author: CARTER, Justice.

text:
    Teondra L. WELLS, Individually and as Next Friend and Parent of Jahsiah Hardat; Douglas Wells, a Minor, by Tina Wells, His Next Friend and Parent; Tina Wells, Individually and as Next Friend of Douglas Wells; and Jahsiah Hardat, a Minor, by Teondra L. Wells, His Next Friend and Parent, Appellants, v. Tanya Whitaker a/k/a Tanya Wright, Defendant, and ENTERPRISE RENT-A-CAR MIDWEST, Appellee.
    No. 03-0196.
    Supreme Court of Iowa.
    Dec. 10, 2004.

      Rodney K. Maharry and Jami J. Ha-gemeier of Williams, Blackburn, Hudson & Maharry, P.L.C., Des Moines, for appellants.
    Mark D. Lowe of Hopkins & Huebner, P.C., Adel, for appellee.
   CARTER, Justice.

Teondra Wells; her minor child, Jahsi-ah; Douglas Wells; and Douglas’s mother, Tina Wells, appeal from an adverse judgment on a jury verdict in their action against Enterprise RenL-A-Car Midwest (Enterprise), a car rental company. The plaintiffs’ injuries were sustained when fireworks exploded in the vehicle owned by Enterprise and operated by Tanya Whitaker, who had rented a 1999 Chevrolet Blazer from Enterprise. At issue on the appeal is whether the district court erred in allowing the jury to determine by interrogatory answer that the damages being sought were not caused by the motor vehicle, as required by Iowa Code section 321.493 (1999), which provides for owner’s liability “for damages done by any motor vehicle by reason of negligence by the driver, and driven with the consent of the owner.” Also at issue is whether the rental agreement between Enterprise and Whitaker for lease of the vehicle in which the fireworks exploded negated consent for Whitaker to use the vehicle for an illegal purpose.

The jury did not respond to the second issue because it found that the damage to plaintiffs was not occasioned by the operation of a motor vehicle so as to impose liability on the owner under section 321.493. After reviewing the record and considering the arguments presented, we conclude that it appears from the evidence as a matter of law that the injuries sustained by plaintiffs were not caused by circumstances that give rise to an owner’s liability claim under Iowa Code section 321.493. We therefore affirm the judgment of the district court.

I. Relevant Facts.

On June 30, 2000, Tanya Whitaker rented a 1999 Chevrolet Blazer from defendant, Enterprise Renb-A-Car Midwest. Defendant was the owner of the Blazer. In the course of renting the Blazer, Whitaker signed a rental agreement with defendant.

The rental agreement was contained in a “jacket.” The “rental jacket” was four pages in length. It consisted of a top white page, which was the contract; yellow and pink pages, which were copies of the contract; and a fourth page, which provided general information and advertising. Terms on the back of the contract prohibited the use of the rented vehicle for any illegal purpose. Specifically, the terms at paragraph 13 stated:

VIOLATIONS OF THE CONTRACT: A violation of the contract shall exist if the car is used or driven....
(c) For any illegal purpose, in a race, speed contest, to tow a vehicle or trailer.

Additionally, on the front of the contract, directly above the signature line, notice was provided that there were terms on the reverse side of the contract. Specifically, the notice above the signature line stated:

I HAVE READ AND AGREE TO THE TERMS AND CONDITIONS ON BOTH SIDES OF THIS AGREEMENT.

Whitaker testified that she had rented a vehicle from defendant five to ten times prior to her rental of the Blazer on June 30, 2000. On her previous rentals, the same contract or a similar contract, with terms on the front and back, was used. She also testified that she knew the language on the reverse side of the contract was binding when she signed it. Finally, Whitaker testified that had she read paragraph 13 on the reverse side of the contract, she would have understood its meaning.

On the early morning of July 4, Whitaker, along with her boyfriend, Tyson Wells, drove to Missouri where Tyson purchased fireworks. This purchase consisted of firecrackers, bottle rockets, roman candles, arterial shells, and mortars (also referred to as cherry bombs). The amount of fireworks purchased filled four grocery bags and a crate.

Later on July 4, Whitaker and Tyson Wells took the fireworks to the home of Whitaker’s mother, Loretta Nelson. That evening some of the fireworks were discharged at a park near Loretta Nelson’s home. The remaining fireworks, a minimum of one full bag and one half full bag remained in the cargo area of the Blazer. When the family gathering at Loretta Nelson’s home broke up, Whitaker drove in the Blazer to the area of Forest Avenue and Sixteenth Street in Des Moines. She was accompanied by O’Keitha Nelson, Tyson Wells, Teondra Wells, Douglas Wells, and Shunntae Averette. When they arrived at their destination, there were people discharging fireworks in the area, and some persons were aiming fireworks at the Blazer.

Tyson and Douglas Wells exited the Blazer and shot fireworks at people and vehicles in the neighborhood. Douglas Wells and a witness named David Fugate testified that some fireworks were being discharged from within the Blazer, but Whitaker denied that. When the Blazer reached a position on Forest Avenue between Seventeenth and Eighteenth Streets the fireworks in the cargo area exploded, severely injuring some of the occupants in the Blazer, including plaintiffs Teondra Wells and Douglas Wells. Tyson Wells testified that the explosion was caused by fireworks thrown into the Blazer by a person standing on the street, but other evidence disputes that conclusion. David Fu-gate, an eyewitness on the street, testified that he recalled seeing a light flicker in the Blazer similar to a cigarette lighter immediately prior to the explosion.

Plaintiffs brought this action against both Whitaker and Enterprise. Based on the jury’s determination of comparative fault, Whitaker was found to be liable for twenty percent of plaintiffs’ damages. Plaintiffs urged that Enterprise should be vicariously liable for Whitaker’s fault under the car owner’s liability provisions contained in Iowa Code section 321.493. The trial court submitted an interrogatory to the jury in the following form:

Special Interrogatory No. 2
1. “Did Doug Wells sustain damage done by the motor vehicle by reason of the negligence of the driver, Tanya Whitaker?”
2. “Did Teondra Wells sustain damage done by the motor vehicle by reason of the negligence of the driver, Tanya Whitaker?”

The jury answered “No” to each of these questions. Based on those answers, plaintiffs’ vicarious-liability claim against Enterprise was rejected. Other facts of significance will be discussed in our consideration of the legal issues presented.

II.Standard of Review.

Alleged errors in jury instructions are reviewed for correction of errors at law. Iowa R.App. P. 6.4; Sleeth v. Louvar, 659 N.W.2d 210, 213 (Iowa 2003). Error in giving or refusing to give a particular jury instruction does not merit reversal unless it results in prejudice to the party. Herbst v. State, 616 N.W.2d 582, 585 (Iowa 2000).

In an action tried at law, appellate review is for corrections of errors at law. Iowa R.App. P. 6.4. “Findings of fact in a law action ... are binding upon the appellate court if supported by substantial evidence.” Iowa R.App. P. 6.14(6)(a). Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion. Beal Bank v. Siems, 670 N.W.2d 119, 125 (Iowa 2003).

III.Whether the District Court Erred When It Submitted Special Interrogatory No. 2 Requiring that Plaintiffs Prove Their Damages were “Done By” the Motor Vehicle.

Plaintiffs contend the trial court erred in submitting Special Interrogatory No. 2 to the jury. They urge that this interrogatory required the jury to find an unwarranted element of proof that is not required by Iowa law. They maintain that vicarious liability of a motor vehicle owner only requires two elements: (1) plaintiffs damages result from the negligence of the driver of a vehicle, and (2) the owner of the vehicle consented to the driving. In support of their two-element theory, plaintiffs rely on Iowa Mutual Insurance Co. v. Combes, 257 Iowa 135, 131 N.W.2d 751 (1964). Specifically, they base their claim on the following language contained in that opinion:

We have never held an owner who consents that his car be driven by another is not liable under section 321.493 for damage done by the driver’s negligence if the latter is an independent contractor. The statute makes no such exception and we should not engraft one upon it. The only facts which must be proven to render the statute applicable are 1) damage done by negligence of the driver, and 2) the owner’s consent to the driving.

Combes, 257 Iowa at 144, 131 N.W.2d at 756. The claim against the motor vehicle owner in Combes resulted from a collision between a truck and two other vehicles. The damages sought were those caused by that collision. As a result, the critical issue involved in the present case concerning whether the damages claimed were “done by any motor vehicle” was not involved in the litigation.

Iowa Code section 321.493(l)(a) provides in pertinent part:

[I]n all eases where damage is done by any motor vehicle by reason of negligence of the driver, and driven with the consent of the owner, the owner of the motor vehicle shall be liable for such damage....

(Emphasis added.) We have indicated that the purpose of section 321.493 is “to protect an innocent third party from the careless operation of a motor vehicle and to make the owner responsible for the negligence of one to whom the owner entrusted its operation.” Briner v. Hyslop, 337 N.W.2d 858, 870 (Iowa 1983). In speaking to the scope of section 321.493 in Stuart v. Pilgrim, 247 Iowa 709, 74 N.W.2d 212 (1956), we stated:

Our statute, section 321.493, supra, by its terms operates only when the consent driven car does some damage. So if it collided with another vehicle without injuring the latter or its occupants, or if the driver of another vehicle in some negligent manner occasioned damage to the consent driven automobile without a direct collision between the two cars, our owner’s responsibility statute would have no application. It is only “where damage is done by any car by reason of the negligence of the driver” that it comes into play.

Stuart, 247 Iowa at 717, 74 N.W.2d at 217; accord Lanz v. Pearson, 475 N.W.2d 601, 606 (Iowa 1991) (“[statute] applies only when damage has been done by the car”) (quoting Stuart, 247 Iowa at 715, 74 N.W.2d at 216); Phillips v. Foster, 252 Iowa 1075, 1080, 109 N.W.2d 604, 606 (1961) (“[U]nder our consent statute an owner is liable for the actionable damage done by his car.”).

Although our discussion in Stuart may have been dictum, we are satisfied that it does fairly describe the applicability of section 321.493. As Enterprise points out, vicarious liability under that statute only extends to damage “done by any car” by reason of the negligence of the driver thereof. To adopt plaintiffs’ interpretation of the statute would be to ignore a significant condition of the liability that the statute imposes.

