IOWA COURT OF APPEALS RECOGNIZES CONCEPT OF A PARENT CORPORATION’S INTERFERENCE WITH A SUBSIDIARY CORPORATION’S CONTRACT
The Iowa Court of Appeals was recently confronted with an issue that it identified as not having been previously decided in the state of Iowa. The question presented is whether, in Iowa, a parent corporation can be found liable for intentional interference with a contract, where the contract exists between a subsidiary corporation and a third party. The general rule in Iowa is that a party cannot be held liable for interference with a contract to which it is a party, because the proper remedy for that is breach of contract. A separate concept exists, however, where a third party interferes with the performance of a contract between two other parties.
The question presented to the Iowa Court of Appeals was whether a parent corporation would be immune from the concept of interference with a contract that existed with its subsidiary corporation. The Iowa Court of Appeals examined related Iowa Supreme Court authority, as well as authority squarely on point from other states, and concluded that a parent corporation had only qualified immunity for an interference claim, and that a parent corporation under Iowa law could be liable for intentional interference where it employs wrongful means, or the interference is not in the economic interest of the subsidiary.
The case before the Iowa Court of Appeals involved an insurance claim, where the parent insurance company that manages the affairs of a subsidiary insurance company was alleged to have interfered with the contract of insurance between the subsidiary company and its insured. Significantly, the Court of Appeals also noted that it was not necessary that the parent insurance company be proven to have engaged in bad faith, but only that the parent insurance company met the above described elements or interference. While not directly discussed by the Court of Appeals, that decision raises an interesting issue as to whether the theory of liability against a parent corporation of an insurance company could be an easier standard to meet than the bad-faith standard required to be met against the subsidiary insurance corporation itself. The Iowa Court of Appeals decision was rendered on July 3, 2019, and a copy of that decision is linked here.