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Insurance Annotations (Agricultural Law and Tax)

This page contains summaries of significant recent court opinions involving insurance litigation of relevance to farmer and ranchers.

Posted April 18, 2023

Homeowner’s Policy Doesn’t Cover Farming Injury. The plaintiff became pinned between a trailer and barn while loading cattle and was hospitalized for several days as a result of his resulting injuries. The plaintiff had a homeowner’s insurance policy with the defendant and filed a claim for coverage under the policy for his injuries. The defendant denied coverage on the basis that the policy only covered claims for bodily or personal injury brought by third parties against the plaintiff, and that the farming endorsement did not extend coverage for the plaintiff’s own bodily injury and incorporated the policy’s exclusion for bodily injury into the farming endorsement. The plaintiff sued, claiming that he intended to purchase coverage for personal injuries he might suffer while operating his farm and that he had a reasonable expectation of coverage under the policy. He also claimed that the exclusions were “buried in the more than 100 pages of the policy.” The trial court disagreed, determining that the policy’s liability provisions applied only to claims for bodily or personal injury brought by third parties against the plaintiff. The trial court also determined that the policy language was not ambiguous and was not “buried deep” into the policy documents. Mills v. CSAA General Insurance. Co., No. 21-CV-0479-CVE-JFJ, 2022 U.S. Dist. LEXIS 114741 (N.D. Okla. Jun. 29, 2022).

Posted April 18, 2023

Injuries Arising from Use of ATV on Farm Not Covered Under Insurance Policy. The defendants ran a farm and cattle ranch. They had a farm liability insurance policy with the plaintiff. An employee drove an all-terrain vehicle (ATV) in a cattle pasture to spray weeds. While doing so, the ATV flipped over and pinned the employee until help arrived. The employee sustained permanent injuries to his legs and filed a personal injury suit against the defendants. The defendants obtained counsel through the plaintiff to represent them in the lawsuit. However, the plaintiff soon thereafter informed the defendants that the insurance policy did not cover the employee’s injuries and that the plaintiff need not provide legal counsel. The plaintiff also asserted that the employee was not covered under the policy. The trial court agreed and granted the plaintiff’s summary judgment motion. On appeal, the employee claimed that his injuries were a result of two distinct but concurrent events, one being covered by the insurance policy and the other not covered. The employee conceded that the insurance policy did not provide coverage for injuries resulting from the use of the ATV but asserted that the defendants’ independent negligence played a role in his injuries and that the policy covered those independent negligent acts. The South Dakota Supreme Court determined that the employee’s use of the ATV was sufficiently related to the negligence claim against the defendants to not be separate from it. The defendants’ negligence, the Supreme Court reasoned, only came about due to the use of the ATV. The Supreme Court determined that he use of the ATV (an activity not covered under the policy), was the direct cause of the injury. Thus, the Supreme Court upheld the trial court’s award summary judgment to the plaintiff. Nationwide Agribusiness Ins. Co. v. Fitch, 2022 S.D. 36 (2022).

Posted December 21, 2021

Farming Operation Didn’t Utilize Good Farming Practices. The plaintiff, a farming operation in southeast Colorado, planted nearly 2,500 acres of corn in the spring of 2018. The plaintiff obtained crop insurance administered by the defendant. In July of 2018 the plaintiff determined that the crop would likely fail due to “hot wind” and filed a notice of crop loss. However, the defendant determined that the plaintiff failed to follow approved farming practices for the area relating to seed population and weed control. The defendant determined that the plaintiff’s stated seeding rate of 22,500 plants per acre was inadequate for the seed variety that comprised more than 25 percent of the seed it purchased. The product information sheet for that variety recommended plant populations not lower than 28,000 seeds per acre. The defendant also noted that existing weed control guidance indicated that the plaintiff’s application of weed control measures in early July was too late. The defendant also considered photographic evidence showing weed pressure on the plaintiff’s insured acreage while neighboring fields had little weed pressure and mature corn. The court determined that the defendant’s good farming practices determination was neither arbitrary nor capricious. RCR Farms, LLC v. Federal Crop Insurance Corporation, No. 20-CV-01602-RM, 2021 U.S. Dist. LEXIS 224579 (D. Colo. Nov. 22, 2021).

Posted February 7, 2021

Failure to Preserve Error at Trial Court Bars Appellate Court Review of Insurance Policy Coverage. The defendants owned several buildings on one side of the road, one of which they rented to their tenants. The defendants kept a woodpile area approximately 100 feet from the building used by the tenants. The woodpile had reportedly been smoldering for four months when a fire consumed the tenants’ building. An investigation identified the smoldering woodpile as the probable cause. The tenants argued that the defendants had exclusive control and management over the burning woodpile and that the fire would not have occurred if the defendants had taken ordinary and reasonable care in the control of the burning woodpile. The defendants had a farm insurance policy with the plaintiff insurance company that insured their property located on the opposite side of the street from the rental property. The policy included the defendants’ occupied house, outbuildings, and farm personal property. Although the plaintiff initially provided the defendants with defense counsel in the tenants’ suit subject to a reservation of rights, the plaintiff eventually argued that the property damage from the fire was not covered by the insurance policy. The trial court determined that the fire did not arise from the insured premises and was not covered under the policy, therefore the plaintiff had no duty to defend the defendants against the tenants’ claims. On appeal, the defendants argued that the woodpile land was covered under the policy. Specifically, the defendants argued that the vacant land provision in the policy included the vacant land the defendants’ owned as part of the insured premises. The appellate court noted that the trial court based its decision solely on the policy provision, which excluded property damage “arising out of a premises that is not an insured premises.” The trial court reached this decision because the defendants failed to point out any policy language that expanded the insurance policy beyond the defendants’ home, outbuildings, and farm personal property. The appellate court noted that the trial court’s decision made no mention of the vacant land provision of the insured premises definition. The appellate court held that because the defendants did not file a motion for the trial court to address the vacant land provision, the defendants could not raise the issue on appeal. Secura Insurance v. Black’s Heritage Farm, Inc., No. 19-1623, 2021 Iowa App. LEXIS 40 (Iowa Ct. App. Jan. 21, 2021).

Posted November 7, 2020

Insurance Company’s Attempt to Seek Contribution Fails. A farmer rented an anhydrous ammonia application system from a co-op. The system consisted of a tool bar, running gear, two anhydrous ammonia tanks, and valves and hoses. The running gear safety chain was wrapped around the hose to prevent it from dragging on the ground. As the farmer attempted to turn his tractor, the hose and valve of the system were pulled apart, which led to the farmer being engulfed in a cloud of anhydrous ammonia. The farmer died as a result of the anhydrous ammonia exposure. The plaintiff was the insurance company for the co-op, which paid a settlement of approximately $4 million to the farmer’s family. After the settlement, the plaintiff sought contribution from the three defendants: the manufacturer of the excess flow valve for the anhydrous ammonia tanks; the manufacturer of the running gear; and the manufacturer of the tool bar. The plaintiffs alleged design defect claims against the defendants, as well as claims for negligence, breach of warranty of fitness for a particular purpose, and breach of warranty of merchantability. All of the defendants claimed that the co-op and farmer were negligent as an affirmative defense. At trial, the plaintiff testified that the application system came with no instructions in regard to how to hook up the hoses to the tank, and that the excess flow valve did not come with any warnings. The jury found the defendants were not at fault and apportioned 51% fault to the co-op and 49% to the farmer. On appeal, the plaintiff claimed the trial court should not have permitted evidence of OSHA violations, should have permitted evidence from other similar accidents, and that the trial court erred in granting directed verdicts to the defendants. The plaintiff argued the evidence of OSHA violations by the co-op was only relevant to the co-op’s employees and not to its relations with the farmer and other third parties. The appellate court held that an OSHA violation is evidence of negligence as to all persons who are likely to be exposed to injury as a result of the violation. Because the co-op’s employees used the same equipment that was rented out to the farmer, the appellate court held the OSHA violation was relevant to the issue of the co-op’s negligence. The plaintiff also argued that the trial court erred in excluding evidence from other similar incidents. The appellate court noted that the cases the plaintiff relied on occurred after the incident involving the farmer, therefore the trial court did not err in excluding the evidence. The plaintiff then argued that there was a design defect in the excess flow valve for the anhydrous ammonia tanks and running gear. Specifically, the plaintiff argued the defendants had a hose stand for sale that would prevent the hose from dragging on the ground, but did not offer it to the co-op. The appellate court held that there was no evidence that other manufacturers of running gear for anhydrous tanks used a hose stand, thus the trial court did not err in dismissing the design defect claim. For the claim of breach of implied warranty of fitness for a particular purpose, the plaintiff argued the defendants knew the particular purpose for the excess flow valves – the application of anhydrous ammonia – and that they were not fit for that purpose. The appellate court held that there was no communication between the defendant and the co-op, and that the co-op purchased the excess flow valve from a third-party supplier. Therefore, the plaintiff was unable to show that the defendant had reason to know the co-op’s particular purpose for using the excess flow valves. Nationwide Agribusiness Insurance Co. v. PGI International, No. 18-1315, 2019 Iowa App. LEXIS 1155 (Iowa Ct. App. Dec. 18, 2019).

Posted September 26, 2020

No Insurance Coverage For Intentional Property Damage. The defendant had a commercial general liability (CGL) policy with the plaintiff. A drainage district had contracted with the defendant to reshape a levee. Members of the drainage district showed the defendant various locations from which dirt could be removed to complete the project. The defendant proceeded to remove dirt from individual landowners’ private property near the levee, rather than from the sites authorized by the drainage district. Where the dirt was removed from was undeveloped and uninhabited. The drainage district confronted the defendant about the dirt removal from the unauthorized sites and the defendant did not give truthful responses. Upon inspection, the U.S. Army Corps of Engineers determined that the removal of the soil from the unapproved properties had weakened part of the levee and that the failure to restore the land would result in the loss of federal assistance for repairing the levee. The drainage district sued the defendant for damages related to the removal of dirt too close to the levee. The defendant sought coverage under its insurance policy with the plaintiff, but the plaintiff asserted that the policy did not provide coverage. The trial court agreed. On appeal, the defendant argued that the policy provided coverage for occurrences resulting in property damage. Specifically, the policy language provided that the insurance applies to property damage only if the damage is caused by an “occurrence.” An “occurrence” was defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions. The appellate court noted that an intentional act resulting in property damages could qualify as an accident if the insured neither expected nor intended the act itself as well as the resulting property damage. However, the appellate court found that the defendant knew and intended to harm the individual landowners’ properties. The appellate court pointed toward the facts that the defendant knew the location of the explicitly authorized sites from which dirt could be removed but decided to save time and money by removing dirt from the land near the levee. The defendant then argued that he had implicit authorization to remove dirt from the sites, based on a right of easement over the land that was 150 feet from the centerline of the levee. The appellate court held that Iowa law prohibits any person from removing earth within 300 feet of the centerline of any levee without first being granted permission from the governing body of the levee district. The appellate court noted that the defendant’s argument was inconceivable because the defendant should have known of the restriction due to his background of serving on a levee district board. Addison Insurance Company v. MEP Co., 941 N.W.2d 30 (Iowa Ct. App. 2019).

Posted July 24, 2020

Stray Voltage Could Lead to Partial Insurance Coverage. The defendant unexpectedly had several cows and calves die and also suffered a loss of milk production and profits. The defendant filed a claimed against the plaintiff for insurance coverage for death of livestock, cost of investigation and repairs, and loss of business profits. The plaintiff investigated the claim, utilizing an electrical company to do so. The electrical company found a stray electrical current present on the property. The plaintiff then hired a fire and explosion company to investigate the property. This investigation resulted in a finding of no stray voltage on the property, but the company did express its belief that stray voltage did cause the defendant’s harm. As a result, the plaintiff paid the insurance claim for death of livestock and repairs, but not for loss of business profits. The plaintiff then filed an action for a determination under the policy of whether loss of business profits was a covered loss. The plaintiff sought a declaratory judgment specifying that coverage for loss and damage resulting from the stray voltage was not triggered because the defendant was not subject to a “necessary suspension” of farming operations, and that the defendant’s loss or damage had to be directly caused by a “peril insured against” rather than being caused by dehydration which resulted from the cattle’s reaction to the stray voltage. The defendant filed a counterclaim for breach of contract; breach of good faith and fair dealing; and unjust enrichment. The plaintiff moved for summary judgment on the basis that the policy wasn’t triggered for lack of electrocution and that there was no suspension in the defendant’s business operations. The court determined that the policy did not define the term electrocution in the context of dairy animals. As such, the court concluded that the term could be reasonably interpreted to mean death by electrical shock or the cause of irreparable harm. As an ambiguous term, it was defined against the plaintiff and in the defendant’s favor. The court also refused to grant summary judgment on the cause of death issue. In addition, because the defendant did not cease operations, the court concluded that the policy provided no coverage for lost profits. The court also rejected the defendant’s breach of contract claim due to lack of suspending the business and rejected the good faith/fair dealing claim because mere negligence was not enough to support such a claim. The unjust enrichment claim was likewise denied. Hastings Mutual Insurance Co. v. Mengel Dairy Farms, Inc., No. 5:19CV1728, 2020 U.S. Dist. LEXIS 87612 (N.D. Ohio May 19, 2020).

Posted October 19, 2019

2014 Winter Wheat Yield Data Excluded From APH. Under the crop insurance program of the 2014 Farm Bill, crop insurance coverage for low yield losses was to be determined based on actual production history (APH). However, APH is determined by excluding abnormally low-yield years in the computation. The Risk Management Agency (RMA) determined that the 2015 winter wheat crop was not excludible from the APH. Thus, the insurer did not exclude the 2015 yield data from the plaintiff’s insurance pay-out computation. On review by the National Appeals Division ("NAD") of the United States Department of Agriculture. The NAD hearing officer determined that the NAD lacked jurisdiction. On further review the NAD Director again determined that the NAD did not have jurisdiction, but that the RMA had discretion to implement the exclusion. The plaintiff then sought judicial review of the RMA’s decision and the NAD Director’s decision of lack of jurisdiction. The trial court determined that the NAD did have jurisdiction over the matter and remanded the matter to the NAD Director for reconsideration of the exclusion of the 2015 wheat crop from the plaintiff’s APH. The trial court also referenced a recent decision by the U.S. Court of Appeals for the 10th Circuit holding that the Congress intended the exclusion to be available for the 2015 crop year (winter wheat planted in 2014). JL Farms v. Vilsack, No. 2:16-cv-02548-CM-GEB, 2019 U.S. Dist. LEXIS 106789 (D. Kan. Jun. 26, 2019).

Posted October 9, 2019

Subrogation Waiver Does Not Limit Negligent Party’s Liability. In 2009, a farmer entered in a contract with the defendant contractors to build a barn. The party’s contract stated: “Both parties waive all rights against each other and any of their respective contractors, subcontractors and suppliers of any tier and any design professional engaged with respect to the Project, for recovery of any damages caused by casualty or other perils to the extent covered by property insurance applicable to the Work or the Project, except such rights as they have to the proceeds of such property insurance and to the extent necessary to recover amounts relating to deductibles of self-insured retentions applicable to insured losses. . . . This waiver of subrogation shall be effective notwithstanding allegations of fault, negligence, or indemnity obligation of any party seeking the benefit or production of such waiver.” The farmer also entered into a contract with another defendant contractor for the concrete work. Both defendants work was covered by the farmer’s insurance policy that the plaintiff provided. The insurance policy allowed the farmer to waive its rights without interfering with the plaintiff’s insurance coverage: "You may waive your right of recovery in writing before a loss occurs without voiding the coverage." The barn was completed in 2010 but collapsed in 2013 killing some of the farmer’s cattle. The plaintiff paid $607,000 to rebuild the farmer’s barn and $51,000 for the losses related to cattle and other damages. The plaintiff claimed the collapse was caused by faulty instillation of rebar cages in the concrete piers, which caused the roof to collapse. The plaintiff filed a subrogation action against the defendants alleging the defendants breached the contracts with the farmer and had been negligent in placing the rebar cages lower than where the specifications required. The contractors countered that the subrogation waiver barred the plaintiff’s claims against them. The trial court and the appellate court found for the defendants. On further review, the state Supreme Court affirmed. The court determined that state law did not void a subrogation waiver and shifted the burden of proof from the defendants to the plaintiff, limited by the coverage of the property insurance. The Court also determined that the farmer could recover the rest of the damages beyond the limit directly from the contractors. The wavier did not limit recovery, but merely shifted it to the party that paid the bulk of the damages. The Court also held that the subrogation wavier did not relive a party from liability from its own negligence and, as a result, was not an unenforceable exculpatory contract. The plaintiff claimed that the waiver was an unenforceable exculpatory contract in violation of public policy. As noted, the Court concluded that the waiver did not protect the negligent party from liability, but merely shifted the burden of payment for some of the damages. The injured party still has a cause of action and will be compensated. Thus, the contract was not an unenforceable exculpatory contract. Rural Mutual Insurance Company v. Lester Buildings, LLC, 387 Wis. 2d 414, 929 N.W.2d 180 (2019).

