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Farmers Crop Insurance Alliance v. Laux

July 18, 2006


The opinion of the court was delivered by: Judge Thomas M. Rose


This matter arises from Plaintiff/Counterlcaim Defendant Farmers Crop Insurance Alliance's (hereinafter "Plaintiff") denial of an insurance claim made by Defendants/Counterclaimants Jerry Laux and Jasen Laux (hereinafter "Defendants"). The Defendants are father and son who reside in Ohio but raise crops, including soybeans, in Rapides Parish, Louisiana.

The Plaintiff seeks a declaration that it properly applied the policy terms and other federally-mandated procedures to the Defendants' claims; that it has satisfied all of its obligations under the terms of the applicable insurance policies; and that Defendants are entitled to no further relief from the Plaintiff. The Defendants counterclaim seeking a declaration that they satisfied all obligations imposed by the insurance policy; that the Plaintiff did not satisfy all of its obligations imposed by the policy; that Plaintiff did not properly apply the terms and other federally-mandated procedures to their claims; that Jerry Laux is entitled to an indemnity in the amount of $69,997, excluding interest for prevented planting and $5,184 for failed acres; that Jasen Laux is entitled to an indemnity in the amount of $59,999, excluding interest, for prevented planting and $4,445, excluding interest, for failed acres; and that Defendants are entitled to an award of pre-judgment interest, post-judgment interest and attorneys fees and costs.

Plaintiff's Motion for a Temporary Restraining Order to prevent an arbitration hearing was previously denied. (Doc. #26 p.1.) Following the arbitration hearing and issuance of an arbitration award, Defendants' Motion To Confirm Arbitration Award was granted.*fn1 (Id.)

Now before the Court are Motions for Summary Judgment filed by the Plaintiff (doc. #25) and by the Defendants (doc. #30). Both of these motions are now fully briefed and ripe for decision. A background will first be set forth followed by an analysis of the motions.


The crop insurance policies involved here were issued subject to the Federal Crop Insurance Act ("FCIA"), 7 U.S.C. §1501 et seq.*fn2 The FCIA was enacted in 1938 by Congress "to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance and providing the means for the research and experience helpful in devising and establishing such insurance." Williams Farms of Homestead, Inc. v. Rain and Hail Insurance Services, Inc., 121 F.3d 630, 633 (11th Cir. 1997)(quoting 7 U.S.C. § 1502).Under the original scheme of the FCIA, only the Federal Crop Insurance Corporation ("FCIC") issued crop insurance policies and handled claims on those policies. Id.

The FCIA was then amended by Congress in 1980 to, among other things, authorize the FCIC to use private insurance companies to provide crop insurance to farmers.*fn3 Id. These private insurance companies sell and service crop insurance policies and are reinsured by the FCIC. Id. The Plaintiff in this case is one such company that sells and services crop insurance and is reinsured by the FCIC's replacement, the Risk Management Agency ("RMA"). Nobles v. Rural Community Insurance Services, 122 F.Supp.2d 1290,1292 (M.D. Ala. 2000). The RMA is a wholly government-owned corporate body and agency within the Department of Agriculture charged with implementing a nationwide crop insurance program. Id. at 1294.

The RMA establishes standard policy guidelines, including terms and conditions, which are to be included in any crop policy issued by a private insurance company. Nobles, 122 F.Supp.2d at 1292. These terms and conditions must be included in the crop policy in order for the private insurer to obtain reinsurance from the RMA. Id. In this case, the Parties do not dispute that the crop insurance policies at issue comport with the standard policy guidelines issued by the RMA.

The terms and conditions provided by the RMA preempt any contrary state laws that would apply to other insurance contracts normally issued by private insurers.*fn4 Id. at 1294. However, the RMA has not extinguished state law causes of action that may arise from tortious conduct by private companies selling RMA-approved reinsurance contracts. Id.

Turning now to the policies at issue, in 2002, the Defendants purchased crop revenue coverage insurance*fn5 (the "CRC Policy") from IGF Insurance Company ("IGF") to cover their individual ownership shares of their intended joint crops in Rapides, Louisiana. This coverage continued into crop year 2003 under the terms of the policies.

