This is a case that touches on the insurance policy and how it was financed, but the Supreme Court ruling is about whether a company with no ties to Iowa can be brought before a state court.
In this case, the Supreme Court said "yes."
In 2006, Ostrem, who founded European luxury car dealership Dave Ostrem Imports, heard about no-cost life insurance policies in which a third-party financer pays the premiums. The insured bears no responsibility for the premiums or the loan, which is repaid from the death benefit, with the balance paid to the designated beneficiary.
Ostrem resided in both Iowa and Florida at the time. He asked his son, Dave Ostrem Jr., to find such a policy. Dave Ostrem Jr. worked for AIP Group-IA LLC Iowa. He sought the help of Richard Kobernusz, an insurance broker associated with AIP in Iowa, according to the court ruling. They found a Tennessee firm that agreed to pay for the policy, which was to be issued by Indianapolis Life Insurance Co., which then was acquired by Aviva USA.
However, Aviva USA declined coverage after learning of the financing arrangement. In the late summer of 2007, Dave Ostrem Jr. and Kobernusz reapplied for coverage through Aviva USA, claiming that the premiums would be paid by Ostrem's father. According to the court ruling, the two insurance men arranged for a Florida company, Imperial Premium Finance LLC, to pay the premium.
"David (Ostrem Jr.) and Kobernusz did not disclose this to Aviva, representing instead that Ostrem (Sr.) would personally pay the insurance premiums. Ostrem had no knowledge of this false statement. Although Imperial knew that Aviva would not approve a policy supported by financed premiums, Imperial assured Kobernusz it would not disclose its involvement in this transaction to Aviva," according to the court ruling.
Aviva issued a $10 million life insurance policy on Ostrem Sr.
A trust was formed in Georgia to own the life insurance policy and pay the premiums using loans from Imperial. Dave Ostrem Sr. signed a personal guarantee on the loan used to pay the premiums. However, he has maintained that "he did not thoroughly examine the documents and did not realize he had signed a personal guaranty," according to the court record.
In 2009, the loan eventually was assigned to another company, California-based PrideCo Secure Loan Fund LP. A company employee testified that company actually had been involved with the loan for Dave Ostrem Sr.'s policy since 2007. Other than its involvement in the loan, PrideCo had no prior business involvement in Iowa.
In 2011, Brandon Small, a fund manager for PrideCo, contacted Aviva regarding the life insurance policy. "To continue concealing from Aviva the premium financing arrangement, Small falsely told Aviva he was calling from the office" of a joint trustee of Dave Ostrem Sr.'s trust.
Later that year, PrideCo said it would pursue Dave Ostrem Sr.'s personal guarantee if the trust defaulted on its loan payment obligations.
In December 2011, Dave Ostrem Sr. filed a petition for declaratory judgment in Iowa on the personal guaranty, claiming the personal guaranty refered to nonexistent loan documents and was not a valid contract. He also alleged a civil conspiracy, and claimed Kobernusz and AIP committed negligent misrepresentation, fraudulent misrepresentation, professional negligence and breach of fiduciary duty. Later, Kobernusz and AIP filed a cross-petition against PrideCo seeking indemnity and contribution from PrideCo.
In January 2012, PrideCo filed a case in Georgia against Ostrem Sr. That case was moved to federal court and later dismissed. The company also filed a motion in Iowa to have the cases filed by Dave Ostrem Sr., Kobernusz and AIP dismissed, claiming that Iowa courts did not have jurisdiction because the company did not have enough "minimum contacts" in the state.
Polk County Judge Arthur Gamble granted the motion to dismiss the case on those grounds. However, the Supreme Court said that by virtue of having a single contact with Dave Ostrem Sr., the company had sufficient exposure to be sued in the state.