PETER R . DAILEY, III V. AMERICAN GROWERS INSURANCE AND AMERICAN AGRISURANCE, INC .
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2001-SC-0364-DG
PETER R . DAILEY, III
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
1999-CA-2954
MONTGOMERY CIRCUIT COURT NO . 97-CI-90092
AMERICAN GROWERS INSURANCE AND
AMERICAN AGRISURANCE, INC .
APPELLEES
OPINION OF THE COURT BY JUSTICE STUMBO
REVERSING AND REMANDING
Peter R . Dailey, III, a Kentucky tobacco farmer, brings the instant action against
American Growers Insurance, an Iowa corporation that sells multiple peril crop
insurance ("MPCI") policies reinsured by the Federal Crop Insurance Corporation
("FCIC"), and American Agrisurance, Inc., the marketing and service affiliate for
American Growers' crop insurance business, in order to receive benefits due under a
MPCI policy.' The Court of Appeals below affirmed the Montgomery Circuit Court's
decision granting summary judgment to American Growers . Dailey now appeals such
judgment. For the reasons set forth in the remainder of this opinion, we reverse .
In 1995, American Growers issued Dailey a MPCI policy, number MP-284734,
through its agent Town & Ranch Insurance Company ("Town & Ranch") of Winchester,
'Hereinafter American Growers Insurance and American Agrisurance, Inc . will be
referred to collectively as "American Growers ."
Kentucky. MP-284734 was issued in Dailey's name, using Dailey's social security
number as an identification number, and was renewed for the following year . The
coverage level provided under MP-284734 was fifty-five percent (55%) .
In 1996, American Growers issued Dailey a MPCI policy, number MP-325886,
on two farms, which are both identified by a farm serial number ("FSN"), FSN 1354 and
FSN 2654 respectively . Both farms are serviced through the Fayette County Farm
Service Administration ("FSA") Office. FSN 1354 is located in Fayette County . While
the majority of the acreage of FSN 2654 is situated in Bourbon County, a small strip lies
in Fayette County and is serviced by the Fayette County FSA Office . MP-325886 was
issued by Hoffman, Ison & Green, Inc. ("HIG"), an agent of American Growers located
in Mount Sterling, Kentucky. MP-325886 was issued under the name "Dayland Farms,"
an unincorporated business entity run by Dailey, using an employer identification
number ("EIN") as the identification number for the policy. The coverage level provided
under MP-325886 was seventy-five percent (75%) .
Dailey had obtained insurance through Town & Ranch for many years, but, like
other area tobacco farmers, Dailey had grown dissatisfied with the service provided by
Town & Ranch. Dailey contacted Henry Alton Stull, Jr ., then an employee of Town &
Ranch . At the same time, Stull was also an employee of a Mount Sterling tobacco
warehouse, which made annual loans to Dailey based on his tobacco crop . With Stull's
assistance, it was determined that Dailey needed to secure a higher level of insurance
coverage on his tobacco crop in order to secure both himself and the local warehouse
against any possible crop losses . Stull completed the appropriate forms for Dailey, and
then referred Dailey to the HIG agency in Mount Sterling, which subsequently issued
the American Growers MPCI policy, number MP-325886, to Dailey.
Later in 1996, Dailey's tobacco crop in FSN 1354 and FSN 2654 sustained
severe damage from a hail storm . Dailey then filed a claim to recover under MP325886 . American Growers sent an adjuster, Wendell Doyle, to investigate the
damage. Following the investigation, Doyle prepared the required appraisal and
production worksheets . Claims personnel at American Growers subsequently
determined that Dayland Farms was not an insurable entity, and then voided MP325886 and transferred all coverage for FSN 1354 and FSN 2654 to MP-284734 .
American Growers then issued a payment based on the level of coverage provided by
MP-284734 . Dailey disagreed and asserted that the claim should have been paid per
the level of coverage provided by MP-325886, which would have resulted in a heftier
payment.
On August 11, 1997, Dailey filed a civil action in the Montgomery Circuit Court
contending that his crop loss should have been paid under MP-325886, the policy in the
name of Dayland Farms, and that American Growers neglected and refused to adjust
his claim in a fair, prompt, and reasonable manner. Dailey further alleged that
American Growers breached and violated the terms of KRS 304.12-230, Kentucky's
Unfair Claims Settlement Practices Act ("UCSPA") .
