Summary of a Recent
Judicial
Development in
Administrative Law
Private Insurers' Failure To Exhaust
Administrative Remedies Not Excused By
Common Law Exceptions
Jeffrey A. PetersonNational AgLaw Center Graduate Assistant
In Ace Property and Cas. Ins. Co. v. Federal Crop Ins. Corp., 440 F.3d 992 (8th Cir. 2006), thirteen insurance companies (Insurance Providers) alleged that the Federal Crop Insurance Corporation (FCIC) breached a 1998 Standard Reinsurance Agreement (SRA) and filed an action in federal district court without exhausting all available administrative remedies under the governing administrative provisions of the Federal Crop Insurance Reform and Department of Agriculture Act of 1994, 7 U.S.C. §§ 6901-7014 (Act). Id. at 994. The Eighth Circuit held that the applicable administrative provisions of the Act are non-jurisdictional and, if excused under common law, do not require all administrative remedies to be exhausted. Id. at 1000. The Eighth Circuit held that no common law exceptions were applicable and, therefore, all administrative remedies need to be exhausted. Id. at 1001-02.
The FCIC reinsures private insurance providers for federal crop insurance provided to producers through an SRA agreement. See id. at 994. The Act mandates and governs the administrative appeals process for SRA disputes. See id. at 995. Under the Act, a party may request a final agency determination, which may be appealed to the Department of Agriculture Board of Contract Appeals (Board) with exclusive jurisdiction to the federal district courts after all administrative remedies have been exhausted. See id. The court concluded that § 6912(e) of the Act is nothing more than "a codified requirement of administrative exhaustion" and is thus not jurisdictional and may be excused by the exceptions to the common law exhaustion principle. Id. at 999.
The court explained that a party may be excused from exhausting administrative remedies if there exists a legitimate constitutional claim, if exhaustion would cause irreparable harm, if further administrative procedures would be futile, or if the issues to be decided are primarily legal rather than factual and therefore not suitable for administrative resolution and are more properly resolved by the courts. Id. at 1000. The Insurance Providers claimed that the futility and legal issue exceptions applied. Id.
The court concluded that the Insurance Providers did not demonstrate that their administrative remedies within the agency would be futile because the Board has jurisdiction over the dispute and the power to award monetary relief. Id. at 1000-01. Furthermore, even though some of the issues involved were legal, the court concluded that the legal issues exception is extremely narrow and should only be invoked if the issues involved are ones in which the agency has no expertise or which call for factual determinations. Id. at 1001(citing Jewel Companies, Inc. v. Fed. Trade Comm'n, 432 F.2d 1155, 1159 (7th Cir.1970)).
The case was decided on March 16, 2006; this summary was posted November 6, 2006.