Full opinion text
MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT BENNETT, District Judge. TABLE OF CONTENTS I. INTRODUCTION AND PROCEDURAL BACKGROUND.1183 II. STANDARDS FOR SUMMARY JUDGMENT.1184 III. FINDINGS OF FACT.1186 A. Undisputed Facts.1186 B. Disputed Facts.1188 IV. LEGAL ANALYSIS.1189 A. The Nature Of Utica’s Cause Of Action.1189 1. Actions founded on fraudulent misrepresentation.1190 2. Utica’s cause of action.1192 B. Fraudulent Misrepresentation At Law And In Equity.1192 1. Elements of fraudulent misrepresentation.1192 a. Material, false representation.1194 b. Intent.1195 e. Reliance.1195 2. Burden of proof.1196 3. Remedies for fraudulent misrepresentation.1197 a. Remedies at law .1197 b. Equitable remedies.1197 C. Utica’s Claim For Rescission .1198 1. Two meanings of rescission.1198 2. Precondition.1199 3. Utica’s right to summary judgment of rescission.1200 i. Representation.1200 ii. Falsity.1200 iii. Materiality.1203 iv. Intent to induce Utica to contract.1205 v. Reliance.1205 V. CONCLUSION.1205 This lawsuit for declaratory judgment pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201-2202, presents the unusual circumstance that the parties do not even agree on the nature of the cause of action asserted by the plaintiff. The plaintiff insurer asserts that its cause of action is for rescission of contracts for errors or omissions insurance for three policy years, alleging as grounds for rescission that the defendant insured, an insurance agency, made misrepresentations in the applications for insurance. The defendant insured, on the other hand, asserts that the insurer’s cause of action is for fraudulent misrepresentation, and that rescission is a possible remedy. This disagreement between the parties on the nature of the plaintiffs cause of action has repercussions for the court’s disposition of the insurer’s motion for partial summary judgment. The insurer asserts that its right to rescission may be decided as a matter of law on the sole issue of whether or not a question in its application form was ambiguous. The insurer argues that the question was clear and unambiguous, and that the insured’s answer was therefore false and fraudulent. The insurance agency argues that even if the application question was not ambiguous, and therefore its answer was false, there are genuine issues of material fact on other elements of a claim of fraudulent misrepresentation precluding summary grant of the relief requested by the plaintiff. The parties’ disagreement over the elements that must be proved is only a reflection of the arcane, obscure, and confusing nature of Iowa law on the issue. The court therefore sympathizes with the parties’ attempts to frame cogent arguments. After painstaking research, which would not have been necessary had Iowa law been clearer, this court has discovered that, historically, Iowa courts have recognized four distinct actions based on fraud, each with differing elements or differing effect on the rights of the parties involved. Thus, the court must determine the nature of this plaintiffs action founded on fraud and precisely what elements the plaintiff must prove in order to obtain rescission of the insurance contracts. This federal court will therefore attempt to illuminate for itself and the parties some abstruse points of the applicable state law in order to dispose of the plaintiffs motion for partial summary judgment. I. INTRODUCTION AND PROCEDURAL BACKGROUND Plaintiff Utica Mutual Insurance Company (Utica) filed this lawsuit for declaratory judgment pursuant to 28 U.S.C. § 2201 on February 10, 1995. Utica is an insurance company incorporated under the laws of New York with its principal place of business in Utica, New York. Utica’s business includes underwriting liability insurance. Defendants in this action are the Stockdale Agency and Stockdale Bancorporation, both Iowa corporations with their principal place of business in Okoboji, Iowa; Jerry Stoekdale, an owner of the two Stoekdale entities and a resident of Iowa; and Ray Bryan, a South Carolina resident who was formerly the president of the Stoekdale Agency and is still an owner of some percentage of the Stoekdale Agency’s stock. Defendants are collectively referred to in this opinion as “Stoekdale,” unless the conduct of a specific defendant is discussed. The complaint seeks declaratory judgment that three errors and omissions insurance policies Utica provided to Stoekdale covering insurance years from 1992 to 1995 may be rescinded and are null, void, and of no effect. Utica alleges that the basis for rescission of each of the policies is false statements made by Stoekdale in the applications for the policies. In addition to rescission of the policies, Utica seeks a declaration that it has no obligations to provide Stoekdale with any indemnity or defense in connection with a claim against Stoekdale made by the Aspen Lodge, reimbursement for all costs incurred in defense of the Aspen Lodge claim, an award of costs in this action, and such other relief as the court deems just and proper. Stoekdale answered the complaint on February 24, 1995, denying Utica’s entitlement to any relief, and including a counterclaim against Utica. Stoekdale moved for leave to file an amended and substituted answer and counterclaim on March 17,1995. Chief Magistrate Judge John A. Jarvey granted Stock-dale’s motion on April 13, 1995. Stoekdale’s amended counterclaim seeks declaratory judgment that Stoekdale has performed all obligations under the policies of insurance issued by Utica, and that Utica is therefore required to maintain the insurance coverage in question, including paying and defending all claims, and providing all automatic and optional extended coverage under the polices. Utica denies Stockdale’s right to relief on its counterclaim. On March 7, 1995, prior to the filing of Stoekdale’s amended answer and counterclaim, Utica moved for partial summary judgment as to the latest renewal of the errors and omissions policy for the 1994-1995 period. Stoekdale resisted the motion for partial summary judgment on March 17, 1995, requested a hearing on the motion, and moved to continue disposition of the motion for partial summary judgment to allow for discovery on a number of issues. Following a status conference on May 22, 1995, this court withdrew the referral of dispositive motions in this matter to the magistrate judge, if there in fact was one, set a briefing schedule on the motion for partial summary judgment, and set the motion down for hearing on July 7,1995. The hearing was subsequently rescheduled for June 30, 1995. At the hearing on Utica’s motion for partial summary judgment, Utica was represented by counsel Walter J. Andrews of Wiley, Rein & Fielding in Washington, D.C., and John D. Mayne of Mayne & Mayne in Sioux City, Iowa. Stoekdale was represented by counsel Michael L. Zenor and Michael J. Houchine of Zenor & Carr Law Office in Spencer, Iowa. The oral arguments in this matter were ably and courteously presented by counsel and did much to clarify, although not to resolve, the dispute between the parties as to the nature of the plaintiffs cause of action and the basis on which this motion must be resolved. This matter is now fully submitted, and the court turns to disposition of Utica’s motion for partial summary judgment by first considering the standards applicable to such a motion. II. STANDARDS FOR SUMMARY JUDGMENT The Eighth Circuit Court of Appeals recognizes “that summary judgment is a drastic remedy and must be exercised with extreme care to prevent taking genuine issues of fact away from [triers of fact].” Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir.1990). On the other hand, the Federal Rules of Civil Procedure have authorized for nearly 60 years “motions for summary judgment upon proper showings of the lack of a genuine, triable issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). Thus, “summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy and inexpensive determination of every action.’ ” Wabun-Inini, 900 F.2d at 1238 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986)); Hartnagel v. Norman, 953 F.2d 394, 396 (8th Cir.1992). The standard for granting summary judgment is well established. Rule 56 of the Federal Rules of Civil Procedure states in pertinent part: Rule 56. Summary Judgment (b) For Defending Party. A party against whom a claim ... is asserted ... may, at any time, move for summary judgment in the party’s favor as to all or any part thereof. (e) Motions and Proceedings Thereon The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(b) & (c) (emphasis added); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Beyerbach v. Sears, 49 F.3d 1324, 1325 (8th Cir.1995); Munz v. Michael, 28 F.3d 795, 798 (8th Cir.1994); Roth v. U.S.S. Great Lakes Fleet, Inc., 25 F.3d 707, 708 (8th Cir.1994); Cole v. Bone, 993 F.2d 1328, 1331 (8th Cir.1993); Woodsmith Publishing Co. v. Meredith Corp., 904 F.2d 1244, 1247 (8th Cir.1990); Wabun-Inini, 900 F.2d at 1238 (citing Fed.R.Civ.P. 56(c)). A court considering a motion for summary judgment must view all the facts in the light most favorable to the nonmoving party, here Stockdale, and give Stockdale the benefit of all reasonable inferences that can be drawn from the facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962)); Munz v. Michael, 28 F.3d 795, 796 (8th Cir.1994); Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir.1994); Johnson v. Group Health Plan, Inc., 994 F.2d 543, 545 (8th Cir.1993); Burk v. Beene, 948 F.2d 489, 492 (8th Cir.1991); Coday v. City of Springfield, 939 F.2d 666, 667 (8th Cir.1991), cert. denied, 502 U.S. 1094, 112 S.Ct. 1170, 117 L.Ed.2d 416 (1992). Procedurally, the moving party, here Utica, bears “the initial responsibility of informing the district court of the basis for [its] motion and identifying those portions of the record which show lack of a genuine issue.” Hartnagel, 953 F.2d at 395 (citing Celotex, 477 U.S. at 323, 106 S.Ct. at 2553); see also Reed v. Woodruff County, Ark., 7 F.3d 808, 810 (8th Cir.1993). Utica is not required by Rule 56 to support its motion with affidavits or other similar materials negating the opponent’s claim. Id. “When a moving party has carried its burden under Rule 56(c), its opponent must do more than simply show there is some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586, Stockdale is therefore required under Rule 56(e) to go beyond the pleadings, and by affidavits, or by the “depositions, answers to interrogatories, and admissions on file,” designate “specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; McLaughlin v. Esselte Pendaflex Corp., 50 F.3d 507, 511 (8th Cir.1995); Beyerbach, 49 F.3d at 1325. Although “direct proof is not required to create a jury question, ... to avoid summary judgment, ‘the facts and circumstances relied upon must attain the dignity of substantial evidence and must not be such as merely to create a suspicion.’ ” Metge v. Baehler, 762 F.2d 621, 625 (8th Cir.1985) (quoting Impro Products, Inc. v. Herrick, 715 F.2d 1267, 1272 (8th Cir.1983), cert. denied, 465 U.S. 1026, 104 S.Ct. 1282, 79 L.Ed.2d 686 (1984)), cert. denied sub nom. Metge v. Bankers Trust Co., 474 U.S. 1057, 1072, 106 S.Ct. 798, 832, 88 L.Ed.2d 774, 804 (1986). The necessary proof that the nonmoving party must produce is not precisely measurable, but the evidence must be “such that a reasonable [trier of fact] could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994). In Anderson, 477 U.S. at 249, 106 S.Ct. at 2510-11, Celotex, 477 U.S. at 323-24, 106 S.Ct. at 2552-53, and Matsushita, 475 U.S. at 586-87, 106 S.Ct. at 1355-56, the Supreme Court established that a summary judgment motion should be interpreted by the trial court to accomplish its purpose of disposing of factually unsupported claims, and the trial judge’s function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. Johnson v. Enron Corp., 906 F.2d 1234, 1237 (8th Cir.1990). The trial court, therefore, must “assess the adequacy of the nonmovants’ response and whether that showing, on admissible evidence, would be sufficient to carry the burden of proof at trial.” Hartnagel, 953 F.2d at 396 (citing Celotex, 477 U.S. at 322, 106 S.Ct. at 2552). If Stockdale, as the non-moving party, fails to make a sufficient showing of an essential element of a claim with respect to which it has the burden of proof, then Utica is “entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323, 106 S.Ct. at 2552; Woodsmith, 904 F.2d at 1247. However, if the court can conclude that a reasonable trier of fact could return a verdict for the nonmovant, then summary judgment should not be granted. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Burk, 948 F.2d at 492; Woodsmith, 904 F.2d at 1247. With these standards in mind, the court turns to consideration of Utica’s motion for partial summary judgment. The court must first determine what facts are undisputed and which are indeed in dispute. III. FINDINGS OF FACT A. Undisputed Facts Stockdale is an insurance agency that sold, as a large share of its business, insurance policies for hotels and motels. Utica has provided errors and omissions liability insurance coverage for the Stockdale Agency since the 1960s. The only insurance policy at issue in this motion for partial summary judgment, however, is the renewal of Stockdale’s errors and omissions coverage with Utica for the policy year of November 3, 1994, to November 3, 1995. In recent years, Stockdale did approximately 50% to 60% of its business, measured by premium value, by writing policies for Global Insurance Company, S.A. (Global), which is a company operating from and possibly incorporated in Uruguay. However, just prior to applying for the renewal policy with Utica at issue here, Stockdale’s business with Global dropped to approximately 1% of its total business, and the renewal application so indicates. At the time of the renewal application, Stockdale had in fact sevei*ed all relationship with Global and was actively attempting to terminate all policies it had written with Global. The change in Stockdale’s business resulted from the issuance by the Commissioner of Insurance of the State of Texas of a Cease and Desist Order on August 4, 1995, which was effective immediately, against “GLOBAL INSURANCE COMPANY S.A. AND MAX WALDEN DBA HOSPITALITY INSURANCE AGENCY INC AND RAY BRYAN DBA THE STOCKDALE AGENCY AND DAVID J MILLER DBA WINMILL INTERNATIONAL INC.” The Cease and Desist Order effectively ordered these respondents to cease and desist doing any insurance business in the state of Texas. The Cease and Desist Order