The Iowa Supreme Court reversed a decision that summarily dismissed a Dubuque County woman's claim that an insurance company was negligent in its handling of her late husband's life insurance policy.

In a 55-page, 4-3 decision filed July 6, the justices ruled that a life insurance agent owes a "duty of care" to the intended beneficiary of a life insurance policy and that a life insurance agent can be liable for negligent misrepresentation.

The majority opinion from justices explained why Michele Pitts deserves to be heard in her quest to receive the full life insurance policy left by her husband, Tom, who died in 2007.

In 1993, Tom and his wife, Michele, purchased life insurance from Farm Bureau Life Insurance Company agent Donald Schiffer that would satisfy Tom's $35,000 child support obligation to his daughter until she finished school in 2005, listing Michele as the beneficiary of the "balance of (the) proceeds, if any."

According to Michele, Tom asked Schiffer to change the beneficiary designation once the obligation ended, however no paperwork was ever completed. When Tom died in 2007, the policy was still split with Tom's daughter receiving the first $35,000 in insurance proceeds, with Michele getting only $74,000.

Michele filed a lawsuit against Schiffer and Farm Bureau in November 2009. Her claim against Schiffer was negligence and negligent misrepresentation, with Farm Bureau being liable.

Farm Bureau claimed it was entitled to summary judgment on the negligence claim because the policy required any change in beneficiary to be in writing and signed by the owner. Farm Bureau also argued that it did not owe a duty to Michele because she was not the policyholder.

Dubuque District Court Judge Monica Ackley agreed with Farm Bureau, granting summary judgment and dismissing the case, saying that Schiffer's failure to remove Tom's daughter as a beneficiary "was not a product of negligence, but rather resulted from his lack of authority to remove (her) as the primary beneficiary without Thomas Pitts' written request."

The court of appeals

affirmed the summary judgment.

The majority opinion from the justices found that Ackley erred when granting the summary judgment on all of plaintiff's claims.

"Michele was not claiming that Tom followed the proper procedures and that the beneficiary had actually been changed," the court wrote.

"She was claiming that, despite the beneficiary designation, Tom intended her to be the sole beneficiary of his policy."

The justices said the question was not as simple as whether Tom's oral desire to change the beneficiary on his policy was effective or whether it gave Schiffer the authority to change the beneficiary.

"The questions are whether Schiffer was negligent in responding to Tom's oral request, if made, and whether Schiffer made negligent misrepresentations after allegedly receiving Tom's oral request," they wrote.

Justice Edward Mansfield authored the dissent for himself and Justices Thomas Waterman and Chief Justice Mark Cady, writing that the majority incorrectly eliminated previous legal requirements and that the ruling could lead to future misuse.

The dissent asserted the importance of having the intended beneficiary being written.

"The daughter, not Michele, was the 'expressed' beneficiary of the $35,000," the opinion said. "Nothing in the transaction documents indicated that Tom intended Michele to receive the $35,000."

Instead, they wrote, there is "a swearing contest" over whether a change to the written plan was requested and over who is to blame for failing to carry that change into effect.

"Allowing people to file suits alleging that someone who wasn't their agent negligently failed to arrange for them to receive a benefit-without written proof they were supposed to receive that benefit-will lead to uncertainty and instability," they wrote.

The case will return to Dubuque District Court.