Jody James Farms, JV v. the Altman Group, Inc. and Laurie Diaz

ACCEPTED
07-15-00060-CV
SEVENTH COURT OF APPEALS
AMARILLO, TEXAS
8/13/2015 9:48:21 AM
Vivian Long, Clerk

No. 07-15-00060-CV

FILED IN
7th COURT OF APPEALS
IN THE SEVENTH COURT OF APPEALS AMARILLO, TEXAS
AMARILLO, TEXAS 8/12/2015 9:48:21 AM
VIVIAN LONG
CLERK

JODY JAMES FARMS, JV,
Appellant,
v.
THE ALTMAN GROUP, INC.
AND LAURIE DIAZ,
Appellees.

Appeal from the 100th District Court of
Floyd County, Texas
Cause No. 10,422

APPELLEES’ BRIEF
August 12, 2105

Respectfully submitted,

FIELD, MANNING, STONE,
HAWTHORNE, AND AYCOCK, P.C.
2112 Indiana Ave.
Lubbock, Texas 79410
Tel: (806) 796-4000
Fax: (806) 792-9148
Anna McKim, SBN 24033381
amckim@lubbocklawfirm.com
J. Paul Manning, SBN 24002521
ATTORNEYS FOR APPELLEES

ORAL ARGUMENT REQUESTED
 Table of Contents

Index of Authorities ............................................................................................. iii
Statement of the Case .......................................................................................... 1
Oral Argument Request ...................................................................................... 2
Issue Presented ..................................................................................................... 3
Facts...................................................................................................................... 3
Summary of the Argument .................................................................................. 4
Argument and Authorities .................................................................................. 5
Issue: .................................................................................................................. 5
Whether Altman and Diaz, as nonsignatory insurance agents, can compel
arbitration of James’ claims against them pursuant to the FCIC governed crop
insurance policy agreement. ................................................................................ 5
A. Standard of Review ..................................................................................... 5
B. Mandatory nature of FCIC arbitration ..................................................... 6
C. An applicable agreement to arbitrate ........................................................ 7
1. Agency ....................................................................................................... 9
2. Equitable estoppel ................................................................................... 12
3. Third-party beneficiary .......................................................................... 16
D. Claims are within scope of arbitration clause ......................................... 17
E. Arbitrator and court acted within authority ........................................... 21
Conclusion .......................................................................................................... 22
Prayer ................................................................................................................. 22
Certificate of Service.......................................................................................... 23
Certificate of Compliance .................................................................................. 23
Appendix Table of Contents .............................................................................. 24

ii
 Index of Authorities
Cases
Bosscorp, Inc. v. Donegal, Inc., 370 S.W.3d 68 (Tex.App.—Houston [14th Dist.]
2012, no pet.) .................................................................................................... 17

Brainard v. State, 12 S.W.3d 6 (Tex. 1999) ........................................................... 5

Cantella & Co. v. Goodwin, 924 S.W.2d 943 (Tex. 1996) ................................... 17

Chelsea Square Textiles, Inc. v. Bombay Dyeing and Manufacturing Co., 189 F.3d
289 (2nd Cir. 1999)............................................................................................. 5

Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842 (Tex. 2005) ................ 14

Ellman v. JC Gen. Contractors, 419 S.W.3d 516 (Tex.App.—El Paso 2013, no
pet.) .................................................................................................................... 5

Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947) ............................. 6

Fyrnetics (Hong Kong) Ltd. v. Quantum Group, Inc., 293 F.3d 1023 (7th Cir.
2002) ................................................................................................................ 15

Garcia v. Huerta, 340 S.W.3d 864 (Tex. App.—San Antonio 2011, pet. denied) 11

Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.), cert. denied,
531 U.S. 1013, 121 S. Ct. 570, 148 L. Ed. 2d 488 (2000) ............................ 12, 13

In re Kaplan Higher Educ. Corp., 235 S.W.3d 206 (Tex. 2007) ..................... 11, 15

In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) ........... 8, 15, 16, 17

In re Merrill Lynch Trust Co., 123 S.W.3d 549 (Tex. App.--San Antonio 2003,
orig. proceeding), mand. granted, 235 S.W.3d 217 (Tex. 2007) (orig. proceeding)
(per curiam) ............................................................................................... 8, 9, 11

iii
In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571 (Tex. 1999) ......................... 5

In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006) ................................... 11
In re Wells Fargo Bank, N.A., 300 S.W.3d 818 (Tex. App.—San Antonio 2009,
orig. proceeding) ............................................................................................ 8, 11

Leander Cut Stone Co. v. Brazos Masonry, Inc., 987 S.W.2d 638 (Tex.App.—
Waco 1999, no pet.) ............................................................................................ 5

McMillan v. Computer Translation Sys. & Support, Inc., 66 S.W.3d 447
(Tex.App.—Dallas 2001, orig. proceeding) ........................................................ 9

Merrill Lynch Trust Co. FSB v. Alaniz, 159 S.W.3d 162 (Tex. App.—Corpus
Christi 2004, no pet.) ........................................................................................ 10

Meyer v. WMCO-GP, LLC, 211 S.W.3d 302 (Tex. 2006) ......................... 12, 13, 14

Nobles v. Rural Community Insurance Services, 122 F.Supp. 2d 1290 (M.D. Ala.
2000) ........................................................................................................... 18, 19

Pritzker v. Merrill Lynch, Inc., 7 F.3d 1110 (3d Cir. 1993) .................................. 11

Rich v. Spartis, 516 F.3d 75 (2d Cir. 2008) ............................................................ 21

Schwartz v. Merrill Lynch & Co., 2011 U.S. App. LEXIS 23803 (2d Cir. Nov. 30, 2011)
......................................................................................................................... 21

Simon v. Pfizer, Inc., 398 F.3d 765 (6th Cir. 2005) .............................................. 15

South Texas Water Authority v. Lomas, 223 S.W.3d 304 (Tex. 2007) .................. 16

Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16 (2d Cir. 1997) .............................. 21

Venture Cotton Coop. v. Freeman, 435 S.W.3d 222 (Tex. 2014) ......................... 20

iv
Statutes
7 C.F.R. §400.352 (Lexis 2015) ............................................................................. 6

7 U.S.C. §1502 (Lexis 2015) ................................................................................. 6

7 U.S.C. §1506 (Lexis 2015) .............................................................................. 6, 7

7 U.S.C. §1507 (Lexis 2015) ............................................................................ 6, 16
Rules
TEX. CIV. PRAC. & REM. CODE § 171.021 (Lexis 2015).......................................... 8

v
TO THE HONORABLE COURT:

Appellees THE ALTMAN GROUP, INC., and LAURIE DIAZ present this

their response to the brief of Appellant JODY JAMES FARMS, JV, and request the

Court to affirm the Trial Court’s decisions to compel arbitration and enforce the

arbitration award.

Statement of the Case

In December 2012, James filed an action in state court alleging fraud and

negligent misrepresentation against his crop insurer, Rain and Hall, LLC. The claims

were sent to arbitration in a proceeding styled In the Matter of the Arbitration

between: Jody James Farm, JV vs. Rain and Hail, LLC, Case No. 71430E003911

before the American Arbitration Association, wherein the arbitrator found James

was not entitled to recover under the policy of insurance because his alleged notice

of a claim to Altman and Diaz was not sufficient and not in compliance with the

Policy. The arbitrator further found James was not entitled to recover under the

Policy, even if notice had been timely, because he commingled performing and non-

performing crops. CR 88-90; App. Tab 2.

Notwithstanding the arbitrator’s determination, James subsequently filed suit

against Altman and Diaz for breach of fiduciary duty and violations of the Texas

Deceptive Trade Practice Act. CR 3-6. Altman and Diaz filed a motion to compel

1
arbitration. CR 9-17. James filed a response denying an agreement to arbitrate

existed. CR Supp. 4-76. The Trial Court granted the motion to compel arbitration,

and after another round of reconsideration, the matter proceeded to arbitration. CR

27-36, 41.

In October 2014, Arbitrator Harper Estes rendered an Award of Arbitrator

stating James did not establish a right of recovery and determining James should

take nothing. CR 92-94; App. Tab 1. The arbitrator indicated the findings of the

original arbitrator were consistent with his findings precluding recovery. CR 94.

Altman and Diaz then filed a petition to confirm and enforce the final

arbitration award, which the Trial Court granted on January 20, 2015, over objection

from James. CR 42-54, 57-73, 125-26.

Oral Argument Request

Appellees do not anticipate oral argument is necessary in this matter.

However, if Appellant’s request for oral argument is granted, Appellees wish to

participate.

2
 Issue Presented

Whether Altman and Diaz, as nonsignatory insurance agents, can
compel arbitration of James’ claims against them pursuant to the FCIC
governed crop insurance policy agreement.

Facts

Appellees do not oppose the facts as represented by Appellant with the

exception of two statements. First, Appellant represents “Diaz was notified by

telephone of the loss.” (Appellant Brief, p. 3). Both the arbitrator in James’ original

suit against Rain and Hail (CR 88-90; App. Tab 2) and the arbitrator in this matter

(CR 92-94; App. Tab 1) determined there was not sufficient evidence to find a claim

had been affirmatively made in a timely manner.

Second, Appellant asserts Rain and Hail denied James’ claim because it was

untimely submitted. (Appellant Brief, p. 4, citing CR Supp. 64-68.) While this was

one reason for denial of the claim, Rain and Hail also outlined denial based upon

improper commingling of performing and non-performing farm crops without

proper measurements and a belief that James intentionally misrepresented planting

dates, both of which led to the proper denial of claims pursuant to both arbitrators

(CR Supp. 66-67; CR 93-94 (App. Tab 1); CR 89-90 (App. Tab 2).

3
 Summary of the Argument

James’ claims result from a disagreement with Rain and Hail regarding the

denial of certain indemnity payments under the subject insurance policy, which,

prior to bringing suit against Altman and Diaz, had already been litigated/arbitrated.

The original arbitration included a finding that, even if the notices for which James

now claims damages had been timely, James’ recovery would have still been

precluded because of commingled crops and faulty documentation.

James’ ill-fated attempt to recover from Altman and Diaz is subject to the

mandatory arbitration provision within the FCIC Policy because Altman and Diaz

maintain agency, equitable estoppel, and/or third-party beneficiary theory status.

The claim is within the scope of the arbitration clause because it involves a

factual determination as set forth within the Policy. Because the determination was

properly within the Policy scope, the arbitrator’s determination and subsequent trial

court judgment were within the authority of each. The trial court’s determinations

should be affirmed.

4
 Argument and Authorities

Issue:

Whether Altman and Diaz, as nonsignatory insurance agents, can
compel arbitration of James’ claims against them pursuant to the FCIC
governed crop insurance policy agreement.

A. Standard of Review
A court determining if arbitration should be compelled under either federal or

Texas law must determine (1) whether the parties agreed to arbitrate, and if so, (2)

whether the scope of the agreement encompasses the asserted claims. See Chelsea

Square Textiles, Inc. v. Bombay Dyeing and Manufacturing Co., 189 F.3d 289, 294

(2nd Cir. 1999) (FAA); Leander Cut Stone Co. v. Brazos Masonry, Inc., 987 S.W.2d

638, 640 (Tex.App.—Waco 1999, no pet.) (FAA); In re Oakwood Mobile Homes,

Inc., 987 S.W.2d 571, 573 (Tex. 1999) (state law).

Review of a trial court’s decision to grant the motion to compel arbitration is

under an abuse of discretion standard. Ellman v. JC Gen. Contractors, 419 S.W.3d

516, 520 (Tex.App.—El Paso 2013, no pet.). The Court must defer to the trial court’s

factual determinations if they are supported by the evidence and must review the

legal determinations de novo. Brainard v. State, 12 S.W.3d 6, 30 (Tex. 1999).

5
B. Mandatory nature of FCIC arbitration
The insurance policy at issue is a Federal Crop Insurance Policy regulated by

the Federal Crop Insurance Act (FCIA). CR 25. The Federal Crop Insurance

Corporation (FCIC) was created in 1938 by the FCIA. 7 U.S.C. § 1501-20 (Lexis

2015). The FCIC was created for the purpose of providing national welfare “by

improving the economic stability of agriculture through a sound system of crop

insurance…” 7 U.S.C. §1502 (Lexis 2015).

Section 1516 of the FCIA authorizes the Secretary of Agriculture and the

FCIC to issue such regulations as may be necessary to carry out the provisions of

the Chapter. These regulations are binding on “all who [seek] to come within the

FCIA.” Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384-85 (1947).

Agents are parties contemplated by the Act. 7 U.S.C. §1507(c).