stated the following at its conclusion: IN THE EVENT THIS ORDER IS VIOLATED, THE COMMISSIONER MAY IMPOSE A CIVIL PENALTY OF $25,-000.00 FOR EACH ACT OF VIOLATION, OR DIRECT THE PERSON AGAINST WHOM THE ORDER IS ISSUED TO MAKE COMPLETE RESTITUTION, IN THE FORM AND AMOUNT AND WITHIN THE PERIOD DETERMINED BY THE COMMISSIONER, TO ALL TEXAS RESIDENTS, TEXAS INSURERS, AND ENTITIES OPERATING IN TEXAS DAMAGED BY THE VIOLATION OR FAILURE TO COMPLY, OR IMPOSE BOTH THE PENALTY AND DIRECT RESTITUTION. The Cease and Desist Order indicates that it was issued upon a “verified application for an ex parte Emergency Cease and Desist Order” by the Texas Department of Insurance, and states that the Department alleged that the named respondents “have been committing unfair or deceptive acts or practices by selling and/or issuing fraudulent, false, or suspect insurance and/or engaging in the business of insurance in an unauthorized manner in the State of Texas” and that, “unless Respondents are immediately ordered to cease and desist from selling and/or issuing fraudulent, false, or suspect insurance and/or engaging in the business of insurance in an unauthorized manner in the State of Texas ..., Respondents will continue to commit such unfair or deceptive acts or practices and/or engage in the business of insurance in Texas in an unauthorized manner.” The Commissioner found that the respondents were unauthorized persons engaging in the business of insurance in violation of Texas law and that such conduct “constitutes an imminent peril to the public welfare” pursuant to Texas law “and should immediately be stopped and enjoined.” The parties do not dispute that Stockdale immediately complied with the Texas Cease and Desist Order by terminating any business in Texas, reevaluating its business relationship with Global, taking steps to cancel all Global polices, and ceasing to write Global policies. Nor do they dispute that the Texas Department of Insurance took no further action against Stockdale in light of Stock-dale’s immediate compliance with the Cease and Desist Order. On October 3, 1994, Stockdale applied for renewal of its errors and omissions policy with Utica to become effective November 3, 1994. The application was signed by Stock-dale Agency President Ray Bryan. Among the questions on the renewal application were several concerning the applicant and its business since the previous year’s application, including the following: 15. Have there been any fines or disciplinary action, including license suspension, taken against you, your employees, or your associates by any insurance regulatory agency? The renewal application contains no further definition or explanation of the kinds of disciplinary action contemplated, apart from fines and license suspensions. In response to this question, Bryan marked the response box to indicate Stockdale’s answer was “no.” In a box above the signature line was a warning as follows: Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or submits a claim containing any false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime. In a paragraph also just above the signature fine, the renewal application bears the following declaration: I/WE HEREBY DECLARE that the above statements and particulars are true to the best of our knowledge, and that I/we have not suppressed or misstated any material facts and I/we agree that this application shall be the basis of the contract with the Utica Mutual Insurance Company, New Hartford, NY, and deemed a part thereof. It is also acknowledged that the applicant is obligated to report any changes that occur after the date of signature, but prior to the effective date of coverage. Utica renewed Stockdale’s errors and omissions coverage for the 1994-1995 year. However, upon learning of the Cease and Desist Order against Stockdale by the Insurance Commissioner of the State of Texas, Utica filed the complaint in this action. Uti-ca’s complaint asserts in part that in answering “no” to the question concerning disciplinary action, Stockdale filed an application for insurance containing an intentional misrepresentation. That misrepresentation, Utica alleges, entitles Utica to rescission of the 1994-1995 policy. Utica now asserts that it is entitled to summary judgment as a matter of law on the ground that Stockdale’s statement that it had been subject to no disciplinary action was a material misrepresentation in response to an unambiguous question in the application for insurance, and therefore Utica is entitled to summary, declaratory judgment that it may rescind the 1994-1995 errors and omissions policy. B. Disputed Facts Contrary to Utica’s assertion that it is entitled to declaratory judgment as a matter of law that it may rescind the 1994-1995 policy, Stockdale alleges a great many issues of fact that it asserts are material to the disposition of Utica’s claim for relief as to the 1994-1995 policy, thus making partial summary judgment as to that policy inappropriate. Stockdale asserts that there is at least a genuine issue of material fact as to whether its statement that it had not been subject to any disciplinary action was false. Stockdale alleges that the term “disciplinary action” is ambiguous, and that a Cease and Desist Order with which it complied, and which resulted in no further action by the issuing authority because of that compliance, was not a “disciplinary action.” Stockdale points to the deposition testimony of Utica’s underwriter who renewed Stockdale’s policy as supporting its assertions, because that underwriter was unable to define the meaning of “disciplinary action” with any precision. Stockdale alleges that even if its response on the application for renewal of insurance was indeed false, there is a genuine issue of material fact as to whether Stockdale or Bryan knew it was false or recklessly disregarded its falsity. Bryan asserted in his deposition testimony that he did not believe, and does not now believe, that the Cease and Desist Order constituted “disciplinary action,” and that no disciplinary action was ever taken against Stockdale, because Stock-dale complied with the order. Because he did not believe the statement was untrue, Bryan asserts further that he had no intention of misleading Utica in making it. Stockdale devotes a substantial portion of its resistance to attempting to establish that even if the statement was false, it was not material to Utica’s renewal of the policy. Stockdale’s evidence in support of this contention focuses on what it asserts is Utica’s leniency in renewing existing policies. Stockdale has presented evidence that of the 10,000 to 11,000 renewal applications received by Utica each year, only a few dozen are denied. Further, Stockdale points to deposition testimony of Utica underwriters that they could not recall having denied a renewal on the ground of “disciplinary action”; rather, the most frequent ground for non-renewal was claims during the previous year. Finally, Stoekdale points to the deposition testimony of the underwriter who renewed Stock-dale’s policy to the effect that she did not know what action she would have taken had Stoekdale answered “yes” to the “disciplinary action” question, and that she would not automatically have denied the renewal application. This underwriter testified that she might