Due to IGF's financial problems, RMA randomly transferred the policies to North Central Crop Insurance, Inc, in 2003. North Central Crop Insurance and Blakely Crop Hail, Inc. then merged to create Farmers Crop, the Plaintiff in this case. The Plaintiff then assigned Jerry Laux policy number 17-801-0001065 and Jasen Laux policy number 17-801-0001066. The Defendants coverage under these policies continued into crop year 2004 under the terms of the policies.

The Defendants leased approximately 2000 acres located on Farm Serial Number ("FSN") 3308*fn6 from A. J. Fowler in Rapides Parish for crop year 2004. They then planted 41.0 acres of soybeans and claimed that they were prevented from planting a remaining 1849.7 acres.

The Defendants subsequently made claims on their 2004 crop which the Plaintiff denied. The Defendants then sought arbitration pursuant to the terms of the CRC Policy.

One of the standard terms and conditions provided by the RMA and included in the CRC Policy involves arbitration of disputes. RMA-approved crop insurance contracts provide that any dispute about "any factual determination" made by a private insurance company "will be resolved in accordance with the rules of the American Arbitration Association." Id. (citing 7 C.F.R. §457.8 ¶ 20(a)); CRC Policy ¶ 20. In this case, after the Court declined, at Plaintiff's request, to prevent arbitration, an arbitration was conducted. The arbitration hearing held on May 23, 2005, was conducted in accordance with the CRC Policy requirements.

Although Plaintiff continues to challenge the Arbitrator's findings of fact, the Arbitration Award has been confirmed by this Court. The Findings of Fact set forth in the Arbitration Award are, therefore, applicable to the pending Motions for Summary Judgment and are as follows:

1. Claimants [Defendants] never farmed in Rapides Parish prior to crop year 2002.

2. Claimants [Defendants], by testimony and exhibits, proved that A. J. Fowler planted and harvested approximately two hundred fifty (250) acres of FSN 3308 in 2001, approximately two hundred fifty (250) acres in 2002, and approximately two thousand acres (2000) in 2003.

3. Claimants [Defendants], each, applied for federally-reinsured CRC policies for crop year 2002 from IGF Insurance Company in 2002, to cover their individual ownership shares of their intended joint crops in Rapides Parish, Louisiana. Claimants [Defendants] mailed the forms provided to Claimants [Defendants] by IGF and designated Exhibit "4" at the arbitration hearing as their crop year 2002 applications for insurance.

4. Claimants' [Defendants'] Rapides Parish CRC coverage continued into crop year 2003, and then into 2004 under the terms of the CRC policies. Due to IGF's financial problems in 2003, the USDA Risk Management Agency (RMA) randomly transferred Claimants' [Defendants'] policies to Farmers Crop predecessor (North Central Crop Insurance, Inc.).

5. Claimant [Defendant] Jerry Laux, received Farmers Crop CRC Policy No. 17-801-0001065 and second Claimant [Defendant] Jasen Laux, received Farmers Crop CRC Policy No. 17-801-0001066 for the 2004 crop year.

During the hearing, there was considerable conflict in testimony and argument of counsel whether or not Respondent [Plaintiff] timely received Exhibit "4", and whether or not Claimants [Defendants] were under any obligation to submit supplemental or additional forms (intended acres report). The 2002 form (intended acres report) had been furnished by the predecessor insurance company, IGF, had a form with the words marked "Estimated Acres," rather than the language "intended acreage." The Claimants [Defendants] are lay person farmers, and the Respondent [Plaintiff] is a sophisticated well-staffed corporation, as was presumably its predecessors. No convincing evidence was furnished by Respondent [Plaintiff] that Claimants [Defendants] were required, or supposed to know, that supplemental or additional intended acreage reports should have been submitted. It was not Claimants' [Defendants'] choice, or wish, that the insurance company with which they had originally contracted failed, and its assets subsequently be involuntarily transferred.