Owner’s liability cases from New York and Connecticut support our conclusion. The New York owner’s liability statute interpreted in Levitt v. Peluso, 168 Misc.2d 239, 638 N.Y.S.2d 878 (N.Y.Sup.Ct.1995), provided in pertinent part:

Every owner of a vehicle used or operated in this state shall be hable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle ... by any person using or operating the same with the permission, express or implied, of such owner.

N.Y. Veh. & Traf. § 308 (1991). In the Levitt case, the plaintiff was blinded in one eye by an egg thrown from a moving automobile owned by defendant and driven by another with his consent. The court refused to impose vicarious liability against the owner of the car under that state’s owner’s liability statute. In denying recovery, the court stated that, in order for vicarious liability to attach under the statute, “the operation or driving function of an automobile or the condition of the vehicle itself’ must be the proximate cause of the injury. Levitt, 638 N.Y.S.2d at 882.

The Connecticut owner’s liability statute interpreted in Hughes v. National Car Rental Systems, Inc., 22 Conn.App. 586, 577 A.2d 1132 (1989), provided in pertinent part:

Any person renting or leasing to another any motor vehicle owned by him shall be liable for any damage to any person or property caused by the operation of such motor vehicle while so rented or leased, to the same extent as the operator would have been liable if he had also been the owner.

Conn. Gen. Stat. § 14-154a (1985). In Hughes a car was rented from the defendant, and the renter of the car loaned it to an acquaintance that drove the car alongside another vehicle and fired a revolver into the passenger side of the car it was traveling next to, causing injury to the driver of that vehicle. Hughes, 577 A.2d at 1133. The court held that, even though the rented car was in operation within the meaning of the statute at the time of the shooting, the injured plaintiffs allegations did not “support the conclusion that the operation of the motor vehicle was the proximate cause of the plaintiffs injuries.” Id., at 1135. Although the language of the New York and Connecticut statutes differs somewhat from that contained in Iowa Code section 321.493, our statute contains an even more specific limitation on the cause of the damages for which a vicarious liability will be recognized.

We conclude that viewing the facts most favorably to plaintiffs, the circumstances that caused their injuries do not create a vicarious liability under section 321.493. The fact that plaintiffs’ injuries occurred in the motor vehicle while it was being driven is not sufficiently related to the operation or condition of the vehicle so as to fall within the provisions of that statute. Enterprise raised this issue by a motion for directed verdict in the trial court. The trial court denied the motion and submitted the issue to the jury by special interrogatory. In so doing, it treated plaintiffs more favorably than the facts warranted. Consequently, there was no prejudice in submitting Special Interrogatory No. 2 to the jury. We have considered all issues presented and conclude that the judgment of the district court should be affirmed.

AFFIRMED.


source: Caselaw Access Project

author: CADY, Justice.

license: Public Domain

text:
    WELLS DAIRY, INC., Appellant, v. AMERICAN INDUSTRIAL REFRIGERATION, INC., Refrigeration Valves and Systems Corporation, and O.H. Livermore Construction, Inc., Appellees. The Pillsbury Company, Appellee, v. Wells Dairy, Inc., Appellant.
    No. 03-1199.
    Supreme Court of Iowa.
    Dec. 10, 2004.

      Paul T. Falk, Steven R. Johnson and David C. Lechner of Falk Johnson LLC, Chicago, Illinois, and Daniel B. Shuck, Jeff W. Wright and Jeana L. Goosman of Heid-man, Redmond, Fredregill, Patterson, Plaza, Dykstra & Prahl, L.L.P., Sioux City, and Juli Wilson Marshall, Julie D. Bailey, Mary Rose Alexander and Leslie N. Ro-sen, of Latham & Watkins LLP, Chicago, Illinois, for appellant.
    John D. Mayne and Missy J. Denton of Mayne, Marks & Madsen, L.L.P., Sioux City, and Lindsay G. Arthur, Jr., of Arthur, Chapman, Kettering, Smetak & Pi-kala, P.A., Minneapolis, Minnesota, for ap-pellee Refrigeration Valves and Systems Corporation.
    Matthew T.E. Early of Rawlings, Nie-land, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, and Michael D. Hutchens of Meagher & Geer, PLLP, Minneapolis, Minnesota, for appel-lee American Industrial Refrigeration, Inc.
    Marci I. Iseminger of Crary, Huff, Ink-ster, Sheehan, Ringgenberg, Hartnett, Storm & Jensen, P.C., Sioux City, and William J. Cremer, Edmund J. Siegert and Bradley M. Burd of Cremer, Kopon, Shaughnessy & Spina, LLC, Chicago, Illinois, for appellee Pillsbury Co.
   CADY, Justice.

This is an interlocutory appeal from a district court order granting appellees’ (American Industrial Refrigeration, Inc. (AIR) and Refrigeration Valves and Systems Corp. (RVS)) motion to compel production by appellant (Wells Dairy) of a report by two investigators from the University of Wisconsin. Wells Dairy had refused to produce the report, claiming it was privileged under the work-product doctrine and self-critical-analysis privilege. After the appeal was fully briefed, appellant’s counsel inadvertently disclosed the report to appellees AIR and RVS along with 30,000 pages of other documents in response to RVS’s discovery requests. After Wells Dairy’s disclosure, RVS moved to dismiss the appeal, claiming the issue in the appeal was moot. On our review, we affirm the district court order.

I. Background Facts and Proceedings.

This case arose out of an explosion that occurred at Wells Dairy’s South Ice Cream Plant (SICP) in LeMars. Appellee O.H. Livermore, Inc. was the general contractor when the SICP was built in 1991. Appel-lees RVS and AIR designed the SICP’s ammonia refrigeration system. On March 29, 1999, the SICP’s refrigeration system sprung an ammonia leak, which caused an explosion and fire.

Sometime after the explosion, Douglas Wells, chief operating officer and senior vice president of marketing for Wells Dairy, retained Drs. Douglas T. Reindl and Frederick T. Elder of the University of Wisconsin “to investigate operations of the SICP’s refrigeration system.” Mr. Wells stated in an affidavit that he

sought a consultant who could do an evaluation of Wells Dairy’s SICP’s refrigeration system, which was the subject of the claims, to assist [him] as the person responsible for addressing these issues at Wells Dairy in evaluating and responding to the legal claims and the status of the refrigeration at issue.

He further stated that “[a]t the time he retained Drs. Reindl and Elder, it was [his] expectation that any report would be kept confidential and not used in any litigation.” Drs. Reindl and Elder conducted “[a] critical review of refrigeration staffing at Wells’ Dairy Inc.” and prepared a 107-page report (the Wisconsin report), the stated goal of which was to answer three questions: (1) “Is refrigeration a core competency for Wells’ Dairy?”; (2) “How competent is Wells’ Dairy, Inc. in the area of refrigeration?”; and (3) “Looking toward the future, what refrigeration capabilities should Wells’ possess?”.

As a result of the explosion, two lawsuits arose. Wells Dairy filed suit against the appellees on March 26, 2001 for breach of contract, negligence, and strict products liability. On August 8, 2002, the Pillsbury Company sued Wells Dairy for breach of their production contract and negligence. The district court consolidated the two cases for purposes of discovery.

On May 30, 2001, AIR served a request for production of documents upon Wells Dairy, requesting production of, inter alia:

All reports, analyses, inspections, or other documents in regard to complaints or other defects in the work, materials, or project performance;
Any written reports prepared as a result of any investigation relating to the facts and allegations related to this lawsuit.
All written notes, memoranda, reports or other documents which in any way relate to the project and which were prepared by or with the assistance or input of a retained consultant or expert witness.
All documents not specifically requested by these document requests but which nonetheless refer or relate to the project or incident.

On December 27, 2001, Wells Dairy objected to the request in part on the grounds that it asked for information prepared in anticipation of litigation.

During the deposition of Wells Dairy’s refrigeration engineer, Donald Palmer, on April 23, 2003, AIR learned of the existence of the Wisconsin report. Counsel for Wells Dairy objected to AIR’s questioning of Mr. Palmer regarding the substance of the report “on the basis of the self-critical-analysis privilege.” Accordingly, AIR, joined by RYS, moved to compel production of the Wisconsin report. Wells Dairy resisted the motion, asserting that the Wisconsin report was work product protected under Iowa Rule of Civil Procedure 1.503(3) and that the report was also protected under the self-eritieal-analy-sis privilege.

On July 2, 2003, the district court granted the motion to compel and ordered production of the report within twenty days of its order. Wells Dairy applied for interlocutory appeal. This court granted the application and stayed the district court’s order compelling production of the report. After the appeal was fully briefed, Wells Dairy inadvertently disclosed the Wisconsin report. RVS moved to dismiss the appeal on mootness grounds.

II. Motion to Dismiss Appeal.

RVS asserts Wells Dairy waived its work-product privilege when it produced the disputed report during the course of the appeal. Consequently, it claims that the interlocutory appeal no longer presents a justiciable controversy and that it must be dismissed as moot. Wells Dairy claims the appeal is not moot because inadvertent disclosure of a document cannot constitute a waiver of the work-product privilege.

We have not previously considered how the work-product doctrine is affected by the inadvertent disclosure of documents or materials. Our consideration of waiver of the work-product privilege has been limited to subject-matter waiver. See Exotica Botanicals, Inc. v. Terra Int'l, Inc., 612 N.W.2d 801 (Iowa 2000) (concerning whether disclosure of the general subject matter of documents constitutes waiver of the work-product privilege).

We understand the nature and scope of the problems of inadvertent disclosure of discovery materials for trial lawyers. We also recognize that courts from other jurisdictions have taken divergent paths in their efforts to address the issue. Moreover, some of these efforts are complicated because the ultimate resolution can often rest with the formulation of protective relief, considering the contents of the documents have been disclosed.

Notwithstanding, it is only necessary to address the issue of inadvertent disclosure in this case if the underlying disputed documents or materials are protected by the privilege. A document must first be privileged to support any claim for protective relief due to inadvertent disclosure. Thus, the substantive issue raised on appeal in this case also relates to the mootness issue and would be dispositive of the inadvertent-disclosure issue if resolved adversely to Wells Dairy. Because we ultimately conclude that the district court correctly decided that the disputed document in this case was not privileged, we find it unnecessary to address the inadvertent-disclosure claim further. Additionally, we observe that the parties have.fully briefed the privilege issue, and judicial resources would be conserved by deciding the case on the question of the existence of a privilege.