have requested more information before making a renewal decision. She testified that she does not know if she would have denied the renewal even if she had had the information about the Texas Cease and Desist Order she now has. Stoekdale also argues that there is another genuine issue as to materiality, and presumably as to whether the representation in question, if false and material, caused Utica any damage, because under the terms of its existing policies, Stoekdale is entitled to purchase a “tail,” which would have provided coverage identical to that provided by the renewal policy, covering the entire period for which any Global policies sold by Stoekdale remained in force. Stoekdale also alleges that the answer to the “disciplinary action” question was not relied on by Utica in making its renewal decision. Stoekdale again points to evidence that Utica’s renewal procedures are extremely lenient. Stoekdale points to the after-the-fact assertion by Utica that they did not know that they were writing a policy for an agent selling “surplus lines” insurance from a poorly-rated company, but compares this statement to notes by a Utica underwriter on Stockdale’s 1992 renewal application that state “Requested financial for Global INS— only one listed in Best is not licensed in IA and is only XS [excess] and surplus?” Thus, Stoekdale asserts, Utica had questions about the financial stability of and lines of insurance sold by Global, and even some question about what “Global” company was involved, in prior years, but still renewed Stockdale’s coverage when it was doing 50% to 60% of its business with that company. Stoekdale asserts that, when asked by Utica, it provided all the financial information about Global it had. Stoekdale points out that this information would have shown that Utica was in fact looking at the “wrong” Global insurance company, not the “off-shore” company with which Stoekdale was doing business. Stoekdale asserts that Utica never questioned the identity of the company, and now claims never to have known about information obvious from materials supplied to Utica by Stoekdale, including the facts that Global was an “offshore,” “surplus lines” carrier with no “Best rating.” The court will consider in the pertinent place whether any of the disputes of fact pressed by Stoekdale creates a genuine issue of material fact. See Fed.R.Civ.P. 56(c); Anderson, 477 U.S. at 248, 106 S.Ct. at 2510; Matsushita Elec. Indus. Co., 475 U.S. at 586-87, 106 S.Ct. at 1355-56; Hartnagel, 953 F.2d at 396. IV. LEGAL ANALYSIS Before the court may determine whether Utica is entitled to partial summary judgment on its cause of action as to the 1994-1995 insurance policy, the court must first determine what that cause of action is. Once the court has determined what Utica’s cause of action is, the court may then determine what the elements of such a cause of action are, what remedy or remedies are available upon proof of the elements of that cause of action, whether there is a genuine issue of material fact as to the elements of the cause of action, and what relief, if any, Utica is entitled to at the current stage of the proceedings. A. The Nature Of Utica’s Cause Of Action Utica’s complaint is clear, and the parties do not dispute, that Utica has filed an action seeking declaratory judgment pursuant to 28 U.S.C. § 2201. Utica’s complaint describes its “cause of action” as one for “declaratory judgment for rescission of the policy.” The complaint seeks as relief, inter alia, “declaratory judgment that the polices issued by Utica covering the 1992-1995 period are hereby rescinded and are null and void and of no effect.” The basis for rescission is alleged misrepresentations in applications for the three insurance policies in question. What is not clear, and the point on which the parties disagree, is what Utica must prove to obtain declaratory judgment in its favor. Throughout its brief and oral arguments, Stockdale has argued that Utica’s complaint alleges fraudulent misrepresentation, and that, because there are genuine issues of material fact on the elements of such a claim, as defined under Iowa law, Utica is not entitled to the rescission of the 1994-1995 policy. Thus, Stockdale characterizes Utica’s cause of action as one alleging fraudulent misrepresentation, and characterizes rescission as the relief requested should the court find fraudulent misrepresentation under Iowa common law. However, at oral arguments, counsel for Utica, in answer to a question from the court, stated that Utica’s action is not a claim of fraudulent misrepresentation, but “a claim for rescission.” Utica asserts different standards apply to a showing of fraudulent misrepresentation as grounds for rescission, particularly when the misrepresentation is in an application for insurance, from what is required to establish a right to damages for fraud at common law. Although there is some truth to the arguments of both parties, neither has framed the question presented to the court under Iowa law entirely accurately. Because allegations of fraudulent misrepresentation are at the very heart of this matter, the court begins by examining the actions to which fraudulent misrepresentation in the inducement to contract may give rise under Iowa law. 1. Actions founded on fraudulent misrepresentation Careful examination of Iowa eases demonstrates that fraudulent misrepresentation in the inducement to contract gives rise to at least three distinct actions, two of which are “at law” and one of which is “in equity.” See, e.g., In re Estate of Lorimor, 216 N.W.2d 349, 353 (Iowa 1974) (fraud may “constitute[ ] an element of a cause of action or of an affirmative defense or is a foundation of a right sought to be established”). First, and by far the most common action based on fraudulent misrepresentation, is a cause of action “at law” for money damages caused to the plaintiff by the fraudulent inducement to contract. See, e.g., Nassen v. National States Ins. Co., 494 N.W.2d 231, 236-37 (Iowa 1992) (action at law for damages by plaintiff insured alleging, inter alia, fraudulent misrepresentation by insurer of the insured’s prior health condition used by the insurer as grounds for rescinding coverage), cert. denied, — U.S. -, 113 S.Ct. 1846, 123 L.Ed.2d 470 (1993); Eldred v. McGladrey, Hendrickson & Pullen, 468 N.W.2d 218, 219-20 (Iowa 1991) (suit for damages by investors against accountancy firm for allegedly misrepresenting financial condition of investment firm, thus allegedly inducing investors to invest); Bates v. Allied Mutual Ins. Co., 467 N.W.2d 255, 260 (Iowa 1991) (action for damages for fraudulent misrepresentation leading to settlement agreement that was later rescinded); Air Host Cedar Rapids v. Cedar Rapids Airport Comm’n, 464 N.W.2d 450, 453-54 (Iowa 1990) (suit for damages for fraudulent misrepresentations in negotiations that ultimately failed to result in a contract between the parties); Sinnard v. Roach, 414 N.W.2d 100, 104-07 (Iowa 1987) (action for damages for fraudulent misrepresentation leading to entry into mortgage contracts); Robinson v. Perpetual Servs. Corp., 412 N.W.2d 562, 567-68 (Iowa 1987) (action at law for damages for fraudulent misrepresentation leading to franchise agreement coupled with action in equity for rescission of franchise