1) An industry member is prohibited, directly or indirectly, from:
a. Acquiring or holding a partial or complete ownership interest in a retail establishment.
b. Acquiring or holding an interest in the real or personal property owned, occupied or used by the retailer in the conduct of the retail establishment.
c. Acquiring a mortgage on the real or personal property owned by the retailer.
d. Guaranteeing any loan or paying a financial obligation of the retailer, in-eluding, but not limited to, personal loans, home mortgages, car loans, operating capital obligations, or utilities.
e. Providing financial, legal, administrative or other assistance to a retailer to obtain a license or permit.

Iowa Admin. Code r. 185 — 16.2(1).

In August 2000, the ABD filed a notice of intended action indicating its intent to amend Iowa Administrative Code rule 185 — 16.2 to define “interest in the ownership” as contained in Iowa Code section 123.45 more narrowly and exclude remote corporate connections that do not affect the retail business directly or indirectly. In its notice, the ABD stated:

Over the past five years, numerous jurisdictions have examined this issue under similar statutory provisions and concluded that the corporate connection of a manufacturer, bottler, or wholesaler may be so remote that rigid application of the statutory prohibition to an applicant for a license or permit is unreasonable.

A public hearing was held to comment on the proposed rule in August 2000. Additional comments were taken at an administrative rules review committee meeting in September 2000. As a result of these meetings and comments, the proposed rule read as follows:

16.2(2) For the purposes of this rule, a subsidiary or an affiliate of an industry member shall not be considered to have any interest in the ownership, conduct or operation of a retailer provided all of the following conditions are satisfied:
a. The industry member and the retail establishment do not share any common officers or directors.
b. The industry member does not control the retail establishment.
c. The industry member is not involved, directly or indirectly, in the operation of the retail establishment.
d. The retail establishment is free from control or interference by the industry member with respect to the retailer’s ability to make choices as to the types, brands and quantities of alcoholic beverages purchased and sold.
e. The retail establishment sells brands of alcoholic beverages that are produced or distributed by competing industry members with no preference given to the industry member that holds a financial interest in the retailer.
f. There is no exclusion, in whole or in part, of alcoholic beverages sold or offered for sale by competing industry members that constitutes a substantial impairment of commerce.
g. The retail establishment shall not purchase more than 20 percent of the total annual liquor sales, 20 percent of the total annual wine sales, and 20 percent of the total annual beer sales (measured by gallons) from the industry member.
h. The primary business of the retail establishment is not the sale of alcoholic beverages.
i All purchases of alcoholic beverages by the retail establishment are made pursuant to Iowa’s three-tier system as provided for in Iowa Code chapter 123.
16.2(3) A retail establishment shall file verification with the alcoholic beverages division that it is in compliance with the conditions set forth in this rule upon application, renewal or request of the agency.
16.2(4) This rule is not subject to waiver or variance in specific circumstances.
This rule is intended to implement Iowa Code sections 123.45 and 123.186.

Iowa Admin. Code r. 185 — 16.2(2), (3), (4).

In November 2000, the final amended rule was submitted to the administrative rules review committee, where a member of the committee made a motion to file an objection to the ABD’s revised rule on the grounds the rule exceeded the authority delegated to the ABD. On a vote of five votes in favor of the objection and five votes opposing the objection, the motion to file the objection to the rule failed to pass by operation of law. The amended rule interpreting Iowa Code section 123.45 became effective in December 2000.

The Wholesalers filed a petition for judicial review challenging the amended rule. In October 2002, the district court upheld the amendment as a valid exercise of the ABD’s rulemaking authority. The Wholesalers appeal.

II. Issues.

We must decide whether the ABD had authority to issue amended rule 185 — 16.2, and if it did, whether the ABD’s interpretation of Iowa Code section 123.45 complies with the provisions contained in section 17A.19(10) of the Iowa Administrative Procedure Act.

