Crop Insurance

Farmers and ranchers in Weatherford, Mineral Wells, Aledo, Springtown, and other places in Parker or Palo Pinto counties may have to deal with crop insurance issues on occasions. Here is a legal case that deals with crop insurance.
The case was decided by the United States District Court, Eastern District of Texas, Paris Division, in 1997. The style of the case is John Earl Bullard v. Southwest Crop Insurance Agency, Inc., Blakely Crop Hail, Inc., Farmers Alliance Mutual Insurance, Co.
There is a federal law called the Federal Crop Insurance Act. Due to the inherent risks of insuring crops, insurance companies in the early 1900’s refused to write multi-peril crop insurance policies. In an effort to remedy the problem, Congress passed the Federal Crop Insurance Act (FCIA) in 1938. Is purpose was to “promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance ….” To carry out this purpose, Congress created an agency within the Department of Agriculture known as the Federal Crop Insurance Corporation (FCIC). The FCIC assists in carrying out the goals of the FCIA by providing crop insurance to farmers in the following ways: (1) selling insurance through private insurance agents, (2) reinsuring private insurance companies that provide crop insurance, and (3) providing crop insurance directly to the farmer.
In this case, Bullard seeks benefits allegedly due under a multi-peril crop insurance policy purchased from Southwest to cover Bullard’s 1995 nursery crop. This policy was reinsured by the FCIC under the provisions of the FCIA.
In 1995, Bullard made a claim for benefits . The insurers denied the claim. Bullard filed a lawsuit in State District Court alleging (1) breach of contract; (2) violations of the Texas Deceptive Trade Practices Act; (3) violations of the Texas Insurance Code; (4) negligence; (5) negligent misrepresentation; (6) breach of duty of good faith and fair dealing in settling an insured’s claim for loss; (7) breach of duty of good faith and fair dealing to timely adjust a claim; (8) conspiracy; and (9) declaratory judgment. The insurers removed the case to Federal Court, alleging federal question jurisdiction pursuant to 28 U.S.C. Section 1331. In so doing, the insurers alleged the FCIA and its corresponding regulations completely preempt all state law causes of action against FCIC-reinsured entities and that Bullards failure to plead violation of the federal laws was an attempt to avoid federal court.
In response, Bullard asserted that the FCIA does not completely preempt his state law causes of action and, since he has pled no federal claim, the federal court should remand the case back to the state court. Thus, the ultimate question at this point for this federal court was whether or not removal jurisdiction existed over Bullard’s state law claims.
The court noted that Bullard alleged the nine state law causes of action noted above. That he did not mention mention or implicate the FCIA or any federal law. Yet, the defendants are alleging federal question.
This federal court then began a several page discussion of the laws regarding removal, the “artful pleading doctrine” and the federal laws regarding crop insurance and associated legislation and the intent of the legislation.
The court noted that the present version of section 1508(j) was created by the passage of H.R. 4217 on October 13, 1994. A previous version of H.R. 4217 which was adopted by the Senate read: “if a claim for indemnity is denied by the Corporation or by the private insurance provider, an action on the claim shall only be brought against the Corporation or Secretary ‘or insurance provider’ in the United States District Court ….” However, the final version passed by both the House and Senate reads: “if a claim for indemnity is denied by the Corporation or by the private insurance provider, an action on the claim may be brought ‘against the Corporation or Secretary’ only in the United States District Court ….”
By opting to exclude the phrase “or insurance provider” in the final version, Congress appears to have addressed the exact subject at issue in the present case. If Congress had included this phrase, it would have clearly granted federal jurisdiction over suits against insurance providers. It declined to do so.
In short, this case did remand the case back to the state court.
This is a case where, once again insurance companies are trying to have a case against them, removed to federal court. They believe that their chances of prevailing in claims against them are much better when the claim is in federal court rather than state court.