The codified regulations specifically set forth the terms of these insurance

policies. The actual provisions and terms of the policies are standardized and

approved by the FCIC. The terms and conditions preempt any contrary state laws

that would apply to other insurance contracts normally issued by private insurance

companies. See 7 U.S.C. §1506(l) (Lexis 2015); 7 C.F.R. §400.352 (Lexis 2015).

Congress specifically provided:

[S]tate and local laws or rules shall not apply to contracts or agreement
of the [FCIC] or the parties thereto to the extent that such contracts or
agreements provide that such laws or rules shall not apply, or to the
extent that such laws or rules are inconsistent with such contracts or
agreements.
6
7 U.S.C. §1506(k).

One of the mandated provisions of the FCIC insurance policies is the

arbitration provision. The terms of the Policy are set forth in the regulations

promulgated by the Risk Management Agency (RMA), which administers the

federal crop insurance program and is regulated, reinsured, and subsidized by the

FCIC. The FCIC added the arbitration requirement to the policy provisions in 1994.

In summarizing the changes to the Common Crop Insurance Regulations, the FCIC

noted, “The arbitration provisions are amended to apply to all disagreements on

factual determinations and be in accordance with the Rules of the American

Arbitration Association.” Common Crop Insurance Regulations; Regulations for the

1994 and Subsequent Crop Years, 59 FR 42751 (emphasis added). Thus, the

language calling for arbitration when “you and we fail to agree on any determination

made by us” is a reflection of federal policy expanding the scope of the arbitration

provision in this case. CR Supp. 44.

C. An applicable agreement to arbitrate
This federally mandated and contractually agreed arbitration provision is

binding between James and his insurance agents. A court must order arbitration upon

receipt of an application showing 1) an agreement to arbitrate, and 2) the opposing

party’s refusal to arbitrate. TEX. CIV. PRAC. & REM. CODE § 171.021(a)(1) (Lexis

7
2015). Success in meeting the element of a valid and enforceable arbitration

agreement requires proof that the party seeking to compel arbitration was a party to

the agreement or had the right to enforce the arbitration agreement. In re Merrill

Lynch Trust Co., 123 S.W.3d 549, 554-555 (Tex. App.--San Antonio 2003, orig.

proceeding), mand. granted, 235 S.W.3d 217 (Tex. 2007) (orig. proceeding) (per

curiam).

Federal courts have recognized six theories based on common principles of

contract and agency law that may bind nonsignatories to arbitration agreements:

• incorporation by reference;
• assumption;
• agency;
• alter ego;
• equitable estoppel; and
• third-party beneficiary.
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005); In re Wells

Fargo Bank, N.A., 300 S.W.3d 818, 824 (Tex. App.—San Antonio 2009, orig.

proceeding). From this list, the theories of agency, equitable estoppel, and third-

party beneficiary are relevant to this Court’s considerations and a finding of any one

is sufficient. Based upon these theories, the Trial Court and arbitrator properly

determined Altman and Diaz were nonsignatories subject to the arbitration

agreement.

8
 1. Agency
Though not named parties within the Policy, Altman and Diaz had agent

obligations related to both James and Rain and Hail under the Policy and the FCIA.

7 U.S.C. §§1701-1724. However, James attempts to narrow the scope of the

arbitration provision by claiming inapplicability because Altman and Diaz did not

have authority to “make a determination.” (Appellant Brief, p. 9).

Under ordinary contract and agency principles, nonsignatories of an

arbitration agreement may be bound by the agreement and entitled to enforce it. In

re Merrill, 123 S.W.3d at 557. When the principal is bound by a valid arbitration

agreement, “its agents, employees, and representatives are covered by that

agreement.” McMillan v. Computer Translation Sys. & Support, Inc., 66 S.W.3d

447, 481 (Tex.App.—Dallas 2001, orig. proceeding). There is ample authority under

which Altman and Diaz, as agents of the insurer, Rain and Hail, LLC, can enforce

the terms of the subject arbitration agreement.

The Policy initially makes reference to an “insurance agent” within the first

paragraph, which reads in relevant part, “The provisions of the policy may not be

waived or varied in any way by us, our insurance agent or any other contractor or

employee of ours…” CR 25. The Policy also makes specific mention of the

“insurance agent” under a provision entitled “Your Duties:”

All notices required in this section that must be received by us within
72 hours may be made by telephone or in person to your crop insurance
agent but must be confirmed in writing within 15 days.”
9
CR Supp 25, 38-39. “Insurance agent” is not a defined term under the Policy, but

James readily identifies Altman and Diaz as his agents throughout his pleadings and

makes no argument otherwise.

This provision does two things. First, it gives James an obligation to utilize

his insurance agents in an agency capacity with Rain and Hail to receive his claim.

If a notice must be received by “us” (defined as the insurance company, CR 25),

then James may provide the notice by telephone or in person “to your crop insurance

agent” (Altman and Diaz) and confirm in writing within 15 days. This section

identifies Altman and Diaz as having obligations to act as agents of Rain and Hail

with regard to receipt of claims from the insured.

Second, it identifies an agency capacity between James and Altman and Diaz.

“Your crop insurance agent” identifies the relationship between James and his agent,

with incumbent duties to take information from James and convey it to Rain and

Hail on his behalf.

Here, it is clear from the contractual provisions that Altman and Diaz were

obligated to perform certain reporting services with the potential claim. Both the

interests of Rain & Hail and those of James were predicated upon the reporting

actions of Altman and Diaz as per the contract. See Merrill Lynch Trust Co. FSB v.

Alaniz, 159 S.W.3d 162, 169 (Tex. App.—Corpus Christi 2004, no pet.).

10
 Courts have consistently recognized the ability of nonsignatory agents of

signatories to arbitration agreements to invoke arbitration.

• In re Wells Fargo Bank, N.A., 300 S.W.3d 818, 825 (Tex. App.—San
Antonio 2009, orig. proceeding) – The nonsignatories were agents of
Wells Fargo and their allegedly wrongful acts related to their behavior as
agents.

• In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007) –
Almost every contract claim against a corporation could be recast as a
fraudulent inducement claim against its agents, so a contracting party
should not be able to avoid unfavorable clauses by suing the party’s
agent.

• In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) – The
trial court should have compelled mediation when every defendant was a
current or former owner, officer, agent or affiliate of the entity with
whom he had agreed to arbitrate such disputes.

• In re Merrill Lynch Trust Co. FSB, 123 S.W.3d 549, 556 (Tex.App.—
San Antonio 2003, orig. proceeding), mand. granted, 235 S.W.3d 217
(Tex. 2007) (orig. proceeding) – "The scope of an arbitration agreement
may be extended to claims against agents of the principal when all the
agents' allegedly wrongful acts relate to their behavior as agents of the
principal signatory company, and those acts were within the scope of the
claims covered by the arbitration provisions for which the principal
would be liable." (citing Pritzker v. Merrill Lynch, Inc., 7 F.3d 1110,
1121 (3d Cir. 1993)).

• Garcia v. Huerta, 340 S.W.3d 864, 869 (Tex. App.—San Antonio 2011,
pet. denied) – Garcia was an agent of Wells Fargo and the claims against
Garcia related to his behavior as Wells Fargo's agent, so Garcia was
entitled to enforce the arbitration agreement as an agent of Wells Fargo.

11
As with these cases, for the reasons set forth above, Altman and Diaz have shown

an agency relationship that affords them the opportunity to compel arbitration.

James also attempts to thwart the application of the arbitration provision to

this agency relationship because “[t]he arbitration clause specifically and

unambiguously covered only ‘any determination made by us,’ with ‘us’ being

defined by the Policy as ‘the insurance company providing insurance.’” (Appellant

Brief, p. 9, CR Supp. 25, 44). James provides no case law to support this proposition

for the purpose of thwarting an agency determination. Case law and the federal

mandate of arbitration in FCIC matters set forth above do not support James’ claim

for lack of applicability to the agency theory.

2. Equitable estoppel
James undertakes to avoid application of the equitable estoppel theory by

asserting he did not seek a “direct benefit” from Altman and Diaz under the policy.

He does so because a party that seeks a direct benefit under a contract cannot deny

that the arbitration clause applies to a non-signatory. Meyer v. WMCO-GP, LLC, 211

S.W.3d 302, 305 (Tex. 2006). If he can twist his claims into an “independent claim,”

he asserts he can avoid the arbitration clause (Appellant’s Brief, p. 9).

The Texas Supreme Court explained the equitable application of estoppel to

arbitration agreements with a recitation from Grigson v. Creative Artists Agency,

12
L.L.C., in which the United States Court of Appeals for the Fifth Circuit quoted an

Elevnth Circuit decision in MS Dealer Services Corp. v. Franklin.

Existing case law demonstrates that equitable estoppel allows a
nonsignatory to compel arbitration in two different circumstances.
•First, equitable estoppel applies when the signatory to a written
agreement containing an arbitration clause must rely on the
terms of the written agreement in asserting its claims against
the nonsignatory. When each of a signatory's claims against a
nonsignatory makes reference to or presumes the existence of
the written agreement, the signatory's claims arise out of and
relate directly to the written agreement, and arbitration is
appropriate.
•Second, application of equitable estoppel is warranted when
the signatory to the contract containing an arbitration clause
raises allegations of substantially interdependent and concerted
misconduct by both the nonsignatory and one or more of the
signatories to the contract.
Otherwise the arbitration proceedings between the two signatories
would be rendered meaningless and the federal policy in favor of
arbitration effectively thwarted.
Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 305-306 (Tex. 2006), citing Grigson

v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir.), cert. denied, 531

U.S. 1013, 121 S. Ct. 570, 148 L. Ed. 2d 488 (2000) (quoting M S Dealer Serv. Corp.

v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999) (internal citations and quotation

marks omitted)) (added emphasis omitted and reformatting added). Id.

The first circumstance described in Meyer is applicable here because, absent

the Policy contract, James has no claim against Altman and Diaz. If the Policy did

13
not exist, James would have no claim. If the Policy did not exist, James would have

had no responsibility to timely report his loss to Altman and Diaz. If the Policy did

not exist, Altman and Diaz would have no obligation to receive the notice of loss

from James and convey it on to Rain and Hail. If the Policy did not exist, James

would have no damages for denial of the claims. James’ entire suit relies upon the

existence of this Policy. The claims are all tied to the written agreement, so

arbitration is appropriate.

The second circumstance described in Meyer is also applicable here because

James has alleged misconduct on both Rain and Hail (a signatory to the contract)

and Altman and Diaz (nonsignatories to the contract). Id.

James’ attempt to creatively plead this matter around the equitable estoppel

doctrine resulted in a claim for breach of fiduciary duty for failure to timely submit

the crop loss claim to Rain and Hail. CR 4. Notably, the arbitrator determined no

fiduciary relationship existed and, if one did exist, it was not breached (CR 93).

Texas and federal courts have often been confronted with plaintiffs who

attempt to creatively recast their claims to avoid certain legal consequences. For

example, the Texas Supreme Court has long held that a party cannot avoid the

requirements of the Medical Liability Act through artful pleading or recasting of

claims. See e.g. Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 847 (Tex.

2005).

14
 The Court addressed a similar attempt to avoid arbitration in In re Kaplan

Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007). In Kaplan, a group of

students sought to avoid the terms of an arbitration clause by asserting their claims

against Kaplan as “fraudulent inducement.” The Court observed “almost every

contract claim against a corporation could be recast as a fraudulent inducement claim

against the agents or employees who took part in the negotiations preceding it.” Id.,

at 209.

Other federal circuit and Texas courts have reached a similar conclusion. A

party cannot avoid arbitration by renaming the claims to appear facially outside the

scope of the arbitration agreement. See, Simon v. Pfizer, Inc., 398 F.3d 765, 776 (6th

Cir. 2005); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005);

Fyrnetics (Hong Kong) Ltd. v. Quantum Group, Inc., 293 F.3d 1023, 1030 (7th Cir.

2002). In each of these cases, the court looked to the underlying facts to determine

whether the essence of the plaintiff’s claims fell within the scope of the arbitration

clause.

Ultimately, James disputes whether it should have received payment under

the policy coverage as previously denied by an arbitrator. CR 4-5. The arbitrator

found that “[t]he Parties acknowledged that their conduct was controlled by

contract.” CR 93. Therefore, this matter falls within the terms of the arbitration

agreement, and arbitration was properly compelled.

15
 3. Third-party beneficiary
Third party beneficiaries can enforce an arbitration agreement even though

they are not parties to the agreement. In re Kellogg & Root, Inc., 166 S.W.3d 732,

739 (Tex. 2005). James alleges Altman and Diaz are, at best, “incidental third-party-

beneficiaries. (Appellant Brief, p. 12).