Posted October 6, 2019

Crop Insurance Claims Properly Denied. The plaintiff suffered crop damage in 2016 and submitted claims under seven federally-backed crop insurance policies. The claims were denied because of the plaintiff’s inability to provide certain records on the crops that were actually sold. The plaintiff exhausted administrative appeals to no avail and then sought judicial review. The issue before the court was the interpretation of the governing regulation concerning what the plaintiff had provide to substantiate the insurance claim. The court noted that 7 C.F.R §457.8, Sec. 14 required the plaintiff to cooperate with the defendant but did not impose a deadline for providing records or that all records had to be supplied at the same time. In addition, the regulation provided for the use of documents from third parties. The court also noted that the governing statute on which the regulation was based, states that a claim can be denied if the plaintiff failed to provide all required records. The court noted that the plaintiff did not provide all necessary records. Thus, the defendant’s denial of claims was neither arbitrary nor capricious. The plaintiff also argued that the defendant’s denial of claims was arbitrary and capricious under the defendant's Loss Adjustment Manual (LAM). The plaintiff argued that the LAM allows third party records to complete or adjust the claim because of the plaintiff’s failure to provide complete records. The court rejected the argument, noting that while the LAM does allow for third party records, it does not rectify the failure to provide complete records. The plaintiff claimed that the records had to come from third parties because they were protected by other obligations and the plaintiff had to request the authority to release the records. The court rejected the argument, noting that 7 C.F.R. § 457.8 sec. 21 states that failure to obtain authorization for third party records results in denial of the claim. Struss v. United States Dep't of Agric., No. 18-2184-JWL, 2019 U.S. Dist. LEXIS 99957 (D. Kan. Jun. 14, 2019).

Posted March 24, 2019

Squirrel-Caused Damage Excluded From Insurance Coverage. A squirrel crawled into the plaintiff’s electrical transformer at their power plant and managed to walk onto the grounded frame and a bare cable clamp that was charged with 7200 volts of electricity. This caused an electrical arc that destroyed the unit and the squirrel. The arc caused $213,524.76 worth of damage to the plaintiff's transformer and other electrical equipment. The plaintiff’s insurance policy contained exclusionary language stating that, "We" do not pay for loss or damage caused directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.. . . . 2. "We" do not pay for loss or damage that is caused by or results from one or more of the following excluded causes or events: . . . . g. Electrical Currents — "We" do not pay for loss caused by arcing or by electrical currents other than lightning. But if arcing or electrical currents other than lightning result in fire, "we" cover the loss or damage caused by that fire.” The plaintiffs filed a claim against the policy and the defendant denied coverage. The plaintiff then sued seeking a declaratory judgment of coverage and damages. The defendant denied liability and asserted affirmative defenses. Both parties moved for summary judgment. The trial court granted the defendant’s motion for summary judgment. The trial court determined that the squirrel-caused electrical arc was the "sole cause" of damage and that the policy excluded coverage for damages caused by electrical arcing. The appellate court affirmed and on further review the Iowa Supreme Court affirmed finding that the policy language clearly stated that if arcing caused the loss the loss was excluded unless it lead to a fire, which it did not. The plaintiff argued that the squirrel was an efficient proximate cause that lead to a covered loss. However, the Court determined that the squirrel and the electric arcing were not two independent causes of the loss. In addition, the Court reasoned that if it were to apply the efficient proximate cause doctrine, doing so would undermine insurers ability to exclude coverage. The policy, the Court concluded, clearly stated that it excluded arcs caused by anything but lighting. The squirrel was a direct cause to the arc which was excluded from coverage in the defendant’s policy. City of West Liberty v. Employers Mutual Casualty Company, No. 16-1972, 2019 Iowa Sup. LEXIS 6 (Iowa Sup. Ct. Feb. 1, 2019).

Posted March 9, 2019

Arbitration Panel Not Required to Break-Down Crop Insurance Award County-by-County. The defendant submitted insurance claims to the plaintiff insurer for damage to his 2013 corn and soybean crops in three separate counties in Missouri. The plaintiff denied the claims, then invoked the arbitration provision under the Federal Arbitration Act, since the policy was a federally-reinsured crop insurance policy. The arbitration panel conducted an evidentiary hearing, where the defendant’s damages expert showed the crops experienced significant damage from drought, rootworm, and heavy winds. The panel accepted the expert’s damage calculations, and awarded the defendant roughly $1.4 million for damage to his corn crop, but denied his soybean claim. The plaintiff sued to vacate the award. The plaintiff argued that the arbitrators failed to comply with the applicable regulations, which required the panel to provide “a written statement describing the issues in dispute, the factual findings, the determinations and the amounts and basis for any award and breakdown by claim for any award.” The plaintiff also argued that the arbitrators failed to comply with the regulations because the panel (1) did not break down the award by county, as “required” by the “breakdown by claim” language, (2) did not explain how the award amount was calculated, and (3) made impermissible interpretations of the regulations. The trial court agreed, holding that the panel had failed to properly break down the award “by claim.” The court relied on a regulation that states that the insurer must determine the loss on a unit basis, and a separate regulation that defines a unit as all the insurable acreage of the same insured crop in the county. The trial court concluded that the arbitration panel was required to break down the award into separate awards for each of the three counties to provide the required “breakdown by claim.” Where the panel did not break down the award by county, the court nullified the entire award. On appeal, the appellate court reversed primarily on the basis that the arbitration panel was obligated to break down its award only by claim, not by unit. The appellate court held that nothing in the regulations required the panel to segregate this claim into multiple separate claims. This was supported by the fact that before litigation, the plaintiff had collapsed all acres farmed by the defendant into a single unit, pursuant to policy provisions. Accordingly, the defendant submitted a single claim covering both his corn and soybean crops for all three counties, and the plaintiff assigned the claim a single claim number. As such, there was no reason why the arbitration panel could not accept the plaintiff’s decision to treat the defendant’s claim as a singular unit when awarding the damages. In fact, the plaintiff raised no objections to the single unit method, until it chose to appeal the award. Additionally, the appellate court was not convinced by the plaintiff’s argument that the arbitration panel’s failure to break down the award by county meant that it “so imperfectly executed” its powers such that it renders no “mutual, final and definite award,” according to the language of the regulation. The appellate court held that public policy favored upholding arbitration agreements, and to be sufficient the award needed only to describe the issues in dispute, the factual findings, the determinations and the amount and basis for any award and breakdown by claim for any award, to be upheld. Applying this standard, the court found the panel’s written explanation for the award amount adequate, even though the panel simply adopted the calculations of the defendant’s expert. However, the plaintiff failed to contest the calculation or provide its own alternative at the hearing, and accordingly, the appellate court overturned the district court. Great Am. Ins. Co. v. Russell, No. 17-2441, 2019 U.S. App. LEXIS 3140 (8th Cir. Jan. 31, 2019).

Posted February 17, 2019

Homeowner Policy Did Not Cover Cattle Leasing Activity. A farm tenant’s cattle escaped their enclosure and were struck by vehicles on a public roadway. A subsequent vehicle struck a vehicle that was stopped on the road. The motorist that was hit filed an uninsured motorist claim against his insurance provider, the plaintiff. The plaintiff then sued the tenant. The plaintiff, the tenant, and the injured motorist settled. The tenant consented to $141,000 judgment against him. The plaintiff insurance company sued the tenant’s liability insurance provider for the judgment against the tenant. The trial court ruled for the plaintiff and awarded the judgment and fees. The tenant’s insurance company appealed, claiming that the policy did not cover the tenant’s leasing activity because it was an excluded “domestic duty.” The appellate court reversed and remanded, holding that maintenance of livestock fencing is not a “domestic duty.” The policy provided coverage for injury or damage arising "in the course of performing domestic duties that relate to the 'insured premises.'" While “domestic duty” was undefined, the appellate court determined that a cattle operation, and fixing cattle fence had nothing to do with a private home or the upkeep of a home. The appellate court directed the trial court to enter summary judgment for the defendant insurer and other defendants. The appellate court remanded for a determination of costs and fees. West Bend Mutual Insurance Co. v. Calumet Equity Mutual Insurance Company, No. 2018AP435, 2019 Wisc. App. LEXIS 24 (Wisc. Ct. App. Jan. 17, 2019).

Posted January 31, 2019

Unprofitable Cattle Activity May Not Be Excluded “Business Pursuit” Under Insurance Policy. The plaintiffs struck the defendant’s cow on a public roadway and sued the defendants and their insurer to recover damages. The defendant was not a full-time farmer, merely operating a hobby farm while being employed full-time in non-farm employment. The defendant’s insurer denied coverage based on a policy exclusion for damages arising from “business pursuits of the insured.” The insurer claimed that defendant’s raising of cattle was a business pursuit because the defendant had claimed losses on his federal tax return for “Beef Cattle Ranching and Farming” for tax years 2010 through 2016. Additionally, the insurer asserted that a business pursuit involves continuity of the activity and the expectation of monetary gain and asserted that both of those elements were satisfied. The insurer moved for summary judgment on its denial of coverage claim, and the trial court agreed. The plaintiff appealed, and the appellate court determined that the defendant’s tax treatment of the activity was a factor in determining whether the defendant’s cattle activity was an excluded business pursuit. However, the appellate court determined that the jury should have considered several factors including the credibility of the defendant’s testimony, the defendant’s subjective intent to make a profit from his farming activities, the defendant’s lack of knowledge regarding farming for profit and the manner in which his animals were treated. Additionally, the appellate court noted, there was testimony at the trial court level from a beef cattle specialist attesting that at least 40 acres of land and 20 cattle were necessary to run a profitable cattle business, and at the time of the accident, the defendant had only 5 cows and approximately six to seven acres of usable land. The specialist classified the defendant’s operation as a part-time hobby or 4-H project, not a “profit making beef production activity.” Therefore, the appellate court determined that summary judgment had been improper, since these facts considered together created a genuine issue as to whether the defendants “farming activities” constituted “business pursuits.” Accordingly, the appellate court reversed and remanded the case. Washington v. Guillotte, No. 2018 CA 0301, 2018 La. App. LEXIS 2570 (La. Ct. App. 1 Cir. Dec. 21, 2018).

Posted December 8, 2018

APH Yield Exclusion Available Producers The Day The Farm Bill Was Signed. The plaintiffs, farmers who produce winter wheat in Baca County, Colorado, sought judicial review of an adverse decision of the Risk Management Agency (RMA) which was subsequently affirmed by the National Appeals Division (NAD). Section 11009 of the 2014 Farm Bill amended subparagraph 1508(g)(4)(C) of the Federal Crop Insurance Act (FCIA) to add an APH Yield Exclusion to give crop producers the opportunity to exclude uncharacteristically bad crop years from the RMA’s calculation of how much crop insurance coverage they are entitled to. The plaintiffs wished to insure their 2015 winter wheat crop. Believing that they were eligible to invoke the APH Yield Exclusion, they gave their crop insurance agents letters electing to exclude all eligible crop years for purposes of calculating their coverage. After receiving the letters from the plaintiff and other crop producers, crop insurance providers contacted the RMA requesting guidance on how to handle the APH Yield Exclusion elections concerning the 2015 winter wheat crop. The RMA informed insurance providers that it had authorized the APH Yield Exclusion for most crops for 2015, but it did not authorize the APH Yield Exclusion for winter wheat. As a result, the Agency directed insurance providers to deny winter wheat producers’ requests for the APH Yield Exclusion. The plaintiffs challenged the directive as an adverse decision appealable to NAD. A NAD Hearing Officer conducted a hearing and issued a determination that NAD did not have jurisdiction over the matter and did not reach the merits. The plaintiffs then requested NAD Director Review of the Hearing Officer’s Determination pursuant to 7 C.F.R. § 11.9. The NAD Director reversed the Hearing Officer’s determination as to jurisdiction, but also held that the RMA has discretion to determine the appropriate time to implement the APH Yield Exclusion with regard to 2015 winter wheat. This decision effectively affirmed the Agency’s decision not to authorize the Exclusion. The plaintiffs appealed, and the trial court determined that, absent clear direction by Congress to the contrary, a law takes effect on the date of its enactment. The court noted that there was no statutory indication that it would take effect other than on the date of its enactment. The court viewed Congress’ silence as an expression that it meant the APH Yield Exclusion to be immediately available to producers on the date the Farm Bill was signed into law. Consequently, the court reversed the NAD Director’s decision and remanded this case for the proper application of the APH Yield Exclusion. The appellate court affirmed. Ausmus v. Perdue, No. 17-1442, 2018 U.S. App. LEXIS 32475 (10th Cir. Nov. 16, 2018), aff’g., 289 F. Supp. 3d 1227 (D. Colo. 2017).

Posted November 25, 2018

Fact Issues Remain In Farm Insurance Dispute. A blizzard destroyed on the plaintiff’s poultry houses. The plaintiff filed a claim for the loss with the defendant. The defendant initially denied coverage on the basis that loss due to snow was not a covered loss under the insurance policy. Before purchasing the policy at issue, the plaintiff met with the defendant’s agent several times. However, at those meetings the plaintiff didn’t explicitly state that he wanted snow coverage. The binders prepared for the plaintiffs suggested peril group 4 (no snow coverage) subject to a inspection to be considered for peril group 5 (snow coverage). The agent assumed that the plaintiff would want peril group 5 coverage, if possible, and therefore asked the company for that coverage. The inspection request was submitted but the inspection was never completed. The defendant agent never checked in to see if the inspection was completed. The plaintiff sued, claiming that the agent negligently failed to obtain snow-ice insurance coverage for their two new chicken houses. The plaintiff also sued the insurance company and the construction company that built the barn. The defendant moved for summary judgment and the trial court granted the motion. On appeal, the plaintiff claimed that the defendant (via its agent) had a duty to ensure snow coverage, a duty to ensure that the inspection of the poultry houses took place, and that the defendant’s lack of action proximately caused the lack of coverage. The appellate court agreed with the plaintiff’s duty arguments, but not with proximate cause. As for the duty to ensure snow coverage the appellate court determined that fact issues remained in that it was not clear whether the plaintiff asked for snow coverage and whether the agent understood that the plaintiff wanted snow coverage. As for the duty to ensure that the barns were inspected, the appellate court also determined that fact issues remained. Whether the agent acted with reasonable care, diligently, and with good judgment is to be left to the jury. The appellate court also examined the proximate cause issue as it related to the defendant’s conduct and the harm that the plaintiffs incurred from the lack of snow coverage. The appellate court determined that the connection was far too speculative. Furthermore, there wasn’t even a guarantee that if the inspection was completed the defendant insurer would have provided the snow coverage. Slaubaugh Farm, Inc. v. Farm Family Cas. Ins. Co., No. S16C-06-033 ESB, 2018 Del. Super. LEXIS 1144 (Super. Ct. Oct. 29, 2018).