American Growers moved the circuit court to grant summary judgment in its
favor. The circuit court sustained said motion finding that "[MPCI] policies are subject
to the regulations of the [FCIC] and are not subject to state or local rules or
regulations ." As a result, the court determined that American Growers properly
adjusted Dailey's claim and further held that American Growers did not breach or
violate the UCSPA . In its opinion affirming, a split panel of the Court of Appeals
adopted the circuit court's findings verbatim . Dailey then moved this Court for
discretionary review, which motion was granted . This appeal followed .
The primary issue this Court must consider is whether the Court of Appeals erred
in sustaining the circuit court's decision granting summary judgment to American
Growers. In its order citing to 7 C .F.R. § 400 .352, the circuit court determined that
MPCI policies were not subject to state law. It must then be determined if the Federal
Crop Insurance Act ("FCIA") and FCIC regulations preempt the laws of this state,
thereby preventing Dailey from asserting his state law claims . We hold that they do not
and reverse the judgment rendered by the Court of Appeals.
The FCIA was enacted in 1938 as part of the second President Roosevelt's
"New Deal ." Its main purpose was "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 ." 7 U .S .C. § 1502(a) . The FCIA also established the
FCIC. 7 U.S .C . § 1503. Farmers can obtain crop insurance under the FCIA by either
being issued insurance directly through the FCIC, or by receiving insurance from a
private company reinsured by the FCIC . 7 U .S.C . § 1508(a)(1). In the instant case, the
policy was obtained from a private company, American Growers . In addition, all
reinsured policies must comply with the requirements of the FCIA and the regulations of
the FCIC . 7 C .F.R. § 400.164 .
In its order granting American Growers' motion for summary judgment, the circuit
court apparently relies on the following language from 7 C .F .R . § 400.352(a) :
No State or local governmental body or non-governmental body shall have
the authority to promulgate rules or regulations, pass laws, or issue
policies or decisions that directly or indirectly affect or govern agreements,
contracts, or actions authorized by this part unless such authority is
specifically authorized by this part or by the [FCIC] .
However, 7 C.F .R. § 400.352(b)(4) provides that "nothing herein is intended to preclude
any action on the part of any authorized . . . State court or any other authorized entity
concerning . . . the regulations, any contract or agreement authorized by the [FCIA] or
by regulations or procedures issued by the [FCIC] ." This language suggests to this
Court that the circuit court below was not precluded from entertaining this action, which
essentially is a bad faith breach of contract claim . "The simple fact that Congress has
established an ordered regulatory scheme is insufficient to preempt all contract claims
involving crop insurance ." Aare v. Rain & Hail LLC, 196 F . Supp. 2d 905, 911 (D . Minn.
2002) . Furthermore, 7 C .F.R . § 400 .351 provides :
The regulations contained in this subpart are issued pursuant to the
[FCIA] . . . to prescribe the procedures for federal preemption of State
laws and regulations not consistent with the purpose, intent, or authority of
the Ff CIAl . These regulations are applicable to all policies of insurance,
insured or reinsured by the [FCIC], contracts, agreements, or actions
authorized by the [FCIA] and entered into or issued by FCIC .
(Emphasis added)
Based on this statutory language, it is our opinion that only those state and local laws or
regulations which are inconsistent with the "purpose, intent, or authority" of the FCIA
will be preempted . Consequently, we do not believe that the claims Dailey presents are
inconsistent with the FCIA or FCIC regulations .
While this Court has not previously addressed this issue, we find persuasive
case law from other jurisdictions in support of the decision we reach today . A similar
result was rendered in a recent South Carolina appellate case . In Lyerly v. American
National Fire Insurance Company, 540 S .E.2d 469 (S .C . Ct. App. 2000), the insured
purchased insurance for his tobacco crop from a private insurance provider reinsured
by the FCIC. The policy provided that if the insured brought suit for crop loss or
damage, then the insured must do so within twelve months of the damage occurrence .