III. Standard of Review.

The Iowa Administrative Procedure Act, Iowa Code chapter 17A, governs the standards under which we review the district court’s decisions on judicial review of agency action. Locate.Plus.Com, Inc. v. Iowa Dep’t of Tramp., 650 N.W.2d 609, 612 (Iowa 2002). “The agency decision itself is reviewed under the standards set forth in section 17A.19(10).” Mosher v. Dep’t of Inspections & Appeals, 671 N.W.2d 501, 508 (Iowa 2003). If the agency action affects the substantial rights of the person seeking judicial review and the agency’s conduct meets one of the enumerated provisions contained in Iowa Code section 17A.19(10), the court shall reverse, modify, or grant other appropriate relief from the agency’s action. Iowa Code § 17A.19(10).

We must apply the standards set forth in section 17A.19(10) and determine whether our application of those standards produce the same result as reached by the district court. Mosher, 671 N.W.2d at 508. The first standard upon which the Wholesalers challenge the agency action is on the ground that the promulgation of the amended rule by the ABD was beyond the authority delegated to the agency by any provision of law. Iowa Code § 17A.19(10)(6).

Alternatively, the Wholesalers claim that even if the ABD had authority to issue the amended rule, the ABD based the amended rule on an erroneous interpretation of the law. Iowa Code § 17A.19(10)(c), ((). If the legislature has not clearly vested the interpretation of the statute at issue with the agency, we are free to substitute our judgment de novo for the agency’s interpretation and determine if the interpretation is erroneous. Iowa Code § 17A. 19(10)(c); Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act, Report on Selected Provisions to Iowa State Bar Association and Iowa State Government 62 (1998). If, however, the legislature has clearly vested the interpretation of the statute at issue with the agency, we will only reverse the agency’s interpretation if it is “based upon an irrational, illogical, or wholly unjustifiable” interpretation of the statute at issue. Iowa Code § 17A.19(10)(i). Neither party claims if we find that one of the provisions in section 17A.19(10) has been met, that the action of the ABD does not affect the substantial rights of the Wholesalers.

IV. Authority of ABD to Issue Amended Rule 185 — 16(2).

“An agency shall have only that authority or discretion delegated to or conferred upon the agency by law and shall not expand or enlarge its authority or discretion beyond the powers delegated to or conferred upon the agency.” Iowa Code § 17A.23. The legislature delegated to the ABD the power to enforce, implement, and administer the laws concerning beer, wine and alcoholic liquor contained in chapter 123 of the code. Id. §§ 123.4,546.9.

The legislature also gave the ABD the power to adopt rules as necessary to carry out the duties delegated to the ABD under Chapter 123. Id. § 123.21. The power conferred on an agency by the legislature to adopt rules is quite broad. Sioux City v. Iowa Dep’t of Commerce, 584 N.W.2d 322, 325 (Iowa 1998). The legislature specifically gave the power to the ABD to adopt rules governing “the conditions and qualifications necessary for the obtaining of licenses and permits.” Iowa Code § 123.21(11). By necessity, to determine “the conditions and qualifications necessary for the obtaining of licenses and permits,” the ABD must interpret the limitations on business interests as contained in section 123.45. We conclude from these statutes the legislature has clearly vested the interpretation of section 123.45 with the agency. See Marion v. Iowa Dep’t of Revenue & Fin., 643 N.W.2d 205, 207 (Iowa 2002) (holding a similar statute delegating rulemaking power to the Department of Revenue and Finance vested the interpretation of section 422.45(20) of the Iowa Code with the agency).

V. The ABD’s Interpretation of Iowa Code Section 123.45.

Having determined the legislature clearly vested the interpretation of section 123.45 with the ABD, we must decide whether the agency’s interpretation is based upon an irrational, illogical, or wholly unjustifiable interpretation of section 123.45. Iowa Code § 17A.19(10)ffi. The goal of statutory construction is to determine legislative intent. State v. McCoy, 618 N.W.2d 324, 325 (Iowa 2000). We determine legislative intent from the words chosen by the legislature, not what it should or might have said. Painters & Allied Trades Local Union v. City of Des Moines, 451 N.W.2d 825, 826 (Iowa 1990). Absent a statutory definition or an established meaning in the law, words in the statute.are given their ordinary and common meaning by considering the context within which they are used. Midwest Auto. III, L.L.C. v. Iowa Dep’t of Transp., 646 N.W.2d 417, 426 (Iowa 2002). Under the guise of construction, an interpreting body may not extend, enlarge or otherwise change the meaning of a statute. See State v. Wedelstedt, 213 N.W.2d 652, 656 (Iowa 1973).

