Claims And Issues

CROPS, INSURANCE, AND THE YIELDS OF ARBITRATION.

Obeying current precedent of the U.S. Supreme Court, a State Supreme  Court held in a recent insurance case that if arbitration arises from a contract involving interstate commerce, it is governed by the Federal Arbitration Act.

That case involved the issue of arbitration of disputes arising under federally reinsured crop insurance contracts.  The Court held in that case that the issue plainly involves interstate commerce and, as such, is governed exclusively by the Federal Arbitration Act.  Karo v. Nau Country Ins. Co., ___ Neb. ___, ___ N.W.2d ___, No. S-16-810, 2017 WL 4185426 (Neb. September 22, 2017).

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APPRAISAL, VALUE, SETTLEMENT "OFFER": CROP INSURANCE CARRIER'S ALLEGED CONTRACT BREACH.

Here is an example of how claims handling can affect the resolution of an insurance coverage question.

In an unusual move, a crop insurance carrier offered to pay its insured's claim without waiting for the insured to agree.  As things turned out, the insured did not agree with its carrier's offer.  The insured disputed value.  As noted by the Eighth Circuit in this case, the dispute over value was "likely sufficient" by itself to trigger an appraisal.

However, in this case there was evidence in the record that the carrier and the insured continued to negotiate settlement of the claim and that the insured was "led to believe" (presumably by the carrier) that the carrier might even up the value of its offer.

This evidence was summarized somewhat ambiguously by the Eighth Circuit but it was enough to foreclose summary judgment for the carrier when the insured in this case did not demand an appraisal as the policy allowed.

There was also a legal dispute about which one of these two parties had the burden to demand an appraisal -- the carrier or its insured -- but regardless of who bore the burden, the appellate court saw a genuine issue of material fact which prevented the entry of judgment for the carrier on the insured's breach of contract claim.  Bruhn Farms Joint Venture v. Fireman's Fund Ins. Co., 823 F.3d 1161, page numbers not provided by Westlaw but paragraphs falling within "Headnotes 7 and 8," which Westlaw has provided (8th Cir. 2016).

The Court also discussed and applied the Iowa law of insurer bad faith in this case which recognizes an insurance carrier's right to debate claims that are fairly debatable.  In this case, however, the same record raised genuine issues of material fact which prevented the entry of summary judgment in favor of the crop carrier at bar:  "Numerous instances of conduct by the insurance representative and adjusters at the very least raise jury issues on bad faith, most specifically the delay in adjusting the fields and then, for the next several months, leading Bruhn [the policyholder] to believe that the claim would be favorably settled without having to go through the hassle of a joint appraisal."

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"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

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Image copyright 2015 Donna Bruno and Dennis J. Wall.

View this YouTube video on Lender Force-Placed Insurance Practices here.

Image by NASA.

Business models centered around insurance frequently dominate the economy.  Stories of new models are published every day.  One such story involves lender force-placed insurance practices, but this is only one of the stories of business models that dominate the economy.   Another story, but again only one story among many such stories, involves crop insurance subsidies.

Crop insurance subsidies do not really subsidize the costs of growing crops.  Crop insurance subsidies instead apparently subsidize crop insurance companies.  Crop insurance subsidies provide a return on investment that the insurance carriers offering crop insurance policies cannot get otherwise.  The margin is paid with your taxes.

And there is no evidence that crops are affected one way or the other.  But people are affected.

The story of crop insurance subsidies and the apparent windfall to crop insurance carriers is the subject of a New York Times report.  The story tells itself with these quotes from a much longer news article, available here:

Federal crop insurance is a public-private program. The government subsidizes insurers, many of them subsidiaries of multinational companies, to cushion farmers against losses from drought, floods, other natural disasters and low market prices.

Taxpayers cover about 60 percent of farmers’ premiums, while insurers get federal reimbursements for their operating costs. A target rate of return on their investment is set at 14.5 percent — “higher than that of other private companies, on average,” the Congressional Budget Office reported.

The provision in the October budget deal cut that rate to 8.9 percent. The outcry from farm-state lawmakers was immediate.

JACKIE CALMES, "NATIONAL | CONGRESSIONAL MEMO / Crop Insurance Subsidy Reflects a Budget Reality" (New York Times Online posted for Friday, November 27, 2015).

As the report observes:

The case of the crop insurance subsidies is just the latest evidence that talking about balancing the budget is far easier than doing it.

Id.

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Rally for Justice June 8, 2012!

    Catholic bishops have called for a rally on Friday, June 8, 2012.  Join and Rally for Justice!

    Rally for all the concerns of the Church and for all the concerns shared by so many people for so many years, concerns which justly cry out for a rally right now:

• Rally for the poor.  Protest budget plans for the Federal Government which require the poor to pay more taxes while at the same time offer deep Tax cuts to wealthy people at the expense of cuts in needed services.  Rep. Paul Ryan (R-Wisconsin) reportedly has attempted to say that reducing people to a condition unworthy of human beings under his budget plan is actually a "Catholic" value.  Show your support for true Catholic values today, real values passionately shared by many.  Rally for Justice!