Id . at 470. The insurance provider moved for summary judgment because the insured
untimely filed suit thirteen months after his tobacco crop was damaged . Id. The
insurance provider also argued that any state law causes of action were preempted by
federal law and the insured's only remedy was the "construction and enforcement of the
policies of insurance pursuant to the terms thereof ." Id . The insured countered by
arguing that the period for filing an insurance claim could not be contractually shortened
under the applicable state statute . Id . at 471 . The circuit court, however, agreed with
the insurance provider and granted summary judgment based on its finding that the
insured's action was not timely filed pursuant to the insurance policy. Id . The same
court further determined that state law was not applicable because all laws governing
the action were preempted by federal law. Id . The South Carolina Court of Appeals
disagreed, holding that under the circumstances, state law was not inconsistent with the
FCIA, and therefore, the insured's state claim was not preempted by federal law. Id . at
474 .
Of the federal courts which have considered issues relating to the FCIA
preempting state law, the majority have held that the FCIA and FCIC regulations do not
totally preempt state law or state law causes of action . For example, the Eleventh
Circuit Court of Appeals held that insureds retained traditional contract remedies
against private insurance companies which issued FCIC reinsured policies . Williams
Farms of Homestead, Inc. v. Rain & Hail Ins. Services . Inc. , 121 F.3d 630, 635 (11 th Cir.
1997) . In addition, the Tenth Circuit determined that the FCIA does not preempt all
state law claims in suits against private insurance companies on reinsured policies .
Meyer v. Conlon , 162 F.3d 1264, 1269-70 (10th Cir. 1998) . The Fifth Circuit held
likewise when it could find no "clear manifestation of congressional intent to displace all
state law claims by insureds against crop insurance agents ." Rio Grande Underwriters .
Inc . v. Pitt Farms . Inc. , 276 F.3d 683, 686 (5th Cir. 2001) . Federal district courts have
.,
.g_
reached similar findings as well . See, e Nobles v . Rural Community Ins. Services ,
122 F. Supp . 2d 1290 (M .D. Ala . 2000); Halfmann v. USAG Ins. Services, Inc. , 118 F.
Supp . 2d 714 (N .D . Tex. 2000) ; Bullard v . Southwest Crop Ins. Agency. Inc. , 984 F.
Supp . 531 (E. D. Tex. 1997) .
While a majority of federal courts have found state law causes of action are not
completely preempted by federal law, we note that some have concluded the contrary .
g
See Owen v. Cry Hail Manaement, 841 F. Supp . 297 (W.D. Mo . 1994) ; Brown v.
Crop Hail Management , 813 F . Supp. 519 (S . D. Tex. 1993) . However, the prevailing
view among the federal courts is that Congress did not intend to preempt all state laws
or state law causes of action . Furthermore, and as previously mentioned in the opinion
herein, we do not believe that Dailey's claims below are inconsistent with the purpose of
the FCIA.
It is abundantly clear that only those state and local laws or regulations which are
inconsistent with the "purpose, intent, or authority" of the FCIA will be preempted . In
the circuit court below, one of the issues Dailey advanced was that American Growers
violated the UCSPA . We fail to see in what way the UCSPA is inconsistent with the
FCIA, much less the regulations of the FCIC . The circuit court found that there was no
violation of the UCSPA because Dailey's claim "was adjusted according to the FCIC
regulations and the adjusting standards employed in the crop insurance industry." The
Court of Appeals adopted the same . This was error. The issue of whether or not there
was a violation of the UCSPA needs to be argued before a trier of fact during a trial. In
addition, we observe that the manner in which American Growers adjusted Dailey's
claim is a valid point of contention between the parties, which should also be put before
a trier of fact. As a result, it is our view that there exist genuine issues of material fact
warranting a trial on the merits .
We hold that Dailey's claims are not inconsistent with the FCIA or the regulations
of the FCIC. It was error to award summary judgment to American Growers . "[T]he
proper function of summary judgment is to terminate litigation when, as a matter of law,
it appears that it would be impossible for the respondent to produce evidence at the trial
warranting a judgment in his favor ." Steelvest, Inc. v. Scansteel Service Center Inc. ,
Ky., 807 S.W.2d 476, 480 (1991) . Since it has been determined that Dailey's claims
based on Kentucky law are not prohibited by the federal regulations, we cannot say that
it would be impossible for Dailey to produce the pertinent evidence .
Accordingly, we hereby reverse the decision of the Court of Appeals and remand
this case to the Montgomery Circuit Court for further proceedings in conformity with this
opinion .