To the contrary, the FCIA specifically provides insurance agents are intended

beneficiaries of FCIC Policies and compels the Board to:

encourage the sale of Federal crop insurance through licensed private
insurance agents and brokers and give the insured the right to renew
such insurance for successive terms through such agents and brokers,
in which case the agent or broker shall be reasonably compensated from
premiums paid by the insured for such sales and renewals recognizing
the function of the agent or broker to provide continuing services while
the insurance is in effect
7 USCS § 1507(c). By its nature, the FCIC Policy seeks to and directly, in fact, does

benefit Altman and Diaz, as required by South Texas Water Authority v. Lomas, 223

S.W.3d 304, 306 (Tex. 2007). They are not incidental third party beneficiaries. A

specifically stated intent of the FCIA was to provide compensation to agents and

brokers, and James and Rain and Hail became participants in that intent when they

bound themselves to an FCIC Policy.

16
D. Claims are within scope of arbitration clause
James further asserts that, even if there was an agreement to arbitrate, “the

trial court erred in compelling arbitration because James’ claims arose outside the

scope of the arbitration clause.” (Appellant’s Brief, p. 13). Whether a claim is within

the scope of the arbitration clause is reviewed de novo. Bosscorp, Inc. v. Donegal,

Inc., 370 S.W.3d 68, 75-76 (Tex.App.—Houston [14th Dist.] 2012, no pet.).

However, disputes concerning the scope of an arbitration agreement are generally

resolved in favor of arbitration. In re Kellogg & Root, Inc., 166 S.W.3d at 737; In

re FirstMerit Bank, 52 S.W.3d at 753; Cantella & Co. v. Goodwin, 924 S.W.2d 943,

944, (Tex. 1996).

Section 20(a) states in relevant part:

If you and we fail to agree on any determination made by us …, the
disagreement may be resolved through mediation in accordance with
section 20(g). If resolution cannot be reached through mediation, or you
and we do not agree to mediation, the disagreement must be resolved
through arbitration in accordance with the rules of the American
Arbitration Association…
Supp. CR 44. “Determination” is not specifically defined within the Policy, but

clearly the dispute at hand involves a disagreement over the determination to decline

the claim based, in part, on James’ untimely notice of the loss which he blames on

Altman and Diaz. As set forth above, the Policy incorporates Altman and Diaz as

agents on behalf of the named parties to the Policy, requiring a role in this factual

determination. While there is a factual dispute as to whether any obligation arose,

17
the determination made by Rain and Hail was based in part on alleged action/inaction

by Altman and Diaz as required under the Policy.

As a result, we have a question of whether the loss was covered by the Policy.

The ultimate determination was the responsibility of Rain and Hail, but it involved

factual determinations of timeliness of the claim made by James, the responsibility

for failure of which he chose to attempt to punt to Altman and Diaz.

In Nobles, an Alabama federal district court analyzed the provisions of the

FCIA and the Code of Federal Regulations and determined that, as a matter of law,

an aggrieved insured must submit all disputes arising from factual determinations to

binding arbitration and that the completion of arbitration proceedings is a condition

precedent to bringing any legal action against the insurance company. Nobles v.

Rural Community Insurance Services, 122 F.Supp. 2d 1290, 1296 (M.D. Ala. 2000)

This matter, like the instant suit, involved farmers’ actions for alleged

misrepresentations and actions of an agent. The causes of action asserted by the

plaintiffs in Nobles are strikingly similar to those claims asserted by James herein,

e.g., breach of contract, misrepresentation, suppression, bad faith, negligent and

wanton distribution of information via the agency, and negligent and wanton

supervision of the agents. The court concluded the producers agreed to arbitrate any

factual determination arising out of their FCIA crop policy, and the agreement was

enforceable as a matter of public policy. Id., 1301.

18
 The court in Nobles relied in part on the provisions under the rules and

regulations of the FCIA that the insured can only bring a legal action against the

insurance company after submitting disputes to binding arbitration, citing 7 C.F.R.

§457.8, ¶20(a). The language in the current regulations applicable to this suit are

even stronger than those at issue in Nobles. Section 407.9 paragraph 23(d)(5)

expressly provides, “if you fail to initiate arbitration in accordance with §23(d)(5)(i)

and complete the process, you will not be able to resolved the dispute through

judicial review.” 7 CFR 407.9

The Nobles court further observed that, pursuant to the arbitration provision,

“the insured may not bring legal action against the insurer ‘unless [the insured has]

complied with all of the policy provision.’ This command would be meaningless if

it allowed plaintiffs to file suit without first complying with the provisions requiring

arbitration of factual disputes.” Nobles, 122 F. Supp.2d at 1296.

Even faced with the argument that some of the claims were not subject to

arbitration, the Nobles court stayed the federal court proceedings and held the

completion of the arbitration was mandatory and the arbitrator’s findings and

conclusions would be given preclusive effect in any subsequent court proceedings,

all as required by the FCIA and the FAA. Id., at 1296. The Nobles court found the

arbitration provisions of the federal crop insurance policy were mandatory, and that

19
the plaintiff was required to submit to binding arbitration regarding the factual

question of whether the loss was covered by the policy. Id., at 1301.

Despite James’ attempt to thwart the arbitration agreement, this Court should

reach a similar result. The crux of James’ complaint is that Rain and Hail determined

refusal of an indemnity payment resulting from some alleged failure of Altman and

Diaz to make a claim under the policy on his behalf. CR 4-5. The dispute is subject

to the arbitration provisions.

James further seeks to attack the scope with reference to FCIC determination

and potentially improper limitations. The inapplicability of the FCIC determination

regarding policy and procedure interpretation, etc., does not limit the scope of

arbitrability. It merely gives guidance with regard to certain disagreements.

James also tacks on an argument that the arbitration should be deemed outside

the scope of the agreement because of limitations issues set forth in the Policy.

However, the Texas Supreme Court has determined that inappropriate limitations

are not a grounds to avoid arbitration. Venture Cotton Coop. v. Freeman, 435

S.W.3d 222, 230-31 (Tex. 2014).

The factual determinations of timeliness of notice of a claim were clearly

disputes applicable to the arbitration provision and were properly submitted within

the arbitration process.

20
E. Arbitrator and court acted within authority
James’ only attack on the arbitrator’s award and resulting judgment is related

to scope of authority under the arbitration agreement. As set forth above and

incorporated here, the arbitrator did not exceed the scope of the agreement. With no

other argument attacking the arbitration, the judgment was within the discretion of

the Trial Court.

The Federal Arbitration Act “creates a strong presumption in favor of

enforcing arbitration awards and has gone so far as to say that courts have an

extremely limited role in reviewing arbitration awards. Rich v. Spartis, 516 F.3d 75,

81 (2d Cir. 2008) (citation and internal quotations omitted). “[A]rbitration . . .

determinations are generally accorded great deference under the FAA” and

“[j]udicial review of arbitration awards is necessarily narrowly limited.” Tempo

Shain Corp. v. Bertek, Inc., 120 F.3d 16, 19 (2d Cir. 1997). A Court may set aside

an arbitration award under the Act only upon a finding that certain statutory or

judicial grounds are present. See Schwartz v. Merrill Lynch & Co., 2011 U.S. App.

LEXIS 23803, at *17-18 (2d Cir. Nov. 30, 2011). James makes no such showing,

so judgment was proper.

21
 Conclusion

This appeal marks the fifth time James has attempted his arguments to avoid

arbitration. They were first presented to the Trial Court prior to its determination to

compel arbitration. CR Supp. 4-76. They were re-urged in a motion for

reconsideration of that determination. CR 27-36. They were presented to and denied

by the arbitrator. CR 100-123. And they were reasserted in response to Altman and

Diaz’s petition to confirm the arbitration award. CR 75-123. The arguments are the

same, and the result should be, as well.

Prayer

Appellees, THE ALTMAN GROUP, INC., AND LAURIE DIAZ, pray this

Court uphold the trial court’s decisions to compel arbitration and enforce the

arbitration agreement.

22
 Respectfully submitted,

/S/ANNA MCKIM
FIELD, MANNING, STONE,
HAWTHORNE, AND AYCOCK, P.C.
2112 Indiana Ave.
Lubbock, Texas 79410
Tel: (806) 796-4000
Fax: (806) 792-9148
Anna McKim, SBN 24033381
amckim@lubbocklawfirm.com
J. Paul Manning, SBN 24002521
ATTORNEYS FOR APPELLEES

Certificate of Service

I hereby certify that a true and correct copy of the foregoing was served via
the Court’s Electronic Filing System on this 12th day of August, 2015, to counsel for
Appellan, Mr. Jody Jenkins, JENKINS, WAGNON & YOUNG, P.C.

/s/ Anna McKim
Anna McKim

Certificate of Compliance

I hereby certify that the word count for relevant portions of Appellees’ Brief
is less than 4500 words.
/s/ Anna McKim
Anna McKim

23
 Appendix Table of Contents

Tab 1 October 2014 Award of Arbitrator

Tab 2 April 2012 Award of Arbitrator

Tab 3 7 C.F.R. §400.352 (Lexis 2015)

Tab 4 7 U.S.C. §1502 (Lexis 2015)

Tab 5 7 U.S.C. §1506 (Lexis 2015)

Tab 6 7 U.S.C. §1507 (Lexis 2015)

24
 u
AMERICAN ARBITRATION ASSOCIATION
Commercial Arbitration Tribunal

In the Matter of the Arbitration between

Case Number: 71-20-1400-0104

Jody James Farms N

Claimant,

-vs-

The Altman Group, Inc.

Respondent.

AWARD OF ARBITRATOR

l, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the
arbitration agreement entered into between the above-named. parties, and having been duly sworn,
and having duly heard the proofs and allegations of the Parties, hereby AWARD as follows:

After consideration of the evidence and argument of counsel, this Arbitrator holds that
Claimant has not established a right of recovery by a preponderance of the evidence.

It is therefore ordered that Claimant take nothing for its claims against Respondent.

The administrative fees and expenses of the American Arbitration Association totaling
$1,275.00, and the compensation and expenses of the Arbitrator totaling $979.92 shall be borne as
incurred.

In accordance with the arbitration clause, the Arbitrator provides the following required
information:

Issues in Dispute

1. The Claimant brings forth claims of breach of fiduciary duty, violation of the Texas
Deceptive Trade Practices Act and negligence, centering around a factual dispute as to whether or
not Claimant made a verbal claim for crop loss which Respondent should have timely reported to the
insurer.

2. Respondent contends that all findings from a prior arbitration between Claimant and
the insurance company are binding, that no duty existed or was violated and there was no causal
connection to the damages alleged.

Case No: 71-20-1400-0104

EXHIBIT

i 92 7
 u u
Factual Findings

3. No evidence was presented as to the existence of a fiduciary duty between Claimant
and Respondent.

4. The Parties acknowledged that their conduct was controlled by contract.

5. There was limited testimony as to prior conduct in terms of how a claim is presented;
however, in the instant case, there was no relationship of trust and confidence established. Jody
James acknowledged that his communications to Respondent were often made in anger and laced
with profanity. Moreover, Jody James acknowledged seeking advice from another insurance agent
indicating his lack of trust or confidence in Respondent.

6. Even had a fiduciary relationship existed, there is no evidence of how it was
breached, but at most, evidence of claimed negligence.

7. There was no evidence of any false or misleading act, again, at most a claim of
alleged negligence.

8. All representations discussed in testimony (existence of coverage, reasons for claim
denial) are found to be true.

9. No witness testified that a representation was made that the claim, which turned out
to be time barred, had been filed or made by Respondent on behalf of Claimant. Indeed, the only
evidence as to a representation as to any claim was that Respondent's representative, Laurie Diaz,
told Jody James that the claim was late.

10. Respondent was granted a hearing amendment to allege claims of negligence
stemming from a purported verbal claim for crop loss presented by Claimant to Respondent's agent,
Laurie Diaz.

I I. The evidence of a verbal claim being made was not sufficient to find a claim had
been affirmatively made in a timely manner. Claimant, Jody James, testified that his conversations
with Respondent's representative, Laurie Diaz, were that he "probably" or "might" have a claim.
Claimant's corroborating witness, Mary Ann Thurman, testified that she overheard him to say only,
"I think I might have a loss."

12. Respondent acknowledged that claims are often made verbally and followed up with
written notice via the insurer's software program; nevertheless, making a verbal claim in clear and
understandable fashion remains the responsibility of Claimant under the policy of insurance in
question.