agreement); Cornell v. Wunschel, 408 N.W.2d 369, 373-80 (Iowa 1987) (action for damages for fraudulent misrepresentation in negotiations leading to contract to purchase motel); Kristerin Dev. Co. v. Granson Investment, 394 N.W.2d 325, 332 (Iowa 1986) (suit for damages for fraudulent misrepresentation inducing plaintiff to enter into a contract for sale of an apartment budding); Clinton Land Co. v. M/S Assocs., Inc., 340 N.W.2d 232, 235-36 (Iowa 1983) (suit for damages based on fraudulent misrepresentations inducing plaintiff to contract); Lockard v. Carson, 287 N.W.2d 871, 873-74 (Iowa 1980) (suit for damages for fraudulently misrepresenting water purity on property in contract for purchase of property); Lungren v. Lamoni Provision Co., 248 Iowa 887, 82 N.W.2d 749, 754-55 (1957) (“A party who has entered into a contract which it is claimed was fraudulent may institute an action at law to recover the consideration paid by giving notice of his decision to rescind the contract and restore the claimed offending party to his or its original position,” and entertaining such an action); Citizens Sav. Bank v. Wild, 512 N.W.2d 799, 801-802 (Iowa Ct.App.1993) (counterclaim for damages based on fraudulent misrepresentation in plaintiffs foreclosure action); Irons v. Community State Bank, 461 N.W.2d 849, 851, 853-58 (Iowa Ct.App.1990) (suit at law for damages for fraudulent misrepresentation inducing plaintiff to enter into financial contracts with bank, coupled with equity action to the court seeking rescission or cancellation of note and security documents); Hagan v. Liberty Loan Corp., 423 N.W.2d 886, 888 (Iowa Ct.App.1988) (action for damages for fraudulent misrepresentation based on alteration of a quitclaim deed inducing contract for purchase of land); see also Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1237 (8th Cir.1987) (applying Iowa law to action for damages based on fraudulent misrepresentation), cert. denied, 484 U.S. 1026, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988). Second, fraudulent misrepresentation in the inducement to contract may be raised as a defense to a breach of contract claim. See, e.g., Higgins v. Blue Cross of Western Iowa and South Dakota, 319 N.W.2d 232, 236 (Iowa 1982) (insurer raised fraudulent misrepresentation by plaintiff of her health condition on application form as defense in breach of contract action); In re Estate of Lorimor, 216 N.W.2d at 353 (fraud may “eon-stitute[ ] ... an affirmative defense”). Third, fraudulent misrepresentation may be pleaded as grounds for rescission of a contract in an action in equity. Sinnard, 414 N.W.2d at 107 (the court sat in equity simultaneously with the law action, and sitting in equity, cancelled the mortgage and assignment of equity in question on the basis of fraudulent misrepresentations, but the Supreme Court set aside that cancellation for lack of evidence of fraud); Robinson v. Perpetual Servs. Corp., 412 N.W.2d 562, 567-68 (Iowa 1987) (action at law for damages for fraudulent misrepresentation leading to franchise agreement coupled with action at equity for rescission of franchise agreement); Midwest Management Corp. v. Stephens, 291 N.W.2d 896, 906 (Iowa 1980) (fraudulent misrepresentation asserted as ground for “common-law right” to void or rescind contract, but claim was denied for lack of an allegation of fraud); Wilden Clinic, Inc. v. City of Des Moines, 229 N.W.2d 286, 291-93 (Iowa 1975) (distinguishing between action in equity for rescission of contract based on fraudulent misrepresentation and action at law for damages for fraudulent misrepresentation, and entertaining the former); In re Estate of Lorimor, 216 N.W.2d 349, 353 (Iowa 1974) (making the same distinction, but finding no fraud pleaded); First Nat’l Bank in Lenox v. Brown, 181 N.W.2d 178, 181-184 (Iowa 1970) (making the same distinction in an action in equity to void or rescind a contract); Detrick v. Aetna Casualty and Surety Co., 158 N.W.2d 99, 105-106 (Iowa 1968) (distinguishing between elements and proof of fraud in equity and in law and the remedies flowing from each kind of fraud action, but finding no fraud established by either standard requiring any kind of relief); Test v. Heaberlin, 254 Iowa 521, 118 N.W.2d 73, 75 (1962) (action in equity to rescind contract for fraud); Rosenberg v. Mississippi Valley Construction Co., 252 Iowa 483, 106 N.W.2d 78, 79-80 (1961) (rescission of a contract may be granted in equity on the proof of fraud in the inducement); New York Life Ins. Co. v. Rotman, 231 Iowa 1249, 3 N.W.2d 603 (1942) (action in equity by insurer to cancel or rescind portions of insurance policies founded on alleged fraudulent misrepresentation of insured’s health condition in application for insurance); Irons v. Community State Bank, 461 N.W.2d 849, 851, 853-58 (Iowa Ct.App.1990) (suit at law for damages for fraudulent misrepresentation inducing plaintiff to enter into financing contracts with bank, coupled with equity action to the court seeking rescission or cancellation of note and security documents); Smith v. Peterson, 282 N.W.2d 761, 764-67 (Iowa Ct.App.1979) (distinguishing between actions at law for fraudulent misrepresentation and action in equity to rescind contract for fraud, and entertaining the latter). 2. Utica’s cause of action It is the third kind of action based on fraudulent misrepresentation identified above that is presented here. Utica’s complaint demonstrates that it seeks rescission, in the first instance, rather than damages, on the grounds that Stockdale made fraudulent misrepresentations in its applications for insurance. See, e.g., Robinson, 412 N.W.2d at 567-68; Wilden Clinic, Inc., 229 N.W.2d at 291-93. In such an action, it is apparent that rescission is the remedy sought by the plaintiff as the result of the defendant’s fraudulent misrepresentation inducing plaintiff to contract, just as damages is the remedy sought in an action at law. See, e.g., Montgomery Properties Corp. v. Economy Forms Corp., 305 N.W.2d 470, 474 (Iowa 1981) (finding court was not required to determine whether party’s proper remedy for fraud inducing plaintiff to enter into contract was rescission, because party wanted contract reformed, which the court found was impermissible); Detrick, 158 N.W.2d at 106 (remedies for fraud in equity are “frequently more beneficial” and may go beyond the rules of law); Maytag Company v. Alward, 253 Iowa 455, 112 N.W.2d 654, 660 (1962) (rescission in equity is a form of relief or remedy which may be granted, inter alia, for fraud in the inducement to contract). This conclusion as to the nature of Utica’s cause of action will be made clearer in the following section distinguishing between actions based on fraudulent misrepresentation brought at law or in equity. B. Fraudulent Misrepresentation At Law And In Equity 1. Elements of fraudulent misrepresentation The elements a plaintiff must prove to prevail on a claim of fraudulent misrepresentation in a law action in Iowa are the following; “(1) a material (2) false (3) representation coupled with (4) scienter and (5) intent to deceive, which the other party (6) relies upon with (7) resulting damages to the relying party.” Bates, 467 N.W.2d at 260 (citing Sinnard v. Roach, 414 N.W.2d 100, 105 (Iowa 1987), which in turn cites Hall v. Wright, 261 Iowa 758, 766, 156 