The parties agree the legislative intent for the enactment of section 123.45 was to maintain the independence of the various levels of the liquor industry and to prevent tied-house arrangements. Norman Williams Co. v. Rice, 108 Cal.App.3d 348, 166 Cal.Rptr. 563, 572, n. 3 (1980). A “tied-house” is a retail outlet that is owned or controlled by a manufacturer, wholesaler, or other entity in the chain of alcohol beverage distribution. The parties disagree whether section 123.45 leaves room for the ABD to interpret the statute to exclude remote connections between industry members and their subsidiaries or affiliates from “directly or indirectly being interested in the ownership” of a retailer of these beverages.

Amended rule 185 — 16.2(2) acknowledges that an industry member has an ownership interest in its subsidiary or affiliate. Iowa Admin.Code r. 185 — 16.2(2). By rule, however, the ABD attempts to declare that an interest of a subsidiary or affiliate in a retailer, coupled with a lack of actual control by an industry member over its subsidiary or affiliate, is not an “interest in the ownership” prohibited by section 123.45. We believe this interpretation is contrary to the language chosen and used by the legislature in section 123.45.

This court has had the occasion to construe statutes that contained language similar to the language used by the legislature in section 123.45. James v. City of Hamburg, 174 Iowa 301, 308-16, 156 N.W. 394, 396-99 (1916). In James, the statutes in question provided:

No member of any council shall ... be interested, directly or indirectly, in any contract or job for work, or the profits thereof, or services to be performed for the corporation,

and

No officer or employee elected or appointed in any such city shall be interested, directly or indirectly, in any contract or job for work or materials, or the profits thereof, or services to be furnished or performed for the city.

174 Iowa at 310, 156 N.W. at 397 (quoting Iowa Code § 668.14 (1897) and Iowa Code § 1056-a31 (1907)). In construing the phrase “interested, directly or indirectly,” the court determined “[t]he fact that the interest of the offending officer in the invalid contract is indirect and is very small, is immaterial.” James, 174 Iowa at 312-13, 156 N.W. at 397 (citation omitted).

At the time the ban on tied-house arrangements was enacted, the legislature drew a bright-line rule defining the allowable relationship between a manufacturer, wholesaler or other entity in the chain of alcohol beverage distribution and the retailer of these beverages. By choosing the language “directly or indirectly be interested in the ownership,” the legislature meant to prohibit any ownership interest, no matter how remote or de minimis, by a manufacturer, wholesaler, or other entity in the chain of alcohol beverage distribution and the retailer of these beverages.

Since its enactment, the statute prohibiting tied-house. arrangements has been amended at least six times. The original statute prohibiting tied-house arrangements was enacted at the end of prohibition and prohibited tied-house arrangements between beer manufacturers, bottlers, wholesalers, their jobbers, or agents with retailers. Iowa Code § 1921-Í115 (1935). In 1963, the legislature further restricted tied-house arrangements by adding manufacturers, wholesalers, their jobbers, or agents of alcoholic beverages to the ban on tied-house arrangements. Iowa Code § 123.40 (1966). In 1981, the legislature made an exception to tied-house arrangements for. manufacturers of beer to obtain one class “B” permit to sell beer at retail off of their premises. Iowa Code § 123.45 (1983). In 1985, the legislature further restricted tied-house arrangements by adding manufacturers, wholesalers, their jobbers, or agents of wine to the ban on tied-house arrangements. Iowa Code § 123.45 (1987). Finally, in 1988 the legislature further restricted tied-house arrangements by adding a representative, broker or employee of a manufacturer or wholesaler of alcoholic beverages, wine, or beer to the ban against tied-house arrangements. Iowa Code § 123.45 (1989). The legislature also amended this section in 1982 and 1991, but neither amendment concerned tied-house arrangements. See Iowa Code § 123.45 (1983) (amending provision dealing with prohibited act of certain state officials and employees); Iowa Code § 123.45 (1993) (permitting disposable glassware to be provided to retailers by a manufacturer or wholesaler of alcoholic beverages, wine, or beer under certain conditions).