All concur. Cooper, J ., also concurs by separate opinion, with Lambert, C .J .,
Graves, Johnstone, and Keller, JJ ., joining the concurring opinion .
COUNSEL FOR APPELLANT :
James T. Harris
112 North Upper Street
Lexington, KY 40507
COUNSEL FOR APPELLEES :
Guy Colson
Fowler, Measle & Bell, LLP
Kincaid Towers, Suite 600
300 West Vine Street
Lexington, KY 40507-1660
R. Laubenthal
35 Main Place, Suite 300
P.O. Box 249
Council Bluffs, IA 51502
Paul Shotkoski
35 Main Place, Suite 300
P .O . Box 249
Council Bluffs, IA 51502
R. Craig Reinhardt
Fowler, Measle & Bell
Kincaid Towers
6th Floor, Suite 650
300 West Vine Street
Lexington, KY 40507-1660
Katherine J . Hornback
Reinhardt & Associates, PLC
2355 Huguenard Drive
Suite 103
Lexington, KY 40503
RENDERED : APRIL 24, 2003
TO BE PUBLISHED
,Sixyrrxttr 11nixrf of ~ntfixxhV
2001-SC-0364-DG
PETER R. DAILEY, III
V.
APPELLANT
ON REVIEW FROM COURT OF APPEALS
1999-CA-2954
MONTGOMERY CIRCUIT COURT NO. 97-CI-90092
AMERICAN GROWERS INSURANCE ; AND
AMERICAN AGRISURANCE, INC.
APPELLEES
CONCURRING OPINION BY JUSTICE COOPER
I concur fully in the majority opinion which correctly decides the only issue
addressed by the trial court and the Court of Appeals, i .e . , whether the Federal Crop
Insurance Act (FCIA) preempts a state law claim against a private insurer for damages
caused by the insurer's failure to pay the proceeds due under the policy. I write
separately to express my views with respect to the other issues raised by American
Growers' in support of its claim of entitlement to a summary judgment and which are
likely to be reiterated upon remand to the trial court.
' American Agrisurance, Inc., is affiliated with American Growers Insurance and
is the marketing and service agent for American Growers Insurance's crop insurance
business . For purposes of this opinion, the two will be treated as one entity and
referred to as "American Growers ."
In addition to its preemption claim, American Growers contends that it is entitled
to summary judgment with respect to Appellant Dailey's claim under policy number MP325886 because (1) it is protected from Dailey's estoppel claim by the "Merrill doctrine,"
enunciated in Federal Crop Insurance Corporation v. Merrill , 332 U .S. 380, 68 S .Ct. 1,
92 L . Ed . 10 (1947); (2) the damaged crops were also insured under policy number MP284734, which was issued in 1995 and had not been canceled, thus, coverage under
that policy prevails over coverage under the subsequently issued MP-325886 (and
payment under MP-284734 has been tendered to Dailey) ; and (3) Dailey applied for
MP-325886 under his "doing business as" ("dba") name of "Dayland Farms," an entity
with no insurable interest in either of the farms insured under that policy, and used his
employee identification number (EIN) instead of his social security number (SSN) in
making the application .
I. ESTOPPEL.
Estoppel is at the heart of this case . A single agent, Henry Alton "Junior" Stull,
drafted all three applications at issue here . Stull was an employee of New Farmers
Tobacco Warehouse which served functionally as buyer, lender, and insurance agent
for many local tobacco farmers . Because Dailey and other farmers were generally
unable to obtain bank loans to finance their tobacco crops, the tobacco warehouse
would provide the financing at the beginning of the season and would be repaid when
the crop was brought in for sale at the end of the season. As the warehouse purchased
each farmer's crop, it would offset the balance of the loan against the purchase price .
As a condition of the loan, the warehouse also required each farmer to maintain crop
insurance, the premium for which was also fronted by the warehouse and offset against
the payoff when the warehouse ultimately purchased the farmer/debtor/insu red's
tobacco.
Stull was both an employee of the warehouse and an insurance agent for Town
& Ranch Insurance Company in Winchester, Kentucky. Town & Ranch issued crop
insurance policies through American Growers and had arranged for Stull to be trained
at American Growers' "agent's school." Upon graduation from "agent's school," Stull
established what amounted to a Town & Ranch branch office at the warehouse .