N.W.2d 661, 666 (Iowa 1968), and also citing Beeck v. Kapalis, 302 N.W.2d 90, 94 (Iowa 1981)); Air Host Cedar Rapids, 464 N.W.2d at 453 (telescoping the first three elements and stating the “intent” element differently, hence: “(1) a material misrepresentation; (2) made knowingly; (3) with intent to induce the plaintiff to act or refrain from acting; (4) upon which the plaintiff justifiably relies; and (5) damages,” citing Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1237 (8th Cir.1987), cert. denied, 484 U.S. 1026, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988)); Sinnard, 414 N.W.2d at 105; Robinson, 412 N.W.2d at 565 (listing the elements in slightly different order as “(1) representation; (2) falsity; (3) materiality; (4) scienter; (5) intent to deceive; (6) reliance; and (7) resulting injury and damage,” citing Cornell); Cornell, 408 N.W.2d at 374 (listing same elements, citing B & B Asphalt Co. v. T.S. McShane Co., 242 N.W.2d 279, 284 (Iowa 1976)); Kristerin Dev. Co., 394 N.W.2d at 332 (listing the elements as in Air Host Cedar Rapids, citing Beeck v. Aquaslide ‘N’ Dive Corp., 350 N.W.2d 149, 155 (Iowa 1984)); Beeck, 350 N.W.2d at 155 (listing elements as in Kristerin, and quoting a prior decision in a related case, Beeck v. Kapalis, 302 N.W.2d 90, 94 (Iowa 1981)); Wild, 512 N.W.2d at 802 (citing Irons); see also Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1237 (8th Cir.1987) (applying Iowa law and stating the factors as quoted in Air Host Cedar Rapids), cert. denied, 484 U.S. 1026, 108 S.Ct. 751, 98 L.Ed.2d 763 (1988). However, Iowa courts have repeatedly stated that the elements of fraudulent misrepresentation the plaintiff must prove in equity to obtain relief are somewhat different from those that must be proved in order to recover damages at law. As compared to the seven elements that must be proved at law, equity may grant relief absent a showing of scienter or pecuniary damages. Wilden Clinic, Inc., 229 N.W.2d at 292; In re Estate of Lorimor, 216 N.W.2d at 353 (“[Pjroof essential to establish fraud in law and in equity is distinguishable in that scienter is not an essential element to constitute fraud in equity.”); First Nat’l Bank in Lenox, 181 N.W.2d at 181; Peterson, 282 N.W.2d at 766 (citing Wilden Clinic, Inc.). Thus, the court in Wilden Clinic, Inc., defined the elements of fraudulent misrepresentation in equity as follows: “(1) a representation, (2) falsity, (3) materiality, (4) intent to deceive, (5) reliance.” Wilden Clinic, Inc., 229 N.W.2d at 292; but see Rosenberg, 106 N.W.2d at 80 (in an equity action, the court stated, “Where there is clear, satisfactory, and convincing evidence that the representations made are false, and known by the person making them to be false, and made with the intent to deceive the purchaser, a right to rescind the contract of purchase is sustained.”). This court turns, then, to further explication of each of the elements common to proof of fraudulent misrepresentation in Iowa actions in both law and equity. a. Material, false representation The Iowa Supreme Court clarified the meaning of the first three elements of fraud in either equity or law proceedings in Sinnard, 414 N.W.2d at 105. The court observed, first, that “[t]he three elements ... are a (1) material (2) representation that is (3) false,” and that they are “frequently treated as a single element and referred to as fraudulent misrepresentation.” Sinnard, 414 N.W.2d at 105; Cf. Air Host Cedar Rapids, 464 N.W.2d at 453 (telescoping the first three elements as “a material misrepresentation”); Kristerin Dev. Co., 394 N.W.2d at 332; Beeck, 350 N.W.2d at 155 (same); Kapalis, 302 N.W.2d at 94; see also Ryko Mfg. Co., 823 F.2d at 1237 (same). The court next noted that “[a] representation need not be an affirmative misstatement; it can arise as easily from a failure to disclose material facts.” Id. (citing Cornell, 408 N.W.2d at 374). The court stated that to be actionable, the misrepresentation must “ ‘relate to a material matter known to the party ... which it is his legal duty to communicate to the other contracting party whether the duty arises from a relation of trust, from confidence, from inequality of condition and knowledge, or other attendant circumstances.’ ” Id. (quoting Wilden Clinic, Inc., 229 N.W.2d at 293, and also citing Cornell, 408 N.W.2d at 374). Similarly, in Cornell, the Iowa Supreme Court considered defendant’s proffered paraphrase of several of the elements of the fraud or fraudulent misrepresentation claim as an “affirmative misstatement of fact by defendant[ ] calculated to induce [the plaintiff] to enter into [a contract or agreement].” Cornell, 408 N.W.2d at 374. However, the court found that either “[concealment of or failure to disclose a material fact can constitute fraud in Iowa.... To be actionable, the concealment must be by a party under a duty to communicate the concealed fact.” Id. (citations omitted). In both law and equity, a false representation must be “material” to be actionable. Wilden Clinic, Inc., 229 N.W.2d at 292 (“ ‘To recover in an equity action on grounds of fraud one fundamental rule is that the alleged fraud must be material,’ ” quoting Rosenberg, 252 Iowa at 486, 106 N.W.2d at 80). A fact is material if it substantially affects the interest of the party alleged to have been defrauded. Id. Thus, materiality has been found where a fact influences a person to enter into a transaction, where it deceives that person or induces that person to act, or where the transaction would not have occurred without it. Id. at 286; First National Bank of Lenox, 181 N.W.2d at 182; Rosenberg, 252 Iowa at 486, 106 N.W.2d at 80; Peterson, 282 N.W.2d at 765 (citing Wilden Clinic, Inc.); see also O’Rieley v. Endicott-Johnson Corp., 297 F.2d 1, 5 (8th Cir.1961) (applying Iowa law, the court, in comments relevant to both the “reliance” and “materiality” elements, noted that misrepresentations must be such that “ ‘but for them the contract or deal would not have been made,’ ” quoting Rorem v. Pederson, 199 Iowa 304, 201 N.W. 784, 786 (1925)). b. Intent The court finds the “intent” element of fraudulent misrepresentation formulated in terms of “intent to deceive” troubling when, in an equity action, there is no requirement to prove scienter of the person making the representation. Wilden Clinic, Inc., 229 N.W.2d at 292; In re Estate of Lorimor, 216 N.W.2d at 353 (“[P]roof essential to establish fraud in law and in equity is distinguishable in that scienter is not an essential element to constitute fraud in equity.”); First Nat’l Bank in Lenox, 181 N.W.2d at 181; Peterson, 282 N.W.2d at 766 (citing Wilden Clinic, Inc.). Logically, one cannot intend to deceive another by making a misrepresentation if one has no knowledge or reckless disregard of falsity of the representation. Indeed, the Iowa Court of Appeals approved an instruction on “intent to deceive” that demonstrates the interrelationship of scienter as to falsity and intent to deceive. Hagan, 423 N.W.2d at 888 (approving an instruction on the “intent to deceive” element which stated that “[a] result is intended if the maker ... acts in reckless disregard of whether his representation is true or false,” and “[a] false statement ... when recklessly asserted, is evidence of intent to deceive.”), and compare Cornell, 