III. Standard of Review.

As we have previously explained, On review of a district court’s ruling on a discovery matter, we afford the district court wide latitude. We will reverse a ruling on a discovery matter only for an abuse of discretion. “A reversal of a discovery ruling is warranted when the grounds underlying a district court order are clearly unreasonable or untenable.” “A ruling based on an erroneous interpretation of a discovery rule can constitute an abuse of discretion.”

Exotica Botanicals, Inc., 612 N.W.2d at 804 (citations omitted).

IY. Work-Product Doctrine.

Iowa Rule of Civil Procedure 1.503(3) creates a qualified privilege for trial preparation materials:

[A] party may obtain discovery of documents and tangible things otherwise discoverable under rule 1.503(1) and prepared in anticipation of litigation or for trial by or for another party or by or for that other .party’s representative (including the party’s attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the case and that the party seeking discovery is unable without undue hardship to obtain the substantial equivalent of the materials by other means.

The pivotal issue in this appeal is whether the Wisconsin report was “prepared in anticipation of 'litigation” so as to constitute work product protected by rule 1.503(3).

The district court held the Wisconsin report “was prepared for business purposes and not in anticipation of litigation” and' was thus not work product. In its conclusions of law, the court stated that to determine whether documents were prepared in anticipation of litigation,

the Court examines the claim in light of .the nature of the document and the factual situation in the particular case to determine whether the document can clearly be said to have been prepared or obtained because of the prospect of litigation.

The court cited the Eighth Circuit case of Simon v. G.D. Searle & Co., which quoted the following test from the Wright and Miller treatise on federal practice and procedure:

“[T]he test should be whether, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation. But the converse of this is that even though litigation is already in prospect, there is no work product immunity for documents prepared in the regular course of business rather than for purposes of litigation.”

816 F.2d 397, 401 (8th Cir.1987) (quoting 8 Charles Alan Wright et al., Federal Practice and Procedure § 2024, at 198-99 (2d ed.1994) [hereinafter Wright & Miller]) (additional citations omitted). Because the parties dispute whether the district court applied the correct test, we must now ascertain what is the proper test for whether a document was prepared in anticipation of litigation under Iowa Rule of Civil Procedure 1.503(3).

Ashmead v. Harris was the case in which we first addressed the meaning of the phrase “prepared in anticipation of litigation.” In Ashmead, the issue was “whether written materials prepared by a liability insurer in a routine investigation following an automobile accident were ‘prepared in anticipation of litigation.’” 336 N.W.2d 197, 198 (Iowa 1983). After noting that cases interpreting the Federal Rules of Civil Procedure serve as a guide in interpreting the Iowa Rules, we observed that the Wright and Miller test was the leading “test that ha[d] emerged in federal decisions interpreting rule 26(b)(3).” Id. at 200 (citations omitted). Turning to the issue of the insurer’s investigation materials, we explained,

It does not matter that the investigation is routine. Even a routine investigation may be made in anticipation of litigation. Thus a document prepared in the regular course of business may be prepared in anticipation of litigation when the party’s business is to prepare for litigation.
We conclude that a routine investigation of an accident by a liability insurer is conducted in anticipation of litigation within the meaning of Iowa R. Civ. P. 122(c) [now rule 1.503(3)]. Even though litigation may not be imminent, the primary purpose of the investigation is to be prepared to defend a third party claim.

Id. at 200-01 (citations omitted). We rejected a test for “prepared in anticipation of litigation” that would have required the document to be prepared when there was “a substantial probability of imminent litigation” in order to be protected. Id. at 201 (citing Miles v. Bell Helicopter Co., 385 F.Supp. 1029, 1033 (N.D.Ga.1974)). Instead, we said, “We agree with the courts that find it sufficient if the primary motivating purpose behind the creation of the document was to aid in possible future litigation.” Id. (citing United States v. Davis, 636 F.2d 1028, 1040 (5th Cir.1981)).

Two years after Ashmead, in Schaffer v. Rogers, we were faced with the issue of whether materials prepared by the Internal Affairs Unit of the Des Moines Police Department were prepared in anticipation of litigation within the meaning of rule 122(c), which is now rule 1.503(3). 362 N.W.2d 552, 553 (Iowa 1985). The district court found the materials were not prepared in anticipation of litigation because “the IAU investigation was conducted in the ordinary course of police department business.” Id. at 555. We concluded this was error and “reiterate[d] the standard adopted in Ashmead that the determinative issue is whether the primary purpose for the creation of the materials in question was to prepare for litigation.” Id. (citing Ashmead, 336 N.W.2d at 201). Thus, we again recognized that “prepared in the ordinary course of business” and “prepared in anticipation of litigation” are not mutually exclusive concepts. See generally Thomas Wilson, Note, The Work Product Doctrine: Why Have an Ordinary Course of Business Exception?, 1988 Colum. Bus. L.Rev. 587.

Since Schaffer, we have reiterated the Ashmead “primary-purpose” test twice more. See Squealer Feeds v. Pickering, 530 N.W.2d 678, 687 (Iowa 1995) (“[I]f the ‘primary motivating purpose’ in preparing the documents is to ‘aid in possible future litigation,’ the documents are prepared in anticipation of litigation.” (quoting Ashmead, 336 N.W.2d at 201)); Shook v. City of Davenport, 497 N.W.2d 883, 887 (Iowa 1993) (“[T]he determinative issue is whether the primary motivating purpose for the creation of the materials in question was to prepare for litigation.” (citing Ashmead, 336 N.W.2d at 201)). Many courts apply the same test. See, e.g., Na vigant Consulting, Inc. v. Wilkinson, 220 F.R.D. 467, 477 (N.D.Tex.2004) (“[A] document is entitled to work product protection if ‘the primary motivating purpose behind the creation of the document was to aid in possible future litigation.’ ” (Citation omitted.)); Ferko v. Nat’l Ass’n for Stock Car Auto Racing, Inc., 219 F.R.D. 396, 400 (E.D.Tex.2003) (stating a document is prepared in anticipation of litigation if “ ‘the primary motivating purpose behind the creation of the document was to aid in possible future litigation’ ” (quoting In re Kaiser Aluminum & Chem. Co., 214 F.3d 586, 593 (5th Cir.2000))); United States ex rel. (Redacted) v. (Redacted), 209 F.R.D. 475, 480 (D.Utah 2001) (“If it appears that materials were prepared for mixed purposes, the privilege is available only if ‘the primary motivating purpose behind the creation of the [materials was] to assist in pending or impending litigation.’ ” (Citation omitted.)); Coltec Indus., Inc. v. Am. Motorists Ins. Co., 197 F.R.D. 368, 371-72 (N.D.Ill.2000) (‘“[I]n order to establish work product[] protection for a document, a discovery opponent must show that “the primary motivating purpose behind the creation of a document ... must be to aid in possible future litigation,” under circumstance[s] where the discovery opponent can show “objective facts establishing an identifiable resolve to litigate.” ’ ” (Citation omitted.)); Disidore v. Mail Contractors of Am., Inc., 196 F.R.D. 410, 413 (D.Kan.2000) (“The court looks to the primary motivating purpose behind the creation of the document to determine whether it constitutes work product.”); Goodyear Tire & Rubber Co. v. Chiles Power Supply, Inc., 190 F.R.D. 532, 535 (S.D.Ind.1999) (“[T]he court must determine whether‘the primary motivating purpose behind the creation of a document or investigative report [was] to aid in possible future litigation.’ ” (Citation omitted.)); Aull v. Cavalcade Pension Plan, 185 F.R.D. 618, 628 (D.Colo.1998) (“[T]he work product privilege is available only if the primary motivating purpose behind the creation of the document was to assist in pending or impending litigation.” (Citation omitted.)); Cooper Hasp./Univ. Med. Ctr. v. Sullivan, 183 F.R.D. 119, 132 (D.N.J.1998) (“In order to receive the protection of the work-product doctrine, a document must have been prepared primarily in anticipation of litigation.” (citing Fed.R.Civ.P. 26(b)(3); United States v. Rockwell Int’l, 897 F.2d 1255, 1265 (3d Cir.1990))); Smith v. Diamond Offshore Drilling, Inc., 168 F.R.D. 582, 584 n. 3 (S.D.Tex.1996) (stating that the key consideration is whether “ ‘the primary motivating purpose behind the creation of the document was to aid in possible future litigation’ ” (citation omitted)); Griffith v. Davis, 161 F.R.D. 687, 698 (C.D.Cal.1995) (“The work product doctrine does not protect materials assembled in the ordinary course of business. Rather, the primary motivating purpose behind the creation of the materials must be as an aid in possible future litigation.” (Citations omitted.)); Blockbuster Entm’t Corp. v. McComb Video, Inc., 145 F.R.D. 402, 404 (M.D.La.1992) (“[T]he general rule is that litigation need not necessarily be imminent as long as the primary motivating purpose behind the creation of the document was to aid in possible future litigation.” (Footnote omitted.)); In re Atl. Fin. Mgmt. Sec. Litig., 121 F.R.D. 141, 144 (D.Mass.1988) (“The essential question is what was the ‘primary motivating purpose behind the creation of the document.’ ” (quoting United States v. Gulf Oil Corp., 760 F.2d 292, 295 (Temp.Emer.Ct.App.1985))); Janicker ex rel. Janicker v. George Washington Univ., 94 F.R.D. 648, 650 (D.D.C.1982) (“While litigation need not be imminent, the primary motivating purpose behind the creation of a document or investigative report must be to aid in possible future litigation.” (Citation omitted.)); Ex parte Cryer, 814 So.2d 239, 247 (Ala.2001) (“ ‘[T]he primary motivating purpose behind the creation of a document or investigative report must be to aid in possible future litigation.’ ” (Citation omitted.)); Arnold, v. City of Chattanooga, 19 S.W.3d 779, 784 (Tenn.Ct.App.1999) (“Litigation need not necessarily be imminent as long as the primary motivating purpose behind the creation of the document is to aid in possible future litigation.” (Citation omitted.)); In re Maher, 143 S.W.3d 907, 912 (Tex.App.2004) (“For the privilege to apply, preparation for litigation must be the primary motivating purpose underlying the creation of the document.” (Footnote omitted.)); Gold Standard, Inc. v. Am. Barrick Res. Corp., 805 P.2d 164, 170 (Utah 1990) (“An inquiry to determine whether a document was prepared in anticipation of litigation should focus on the “ ‘primary motivating purpose behind the creation of the document.’ ” Under this standard, ‘if the primary purpose behind the creation of the document is not to assist in pending or impending litigation,’ then work product protection is not justified.” (Citations omitted.)); West Virginia ex rel. Allstate Ins. Co. v. Madden, 215 W.Va. 705, 601 S.E.2d 25, 35 (2004) (“ ‘[T]o determine whether a document was prepared in anticipation of litigation and, is therefore, protected from disclosure under the work product doctrine, the primary motivating purpose behind the creation of the document must have been to assist in pending or probable future litigation.’ ” (Citations omitted.)).