In 1995, Dailey approached Stull to apply for crop insurance as a precursor to
obtaining a crop loan from the warehouse . Stull prepared the application for MP284734 to insure Dailey's crops at fifty-five percent of cash value and Dailey signed it.
Upon receipt of the application, American Growers issued MP-284734 insuring Dailey's
crops at the fifty-five percent level. At the conclusion of the tobacco season, Dailey
sold his tobacco crop to the warehouse and took home his net profit after deducting that
year's crop loan and insurance premium .
In 1996, Dailey again approached Stull. This time, Stull informed Dailey that, to
obtain the crop loan, he would need to insure the tobacco on his two farms, farm serial
number ("FSN") 1354 and FSN 2654, at a seventy-five percent level instead of the
previous fifty-five percent level. Dailey assented but asked Stull if he could insure those
crops with a different agency . Dailey was dissatisfied with the service he had received
from Town & Ranch and further believed that the Hoffman, Ison, & Greene, Inc. ("HIG")
agency in Mt. Sterling, Kentucky, would be more convenient for him . Dailey planned to
move some crops to HIG in 1996 and, if satisfied with the service, eventually move all
of his policies to HIG .
Despite his status as a Town & Ranch employee, Stull agreed to place the new
policy with HIG . Stull explained in his deposition that HIG also sold insurance for
American Growers and, "as an agent for American Agrisurance, I felt a responsibility
. . . [to] save him [Dailey] for American Agrisurance [and] also [to] save him for myself."
Thus, by transferring Dailey's crops to HIG, Stull could ensure that both he and
American Growers retained Dailey's business . Sometime after drafting the application
for MP-325886, Stull contacted Terry Bohannon, American Growers' regional claims
supervisor for the Mideast Region, and asked him whether Stull "could be an agent for
two different agencies ." Bohannon replied that, to his knowledge, Stull could work for
two agencies.
As he had done with respect to the 1995 MP-284734 application, Stull prepared
the 1996 MP-325886 application and MP-284734 renewal application in their entireties.
Stull, not Dailey, chose to draft the MP-325886 application in Dailey's "dba" name,
"Dayland Farms," and to use Dailey's EIN number instead of his SSN number on the
application . Stull testified that he made these choices in order to keep MP-325886
distinct from MP-284734 . In fact, Stull testified that he used Dailey's EIN number on
the MP-325886 application because he had been trained by American Growers not to
use the same identification number on two different applications. Stull was fully aware
that "Dayland Farms" was simply Dailey's "dba" name .
At Dailey's request, Stull kept MP-284734 in effect for a portion of Dailey's other
crops (still others were insured by a third policy not at issue here), and continued to
2 Bohannon told Stull that he would confirm this position with another American
Growers' employee . The record is unclear whether he ever did so . Upon learning
(when Dailey filed his hail damage claim) that Stull had placed Dailey's policies with
another agency, Town & Ranch terminated Stull's employment as its agent.
insure those crops at fifty-five percent. In order to indicate that MP-284734 no longer
provided coverage for FSN 2654, Stull wrote "0" on the renewal application for MP284734 next to the number of acres of FSN 2654 that were to be insured under that
policy . This practice is sometimes referred to as "zeroing out" coverage on a particular
farm . Dailey signed both policy applications on March 15, 1996 . American Growers
then renewed MP-284734, and issued MP-325886 .
Given these facts, Dailey has a colorable argument that American Growers
should be estopped from claiming that MP-325886 was invalid .
[I]f an insurance company through those who are authorized to speak for
it, either by words or conduct, has induced an insured to refrain from
doing that which he is obligated to do under the conditions of the policy, it
will be deemed to have waived the requirements and may be estopped to
deny the authority of its agent on whose conduct or representations the
insured relied .
Hanover Ins . Co . v. McLoney, 205 F.Supp. 49, 53 (E .D .Ky. 1962). See also Kentucky
Farm Bureau Mut . Ins. Co. v. Hardin , Ky., 262 S .W .2d 831, 833 (1953) (insurer
estopped from defensively asserting provision against additional insurance when agent
was aware of existing policy) ; Northwestern Nat. Ins. Co. of Milwaukee v. Avant, 132
Ky. 106, 116 S .W . 274, 276 (1909) ("If subsequent to the issual of the policy the
[insured] by its agent then representing it assented that the insured might take out
additional insurance upon the property, the condition against other insurance was
waived . Whether there was such assent is a question of fact, to be determined by the
jury.").