13. Claimant's representative, Jody James, when speaking of Respondent's
representative, Laurie Diaz, testified, "I guess she misunderstood or something." The evidence
establishes a failure on the part of Claimant to present a timely claim in a manner which a reasonably
prudent person under the same or similar circumstances would understand or believe a claim was
being submitted.
2
Case No: 71-20-1400-0104
93
 u
14. This Arbitrator further finds no proximate or producing cause of damages as the
evidence is undisputed that the crop for which a loss is claimed, was co-mingled with crops from
other units, and perhaps even other entities. The evidence is further undisputed that Claimant's
crop, when considered as a single unit, did not result in any loss.

Determinations

15. The existence or non-existence of a fiduciary duty is a matter of Jaw to be determined
by the Arbitrator.

16. None existed in this instance as there was no special relationship established.

17. No liability would have resulted, even if a duty had been established and breached, as
any such breach did not cause the damage for which a claim is made.

18. The Texas Deceptive Trade Practices Act prohibits false, misleading or deceptive
practices and such must be established by a preponderance of the evidence for recovery of damages.
A claim for negligence in purportedly failing to submit a claim does not meet any criteria under the
Act.

19. The acts purported to violate the Act must be a producing cause of damage for which
a claim is made and such was not the case in this instance.

20. Recovery under a theory of negligence requires proof by a preponderance of the
evidence that the party complained of failed to act as a reasonably prudent person under the same or
similar circumstances and that such failure was a proximate .cause of the damages alleged. Claimant
did not prove these elements by a preponderance of the evidence.

21. The findings of this Arbitrator are consistent with the findings in the prior arbitration;
therefore, it is not necessary to determine whether or not such findings are binding here.

22. This Award is in full settlement of all claims submitted to this Arbitration. All
claims not expressly granted herein are hereby denied.

cr ..y_h_
Signed this day of October, 2014.

f ___
3
Case No: 71-20-1400-0104

94
 AMERICAN ARBITRATION ASSOCIATION

In the Matter of the Arbitration between:

JODY JAMES FARMS, JV.
Claimant

Vs. Case No: 71 430 E 00391 11

RAIN AND HAIL LLC.
Respondent

AWARD

After consideration of the evidence presented, this Arbitrator holds that the Claimant has not
established, by a preponderance of the evidence, a right of recovery. Therefore. the holding ofthis
Arbitrator is that Claimant shall take nothing by his claim and that each party is responsible for its
own share of AAA administrative expenses and the Arbitrator• s fee.

The threshold question is whether Jody James Farms timely presented notice of its claim in
accordance with the provisions of the crop insmance policy in question. There is no evidence that
Jody James Fanns gave any written notice of its claim prior to the claim reported deadline.
However, it claims that it provided oral notice of its claim.

The relevant portions of the policy provide that:

IS. Duties in the Event of Damages, Loss, Abandonment, Destruction, or alternative Use of
Crop or Acreage.

Your Duties -

(a) In case of damage to any insured crop you must:

2. Give us notice within 72 hours of your initial discovery of damage (but no later

.....
than 15 days after the end of the ins~ance period), by unit, for each insured crop;

(g) All notices required in this section that must be received by us within 72 hours may be
made by telephone or in person to your crop insurance agent but mUst be confinned in
writing within 1S days.

Failure to comply with the required timeline for providing notice of a claim bars the insured from
recovering under the Federal Crop Insurance Policy. See, e.g. Felder v. Federal Crop Ins. Corp.,
146 F.2d 638 (4dJ Cir. 1944).

EXHIBIT

I 88 3
 The general consensus is that a notice of a claim must provide enough infonnation for the
insurer to begin its investigation of the circumstances and to enable it to fonnulate an intelligent
estimate of its rights and liabilities before it is obliged to pay. Couch, On Insurance 3d §189:5.
Notice provisions are geared towards protecting the insurer's interests. Couch, On Insunnce 3d
§186.14. Courts therefore generally focus on whether the initial notice was adequate to provide the
insurer:

l) Notice of the potential liability under the policy.
2) Notice of sufficient facts for·an insurer to begin its investigation and discovezy of
all facts relevant to its potential liability under the policy.

Couch, Oo Insurance 3d §189:5 citing, e.g., First Banko[Tur/eyv. Fidelity and Deposit Ins. Co. of
Maryland, 928 P.2d. 298 (Okla. 1996).

Therefore the oral notice of a claim includes more than simply mentioning to an agent that the
insured may have sustained crop damage. The notice of an insurance claim should logically contain
the following elements by unit for each insured crop:

1. The Insured is making a claim;
2. The nature of the claim;
3. The date(s) of occUITence giving rise to the claim; and
4. The nature and extent of the claimed damage, including the crop and its location.

Under the terms of the policy, this oral notice must then be confirmed in writing. In support of its
position that it gave oral notice of its claim, Jody James Farms submitted the testimony of Jody
James and Mmy Ann Thurmond, an employee of lody lames Farms.

According to his testimony, Jody James stated that he was talking to his insurance agent about
another issue when he mentioned a crop loss claim. Under cross-examination, lody James
acknowledged that he was using abusive language, and that also that the focus of the conversation
was on an issue other than the presentation of the crop failure claim.

Claimant's evidence was sketchy as to when Mr. James supposedly orally mentioned a crop
faifure. Be that as it may, his testimony described a statement which did not rise to the Jevel of a
notice of claim. Mr. lames never testified that his oral presentation of his claim included all of the
elements listed above. Even if the oral mention of a crop failure occurred at a time when the .
presentation of a claim would have been timely, there was no evidence of the required subsequent
Written confirmation within 1S days of the oral statement.

Mr. James also presented the testimony of Mary Ann Thurmond, an employee of Jody lames
Farms, in support of Mr. James' position that he had made an oral notice of his claim. Ms.
Thunnond never testified that she orally presented all of the elements of the notice nor did she testify
that Mr. James orally presented all of the elements ·of the notice. Ms. Thurmond's demeanor,
coUJ)Jed with the extensive testimony that Mr. James engaged in abusive language and conduct, lead
this Arbitrator to severely discount the credibility of Ms. Thurmond's testimony.

AWARD-Page2 89
 Respondent presented evidence relating to its contention that Mr. James never timely presented
a claim for crop failure. In support of its position, it presented the testimony of Laurie Diaz, an
employee of The Altman Group, Inc., the agent of the Respondent. Ms. Diaz presented handwritten
notes that she testified that she took relating to all of her conversations with Mr. James. However,
the notes appear to be pristine with no mark-outs, inter-lineation or any other indication that the
notes were made contemporaneously with the telephone conversation reflected in the notes. Even
though Ms. Diaz testified that the notes were made contemporaneously, the physical characteristics
of the notes are consistent with them being formulated after the fact. Also, Ms. Diaz testified that she
does not take claim notes relating to all telephone conversations that she has with all insureds. As a
result, this Arbitrator severely discounted the credibility of Ms. Diaz's testimony.

The Respondent also presented the testimony of Ms. Regina Adams who was an employee of
Assiter Insurance Agency, LLC, who is not associated with the Respondent. She was an insurance
agent working with Mr. James on other crop insurance. She kept computerized notes of her
conversations with Mr. James. However, her notes, even though kept on the computer, appear to be
contemporaneous and spontaneous. Furthermore, Ms. AdamS is not directly affiliated with either the
Claimant or the Respondent. As a result, this arbitrator finds the testimony of Ms. Adams credible.

Ms. Adams testimony and her claim notes establish that the first mention of any claim to her
was made by Mr. James on January 26, 2011. This is well after the claim notice deadline of no "later
than 15 days after the end of the insurance period" on December 10, 2010.

The evidence also reflects that Mr. James did not attempt to segregate grain from his
performing units from the grain harvested from the crop in question. This, in the mind of the
Arbitrator, is further evidence that Mr. James was not presenting notice of a claim in his telephone
conversation. Had he believed that he was presenting a claim, it would have been expected that he
would have segregated the crop gleaned from the non-perfonning fann from crops gleaned from his
farms where a claim was not being made.

Furthermore, even had Mr. James timely presented a claim, he did not state a presentable loss
because he comingled crops from the performing and non-performing farms, thereby resulting in all
of the farms being considered as one unit. When considering the performing and non-performing
farms as one unit, there is no loss. ·

Any other issues raised in this arbitration are not reached because of the rulings set forth above.

Signed the--f_Q._ day of ~tv\ ,2012

oc-.d~
Michael vT. IohnStOil
Arbitrator

90

AWARD-Pa e3
 7 CFR 400.352
This document is current through the August 5, 2015 issue of the Federal Register

Code of Federal Regulations > TITLE 7 -- AGRICULTURE > SUBTITLE B -- REGULATIONS OF
THE DEPARTMENT OF AGRICULTURE > CHAPTER IV -- FEDERAL CROP INSURANCE
CORPORATION, DEPARTMENT OF AGRICULTURE > PART 400 -- GENERAL ADMINISTRATIVE
REGULATIONS > SUBPART P -- PREEMPTION OF STATE LAWS AND REGULATIONS

§ 400.352 State and local laws and regulations preempted.
(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 Corporation.
(b) The following is a non-inclusive list of examples of actions that State or local governmental
entities or non-governmental entities are specifically prohibited from taking against the Corporation
or any party that is acting pursuant to this part. Such entities may not:
(1)Impose or enforce liens, garnishments, or other similar actions against proceeds obtained, or
payments issued in accordance with the Federal Crop Insurance Act, these regulations, or
contracts or agreements entered into pursuant to these regulations;
(2)Tax premiums associated with policies issued hereunder;
(3)Exercise approval authority over policies issued;
(4)Levy fines, judgments, punitive damages, compensatory damages, or judgments for attorney
fees or other costs against companies, employees of companies including agents and loss
adjustors, or federal employees arising out of actions or inactions on the part of such individuals
and entities authorized or required under the Federal Crop Insurance Act, the regulations, any
contract or agreement authorized by the Federal Crop Insurance Act or by regulations, or
procedures issued by the Corporation (Nothing herein precludes such damages being imposed
against the company if a determination is obtained from FCIC that the company, its employee,
agent or loss adjuster failed to comply with the terms of the policy or procedures issued by FCIC
and such failure resulted in the insured receiving a payment in an amount that is less than the
amount to which the insured was entitled); or
(5)Assess any tax, fee, or amount for the funding or maintenance of any State or local
insolvency pool or other similar fund.

The preceding list does not limit the scope or meaning of paragraph (a) of this section.

Statutory Authority

AUTHORITY NOTE APPLICABLE TO ENTIRE SUBPART:

7 U.S.C. 1506, 1516.
 7 CFR 400.352

History

[55 FR 23069, June 6, 1990; 69 FR 48652, 48730, Aug. 10, 2004]

Annotations

Notes

[EFFECTIVE DATE NOTE:

69 FR 48652, 48730, Aug. 10, 2004, amended paragraph (b)(4), effective Aug. 30, 2004.]

Case Notes

NOTES TO DECISIONS: COURT AND ADMINISTRATIVE DECISIONS SIGNIFICANTLY
DISCUSSING SECTION --

Alliance Ins. Co. v Wilson (2004, CA8 Minn) 384 F3d 547, reh den, reh, en banc, den (2004, CA8)
2004 US App LEXIS 25562

Agre v Rain & Hail LLC (2002, DC Minn) 196 F Supp 2d 905, 187 ALR5th 529, motion gr sub nom
In re 2000 Sugar Beet Crop Ins. Litig. (2002, DC Minn) 228 F Supp 2d 992, dismd (2002, DC Minn)
228 F Supp 2d 999 (criticized in Ace Prop. & Cas. Ins. Co. v Fed. Crop Ins. Corp. (2006, CA8 Iowa)
440 F3d 992) and (criticized in Monroe v Brown (2003, MD Ala) 256 F Supp 2d 1292)

Reimers v Farm Credit Servs. AgCountry (2001, DC ND) 2001 US Dist LEXIS 8388

Dailey v Am. Growers Ins. (2003, Ky) 103 SW3d 60

LexisNexis® Notes

Case Notes Applicable to Entire Part
Administrative Law : Agency Rulemaking : General Overview
Administrative Law : Separation of Powers : Jurisdiction
Constitutional Law : Supremacy Clause : General Overview
Governments : Agriculture & Food
Governments : Agriculture & Food : General Overview
Governments : Federal Government : Claims By & Against
Governments : Local Governments : Finance
Governments : State & Territorial Governments : Claims By & Against
Governments : State & Territorial Governments : Relations With Governments
Insurance Law : General Liability Insurance : Coverage : Property
Insurance Law : Industry Regulation : General Overview
Insurance Law : Industry Regulation : Federal Regulations : General Overview
Insurance Law : Industry Regulation : Unfair Business Practices : Claims Investigations & Practices
Insurance Law : Property Insurance : Coverage : Crop Insurance
Torts : Business Torts : Fraud & Misrepresentation : Negligent Misrepresentation : General Overview
 7 CFR 400.352