Insured Loss Triggered By Fire Rather Than Tornado. The plaintiff had an insurance policy with the defendant that covered the plaintiff’s residence, farm buildings, machinery, equipment, and livestock. The policy provided coverage for loss of business income if faming was prevented because of property damage. In June of 2015, a tornado caused damage to the plaintiff’s residence, farm buildings, machinery, and equipment. The plaintiff filed a claim with the defendant for coverage under the policy. In March of 2016, the plaintiff’s barn that suffered tornado damage caught fire. The cause of the fire was determined to be from exposed wiring as a result of the barn shifting during the tornado. The plaintiff’s planting equipment that was stored in the barn was damaged in the fire. Without the equipment, the plaintiff delayed planting soybeans several weeks. The plaintiff made a claim to for the fire damage and loss of income. Partial payment was made on the claim, but it was not clear if the payment was for the damage or loss of income. The plaintiff sued in early 2017 for breach of contract and bad faith for failure to pay the entire fire loss claim. The defendant moved for dismissal under the 12-month statute of limitations for contract claims. The trial court granted the dismissal and the plaintiff appealed. The issue on appeal is when “inception of the loss” occurred – whether it was during the tornado or during the fire. The appellate court reversed, holding that “inception of the loss” occurred at the time of the fire, thus this complaint was timely. The appellate court determined that the "inception of the loss" policy language "clearly and unambiguously means the date on which the loss occurs." The appellate court determined that it was not constrained by looking back at the causation of the loss, but was solely focused on when the loss itself was incurred. As such, the appellate court noted that there were two distinct sets of damages alleged by the plaintiff, one from the tornado and one from the fire. The defendant claimed that the tornado started the damage and the extent of the damage was discovered when the fire happened. The appellate court rejected this argument, as it only focused on inception and not on the entirety of the language. Losses that the plaintiffs are claiming happened in the fire, thus the “inception” of the losses did not happen during the tornado. Furthermore, the losses were not merely discovered with a fire, the fire was the direct cause of the damages claimed. Thus, the appellate court concluded that the inception of the loss happened at the time of the fire, and the plaintiff’s complaint was timely. Stelpflug v. Rural Mutual Insurance Company, No. 2018AP34, 2018 Wisc. App. LEXIS 832 (Wisc. Ct. App. Oct. 25, 2018).

Posted November 17, 2018

U-Pick Business Separate From Farming Operation For Liability Coverage Purposes. The defendants owned a farm and orchard. The orchard was listed in the area brochure as one of the “U-Pick” orchards. The orchard also sold pre-picked cherries. The plaintiff called the defendants to ensure that they were open before visiting. The plaintiff and her friend arrived at the orchard, and each of them were given a basket to strap on and were directed to the orchard where the 10-foot tall, three-legged ladders were located. While picking cherries on a ladder, the plaintiff ‘s basket filled and caused her to become top-heavy. She lost her balance and fell off the ladder. As a result of the fall, the plaintiff broke her hand and foot, and injured her neck, back and shoulder. The defendants were not at the orchard that day. The plaintiff sued alleging that the defendants, doing business as an orchard, failed to maintain the orchard in a safe manner and failed to properly instruct her on use of the ladder. The defendants’ insurance company with whom they held a homeowners’ policy defended the suit which was dismissed by the trial court for improper service. The appellate court reversed as to the dismissal and the insurance company brought a declaratory judgment action claiming that the homeowners’ policy did not provide liability coverage for the defendant’s orchard business due to an exclusion for business pursuits of the insured. The trial court agreed and denied coverage under the policy for the plaintiff’s injuries. The appellate court affirmed, finding that the accident arose from a separate business pursuit of the insured that was within the policy exclusion. The appellate court determined that it was immaterial that the defendants did not make much profit from the U-Pick business as a part of their overall farming operation. What mattered, the appellate court determined, was that the defendants sold produce to the public that were invited as business guests to the premises. In addition, the appellate court determined that the use of a ladder was within the scope of the U-Pick business. Western National Assurance Company v. Robel, No. 35394-0-III, 2018 Wash. App. LEXIS 2387 (Wash. Ct. App. Oct. 23, 2018).

Posted October 13, 2018

Bitcoin is Covered Property Under Homeowner’s Policy. The plaintiff owned a homeowner’s insurance policy with the defendant and sought coverage for a $16,000 loss of stolen bitcoin from his online account. The insurer claimed that, while a covered loss, the bitcoin was a monetary loss which limited the plaintiff’s recovery to $200. The plaintiff sued for breach of contract and bad faith, claiming that bitcoin was “property” as defined by the policy and not subject to the $200 limit. The defendant moved for judgment on the pleadings on the basis that bitcoin was generally viewed as “money.” However, the court disagreed with the defendant. The court noted in particular that the IRS categorizes “virtual currency” as property for federal tax purposes. Thus, the court held that the plaintiff had properly plead its complaint for breach of contract and bad faith. Kimmelman v. Wayne Insurance Group, No. 18 CV 1041, 2018 Ohio Misc. LEXIS 1953 (Franklin Co., Ohio Ct. of Common Pleas, Sept. 25, 2018).

Posted September 23, 2018

Crop Insurance Fraud Case Involves Failure to Report Carryover Crops. The plaintiff owned two tracts of land planted to tobacco. In 2009, the production guarantee for crop insurance was 71,100 pounds for the first tract and 66,440 pounds for the other. Also, in 2009, the plaintiff filed for drought damage, and the fields were inspected. The insurance adjustor projected that the first tract produced 98,460 pounds and the second plot produced 97,108 pounds. Thus, it was determined that the plaintiff did not need to file a claim because the projections exceeded the production guarantee. At harvest, the plaintiff reported that the first tract produced 177,099 pounds (100,000 pounds of which was sold that year) and the second tract produced only 13,394 pounds. The plaintiff made a claim on the second tract and collected insurance on it in 2010. The office of the inspector general (IG) began broad investigations into crop insurance fraud in 2009, and the plaintiff’s reports were flagged for review. The inspector general hypothesized that the plaintiff shifted some of the tobacco from the second tract to the first tract. The investigation was referred to the attorney general in 2012. The plaintiff claimed that some of the tobacco sold in 2009 was carried over from 2006, and was sold in 2009 for a better price. The plaintiff also provided evidence of a 2009 drought. The attorney general declined to prosecute, so the issue was referred for an administrative review. This review focused not only on the payments in 2009 for the drought but also the lack of reporting of the carryover in 2006. The administrative review determined that the plaintiff did not suffer a loss in 2009, and intentionally failed to report the carryover, and that the claims by the government were not precluded. On further review, the trial court vacated the administrative hearing finding that the plaintiff did not suffer a loss in 2009, based on that determination being arbitrary and capricious. However, the trial court upheld the administrative determinations of intentional failure to report the carryover crops and that the government’s case was not precluded. The trial court remanded the case to the administrative body for a determination of the appropriate sanctions. Lane v. United States, No. CV 617-082, 2018 U.S. Dist. LEXIS 152172 (S.D. Ga. Sept. 6, 2018).

Posted September 8, 2018

Spotted Wilt Virus Insufficient To Incur Additional Indemnity Payments. The plaintiff sought additional indemnity payments for 2009 crop losses under a federally reinsured crop insurance policy. During the administrative review process, the Risk Management Agency Regional Office Director, found that the plaintiff had not met its burden of proof and declined to award any additional indemnity payments. On further review, the Administrative Judge upheld the Director’s determination. Upon exhaustion of administrative remedies, the matter proceeded to court. The trial court considered the administrative record and remanded the case to the administrative agency to review three issues: (1) whether there was evidence that the plaintiff’s 2009 tobacco crop suffered from plant disease; (2) whether such plant disease, if any, entitled the plaintiff to additional indemnity amount; and (3) whether RCIS, the insurance agency, “applied the proper methods when calculating plaintiff’s indemnity payment.” The plaintiff did not present additional evidence to the administrative agency during the remand process and the Director again found that the plaintiff had not met its burden of proof. The plaintiff appealed, and the defendant motioned for summary judgment. At trial, the plaintiff argued that the agency’s determination concerning plant disease and causation was contrary to the evidence because the agency allegedly ignored certain exhibits and testimony, including the testimony of the Beaufort County Extension agent that the quantity of the plaintiff’s crop yield was “seriously diminished” by Tomato Spotted Wilt Virus. However, the court found that the administrative judge made specific findings of fact concerning the extension agent’s testimony and concerning the testimony of a plant pathologist and tobacco disease specialist. As such, the court rejected the plaintiff’s argument that the agency’s determination concerning plant disease and causation was contrary to the evidence. In addition, the court noted that while the administrative judge had determined that RCIS made numerous mistakes in calculating the plaintiff’s original indemnity payment, those mistakes resulted in a final indemnity payment amount that was higher than it would have been if RCIS had properly calculated the payment. Accordingly, the court granted the defendant’s motion for summary judgement. J.O.C. Farms, LLC v. Perdue, No. 4:16-CV-288-D 2018 U.S. Dist. LEXIS 144875 (E.D. N.C. Aug. 27, 2018).

Posted August 11, 2018

USDA Improperly Delayed Implementation of Crop Insurance Provision. A provision in the 2014 Farm Bill, Actual Production History (APH) Yield Exclusion, allows eligible producers impacted by severe weather to receive a higher approved yield on their insurance policies through the federal crop insurance program. APH works by allowing a farmer to exclude yields in particularly bad years (e.g., those having a natural disaster or other extreme weather event) from their production history when calculating yields that are used to establish their crop insurance coverage. The level of crop insurance available to a farmer is based on the farmer’s average recent yields. Particularly low yields in a prior year would reduce the level of insurance coverage in future years but for the APH provision. Farmers are eligible for the APH exclusion when the county yield is at least 50 percent below the average of the immediately previous 10 consecutive crop years. The provision was to become effective in the spring of 2015 for spring crops with a November 30, 2014 change date. Eligible crops include corn, soybeans, wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts and popcorn. However, the USDA later decided to delay the APH Yield Exclusion for wheat for the 2015 crop year for winter wheat. The plaintiff challenged that decision as arbitrary, but the USDA’s National Appeals Division (NAD) upheld the decision. However, in late 2016 a U.S. Magistrate Judge recommended that the court reverse the USDA’s decision to delay implementation of the APH Yield Exclusion (i.e., “yield plug”) for winter wheat. The USDA appealed, but the trial court found that the NAD’s decision was erroneous because it failed to recognize the Farm Bill’s (7 U.S.C. §1508 (g)(4)(A)) effect on implementation for the 2015 winter wheat crop year. The court determined that Congress chose to leave the applicability provision in place thereby making it self-executing and immediate for the APH Yield Exclusion. In addition, the fact that Congress chose to include specific application/implementation language for other crops and yet stay silent as to winter wheat indicates a direct intention to allow the governing and existing statutory law to be applicable as to the implementation of the APH Yield Exclusion for the 2015 winter wheat crop. As a result, the court adopts the findings and conclusions of the Magistrate Judge. The USDA appealed, and the issue on appeal was “whether farmers were permitted to exclude the historical data for the 2015 crop year, even though the FCIC had not completed its data compilation.” The appellate court considered the “plain meaning” of the statute at issue in accordance with the standard set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) and affirmed the trial court's decision. Adkins v. Vilsack, No. 1:15-CV-169-C 2017 U.S. Dist. LEXIS 72790 (N. D. Tex. May 12, 2017), aff’d. sub. nom., Adkins v. Silverman, No. 17-10759, 2018 U.S. App. LEXIS 21961 (5th Cir. Aug. 7, 2018).

Posted August 7, 2018

Insurance Policy Did Not Cover Farm Injury. A hay company was hired to pick up a load of hay from a farm. The defendant, an insurance company, provided insurance coverage on the truck and trailer used to pick up the hay. This policy stated that the defendant would “’pay all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' . . . caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'” The policy also stated that the policy covered anyone using the truck and trailer with permission to operate them. The hay company employee with the help of an equipment operator (not employed by the hay company or the farm where the hay was picked up) arrived at the farm to load the hay. The hay had to be un-tarped before loading, which the employee and the equipment operator did. Once loaded the hay company employee attempted to leave, however the equipment operator stopped him to re-tarp, which was not normal at this farm. The loaded truck was 50-75 feet away from the stack. The employee stood on the forks of the tractor and the equipment operator lifted him up to re-tarp. On the way back down the employee was brushed off the forks by the stack and was injured. The employee sued the employer of the equipment operator and the farm where the accident happened for the injuries. The plaintiff insurance company held the policy on the equipment and was indemnified by the employer of the equipment operator. The plaintiff settled, and the defendants continued their denial of involvement. The plaintiff then filled suit for equitable contribution, indemnity, declaratory relief, and breach of the covenant of good faith and fair dealing. The plaintiff claimed that the injured employee was co-covered at the time of the accident. The trial court granted the defendants’ motion for summary judgment. The court determined that the injury clearly happened on equipment that was covered by the plaintiff, not anywhere near the truck that was covered by the defendant. The appellate court affirmed. The plaintiff claimed that the defendant has a duty to defend, but the appellate court determined that the accident did not happen during the unloading/loading or usage of the truck. Instead, the loading was over once the injured employee started driving way, only to return to re-tarp. The tarping was not a part of the loading/unloading coverage, even though it was a part of the whole process. The truck that was covered by the defendant was not a factor in the accident. Thus, the defendant did not have a duty to defend. Monterey Ins. Co. v. Peerless Indem. Ins. Co., No. D072539, 2018 Cal. App. Unpub. LEXIS 5124, (Cal. Ct. App. Jul. 27, 2018).

Posted August 5, 2018

Improperly Raised Claims Preclude Claims By Private Insurers Against FCIC. The Federal Crop Insurance Act authorizes the Federal Crop Insurance Corporation (FCIC) to "insure, or provide reinsurance for insurers of, producers of agricultural commodities grown in the United States." The FCIC enlists private crop insurers to sell "policies written on terms, including premium rates, approved by FCIC.” The private crop insurers obtain reinsurance from FCIC pursuant to a Standard Reinsurance Agreement (SRA) negotiated between FCIC and the private crop insurance industry. FCIC requires the private crop insurers to renew these reinsurance contracts annually, although the Act limits renegotiation of "the financial terms and conditions" of the SRA to once in every five-year period. As relevant here, FCIC and the private crop insurers, including Agri-Business, negotiated a new SRA to become effective in the 2011 crop year. The SRA detailed how FCIC would take a share of the premiums collected from insured farmers in exchange for reimbursing the private crop insurers for certain administrative expenses and providing them with reinsurance against the risk of loss. Importantly, however, nothing in the 2011 SRA dictated what premium rates the private crop insurers could charge insured farmers or the methodology by which FCIC would calculate those rates. The 2011 SRA simply incorporated the Act, which requires FCIC to set premium rates that are actuarially sound and provides that the ratemaking methodology is subject to change. After negotiating the 2011 SRA, FCIC modified its ratemaking methodology, effective the following year. This resulted in lower premium rates than had been authorized in 2011 and allegedly cost the private crop insurers hundreds of millions of dollars in underwriting. The private crop insurers sought relief from the Risk Management Agency's Deputy Administrator for Insurance Services. When that failed, they appealed to the Civilian Board of Contract Appeals (the Board), arguing that this modification to the ratemaking methodology violated both the duty of good faith and fair dealing implied in the 2011 SRA and the Act's limitation on renegotiating financial terms and conditions. In the alternative, the private crop insurers argued for reformation or rescission of the 2011 SRA on the ground that the parties had mistakenly assumed that the ratemaking methodology in place when they agreed to the 2011 SRA was actuarially sound. The private crop insurers further attempted to invoke promissory estoppel based on alleged representations by FCIC that the ratemaking methodology and subsequent premiums would remain unchanged for the five years the 2011 SRA would be in place. The Board determined it had no jurisdiction to decide the claim of promissory estoppel and granted summary relief to FCIC on all other claims. The private crop insurers brought this suit in November 2014, but they did not seek judicial review of the Board's decision. Instead, they raised anew the claims they had made to the Board. They also brought additional claims alleging that FCIC had unjustly enriched itself and had failed to take into consideration the financial condition of the reinsured companies when making SRA decisions as required by the Act. The trial court dismissed all their claims and the private crop insurers, the plaintiffs in this case, appealed. The appellate court first determined that the plaintiffs cannot pursue again in the trial court the claims they had previously raised before and that were already adjudicated by the Board. The appellate court held that the plaintiffs’ only remedy was to seek review under the Administrative Procedures Act of the Board’s decision on their claims. Second, the court held that the plaintiffs cannot pursue a claim in the trial court that FCIC violated the law by changing the ratemaking methodology without considering the financial condition of the reinsured companies unless the plaintiffs first raised that issue in the administrative proceedings below. Lastly, the court determined that the plaintiffs’ promissory estoppel and unjust enrichment claims were foreclosed by the existence of the 2011 SRA because the ratemaking methodology and subsequent premiums were repeatedly discussed during negotiations as they closely related to the standard agreement and cannot qualify as some separate quasi-contract that could be the basis for additional equitable remedies. ACE Am. Ins. Co. v. Fed. Crop Ins. Corp., No. 16-5348, 2018 U.S. App. LEXIS 19855 (D. D.C. Jul. 13, 2018).