In recent years, however, the primary-purpose test has come under criticism. In United States v. Adlman, the Second Circuit Court of Appeals rejected the primary-purpose test, describing it as “a formulation that would potentially exclude documents containing analysis of expected litigation, if their primary ... purpose is to assist in making [a] business decision.” 134 F.3d 1194, 1198 (2d Cir.1998). The court explained

[T]he policies underlying the work-product doctrine suggest strongly that work-product protection should not be denied to a document that analyzes expected litigation merely because it is prepared to assist in a business decision. Framing the inquiry as whether the primary or exclusive purpose of the document was to assist in litigation threatens to deny protection to documents that implicate key concerns underlying the work-product doctrine.

Id. at 1199. The court held the proper test is whether “ ‘in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.’ ” Id. at 1202 (quoting 8 Wright & Miller § 2024, at 343).

Where a document is created because of the prospect of litigation, analyzing the likely outcome of that litigation, it does not lose protection under [the “beeause-of’] formulation merely because it is created in order to assist with a business decision.

Id. However, the court cautioned that this test

withholds protection from documents that are prepared in the ordinary course of business or that would have been created in essentially similar form irrespective of the litigation.... Even if such documents might also help in preparation for litigation, they do not qualify for protection because it could not fairly be said that they were created “because of’ actual or impending litigation.

Id. (citations omitted). Thus, in essence, the Second Circuit’s approach asks, “Would the document have been prepared but for the prospect of litigation?” See id. at 1204. If the answer is yes, the document was not prepared in anticipation of litigation; if the answer is no, it was.

Other decisions have followed the Second Circuit’s lead and abandoned the primary-purpose test in favor of the because-of test. For example, in United States v. ChevronTexaco Corp., the court adopted the Adlman approach, explaining,

An attorney’s (or a party’s) reasoning or research (factual or legal) about anticipated litigation should not be discoverable simply because the work also had to be undertaken to facilitate or consider a business transaction. The expectation of litigation is either real or it is not. Whether the party prepared for that litigation before conducting a transaction (to inform its business affairs) or implemented the transaction “in the dark” and then prepared for the litigation that would surely arise from it does not alter the imminence or “realness” of the expectation of litigation. Additionally, refusing to protect litigation analyses prepared prior to implementing a transaction will discourage parties from making every effort to structure their deals in unobjectionable ways (to the extent possible) and could needlessly increase litigation.
Thus, we agree with the Second Circuit that, except where a document would have been generated in the normal course of business even if no litigation was anticipated, the work product doctrine can reach documents prepared “because of litigation” even if they were prepared in connection with a business transaction or also served a business purpose.

241 F.Supp.2d 1065,1082 (N.D.Cal.2002).

Other courts have agreed that the proper test is Wright and Miller’s because-of test, but have formulated different inquiries to ascertain whether that standard is met. For example, in Hertzberg v. Veneman, the court stated that to meet the because-of test, “a party ‘must at least have had a subjective belief that litigation was a real possibility, and that belief must have been objectively reasonable’ in the circumstances.” 273 F.Supp.2d 67, 79 (D.D.C.2003) (citing In re Sealed Case, 146 F.3d 881, 884 (D.C.Cir.1998)). In contrast, in JumpSport, Inc. v. Jumpking, Inc., the same judge who authored United States v. ChevronTexaco Corp. five months earlier held that whether a document was prepared in anticipation of litigation should be determined using a two-stage test:

In the first stage, the court should determine whether the party trying to invoke work product protection has shown that the prospect of litigation was a substantial factor in the mix of considerations, purposes, or forces that led to the preparation of the document. If, but only if, the party trying to invoke the protection makes this showing, the court proceeds to the second stage of the analysis. In this second stage, the court focuses on the policy objectives that the work product doctrine has been developed to promote — then determines whether (and to what extent) denying Rule 26(b)(3)’s protections to the document would harm those objectives (or, the extent to which conferring that protection would advance the policy purposes that inform the work product doctrine.) The court would conclude that the document comes within the ambit of the Rule (was “prepared in anticipation of litigation”) on a showing that a contrary conclusion would likely frustrate or interfere (more than minimally) with the promotion of the principal objectives this doctrine is designed to serve.

213 F.R.D. 329, 330-31 (N.D.Cal.2003).

We initially note that our approach is not inconsistent with Adlman’s holding that a document “does not lose protection ... merely because it is created in order to assist with a business decision.” 134 F.3d at 1202. We have long recognized that documents can be prepared for business purposes and still be prepared in anticipation of litigation. See Schaffer, 362 N.W.2d at 555; Ashmead, 336 N.W.2d at 200-01. However, in reviewing the decisions attempting to define what it means for something to be prepared in anticipation of litigation, it becomes apparent that our primary-purpose test is unduly restrictive given the language and purpose of our rule. Rule 1.503(3) merely requires a document to be prepared in anticipation of litigation. It does not require the primary purpose motivating the creation of the document to be to aid in litigation. Cf. Adlman, 134 F.3d at 1198 (“Nowhere does Rule 26(b)(3) state that a document must have been prepared to aid in the conduct of litigation in order to constitute work product, much less primarily or exclusively to aid in litigation. Preparing a document ‘in anticipation of litigation’ is sufficient.”). Thus, we find the Wright and Miller test is more consistent with the language and purposes of rule 1.503(3). Accordingly, we hold that the overarching inquiry in determining whether a document was prepared in anticipation of litigation is “whether, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation.” 8 Wright & Miller § 2024, at 198— 99. If documents “would have been created in essentially similar form irrespective of the litigation[,] ... it [cannot] fairly be said that they were created ‘because of actual or impending litigation.” Adlman, 134 F.3d at 1202 (citation omitted).

Thus, we conclude the district court ultimately applied the correct test. We must next address Wells Dairy’s contention that the district court erred in applying the test. In applying the facts to reach its conclusion, the district court explained,

[T]he document was prepared for business purposes and not in anticipation of litigation. Although the investigation and report was ordered by Wells after the explosion, its stated purpose and goals have nothing to do with the explosion or the manner in which litigation should be addressed. Rather, the report lists three project goals that concern the business of Wells Dairy, not the explosion. When the explosion is mentioned in the report, the consultant qualifies his observation by stating “investigating and evaluating this incident was not directly in the investigator’s scope of work ... [.] ” Under these circumstances, the document was clearly prepared for business purposes, not in anticipation of litigation.

In other words, the district court concluded that the Wisconsin report would have been prepared in essentially similar form irrespective of the prospect of litigation. See id. Thus, it could not fairly be said that the Wisconsin report was prepared because of impending litigation. See id. Accordingly, it was not prepared in anticipation of litigation and was not entitled to protection under the qualified privilege of rule 1.503(3).

Wells Dairy argues that the district court abused its discretion in reaching this conclusion because it disregarded Douglas Wells’s affidavit, in which he stated that he sought a consultant to help him respond to legal claims. However, the district court did not disregard Mr. Wells’s affidavit; it acknowledged it but did not give it much weight in view of the other circumstances indicating the report was prepared for business reasons. The court concluded, based on its in camera review of the Wisconsin report, that “[t]he investigative report itself does not support this statement and does not address this goal.” As previously noted, we afford the district court wide latitude on discovery rulings and will not reverse them unless their underlying grounds are clearly unreasonable or untenable. Exotica Botanicals, Inc., 612 N.W.2d at 804 (citations omitted). Having conducted our own in camera review of the Wisconsin report, we cannot say that the district court’s conclusion was clearly unreasonable or untenable. Accordingly, we affirm the district court’s order compelling production of the report.

V. Self-Critical-Analysis Privilege.

Wells Dairy alternatively argues that the Wisconsin report is protected from disclosure under the self-critical-analysis privilege. Wells Dairy, as the party “resisting discovery through assertion of privilege^] has the burden of showing that a privilege exists and applies.” Carolan v. Hill, 553 N.W.2d 882, 886 (Iowa 1996) (citing Hutchinson v. Smith Labs., Inc., 392 N.W.2d 139, 141 (Iowa 1986)). “An asserted privilege is narrowly construed because it is an exception to our rules governing discovery.” Id. (citing Hutchinson, 392 N.W.2d at 141). The district court held the report was not protected by the self-critical-analysis privilege, finding “neither Iowa statutory nor case authority to extend a self-critical-analysis privilege to a dairy business.”

The self-critical-analysis privilege is a relatively new privilege “grounded on the basic notion that “ ‘disclosure of documents reflecting candid self-examination will deter' or suppress socially useful investigations and evaluations or compliance with the law.’ ” ” Donald P. Vandegrift, Jr., The Privilege of Self-Critical Analysis: A Survey of the Law, 60 Alb. L.Rev. 171, 176 (1996) (quoting Sheppard v. Consol. Edison Co. of N.Y., Inc., 893 F.Supp. 6, 7 (E.D.N.Y.1995)). It has not gained much support from the federal courts due to the Supreme Court’s “reluctance ‘to recognize a privilege in an area where it appears that Congress has considered the relevant competing concerns but has not provided the privilege itself.’.” Id. at 175 (quoting Univ. of Pa. v. EEOC, 493 U.S. 182, 189, 110 S.Ct. 577, 582, 107 L.Ed.2d 571, 582 (1990)). Another reason to reject the privilege is “the general rule that the public “ ‘has a right to every man’s evidence.’ ” ” Note, The Privilege of Self-Critical Analysis, 96 Harv. L.Rev. 1083, 1083-84 (1983) (quoting United States v. Bryan, 339 U.S. 323, 331, 70 S.Ct. 724, 730, 94 L.Ed. 884, 891 (1950)). According to Wright and Miller,

In recent years there has been some recognition by federal courts of a privilege for certain corporate records under the rubric of “self-evaluative reports.” Although the term and its usage are imprecise, it is generally used to refer to records required to be kept by some administrative regulation and that may contain admissions or statistics of use to an opposing .litigant in a suit arising under the regulatory scheme of which the report is a part. The decisions are divided, and there seems little justification for creating a new privilege if the matter sought to be protected falls outside the required reports privilege.

Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice and Procedure § 5431, at 524 (Supp.2004).

Those courts that recognize a federal self-critical analysis privilege generally require three criteria to be met for the information to qualify for protection: first, the information must result from a critical self-analysis undertaken by the party seeking protection; second, the public must have a strong interest in preserving the free flow of the type of information sought; finally, the information must be of the type whose flow would be curtailed if discovery were allowed.

Torres v. Kuzniasz, 936 F.Supp. 1201, 1214-15 (D.N.J.1996) (citations omitted). “Even where a self-critical analysis privilege has been held to exist, ... that privilege is clearly limited to expressions of opinion or recommendations, and not to facts underlying such opinions or recommendations.” Price v. County of San Diego, 165 F.R.D. 614, 619 (S.D.Cal.1996) (citing Granger v. Nat’l R.R. Passenger Corp., 116 F.R.D. 507, 510 (E.D.Pa.1987)).

Deciding whether to recognize this privilege involves balancing “the public need for all available evidence ... against the public interest in confidentiality.” Note, 96 Harv. L.Rev. at 1084. “The balancing of conflicting interests of this type is particularly a legislative function.” Univ. of Pa., 493 U.S. at 189, 110 S.Ct. at 582, 107 L.Ed.2d at 582. Our legislature has recognized the self-critical-analysis privilege in the context of medical peer review committees. See Iowa Code § 147.135(3) (2003). We decline to judicially extend the self-critical-analysis privilege, and we leave it to the legislature to do so if it finds the competing policy concerns weigh in favor of such an extension of the privilege.

VI. Conclusion.

For the foregoing reasons, we conclude that the Wisconsin report is not protected from disclosure by either rule 1.503(3) or the self-critical-analysis privilege. The district court did not abuse its discretion in determining that the report was not prepared in anticipation of litigation. Moreover, we find no error in its refusal to extend the self-critical-analysis privilege, which is solely a creature of statute in Iowa, to the report. Thus, the district court’s order compelling discovery of the Wisconsin report is affirmed.

AFFIRMED.

      . " 'The inadvertent production of a privileged document is a specter that haunts every document intensive case.'" United States ex rel. Bagley v. TRW, Inc., 204 F.R.D. 170, 175 (C.D.Cal.2001) (quoting FDIC v. Marine Midland Realty Credit Corp., 138 F.R.D. 479, 479-80 (E.D.Va.1991)); see Note, Inadvertent Disclosure of Documents Subject to the Attorney-Client Privilege, 82 Mich. L.Rev. 598, 599 (1983) ("Privileged documents can easily slip through a screening procedure into adversaries’ hands. This problem has become increasingly common as litigation and document productions grow in size.”). The increased incidents of inadvertent disclosure have generally been attributed to the expanded discovery rules and the existence of a greater number of copies of documents due to the low cost of photocopying. John T. Hundley, "Inadvertent Waiver” of Ev-identiary Privileges: Can Reformulating the Issue Lead to More Sensible Decisions?, 19 S. Ill. U. LJ. 263, 264 (1995) [hereinafter Hundley].

      . Generally, three lines of authority have emerged to resolve disputes over the inadvertent disclosure of privileged documents. See 8 Charles Alan Wright et al., Federal Practice and Procedure § 2016.2, at 241-45 (2d ed.1994) (listing the strict, lenient, and middle-of-the-road approaches); John T. Hund-ley, Waiver of Evidentiary Privilege by Inadvertent Disclosure — State Law, 51 A.L.R.5th 603, 634 (1997) (same); Hundley, 19 S. Ill.U.L.J. at 266-68 (same). Another thoughtful approach considers the issue under the principles of equitable estoppel instead of waiver. See id. at 280-302.


text:
    In the Matter of the George G. BARKEMA TRUST. Gayle Torgerson and Dianne Gille, Beneficiaries, Appellants, v. Richard G. Barkema, Trustee, and Health Management Systems, Inc., An Agent for Iowa Department of Human Services, Appellees.
    No. 03-1836.
    Supreme Court of Iowa.
    Dec. 10, 2004.

      James A. Brewer of Newbrough, Johnston, Brewer, Maddux & Howell, L.L.P., Ames, for appellants.
    Thomas J. Miller, Attorney General, and Barbara E.B. Galloway, Assistant Attorney General, for appellees Iowa Department of Human Services and Health Management Systems, Inc.
    Gary J. Groves, Webster City, for appel-lee trustee.
   CADY, Justice.

In this appeal, we must decide if the corpus of a support trust is included in the estate of the beneficiary of the trust upon death for purposes of a claim for recovery of Medicaid benefits provided to the trust beneficiary during her lifetime for nursing home care. The district court found the trust was included within the estate. Upon our review, we affirm.

I. Background Facts and Proceedings

George Barkema established a trust in his will. He left one quarter of the residue of his estate to three of his children, Richard, Doris, and Rose, to hold in trust for his fourth child, Lois. His will directed, “If possible, only the income from said share shall be used for Lois, however, if necessary for her proper support and maintenance, then the corpus of said trust may be invaded to the extent said trustees deem necessary.” George’s will failed to specify what was to become of the remainder of the trust corpus after Lois’s death. After George died, his children entered into an agreement providing that in the event of Lois’s death, the trust corpus was to be distributed in equal shares to Lois’s children, Dianne Gille and Gayle Torgen-son. This agreement was filed with the court in 1978.

Years later, Lois began living in a nursing home. In 1998, Richard helped her apply for Title XIX Medicaid to pay for her medical expenses. Between the time when Lois began receiving Medicaid benefits and her death on April 14, 2003, the State Medicaid program paid approximately $55,000 for her care. However, the State never attempted to obtain income payments from the trustee or compel the trustee to invade the corpus for Lois’s support during Lois’s lifetime.

On June 2, 2003, Richard, as trustee, filed a final report, recommending that the remaining corpus of the trust (approximately $18,000) be distributed to Dianne and Gayle, pursuant to the 1978 agreement between the siblings. On June 25, 2003, Health Management Systems, Inc., on behalf of the Iowa Department of Human Services (hereinafter the Department), filed both a claim in the trust and an objection to the final report. It claimed it was entitled to the remaining corpus of the trust under Iowa Code section 249A.5(2) (2003). On October 8, 2003, the district court granted the Department’s claim and ordered Richard to pay to it the remaining corpus of the trust and interest thereon. The district court based its decision on policy reasons and on what it perceived to be George’s intent. Dianne and Gayle appeal.

II. Standard of Review

This case was tried by the probate court in equity. See In re Roehlke’s Estate, 231 N.W.2d 26, 27 (Iowa 1975) (“A hearing on objections to a fiduciary’s final report is an equitable proceeding.” (Citations omitted.)); see also Iowa Code § 633.33 (2003) (stating that all matters are tried by the probate court in equity other than will contests, involuntary proceedings to appoint guardians or conservators, and establishment of contested claims). Accordingly, our scope of review is de novo. Iowa R.App. P. 6.4.

III. Discussion

Iowa Code section 249A.5(2) provides:

The provision of medical assistance tb an individual who is fifty-five years of age or older, or who is a resident of a nursing facility, intermediate care facility for persons with mental retardation, or mental health institute, who cannot reasonably be expected to be discharged and return to the individual’s home, creates a debt due the department from the individual’s estate for all medical assistance provided on the individual’s behalf, upon the individual’s death.

Iowa Code § 249A.5(2) (2003). Thus, the Medicaid benefits provided by the Department to Lois created a $55,000 debt due to the Department upon her death. See id. This debt is payable from Lois’s “estate,” which is defined as

any real property, personal property, or other asset in which [she] ... had any legal title or interest at the time of [her] death, to the extent of such interests, including but not limited to interests in jointly held property, retained life estates, and interests in trusts.

Id. § 249A.5(2)(c) (emphasis added).

The Department argues the $18,000 remaining corpus of the trust is an “interest in [a] trust[],” id-, and is part of Lois’s estate, from which it can collect its $55,000 debt. Dianne and Gayle, however, contend that the trust terminated upon Lois’s death and that she therefore had no interest in the trust “at the time of her death.” See id.

Our first task is to classify the trust at issue. Because the corpus of the trust could only be invaded “if necessary for [Lois’s] proper support and maintenance,” the corpus of the trust was held in a form of support trust. See Austin Wakeman Scott, Abridgement of the Law of Trusts § 154 (1960) [hereinafter Scott on Trusts] (defining a support trust as one in which the trustee is directed to distribute so much “as is necessary for the education or support' of the beneficiary”); accord Strojek v. Hardin County Bd. of Supervi sors, 602 N.W.2d 566, 570 (Iowa Ct.App.1999) (“The terms of a support trust require the trustee to pay or apply so much of the trust’s income or principal as necessary for the beneficiary’s care or education.” (Citation omitted.)). There are two types of support trusts: (1) pure support trusts, and (2) discretionary support trusts. See George Gleason Bogert & George Taylor Bogert, The Law of Trusts and Trustees § 229 (2d ed.1993) [hereinafter Bogert on Trusts]; see also Strojek, 602 N.W.2d at 570; Smith v. Smith, 246 Neb. 193, 517 N.W.2d 394, 398 (1994); Evelyn Ginsburg Abranavel, Discretionary Support Trusts, 69 Iowa L.Rev. 273, 278-80 (1983) [hereinafter Abranavel].