Torts : Procedure : Preemption : General Overview

Case Notes Applicable to Entire Part

Part Note

Administrative Law : Agency Rulemaking : General Overview

Nobles v. Rural Community INS. Servs., 122 F. Supp. 2d 1290, 2000 U.S. Dist. LEXIS 19493 (MD
Ala Nov. 21, 2000).
Overview: Terms of federally reinsured crop policies required cotton farmers to submit to binding
arbitration concerning factual questions arising out of their policies before pursuing common law
claims against their insurer in court.
• Using its rulemaking powers, the Risk Management Agency (RMA) dictates the terms of the
crop insurance contracts issued by private-sector insurance companies. 7 C.F.R. § 457.7. The
terms and conditions preempt any contrary state laws that apply to other insurance contracts
normally issued by private insurance companies. 15 U.S.C.S. § 1506(1); 7 C.F.R. § 400.352. At
the same time, however, RMA has never intended to extinguish state law causes of action that
may arise from tortious conduct by private companies selling RMA-approved reinsurance
contracts. Go To Headnote

Administrative Law : Separation of Powers : Jurisdiction

Meyer v. Conlon, 162 F.3d 1264, 1998 U.S. App. LEXIS 31659 (10th Cir Dec. 21, 1998).
Overview: Where defendant failed to pay plaintiff’s crop insurance claim, and plaintiff sued, inter alia,
for breach of contract and negligent misrepresentation, court held that regulations did not preempt
state law causes of action.
• State or local governmental entities or non-governmental entities are specifically prohibited
from levying fines or judgments against companies arising out of actions or inactions on the part
of individuals and entities authorized or required under the Federal Crop Insurance Act (FCIA),
the regulations, any contract or agreement authorized by the FICA or by regulations, or
procedures issued by the Federal Crop Insurance Corporation (FCIC) (nothing herein is
intended to preclude any action on the part of any authorized state regulatory body or any state
court or any other authorized entity concerning any actions or inactions on the part of the agent,
company or employee of any company whose action or inaction is not authorized or required
under the FCIA, the regulations, any contract or agreement authorized by the FCIA or by
regulations or procedures issued by the FCIC). 7 C.F.R. §§ 400.352(b), 400.352(b)(4). Go To
Headnote

Constitutional Law : Supremacy Clause : General Overview

Brown v. Crop Hail Management, Inc., 813 F. Supp. 519, 1993 U.S. Dist. LEXIS 1688 (SD Tex Feb.
3, 1993).
Overview: An insured’s cause of action against insurers who were reinsured entities of the Federal
Crop Insurance Corporation was properly removed to federal court because the Federal Crop
Insurance Act completely preempted the insured’s state law claims.
 7 CFR 400.352

• 7 C.F.R. § 400.352 states: no state or local governmental body or nongovernmental 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 the part or by the Federal Crop Insurance
Corporation. Go To Headnote

Governments : Agriculture & Food

Rain & Hail INS. Serv. v. Fed. Crop INS. Corp., 426 F.3d 976, 2005 U.S. App. LEXIS 22437 (8th Cir
Oct. 19, 2005).
Overview: A Federal Crop Insurance Corporation (FCIC) bulletin was properly interpreted to bar
reimbursement of compensatory and punitive state court damages against crop insurers under a
reinsurance agreement, since the reimbursement was contrary to a regulation, but the agreement itself
required the FCIC to reimburse non-consequential compensatory damages.
• 7 C.F.R. § 400.352(b)(4) prohibits states from levying judgments, punitive damages, or
compensatory damages against companies arising out of their actions or inactions authorized or
required under the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., the
regulations, any contract or agreement authorized by the FCIA, or by regulations or procedures
issued by the Federal Crop Insurance Corporation. Go To Headnote

Governments : Agriculture & Food : General Overview

Olsen v. United States, 546 F. Supp. 2d 1122, 2008 U.S. Dist. LEXIS 30878 (ED Wash Mar. 10, 2008),
affirmed by 334 Fed. Appx. 834, 2009 U.S. App. LEXIS 12492 (9th Cir. Wash. 2009).
Overview: Summary judgment was granted in favor of Federal Crop Insurance Corporation (FCIC)
because the FCIC was a party to neither the policies nor the arbitration agreements they contain and
given the dispute between the parties concerning the existence of an arbitration agreement, the
arbitrators did not have jurisdiction to preside over the disputes.
• The Federal Crop Insurance Corporation’s (FCIC’s) regulations preempt state and local law to
the extent that they conflict with the statute and regulations governing the FCIC. 7 U.S.C.S. §
1506(l). Likewise, inconsistent state and local laws are inapplicable to the contracts of the FCIC.
7 C.F.R. § 400.352(a). The federal regulations governing the FCIC refer to ″reinsurance,″ rather
than ″substituted insurance.″ 7 C.F.R. § 400.96 also indicates that, however the relationship
between a participant and the FCIC might be described, the mere existence of that relationship
does not create privity of contract between an insured and the FCIC. The creation of privity via
state contract or insurance law would be inconsistent with these regulations. Consequently,
federal law prohibits the inference that the FCIC provided substitute insurance. Go To Headnote

Granville United Bank v. Rain & Hail INS. Servs., 1996 U.S. Dist. LEXIS 12912 (ED NC Aug. 1,
1996).
Overview: Action filed by claimant and bank against insurer was remanded to state court. State law
claims were not considered federal claims. Neither FCIA nor its regulations did not provide for
complete preemption of suits against FCIC reinsured companies.
• 7 C.F.R. § 400.352(a) provides that 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
 7 CFR 400.352

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 Federal Crop
Insurance Corporation. Go To Headnote

Kansas Ex Rel. Todd v. United States, 791 F. Supp. 1491, 1992 U.S. Dist. LEXIS 8749 (D Kan Mar.
10, 1992).
Overview: Federal Crop Insurance Corporation (FCIC) regulations preempting all state regulation
and taxation of policies insured or reinsured by the FCIC did not exceed the agency’s statutory
authority and were not arbitrary or capricious.
• The Federal Crop Insurance Corporation did not exceed its statutory authority in promulgating
7 C.F.R. §§ 400.351 and 400.352. Go To Headnote

Governments : Federal Government : Claims By & Against

Olsen v. United States, 546 F. Supp. 2d 1122, 2008 U.S. Dist. LEXIS 30878 (ED Wash Mar. 10, 2008),
affirmed by 334 Fed. Appx. 834, 2009 U.S. App. LEXIS 12492 (9th Cir. Wash. 2009).
Overview: Summary judgment was granted in favor of Federal Crop Insurance Corporation (FCIC)
because the FCIC was a party to neither the policies nor the arbitration agreements they contain and
given the dispute between the parties concerning the existence of an arbitration agreement, the
arbitrators did not have jurisdiction to preside over the disputes.
• The Federal Crop Insurance Corporation’s (FCIC’s) regulations preempt state and local law to
the extent that they conflict with the statute and regulations governing the FCIC. 7 U.S.C.S. §
1506(l). Likewise, inconsistent state and local laws are inapplicable to the contracts of the FCIC.
7 C.F.R. § 400.352(a). The federal regulations governing the FCIC refer to ″reinsurance,″ rather
than ″substituted insurance.″ 7 C.F.R. § 400.96 also indicates that, however the relationship
between a participant and the FCIC might be described, the mere existence of that relationship
does not create privity of contract between an insured and the FCIC. The creation of privity via
state contract or insurance law would be inconsistent with these regulations. Consequently,
federal law prohibits the inference that the FCIC provided substitute insurance. Go To Headnote

Governments : Local Governments : Finance

Meyer v. Conlon, 162 F.3d 1264, 1998 U.S. App. LEXIS 31659 (10th Cir Dec. 21, 1998).
Overview: Where defendant failed to pay plaintiff’s crop insurance claim, and plaintiff sued, inter alia,
for breach of contract and negligent misrepresentation, court held that regulations did not preempt
state law causes of action.
• State or local governmental entities or non-governmental entities are specifically prohibited
from levying fines or judgments against companies arising out of actions or inactions on the part
of individuals and entities authorized or required under the Federal Crop Insurance Act (FCIA),
the regulations, any contract or agreement authorized by the FICA or by regulations, or
procedures issued by the Federal Crop Insurance Corporation (FCIC) (nothing herein is
intended to preclude any action on the part of any authorized state regulatory body or any state
court or any other authorized entity concerning any actions or inactions on the part of the agent,
company or employee of any company whose action or inaction is not authorized or required
under the FCIA, the regulations, any contract or agreement authorized by the FCIA or by
 7 CFR 400.352

regulations or procedures issued by the FCIC). 7 C.F.R. §§ 400.352(b), 400.352(b)(4). Go To
Headnote

Governments : State & Territorial Governments : Claims By & Against

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 6734 (D Minn Apr. 16, 2003).
Overview: The Commissioner of the Minnesota Department of Commerce could examine the practices
of two insurance companies regarding crop insurance policies. The Federal Crop Insurance Act did
not completely preempt the regulation of that area.
• While state and local government authorities are precluded from levying fines or judgments
against insurance companies for acts consistent with the Federal Crop Insurance Act (FCIA), 7
U.S.C.S. § 1501 et seq., there was nothing intended to preclude any action on the part of any
authorized state regulatory body regarding activity that is not required or prohibited by the FCIA
or the Federal Crop Insurance Corporation’s regulations. 7 C.F.R. § 400.352(b)(4). Go To
Headnote

Governments : State & Territorial Governments : Relations With Governments

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 14128 (D Minn Aug. 12, 2003).
Overview: A stay was denied as federal law did not preempt state insurance regulatory standards or
the jurisdiction of the Commissioner of the Minnesota Department of Commerce to examine insurers’
affairs. Injunction requirements were not met.
• Congress intends that, while state and local government authorities are precluded from levying
fines or judgments against insurance companies for acts consistent with the Federal Crop
Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., under 7 C.F.R. § 400.352 (b)(4), nothing is
intended to preclude any action on the part of any authorized state regulatory body regarding
activity that is not required or prohibited by the FCIA or the Federal Crop Insurance
Corporation’s regulations. Go To Headnote

Insurance Law : General Liability Insurance : Coverage : Property

Nobles v. Rural Cmty. INS. Servs., 303 F. Supp. 2d 1292, 2004 U.S. Dist. LEXIS 2807 (MD Ala Feb.
24, 2004).
Overview: Under the arbitration panel’s decision, plaintiff farmers were restored to the position they
would have been in if their crop insurance contract had been fully performed and any greater recovery
for breach-of-contract would violate Alabama law.
• The parenthetical language in 7 C.F.R. § 400.352(b)(4) explains that nothing herein is intended
to preclude any action on the part of any authorized entity concerning any actions or inactions
on the part of the company whose action or inaction is not authorized or required under the
Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the Federal Crop Insurance
Corporation rules and regulations. Go To Headnote
• The parenthetical language in 7 C.F.R. § 400.352(b)(4) permits lawsuits based on agents’
actions not authorized by the Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the
Federal Crop Insurance Corporation. Go To Headnote
 7 CFR 400.352

Insurance Law : Industry Regulation : General Overview

Nobles v. Rural Cmty. INS. Servs., 303 F. Supp. 2d 1292, 2004 U.S. Dist. LEXIS 2807 (MD Ala Feb.
24, 2004).
Overview: Under the arbitration panel’s decision, plaintiff farmers were restored to the position they
would have been in if their crop insurance contract had been fully performed and any greater recovery
for breach-of-contract would violate Alabama law.
• The parenthetical language in 7 C.F.R. § 400.352(b)(4) explains that nothing herein is intended
to preclude any action on the part of any authorized entity concerning any actions or inactions
on the partof the company whose action or inaction is not authorized or required under the
Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the Federal Crop Insurance
Corporation rules and regulations. Go To Headnote

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 14128 (D Minn Aug. 12, 2003).
Overview: A stay was denied as federal law did not preempt state insurance regulatory standards or
the jurisdiction of the Commissioner of the Minnesota Department of Commerce to examine insurers’
affairs. Injunction requirements were not met.
• Congress intends that, while state and local government authorities are precluded from levying
fines or judgments against insurance companies for acts consistent with the Federal Crop
Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., under 7 C.F.R. § 400.352 (b)(4), nothing is
intended to preclude any action on the part of any authorized state regulatory body regarding
activity that is not required or prohibited by the FCIA or the Federal Crop Insurance
Corporation’s regulations. Go To Headnote