In 1981, the legislature enacted a limited exception to the ban against tied-house arrangements as it applied to manufacturers of beer. If the legislature wanted to exclude remote connections between industry members, their subsidiaries or affiliates, and retailers of these beverages, it would have done so by amendment. See RIEGA Int’l U.S.A., Inc. v. New York State Liquor Auth., 84 N.Y.2d 876, 620 N.Y.S.2d 784, 644 N.E.2d 1340, 1341-42 (1994) (holding state liquor authority did not have discretion, under statute prohibiting liquor manufacturer or wholesaler from holding interest, directly or indirectly, in premises where any alcoholic beverage is sold at retail, to issue license to owner of hotel in which three unrelated manufacturers of alcohol products indirectly held ownership interests totaling -less than ten percent, notwithstanding contention that manufacturers’ interests were de minimis).

The interpretation given to Iowa Code section 123.45 by the ABD in amended rule 185 — 16.2 is based upon an illogical interpretation of section 123.45. A remote or de minimis ownership interest is an indirect ownership interest, which is prohibited by the statute. In essence, the ABD ignored the phrase “indirectly be interested in ownership” as used by the legislature in section 123.45. For these reasons, we agree with the Wholesalers that Iowa Code section 123.45 does not permit the ABD to promulgate a rule allowing a tied-house arrangement between industry members, their subsidiaries or affiliates, and retailers, when the relationship is remote or de minimis.

In its notice of intended action, the ABD noted that numerous jurisdictions have examined this issue under similar statutory provisions and concluded a rigid application of the laws preventing tied-house arrangements when the corporate connections were remote was unreasonable. In the jurisdictions cited by the ABD where the interpretation was made by an attorney general opinion, declaratory statement of the agency, or an informal letter from the agency, the interpretation by the attorney general or the agency was not challenged in a subsequent court proceeding. We are sympathetic to the ABD’s position that modern corporate relationships not anticipated by the legislature when these statutes were enacted may unnecessarily exclude desirable operators of retail establishments from locating their businesses in Iowa. Nevertheless, it is best left up to the legislature to determine if this policy is out-dated, not the ABD.

VI. Disposition.

Because we conclude amended rule 185 — 16.2(2) is an illogical interpretation of Iowa Code section 123.45, the district court erred in upholding the rule. Accordingly, we reverse the decision of the district court upholding the ABD’s exercise of its rulemaking power, declare the amended rule null and void, and remand the case to the district court, which must then return the case to the ABD for rule-making proceedings in compliance with the provisions of the Iowa Administrative Procedure Act.

REVERSED AND REMANDED WITH INSTRUCTIONS.

      . All references are to the 2001 Code of Iowa, unless otherwise noted.


author: LARSON, Justice.

text:
    STATE of Iowa ex rel. Thomas J. MILLER, Attorney General of Iowa, Appellee, v. NEW WOMYN, INC. and Dan Kaiser, Appellants.
    No. 02-1049.
    Supreme Court of Iowa.
    May 12, 2004.

      Timothy S. Eckley of Duncan, Green, Brown, Langeness & Eckley, A P.C., Des Moines, and Jay R. Hamilton, Le Claire, for appellants.
    Thomas J. Miller, Attorney General, and Steve St. Clair, Assistant Attorney General, for appellee.
   LARSON, Justice.

The State of Iowa, through its attorney general, brought an action under our Consumer Fraud Statute, Iowa Code § 714.16 (1999), against New Womyn, Inc. and its president, Dan Kaiser, based on the defendants’ promotion and sale of a breast-enlargement device called a “Stimulation VII.” Acting on a complaint filed by a New Womyn customer, the attorney general unsuccessfully sought information from the defendants about their product. The attorney general ultimately applied for, and the court granted, a default against the defendants for their failure to comply with discovery requests and related court orders. The court entered a judgment against the defendants for restitution, civil penalty, and related costs. We affirm.

I. Prior Proceedings.

New Womyn’s claims for its Stimulation VII were: it would permanently enlarge breast tissue, result in breast enlargement of two to four cup sizes, and would even regrow breasts that had been removed by mastectomy. New Womyn claimed the device had been proven to be safe and effective.

On September 21, 1999, the attorney general directed a Civil Investigative Demand (CID), under Iowa Code section 714.16(3)(a), to the defendants requesting information about the company and its customers. The defendants did not comply, and on January 11, 2000, the attorney general filed a petition under the Consumer Fraud Act. The petition asserted that the defendants had committed consumer fraud and requested an injunction pending the defendants’ compliance with the pending CID.