American Growers contends that application of this principle in the context of
crop insurance is precluded by the " Merrill doctrine ." In Federal Crop Insurance
Corporation v. Merrill , supra , the FCIC had issued insurance on a spring wheat crop
that had been reseeded on winter wheat acreage in violation of federal wheat crop
insurance regulations . Id . at 382, 68 S .Ct. at 2. Relying on the doctrine of estoppel, the
plaintiff in Merrill claimed that the FCIC should be required to honor his claim because
the FCIC's agent had advised him prior to writing the policy that the entire crop was
insurable . Id. The United States Supreme Court disagreed, holding that the FCIC was
not bound by "the rules of law whereby private insurance companies are rendered liable
for the acts of their agents . . . ." Id. at 383 n .1, 68 S .Ct. at 3 n .1 . Noting that "[m]en
must turn square corners when they deal with the Government," the Court held that the
FCIC's agent could not bind the public treasury in contravention of federal law. Id. at
384-85, 68 S.Ct. at 3-4 (quoting Rock Island . A. & L. R. Co . v. United States , 254 U.S .
141, 143, 41 S .Ct. 55, 56, 65 L .Ed . 188 (1920)) . American Growers claims that
because it insures crops and is regulated and reinsured by the FCIC, it enjoys Merrill
protection .
The Merrill doctrine, however, generally does not apply to private insurers .
Indeed, Merrill explicitly stated :
We assume that recovery could be had against a private insurance
company. But the Corporation is not a private insurance company.
Id . at 383, 68 S .Ct. at 3 (emphasis added). An important rationale for the Merrill
doctrine was the principle of separation of powers; the Court found that judge-made
principles such as estoppel should not be applied to open the public coffers when
Congress has explicitly ordered them closed . Id . at 385, 68 S .Ct. at 3-4; see REW
Enters., Inc. v. Premier Bank N A , 49 F.3d 163, 167 (5th Cir. 1995) (citing Merrill and
noting that separation of powers concerns emerge because "[e]stopping an agency
from disavowing an unauthorized act would validate the agency's improper infringement
of the authority of a coordinate branch [and] . . . permit government employees to
'legislate' by misinterpreting or ignoring an applicable statute or regulation .") (quotations
and internal citations omitted) . However, separation of powers is not an issue when
estoppel is applied against a private party. Id . Likewise, claims against private insurers
represent no direct threat to the public coffers . Id . Finally, the precept that "[m]en must
turn square corners when they deal with the Government," Merrill , supra , at 385, 68
S .Ct. at 3, generally does not apply when they deal with private insurers .
A necessary condition for applying Merrill to private insurers is that Congress has
explicitly so decreed, as in the context of the National Flood Insurance Act of 1968
("NFIA") . Given the peculiar regulatory framework of the NFIA, nearly every flood claim
results in a drain on the federal treasury . See Flick v. Liberty Mut. Fire Ins. Co. , 205
F.3d 386, 393-94 (9th Cir. 2000). Under the NFIA, private flood insurers are considered
to be "fiscal agents" of the United States . 42 U .S .C . § 4071(a)(1) (declaring that FEMA
Director may enlist the participation of private insurers "as fiscal agents of the United
States") . Some federal courts of appeals, noting this designation, have held that private
insurers acting*as "fiscal agents of the United States" enjoy Merrill protection in the
context of the NFIA. Flick, supra at 391-92 ; Gowland v. Aetna, 143 F.3d 951, 954-55
(5th Cir. 1998) .
In contrast, the Federal Crop Insurance Act ("FCIA") does not designate private
crop insurers as "fiscal agents of the United States" or otherwise indicate that these
insurers should be treated as governmental entities. The Eleventh Circuit Court of
Appeals has explicitly distinguished the FCIA from the NFIA, noting that the FCIA does
not contain the NFIA's provisions regarding suits against private companies, Williams
Farms of Homestead, Inc. v. Rain & Hail Ins . Servs . Inc. , 121 F .3d 630, 634-35 (11th
Cir. 1997), and concluding that the FCIA intended to leave insureds with their traditional
state law remedies against private crop insurance companies . Id . at 635.
