Summary of a Recent
Judicial Development in
Crop Insurance

Summary Judgment Motion File By
Crop Insurance Agency Denied

Harrison M. Pittman
Staff Attorney

The United States District Court for the Western District of Tennessee has denied a motion for summary judgment filed by a crop insurance agency because a genuine issue of material fact existed as to whether an employee for the insurance agency failed to procure a crop insurance policy for the plaintiff-farmers. Campbell v. White & Associates Ins. Agency, Inc., 197 F.Supp.2d 1104, 1009-10 (W.D. Tenn. 2002)).

Plaintiffs, Robert and Janette Campbell, operated several farming operations located throughout three counties in western Tennessee. See id. at 1106. The defendant, White & Associates, was an insurance company doing business in Dyersburg and Halls, Tennessee. See id. The defendant, Rain and Hail, LLC, had its home office in Iowa but conducted its insurance business in Tennessee by and through White & Associates. See id.

The Campbells obtained a crop insurance policy through White & Associates, as agent for Rain and Hail, to insure its crops planted in the 1999 crop year. See id. When they obtained this policy they did not know the exact amount of acreage that would be planted on each of their farms located in each of three counties. See id. The plaintiffs claimed that when Robert Campbell communicated this fact to the agent, Bill Spiller, Spiller told them "'to more or less not worry about it.'" Id. (quoting Dep. of Robert T. Campbell at p.14). The plaintiffs claimed that Spiller told them it was not necessary to have the acreage amounts at that time because he would collect that information from the Farm Service Agency ("FSA") files after Robert certified his acreage with the FSA by July 15th. See id.

Prior to the July 15th deadline, the plaintiffs certified the actual acreage planted on all of their farms except one, Farm No. 3310. See id. Robert Campbell told the FSA agent that he did not yet know what the actual acreage was for Farm No. 3310. See id. Campbell signed a form showing that he had certified Farm No. 3310, and that "it was understood that the FSA would fill in the acreage after the measurement was performed." Id. (citing Dep. of Robert T. Campbell at p. 12). The measurement of planted acreage for Farm No. 3310 was recorded with the FSA on November 3, 1999. See id. at 1107.

Robert Campbell testified that he knew he was required to report his planted acreage by a certain date, but that he did not know that the information had to be reported to other parties. See id. He also testified that his understanding was that "if he reported the information to the FSA office, the insurance company would in turn obtain the information from the agency." Id. (citing Dep. of Robert T. Campbell at p. 11). He admitted that there was no way a person--including the insurance agent--could have discovered on July 15, 1999, the amount of acreage planted on Farm No. 3310. See id.

The plaintiffs submitted crop loss claims for several of their farms, including Farm No. 3310. See id. The insurance company paid or gave credit for the all of the plaintiffs' loss claims except for those losses derived from crops planted on Farm No. 3310. Id. An adjuster from Rain and Hail informed the plaintiffs that Farm No. 3310 was not covered by the insurance policy. See id. Campbell testified that he "was not aware there was a problem with the insurance on Farm No. 3310 until he was informed by an adjuster for Rain and Hail that that particular farm was not covered under the policy." Id. The plaintiffs claimed that, after this conversation with the adjuster from Rain and Hail, Robert Campbell contacted Spiller about the matter and was assured that "'this wasn't a problem; that this could be corrected. Nothing to worry about.'" Id. (quoting Dep. of Robert T. Campbell at pp. 25-26).

Rain and Hail denied the loss claim for Farm No. 3310 because the number of acres planted was not reported in a timely fashion. See id. The plaintiffs brought an action against the defendants alleging "negligence and/or breach of contract." Id. The plaintiffs asserted that White & Associates "offered to obtain relevant information concerning plaintiff's operations and, based upon that information, procure insurance to cover any loss sustained by the plaintiffs in 1999." Id. The plaintiffs also asserted that the insurance agency's failure to obtain information with respect to Farm No. 3310 "resulted in a loss that would have been covered by insurance had the applications been correct." Id.

This ensuing lawsuit centered on White and Associates' argument that it was not liable to the plaintiffs pursuant to Tenn. Code Ann. § 56-6-147 (2000 Repl.) because it was "only acting on behalf of its principal, Rain and Hail." Id. at 1107. Tenn. Code Ann. § 56-6-147 provides that:

Every insurance agent or limited insurance representative who solicits or negotiates an application for insurance of any kind shall, in any controversy arising from the application for insurance or any policy issued in connection therewith between the insured or insured's beneficiary and the insurer, be regarded as the agent of the insurer and not the insured or insured's beneficiary. This provision shall not affect the apparent authority of an agent.

Id. at 1107-08. (citing Royal Surplus Lines, Ins. v. Sofomor Danek Group, 190 F.R.D. 463, 470 (W.D. Tenn. 1990) (observing that this statute "'was intended to protect consumers by binding insurance companies to the representatives of local, sometimes unethical, solicitors'")).

The district court explained that Tennessee courts adhered to the general rule that "'an agent or broker of insurance who, with a view to compensation for his services, undertakes to procure insurance for another, and unjustifiably and through his fault or neglect, fails to do so, will be held liable for any damage resulting therefrom.'" Id. at 1108 (quoting Massengale v. Hicks, 639 S.W.2d 659, 660 (Tenn. Ct. App. 1982) (citing Wood v. Norman, Hayes & Dixon Ins. Agency, 905 S.W.2d 559 (Tenn. 1995) (stating that "'[i]t is well established that an insurance agent employed to maintain insurance coverage for a client may be held liable on a negligence theory if the agent fails to use reasonable care and diligence in continuing the insurance, either by obtaining a renewal or replacement policy or by properly maintaining an existing policy'") and Magnavox Co. v. Boles & Hite Constr. Co, 585 S.W.2d 622, 627 (Tenn. Ct. App. 1979) (noting that "'when [agent] undertook to provide [insured] with complete liability coverage he had a duty to ascertain the required coverages'")). Id.

The court rejected White and Associate's argument that "this is not a lawsuit in which cases for negligent failure to procure insurance are applicable because there was a policy in full force and effect at the time of the loss upon which the suit was based." Id. The court stated it, "regretfully, does not follow defendant's logic. While there certainly was a crop insurance policy in effect, there was no coverage for Farm No. 3310." Id. The court added that "[t]his lack of coverage was . . . the result of the agency's failure to procure insurance covering the parcel as plaintiffs intended." Id.

The court stated that "[i]n sum, and upon review of the applicable Tennessee law, the court does not agree with White & Associates that it cannot, as a matter of law, remain as a defendant in this lawsuit." Id. at 1109. The court added that "[i]t is further the opinion of the court that, viewing the evidence in the light most favorable to the plaintiff, a finder of fact could conclude that Spiller did in fact agree to procure crop insurance for Campbell to cover all of his fields, including that designated as Farm No. 3310." Id. at 1109-10. Thus, the court concluded that summary judgment was not appropriate. See id. at 1110.

This case summary was prepared in September, 2002.