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 6734 (D Minn Apr. 16, 2003).
Overview: The Commissioner of the Minnesota Department of Commerce could examine the practices
of two insurance companies regarding crop insurance policies. The Federal Crop Insurance Act did
not completely preempt the regulation of that area.
• While state and local government authorities are precluded from levying fines or judgments
against insurance companies for acts consistent with the Federal Crop Insurance Act (FCIA), 7
U.S.C.S. § 1501 et seq., there was nothing intended to preclude any action on the part of any
authorized state regulatory body regarding activity that is not required or prohibited by the FCIA
or the Federal Crop Insurance Corporation’s regulations. 7 C.F.R. § 400.352(b)(4). Go To
Headnote

Insurance Law : Industry Regulation : Federal Regulations : General Overview

Alliance INS. Co. v. Wilson, 384 F.3d 547, 2004 U.S. App. LEXIS 20102 (8th Cir Sept. 24, 2004).
Overview: Federal Crop Insurance Act did not totally preempt Minnesota law; district court properly
held that state Commerce Commissioner could initiate market conduct examination to review insurers’
handling of farmers’ claims under crop insurance policies.
• The language of 7 C.F.R. § 400.352 permits lawsuits based on agents’ actions not authorized by
the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., or the Federal Crop Insurance
Corporation, which negates the argument that the regulations interpret the FCIA as wholly
 7 CFR 400.352

preemptive. The FCIA does not intend to preempt all state-based regulation of companies that
sell federally reinsured crop insurance. Go To Headnote

Brown v. Crop Hail Management, Inc., 813 F. Supp. 519, 1993 U.S. Dist. LEXIS 1688 (SD Tex Feb.
3, 1993).
Overview: An insured’s cause of action against insurers who were reinsured entities of the Federal
Crop Insurance Corporation was properly removed to federal court because the Federal Crop
Insurance Act completely preempted the insured’s state law claims.
• 7 C.F.R. § 400.352 states: no state or local governmental body or nongovernmental 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 the part or by the Federal Crop Insurance
Corporation. Go To Headnote
• The purpose of 7 C.F.R. §§ 400.351, 400.352 is to prescribe the procedures for federal
preemption of state laws and regulations not consistent with the purpose, intent, or authority of
the Federal Crop Insurance Act. 7 C.F.R. § 400.351. Go To Headnote

Insurance Law : Industry Regulation : Unfair Business Practices : Claims Investigations &
Practices

Alliance INS. Co. v. Wilson, 384 F.3d 547, 2004 U.S. App. LEXIS 20102 (8th Cir Sept. 24, 2004).
Overview: Federal Crop Insurance Act did not totally preempt Minnesota law; district court properly
held that state Commerce Commissioner could initiate market conduct examination to review insurers’
handling of farmers’ claims under crop insurance policies.
• The language of 7 C.F.R. § 400.352 permits lawsuits based on agents’ actions not authorized by
the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., or the Federal Crop Insurance
Corporation, which negates the argument that the regulations interpret the FCIA as wholly
preemptive. The FCIA does not intend to preempt all state-based regulation of companies that
sell federally reinsured crop insurance. Go To Headnote

Insurance Law : Property Insurance : Coverage : Crop Insurance

State Bank of Toulton v. Covey (in re Duckworth), 2012 Bankr. LEXIS 1219 (Bankr CD Ill Mar. 22,
2012).
Overview: Creditor bank argued that it was not necessary for its security agreement to identify the date
or amount of a secured note in order to be effective under 810 ILCS 5/9-203(b), however, the
agreement did not include an express written dragnet clause, and so did not include the future acquired
crop insurance proceeds.
• Preemption is intended with respect to both the imposition and enforcement of liens, 7 C.F.R.
§ 400.352, an interest in an insured crop existing by virtue of a lien does not entitle the
lienholder to any benefit under the contract, 7 C.F.R. § 401.5, and, while a debtor may assign
the right to indemnity, the assignment must be on FCIC’s form and will not be effective until
approved in writing by the Federal Crop Insurance Commission, 7 C.F.R. § 401.8. Go To
Headnote
 7 CFR 400.352

Farmers Crop INS. Alliance v. Laux, 442 F. Supp. 2d 488, 2006 U.S. Dist. LEXIS 48717 (SD Ohio
July 18, 2006).
Overview: Farmers were entitled to indemnification for losses associated with prevented planting and
crop losses and to other remedies in the form of pre-judgment and post-judgment interest and attorney
fees and costs because the insurance company’s failure to honor the terms of the crop revenue
coverage (CRC) policies was not authorized by federal law.
• While federal law, particularly the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et
seq., does not contain language permitting suits against private companies reinsured by the
Federal Crop Insurance Corporation (FCIC), or its replacement the risk management agency
(RMA), farmers are not prevented from suing their private crop insurance company under state
law when that insurance company denies the farmer’s claim. 7 U.S.C.S. § 1508(j)(2)(A) does
not preempt state law claims against private insurance companies. 7 C.F.R. § 400.352(b) and
(b)(4) permits lawsuits based on an insurance agent’s actions not authorized by the FCIA or the
FCIC or RMA of which one such action is a failure to honor the terms of an insurance contract.
The FCIA merely confers exclusive federal jurisdiction over lawsuits against RMA or the
Secretary of Agriculture. Go To Headnote

Rain & Hail INS. Serv. v. Fed. Crop INS. Corp., 426 F.3d 976, 2005 U.S. App. LEXIS 22437 (8th Cir
Oct. 19, 2005).
Overview: A Federal Crop Insurance Corporation (FCIC) bulletin was properly interpreted to bar
reimbursement of compensatory and punitive state court damages against crop insurers under a
reinsurance agreement, since the reimbursement was contrary to a regulation, but the agreement itself
required the FCIC to reimburse non-consequential compensatory damages.
• 7 C.F.R. § 400.352(b)(4) prohibits states from levying judgments, punitive damages, or
compensatory damages against companies arising out of their actions or inactions authorized or
required under the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., the
regulations, any contract or agreement authorized by the FCIA, or by regulations or procedures
issued by the Federal Crop Insurance Corporation. Go To Headnote

Alliance INS. Co. v. Wilson, 384 F.3d 547, 2004 U.S. App. LEXIS 20102 (8th Cir Sept. 24, 2004).
Overview: Federal Crop Insurance Act did not totally preempt Minnesota law; district court properly
held that state Commerce Commissioner could initiate market conduct examination to review insurers’
handling of farmers’ claims under crop insurance policies.
• The language of 7 C.F.R. § 400.352 permits lawsuits based on agents’ actions not authorized by
the Federal Crop Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., or the Federal Crop Insurance
Corporation, which negates the argument that the regulations interpret the FCIA as wholly
preemptive. The FCIA does not intend to preempt all state-based regulation of companies that
sell federally reinsured crop insurance. Go To Headnote

Nobles v. Rural Cmty. INS. Servs., 303 F. Supp. 2d 1292, 2004 U.S. Dist. LEXIS 2807 (MD Ala Feb.
24, 2004).
Overview: Under the arbitration panel’s decision, plaintiff farmers were restored to the position they
would have been in if their crop insurance contract had been fully performed and any greater recovery
for breach-of-contract would violate Alabama law.
 7 CFR 400.352

• The parenthetical language in 7 C.F.R. § 400.352(b)(4) explains that nothing herein is intended
to preclude any action on the part of any authorized entity concerning any actions or inactions
on the part of the company whose action or inaction is not authorized or required under the
Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the Federal Crop Insurance
Corporation rules and regulations. Go To Headnote
• The parenthetical language in 7 C.F.R. § 400.352(b)(4) permits lawsuits based on agents’
actions not authorized by the Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the
Federal Crop Insurance Corporation. Go To Headnote

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 14128 (D Minn Aug. 12, 2003).
Overview: A stay was denied as federal law did not preempt state insurance regulatory standards or
the jurisdiction of the Commissioner of the Minnesota Department of Commerce to examine insurers’
affairs. Injunction requirements were not met.
• Congress intends that, while state and local government authorities are precluded from levying
fines or judgments against insurance companies for acts consistent with the Federal Crop
Insurance Act (FCIA), 7 U.S.C.S. § 1501 et seq., under 7 C.F.R. § 400.352 (b)(4), nothing is
intended to preclude any action on the part of any authorized state regulatory body regarding
activity that is not required or prohibited by the FCIA or the Federal Crop Insurance
Corporation’s regulations. Go To Headnote

Alliance INS. Co. v. Wilson, 2003 U.S. Dist. LEXIS 6734 (D Minn Apr. 16, 2003).
Overview: The Commissioner of the Minnesota Department of Commerce could examine the practices
of two insurance companies regarding crop insurance policies. The Federal Crop Insurance Act did
not completely preempt the regulation of that area.
• While state and local government authorities are precluded from levying fines or judgments
against insurance companies for acts consistent with the Federal Crop Insurance Act (FCIA), 7
U.S.C.S. § 1501 et seq., there was nothing intended to preclude any action on the part of any
authorized state regulatory body regarding activity that is not required or prohibited by the FCIA
or the Federal Crop Insurance Corporation’s regulations. 7 C.F.R. § 400.352(b)(4). Go To
Headnote

Nobles v. Rural Community INS. Servs., 122 F. Supp. 2d 1290, 2000 U.S. Dist. LEXIS 19493 (MD
Ala Nov. 21, 2000).
Overview: Terms of federally reinsured crop policies required cotton farmers to submit to binding
arbitration concerning factual questions arising out of their policies before pursuing common law
claims against their insurer in court.
• Using its rulemaking powers, the Risk Management Agency (RMA) dictates the terms of the
crop insurance contracts issued by private-sector insurance companies. 7 C.F.R. § 457.7. The
terms and conditions preempt any contrary state laws that apply to other insurance contracts
normally issued by private insurance companies. 15 U.S.C.S. § 1506(1); 7 C.F.R. § 400.352. At
the same time, however, RMA has never intended to extinguish state law causes of action that
may arise from tortious conduct by private companies selling RMA-approved reinsurance
contracts. Go To Headnote

Meyer v. Conlon, 162 F.3d 1264, 1998 U.S. App. LEXIS 31659 (10th Cir Dec. 21, 1998).
 7 CFR 400.352

Overview: Where defendant failed to pay plaintiff’s crop insurance claim, and plaintiff sued, inter alia,
for breach of contract and negligent misrepresentation, court held that regulations did not preempt
state law causes of action.
• State or local governmental entities or non-governmental entities are specifically prohibited
from levying fines or judgments against companies arising out of actions or inactions on the part
of individuals and entities authorized or required under the Federal Crop Insurance Act (FCIA),
the regulations, any contract or agreement authorized by the FICA or by regulations, or
procedures issued by the Federal Crop Insurance Corporation (FCIC) (nothing herein is
intended to preclude any action on the part of any authorized state regulatory body or any state
court or any other authorized entity concerning any actions or inactions on the part of the agent,
company or employee of any company whose action or inaction is not authorized or required
under the FCIA, the regulations, any contract or agreement authorized by the FCIA or by
regulations or procedures issued by the FCIC). 7 C.F.R. §§ 400.352(b), 400.352(b)(4). Go To
Headnote

Granville United Bank v. Rain & Hail INS. Servs., 1996 U.S. Dist. LEXIS 12912 (ED NC Aug. 1,
1996).
Overview: Action filed by claimant and bank against insurer was remanded to state court. State law
claims were not considered federal claims. Neither FCIA nor its regulations did not provide for
complete preemption of suits against FCIC reinsured companies.
• 7 C.F.R. § 400.352(a) provides that 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 Federal Crop
Insurance Corporation. Go To Headnote

Torts : Business Torts : Fraud & Misrepresentation : Negligent Misrepresentation : General
Overview

Nobles v. Rural Cmty. INS. Servs., 303 F. Supp. 2d 1292, 2004 U.S. Dist. LEXIS 2807 (MD Ala Feb.
24, 2004).
Overview: Under the arbitration panel’s decision, plaintiff farmers were restored to the position they
would have been in if their crop insurance contract had been fully performed and any greater recovery
for breach-of-contract would violate Alabama law.
• The parenthetical language in 7 C.F.R. § 400.352(b)(4) permits lawsuits based on agents’
actions not authorized by the Federal Crop Insurance Act, 7 U.S.C.S. §§ 1501 to 1521, or the
Federal Crop Insurance Corporation. Go To Headnote

Torts : Procedure : Preemption : General Overview

Nobles v. Rural Community INS. Servs., 122 F. Supp. 2d 1290, 2000 U.S. Dist. LEXIS 19493 (MD
Ala Nov. 21, 2000).
Overview: Terms of federally reinsured crop policies required cotton farmers to submit to binding
arbitration concerning factual questions arising out of their policies before pursuing common law
claims against their insurer in court.
 7 CFR 400.352

• Using its rulemaking powers, the Risk Management Agency (RMA) dictates the terms of
thecrop insurance contracts issued by private-sector insurance companies. 7 C.F.R. § 457.7. The
terms and conditions preempt any contrary state laws that apply to other insurance contracts
normally issued by private insurance companies. 15 U.S.C.S. § 1506(1); 7 C.F.R. § 400.352. At
the same time, however, RMA has never intended to extinguish state law causes of action that
may arise from tortious conduct by private companies selling RMA-approved reinsurance
contracts. Go To Headnote

Research References & Practice Aids

NOTES APPLICABLE TO ENTIRE TITLE:

CROSS REFERENCES: Animal and Plant Health Inspection Service, Department of Agriculture, see
7 CFR chapter III; 9 CFR chapter I.