Posted August 3, 2018

No Insurance Coverage for Damage to Poultry House. The plaintiff’s poultry houses collapsed during a winter blizzard. The defendant retained two engineers. One engineer determined that the snow load caused the collapse. The second engineer determined that roof trusses collapsed because of a failure in the truss connector plates in the poultry house. Initially the defendant denied coverage because snow damages were not covered loss in the defendant’s policy that the plaintiff had purchased to insure the buildings. Later, the defendant changed its rationale for denying coverage to defective construction/design. The plaintiff sued for breach of contract, bad faith and negligence. The plaintiff also sued the agent that sold the policy and the construction company that built the barn. The plaintiff moved for partial summary judgment and the defendant moved for partial summary judgment. The court denied the plaintiff’s motion and granted the defendant’s. The court determined that the plaintiff failed to prove that the defendant acted without reasonable justification when denying the coverage. The court determined that the policy excluded coverage for snow damage and design defect based on the policy’s plain language. Slaubaugh Farm. Inc. v. Farm Family Cas. Ins. Co., No. S16C-06-033 ESB, 2018 Del. Super. LEXIS 308 (Del. Super. Ct. Jul. 23, 2018).

Posted July 28, 2018

Condition Precedent for Crop Insurance Coverage Not Satisfied. The plaintiffs are entities engaged in rice farming. Their rice crops were insured under federally-reinsured multi-peril crop insurance policies purchased from Rural Crop Insurance Services (RCIS). The insurance policy was provided under the Federal Crop Insurance Act (FCIA), which is administered by the Federal Crop Insurance Corporation (FCIC) and the Risk Management Agency (RMA). After they purchased the insurance and planted the 2012 crop, their rice crops were damaged by excessive rainfall. They filed claims for indemnity with RCIS. RCIS denied the claims on the basis that the crops were not insurable under the policy because levees were not surveyed and constructed immediately after seeding the rice, and levee gates were not immediately installed and butted as required by a special provision in the policy. When their claims were denied, the plaintiffs sought arbitration with RCIS as required by the policy, which stated that: “In addition to the definition of Planted Acreage specified in section 1 of the Crop Provisions, the following must have occurred immediately following seeding. If these activities have not occurred, the acreage will be considered ‘acreage seeded in any other manner’ and will not be insurable: (1) levees are surveyed and constructed; (2) levee gates are installed and butted; and (3) the irrigation pump is operable, ready to be started in the event sufficient rainfall has not been received, and turned on to provide sufficient water for the purposes of germination or elimination of soil crusting.” The FCIC agreed with RCIS that the Merriam-Webster dictionary defines "immediately" as "without any delay,” which means that the listed activities must occur right after planting has ended, weather permitting, without any delay. The plaintiffs requested a review of the FCIC's interpretation by the RMA, and the RMA affirmed. The National Appeals Division (NAD) concluded that RMA's written interpretation was not appealable and that the plaintiffs had exhausted their administrative remedies. The trial court upheld the administrative determinations, as did the appellate court. The appellate court noted that the clear language of the FCIA indicated that the Congress intended the FCIC to have extensive and broad authority. Under the FCIA, judicial review is available but limited. Given the FCIA’s broad grant of authority to the FCIC, and the specific authority over the provisions of insurance and insurance contracts, the appellate court concluded that it must give substantial deference to the FCIC's interpretation of the special provision. In addition, the court determined that the FCIC's interpretation of the special provision was consistent with the plain reading of the policy, which indicated that the activities listed must "have occurred immediately following seeding" or the acreage would be considered to be uninsurable. The appellate court also determined that the FCIC's decision that the language provided a condition for insurability and was not subject to an analysis of good farming practices was not plainly erroneous. The appellate court, like the trial court found that the interpretation was not "'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Bottoms Farm Partnership v. Perdue, No. 17-2164, 2018 U.S. App. LEXIS 19609 (8th Cir. Jul. 17, 2018).

Posted July 7, 2018

Farmer Need Not Read Crop Insurance Policy - Reliance On Insurance Agent’s Calculation Of APH Sufficient. The plaintiff in this case owns a 280-acre soybean and wheat farm. The farm has been in his family for many years and operated as a dairy farm. In 2011, the plaintiff began planting wheat and soybean as commodity crops. At this point he took out several loans from the defendant in order to purchase farm machinery and equipment. After he obtained these loans, the defendant recommended that he get crop insurance in case of a weather-related crop loss. The plaintiff had heard about crop insurance and agreed that he needed it, but told the defendant that he knew nothing about crop insurance or anybody who “writes it.” The defendant put the plaintiff in touch with an insurance agent who has been a licensed crop insurance agent with defendant since 2000. The insurance agent told the plaintiff she sold crop insurance for “Diversified” (a company contracted with USDA to deliver the federal crop insurance program). At that time, the plaintiff told her where he obtained his grain and that he had never sold crops commercially before 2011, using it only as feed or seed to replant. The insurance agent handled all of the production history calculations, presumably from weight tickets he had provided to her. As a result of their meetings, the insurance agent procured crop insurance from Diversified for the plaintiff’s 2011 soybean crop and his 2012 wheat crop. The plaintiff had a continuous policy for wheat with an actual production history (APH) of 75 bushels per acre, which the insurance agent calculated based upon what the plaintiff told her that he produced for the four years prior to 2012. The agent did not ask the plaintiff for documents supporting these amounts and explained that he was not required to submit such documentation with his insurance application, but she warned him that if he was ever audited he would have to document what was reported in the insurance application. The application requested 60 percent coverage, and the plaintiff testified that he left it up to the agent to decide the amount, but did not object to it when he signed the application. The plaintiff did not read the insurance application or the production and yield report on which the insurance agent calculated the APH, and he did not ask any questions about either document. For crop year 2012, the plaintiff planted over 600 acres of wheat and conducted his farming operations based on the agent’s representation that the wheat was insured at the coverage level stated in his policy. In July of 2013, he suffered a complete loss of his wheat crop due to excessive moisture. The plaintiff called the insurance agent to report the loss, and Diversified sent an adjuster to examine the crop and calculate the loss. The plaintiff received approximately $102,986 from Diversified, which he then assigned to the defendant to pay down an existing loan. In July 2014 Diversified performed an audit of the plaintiff’s claim. Shortly thereafter, Diversified notified the plaintiff that a reduction in production and yields for specific units was applied resulting in an overpayment of $102,986 and demanded repayment. The plaintiff filed this complaint against the defendant and the insurance agent on May 9, 2016, alleging that the agent held herself out as a crop insurance expert and that he relied on that expertise and her representations to establish his farming plan. The plaintiff also claimed that the defendant, as the agent’s employer, was vicariously liable for her actions. The defendants moved for summary judgment, arguing that the plaintiff was obligated to read the policy and, if he had, he would have known that documentation was required to support the claimed APH. The trial court granted the defendants’ motion for summary judgment and the plaintiff appealed. The appellate court determined that a jury could find that the plaintiff, a layperson, could not be expected to read the policy and determine what constituted a written verifiable record. The policy at issue referred to supporting “written verifiable records” and relied upon a reference to a federal regulation to define that term. Thus, the court held that it would not have been readily apparent to the plaintiff, on the face of the policy, that the weight tickets or other information he provided to the agent were not adequate to meet the definition of “written verifiable record.” Thus, the court held that even if the plaintiff had the read the policy from beginning to end, he would not have known that the calculation was not properly done in accordance with federal regulations because calculating the APH was up to the expert agent and governed by the rules set out in the Crop Insurance Handbook. As such, the appellate court held that the trial court erred in granting summary judgment to the defendant. Bush v. AgSouth Farm Credit, No. A18A0339 2018, Ga. App. LEXIS 437 (Ga. Ct. App. Jun 27, 2018).

Posted July 3, 2018

Insurance Company Has No Duty To Defend Farm Managers. The defendant bought 265 acers of citrus groves and hired managers to maintain the groves. The managers were insured under the plaintiff’s commercial general liability (CGL) policy and sub-contracted some of the required work out. A sub-contractor approached the defendant about unpaid work. Based on those conversations, it became clear to the defendant that the managers were over charging for product, charging for labor the subcontractors never did, charging for trees never planted, and that there were many other accounting discrepancies. The defendant submitted the evidence to the state for criminal charges. The defendant also hired a new farm manager that estimated tree that would be prevalent for 20 years or more and cost approximately $2.9 million. The defendant also sued the managers for breach of oral contract and breach of fiduciary duty. The defendant also sought an equitable accounting, and later added a negligence claim. The managers did not notify the plaintiff of the action against them until the negligence claim was added. The managers agreed to settle by paying the defendant $200,000 for the breach of contract claims and the equitable accounting. As for the negligence claim the managers agreed to a $2,965,750 judgment, but the defendant agreed to set this aside rights under the manager’s insurance so long as the managers established insurance coverage for bad faith. The plaintiff sued to vindicate its liability owed to the defendant managers. The defendant, under the assigned rights, countered for the $2.9 million judgment and for breach of insurance policy. The plaintiff moved for summary judgment on the basis that the policy did not cover intended damages, and that the settlement was unreasonable and a result of collusion between the defendant and the managers. The plaintiff also claimed that there was no duty to defend the defendant in the state civil claim, and the negligence claim was improperly determined from the breach claims. The defendant moved for partial summary judgment on the plaintiff’s duty to defend argument. The court granted the plaintiff’s motion for summary judgment on the basis that the policy excluded damage from "expected or intended" actions; a provision in the policy excluded coverage on property damage; the state civil settlement was unreasonable; the negligence claim did not trigger a duty to defend; and bad faith and collusion stained the settlement. The court determined that it was clear that the actions by the managers were intentional. The court also noted that the same policy in a different case involving subcontractors and an accidental fire was held to only cover the portion of the loss where construction was involved, and not the rest of the building damage. The court also held that the policy explicitly did not cover intentional actions or related property damage. The court also found that the settlement was unreasonable for at least three reasons. First, lost future revenue accounted for most of the damages. Second, the damage amount failed to differentiate from crop disease damage which was likely to happen on the property because of the soil, and damage caused by the defendant’s mismanagement. Finally, the settlement failed to accommodate the economic loss rule or for the defendant’s failure to file a negligence claim under the policy. Next, the court found that the plaintiff did not have a duty to defend. The defendant did not allege many facts in the negligence claim, relying on the allegations in the other claims to show negligence. Because of this conclusion-based negligence claim, the plaintiff had no duty to defend. With the pending criminal charges, the court determined that the mangers were making a settlement that was favorable to the charges. Also, the fact that it was obvious that the defendant would not be able to pay for that settlement on its own, was evidence that the defendant was expecting the insurance to cover the amount. The dollar amount was not a priority to the defendant like it would have been to the plaintiff if they had been in settlement negotiations. Considering all of these factors, the court granted summary judgment to the plaintiffs. Travelers Indemnity Co. v. Richard McKenzie & Sons, Inc., No. 8:17-cv-2106-T-23CPT, 2018 U.S. Dist. LEXIS 108140 (M.D. Fla. Jun. 28, 2018).

Posted May 7, 2018

Arbitrator’s Award Vacated in Crop Insurance Case. The plaintiff, a farming partnership, bought crop insurance from the defendant for the 2013 crop year. The plaintiff intended to buy full crop coverage on all planted acres, and the defendant’s agents represented that the coverage purchased was full coverage. The plaintiff incurred a loss on one parcel, and was prevented from planting on two other tracts. The plaintiff filed claims for the losses under the policy and the defendant denied coverage on the basis that one tract on which the claim was made was listed under the policy as being in a different county and the tracts on which the plaintiff was prevented from planting crops were improperly claimed on an Farm Service Agency report. The defendant conceded that the errors were the fault of the defendant’s agents. The plaintiff sought arbitration pursuant to the policy and was awarded coverage on the claims and treble damages. The arbitrator’s award was based on legal theories of negligence, breach of fiduciary duty, constructive fraud and violation of state (NC) law. The defendant challenged the arbitrator’s award as beyond the scope and authority of the arbitrator insomuch as the arbitrator engaged in interpreting the meaning, scope and applicability of the crop insurance policy at issue rather than obtaining an interpretation from the Federal Crop Insurance Corporation (FCIC). The court agreed, noting that 7 U.S.C. §1506(l) pre-empts the arbitrator’s award unless FCIC procedures had been followed. The court also noted that the treble damages were based on the arbitrator finding a violation of NC law involving unfair and deceptive trade practices without first seeking a ruling from the FCIC. Accordingly, the court vacated the award as being beyond the arbitrator’s authority. Williamson Farm v. Diversified Crop Insurance Services, No. 5:17-cv-513-D, 2018 U.S. Dist. LEXIS 49249 (E.D. N.C. Mar. 26, 2018).

Posted April 9, 2018

Farm Lender Handled Crop Insurance Claims Properly. The plaintiff made a series of operating and equipment loans to the defendant that were secured by various security agreements and mortgages that granted the plaintiff liens in the defendant’s crops government payments, crop insurance, equipment and real estate. The defendants lost their wheat crop in 2007 to freeze damage and a severe drought that year also reduced their soybean yield. As a result, the defendant could not fulfill various contracts with a grain buyer. That, in turn, caused the defendant to default on its loans with the plaintiff. The plaintiff then filed a foreclosure and replevin action, but the defendant raised various affirmative defenses, including that the plaintiff improperly required the defendant to book their crops as a condition or receiving loans; that the plaintiff disclaimed any interest in the proceeds of the soybean crop; and that the plaintiff mishandled the defendant’s crop insurance applications and claims. The defendant also sought punitive damages and a jury trial. The trial court granted partial summary judgment to the plaintiff on the defendant’s claim for punitive damages. The trial court also granted the plaintiff summary judgment on its complaint which the trial court granted as to liability, but didn’t enter judgment as to the defendant’s counterclaim when the value of all claims could be determined. After a jury trial, the jury found for the plaintiff on all of their claims and for the defendant on one of their claims for a total of $173,867.45. The jury specifically determined that the plaintiff was not negligent in the manner that it handled the defendant’s crop insurance claims, noting that an insurance agent generally does not have a duty to advise or inform a policyholder as to various coverages that are available. The court affirmed the jury’s verdict on the defendant’s crop insurance claims. Farm Credit Midsouth, PCA v. Bollinger, et al., No. CV-16-739, 2018 Ark. App. LEXIS 248 (Ark. Ct. App. Apr. 4, 2018).

