Why Do States Believe an Insurance Company Cannot Be a Victim?

Every Victim of Crime Is Entitled to Restitution

State legislators, like those in the State of Iowa, seem to think that when an insurer pays an insured for a loss due to a criminal act is not a victim of the crime. Of course, this conclusion is absurd. When an insurer pays its insured for a loss due to a crime the insured suffers no loss but the insurer, acting on behalf of its insured, is the actual victim of the crime and should be entitled to restitution from the criminal either as a direct victim or as the subrogee of the victim.

The purpose of restitution is to require the convicted criminal to make the victim whole. In State Of Iowa v. Robert Lionel Dubois,…, Supreme Court of Iowa, — N.W.2d —- (2016 WL 7175257) (12/9/16) the Supreme Court was faced with the interpretation of a statute that deprives an insurer of its right and allows the criminal to avoid responsibility for his or her crime if the victim was smart enough to buy insurance.

The Supreme Court examined the relationship between restitution in a criminal case under Iowa Code section 910.3 (2014) and the possible availability of insurance coverage of the loss. A district court ordered restitution in the full amount of loss without a deduction for potential insurance coverage. The defendant maintained that restitution should be limited to the amount of the insurance deductible and any other costs not covered by insurance.


Lisa and Robert Dubois divorced in 2008. In September of 2014, their teenage son had been living with Lisa but decided he wanted to live with his father. Robert picked him up from Lisa’s residence on September 10. The teenager, however, left many of his belongings at his mother’s house.

The next day, Robert drove his son back to the residence to retrieve his belongings, but Lisa was not home and the door was locked. The teen entered the home through a second-story window. In addition to taking his belongings, the teen took savings bonds, stereo equipment, tire ramps, and a leaf blower with his father’s permission. When Lisa returned to the home, she saw that her stereo receiver and speakers were missing along with several pieces of jewelry, a necklace with a locket, diamond earrings, and a tennis bracelet.

Lisa called 911 and reported the break-in. Robert admitted he was present when some of the items were removed from the house. He eventually returned the ramps, the leaf blower, and the stereo speakers but did not return the receiver because he claimed to have paid for it. Robert asserted he knew nothing about the jewelry or missing savings bonds.

The State charged Robert with burglary in the third degree. The defendant entered a guilty plea to theft in the third degree. The district court sentenced Dubois to a two-year prison term, suspended the sentence, and placed him on probation for a year.

The district court also entered an order of restitution. The order provided that Robert pay $2950 in restitution to Lisa. The defendant objected and the district court set the matter for hearing. At the hearing, Lisa stated she had an insurance policy in place that had a deductible in the amount of $1000. She stated that she had not filed a claim with her insurance company for the stolen items. After the hearing, the district court ordered the defendant to pay $2001 in restitution.

Robert appeals. On appeal, he claims that the restitution award should be limited to reflect only losses not covered by insurance.


In this appeal, the fighting issue is whether the district court should have limited the restitution award to reflect only losses not covered by insurance. Restitution is a creature of statute. The framework for statutory restitution is provided in Iowa Code chapter 910. Under the statute, “restitution” means “payments of pecuniary damages to a victim in an amount and in the manner provided by the offender’s plan of restitution.”

Pecuniary damages means “all damages to the extent not paid by an insurer, which a victim could recover against the offender in a civil action arising out of the same facts or event.” The statutory language at the heart of this dispute is the meaning of the phrase “to the extent not paid by an insurer” in Iowa Code section 910.1(3).

Robert maintains that this phrase can reasonably be read as referring to instances in which the victim has no applicable insurance policy in place which covers the loss for which he or she is seeking compensation in the restitution action. According to Robert, it does not matter whether an insurance claim has actually been filed or paid at the time of the restitution hearing. Robert argues that the phrase “not paid by an insurer” is a reference to amounts that the victim’s insurance policy does not or would not cover.

Robert claims his interpretation of the statute is consistent with the primary purpose of restitution orders, which is to make the victim whole. The State notes that the statutory language does not require a victim seeking pecuniary damages from an offender to file a claim with her own insurance plan before restitution is ordered.

The statute should not impose an affirmative duty on the victim to pursue all possible sources of reimbursement before claiming restitution. The fact that the victim had insurance was purely fortuitous and should not entitle the defendant to benefit. There is nothing in the Iowa Code that requires a victim to seek insurance coverage for pecuniary damage. The statute simply provides that a victim is entitled to restitution of all damages not paid by an insurer. According to ordinary usage, the term “all damages to the extent not paid by an insurer” means all amounts not actually paid. It does not mean amounts that might be paid, could be paid, will be paid, or even should be paid by the insurer.

No doubt, the legislature could have taken a different approach to the question of the role of insurance in determining restitution amounts. The court’s interpretation does not produce absurd results. Whether or not certain losses are “covered” by an insurance policy can often be contested and can lead to protracted disputes. Whether or not a loss has been paid at the time of a restitution hearing, however, is a simple yes or no question.

At present, Lisa is entitled to seek full restitution from Robert for pecuniary damages “not paid” by her insurer. She is under no obligation to act for Robert’s benefit by seeking coverage for her losses. A court will not, nor should it, engage in extended speculation about future insurance payment. If, however, Lisa actually receives insurance payments related to her loss, the offender would be entitled to seek adjustment of the restitution.


The Iowa Legislature – by eliminating from restitution amounts the “victim” receives from insurance, rewrites the insurance contract without right or reason and deprives the insurer of its right to restitution. If Lisa had made a claim and her insurer paid it the insurer would have been entitled to subrogate against Robert. Allowing insurance payments to reduce the restitution obligation allows a criminal to profit from the wisdom of his victim to buy insurance and not wait until a court convicts the criminal. This is an absurd statute and the language “not paid by an insurer” must be eliminated and prevent this statute that encourages crime against people insured.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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