A settlor creates a pure support trust “[i]f a trustee is directed to pay or apply trust income or principal for the benefit of a named person, but only to the extent necessary to support him, and only when the disbursements will accomplish support.” Bogert on Trusts § 229 (emphasis added). In contrast, a settlor creates a discretionary support trust if “the stated purpose of the trust is to furnish the beneficiary with support, and the trustee is directed to pay to the beneficiary whatever amount of trust income [or principal] the trustee deems necessary for his support.” Bogert on Trusts § 229; see also Smith, 517 N.W.2d at 398 (describing a discretionary support trust as a hybrid of a pure support trust and a pure discretionary trust). Generally, if the trust is a discretionary support trust,

the beneficiary has a right that the trustee pay him the amount which in the exercise of reasonable discretion is needed for his support ...; and the beneficiary can transfer this interest or his creditors may reach it, unless it is protected by a spendthrift clause.

Bogert on Trusts § 229; see also Bureau of Support v. Kreitzer, 16 Ohio St.2d 147, 243 N.E.2d 83, 86 (1968) (stating that “the words ‘care, comfort, maintenance and general well-being’ are to be deemed an enforceable standard of a fiduciary’s conduct to the extent of providing minimal support for a destitute cestui que trust” and that the state, as a creditor having provided support to the beneficiary, “may be considered to stand in [her] place to pursue whatever right, claim or remedy she may have, including such as she may have as a destitute cestui que trust”); Scott on Trusts § 187 (stating that although a trustee has discretion whether to make distributions, “if he is directed to pay as much of the income and principal as is necessary for the support of a beneficiary, he can be compelled to pay at least the minimum amount which in the opinion of a reasonable man would be necessary”); Lawrence A. Frolik, Discretionary Support Trusts for a Disabled Beneficiary: A Solution or a Trap for the Unwary?, 46 U. Pitt. L.Rev. 335, 342 (1985) (explaining that when a trust is a discretionary support trust, “the trustee can be required to distribute sufficient income to the beneficiary to provide at least a minimum level of support”).

The language used by George Barkema created a discretionary support trust. The trust agreement contained a support provision and provided directions for the trustee to use the trust corpus if necessary for Lois’s support and maintenance. By using the words “to the extent said trustees deem necessary,” it gave the trustees some discretion as to whether to invade the corpus, see Bohac v. Graham, 424 N.W.2d 144, 146 n. 3 (N.D.1988) (finding a discretionary support trust when the trust allowed the trustee to invade the corpus as he “may deem necessary” for the beneficiary’s support; stating that “inclusion of the support language suggests an enforceable standard requiring the trustee to provide a minimum level of support to the beneficiary” (citations omitted)).

Having determined that the trust at issue was a discretionary support trust, we must next determine whether Lois’s interest in the discretionary support trust is the kind of interest encompassed by section 249A.5(2)(c). In construing a statute,

[o]ur goal is to determine the intent of the law, gleaned generally from the statutory language. We also consider the statute’s “subject matter, the object sought to be accomplished, the purpose to be served, underlying policies, remedies provided, and the consequences of the various interpretations.”

Cox v. State, 686 N.W.2d 209, 213 (Iowa 2004) (citations omitted). Thus, we begin by examining the statutory language.

The phrase “interests in trusts” is not defined in chapter 249A. See Iowa Code ch. 249A. However, the legislature clearly intended to define “estate” broadly, and to include more than legal title, because it defined it to include any “legal title or interest.” Id. § 249A.5(2)(c) (emphasis added). It also chose to define “estate” more broadly than the federal Medicaid law. The federal statute provides that “estate” “shall include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law.” 42 U.S.C. § 1396p(b)(4)(A) (2000). However, the federal statute provides that “estate” “may include, at the option of the State ..., any other real and personal property and other assets in which the individual had any legal title or interest at the time of death.” Id. § 1396p(b)(4)(B). It appears our legislature sought to exercise its option by including interest in addition to legal title.

We next consider the purpose of the Medicaid recovery statute. As one court explained,

Congress mandated that [states participating in the Medicaid program] adopt estate recovery provisions and permitted states to adopt an expansive definition of “estate” to address the increased demand for Medicaid benefits from the nation’s aging population. In doing so, Congress intended to give states “wide latitude” in seeking estate recoveries. “Allowing states to recover from the estates of persons who previously received assistance furthers the broad purpose of providing for the medical care of the needy; the greater amount recovered by the state allows the state to have more funds to provide future services.”

Estate of DeMartino v. Div. of Med. Assistance & Health Servs., 373 N.J.Super 210, 861 A.2d 138, 144 (2004) (citations omitted). The Medicaid program is designed to serve “individuals and families who do not possess adequate funds for basic health services. It is “ ‘the payer of last resort.’ ” ” Strand v. Rasmussen, 648 N.W.2d 95, 106 (Iowa 2002) (citations omitted).

With this in mind, we find that a person has an “interest” in the trust to the extent the assets of a trust are actually available to a trust beneficiary, as that term is used in section 249A.5(2)(e). Cf. Linser v. Office of Attorney Gen., 672 N.W.2d 643, 646 (N.D.2003) (“Under both federal and state law, an asset must be ‘actually available’ to an applicant to be considered a countable asset for determining Medicaid eligibility.” (Citation omitted.)). “In order for an asset to be considered an actually available resource, an applicant must have a legal ability to obtain it.” Hecker v. Stark County Soc. Serv. Bd., 527 N.W.2d 226, 237 (N.D.1994) (citations omitted). This approach is consistent with the purpose of the recovery statute and the broad language used by our legislature.

The Barkema Trust was a discretionary support trust that contained enough of a distribution standard to create an interest of the beneficiary in the corpus. The trustee was required to pay Lois, during her lifetime, “the amount which in the exercise of reasonable discretion [was] needed for [her] support.” Bogert on Trusts § 229. This gave Lois the legal ability to compel the trustee to invade the corpus of the trust and make distributions to her for her support. Consequently, she had an “interest” in the corpus of the trust. We next consider whether the interest was present at the time of her death.

Under the Medicaid recovery statute, the Department can collect its debt from Lois’s interest in the trust that she had “at the time of [her] death.” Iowa Code § 249A.5(2)(c). Gayle and Dianne argue that “at the time of her death” means “at the precise moment she died.” They claim Lois had no interest at the time of her death because the corpus passed to them upon her death by operation of law. We reject this argument for the reason expressed by the Minnesota Court of Appeals: “ ‘[A]t the time of death’ must be construed to mean a point in time immediately before death. Any other reading of this phrase would render the estate recovery statute meaningless because upon death, property immediately passes to beneficiaries.” In re Estate of Gullberg, 652 N.W.2d 709, 713 n. 1 (Minn.Ct.App.2002) (citation omitted). For example, besides interests in trusts, the Medicaid recovery statute includes jointly held property in the definition of “estate.” See Iowa Code § 249A.5(2)(c). Under property law, joint tenancy property passes by operation of law to the other joint tenant when one joint tenant dies. 20 Am. Jur.2d Cotenancy and Joint Ownership § 3 (1995). If “at the time of death” meant “at the moment of death,” the jointly held property would already have passed to the decedent’s joint tenant at the time when the decedent’s “estate” is to be defined for purposes of the Medicaid recovery statute. This interpretation of “at the time of death” would render the legislature’s inclusion of jointly held property in the definition of “estate” meaningless. “In interpreting statutes, we will assume that the legislature intends to accomplish some purpose and that the statute was not intended to be a futile exercise.” State v. Reed, 596 N.W.2d 514, 515 (Iowa 1999) (citing State v. Horton, 509 N.W.2d 452, 454 (Iowa 1993); Mallory v. Paradise, 173 N.W.2d 264, 268 (Iowa 1969)). Accordingly, we conclude the phrase “at the time of death” means the time immediately before the Medicaid recipient’s death.

Thus, the Department acquired Lois’s “right that the trustee pay [her] the amount which in the exercise of reasonable discretion is needed for [her] support.” Bogert on Trusts § 229. Richard, the trustee of the trust, conceded that the Medicaid benefits the Department provided to Lois were necessary for her support. Accordingly, the Department’s $55,000 debt may be collected from the remaining corpus of the trust.

IV. Conclusion

For the foregoing reasons, we affirm the ruling of the district court.

AFFIRMED.

      . We confine our holding to the specific trust agreement at issue in this case and do not consider the extent to which other trusts are included in the definition of "estate” under section 249A.5(2)(c).


text:
    IOWA SUPREME COURT BOARD OF PROFESSIONAL ETHICS AND CONDUCT, Complainant, v. Brien Patrick O’BRIEN, Respondent.
    No. 04-1281.
    Supreme Court of Iowa.
    Dec. 10, 2004.
    Charles L. Harrington and David J. Grace, Des Moines, for complainant.
    Joe Cosgrove, Sioux City, for respondent.
   CARTER, Justice.

This is a review of the findings and recommendation of the court’s grievance commission with respect to allegations of professional misconduct against attorney Brien Patrick O’Brien (respondent). The grievance commission found that respondent violated the Iowa Code of Professional Responsibility for Lawyers in connection with his failure to file Iowa income tax returns for the years 1997 and 1998 when required to do so. That failure resulted in his criminal conviction for fraudulent practices in the third degree, an aggravated misdemeanor. The commission found that this course of conduct was a violation of Disciplinary Rule 1-102(A) of the Iowa Code of Professional Responsibility for Lawyers. The grievance commission recommended that respondent’s license be suspended for an indefinite period of no less than six months to run concurrently with a suspension previously imposed against respondent by this court.

Our review of the findings and recommendations of the grievance commission is undertaken in accordance with Iowa Court Rule 35.10. This review process is de novo. Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Pracht, 656 N.W.2d 123, 125 (Iowa 2003); Iowa Supreme Ct. Bd. of Prof'l Ethics & Conduct v. Mulford, 625 N.W.2d 672, 679 (Iowa 2001). We are not bound by the findings of the commission but give them weight. Pracht, 656 N.W.2d at 125. Iowa Court Rule 35.10 provides that “the supreme court may impose a lesser or greater sanction than the discipline recommended by the grievance commission.”