The mere fact that the FCIC provides reinsurance coverage to private crop
insurance companies and heavily regulates those companies does not entitle them to
Merrill protection . At least two federal courts of appeals have rejected that argument
when made by the Foreign Credit Insurance Association . Nu-Air Mfg . Co . v. Frank B .
Hall & Co. of New York, 822 F .2d 987, 994 (11 th Cir. 1987) ; Lovell Mfg. v. ExportImport Bank of the United States , 777 F.2d 894, 901 (3d Cir. 1985) . The Foreign Credit
Insurance Association ("the Association") is a collection of private insurance companies
formed at the behest of the United States Export-Import Bank ("Eximbank") to provide
insurance for foreign commercial ventures . Lovell Mfg . , supra , at 895. Like private
insurance companies issuing crop insurance pursuant to the FCIA, the Association was
heavily regulated and reinsured by Eximbank and argued that it was therefore entitled
to Merrill protection . Both appellate courts disagreed . Concluding that the Association
had read Merrill too broadly, the Eleventh Circuit held that Merrill did not "bear[] any
application to private contractual arrangements between private litigants." Nu-Air Mfg . ,
supra, at 994. The Third Circuit, while acknowledging that Eximbank owed a duty of
reinsurance to the Association, held that its claim did not directly implicate the public
treasury . It was the "[Association's] potential claim against the government under the
reinsurance agreements, and not [the insured's claim against the Association], which is
directed toward the public fisc." Lovell Mfg. , supra , at 901 .
Thus, Dailey's estoppel claim is not barred by Merrill and appears (at least on the
present record) to be a viable claim . Stull was American Growers' agent and prepared
both the 1995 and 1996 policy applications . Once he made his wishes clear to Stull,
Dailey's participation in the application process appears to have been limited to simply
adding his signature . Stull testified during his deposition that he, not Dailey, decided to
apply for MP-325886 in the "dba" name, "Dayland Farms," and that he decided to use
Dailey's EIN number instead of his social security number. Stull knew that Dailey
intended to cancel coverage for FSN 1354 and FSN 2654 on MP-284734, the fifty-five
percent policy, and to institute coverage for those farms on MP-325886, the seventyfive percent policy, because the increased coverage level was instigated by Stull,
himself. Dailey testified that he relied entirely on Stull to properly accomplish the
coverage changes and Stull's deposition testimony makes it clear that he was aware of
Dailey's reliance .
II. DOUBLE COVERAGE .
A second disputed issue of material fact is whether MP-284734 was still in effect
with respect to FSN 1354 and FSN 2654 after MP-325886 was issued . Each policy
provides :
We will not permit another Multiple Peril Crop Insurance Policy or Federal
Crop Insurance Corporation Policy on your share of the insured crop(s) .
If another policy or Federal Crop Insurance Corporation Policy has been
issued, the policy with the earliest date of application will be the one in
force, and all other policies will be void .
American Growers contends that both crops were insured under both policies and, thus,
it was required by this provision to pay Dailey's claims under MP-284734, the policy
"with the earliest date of application," and that MP-325886 was consequently void .
3 American Growers also asserts that it did not charge Dailey a premium for the
seventy-five percent coverage provided by MP-325886 . What this apparently means is
that, upon determining that MP-325886 did not provide coverage for Dailey's loss, it
caused only the premium for MP-284734 to be deducted from the sum ultimately paid
to Daileyforwhat remained of his tobacco crop .
This assertion depends, of course, on two assumptions : (1) that both FSN 1354
and FSN 2654 were insured under MP-284734 ; and (2) that coverage under MP284734 was not canceled with respect to FSN 1354 and FSN 2654 . Those
assumptions, however, are not supported by undisputed facts of record . First, the
record is unclear as to whether FSN 1354 was ever insured under MP-284734 . The
only support for American Growers' position is that Stull answered "yes" when he was
asked in his deposition whether MP-284734 covered FSN 1354 "to his knowledge ."
However, in his October 1, 1998, deposition, Dailey testified that 1996 was the first year
that he farmed FSN 1354. If so, FSN 1354 could not have been insured under MP284734. In fact, this seems likely because neither the MP-284734 application nor any
document in the record indicates that FSN 1354 was ever covered under MP-284734 .
Of course, if FSN 1354 was never insured under MP-284734, there was no reason
whatsoever for American Growers to adjust Dailey's claim with respect to that farm
under the coverage of that policy.