Posted March 28, 2018

Arbitrator’s Decision in Crop Insurance Case Upheld. The plaintiff purchased crop insurance from the defendant for 2010 and 2011. The premium for the 2010 policy was $44,251, of which the federal government’s portion was $26,998 and the plaintiff’s portion was $17,658.80. The defendant paid the plaintiff $42,708 for his 2110 crop loss. That amount represented the plaintiff’s actual crop loss of $58,159.00 less the balance of his outstanding premium due of $12,699.68. The plaintiff was denied eligibility to buy crop insurance for 2012 due to his failure to pay for the premiums on his 2009 policy. Upon learning this, the plaintiff paid the balance of the 2009 premium. The plaintiff also learned that he was not eligible to participate in the federal crop insurance program until he repaid the payment he had received for his 2010 crop loss. The defendant began efforts to recover the entire amount it paid to the plaintiff in 2010. The plaintiff filed a declaratory judgment action seeking a declaration that the defendant was not due a refund because the insurance contract for the 2010 crop year was valid, that he had not been compensated for his loss in accordance with the contract, and that the parties’ becoming aware that he was ineligible to participate in the crop insurance program after the payment was made was not relevant. In the alternative, the plaintiff claimed that if the court found the insurance contract to be void, that the premiums be used to set off any refund due, which would mean that the defendant was not due any money. The court stayed the action pending the outcome of arbitration. The arbitrator determined that the 2010 insurance contract was void, and that the defendant was entitled to recover $42,708 plus interest for a total of $52,146.78. The arbitrator also noted that the parties had agreed to be bound by the Federal Crop Insurance Act and the associated regulations. Thus, the contract would be interpreted accordingly. The plaintiff filed a motion to vacate the arbitrator’s decision on the basis that the arbitrator exceeded his authority under federal law. However, the court noted that the applicable regulation, 7 C.F.R. §400.681(b)(5), provided that “any indemnities or payments made on a voided policy, or on the portion of the policy reduced because of ineligibility, will be declared overpayments and must be repaid.” As such, the court held that the plaintiff’s argument lacked merit and the trial court’s decision was affirmed. Stewart v. Armtech, No. M2017-01299-COA-R3-CV, 2018 Tenn. App. LEXIS 151 (Tenn. Ct. App. Mar. 21, 2018).

Posted November 23, 2017

Federal Crop Insurance Policy Does Not Preempt Kansas Statue Of Limitations. In 2009, the defendant, as a new wheat producer, purchased crop insurance from the plaintiff. In 2011, the defendant, as a new soybean producer, again purchased crop insurance from the plaintiff. The defendant suffered a crop loss in both years and the plaintiff paid the claims. In 2012, the plaintiff notified the defendant that it overpaid his claims because he did not qualify as a new producer in either 2009 or 2011. The plaintiff applied the $10,818 owed on the 2012 crop loss policy claim to the overpaid balanced and indicated that the defendant still owed a total of $9,238. In October 2015, the plaintiff filed a limited action claim for $9,238 for the outstanding overpayment. The defendant answered and counterclaimed for $10,818 for breach of contract and conversion. The defendant moved for partial summary judgment arguing that the applicable state (Kansas) statute of limitations barred the recovery for the overpayment of the 2009 claim. The plaintiff responded by arguing that federal law preempted the state statute of limitations. The trial court found that Kansas’ five-year statute of limitations barred the plaintiff’s claim for overpayment for the crop year 2009. After a trial, the court found that the plaintiff waived the arbitration requirement in the policy when it filed the lawsuit. In addition, the trial court found that the defendant was a new producer of soybeans in 2011 and the plaintiff did not overpay on the defendant’s 2011 claim. Consequently, the trial court denied the plaintiff’s claim against the defendant and granted the defendant’s counterclaim for $10,818. The plaintiff appealed. On appeal the plaintiff claimed that the Federal Crop Insurance Act (FCIA) and the crop insurance policy preempted conflicting state law. The appellate court noted that the FCIA states “if the provisions of this policy conflict with statue of the State or locality in which this policy is issued, the policy provisions will prevail. State and local laws and regulation in conflict with federal statues, this policy and the applicable regulations do not apply to this policy.” The appellate court held that this language made it clear that Congress only intended to preempt conflicting state laws. However, because the plaintiff did not show and the court could not find an applicable federal statute of limitations the appellate court held that the trial court did not err when it applied the Kansas five-year statute of limitations as to the crop policy issued for 2009. In addition, the appellate court found that the plaintiff’s issue raised in his motion in limine to prevent the defendant from admitting evidence at trial was not preserved for appeal because the plaintiff failed to contemporaneously object to any of the defendant’s evidence presented at trial. Finally, the court held that the plaintiff again did not preserve for appeal the argument that the trial court lacked authority to interpret the policy because the only mention occurred during a witness testimony and did not include a citation to authority and was not expanded upon by the plaintiff. As a result, the appellate court affirmed the trial court’s decision. Great Am. Ins. Co. v. Wahl, No. 117,176 2017, Kan. App. Unpub. LEXIS 922 (Kan. Ct. App. Nov. 3, 2017).

Posted November 18, 2017

Insurance Policy Didn’t Cover Damage to Customer Lawns. The plaintiff operated a flower shop and lawn care business. In 2013, one of the plaintiff’s employees negligently mixed glyphosate, a herbicide commonly known as Roundup, instead of Eliminate in a lawn sprayer. As a result, the plaintiff’s employee severely damaged 26 of the plaintiff’s customers’ lawns. The plaintiff incurred substantial expenses for the restoration of the lawns. At the time of the incident, the plaintiff was insured pursuant to a policy with the defendant. The policy included a limited pesticide-or herbicide-applicator coverage endorsement. After the defendant denied coverage, the plaintiff filed a complaint. In its complaint, the plaintiff relied on the Illinois Pesticide Act. The defendant filed a motion to dismiss the plaintiff’s complaint arguing that the claim was barred under the property-damage exclusions contained in the policy which provided: “This insurance company does not apply to: Property damage to That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” The trial court dismissed the plaintiff’s entire complaint with prejudice. The plaintiff appealed. On appeal the plaintiff argued that the trial court erred in determining that the property-damage exclusions in the policy applied, because they conflicted with the Pesticide Act. The plaintiff claimed that the Pesticide Act reflected Illinois public policy mandating coverage for parties that are required to purchase coverage. The appellate court rejected the plaintiff’s argument as contrary to the plain language of the Pesticide Act. The appellate court determined that the plain language of the Pesticide Act illustrated an intent to protect persons who suffered personal injury or property damage as the result of pesticide application. However, the plaintiff did not suffer any personal injury or property damage. Rather, it caused property damage to its customers’ lawns. The court held that to accept the plaintiff’s argument would require them to interpret the terms “cause” and “suffer” as synonymous, which they declined to do. Therefore, because the plaintiff was not an intended beneficiary of the Pesticide Act’s protections, the plaintiff’s rights were governed by the terms of its contract with the defendant. The appellate court affirmed. Deemeester’s Flower Shop & Greenhouse, Inc. v. Florists’ Mut. Ins. Co., No. 2-16-1001, 2017 Ill. App. LEXIS 666 (Ill. Ct. App. Oct. 26, 2017).

Posted November 13, 2017

No Need To Inform Farm About Criminal Investigation Concerning Crop Insurance Fraud. The defendant is a federal crop insurer and the plaintiff is a farming operation that raised potatoes and onions. The plaintiff claimed that it purchased a federal crop insurance policy from the defendant and tendered an insurance claim to the defendant in 2004. The defendant denied the claim and the plaintiff demanded arbitration. The arbitrator found for the plaintiff, requiring the defendant to pay $1,454,450 plus interest on the claim. The defendant appealed the arbitrator’s award, but the trial court affirmed the award for the plaintiff. While the claim was in dispute the USDA was, unbeknownst to the plaintiff, conducting a criminal investigation of the plaintiff for an alleged scheme to profit from the filing of false federal crop insurance claims. Ultimately, the plaintiff and its principal were indicted based on their acceptance of the arbitration award which the government claimed constituted a criminal act. At the subsequent trial, the court dismissed all of the counts with prejudice. The plaintiff had also sued the defendant for breach of contract, negligent misrepresentation, and violation of the Washington Consumer Protection Act (WCPA). The plaintiff claimed that the defendant had acted as the USDA’s agent and, as a result, the arbitration award was simply a ruse to entrap the plaintiff. The plaintiff claimed that if it had known about the criminal investigation that it could have required the USDA’s direct involvement in the arbitration process and be assured that no criminal charges were pending.  The plaintiff also claimed that USDA's direct involvement would have allowed it to get a court order that the plaintiff had a right to recover on its claims. The trial court granted summary judgment for the defendant holding that a private insurance company has no authority to bind the federal government from pursuing a criminal prosecution, absent involvement from a party with the requisite authority. The trial court ruled that it was unreasonable as a matter of law for a settlement agreement between private parties which clearly defines the subject matter of the agreement, to preclude criminal prosecution by the government. The plaintiff appealed. The Mutual Release in the parties’ contract provided that the defendant, “for itself and for its insurance companies, and related companies” releases the plaintiff from liability for claims arising out of the plaintiff’s claim for indemnity under the 2003 crop insurance policies issued by the defendant. The plaintiff argued that “its insurance companies” included the Federal Crop Insurance Company and, therefore, the federal government. However, the appellate court held that the phrase could not reasonably be interpreted to bind the federal government and prevent the Department of Justice from pursing a criminal prosecution against the plaintiff for events related to the 2003 policies. Furthermore, the limited scope of the release could not be reasonably read to encompass the criminal charges filed against the plaintiff, which dealt with inflating crop baseline prices to increase eventual payouts on numerous insurance policies. Thus, the appellate court affirmed the trial court’s grant of summary judgment on the breach of contract claim. The plaintiff also alleged misrepresentation of a material fact. The appellate court determined, however, that the plaintiff failed to demonstrate a genuine factual dispute as to whether the defendant knew that the plaintiff was under a criminal investigation. The plaintiff’s evidence in support of that proposition stemmed from a 2004 insurance policy, rather than the 2003 insurance policy at issue in this case. Consequently, the appellate court agreed with the trial court that, as a matter of law, the plaintiff could not have reasonably relied on the purported misrepresentation. Therefore, the trial court’s grant of summary judgment on the plaintiff’s misrepresentation claim was granted. Finally, the plaintiff’s WCPA claim failed because there was no misrepresentation, deception or unfairness. The terms of the contract were not deceptive and the plaintiff did not make a showing that there was a genuine dispute over whether the defendant knew about the criminal investigation. POCO, L.L.C. v. Farmers Crop Ins. All., Inc., No. 16-35310, 2017 U.S. App. LEXIS 20853 (9th Cir. Oct. 23, 2017).

Posted November 4, 2017

Fact Issues Remain In Case Involving Insurance Claim for Home Ravaged by Gunfire and Tear Gas. The plaintiffs owned a rural rental home. While the plaintiffs were away from their home, a two-state police chase involving gunfire and a downed officer ended near their home. Near the plaintiff’s home, the suspect began another gunfight with police and a civilian he had taken hostage in a carjacking during the case was shot. The suspect fled the gunfight on foot, ending up at the plaintiff’s rental home. According to the plaintiffs he then broke a window to gain entry to the garage and ultimately to the residence. Law-enforcement officers quickly surrounded the house, but their calls for the suspect to come out and surrender got no response. Eventually the officers decided the safest approach would be to fill the home with tear gas and pepper spray in an effort to limit the areas of the home that the suspect could be in and degrade his ability to respond aggressively when officers eventually came in. The officers shot what may have been 15 canisters at the house, most breaking through windows and then delivering their intended payload upon hitting some object, often a sheetrock wall, in the house. The officers ultimately broke through a door and found the suspect hiding under a mattress in the closet doing his best to avoid the chemicals. He was taken into custody without further gunshots or injury. The damage to the plaintiff’s rental house from all of this was extensive. Repair estimates ranged from $34,000 to $36,000. The house was insured for $32,000 and in the plaintiff’s view it was a total loss. The plaintiffs filed a claim with their property-insurance carrier, the defendant in this case. The defendant said that the loss was totally excluded from coverage by a policy provision that excluded coverage for “a loss which results from order of civil authority,” even if there were other causes for the loss that would have been covered under the policy. The defendant argued that the search warrant officers got from a local judge while they were waiting to enter the home constituted an order of civil authority and that the officers entered under that authority. The district court granted summary judgment in favor of the defendant based on the policy exclusion. The plaintiff appealed. The court of appeals determined that the officers didn’t need a search warrant to go into the residence. A warrant wouldn’t have been required to apprehend this man who posed a clear threat to the local community and who officers had good reason to believe had committed attempted murder and other crimes on his way. Nor would a warrant have been required to enter the house to gather evidence since both property owners, the plaintiffs and the renters, had given officers permission to go in. Therefore, the damage to the house was caused not by the issuance of a search warrant but by the appropriate and foreseeable actions taken by law-enforcement officers after a dangerous fugitive took refuge in a private home and refused to surrender. If the suspect entered the home by breaking a window, as the plaintiffs claimed, then the damages would be covered under an act of vandalism which is covered in the policy. However, the evidence conflicted as to whether the suspect entered the home by breaking a window or through an unlocked door. Consequently, neither party was entitled to summary judgment. Thus, the appellate court reversed the trial court’s grant of summary judgment to the defendant and returned the case to the trial court for further proceedings. Allen v. Marysville Mutual Ins. Co., No. 116,888, 2017 Kan. App. LEXIS 76 (Kan. Ct. App. Oct. 20, 2017).

Posted October 24, 2017

APH Yield Exclusion Available Producers The Day The Farm Bill Was Signed. The plaintiffs, farmers who produce winter what in Baca County, Colorado, sought judicial review of an adverse decision of the Risk Management Agency (RMA) which was subsequently affirmed by the National Appeals Division (NAD). Section 11009 of the 2014 Farm Bill amended subparagraph 1508(g)(4)(C) of the Federal Crop Insurance Act (FCIA) to add an APH Yield Exclusion to give crop producers the opportunity to exclude uncharacteristically bad crop years from the RMA’s calculation of how much crop insurance coverage they are entitled to. The plaintiffs wished to insure their 2015 winter wheat crop. Believing that they were eligible to invoke the APH Yield Exclusion, they gave their crop insurance agents letters electing to exclude all eligible crop years for purposes of calculating their coverage. After receiving the letters from the plaintiff and other crop producers, crop insurance providers contacted the RMA requesting guidance on how to handle the APH Yield Exclusion elections concerning the 2015 winter wheat crop. The RMA informed insurance providers that it had authorized the APH Yield exclusion for most crops for 2015, but it did not authorize the APH Yield Exclusion for winter wheat. As a result, the Agency directed insurance providers to deny winter wheat producers’ requests for the APH Yield Exclusion. The plaintiffs challenged the directive as an adverse decision appealable to NAD. A NAD Hearing Officer conducted a hearing and issued a determination that NAD did not have jurisdiction over the matter and did not reach the merits. The plaintiffs then requested NAD Director Review of the Hearing Officer’s Determination pursuant to 7 C.F.R. § 11.9. The NAD Director reversed the Hearing Officer’s determination as to jurisdiction, but also held that the RMA has discretion to determine the appropriate time to implement the APH Yield Exclusion with regard to 2015 winter wheat. This decision effectively affirmed the Agency’s decision not to authorize the Exclusion. The plaintiffs appealed, and the trial court determined that, absent clear direction by Congress to the contrary, a law takes effect on the date of its enactment. The court noted that there was no statutory indication that it would take effect other than on the date of its enactment. The court viewed Congress’ silence as an expression that it meant the APH Yield Exclusion to be immediately available to producers on the date the Farm Bill was signed into law. Consequently, the court reversed the NAD Director’s decision and remanded this case for the proper application of the APH Yield Exclusion. Ausmus v. Perdue, No. 16-cv-01984-RBJ, 2017 U.S. Dist. LEXIS 169305 (D. Colo. Oct. 13, 2017).