 

• Rally for the homeless.  In Washington, D.C. the rally will begin at Noon in the parking lot between the Capitol Building and the U.S. Grant Memorial.  There are homeless within sight of that spot in our nation's capitol.  Reach out.  Ask how they are and, if you are bold enough, ask how you can help them at this moment, at least.  They are your sisters and brothers, and they require your concern.  Rally for Justice!

 

• Rally for the starving.  Attend the hearings that are taking place in the U.S. Capitol if you are in D.C. right now, on extending or restricting Federal Taxpayer subsidies for corporations to pay Premiums for Crop Insurance which will pay off when they plant crops in places where crops cannot grow.  See the post and links here on June 6, 2012 and on Insurance Bad Faith Law Blog on June 7, 2012.  If crops cannot grow, they cannot feed people.  Ask why aid to the hungry is being reduced, at the same time.  Rally for Justice!

 

    Rally also out of concern for all people who are reduced to a condition unworthy of human beings for any reason, including by rape, sexual or physical abuse, and war.

    Find out where the Friday, June 8, 2012 Rally is taking place in your community, and confirm that it is taking place at "Noon" or at some other starting time.  Rally for Justice today!

    And every day, show your support for Justice, for the values that are real.

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Crop Insurance Revisited.

    This is how the post here on April 18, 2012 began:

Crop Insurance and Federally Undefined "Material" Misrepresentations in the Application.

   Crop Insurance is flying under the radar of most Insurance Coverage practitioners.  It is reportedly a highly lucrative business, heavily subsidized by the Federal Government.  See Ron Nixon, "Report Says a Crop Subsidy Cap Could Save Billions" p. A15, col. 3 (New York Times Nat'l ed., Thursday, April 12, 2012).

    Subsidization of Crop Insurance Premiums by our tax dollars has now attracted even wider attention.  See David Rogers, "Environmental Groups Go After Crop Insurance" p. 1, col. 3 (Politico, Friday, June 1, 2012).

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Crop Insurance and Federally Undefined "Material" Misrepresentations in the Application.

   Crop Insurance is flying under the radar of most Insurance Coverage practitioners.  It is reportedly a highly lucrative business, heavily subsidized by the Federal Government.  See Ron Nixon, "Report Says a Crop Subsidy Cap Could Save Billions" p. A15, col. 3 (New York Times Nat'l ed., Thursday, April 12, 2012).

   A mom and dad tried to set their son up with a Crop Insurance Policy, but the attempt was not successful when the Crop Policy was rescinded by a Federal Court.  Among other evidence in the record of that case, the Federal Court pointed out that apparently the son did not invest very much in the crop which he was applying to insure before he made a claim for a big loss on it.  Skymont Farms v. Federal Crop Insurance Corp., 2012 WL 1193407 *1 (E.D. Tenn. April 10, 2012), Download Skymont Farms v. Federal Crop Ins. Corp. (E.D. Tenn. Case No. 4.09cv65, Memorandum and Order of Lee, U.S.M.J.) PUBLIC ACCESS.

   However, the Federal Court faced the task of defining what a "material" misrepresentation would be in an application for Crop Insurance, because Congress had not defined the term.  Without a Federal definition, the Federal Court turned to State Insurance Law for a definition, held that the application for Crop Insurance at bar met the definition because the son just did not display an insurable interest for the Crop Insurance he was applying for, and ordered that the Crop Insurance Policy was rescinded -- without payment of the son's claim, of course.  Id. at *8 - *10.

   This decision is of interest at the present time for reasons beyond Crop Insurance and that extend to Health Insurance.  The Patient Protection and Affordable Care Act, or "ACA," one provision of which is currently under constitutional review by the U.S. Supreme Court, contains a provision governing Rescission of Health Insurance policies and plans subject to the ACA.  It does not contain any definition of what constitutes a "material" misrepresentation sufficient for Rescission of such Health Coverage.

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"Knee High by the Fourth of July": Crop Claims, CatClaims ....

....  Claims Rise Higher and Faster Than Crop Prices.

     Recent newspaper articles reflect that an increase in Crop Prices has brought an increase in the number of Crop Insurance Policies sold, but that the number of CatClaims from Tornadoes is rising even faster, potentially draining the financial capacity of Crop Insurance Companies to pay them.  See, for example, Ari Levy, "Iowa Storms, Flood to Cause Losses for Crop Insurers (Update 2)" (Bloomberg.com, Monday, June 16, 2008);  Erik Holm, "Increase in Tornadoes to Cost Insurers in Quarter (Update 3)" (Bloomberg.com, Friday, June 13, 2008); and see this revealing report which cannot be accessed nor found on Bloomberg.com online at the time of this post, by Ari Levy, "Crop Insurance Sales Surge as Wells Fargo Leads Boom (Update 2)" (Bloomberg.com, Thursday, June 12, 2008).

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