United States District Court, W.D. Missouri, Western Division
ORDER AFFIRMING ARBITRATION AWARD
KAYS, JUDGE UNITED STATES DISTRICT COURT.
case arises out of a $1, 433, 008 arbitration award (the
“Award”) in favor of Defendant Jonathan Russell.
After Plaintiff Great American Insurance Company denied
Russell's claims for indemnity under a federal crop
insurance policy, the parties proceeded to arbitration. A
three-member arbitration panel (the “Panel”) held
that Great American was required to indemnify Russell's
loss and issued the Award in his favor.
before the Court is Great American's Motion to Vacate
Arbitration Award (Doc. 1). The motion is DENIED, and the
Award is AFFIRMED.
The Underlying Insurance Claim
American is an approved crop insurance provider under the
United States Department of Agriculture's Federal Crop
Insurance Program (the “Program”), a federal
benefit program established by the Federal Crop Insurance Act
(“FCIA”), 7 U.S.C. § 1501 et seq.,
and its implementing regulations, 7 C.F.R. §§ 400
et seq. The Federal Crop Insurance Corporation
(“FCIC”)-a wholly-owned government
corporation-administers the Program and promulgates rules and
regulations setting mandatory terms and conditions for crop
insurance policies. So long as the approved private insurers
use the standard policy terms and conditions established by
FCIC's rules and regulations, FCIC reinsures and
subsidizes the policies.
2013, Great American issued Jonathan Russell a policy through
the Program that covered Russell's 2013 corn and soybean
losses (the “Policy”). FCIC reinsured the Policy,
which incorporated the FCIC's Common Crop Insurance
Policy Basic Provisions (the “Basic Provisions”)
appearing at 7 C.F.R. § 457.8.
November 4, 2013, Russell claimed losses under the Policy for
his 2013 corn and soybean crops due to drought. In early
2014, though, he amended his claim to allege that the loss
was due not only to drought, but also to wind and rootworm
damage. After Great American conducted an on-the-farm
inspection in the spring of 2014, it denied Russell's
claims based on its inability to substantiate an insurable
cause of loss. Russell demanded arbitration under the
Policy's arbitration clause.
January 2016, the arbitration Panel held a three-day
evidentiary hearing on Russell's claims. Less than two
months later, the Panel issued its award, which found that
Russell was entitled to indemnity for his corn crop losses,
but not his soybean losses, and awarded him $1, 433, 008.
analysis, the Panel first determined that Russell's corn
crops were destroyed from a combination of drought, wind
damage, and rootworm-all insurable perils. But Russell had
delayed informing Great American that wind damage and
rootworm were a contributing cause of the loss, so the Panel
had to determine whether he forfeited his right to indemnity
under ¶ 14(b)(1) of the Basic Provisions, which provides
that an insured must give notice of “damage or
loss” to the insurer within seventy-two hours of its
Panel suggested that although Russell did not give notice
that rootworm was a contributing cause of the loss within
seventy-two hours of its discovery, ¶ 14(b)(1) requires
only notice of “damage or loss, ” not notice of
each contributing cause of such loss. Russell was, therefore,
not required to list all insurable causes in his notice of
loss since the damage from the three causes was singular and
indivisible. And because no one disputed that Russell's
November 2013 notice was timely, the Panel found he did not
forfeit his right to indemnity.
Panel went a step further, though, and concluded that even if
Russell's notice was untimely, ¶ 14(b)(5) of the
Basic Provisions excused that failure. That paragraph
provides that an insured may be absolved of an untimely
report of loss if the insurer has the “ability to
accurately adjust the loss.” Here, the Panel determined
that Great American could have accurately adjusted
Russell's loss by either: asking Russell to leave some
crop rows unharvested or performing an on-the-farm inspection
in the three weeks between when Russell notified Great
American of the damage and when he harvested the crops.
Panel found insufficient Great American's explanation
that it had no reason to inspect what it thought was only a
drought-induced loss in those three weeks. Great American,
the Panel noted, was required to follow the FCIC's Loss
Adjustment Manual Standards Handbook (“LAM”),
A final inspection must be made in order to document
production acreage, insured and uninsured causes of loss, and
all other pertinent entries to determine the amount of
indemnity, unless the notice has been withdrawn or cleared.
A. Field Visit. To make adequate determination, actual visits
to the field(s) where the crop ...