6. Claimants [Defendants] were never given any forms or documents by Respondent [Plaintiff], or their agent, to report intended acres in 2003, or 2004. The agent for the Respondent [Plaintiff], Mr. Gary Morgan, by testimony indicated that the only time the insured reports intended acreage is when one initially applies for insurance. There was no testimony or evidence that any request for supplemental forms or reports accompanied the policies furnished by Respondent [Plaintiff] to Claimants [Defendants].

7. Claimants [Defendants] notified Respondent's [Plaintiff's] agent, Mr. Gary Morgan, by telephone that they were prevented from planting all but 41.0 acres on June 14th, which was within seventy-two (72) hours of the June 15th final claim date. Mr. Morgan submitted written notice of loss to the Respondents [Plaintiffs] on that same date. The final plant date for soybeans in Rapides Parish is June 15th. The testimony of Mr. Laux proved as a matter of fact that he offered to meet the adjuster, Mr. Ronnie Harris, at the farm. However, the adjuster told him it was unnecessary since he had all the maps and knew where the farm was.

8. The testimony of Mr. Morgan and Mr. Laux proved as a matter of fact that the Claimant [Defendant] inquired about the status of their failed acres at some point in the summer of 2004, and probably in July or early August. It is further found as a matter of fact that Mr. Morgan resubmitted the claim in early December after the concern that the claim had not yet been acted on. Mr. Morgan was an employee of the Respondent [Plaintiff], not the Claimants [Defendants]. The testimony of Mr. Laux further proved that Mr. Harris never met with either of the Claimants [Defendants] until some time in December, and that the Claimants were never provided anything to sign prior to that meeting. There is no documentation of any inspection of FSN 3308 (which includes the 41.0 failed acres) taking place anytime from the notice of loss on June 14th, until the middle of December.

9. The landlord, not the Claimants [Defendants], actually disked up and destroyed the 41.0 failed acres. There was not written consent filed by the Respondent [Plaintiff], but there was also no evidence presented that the Claimants [Defendants] (the tenants) had any power or authority to prevent Mr. A.J. Fowler (the landlord), from plowing the 41.0 acres, as by November it was clear that Claimants [Defendants] would not rent again. When Respondent's adjuster did finally arrive in December (after the notice of loss being provided June 14th), and as a result of the landlord's plowing of the crops, there were no crops remaining on the 41.0 acres, and the adjusters were obviously unable to appraise the crops.

10. Farmers Crop's [Plaintiff's] adjusters determined that the crops had been destroyed without consent ("WOC"). Jerry Laux executed production work sheets (Exhibits "11-D" and "11-E") and Non-Waiver Agreements (Exhibits "11-C" and "11-E") for each policy that reflected that determination and as furnished by Respondent [Plaintiff] to Claimants [Defendants]. Farmers Crop [Plaintiff] denied Claimants' [Defendants'] claims on the 41.0 acres, and identical letters were sent to each Claimant [Defendant] on February 12, 2005 (Exhibits "11" and "11-E").

The facts demonstrate that the Claimants insured complied with, and completed, all requisites to receive the insurance policies to which they were entitled, and did not know that Respondent [Plaintiff] was not in receipt of all documents from their former insurer, nor did Respondent [Plaintiff] request supplemental forms. Furthermore, notice of loss of the failed planted acres was timely and proper and failure to obtain written consent to destroy the planted acreage was made impracticable or impossible due to the extreme lateness of Respondent's [Plaintiff's] acting on the notice.

These facts, when applied to the policies, predict an award in favor of Claimants [Defendants]. However, such a result cannot be reached by the Arbitrator in this fact finding hearing, but must await another judicial proceeding.

No amount can be awarded to Claimants [Defendants] pursuant to the policies. (Defendants' Motion To Confirm Arbitration Award (doc. #15), Ex. 1 American Arbitration Association Award 7/5/05.) Having summarized the relevant facts, the standard of review for the Motions for Summary Judgment will next be set forth.


The standard of review applicable to motions for summary judgment is established by Federal Rule of Civil Procedure 56 and the associated caselaw. Rule 56 provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue ...

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