The Iowa Supreme Court ruled on April 18, 2025, that Columbia Insurance Group is not responsible for covering a judgment awarded against its insured, bringing clarity to how commercial general liability (CGL) policies apply to claims arising from consumer fraud tied to construction projects.
The dispute began in 2017, when John and Deena Dostart contracted Tyler Custom Homes to build a custom residence in Altoona, Iowa. Under the agreement, the home was to be substantially completed by June 2018. When the project stalled, the Dostarts filed a lawsuit against Tyler Custom Homes and its owner, James Harmeyer, accusing them of consumer fraud under Iowa law.
In April 2022, a jury found in favor of the Dostarts, awarding $182,408.30 in compensatory damages and $17,591.70 in exemplary damages. The award covered costs for temporary living arrangements, moving expenses, loan extension fees, and the cost to complete construction. The jury rejected their claims for breach of contract and warranty.
Unable to collect from Tyler Custom Homes or Harmeyer, the Dostarts turned to Columbia Insurance Group, filing a direct action under Iowa Code section 516.1 to collect the unsatisfied judgment. Columbia denied coverage, arguing that the consumer fraud judgment was not covered by the CGL policy it had issued.
At the center of the case were the terms of the insurance policy. Columbia pointed out that the policy defined an “occurrence” as an accident and covered “property damage” only if it was caused by an occurrence. The insurer maintained that consumer fraud was not an accident and that the damages awarded related solely to the insured’s own incomplete work, not to injury or damage to other property. The policy also excluded coverage for exemplary damages and for intentional acts.
The district court initially granted Columbia summary judgment on the claim for exemplary damages but allowed the rest of the case to proceed, finding that there were factual questions remaining. The Iowa Court of Appeals affirmed that decision. Columbia then sought further review.
The Iowa Supreme Court reversed course. Writing for the Court, Justice Oxley concluded that consumer fraud, even under Iowa’s statute, did not qualify as an accidental “occurrence.” The Court also emphasized that the damages sought by the Dostarts were for completing the work Tyler Custom Homes had been hired to perform, and thus did not qualify as covered “property damage.” As the Court explained, a CGL policy is not a performance bond guaranteeing a contractor’s work; it protects against accidents causing damage to other property.
Because there was no coverage under the policy, the Court found it unnecessary to consider whether any policy exclusions would have applied. The Court vacated the court of appeals’ decision, reversed the district court’s partial denial of summary judgment, and remanded the case with instructions to enter judgment in Columbia’s favor.
For insurance professionals, the decision reinforces the principle that defective workmanship or incomplete construction — even when recast as fraud — typically falls outside the scope of CGL coverage. It also highlights the importance of understanding how courts interpret “occurrence” and “property damage” provisions in the context of contractor liability claims.
The ruling offers a strong reminder for insurers managing construction risks: coverage disputes tied to workmanship failures, even when involving claims of consumer fraud, are unlikely to succeed under the standard language of CGL policies in Iowa.
