Three words in its own policy - "prejudicial to us" - just cost an insurer a dismissal and shifted who has to prove prejudice.
In a July 22, 2026 decision, the Court of Appeals of Iowa reversed a summary judgment favoring Grinnell Select Insurance Company and Grinnell Mutual Reinsurance Company, reviving an underinsured-motorist claim and ruling the carrier could not rely on a shortcut it had written out of its own contract.
The case began with a November 2022 crash. A policyholder was hurt by an underinsured driver who ran a stop sign, and that driver's insurer paid its $300,000 limit. The policyholder and his spouse then looked to their own coverage - a Grinnell Select auto policy and a Grinnell Mutual umbrella policy, worth a combined $1.25 million in underinsured-motorist limits.
In March 2024, their lawyer sent Grinnell a 22-page "settlement opportunity letter" demanding the full amount. It included medical records, a $500,000 estimate for future medical costs and a $300,000 estimate for past and future wage loss tied to an early retirement.
Grinnell's counsel replied a month later. Pointing to "previously unidentified injuries outlined in the demand," he asked for a physical exam, an examination under oath and several records waivers before evaluating the claim. The couple's lawyer answered the next day, said suit was coming, and never addressed the requests. Grinnell never renewed them, never warned that silence would count as a breach, and never said coverage was at risk.
The couple sued for breach of contract and bad faith. Grinnell asked for summary judgment, arguing they had broken the policy by skipping the exam, the sworn examination and document production before filing. Its motion did not claim any real harm - only that prejudice was presumed. The trial court agreed and dismissed all three claims.
The appeals court saw the contract differently. Part E of the auto policy began with a single line: "We have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us." Because Grinnell wrote that condition, the court held, the trigger for denial was prejudice - not noncompliance. The carrier, not the insured, had to prove it.
That split matters for claims teams. A widely cited rule lets insurers presume prejudice when a policyholder ignores conditions. But the court said a carrier that writes a prejudice requirement into its own policy cannot lean on that presumption.
The case now returns to the trial court to decide whether the record shows prejudice. A dissenting judge would have upheld the dismissal, arguing the harm was plain.