Because the facts surrounding respondent’s failure to file Iowa income tax returns and the resulting criminal conviction appear without dispute, the Iowa Supreme Court Board of Professional Ethics and Conduct (board), which prosecuted the complaint against respondent, has satisfied its burden to prove the alleged ethical violations by a convincing preponderance of the evidence. See Mulford, 625 N.W.2d at 679. The grievance commission’s recommended sanction of an indeterminate suspension for at least six months is consistent with discipline imposed by this court in similar cases involving failure to file income tax returns. See Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Engelhardt, 630 N.W.2d 810, 815 (Iowa 2001) (failure to file state income tax returns for three years and employee withholding tax declarations for fifteen quarters—six-month suspension); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Wickey, 619 N.W.2d 319, 321 (Iowa 2000) (failure to file Iowa income tax returns for four years—six-month suspension); Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Runge, 588 N.W.2d 116, 119 (Iowa 1999) (failure to file state income tax returns for four years — six-month suspension); Comm. on Prof’l Ethics & Conduct v. Baudino, 452 N.W.2d 455, 460 (Iowa 1990) (failure to file state income tax returns for three years, failure to file federal income tax returns for three years—six-month suspension); Comm. on Prof’l Ethics & Conduct v. Ramey, 424 N.W.2d 435, 436-37 (Iowa 1988) (failure to file state income tax returns for three years, failure to file federal income tax returns for one year—six-month suspension).

As we have previously noted, respondent’s license is presently under suspension. That suspension is in regard to a proceeding for reciprocal discipline based on his voluntary disbarment in Nebraska. In response to the Nebraska proceedings, we found that the course of conduct revealed by the record therein, although amounting to a serious ethical violation, was not such conduct as would result in disbarment by this court. Consequently, we imposed an indefinite period of suspension of not less than three years. That suspension commenced on May 21, 2003.

The board suggests that the period of suspension to be imposed for respondent’s income-tax violations should take effect at the conclusion of the suspension previously imposed rather than being made concurrent with the existing suspension. We disagree. Respondent’s conduct with respect to his failure to file tax returns antedated the transactions that led to the disciplinary proceedings on which his current suspension was based. Had we been aware of the tax-return violations at the time of imposing the three-year suspension of his license, it is unlikely that this information would have resulted in a more lengthy suspension. See Pracht, 656 N.W.2d at 126 (one-year suspension made to run concurrently with pending two-year suspension).

We suspend the license of respondent, Brien Patrick O’Brien, to practice law indefinitely with no possibility of reinstatement for six months. This suspension shall be concurrent with the suspension imposed by this court on May 21, 2003. It applies to all facets of the practice of law. Iowa Ct. R. 35.12. Costs of this action are taxed to respondent, as provided in Iowa Court Rule 35.25.

LICENSE SUSPENDED.

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

      . The disbarment order in Nebraska was pursuant to a voluntary surrender of respondent's license. Respondent's affidavit filed in connection with that proceeding recited that he had received a personal-injury settlement in the sum of $35,000 on behalf of a client. He remitted a portion thereof to the client and paid himself his contingent fee and cost reimbursements. The amount of $9918 that remained was intended to pay medical providers. That sum was not properly maintained in respondent's trust account while he was negotiating with the medical providers. However, the medical providers were ultimately paid, and the $6079 remaining from the settlement proceeds was remitted to the client. The entire transaction took approximately nine months.


author: LAVORATO, Chief Justice.

text:
    Doug HOLLIDAY, Janet Holliday and Wendel Holliday, Appellants, v. RAIN AND HAIL L.L.C., Rain and Hail Insurance Services, Inc., and Cigna Property and Casualty Insurance Company, Appellees.
    No. 02-0512.
    Supreme Court of Iowa.
    Dec. 17, 2004.

      Andrew B. Howie and Michael P. Malla-ney of Hudson, Mallaney & Shindler, P.C., Des Moines, for appellants.
    Frank W. Pechacek, Jr., and Bruce B. Green of Willson & Pechacek, P.L.C., Council Bluffs, for appellees.
   LAVORATO, Chief Justice.

Insureds under multiple peril crop insurance policies appeal from adverse ruling by the jury regarding a breach of contract claim against its insurers and from an adverse ruling by the district court on their motion to amend the pleadings. The insurers cross-appeal from the district court’s entry of judgment in favor of the insureds on the insurers’ counterclaim. We affirm on the appeal and reverse on the cross-appeal. We remand with directions.

I. Background Facts.

The jury could find the following facts.

In 1998 Doug Holliday, Janet Holliday, and Wendel Holliday (hereinafter collectively referred to as the Hollidays) farmed a number of acres in several southern Iowa counties in which they raised corn and soybeans. Rain and Hail L.L.C. (Rain and Hail) is the managing general agent for CIGNA Property and Casualty Insurance Company (CIGNA). (Hereinafter we refer to Rain and Hail and CIGNA collectively as Rain and Hail unless otherwise indicated.) Rain and Hail issues and services federal crop insurance policies under the authority of the Federal Crop Insurance Act through federally reinsured “Multiple Peril Crop Insurance” policies. The policies were issued pursuant to a standard reinsurance agreement with the Federal Crop Insurance Corporation (FCIC). The FCIC is the governmental agency charged with implementing the federal crop insurance program, - see 1 U.S.C.A. § 1503 (West 1999), in which the Hollidays were participating.

Under this federal program, the FCIC pays Rain and Hail for servicing crop insurance policies issued to American farmers and subsidizes a portion of each farmer’s premium. The FCIC also pays a portion of each farmer’s loss. The policies guarantee that participating farmers will earn a specific amount of revenue on their insured farms by guaranteeing farmers will obtain certain yields, that is, production on their insured farms. The yield guarantees are based either on average county yields or the participating farmer’s actual yield history.

If a farmer relies on actual yields, the farmer must maintain and certify the farmer’s past yields. The farmer certifies the actual yields on “production reports.” Insurers use these certified yields on the production reports to determine the amount of each farmer’s coverage for the upcoming crop year. To the extent certified yields are inaccurate, the coverage is misstated.

In addition to production reports in which a participating farmer certifies the farmer’s past yields, such farmer must also certify planting dates in “acreage reports.” Similar to past yields, planting dates also affect the amount of insurance coverage. To obtain full coverage, a participating farmer must plant crops by the “final plant date.” If a participating farmer does not plant by the final plant date, insurance coverage is reduced one percent for each day following the final plant date. Except for certain exceptions not applicable here, after twenty-five days there is no coverage.

During the 1998 planting season, the Hollidays had yet to harvest their 1997 crops. Some of those crops remained unharvested into the summer and fall of 1998. Crops on four of the Hollidays’ farms in Wayne County that were planted in 1997 were never harvested in 1997. Nor did the Hollidays plant crops on those farms in 1998. Notwithstanding these facts, in March 1998 the Hollidays certified 1997 yields on two of these farms although they did not harvest crops on those farms and made no appraisals of their yields.

In June 1998, the Hollidays submitted acreage reports in which they certified their 1998 planting dates. In these reports, the Hollidays certified that they had planted crops on the Wayne County farms when in fact they had not done so. In addition, testimony from eyewitnesses disputed the planting dates certified by the Hollidays on eight other farms.

The FCIC asked Rain and Hail to investigate the Hollidays’ 1997 and 1998 activities. At about the same time, the federal government audited the Hollidays’ prior crop year policies and concluded: (1) the Hollidays’ actions were fraudulent, (2) they had received indemnities to which they were not entitled in prior years, and (3) their approved yields were overstated.

In October 1998, Rain and Hail notified the Hollidays of the discrepancies between the Hollidays’ certified plant dates and the eyewitnesses’ accounts. That prompted the Hollidays to submit thirty-one “corrected planting dates” to Rain and Hail. Even then, the corrected planting dates were inconsistent with the eyewitnesses’ accounts. Moreover, the corrected planting dates did not match time cards kept by the Hollidays’ employees.

The Hollidays were never able to produce records to support their claim of a potential yield loss they reported to Rain and Hail for the 1998 crop year. Nor did the Hollidays’ notice of loss identify the specific farms on which it suspected a yield loss.

Eventually, Rain and Hail voided the Hollidays’ 1998 policies covering the 1998 crop year in accordance with paragraph twenty-seven of the insurance policies, a provision that allows the insurer to void the policies when the insured “intentionally conceal[s] or misrepresents] any material fact relating to [the policies].” Rain and Hail incurred expenses in excess of $80,000 in investigating the Hollidays’ activities and voiding their policies.

II. Proceedings.

In February 2000, the Hollidays sued Rain and Hail for breach of contract and bad faith in connection with Rain and Hail’s action in voiding the 1998 policies. The Hollidays also sought a declaratory ruling that the 1998 policies were in full force and effect.

Rain and Hail’s answer raised several affirmative defenses, one of which was that the policies were void because of the Holli-days’ alleged “intentional concealment and/or misrepresentation of one or more material facts as prohibited by the terms of [the Hollidays’] policies.” Rain and Hail also counterclaimed, requesting (1) premium underpayments and indemnity over-payments for the 1995 and 1996 crop years and (2) twenty percent of the premium for the 1998 crop year pursuant to the policies to offset Rain and Hail’s costs in servicing them.

Thereafter, pursuant to leave of court, the Hollidays amended their petition, adding a claim for (1) breach of contract for loss and indemnity payments under the 1999 policies, (2) conversion of the 1999 indemnity payments, and (3) duress.

Later, the district court entered a scheduling order setting trial for February 5, 2002 and closing pleadings as of December 5, 2001. The court also granted Rain and Hail’s motion for summary judgment on the Hollidays’ claim for duress.

Several weeks before trial, the Hollidays dismissed their breach of contract claim for indemnity payments under the 1999 policies. A short time later, Rain and Hail filed a motion in limine. In that motion, Rain and Hail maintained that the Holli-days and Rain and Hail had admitted that the 1999 policies were with CIGNA. For that reason, Rain and Hail contended, the Hollidays should not therefore be permitted to introduce evidence on their conversion claim that Agri-General Insurance Company (Agri-General) actually issued the 1999 policies rather than CIGNA.

On the day before trial, the Hollidays moved to amend the petition. The Holli-days alleged that they had erred in previously alleging that the 1999 policies were with Cigna rather than with Agri-General and that they learned of the mistake through discovery. Rain and Hail resisted, and the district court denied the Holli-days’ request to amend.

The case proceeded to trial before a jury. The district court sustained Rain and Hail’s motion for directed verdict on the Hollidays’ conversion claim. The Hol-lidays objected to the district court’s instruction on Rain and Hail’s burden of proof concerning the misrepresentation issue. The Hollidays argued that the court should instruct the jury that Rain and Hail’s burden of proof on this issue should be by a preponderance of clear, satisfactory, and convincing evidence rather than by a preponderance of evidence. The court overruled the objection. The court then submitted the Hollidays’ original breach of contract claim and their bad-faith claim, with the following special interrogatory:

Question: Did the plaintiffs, or someone assisting them, intentionally misrepresent material facts relating to the plaintiffs’ 1998 Multi-Peril Crop Insurance policies?
Answer “yes” or “no”.
Answer: -
[If your answer is “no”, proceed to Verdict Form 1. If your answer is “yes”, do not answer any questions on Verdict Form 1 or Verdict Form 2.]