Posted October 18, 2017

Feed Company Might Be Covered By Insurance Policy Because Of “Separation Of Insureds” Clause. The defendant manufactures and sells feed for different kinds of livestock. The defendant is also the sole member of another limited liability company--C&K LLC. C&K manages a feedlot in California that the defendant owns. All profits and losses of C&K are allocated to the defendant, and C&K does not itself own any property, cattle, or equipment. There are no written contracts between the defendant and C&K but there is an oral agreement that C&K’s employees will manage and care for the cattle housed at the feedlot. Some of the cattle belong to the defendant while other cattle belong to third parties who contract with the defendant for the caretaking of their cattle. The defendant provides cattle feed and directs the proportions of different products to be included in the feed. On August 5, 2014, the cattle at the feedlot were given feed that was contaminated with high levels of Monensis/Rumensin, causing 861 cattle deaths, as well as numerous injuries to the reproductive capacities of other cattle which did not die. This feed was sent directly from the defendant’s mill to the feedlot. The defendant submitted a notice of the loss to Praetorian Insurance Company, the plaintiff in this action, on August 14, 2014. On December 2, 2014, the plaintiff sent a reservation of rights letter to the defendant which indicated that the plaintiff believed the claims were excluded under the “care, custody, or control” exclusion of the policy. On April 10, 2015, the plaintiff sued seeking declaratory judgment as to whether coverage existed for the defendant’s losses and subsequently moved for summary judgment on its claim. The plaintiff asserted that the losses were not covered under the policy because they fell within an exception that exempts “property damage” to “personal property in the care, custody or control of an insured.” The defendant, however, claimed that the exclusion did not bar recovery because the cattle were actually in the care, custody, or control of C&K, not the defendant, and the contract contained a “separation of insureds” provision. That provision provides that the policy applies “as if each Named Insured were the only Named Insured” and “separately to each insured against whom claim is made or ‘suit’ is brought. The court held that the introduction of a severability or separation of insureds provision created an ambiguity which must be construed in favor of the insured. The court also determined that a reasonable insured would understand a policy with a separation of insureds provision to mean that “each insured’s coverage would be analyzed separately, even where the exclusion would normally treat the insureds collectively. Therefore, the court analyzed the insured actions for caring for the cattle, or exercising custody or control of them separately. As a result, the court determined that the evidence supported a finding that the defendant had some level of care, custody, or control of the feedlot and the cattle housed there. At the same time, however, there was also evidence before the court suggesting that the defendant at least shared care, custody and control of the cattle with C&K and did not have exclusive control of the feedlot. Thus, the court held that C&K shared in the care, custody, or control of the cattle and the defendant’s custody of them was not complete and exclusive. As a result, the court concluded that a reasonable factfinder could conclude the defendant did not exercise complete and exclusive care, custody, or control of the cattle at issue because much of the caretaking was done by C&K, a separate legal entity with its own employees. According the plaintiff’s motion for summary judgment with respect to the issue of insurance coverage was denied. Praetorian Ins. Co. v. Western Milling, LLC, No. 1:15-cv-00557-DAD-EPG, 2017 U.S. Dist. LEXIS 159181 (E.D. Cal. Sept. 27, 2017).

Posted October 14, 2017

Statutory Time Limit For Notice Of Application To Vacate Crop Insurance Arbitration Award Cannot Be Waived. The plaintiffs farm together in Holt County, Nebraska. They each obtained federally reinsured crop insurance policies, serviced by the defendant. In 2012, the plaintiffs submitted “prevented planting” claims under their crop insurance policies, claiming they were unable to plant corn on certain acres due to wet conditions. The defendant denied the plaintiffs’ prevented planting claims, finding that excessive moisture was not general to the surrounding area and did not prevent other producers from planting acres with similar characteristics. Pursuant to the mandatory arbitration clause in the policies, the parties submitted their disputes to binding arbitration. The arbitrator issued a final arbitration award in favor of the defendant on January 21, 2014. On May 15, 2014, the plaintiffs filed a petition for judicial review in the Holt County District Court seeking to vacate the arbitration award under §10 of the Federal Arbitration Act (FAA) which provides “the district court wherein the award was made may make an order vacating the award upon the application of any party to the arbitration. . . where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.” The district court granted the plaintiffs’ summary judgment motion and vacated the arbitration award finding that the arbitrator exceeded his powers and manifestly disregarded the law. The defendant appealed, but failed to note in the appeal that the plaintiffs did not meet the three-month time limit for appealing. Consequently, because the defendant did not raise the issue of the violation of the three-month limit, the court had to determine whether the time limit was jurisdictional in nature and, thus, cannot be waived even if the parties do not raise the issue. According to the U.S. Supreme Court, absent such a clear statement, the restriction should be treated as non-jurisdictional in character. Section 9 of the FAA which enumerates the notice requirements for judicial confirmation expressly states that after service of proper notice “the court shall have jurisdiction over the adverse parties to the arbitration.” Consequently, the court determined that this was a clear indication that Congress intended the statutory requirements for service notice of an application for expedited judicial review under the FAA to be jurisdictional in nature. The court held that although different timeframes apply for serving notice under section 9 and section 12 of the FAA, there is no difference in the mandatory process by which the adverse party must be served with notice and no difference in the practical purpose for requiring such notice. Thus, it would make little sense for Congress to give clear jurisdictional weight to service notice in one context but not the other. In addition, the court saw no indication in the statute that Congress intended the notice requirements for expedited judicial review to be jurisdictional when a party seeks judicial confirmation, but not jurisdictional when a party seeks judicial vacatur or modification. Consequently, the court determined that whether an arbitrating party is applying for judicial review to confirm and award under section 9 or to vacate or modify an award under section 10 and 11, Congress intended that party’s failure to serve notice of the application within the mandatory time limits, would have jurisdictional consequences. Because the court concluded that the three-month requirement is jurisdictional in nature and the plaintiffs failed to comply with the three-month requirement the district court did not have authority under the FAA to vacate the arbitration award. As a result, the court vacated the district court’s judgment and dismissed the appeal for lack of jurisdiction. Karo v. NAU Country. Ins. Co., 297 Neb. 798 (2017).

Posted October 5, 2017

No Insurance Coverage For Manure-Related Damages From Dairy CAFO. The plaintiff operates a dairy which was classified as a concentrated animal farm operation (CAFO). Manure from the CAFO was stored in holding ponds and then spread on crops as fertilizer. The holding ponds leaked, allowing seepage of over 1.6 million gallons of untreated manure into the groundwater annually. In addition, the manure soaked the soil and entered the ground water table, contaminating the local water supply. An environmental activist group sued for damages on behalf of its members, and the plaintiff submitted a tender for defense and indemnity to its insurers, but the insurers (the defendants in this case), denied coverage and did not provide a defense. The parties to the damage case causing the plaintiff to incur extensive expenses. The plaintiff then sought a declaratory judgment that the defendant had a duty to defend the plaintiff in the litigation and indemnify them for the losses arising from the litigation. Under applicable state law, insurance policies are construed as contracts, and courts consider the policy as a whole and give it a fair, reasonable and sensible construction as would be given to the contract by the average person purchasing insurance. A duty to indemnify the insured arises when the insurance policy actually provides coverage for the loss. The parties did not dispute that the losses would be covered under the relevant insurance policies. However, the defendants argued that this case fell under the absolute pollution exclusion. The absolute pollution exclusion purports to exclude from coverage all losses related to pollution. Among other things, the policies exclude from coverage “any liability arising out of (a) the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants: (i) at or from the premises; and (ii) at or from any site or location used for the handling, storage, disposal, processing or treatment of waste.” In addition, the policies define pollutants as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” The court concluded that manure clearly fell under the definition of a pollutant as waste. In addition, the court held that no reasonable person could seriously deny manure is a pollutant in the context of entering water. The court also held that the manure was clearly acting as a pollutant in contaminating the water. As a result, the court determined that the absolute pollution exclusion applied. However, the court also determined that the policy may still cover the claim if an otherwise covered occurrence was the efficient cause of the excluded harm. In other words, if the initial event, is a covered peril then there is coverage under the policy regardless of whether subsequent events within the chain, which may be causes-in-fact of the loss, are excluded by the policy. The court viewed the two sources of contamination separately. The court determined that the over application of manure directly to the land was a single event that fell squarely under the specific cause of pollution (release or dispersal), and was excluded from coverage. With regards to the seepage via the holding ponds the court determined that it was inadequate storage of the manure that caused the seepage. The court held that this also was explicitly excluded by the terms of the policy, which excluded from coverage the seepage of pollutants stored or processed as waste. Consequently, both events of pollution were not covered under the policy. The court also concluded that because the non-coverage was clear, the defendants also did not have a duty to defend the plaintiffs in the underlying litigation and granted the defendants’ motion for summary judgment. Dolsen Companies. v. Bedivere Ins. Co., No. 1:16-CV-3141-TOR, 2017 U.S. Dist. LEXIS 151057 (E.D. Wash. Sept. 11, 2017).

Posted September 26, 2017

Claimed Losses Associated With Euthanized Birds Infected by “Bird Flu” Survives Dismissal. Avian influenza (“bird flu”) spread across parts of the United States in 2015, infecting flocks of turkeys and egg-laying hens in 15 states and resulting in more than 48 million birds being euthanized. The plaintiff owned and operated commercial poultry farms in several states including Minnesota and Iowa. In 2011, the plaintiff purchased a Premises Pollution Liability Insurance Policy from the defendant, and renewed the policy in 2014. The policy insured the plaintiff’s farms against losses caused by a “pollution condition.” Specifically, under the terms of the policy, losses caused by the discharge, dispersal, migration or seepage of any contaminant or pollutant onto the land is covered, except for those arising out of “naturally occurring materials,” with the exception being if those materials resulted from human activity. It also provided remediation coverage for costs incurred responding to a pollution condition. In May 2015, the plaintiff’s farms were hit with the outbreak of bird flu. Federal and state regulators ordered the plaintiff to quarantine its facilities and euthanize all of its eight million birds at the locations affected by the virus in order to help contain the spread. Once that process was complete, the plaintiff purchased new chicks to repopulate its facilities, at a cost exceeding $21 million. The plaintiff submitted a claim to the defendant for the policy’s entire $7 million limit: $5 million for business interruption losses and $2 million for remediation expenses. The defendant denied coverage and the plaintiff sued. The parties argued over how the virus arrived on the plaintiff’s property, and whether or not humans were partially involved in the transfer. The plaintiff claimed that nearby infected farms that depopulated their flocks via gas chamber created a “virus cloud” that spread through the air. However, the defendant claimed that the plaintiff could not prove that theory with certainty and that it was just as likely that the virus spread naturally and, therefore, the bird losses were not covered losses under the policy. In essence, the defendant claimed that avian flu wasn’t a “contaminant” within the meaning of the policy or, alternatively, that the virus was a “naturally occurring material” that fell into a policy exclusion. The plaintiff sought to recover for two types of expenses under the policy’s remediation costs provision: money spent acquiring chicks to replace euthanized birds and money spent to heat the barns once the flocks were depopulated. Remediation costs, as defined by the policy, are reasonable expenses required to restore, repair or replace real or personal property to substantially the same condition it was in before being damaged during the course of responding to a pollution condition. Thus, the key issue was whether the plaintiff’s property was “damaged during the course of responding to a pollution condition.” The defendant argued that the plaintiff’s birds were damaged by the bird flu itself which was the “pollution condition” and that none of the birds were damaged by the response to that infection. Thus, according to the defendant, because all the birds were going to die from bird flu the damage was complete the moment the flock became infected. The defendant eventually dropped its contamination defense argument, but continued to claim that the plaintiff could not prove with certainty exactly how the virus had arrived at its farms. The court determined, however, that some of the plaintiff’s birds were not infected when the government officials ordered the entire flock to be euthanized. In addition, the court determined that the policy did not require property to be in pristine condition before being damaged during the course of responding to a pollution condition. As a result, the destruction of the healthy birds squarely fell within the policy’s provisions for property damage during the course of responding to a pollution condition. The plaintiff argued that because the birds typically emanate enough heat to keep the barns' temperature above 50 degrees he was forced to heat its barns (at a cost of $800,000) after the flocks were euthanized in order to prevent damage until new birds could be purchased. However, the court determined that the barns themselves did not sustain any damages during the bird-flu crisis only the birds contained in the barns. In addition, the court pointed out that the plaintiff heated the barns in order to prevent damage rather than to repair any damage that occurred during the flu outbreak. For these reasons, the court granted the defendant’s motion for summary judgment in regards to the heating expenses and any claims to recover those expenses as remediation costs (the $2 million portion of the claim that the plaintiff was seeking) were dismissed without prejudice. In all other respects the defendant’s motion for summary judgment was denied. Thus, the plaintiff’s claim for the euthanized birds goes forward. Rembrandt Enterprises. v. Illinois Union Insurance Company, No. 15-2913, 2017 U.S. Dist. LEXIS 147030 (D. Minn. Sept. 12, 2017).

Posted September 5, 2017

RMA Not Required To Provide Information Via FOIA Request. The plaintiff filed an action against the United States Department of Agriculture’s (USDA) Risk Management Agency (RMA) pursuant to the Freedom of Information Act (FOIA). The plaintiff was seeking the disclosure of soybean and corn yield within four townships in Cherokee County, Iowa. The RMA provided a no records in response to the plaintiff’s request explaining that it did not have the information available by section for townships within a county. The court determined that the purpose of the FOIA is to give the public greater access to governmental records. However, there are exceptions to this rule. The court determined that summary judgment for an agency is appropriate when the agency shows that it made a good faith effort to conduct a search for the requested records, using methods which can reasonably be expected to produce the information requested. However, the agency does not have to search every record system. In addition, the court pointed out that the FOIA neither requires an agency to answer questions disguised as FOIA requests or to create documents or opinions in response to an individual’s request for information. The court concluded that the evidence illustrated that RMA did not maintain records matching the description of the plaintiff’s requests. Although it did collect some information from the records of insurance companies which would contain some of the information the plaintiff sought, it did not maintain records containing the precise information requested. As a result, the RMA was not required to provide information that it did not have to the plaintiff. Consequently, the court granted RMA’s motion for summary judgment. Bush v. United States Department of Agriculture, No. 16-CV-4128-CJW, 2017 U.S. Dist. LEXIS 131381 (N.D. Iowa Aug. 17, 2017).

Posted August 25, 2017

Federal Crop Insurance Act Preempts State Negligence Claim. The plaintiff sued the defendant insurance agency asserting negligence, slander and defamation claims. The plaintiff informed the defendants of frost and hail events that occurred during the applicable crop year. The defendant told the plaintiff that a notice of loss cannot be filed if the farmer intends to harvest the field and that there must be evidence of damage, with harvest being the ultimate determining factor of damage. The plaintiff asserted that the defendants negligently handled his claims by failing to file a notice of loss and providing misleading and inaccurate information to the plaintiff which was the direct and proximate cause of his loss in excess of $50,000. The trial court found that the insurance contract was governed by 7 C.F.R. § 400.352 (2017), which generally prevents state and local governmental entities from levying judgments for damages and costs against companies arising out of action or inaction on the part of individuals and entitles authorized under the Federal Crop Insurance Act (FCIA) The trial court determined that the plaintiff’s claim involved the alleged negligence of an agency that was proceeding under the FCIA and that it was federally preempted. The plaintiff appealed. The appellate court determined that the plaintiff’s negligence claim was a request for the trial court to levy a judgment for damages against agents of an insurance company for their actions and inactions regarding a crop insurance policy governed by the FCIA. As a result, the claim was preempted under the plain language of the 7 C.F.R.§ 400.352(a). In addition, the court determined that under the FCIA a party must obtain a determination of wrongdoing from the Federal Crop Insurance Corporation before that party may seek damages regarding a policy covered by the FCIA. The defendant did not attempt to obtain a determination from the FCIC. As a result, the appellate court affirmed the decision of the trial court and dismissed the plaintiff’s claim. Zych v. Haugen, No. A16-2082, 2017 Minn. App. Unpub. LEXIS 645 (Minn. Ct. App. Jul. 31, 2017).

Posted July 24, 2017

Pollution Exclusion Applies With Respect to Contaminated Feed. The Plaintiff, New Fashion Pork (NFP) is a pork producer that owns and operates feed mills where it blends grain. Defendant, Restaurant Recycling (RR), is a manufacturer and supplier of fat products for animal feed. NFP claims that it used RR’s fat products to produce feed for its swine and the contaminated feed caused serious health problems in its swine. NFP sued for breach of contract. RR had a general commercial liability insurance policy with Employer Mutual Casualty Company (EMC). However, the policy contained an absolute pollution exclusion. The exclusion provided that the policy did not cover “body injury” or “property damages” which would not have occurred but for the actual alleged or threatened discharge of pollutants at any time. RR filed an action seeking a declaration that EMC was obligated under the policy to provide defense and coverage for all claims asserted by NFP and for any damages awarded. The court determined that the lasalocid which was found in RR’s fat products was a contaminate and that the mere fact that it is safe at certain levels did not exclude it from being a contaminate. In addition, the court determined that although the complaint did not specifically allege that lasalocid was administered at unsafe or illegal levels, a logical conclusion was that RR’s fat products were contaminated with unsafe levels of lasalocid. The court also concluded that RR’s intentions were irrelevant because the insurance policy only required that but for RR’s actions, the contaminants would not have been dispersed into the fat product and swine feed. As a result, EMC had no duty to defend or indemnify RR under the insurance policy. Restaurant Recycling, LLC v. New Fashion Pork, LLP, No. 17-7 (DSD/SER), 2017 U.S. Dist. LEXIS 109755 (D. Minn. Jul. 14, 2017).