On March 8, 2001, the district court ordered the defendants to produce customer information, including names, dates of purchase, and amounts of the customers’ payments. As of September 11, 2001, the defendants still had not complied with the request for information, and the court set a hearing for October 26 on the attorney general’s motion to compel discovery. On October 26, 2001, the court ordered the defendants to produce the customer infor? mation and to make any experts they intended to use available for deposition. The defendants tentatively identified expert witnesses but failed to provide background information on them within the time required by the court. They did not provide any customer information.

On November 13, 2001, the attorney general filed a motion for default “and/or to exclude evidence.” As of that time, the defendants had not complied with the court’s orders of March 8, 2001, and October 26, 2001, to produce the customer information. As of November 19, 2001, the date set for trial, the defendants still had not produced the information.

On the date set for trial, defendant Kaiser did not appear — either on his own behalf or on behalf of the corporation. The court asked the defendants’ attorney, Jay Hamilton, how the defendants wanted to proceed. Hamilton responded that the defendants did not resist the attorney general’s motion for default because he was not prepared to go to trial that day. The attorney general presented testimony of its witnesses to provide a basis for the court’s ultimate ruling.

II. Resolution of the Issues.

A. Denial of the continuance. On October 31, 2001, over a year and a half after the attorney general’s petition was filed, and only nineteen days before the trial date of November 19, the defendants moved for a continuance of the trial. The court denied the continuance, and the defendants raise this as an issue on appeal. The attorney general responds that (1) any argument regarding the continuance motion was waived by the defendants’ stipulation to a default; and (2) in any event, such rulings are discretionary with the trial court.

Under Iowa Rule of Civil Procedure 1.911(1), a continuance may be granted “for any cause not growing out of the fault or negligence of the movant, which satisfies the court that substantial justice will be more nearly obtained.” Rulings on continuance motions are left to the discretion of the district court and are presumed to be correct. A party challenging such a ruling carries a heavy burden. Rattenborg v. Montgomery Elev. Co., 438 N.W.2d 602, 605 (Iowa Ct.App.1989).

In this case, the court was justified in denying the continuance because the defendants had already slowed the progress of the case by disregarding the court’s scheduling order and by failing to comply with the court’s orders of March 8 and October 26, 2001, regarding discovery. The court also rejected the defendants’ argument that they needed a continuance to allow a new attorney to prepare for trial because the defendants had been dilatory in attempting to find new counsel. We agree with this conclusion as well.

We conclude the district court did not abuse its discretion in denying the motion for continuance.

B. The federal preemption claim. The defendants’ second issue raises a claim of federal preemption under the Medical Device Amendment (MDA) to the Federal Food, Drug, and Cosmetic Act. The defendants raised this issue in a motion for summary judgment, which was denied. They now raise the court’s denial of their summary-judgment motion in this appeal. The federal statute on which the defendants rely provides:

State and local requirements respecting devices
(a) General rule
Except as provided in subsection (b) of this section [not applicable here], no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement—
(1) which is different from, or in addition to, any requirement applicable under this chapter to the device, and
(2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.

21 U.S.C. § 360k.

In a case under the MDA, raising a similar preemption issue, the Supreme Court noted:

[B]ecause the States are independent sovereigns in our federal system, we have long presumed that Congress does not cavalierly pre-empt State-law causes of action. In all pre-emption cases, and particularly in those in which Congress has “legislated ... in a field which the States have traditionally occupied,” we “start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”

Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 2250, 135 L.Ed.2d 700, 715 (1996) (quoting Rice v. Santa Fe Elev. Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447, 1459 (1947)). In this case, the defendants’ claim of preemption faces the “assumption” under Medtronic that preemption was not intended. Id. The Court in Medtronic stated that its interpretation of the preemption statute was “substantially informed” by the federal regulations under the statute. In turn, the Code of Federal Regulations states that preemption is not intended as to

[s]tate or local requirements of general applicability where the purpose of the requirement relates either to other products in addition to devices ... orto unfair trade practices in which the requirements are not limited to devices.