Second, there exists a dispute as to whether MP-284734 still provided coverage
for FSN 2654 (and FSN 1354 if it, indeed, was insured in 1995) after MP-325886 was
issued in 1996. The pertinent policy provision reads :
LIFE OF POLICY
a . Policy Period .
This is a continuous policy and will remain in effect for each crop year
following the signing of the original application or until canceled by either
you or us in accordance with the cancellation provision contained herein .
b . Cancellation .
Prior to the cancellation date shown in the State Endorsement, this policy
may be canceled for any crop year by either you or us providing written
notice to the other. In the absence of such written notice to cancel, the
policy will remain in force for each succeeding crop year .
- 1 0-
According to this provision, "written notice" suffices to cancel coverage. No provision of
the policy suggests that a farmer may not cancel a policy's coverage with respect to one
farm but retain its coverage with respect to another farm. After all, a farmer might
choose to sell one farm and retain ownership of another. Thus, if Dailey provided
"written notice" to American Growers of cancellation of coverage for FSN 2654 under
MP-284734, that policy would no longer have been in effect with respect to FSN 2654
during crop year 1996.
The policy does not define "written notice" or explain what sort of written notice is
required . Given this lack of specificity, the question of whether American Growers
received "written notice" of the cancellation of coverage for FSN 2654 on MP-284734 is,
at best, a disputed issue of fact. Stull testified that he "zeroed out" coverage for FSN
2654 on the MP-284734 renewal application in 1996 and included FSN 2654 on the
MP-325886 application . Both documents were "written" and received by American
Growers . Did they together constitute "written notice"? In the absence of a definition,
this question is for the fact-finder.
111111. INSURABLE INTEREST .
Finally, there is no basis for American Growers' claim that the 1996 policy was
void because Dailey applied for it in his "dba" name . As noted, the MP-325886
application listed "Dayland Farms" as the applicant and policyholder, and was signed,
"Dayland Farms by Peter R. Dailey ." Stull thought these steps were required in order to
distinguish the two policies . American Growers asserts that these steps rendered MP325886 void . It claims that because "Dayland Farms," a mere "dba" name, had "no
insurable interest" in either FSN 1354 or FSN 2654, MP-325886 was void ab initio . Put
differently, American Growers contends that a policy is void unless the application is
made and the policy issued in the insured's "real name ."
However, a review of the policy and the applicable federal guidelines reveals no
support for that contention . No cited regulation or policy provision provides that an
individual may not apply for insurance under a "dba" name . Indeed, Dailey points out
that the "Catastrophic Risk Protection Handbook," published by the United States
Department of Agriculture and approved by the Federal Crop Insurance Corporation,
contains a chart with examples of how different entities may apply for crop insurance
and lists "Northham Land Company c/o James T. Anderson" as a sample form name
under which an individual can apply for and obtain crop insurance, and "Northham Land
Company By James T. Anderson" as an example of how to sign such a policy
application . (The chart also notes that the applicant's identification number can be "EIN
or SSN of The Owner" (emphasis added), facially contradicting American Growers'
assertion that the application must contain the applicant's social security number.)'
Dailey's signature, "Dayland Farms By Peter R. Dailey," clearly indicates his
intent to acquire insurance as an individual in this format. Although the MP-325886
application does not perfectly conform to the example (Stull did not list Dailey's name
as a "c/o"), Dailey's identity and intention to file as an individual doing business as
"Dayland Farms" are obvious at a glance . If American Growers did not wish to insure
Dailey's farms in the "dba" format, it should have rejected the application . There is no
dispute that Dailey had an "insurable interest" in both FSN 1354 and FSN 2654. If
'Nevertheless, in an obscure footnote on a different page, the chart indicates
that both the EIN and SSN number should be listed when the individual is applying with
a dba name . It is easy to see why Stull was confused .
- 1 2-
these tracts were not insured under MP-284734 in 1996, then they were insurable by
Dailey -- including Dailey doing business as "Dayland Farms" -- under MP-325886 .
For these reasons and those expressed in the majority opinion, I agree that the
decision of the Court of Appeals should be reversed and that this case should be
remanded to the Montgomery Circuit Court for further proceedings .
Lambert, C .J . ; Graves, Johnstone, and Keller, JJ ., join this concurring opinion .
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