The jury answered the interrogatory in the affirmative, and thereafter the district court entered judgment in favor of Rain and Hail on the breach of contract, bad faith, and declaratory judgment claims.

As to Rain and Hail’s counterclaim for underpayment of premiums and overpayment of indemnity payments, Rain and Hail voluntarily dismissed their claims for the 1995 and 1996 crop years during trial, leaving only a counterclaim for twenty percent of the premium on the 1998 policies. Because the parties agreed that this latter claim presented only a question of law for the court, the district court did not submit the counterclaim to the jury. Ruling against Rain and Hail on this issue, the court dismissed the counterclaim.

The Hollidays appealed and Rain and Hail cross-appealed.

III.Issues.

The Hollidays raise two issues on appeal. The first issue is whether the jury instructions incorrectly stated the law by referring to Rain and Hail’s burden of proof on its affirmative defense of misrepresentation as a preponderance of the evidence rather than a preponderance of clear, convincing, and satisfactory evidence. The second issue the Hollidays raise is whether the district court erred by not granting their motion for leave to amend petition filed the day before trial.

The issue Rain and Hail raises on the cross-appeal is whether the district court erred by dismissing its counterclaim.

IV. Scope of Review.

We review claims of errors in instructing the jury for correction of errors at law. Greenwood v. Mitchell, 621 N.W.2d 200, 204 (Iowa 2001). We review a ruling on a motion for leave to amend a petition for abuse of discretion. Bailiff v. Adams County Conference Bd., 650 N.W.2d 621, 626 (Iowa 2002).

As mentioned, the parties agreed that whether the counterclaim should be dismissed was a question of law for the court. So our review is for correction of errors at law. Iowa R.App. P. 6.4.

V. Burden of Proof Instruction.

The district court’s instruction on Rain and Hail’s affirmative defense stated in relevant part:

The defendants voided the plaintiffs’ 1998 Multi-Peril Crop Insurance policies .... In connection with those insurance policies, you must determine whether the defendants have proved each one of the following:
1. That the plaintiffs, or anyone assisting them, misrepresented facts; and
2. That the misrepresentations were intentionally made; and
3. That the misrepresentations were material.
If the defendants have proved each of the above, you will answer the Special Interrogatory “Yes”. If the defendants have failed to prove each of the above, you will answer the Special Interrogatory “No”.

(Emphasis added.)

In another instruction, the district court instructed the jury that “[wjhenever a party must prove something, they must do so by the preponderance of the evidence.” The instruction defines a prepon-deranee of evidence as evidence “that is more convincing than opposing evidence” and states that “[t]o prove something by the preponderance of the evidence is to prove that it is more likely true than not true.”

Taking these two instructions together, the jury could find for Rain and Hail on its affirmative defense if it found Rain and Had proved its defense by a preponderance of the evidence. The Hollidays contend the court should have instructed the jury that Rain and Hail had to prove its affirmative defense by a preponderance of clear, satisfactory, and convincing evidence rather than by a preponderance of evidence. And the district court’s failure to so instruct the jury was a material misstatement of the law and for that reason was prejudicial, warranting reversal. For reasons that follow, we disagree.

Our law is clear that all the elements of common-law fraud must be established by a preponderance of evidence that is clear, satisfactory, and convincing. Lockard v. Carson, 287 N.W.2d 871, 874 (Iowa 1980). The reason for this heavier burden is to give deference to the presumption of fair dealing. Id. “ ‘[Cjlear and satisfactory’ refers to the character or nature of the evidence, whereas ‘preponderance’ of the evidence is a quantitative measure.” Id.

What Rain and Hail had to prove here was not common-law fraud for damages. Rather it had to prove a contractual defense, pursuant to paragraph twenty-seven of the policy, to void the policies based simply on intentional concealment or misrepresentation of any material fact relating to the policies. Thus, all that Rain and Hail had to prove was either one of two elements: intentional concealment or misrepresentation; there was no language indicating that Rain and Hail had to prove all the elements of common-law fraud. See Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001) (listing elements necessary to establish common-law fraud claim: “(1) defendant made a representation to the plaintiff, (2) the representation was false, (3) the representation was material, (4) the defendant knew the representation was false, (5) the defendant intended to deceive the plaintiff, (6) the plaintiff acted in reliance on the truth of the representation and was justified in relying on the representation, (7) the representation was a proximate cause of plaintiffs damages, and (8) the amount of damages”).

In its ruling on the Hollidays’ motion for new trial, the district court addressed the issue squarely and in accord with our reasoning here:

The plaintiffs urge that the Court erred in instructing the jury regarding the burden of proof required of the defendants in their affirmative defense. The plaintiffs are correct that the burden of proof in a cause of action for damages sustained as a result of fraud is proof by a preponderance of the clear and convincing evidence. However, there was no claim for damages for fraud submitted to the jury in this case.
In this case, the cause of action was for breach of contract. The burden of proof on the plaintiffs was to prove a breach of contract by a preponderance of evidence. Part of the proof required of the plaintiffs was the existence of a contract of insurance, insuring against the plaintiffs’ losses. The defendants raised the affirmative defense that, pursuant to the terms of the contract, there was no policy and no coverage for the plaintiffs’ losses. The same burden of proof fell upon the defendants in their affirmative defense. The defendants were required to prove, by a preponderance of the evidence, that pursuant to its terms, there was no policy in effect and hence no coverage. In this case, the defendants, to prove their affirmative defense, were required to prove that the plaintiffs intentionally misrepresented material facts. The insurance policies provided that they were void if those facts were proved. The fact that the policy language included some, but not all, of the elements of a cause of action for fraud, did not however, require the defendants to prove their entitlement to a judgment for damages for fraud in order to prove their defense.

The district court did not err in instructing the jury on Rain and Hail’s burden of proof regarding its affirmative defense.

VI. Motion to Amend.

In their original amended petition, the Hollidays asserted a claim for conversion against Rain and Hail because it had set off monies allegedly due the Hollidays under the 1999 policies against monies for premium underpayments and indemnity overpayments that Rain and Hail claimed to be due to it under the 1995 and 1996 policies. In asserting the conversion claim, the Hollidays alleged that for the 1999 crop year, they had policies with CIGNA when in fact the policies were with Agri-General. Rain and Hail’s answer admitted the policies were with CIGNA. The day before trial, the Hollidays moved to amend their petition to correct the factual error. The district court denied the Hollidays’ motion. The Hollidays contend the district court abused its discretion in denying their motion.

We conclude, for two reasons, that the district court did not abuse its discretion in denying the motion. First, as the district court found, the amendment would inject a new issue into the case — whether Rain and Hail had a right of setoff against funds due under another insurer’s policy. This issue was not raised in the original pleadings and allowing the amendment would unduly prejudice Rain and Hail. See Atl. Veneer Corp. v. Sears, 232 N.W.2d 499, 503 (Iowa 1975) (stating “an amendment is not permissible which will substantially change the issue”). Moreover, in addition to adding a new issue, the amendment would require in our opinion the addition of another party — Agri-General.

Second, as the district court found, the motion was untimely. The pretrial order closed pleadings as of December 5, 2001. The district court found that the information the Hollidays needed to correct the factual error was available to them as early as November 2001, but they waited until the day before trial to file their motion to amend. See Bennett v. City of Redfield, 446 N.W.2d 467, 474-75 (Iowa 1989) (finding district court did not abuse its discretion in denying as untimely motion to amend petition that “would have substantially changed the issues of the suit”; motion to amend was filed sixteen months after suit was commenced, twenty days before trial date, and after amendment deadlines established in court’s scheduling order).

VII. The Counterclaim.

As mentioned, Rain and Hail sought twenty percent of the premium for the voided 1998 policy. The parties agreed the counterclaim presented a legal question for the court. The court found that the liquidated damage provision in paragraph twenty-seven of the policies was discretionary, and for that reason Rain and Hail had to make an election and demand for payment before it had any right of action for the liquidated damages. Because Rain and Hail made no such election and demand before filing its counterclaim, the court concluded Rain and Hail had no cause of action for the damages at the time it filed the counterclaim. The court therefore entered judgment in favor of the Hol-lidays on the counterclaim.

Rain and Hail contends the court erred in reaching its conclusion, and we agree. Paragraph twenty-seven of the policies provides in relevant part:

(b) Even though the policy is void, you may still be required to pay 20 percent of the premium due under the policy to offset costs incurred by us in the service of this policy. If previously paid, the balance of the premium will be returned.

(Emphasis added.)

As the district court found, this provision is discretionary because of the use of the word “may” in connection with the insured’s liability for the liquidated damages. See 17A C.J.S. Contracts § 323, at 347-48 (1999) (stating that when construing contracts, “the word ‘may’ ordinarily is regarded in a permissive, rather than in a mandatory, sense”). However, there is no language in this provision requiring Rain and Hail to first make an election and demand before filing suit. In the absence of such language, we think the general rule is that no such election and demand is necessary before filing suit. Coffin v. Younker, 196 Iowa 1021, 1026, 195 N.W. 591, 593 (1923); Wyatt v. Bailey, 1 Morris 522, 523 (Iowa 1845); 25 C.J.S. Damages § 229, at 630 (2002). Filing suit, as was done here, constitutes the demand. Coffin, 196 Iowa at 1026, 195 N.W. at 593; Wyatt, 1 Morris at 523.

VIII. Disposition.

Because we find that the district court correctly instructed the jury on the burden of proof regarding Rain and Hail’s affirmative defense and did not abuse its discretion in denying the Hollidays’ motion to amend, we affirm on these issues. However, because the district court erred in entering judgment in favor of the Hollidays on the counterclaim, we reverse the judgment and remand to allow the district court to decide the issue on the record before it in conformity with the conclusions we have reached.

APPEAL AFFIRMED; REVERSED AND CASE REMANDED WITH DIRECTIONS ON CROSS-APPEAL.