408 N.W.2d at 375 (defining “scien-ter” as follows: “[s]cienter requires a showing that alleged false representations were made with knowledge that they were false.”). Yet, the “intent” element is often stated as “intent to deceive” even in equity actions. See, e.g., Wilden Clinic, Inc., 229 N.W.2d at 292. However, although the intent element is most often stated in terms of intent to deceive, it is in several cases stated as an “intent to induce the plaintiff to act or refrain from acting.” Air Host Cedar Rapids, 464 N.W.2d at 453 (this formulation of intent element); Kristerin, 394 N.W.2d at 332 (same); Beeck, 350 N.W.2d at 155 (same); Kapalis, 302 N.W.2d at 94; see also Ryko Mfg. Co., 823 F.2d at 1237 (same). In this court’s opinion, such a formulation of the “intent” element is proper in an equity action, because knowledge of falsity is not at issue, but whether misrepresentations induced the complaining party to contract is at issue. Consequently, the court finds that the proper elements the complaining party must prove in order to establish a right to equitable relief for fraudulent misrepresentation are as follows: (1) a representation, (2) falsity, (3) materiality, (4) intent to induce the plaintiff to act or refrain from acting, (5) reliance. Cf. Wilden Clinic, Inc., 229 N.W.2d at 292. The court therefore turns to the last of these elements, reliance. c. Reliance In Eldred v. McGladrey, Hendrickson & Pullen, 468 N.W.2d 218 (Iowa 1991), the Iowa Supreme Court considered in some detail the “reliance” element of a tortious misrepresentation claim. Plaintiffs asserted fraudulent, negligent, or innocent misrepresentation by an accounting firm concerning the financial condition of an investment company. Eldred, 468 N.W.2d at 219. The court, citing the Restatement (Second) of Torts §§ 537, 552, and 552C (1977), found that reliance is “[a]n essential element” of a plaintiffs misrepresentation claim. Id. In Eldred, the plaintiffs conceded that “they never actually saw or read” the materials containing the alleged misrepresentation, but that the state had, and the state had relied upon them, and that the plaintiffs had in turn relied on the state. Id. The court observed that “privity is not required, [but] all three of plaintiffs’ misrepresentation theories require that the plaintiffs justifiably rely to their detriment on some misrepresentation.” Id. at 219-220 (citing Restatement (Second) of Torts §§ 537, 552, 552C, and Pahre v. Auditor of State, 422 N.W.2d 178, 180-81 (Iowa 1988)). The court pointed out that this was “not a ease in which reliance may be inferred, as the plaintiffs concede they never saw [the materials containing the alleged misrepresentations] nor were any misrepresentations concerning its contents ever made to them.” Id. at 220. Similarly, in a decision of the Eighth Circuit Court of Appeals applying Iowa law, the court found that where there was no evidence that the complaining party relied on the alleged misstatements of the other party, the complaining party was not entitled to rescission on the ground of misrepresentations. Rochholz v. Farrar, 547 F.2d 63, 66 (8th Cir.1976); see also O’Rieley v. Endicott-Johnson Corp., 297 F.2d 1, 5 (8th Cir.1961) (applying Iowa law, the court noted that “It is not necessary that the false representations be the sole inducement; it is sufficient if it is shown that ‘they were relied upon to some extent, and but for them the contract or deal would not have been made,’” quoting Rorem v. Pederson, 199 Iowa 304, 201 N.W. 784, 786 (1925)). The sufficiency of evidence on the reliance element troubled the Iowa Supreme Court in Air Host Cedar Rapids, 464 N.W.2d at 454. The court noted that the plaintiff was deceived only in negotiations that did not lead to a binding contract, and there was little indication of what the plaintiff would have done had misrepresentations not been made. Air Host Cedar Rapids, 464 N.W.2d at 454. However, the court found that there was sufficient evidence that the plaintiff had relied on the misrepresentations to the extent that it had been deterred from pursuing the contract, rather than relying on them to enter into a contract, and therefore the district court properly submitted the claim to the jury. Id. Thus, Air Host Cedar Rapids can be read as holding that the reliance element is shown where there is evidence that the plaintiff relied on the misrepresentation in making its ultimate determination of whether or not to enter into a contract. This two-sided quality of the reliance factor seems to this court to mirror the two-sided quality of the “intent” factor, which is that the defendant act “with intent to induce the plaintiff to act or refrain from acting.” See, e.g., Air Host Cedar Rapids, 464 N.W.2d at 453 (this formulation of intent element; emphasis added); Kristerin, 394 N.W.2d at 332 (same); Beech, 350 N.W.2d at 155 (same); Kapalis, 302 N.W.2d at 94; see also Ryko Mfg. Co., 823 F.2d at 1237 (same). As a final observation concerning this element, Iowa courts have stated that the reliance must be “justifiable.” Kapalis, 302 N.W.2d at 94; Irons, 461 N.W.2d at 853 (citing Kapalis). Even in an arms-length transaction, a party may rely on an opposing party to disclose matters of which the opposing party has superior knowledge resulting from inequality of condition or knowledge between the parties. Peterson, 282 N.W.2d at 767 (citing Wilden Clinic, Inc., 229 N.W.2d at 293; First Nat’l Bank in Lenox, 181 N.W.2d at 184). 2. Burden of proof In an action at law, the plaintiff has the burden to establish fraudulent misrepresentation by clear, satisfactory, and convincing evidence. Bates, 467 N.W.2d at 260; Robinson, 412 N.W.2d at 565; Cornell, 408 N.W.2d at 374; Lockard v. Carson, 287 N.W.2d 871, 874 (Iowa 1980); Wild, 512 N.W.2d at 802; Irons, 461 N.W.2d at 854; see also Higgins, 319 N.W.2d at 237 (same burden applies to proof of affirmative defense of fraudulent misrepresentation). As the Iowa Supreme Court has observed, Stated otherwise, plaintiffs must establish their ease by a preponderance of the evidence that is clear, satisfactory, and convincing. B & B Asphalt Co. v. T.S. McShane Co., 242 N.W.2d 279, 284 (Iowa 1976). The purpose of that standard is to give deference to the presumption of fair dealing. Mills [County State Bank v. Fisher], 282 N.W.2d [712] at 715 [(Iowa 1979) ]; Hall v. Wright, 261 Iowa 758, 767, 156 N.W.2d 661, 667 (Iowa 1968). Lockard, 287 N.W.2d at 874 (specifically rejecting a mere “preponderance” standard); see also Bates, 467 N.W.2d at 260 (stating the standard as “preponderance of clear, satisfactory and convincing evidence”); Robinson, 412 N.W.2d at 565 (same); Irons, 461 N.W.2d at 854 (same). There is some debate raised by the applicable cases, however, as to whether or not fraud in equity must be proved to this same standard. In Wilden Clinic, Inc., for example, the court attempted to clarify the differences between proof of fraud at law and in equity: “Fraud cannot be presumed [in law actions] but must be affirmatively proved by the one who relies on it either for the purpose of defense or attack. It must be established by a preponderance of the evidence by proof that is clear, satisfactory and convincing — such as to overcome the presumption in favor of fair dealing.” Where fraud is alleged in cases of equity, however, the rules are not so strict. “Fraud may there be constructed from circumstances, whereas the law must find it as a fact.