Commodity Futures Trading Commission, see 17 CFR chapter I.

Commodity Credit Corporation, Department of Agriculture, see 7 CFR chapter XIV.

Customs Service, Department of the Treasury, see 19 CFR chapter I.

Farm Credit Administration, see 12 CFR chapter VI.

Farmers Home Administration, Department of Agriculture, see 7 CFR chapter XVIII.

Federal Crop Insurance Corporation, Department of Agriculture, see 7 CFR chapter IV.

Fish and Wildlife Service, Department of the Interior, see 50 CFR chapters I and IV.

Food and Drug Administration, Department of Health and Human Services, see 21 CFR chapter I.

Food Safety and Inspection Service, Meat and Poultry Inspection, Department of Agriculture, see 9
CFR chapter III.

Forest Service, Department of Agriculture, see 36 CFR chapter II.

Rural Electrification Administration, Department of Agriculture, see 7 CFR chapter XVII.

Soil Conservation Service, Department of Agriculture, see 7 CFR chapter VI.

United States International Trade Commission, see 19 CFR chapter II.

Other regulations issued by the Department of Agriculture appear in chapters I to XLI of title 7, and
chapter 4 of title 48.

LEXISNEXIS’ CODE OF FEDERAL REGULATIONS
Copyright © 2015, by Matthew Bender & Company, a member of the LexisNexis Group. All rights reserved.
 7 USCS § 1502
Current through PL 114-40, approved 7/30/15

United States Code Service - Titles 1 through 54 > TITLE 7. AGRICULTURE > CHAPTER 36. CROP
INSURANCE > FEDERAL CROP INSURANCE ACT

§ 1502. Purpose and definitions
(a) Purpose. It is the purpose of this subtitle [7 USCS §§ 1501 et seq.] 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.
(b) Definitions. As used in this subtitle [7 USCS §§ 1501 et seq.]:
(1) Additional coverage. The term ″additional coverage″ means a plan of crop insurance
coverage providing a level of coverage greater than the level available under catastrophic
risk protection.
(2) Approved insurance provider. The term ″approved insurance provider″ means a private
insurance provider that has been approved by the Corporation to provide insurance coverage
to producers participating in the Federal crop insurance program established under this
subtitle [7 USCS §§ 1501 et seq.].
(3) Beginning farmer or rancher. The term ″beginning farmer or rancher″ means a farmer or
rancher who has not actively operated and managed a farm or ranch with a bona fide
insurable interest in a crop or livestock as an owner-operator, landlord, tenant, or
sharecropper for more than 5 crop years, as determined by the Secretary.
(4) Board. The term ″Board″ means the Board of Directors of the Corporation established under
section 505(a) [7 USCS § 1505(a)].
(5) Corporation. The term ″Corporation″ means the Federal Crop Insurance Corporation
established under section 503 [7 USCS § 1503].
(6) Department. The term ″Department″ means the United States Department of Agriculture.
(7) Farm financial benchmarking. The term ″farm financial benchmarking″ means--
(A) the process of comparing the performance of an agricultural enterprise against the
performance of other similar enterprises, through the use of comparable and reliable
data, in order to identify business management strengths, weaknesses, and steps
necessary to improve management performance and business profitability; and
(B) benchmarking of the type conducted by farm management and producer associations
consistent with the activities described in or funded pursuant to section 1672D of the
Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C. 5925f).
(8) Loss ratio. The term ″loss ratio″ means the ratio of all sums paid by the Corporation as
indemnities under any eligible crop insurance policy to that portion of the premium
designated for anticipated losses and a reasonable reserve, other than that portion of the
premium designated for operating and administrative expenses.
 7 USCS § 1502

(9) Organic crop. The term ″organic crop″ means an agricultural commodity that is organically
produced consistent with section 2103 of the Organic Foods Production Act of 1990 (7
U.S.C. 6502).
(10) Secretary. The term ″Secretary″ means the Secretary of Agriculture.
(11) Transitional yield. The term ″transitional yield″ means the maximum average production
per acre or equivalent measure that is assigned to acreage for a crop year by the Corporation
in accordance with the regulations of the Corporation whenever the producer fails--
(A) to certify that acceptable documentation of production and acreage for the crop year is
in the possession of the producer; or
(B) to present the acceptable documentation on the demand of the Corporation or an
insurance company reinsured by the Corporation.
(c) Protection of confidential information.
(1) General prohibition against disclosure. Except as provided in paragraph (2), the Secretary,
any other officer or employee of the Department or an agency thereof, an approved
insurance provider and its employees and contractors, and any other person may not
disclose to the public information furnished by a producer under this subtitle [7 USCS §§
1501 et seq.].
(2) Authorized disclosure.
(A) Disclosure in statistical or aggregate form. Information described in paragraph (1) may
be disclosed to the public if the information has been transformed into a statistical or
aggregate form that does not allow the identification of the person who supplied
particular information.
(B) Consent of producer. A producer may consent to the disclosure of information
described in paragraph (1). The participation of the producer in, and the receipt of any
benefit by the producer under, this subtitle [7 USCS §§ 1501 et seq.] or any other
program administered by the Secretary may not be conditioned on the producer
providing consent under this paragraph.
(3) Violations; penalties. Section 1770(c) of the Food Security Act of 1985 (7 U.S.C. 2276(c))
shall apply with respect to the release of information collected in any manner or for any
purpose prohibited by this subsection.
(4) Information.
(A) Request. Subject to subparagraph (B), the Farm Service Agency shall, in a timely
manner, provide to an agent or an approved insurance provider authorized by the
producer any information (including Farm Service Agency Form 578s (or any successor
form)) or maps (or any corrections to those forms or maps) that may assist the agent or
approved insurance provider in insuring the producer under a policy or plan of
insurance under this subtitle.
(B) Privacy. Except as provided in subparagraph (C), an agent or approved insurance
provider that receives the information of a producer pursuant to subparagraph (A) shall
treat the information in accordance with paragraph (1).
 7 USCS § 1502

(C) Sharing. Nothing in this section prohibits the sharing of the information of a producer
pursuant to subparagraph (A) between the agent and the approved insurance provider of
the producer.
(d) Relation to other laws.
(1) Terms and conditions of policies and plans. The terms and conditions of any policy or plan
of insurance offered under this subtitle [7 USCS §§ 1501 et seq.] that is reinsured by the
Corporation shall not--
(A) be subject to the jurisdiction of the Commodity Futures Trading Commission or the
Securities and Exchange Commission; or
(B) be considered to be accounts, agreements (including any transaction that is of the
character of, or is commonly known to the trade as, an ″option″, ″privilege″,
″indemnity″, ″bid″, ″offer″, ″put″, ″call″, ″advance guaranty″, or ″decline guaranty″), or
transactions involving contracts of sale of a commodity for future delivery, traded or
executed on a contract market for the purposes of the Commodity Exchange Act (7
U.S.C. 1 et seq.).
(2) Effect on CFTC and Commodity Exchange Act. Nothing in this subtitle [7 USCS §§ 1501
et seq.] affects the jurisdiction of the Commodity Futures Trading Commission or the
applicability of the Commodity Exchange Act (7 U.S.C. 1 et seq.) to any transaction
conducted on a contract market under that Act by an approved insurance provider to offset
the approved insurance provider’s risk under a plan or policy of insurance under this subtitle
[7 USCS §§ 1501 et seq.].

History

(Feb. 16, 1938, ch 30, Title V, Subtitle A, § 502,52 Stat. 72; June 21, 1941, ch 214, § 1, 55
Stat. 255; Aug. 1, 1947, ch 440, § 4, 61 Stat. 719; Oct. 13, 1994, P.L. 103-354, Title I, § 102(a),
108 Stat. 3180; June 20, 2000, P.L. 106-224, Title I, Subtitle B, § 122, Subtitle D, § 141, 114 Stat.
377, 389; May 22, 2008, P.L. 110-234, Title XII, Subtitle A, §§ 12001, 12033(c), 122 Stat. 1371,
1405; June 18, 2008, P.L. 110-246, § 4(a), Title XII, Subtitle A, §§ 12001, 12033(c), 122 Stat.
1664, 2133, 2167; Feb. 7, 2014, P.L. 113-79, Title XI, §§ 11001, 11016(a), 11027(a), 128 Stat. 954,
963, 977.)

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 7 USCS § 1506
Current through PL 114-40, approved 7/30/15

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INSURANCE > FEDERAL CROP INSURANCE ACT

§ 1506. General powers
(a) Succession. The Corporation shall have succession in its corporate name.
(b) Corporate seal. The Corporation may adopt, alter, and use a corporate seal, which shall be
judicially noticed.
(c) Property. The Corporation may purchase or lease and hold such real and personal property as
it deems necessary or convenient in the transaction of its business, and may dispose of such
property held by it upon such terms as it deems appropriate;
(d) Suit. Subject to section 508(j)(2)(A) [7 USCS § 1508(j)(2)(A)], the Corporation, subject to the
provisions of section 508(j) [7 USCS § 1508(j)], may sue and be sued in its corporate name, but
no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued
against the Corporation or its property. The district courts of the United States, including the
district courts of the District of Columbia and of any territory or possession, shall have exclusive
original jurisdiction, without regard to the amount in controversy, of all suits brought by or
against the Corporation. The Corporation may intervene in any court in any suit, action, or
proceeding in which it has an interest. Any suit against the Corporation shall be brought in the
District of Columbia, or in the district wherein the plaintiff resides or is engaged in business.
(e) Bylaws and regulations. The Corporation may adopt, amend, and repeal bylaws, rules, and
regulations governing the manner in which its business may be conducted and the powers
granted to it by law may be exercised and enjoyed.
(f) Mails. The Corporation shall be entitled to the use of the United States mails in the same manner
as the other executive agencies of the Government.
(g) Assistance. The Corporation, with the consent of any board, commission, independent
establishment, or executive department of the Government, including any field service thereof,
may avail itself of the use of information, services, facilities, officials, and employees thereof
in carrying out the provisions of this subtitle [7 USCS §§ 1501 et seq.];
(h) Collection and sharing of information.
(1) Surveys and investigations. The Corporation may conduct surveys and investigations
relating to crop insurance, agriculture-related risks and losses, and other issues related to
carrying out this subtitle [7 USCS §§ 1501 et seq.].
(2) Data collection. The Corporation shall assemble data for the purpose of establishing sound
actuarial bases for insurance on agricultural commodities.
(3) Sharing of records. Notwithstanding section 502(c) [7 USCS § 1502(c)], records submitted
in accordance with this subtitle [7 USCS §§ 1501 et seq.] and section 196 of the Agricultural
Market Transition Act (7 U.S.C. 7333) shall be available to agencies and local offices of the
Department, appropriate State and Federal agencies and divisions, and approved insurance
 7 USCS § 1506

providers for use in carrying out this subtitle [7 USCS §§ 1501 et seq.], such section 196,
and other agricultural programs.
(i) Expenditures. The Corporation shall determine the character and necessity for its expenditures
under this subtitle [7 USCS §§ 1501 et seq.] and the manner in which they shall be incurred,
allowed, and paid, without regard to the provisions of any other laws governing the expenditure
of public funds and such determinations shall be final and conclusive upon all other officers of
the Government.
(j) Settling claims. The Corporation shall have the authority to make final and conclusive
settlement and adjustment of any claim by or against the Corporation or a fiscal officer of the
Corporation.
(k) Other powers. The Corporation shall have such powers as may be necessary or appropriate for
the exercise of the powers herein specifically conferred upon the Corporation and all such
incidental powers as are customary in corporations generally.
(l) Contracts. The Corporation may enter into and carry out contracts or agreements, and issue
regulations, necessary in the conduct of its business, as determined by the Board. State and local
laws or rules shall not apply to contracts, agreements, or regulations of the Corporation or the
parties thereto to the extent that such contracts, agreements, or regulations provide that such
laws or rules shall not apply, or to the extent that such laws or rules are inconsistent with such
contracts, agreements, or regulations.
(m) Submission of certain information.
(1) Social security account and employer identification numbers. The Corporation shall require,
as a condition of eligibility for participation in the multiple peril crop insurance program,
submission of social security account numbers, subject to the requirements of section
205(c)(2)(C)(iii) of the Social Security Act [42 USCS § 405(c)(2)(C)(iii)], and employer
identification numbers, subject to the requirements of section 6109(f) of the Internal
Revenue Code of 1986 [26 USCS § 6109(f)].
(2) Notification by policyholders. Each policyholder shall notify each individual or other entity
that acquires or holds a substantial beneficial interest in such policyholder of the
requirements and limitations under this subtitle [7 USCS §§ 1501 et seq.].
(3) Identification of holders of substantial interests. The Manager of the Corporation may
require each policyholder to provide to the Manager, at such times and in such manner as
prescribed by the Manager, the name of each individual that holds or acquires a substantial
beneficial interest in the policyholder.
(4) Definition. For purposes of this subsection, the term ″substantial beneficial interest″ means
not less than 5 percent of all beneficial interests in the policyholder.
(n) Actuarial soundness.
(1) Projected loss ratio as of October 1, 1995. The Corporation shall take such actions as are
necessary to improve the actuarial soundness of Federal multiperil crop insurance coverage
made available under this subtitle [7 USCS §§ 1501 et seq.] to achieve, on and after October
1, 1995, an overall projected loss ratio of not greater than 1.1, including--
 7 USCS § 1506