21 C.F.R. 808.1(d)(1) (emphasis added).

We conclude the defendants have failed to rebut the presumption that Iowa’s Consumer Fraud Act is not preempted by the federal act.

C. Application of the statute. Actions by the attorney general under the Consumer Fraud Act are in equity, Iowa Code § 714.16(7), so our review is de novo. The burden of proof with regard to truthful advertising is on the person making the claim. Under the Consumer Fraud Act,

[i]t is deceptive advertising within the meaning of this section for a person to represent in connection with the lease, sale, or advertisement of any merchandise that the advertised merchandise has certain performance characteristics, accessories, uses, or benefits or that certain services are performed on behalf of clients or customers of that person if, at the time of the representation, no reasonable basis for the claim existed. The burden is on the person making the representation to demonstrate that a reasonable basis for the claim existed.

Iowa Code § 714.16(2)(a) (emphasis added).

The defendants presented no credible expert evidence that the device was adequately tested or that reliable evidence would substantiate the claims made for it. Kaiser was asked in a deposition about the research design for the testing he claims were done. His response was “what is that”? Kaiser showed no medical or scientific input into the design for the tests, which were done largely on himself and his wife. Kaiser was asked what qualifications he possessed to design the breast device, and he replied “I breathe, I live.” When asked how he determined the proper function of the device, he said “my eyes” and “common sense.”

While the defendants showed several pictures of women’s breasts, claimed by the defendants to have been enlarged by the device, many of the women, including one who allegedly regained breast tissue after a mastectomy, had never even used the device. A Federal Food and Drug Administration employee with extensive experience in the review of applications regarding new medical devices testified that scientists would not accept the defendants’ substantiation of their claims. In fact, he testified that a breast pump similar to the Stimulation VII was on display in the public lobby of the FDA building in a collection of what the FDA labeled “quack devices.”

We conclude on our de novo review that the defendants have failed to show a reasonable basis for their claims and therefore affirm the district court on this issue.

D. Scope of restitution order. The district court did not limit its restitution order to Iowa residents, and the defendants claim this was error. The consumer fraud statute is not limited to residents of Iowa; in fact, it suggests the contrary. It provides that in a consumer-fraud action the court “may make orders or judgments as necessary ... to restore to any person in interest” the money they have lost. Iowa Code § 714.16(7). The statute, in turn, defines “person” broadly:

The term “person” includes any natural person or the person’s legal representative, partnership, corporation (domestic and foreign), company, trust, business entity or association, and any agent, employee, salesperson, partner, officer, director, member, stockholder, associate, trustee, or cestui que trust thereof.

Iowa Code § 714.16(1)0’).

Authorities in other jurisdictions have applied similar statutes to provide recovery for nonresidents as well as residents. See, e.g., State ex rel. Corbin v. Pickrell, 136 Ariz. 589, 667 P.2d 1304, 1312 (1983) (consumer fraud statute applied to obtain restitution for nonresidents); Brown v. Market Dev., Inc., 41 Ohio Misc. 57, 322 N.E.2d 367, 372 (1974) (civil fraud case; court stated: “In a highly complex and mobile society, the components of which are intertwined and interdependent, a state may validly prohibit acts within its [bjorders where the damages resulting from those acts are much more clearly located in another state.”); Rio Grande Oil Co. v. State, 539 S.W.2d 917, 921 (Tex.Civ.App.1976) (“A state is damaged if its citizens are permitted to engage in fraudulent practices even though those injured are outside its borders.”); State by Abrams v. Camera Warehouse, Inc., 130 Misc.2d 498, 496 N.Y.S.2d 659, 660 (N.Y.1985) (same).

We conclude that our civil fraud statute provides for restitution on behalf of all consumers, including nonresidents.

III. Conclusion.

Apparently, the defendants never produced the customer information requested by the attorney general. Nevertheless, the parties stipulated that, to the extent the court would find damages, $311,312.52 would be the total amount owed if paid to all customers. This would be reduced by $2630, which had already been paid to the attorney general. The court entered a judgment accordingly, together with a civil penalty of $40,000, as provided by Iowa Code section 714.16(7). The court reaffirmed its previous order granting judgment for attorney fees and investigative costs of $50,000.

We find that these awards are supported by the evidence and therefore affirm them.

AFFIRMED.