[”] * * * “Fraud may arise from facts and circumstances, and an intent to defraud may properly be inferred from circumstances, words, and actions shown in evidence.” Wilden Clinic, Inc., 229 N.W.2d at 292 (internal citations omitted). The decisions of Iowa courts are consistent, however, that in equity, fraud may be shown from surrounding circumstances. Wilden Clinic, Inc., 229 N.W.2d at 292; First Nat’l Bank in Lenox, 181 N.W.2d at 181; Peterson, 282 N.W.2d at 766 (citing Wilden Clinic, Inc.). In Peterson, the court of appeals found that both inducement and reliance could be inferred from evidence, including statements of defendants, that the defendants, not highly educated people and inexperienced in business matters, entered into the contract based on the information provided by the plaintiff sellers that misrepresented the status of condemnation of and loss of access to the property being sold. Peterson, 282 N.W.2d at 766. 3. Remedies for fraudulent misrepresentation a. Remedies at law Ordinarily, a successful plaintiff in a fraud action at law may only recover the benefit-of-the-bargain plus consequential damages, but may, under certain circumstances, obtain instead out-of-pocket expenses. Bates, 467 N.W.2d at 260; Robinson, 412 N.W.2d at 567; Cornell, 408 N.W.2d at 380. The Iowa Supreme Court has stated that [t]he purpose of this rule is to put the defrauded party in the same financial position they would have been in had the fraudulent misrepresentations been true. [Cornell, 408 N.W.2d at 380]. However, if application of the benefit-of-the-bargain rule fails to make the plaintiff whole, out-of-pocket expenses become the measure of damages. Id.; Robinson v. Perpetual Serv. Corp., 412 N.W.2d 562, 567 (Iowa 1987).... Under the out-of-pocket rule, a defrauded party is to be compensated for the amount the party lost through dealing with the defrauding party when it is apparent that no dealing would have occurred if the facts had been disclosed. Cornell, 408 N.W.2d at 381. This rule simply does not apply to the present case. Plaintiff was made whole by the actions of the defendants shortly after the alleged fraud. Bates, 467 N.W.2d at 260; see also Cornell, 408 N.W.2d at 380 (also considering the appropriate application of either the “benefit-of-the-bargain plus consequential damages” rule and the “out-of-pocket” rule). The reason the plaintiff had already been made whole in Bates, however, is that the settlement agreement based on the asserted fraudulent statements had already been rescinded, and another settlement agreement had been entered into by the parties. Id. The court in Bates contrasted this result with the situation in which a party complains in equity of fraudulent misrepresentations that had induced the party to enter into a contract. Id. (citing Test v. Heaberlin, 254 Iowa 521, 118 N.W.2d 73 (1962)). b. Equitable remedies The Iowa Supreme Court has recognized that, in an equity ease, “[a]s a general rule, fraudulent misrepresentations leading to the creation of a contract give rise to a right of rescission.” Robinson, 412 N.W.2d at 568 (citing Midwest Management Corp. v. Stephens, 291 N.W.2d 896, 906 (Iowa 1980); Maytag Co. v. Alward, 253 Iowa 455, 464-66, 112 N.W.2d 654, 659-60 (1962)); First Nat’l Bank in Lenox, 181 N.W.2d at 182 (“It is a well settled principle of equity that misrepresentations amounting to fraud in the inducement of a contract, whether innocent or not, give rise to a right of avoidance on the part of the defrauded party.”)- That is not the extent of the remedies available in equity, however: Parties seeking rescission are entitled to restitution for expenses incurred under the contract, but as a result of the election to rescind ordinarily cannot also recover contract damages. Maytag, 253 Iowa at 464-66, 112 N.W.2d at 659-60; Miller-Piehl Equip. Co. v. Gibson Comm’n Co., 244 Iowa 103, 110, 56 N.W.2d 25, 29 (1952). Robinson, 412 N.W.2d at 568. In an earlier decision, the Iowa Supreme Court attempted to explain the differences between equity actions and law actions in terms of the remedies available: “Unfortunately in some of the cases for rescission in equity language is used from which it might be inferred that precisely the same principles govern in suits in equity that are applied to determine the right of the party to sue at law.... [When] a court of equity grants rescission or cancellation, its decree wipes out the instrument, and renders it as though it does not exist. Moreover, while a court of equity entertains a suit for the express purpose of procuring a contract of conveyance to be cancelled and renders a decree conferring in terms that exact relief, a court of law entertains an action for the recovery of possession of chattels, or, under some circumstances, for the recovery of land, or for the recovery of damages, and although nothing is said concerning it either in the pleadings or in the judgment, a contract or conveyance, as the case may be, is virtually rescinded; the recovery is based on the facts of such rescission and could not have been granted unless the rescission had taken place.” Binkholder v. Carpenter, 260 Iowa 1297, 1302, 152 N.W.2d 593, 596 (1967) (quoting 12 C.J.S. Cancellation of Instruments § 5, p. 945.). These decisions make clear that rescission is essentially an equitable remedy for fraudulent misrepresentation, but that it must be obtained by making a claim for rescission in equity and proving the fraud, including proof of the five elements identified above by the standard stated above. This is the nature of Utica’s “claim for rescission” or “cause of action for rescission” here. C. Utica’s Claim For Rescission 1. Two meanings of rescission The Iowa Supreme Court has identified two meanings of “rescission” under contract law: ‘Rescission’, as used in connection with the cancellation or termination of contracts, has two connotations. A contract may be rescinded by the acts of one of the parties and does not require court action except such action at law as may be necessary to restore the status quo. 17A C.J.S. Contracts, §§ 434, 438. Rescission may also be effected by a suit in equity seeking to have the court declare a rescission and restore the status quo. The methods are analogous, but not the same. Both are governed by equitable principles. 17A C.J.S. Contracts § 413, p. 504; 13 Am. Jur.2d 496, Cancellation of Instruments, § 1. Binkholder, 260 Iowa at 1302, 152 N.W.2d at 596; see also Smith v. Peterson, 282 N.W.2d 761, 764 (Iowa Ct.App.1979) (quoting Bink-holder, and observing that in the case before it, “The second method was accomplished when the [defendant] counterclaimed, asking the court in equity to declare a rescission and restore the status quo.”). In Binkholder, the court found that it had previously recognized these two meanings of rescission in Butler Mfg. Co. v. Elliott & Cox, 211 Iowa 1068, 1071-72, 233 N.W. 669 (1931), in which the court said Rescission is the unmaking of the contract. Rescission may be accomplished by acts in pais, as well as through resort to the court of equity. Binkholder, 152 N.W.2d at 597. Utica has resorted to the court for the second kind of rescission. Such a claim for res