Posted July 22, 2017

USDA Improperly Delayed Implementation of Crop Insurance Provision. A provision in the 2014 Farm Bill, Actual Production History (APH) Yield Exclusion, allows eligible producers impacted by severe weather to receive a higher approved yield on their insurance policies through the federal crop insurance program. APH works by allowing a farmer to exclude yields in particularly bad years (e.g., those having a natural disaster or other extreme weather event) from their production history when calculating yields that are used to establish their crop insurance coverage. The level of crop insurance available to a farmer is based on the farmer’s average recent yields. Particularly low yields in a prior year would reduce the level of insurance coverage in future years but for the APH provision. Farmers are eligible for the APH exclusion when the county yield is at least 50 percent below the average of the immediately previous 10 consecutive crop years. The provision was to become effective in the spring of 2015 for spring crops with a November 30, 2014 change date. Eligible crops include corn, soybeans, wheat, cotton, grain sorghum, rice, barley, canola, sunflowers, peanuts and popcorn. However, the USDA later decided to delay the APH Yield Exclusion for wheat for the 2015 crop year for winter wheat. The plaintiff challenged that decision as arbitrary, but the USDA’s National Appeals Division (NAD) upheld the decision. However, in late 2016 a U.S. Magistrate Judge recommended that the court reverse the USDA’s decision to delay implementation of the APH Yield Exclusion (i.e., “yield plug”) for winter wheat. The USDA appealed, but the trial court found that the NAD’s decision was erroneous because it failed to recognize the Farm Bill’s (7 U.S.C. §1508 (g)(4)(A)) effect on implementation for the 2015 winter wheat crop year. The court determined that Congress chose to leave the applicability provision in place thereby making it self-executing and immediate for the APH Yield Exclusion. In addition, the fact that Congress chose to include specific application/implementation language for other crops and yet stay silent as to winter wheat indicates a direct intention to allow the governing and existing statutory law to be applicable as to the implementation of the APH Yield Exclusion for the 2015 winter wheat crop. As a result, the court adopts the findings and conclusions of the Magistrate Judge. On July 18, 2017, the USDA filed a notice of appeal with the Fifth Circuit. Adkins v. Vilsack, No. 1:15-CV-169-C 2017 U.S. Dist. LEXIS 72790 (N. D. Tex. May 12, 2017).

Posted April 2, 2017

Insurance Company Has No Duty To Defend Under "Pollution Exclusion" Clause For Potential CWA Violation. The plaintiff construction company entered into a contract with a city for two road projects in late 2002. The plaintiff obtained insurance coverage for the two projects from the defendant. Construction work began in 2003, and in late 2004 the United States Army Corps of Engineers (Corps) issued a cease and desist order that stopped construction on the projects. The Corps alleged violations of the Clean Water Act against the plaintiff for operating in protected wetlands and discharging “pollutants” into those wetlands without a permit. In 2011, the federal and state Environmental Protection Agencies sued for the alleged violations. The plaintiff gave notice to the defendant and sought indemnity coverage under the policies. The defendant denied coverage and the plaintiff sued for breach of contract and sought a declaratory judgment that it was entitled to a defense and indemnity coverage. The defendant moved for summary judgment, claiming that there was no “accident” or “occurrence” to trigger coverage, but that the suit against the plaintiff stemmed from the plaintiff’s own conduct. The plaintiff claimed that environmental damage constituted “property damage and whether there was an “occurrence” was a fact question not suitable for a summary judgement motion. The plaintiff also asserted that the “pollution exclusion” clause in the policies did not apply because dredged and fill material do not meet the policy description of “pollutant.” The court determined that whether the plaintiff’s discharge of dredged or fill material was an “occurrence” was a factual issue that could not be disposed of on a summary judgment motion. The court also held that the plaintiff had arguably presented a claim for property damage under the policies that would trigger coverage. However, on the pollution exclusion clause in the policies, the court determined that both federal and state (OH) law clearly define dredge and fill material as a “contaminant” and the exclusionary clause in the policies applied. The court also determined that the plain language of the policies clearly excluded coverage for the types of governmental regulatory enforcement actions against the plaintiff as alleged in the complaint. Accordingly, the court held that the defendant was not obligated to either defend or indemnify the plaintiff and granted the defendant its motion for judgment on the pleadings on all of the plaintiff’s claims. JTO, Inc. v. Travelers Indemnity Company of America, No. 1:16CV648, 2017 U.S. Dist. LEXIS 38033 (N.D. Ohio Mar. 16, 2017).

Posted March 27, 2017

Exclusionary Clause Ambiguous in Contract Hog Feeding Case. The plaintiff entered into a contract with the defendant to have the defendant use the defendant’s facilities to provide for the feeding and daily care and management of the plaintiff’s pigs in accordance with “good husbandry practices.” The contract required the defendant to check the hogs at least twice daily, to monitor their health, and notify the plaintiff of any sickness or other unusual conditions. The plaintiff retained ownership of the pigs. The defendant hired others to care for the hogs on its behalf. All 1,073 pigs suffocated and died when the ventilation was cut-off when the facility was pumped to remove manure. The plaintiff sued for breach of contract and negligence for the loss of the pigs. The trial court ruled for the plaintiff on the basis that the defendant was negligent in selecting the third parties who provided the actual care for the pigs and awarded $127,526.05 in damages to the plaintiff plus interest. The plaintiff then brought an equitable recoupment action against the defendant’s insurer claiming that the insurer issued a general liability insurance policy to the defendant that provided coverage for the defendant’s negligence. The plaintiff sought judgment against the insurer in the amount of the judgment received against the defendant. The insurer claimed that the plaintiff’s claim was barred by an exclusion in the policy stating that the policy did not apply to “…property damage to property related to, occupied or used by or in the care of the insured…”. The trial court held that the policy excluded coverage because the pigs (property) were in the care of the defendant (insured) at the time they suffocated. The plaintiff appealed, claiming that the policy language at issue was ambiguous and, as a result, should be construed in favor of providing coverage to the insured (from which the plaintiff could recoup). The appellate court agreed, noting that “care, custody or control” exclusions have been enforced as unambiguous by state (MO) courts, but that there was less clarity in the policy language at issue which excluded coverage for damage to property “in the care of the insured.” The court noted that the policy did not define “care” and that the term was ambiguous because it didn’t identify the level of care required to trigger the exclusion. That was particularly the case, the court reasoned, because of the multiple parties having at least some involvement in the care of the pigs. The appellate court reversed the trial court’s judgment and remanded the case. Maher Bros., Inc. v. Quinn Pork, LLC, No. ED104184, 2017 Mo. App. LEXIS 140 (Mo. Ct. App. Mar. 7, 2017).

Posted February 26, 2017

No Misconduct by Arbitrator on Crop Insurance Claim. The plaintiff made two claims involving his wheat crop on the defendant’s insurance policy. He claimed that heavy rains barred him from planting a portion of the crop and that a wild oat infestation damaged the resulting crop. The defendant denied the claims in August of 2012 and the parties could not agree on mediation. In November of 2012, the plaintiff sued for breach of contract, bad faith and mental anguish based on the denial of his claims. The trial court ordered arbitration and the plaintiff appealed, but the court denied the appeal based on lack of jurisdiction. The plaintiff refused to participate in arbitration, which proceeded without him and resulted in a finding against him and assessed fees and costs against him. The court confirmed the decision, but did not award fees and costs to the defendant. On further review, the court affirmed. The arbitrator did not exceed his powers or act with misconduct in any way. Gilbert v. Rain & Hail, Insurance., No. 02-16-00277-CV, 2017 Tex. App. LEXIS 1542 (Tex. Ct. App. Feb. 23, 2017).

Posted February 25, 2017

Arbitrator’s Decision Holds in Crop Insurance Dispute. The plaintiff bought an insurance policy from the defendant that insured against the inability to plant crops due to weather. The policy was issued in accordance with the Federal Crop Insurance Act (FCIA). The plaintiff submitted a claim under the policy based on the inability due to weather to plant a wheat crop. The claim was filed in December of 2012 and the claim was denied on May 14, 2013. The plaintiff received the denial, but the plaintiff’s farm was referenced as being in an incorrect county. The defendant realized the error and sent a corrected letter which the plaintiff did not receive. On March 31, 2014, the plaintiff sought to reinstate the claim. That request was denied on April, 28, 2014. Mediation was not agreed to and, as such, arbitration had to commence within one year from the denial of the claim or the determination in dispute, whichever is later. The arbitrator ruled for the defendant on April 28, 2015 on the basis that the denial of the claim for benefits occurred on May 14, 2013 and the one-year window closed on May 14, 2014, but the plaintiff didn’t file its request until May 21, 2014. The court upheld the arbitrator’s decision because none of the Federal Arbitration Act (FAA) requirements for vacating an arbitration award were met. The arbitrator was not corrupt, partial or conducted the proceedings in a manner that prejudiced the plaintiff. C & N Farms v. Producers Agriculture Insurance Co., No. 2:15-CV-00136 BSM, 2017 U.S. Dist. LEXIS 21254 (E.D. Ark. Feb. 15, 2017).

Posted January 16, 2017

Farm Tractor Is Covered “Vehicle” Under Policy. The plaintiff was seriously injured when the truck he was driving collided with a tractor with a hay spear attachment. The hay spears pierced the truck impaling the plaintiff. The plaintiff settled his claim with the tractor driver’s insurance company for the policy limits. However, the plaintiff claimed that his damages exceeded the tractor driver’s policy limits. The plaintiff had uninsured motorist (UIM) insurance with the defendant and filed a claim for benefits under the UIM policy. The defendant denied the claim and the plaintiff sued for breach of contract, bad faith, breach of insurance contract and improper denial of an insurance claim. The defendant motioned for a determination as a matter of law that a tractor is not a covered motor vehicle for purposes of coverage under the UIM policy. The trial court granted the motion and dismissed the complaint. The plaintiff appealed and the appellate court reversed. The court noted that the defendant’s policy failed to define the term “motor vehicle” and thus, on its face, neither included or excluded the tractor from coverage. The court noted that the term “motor vehicle” is a term of “ordinary and common” usage and looked to the dictionary for its plain meaning. Accordingly, the court found the dictionary definition of “motor vehicle” to mean an automotive vehicle not operated on rails with rubber tires for use on streets or highways. Under this definition, the tractor was a “motor vehicle” under the UIM coverage provision. Indeed, the court pointed out that the tractor’s operator’s manual confirmed that the tractor was fit for use on streets and highways and includes an entire section devoted to highway use. The court rejected the insurance company’s claim that that a motor vehicle be used “primarily” for driving on streets and highways and, as such, the tractor was not a covered “motor vehicle.” The court noted that the dictionary did not limit the definition of “motor vehicle” to a vehicle’s primary use. The court also rejected the defendant’s attempt to inject into the UIM the state’s (CO) motor vehicle definition into the policy provision. The state statute had the “primarily” language that the defendant desired. The policy did not incorporate the statutory definition of “motor vehicle.” Bishop v. State Farm Mutual Auto Insurance Company, No. 15CA203, 2017 Colo. App. LEXIS 11 (Colo. Ct. App. Jan. 12, 2017).

Posted January 14, 2017

Custom Feeding Endorsement Provided No Coverage for Death Loss. The plaintiff farming operation contracted with a company to custom feed hogs that the plaintiff owned at a third party’s site. The company was to take delivery of 50-pound hogs and raise and care for them until they reached 275 pounds. The plaintiff owned the hogs, but were under the care of the company. The company contacted its insurance agent to get coverage for the custom feeding of the hogs, telling the agent that the company neither owned the hogs nor the facility in which they were raised, but that the company was responsible for the care and feeding of the hogs and building maintenance. The agent recommended a liability policy, and a custom feeding endorsement for an additional $118 annually. The custom feeding endorsement extended coverage for custom feeding and deleted exclusions in the liability policy that pertained to custom feeding. The ventilation system in the building failed when an electrical breaker tripped and 837 hogs died. The company filed a claim with the defendant for coverage, and the defendant denied coverage. The company then assigned its claim to the plaintiff who sued the defendant, the insurer. The trial court granted the defendant’s motion for summary judgment. On appeal, the plaintiff claimed that because the endorsement deleted the exclusions pertaining to custom feeding, the death of the hogs produced in the custom feeding operation was a covered loss. The court determined that the custom feeding endorsement functioned only to remove the exclusion for bodily injury or property damage arising out of the insured’s performance of, or failure to perform, relating to the custom feeding of the hogs. In other words, by removing that exclusion, the company had coverage for bodily injury or property damage to others or the insured as a result of the custom feeding operation (i.e., damage caused by the hogs). The court determined that the endorsement did not eliminate the exclusion of coverage for damage to property, including the hogs. Damage to the building caused by fire, smoke or explosion was a covered loss. The court reached this conclusion because the company paid only $118 annually for the endorsement which the court believed did not correspond to the additional risk of insuring the hogs. The court believed that the $118 annual charge did reflect the additional risk of damage caused by the hogs. The court provided no data for its conclusion (there was apparently no data in the record) and no analysis of the endorsement language, instead merely citing a 2013 opinion of the state (IA) Supreme Court where the Court held that a custom feeding endorsement did not cover the loss of 535 feeder pigs that died due to suffocation. Schulz Farm Enterprises, Inc. v. IMT Insurance, No. 15-1960, 2017 Iowa App. LEXIS 11 (Iowa Ct. App. Jan. 11, 2017).

Posted January 5, 2017

Failure to Change Beneficiary Designation Cost Surviving Wife Insurance Proceeds. The decedent was a postal service employee and purchased a life insurance policy via the Federal Employees’ Group Life Insurance (FEGLI) program. Under the rules governing a FEGLI policy, the benefits are paid upon the insured’s death to the designated beneficiary. If there is no designated beneficiary, the death benefits are paid to the insured’s surviving spouse and then children or next of kin. A beneficiary designation, under the FEGLI rules, must be in writing, signed by the insured, and witnessed by two people. In addition, the completed beneficiary form must be submitted to the employing office under office-approved methods and the office must receive the form before the insured’s death. An insured can change the beneficiary at any time without the knowledge or consent of a prior or then current beneficiary. The insured, in this case, changed the beneficiary designation on his FEGLI policy in order to prevent his ex-wife from receiving the benefits. He later broke up with the girlfriend and married another woman, but did not change the beneficiary designation to the second wife before his death. The second wife, upon his death, filed a claim to receive the death benefits, but the insurance company refused because she was not the named beneficiary under the policy. The second wife claimed she witnessed the insured sign the FEGLI form to change the beneficiary designation to her and that he had talked with his employer and added benefits so that she would have sufficient funds to pay-off the couple’s mortgage. However, the trial court determined that the form had not been completed properly and that strict compliance with the federal rules governing the change of a beneficiary was required. On appeal, the appellate court affirmed, also finding that the there was a lack of evidence that the girlfriend was a higher paid employee that would have barred her from receiving a gift from the insured. Switzer v. Vaughan, No. 05-15-00811-CV, 2016 Tex. App. LEXIS 8026 (Tex. Ct. App. Jul. 27, 2016), pet. for rev. den., No. 16-0824, No. 16-0824, 2016 Tex. LEXIS 1073 (Tex. Sup. Ct. Dec. 2, 2016).