(A) instituting appropriate requirements for documentation of the actual production history
of insured producers to establish recorded or appraised yields for Federal crop insurance
coverage that more accurately reflect the associated actuarial risk, except that the
Corporation may not carry out this paragraph in a manner that would prevent beginning
farmers (as defined by the Secretary) from obtaining Federal crop insurance;
(B) establishing in counties, to the extent practicable, a crop insurance option based on area
yields in a manner that allows an insured producer to qualify for an indemnity if a loss
has occurred in a specified area in which the farm of the insured producer is located;
(C) establishing a database that contains the social security account and employee
identification numbers of participating producers, agents, and loss adjusters and using
the numbers to identify insured producers, agents, and loss adjusters who are high risk
for actuarial purposes and insured producers who have not documented at least 4 years
of production history, to assess the performance of insurance providers, and for other
purposes permitted by law; and
(D) taking any other measures authorized by law to improve the actuarial soundness of the
Federal crop insurance program while maintaining fairness and effective coverage for
agricultural producers.
(2) Projected loss ratio. The Corporation shall take such actions, including the establishment of
adequate premiums, as are necessary to improve the actuarial soundness of Federal
multiperil crop insurance made available under this subtitle [7 USCS §§ 1501 et seq.] to
achieve an overall projected loss ratio of not greater than 1.0.
(3) Nonstandard classification system. To the extent that the Corporation uses the nonstandard
classification system, the Corporation shall apply the system to all insured producers in a
fair and consistent manner.
(o) Regulations. The Secretary and the Corporation are each authorized to issue such regulations
as are necessary to carry out this subtitle [7 USCS §§ 1501 et seq.].
(p) Purchase of American-made equipment and products.
(1) Sense of Congress. It is the sense of Congress that, to the greatest extent practicable, all
equipment and products purchased by the Corporation using funds made available to the
Corporation should be American-made.
(2) Notice requirement. In providing financial assistance to, or entering into any contract with,
any entity for the purchase of equipment and products to carry out this subtitle [7 USCS §§
1501 et seq.], the Corporation, to the greatest extent practicable, shall provide to the entity
a notice describing the statement made in paragraph (1).
(q) [Redesignated]
(r) Procedures for responding to certain inquiries.
(1) Procedures required. The Corporation shall establish procedures under which the Corporation
will provide a final agency determination in response to an inquiry regarding the
interpretation by the Corporation of this subtitle [7 USCS §§ 1501 et seq.] or any regulation
issued under this subtitle [7 USCS §§ 1501 et seq.].
 7 USCS § 1506

(2) Implementation. Not later than 180 days after the date of enactment of this subsection
[enacted June 23, 1998], the Corporation shall issue regulations to implement this
subsection. At a minimum, the regulations shall establish--
(A) the manner in which inquiries described in paragraph (1) are required to be submitted
to the Corporation; and
(B) a reasonable maximum number of days within which the Corporation will respond to
all inquiries.
(3) Effect of failure to timely respond. If the Corporation fails to respond to an inquiry in
accordance with the procedures established pursuant to this subsection, the person
requesting the interpretation of this subtitle [7 USCS §§ 1501 et seq.] or regulation may
assume the interpretation is correct for the applicable reinsurance year.
(s) [Redesignated]

History

(Feb. 16, 1938, ch 30, Title V, Subtitle A, § 506,52 Stat. 73; June 21, 1941, ch 214, § 2, 55
Stat. 255; Aug. 1, 1947, ch 440, § 7, 61 Stat. 719; Aug. 25, 1949, ch 512, § 8, 63 Stat. 665; Sept.
26, 1980, P.L. 96-365, Title I, §§ 103, 107(a), 94 Stat. 1313; Nov. 28, 1990, P.L. 101-624, Title
XXII, Subtitle A, §§ 2201(a), 2202, 104 Stat. 3951, 3954; Dec. 13, 1991, P.L. 102-237, Title VI, §
601(1), (2), 105 Stat. 1878; Aug. 10, 1993, P.L. 103-66, Title I, Subtitle D, § 1403(a), 107 Stat.
333; Oct. 13, 1994, P.L. 103-354, Title I, §§ 104, 119(f)(2), 108 Stat. 3181, 3208; June 23, 1998,
P.L. 105-185, Title V, Subtitle C, § 533, 112 Stat. 583; June 20, 2000, P.L. 106-224, Title I,
Subtitle B, §§ 121(b), 124(b), 114 Stat. 377, 378; May 22, 2008, P.L. 110-234, Title XII, Subtitle
A, §§ 12002(a), (b)(1), 12003(a), 12033(c), 122 Stat. 1371, 1405; June 18, 2008, P.L. 110-246, §
4(a), Title XII, Subtitle A, §§ 12002(a), (b)(1), 12003(a), 12033(c), 122 Stat. 1664, 2133, 2167.)

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 7 USCS § 1507
Current through PL 114-40, approved 7/30/15

United States Code Service - Titles 1 through 54 > TITLE 7. AGRICULTURE > CHAPTER 36. CROP
INSURANCE > FEDERAL CROP INSURANCE ACT

§ 1507. Personnel of Corporation
(a) Appointment; Civil service exemption; compensation The Secretary shall appoint such officers
and employees as may be necessary for the transaction of the business of the Corporation
pursuant to civil-service laws and regulations, fix their compensation [in accordance with the
provisions of the Classification Act of 1923, as amended], define their authority and duties, and
delegate to them such of the powers vested in the Corporation as the Secretary may determine
appropriate. However, personnel paid by the hour, day, or month when actually employed may
be appointed [and their compensation fixed] without regard to civil-service laws and regulations
[or the Classification Act of 1923, as amended].
(b) Application of employee’s compensation law. Insofar as applicable, the benefits of the Act
entitled ″An Act to provide compensation for employees of the United States suffering injuries
while in the performance of their duties, and for other purposes,″ approved September 7, 1916,
as amended, shall extend to persons given employment under the provisions of this subtitle [7
USCS §§ 1501 et seq.], including the employees of the committees and associations referred to
in subsection (c) of this section and the members of such committees.
(c) Use of associations of producers and private insurance companies; payment of administrative
and program expenses; sale of crop insurance through private agents and brokers; renewals,
exclusion of compensation from premium rates, indemnification for errors or omissions of
Commission or its contractors. In the administration of this subtitle [7 USCS §§ 1501 et seq.],
the Board shall, to the maximum extent possible, (1) establish or use committees or associations
of producers and make payments to them to cover the administrative and program expenses, as
determined by the Board, incurred by them in cooperating in carrying out this subtitle [7 USCS
§§ 1501 et seq.], (2) contract with private insurance companies, private rating bureaus, and other
organizations as appropriate for actuarial services, services relating to loss adjustment and rating
plans of insurance, and other services to avoid duplication by the Federal Government of
services that are or may readily be available in the private sector and to enable the Corporation
to concentrate on regulating the provision of insurance under this subtitle [7 USCS §§ 1501 et
seq.] and evaluating new products and materials submitted under section 508(h) or 523 [7 USCS
§ 1508(h) or 1523], and reimburse such companies for the administrative and program expenses,
as determined by the Board, incurred by them, under terms and provisions and rates of
compensation consistent with those generally prevailing in the insurance industry, and (3)
encourage the sale of Federal crop insurance through licensed private insurance agents and
brokers and give the insured the right to renew such insurance for successive terms through such
agents and brokers, in which case the agent or broker shall be reasonably compensated from
premiums paid by the insured for such sales and renewals recognizing the function of the agent
or broker to provide continuing services while the insurance is in effect: Provided, That such
compensation shall not be included in computations establishing premium rates. The Board shall
provide such agents and brokers with indemnification, including costs and reasonable attorney
 7 USCS § 1507

fees, from the Corporation for errors or omissions on the part of the Corporation or its
contractors for which the agent or broker is sued or held liable, except to the extent the agent
or broker has caused the error or omission. Nothing in this subsection shall permit the
Corporation to contract with other persons to carry out the responsibility of the Corporation to
review and approve policies, rates, and other materials submitted under section 508(h) [7 USCS
§ 1508(h)].
(d) Allotment of funds to Federal and State agencies. The Secretary may allot to bureaus and
offices of the Department or transfer to such other agencies of the State and Federal
Governments that the Secretary requests to assist in carrying out this subtitle [7 USCS §§ 1501
et seq.] any funds made available pursuant to the provisions of section 516 [7 USCS § 1516].
(e) Utilization of producer cooperative associations. In carrying out the provisions of this subtitle
[7 USCS §§ 1501 et seq.] the Board may, in its discretion, utilize producer-owned and
producer-controlled cooperative associations.
(f) Use of resources, data, boards, and committees of Federal agencies. The Board should use, to
the maximum extent possible, the resources, data, boards, and the committees of (1) the Soil
Conservation Service, in assisting the Board in the classification of land as to risk and
production capability and in the development of acceptable conservation practices; (2) the
Forest Service, in assisting the Board in the development of a timber insurance plan; (3) the
Agricultural Stabilization and Conservation Service, in assisting the Board in the determination
of individual producer yields and in serving as a local contact point for farmers where the Board
deems necessary; and (4) other Federal agencies in any way the Board deems necessary in
carrying out this subtitle [7 USCS §§ 1501 et seq.].
(g) Specialty Crops Coordinator.
(1) The Corporation shall establish a management-level position to be known as the Specialty
Crops Coordinator.
(2) The Specialty Crops Coordinator shall have primary responsibility for addressing the needs
of specialty crop producers, and for providing information and advice, in connection with
the activities of the Corporation to improve and expand the insurance program for specialty
crops. In carrying out this paragraph, the Specialty Crops Coordinator shall act as the liaison
of the Corporation with representatives of specialty crop producers and assist the
Corporation with the knowledge, expertise, and familiarity of the producers with risk
management and production issues pertaining to specialty crops.
(3) The Specialty Crops Coordinator shall use information collected from Corporation field
office directors in States in which specialty crops have a significant economic effect and
from other sources, including the extension service and colleges and universities.

History

(Feb. 16, 1938, ch 30, Title V, Subtitle A, § 507,52 Stat. 73; Aug. 1, 1947, ch 440, § 6, 61 Stat.
719; Aug. 25, 1949, ch 512, § 10, 63 Stat. 665; June 6, 1972, P.L. 92-310, Title II, Part 2, §
221(b), 86 Stat. 201; Sept. 26, 1980, P.L. 96-365, Title I, § 104, 94 Stat. 1313; Nov. 28, 1990, P.L.
101-624, Title XXII, Subtitle A, § 2206, 104 Stat. 3958; Dec. 13, 1991, P.L. 102-237, Title VI, §
 7 USCS § 1507

601(3), 105 Stat. 1878; Oct. 13, 1994, P.L. 103-354, Title I, §§ 102(b)(4)(B), (C), 105, 115(b),
119(f)(2), 108 Stat. 3181, 3182, 3204, 3208; June 20, 2000, P.L. 106-224, Title I, Subtitle D, §
143, 114 Stat. 391; May 22, 2008, P.L. 110-234, Title XII, Subtitle A, § 12033(c), 122 Stat. 1405;
June 18, 2008, P.L. 110-246, § 4(a), Title XII, Subtitle A, § 12033(c), 122 Stat. 1664, 2167.)

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