Summary of a Recent
Judicial Development in
Crop Insurance

Crop Insurance Companies Not Required
to Exhaust Administrative Remedies

Gaby R. Jabbour
National AgLaw Center Research Assistant

Summary of Decision

In National Crop Ins. Services, Inc. v. Federal Crop Insurance Corporation, 351 F.3d 346 (8th Cir. 2003), the United States Court of Appeals for the Eighth Circuit held that two crop insurance companies and an insurance trade association were not required to exhaust their administrative remedies before the United States Department of Agriculture Board of Contract Appeals (BCA).

Background

Two insurance companies and an insurance trade association (hereinafter "insurers") provided multi-peril insurance to sugar beet farmers in Minnesota for the year 2000. See id. at 347. The Federal Crop Insurance Corporation (FCIC), as authorized by the Federal Crop Insurance Act (FCIA), 7 U.S.C. §§ 1501-1524, executed a Standard Reinsurance Agreement with the insurers. See id. at 348. In October of 2000 several sugar beet growers filed insurance claims after their crops were severely damaged. See id. The growers' claims were denied by the insurers based on a failure to provide timely notice of loss as required by the reinsurance contracts. See id.

On March 2, 2001, however, the FCIC issued a Manager's bulletin, MGR-01-010 ("Bulletin"), that provided as follows:

(1) sugar beets that were harvested after October 6, 2000, may have suffered an insurable loss within the insurance period; (2) the notice of loss deadline may not be enforceable against the growers whose losses were not discoverable until after the deadline passed; (3) the decision whether to cover these claims resides solely with the insurance companies; and (4) the FCIC would reinsure any eligible freeze-damage claim paid by the insurance companies.

Id.

Arguments

The insurers brought an action seeking declaratory and injunctive relief against the FCIC, arguing that when it issued the Bulletin it unlawfully changed crop insurance policy provisions in violation of the FCIA, the Administrative Procedure Act ("APA"), and various FCIC regulations. See id. The FCIC moved to dismiss the suit, arguing that the district court lacked jurisdiction because the insurers had not exhausted their administrative remedies before the BCA as required by 7 U.S.C. § 6912(e). See id. The district court granted the FCIC's motion to dismiss on the basis that exhaustion was required under 7 C.F.R. § 400.169(c) because the Bulletin "'interprets, explains or restricts the terms of the reinsurance agreement.'" Id. (citation omitted). The insurers appealed the district court's decision to the Eighth Circuit. See id. at 349.

Analysis and Holding

Noting that § 400.169(c) states that "the BCA does not have jurisdiction to hear appeals about bulletins which do not 'interpret, explain, or restrict the terms of the reinsurance agreement,'" the Eighth Circuit explained that § 400.169 applied to disputes between an insurance provider and the FCIC concerning reinsurance contracts and not insurance contracts, as was the case in the present dispute. See id. The court held that there was nothing in § 400.169 "which requires a dispute about whether the FCIC is liable for expanding the Insurers' liability under an insurance contract to be heard by the BCA before being brought to the district court." Id. It therefore reversed the district court's finding that it lacked jurisdiction and concluded that "the district court can properly exercise jurisdiction over disputes such as this." Id.

The case was decided on December 5, 2003; this summary was posted Apr. 6, 2004.