Posted November 6, 2016

Commercial General Liability (CGL) Policy Covers Bad Work by Subcontractor. The plaintiff (a property owner) sued the defendant (a general contractor) for damages arising from water from rain that flowed to the interior common areas of the plaintiff’s complex. The damage was the result of faulty work performed by one of the defendant’s subcontractors. The plaintiff also brought a declaratory judgment claim against the defendant’s insurers seeking coverage. The trial court determined that the water damage did not constitute “property damage” as defined in the policy and that there had not been an “occurrence” that would trigger coverage. On appeal, the court of appeals reversed, determining that “unintended and unexpected consequential damages to the common areas and residential units caused by the subcontractors’ defective work constitute ‘property damage’ and an ‘occurrence’ under the CGL policies.” On further review, the state Supreme Court affirmed. According to the court, post-construction consequential damages, and the resulting loss of use, were covered “property damage” that the policy defined. In addition, the court determined that the subcontractor’s faulty workmanship was an “occurrence” because it was an “accident.” While the policy didn’t define “accident,” the court determined that its plain meaning included unintended and unexpected harm that the negligent conduct caused. The court also determined that the “your work” exclusion in the policy (eliminating coverage for property damage to “your work”) contained the subcontractor exception which meant that coverage applied for work performed by a subcontractor. The court rejected the defendant’s argument that the CGL policy only provided coverage for damages to other property and not the property involved in the construction project at issue. Courts in other states (Iowa, Florida, and Texas) have decided similarly in recent years, as has the U.S. Court of Appeals for the Fourth Circuit (applying Maryland law). Cypress Point Condominium Association, Inc. v. Adria Towers, L.L.C., 226 N.J. 403 (2016).

Posted July 31, 2016

Statement of Underwriting Supervisor Made Through Insurance Agents Resulted in Farmers Having Coverage for Crop Loss. The plaintiffs were tobacco farmers that became concerned that their tobacco crops would not be eligible for crop insurance coverage due to a requirement in multi-peril crop insurance policies that their crops had to be grown on land that qualified for coverage in at least one of the immediate past three years. They sought advice from their insurance company through its agents. Before the planting of the tobacco crops, the agents invited a representative of the insurance company to attend a dinner the agents were putting on for the benefit of local tobacco farmers, including the plaintiffs, to discuss the policy requirements. An insurance company underwriting supervisor attended and spoke at the dinner, and stated that an insurable crop had to have been grown on the property in question at least one year within the immediate past three years. If that requirement was not satisfied, then a written agreement between the farmer and the Risk Management Agency (RMA) had to be executed allowing the crop to be eligible for insurance coverage. The plaintiffs attended the meeting and after the meeting the agents told the supervisor that several farmers, including the plaintiffs, would need to execute agreements with the RMA and that they wanted the supervisor’s help in getting the agreements executed. The supervisor told the agents that the farmers’ tobacco crops would be insured without an agreement if hay had been raised on the land in at least one year of the past three. The agents conveyed that information to the farmers, who then planted a tobacco crop that they believed was covered by MPCI policies they purchased from the insurance company. The crop failed and the insurance company, the farmers filed a claim, and the insurance company denied it. The plaintiffs sued, not based on the policy, but based on the statement of the insurance company representative conveyed to them through the agents for negligent misrepresentation and intentional misrepresentation. The insurance company moved for summary judgment on the basis that the policy first required arbitration before judicial remedy could be sought and because the policy barred extra-contractual damages. The court denied the motion for summary judgment on the basis that the farmers had provided sufficient evidence to establish the elements for fraudulent misrepresentation – the defendant made a representation; the representation was false; the representation was in regard to a material fact; the representation was made either knowingly or without belief in its truth or was made recklessly; the plaintiff reasonably relied on the representation; and the plaintiff suffered damage as a result. As for the insurance contract barring the plaintiffs’ claims, the court disagreed. The court held that the MPCI terms and policies did not apply because the plaintiffs’ claims were not based on the policy. Thus, the court refused to dismiss the case based on preemption or because extra-contractual damages were barred by the policy. Dixon v. Producers Agricultural Insurance Co., No. 2:14-cv-00034, 2016 U.S. Dist. LEXIS 99587 (M.D. Tenn. Jul. 28, 2016).

Death of Livestock In Blizzard Was a Covered Loss by “Drowning.” The plaintiffs (a married couple) operate a cattle and row-crop operation in South Dakota. A storm in the fall of 2013 began as rain and turned into a blizzard in which 93 of their cattle (yearling heifers) died. Their veterinarian necropsied some of the cattle and determined that their death was by drowning because the lungs of the cattle were saturated with water and their airways were obstructed with foam (air trapped in water), and there was clear liquid in all airways and running from the noses of the cattle. This was all the result of the cattle inhaling large amounts of rain and snow during the storm which triggered cardiac arrest and death. The plaintiffs insured the cattle that, among other things, insured the cattle against loss by “drowning.” The plaintiffs filed a claim for the death of the cattle by drowning, but the insurance company denied the claim due to none of the cattle being found submerged in water. The trial court agreed with the insurance company and granted them summary judgment. On appeal, the appeal the state Supreme Court reversed. The Court noted that “drowning” was not defined in the policy and that because both parties offered reasonable interpretations of the term, the term was ambiguous and the ambiguity was to be construed in the insured’s favor. The Court also held that exclusionary language contained in the policy excluding coverage for loss to livestock due to “smothering, suffocation or asphyxiation” or “freezing in blizzards or snowstorms,” didn’t apply because the plaintiffs only claimed coverage under drowning provision which didn’t contain similar exclusionary language. Papousek v. De Smet Farm Mutual Insurance Company of South Dakota, No. 27658-r-JMK, 2016 S.D. LEXIS 93 (Jul. 20, 2016).

Posted July 10, 2016

Denial of Crop Insurance Coverage Not Arbitrary and Capricious. The plaintiff planted 1,354 acres of peanuts on its farms and insured the peanuts against crop loss with a yield guarantee policy. The resulting peanut harvest was less than the guarantee, and the plaintiff claimed that the low yield was a result of drought, a covered event. The regional office of the Risk Management Agency (RMA) (the entity that administers the federal crop insurance program on behalf of the Federal Crop Insurance Corporation) investigated the claim and denied it on the basis that the peanuts received sufficient rainfall to produce a normal yield. The plaintiff did not record rainfall on its farms to the RMA compiled various weather data for the area, analyzed the data, and concluded that drought was not the cause of the low crop yield. The plaintiff sought review of the decision and the regional officer’s decision was upheld. The plaintiff then appealed to the USDA National Appeals Division (NAD) and the NAD hearing officer affirmed the RMA’s decision. On further review, the NAD director affirmed the hearing officer. The plaintiff then sought judicial review and the court affirmed. The court found it key that the plaintiff had not recorded any rainfall data. As such, the court determined that the methods of rainfall data collection by the RMA and the analysis of that data which led to a conclusion that drought had not caused the low crop yield was not arbitrary and capricious. The court believed that the RMA’s expert used reliable data and did not misinterpret the data, and that a clerical error as to planting dates of various farms was a mere oversight that did not render RMA’s decision arbitrary and capricious. Spring Creek Farming Co. v. Federal Crop Insurance Corporation, No. 15-14818, 2016 U.S. App. LEXIS 11844 (11th Cir. Jun. 29, 2016).

Posted May 14, 2016

Failure to Establish that Four-Wheeler Used in Farming Operations at Time of Accident Precludes Insurance Coverage. The plaintiff insurance company brought a declaratory judgment action to determine whether the defendants had coverage for the death of their son under a policy purchased from the plaintiff. The policy provided coverage for injury or death for any person operating (among other things) “farm machinery” in the defendants’ farming operation. The defendants’ son was killed while riding a four-wheeler on the defendants’ property. However, based on the facts surrounding the accident that resulted in the death of the defendants’ son, the court could only speculate on how the four-wheeler was being used at the time. The court noted that the defendants bore the burden to establish additional coverage for their son under the policy, and that speculation as to the four-wheeler’s use was insufficient to carry the burden on proof. While purely recreational activity was not a covered use under the policy, it was not established by the evidence that the four-wheeler was being operated in a covered use. Thus, the plaintiff was entitled to a declaratory judgment. Southern Farm Bureau Casualty Insurance Co. v. Hammond, No. 2:15-CV-02107, 2016 U.S. Dist. LEXIS 53617 (W.D. Ark. Apr. 21, 2016).

Posted April 26, 2016

Crop Insurance Losses Not Associated with Agent’s Lack of License. The plaintiffs are Texas farmers that bought a crop insurance policy from the defendant, a person they believed to be licensed to sell crop insurance policies based on the defendant’s representations as such. The initial crop insurance policy was purchased in 2004, and the plaintiffs experienced no crop insurance issues for seven years. However, they asserted that the defendant made 10 errors in 2011 and 2012 in handling the crop insurance policies that caused their financial losses. The plaintiffs sued the defendant for a multi-year mail and wire fraud conspiracy under the Rackateer, Influenced and Corrupt Organizations Act (RICO), claiming that the defendant used the mail and other means of communication to perpetrate and reinforce his deception that he was licensed to sell crop insurance. The trial court dismissed the complaint because the plaintiffs failed to plausibly plead a “pattern of racketeering activity” under 18 U.S.C. §1962(c) because all of the defendant’s acts were part of a single, lawful insurance transaction. On appeal, the court affirmed, but for a different reason. The appellate court determined that the plaintiffs had failed to show that their losses were causally related to the defendant’s lack of a license to sell crop insurance. The appellate court noted that the defendant had handled the crop insurance for the plaintiffs for seven years before the alleged problems without incident. Thus, the court concluded that the lack of a license was not directly attributable to the plaintiffs’ loss and also indicated that the purpose of the defendant’s deception was not to harm the plaintiffs. The appellate court concluded, therefore, that the plaintiffs’ claim should have been grounded in the common law or state (TX) statutory law. Shannon v. Ham, No. 15-10483, 2016 U.S. App. LEXIS 2404 (5th Cir. Feb. 11, 2016).

Posted April 1, 2016

Insured That Left Farming Due To Agent Misrepresentations of GRIP Policy Has No Case. The plaintiff applied for a Group Risk Income Protection (GRIP) insurance policy under the Federal Crop Insurance Act (FCIA) for his 2011 corn crop. When he applied, the insurance agent told him that he would get an indemnity payment if the county actual corn crop yield exceeded 10 percent less than the expected yield. The expected yield was 136.7 bushels/acre, and the actual yield would be based on planted acres. The plaintiff bought the policy with the defendant. In March of 2012, the agent told the plaintiff that the county’s actual yield for 2011 was 102.1 bushels/acre and that the defendant would issue him a check in the amount of $104,961. The agent also showed the plaintiff a computation sheet showing how the payment was calculated. The plaintiff then leased his farm, disposed of his farm equipment and left farming. A month later, the agent told the plaintiff that the defendant originally calculated the corn crop yield using the planted acres standard instead of the (correct) harvested acres standard. Under the harvested acres standard, the actual crop yield was 125 bushels/acre which meant that the plaintiff would not receive any indemnity payment. The plaintiff sued for negligent and intentional misrepresentation, and the defendant moved to dismiss. The court granted the defendant’s motion to dismiss. The court determined that, as a matter of law, the plaintiff was deemed to know the terms and conditions of the GRIP policy. This was the case, the court reasoned, because federal crop insurance is a government remedial program with the federal treasury covering its costs. Thus, the plaintiff was charged with notice of the federal statutes and regulations and policy provisions. Deemed to have constructive knowledge of the policy terms, the court determined that the plaintiff’s reliance on the agent’s representations were not reasonable. The court noted that the policy correctly stated payment terms and conditions and how county yields and revenues would be calculated. The court stated that, “A reasonable person with knowledge of the actual totals, even when an insurance agent confronts him with differing totals, does not reasonable rely on the agent’s representations without minimal due diligence.” The plaintiff relied to his detriment in leaving farming. Buckman v. Nau Country Insurance Co., No. 3:14-CV-000921-CRS, 2016 U.S. Dist. LEXIS 35203 (W.D. Ky. Mar. 18, 2016).


No Coverage Under Liability Policy For Tractor Accident. One of the insured’s grandsons got his pickup stuck in a snowdrift and another grandson, the plaintiff, tried to use the insured’s tractor to pull the truck out of the drift in the early morning hours. However, on the way to where the truck was stuck the tractor broke down without being able to get off the road. Consequently, a motorist struck the tractor and sued the grandson and the insured for her injuries. The insured’s farm liability policy with the defendant required the defendant to defend the insured, but the defendant refused to defend the plaintiff on the basis that the plaintiff was not an insured under the policy. The trial court granted summary judgment for the defendant finding that the defendant had no duty to defend the plaintiff. On appeal, the court affirmed. The plaintiff claimed he was covered because the accident occurred on an “insured location” and because he was an “employee” of the insured. The policy covered the insured’s employees, but the court determined that he did chores on the insured’s farm along with his brother. The court agreed with the trial court finding that the plaintiff was not an employee, and even if he were an employee the court determined that he was not acting within the scope of his employment at the time of the accident. As for the location of the accident, the court determined that the accident was not on an “insured location” such as the farm premises or premises used in conjunction with the farm premises as the policy required. Here, the accident occurred about one-half mile down the road from the insured farming premises and the plaintiff was using the public roadway to get to the brother’s stuck truck. He was not using the roadway to go from one part of the insured premises to another part of the insured premises. Clark v. Farmers Union Mutual Insurance, 872 N.W.2d 620 (N.D. 2015).


No Insurance Coverage For Nuisance Claims Arising From Swine and Poultry Operation. The plaintiff reinsured insurance policies that the defendants owned. The plaintiff sought a declaratory judgment that the policies did not provide coverage for claims brought against the defendant based in nuisance arising from the operation of the defendants’ swine and poultry farms. The court affirmed a magistrate judge’s finding that the pollution liability exclusion in one policy and the business activities and custom feeding exclusion in another policy unambiguously precluded coverage for the claims against the defendants. Grinnell Mutual Reinsurance Company v. Rambo, et al., No. 14-3530 (8th Cir. Dec. 29, 2015).


No Income Tax Basis in Stock Received Upon Demutualization. The plaintiff obtained shares of stock upon demutualization of an insurance company. The plaintiff later sold some of the shares of stock and the defendant asserted that the plaintiff's income tax basis in the stock was zero triggering 100 percent gain on the sale of the shares. The trial court rejected the defendant's position, and set forth the computation for calculating basis in stock shares received upon demutualization. The court grounded the computation of stock basis in the same manner in which the insurance company determined the value of demutualized shares for initial public offering (IPO) for purposes of determining how many shares to issue to a policyholder. Based on that analysis, the court noted that the company calculated a fixed component for lost voting rights based on one vote per policy holder and a variable component for other rights lost based on a shareholder's past and anticipated future contributions to the company's surplus. The court estimated that 60 percent of the plaintiff's past contributions were to surplus and 40 percent was for future contributions to surplus which the plaintiff had not actually yet paid before receiving shares and are not part of stock basis; thus, plaintiff's basis in stock comprised of fixed component for giving up voting rights and 60 percent of the variable component representing past contributions to surplus the end result was that the plaintiff's stock basis was slightly over 60 percent of IPO value of stock. On further review, the U.S. Court of Appeals for the Ninth Circuit reversed in a split opinion. The court determined that the plaintiffs didn't pay any additional amount for the mutual rights and that treating the premiums as payment for membership rights was inconsistent with how tax law treats insurance premiums. The court noted that under the tax code gross premiums paid to buy a policy are allocated as income to the insurance company and no portion is carved out as a capital contribution.

Conversely, the policyholder can deduct the "aggregate amount of premiums" paid upon receipt of a dividend or cash-surrender value. No amount is carved out as an investment in membership rights. Because of that, the court held that the plaintiffs couldn't have a tax-free exchange with zero basis and then an increased basis upon later sale of the stock. Accordingly, the court held that the trial court erred by not determining whether the plaintiffs paid anything to acquire the mutual rights, and by estimating basis by using the stock price at the time of demutualization instead of calculating basis at the time of policy acquisition. Thus, because the taxpayers did not prove that they paid for their membership rights as opposed to premiums payments for the underlying insurance coverage, they could not claim any basis in the demutualized stock. Dorrance v. United States, No. 13-16548, 2015 U.S. App. LEXIS 21287 (Dec. 9, 2015), aff'g., No. CV-09-1284-PHX-GMS, 2013 U.S. Dist. LEXIS 37745 (D. Ariz. Mar. 19, 2013).