Summary of a Recent
Judicial
Development in
Crop Insurance
Private Insurer Potentially Liable for
Agent's Actions
Jillian HishawNational AgLaw Center Graduate Assistant
In Simms v. Insurance Company of North America, No. E2005-00062-COA-R3-CV, 2005 WL 2604049 (Tenn. Ct. App. Oct. 14, 2005), the Tennessee Court of Appeals held that an action brought by an insured against a private insurer was not barred by the "Merrill doctrine" and that a genuine issue of material fact existed as to whether an agent had apparent authority to make the company liable for the agent's actions. Simms, 2005 WL 2604049, at *1. Plaintiff Jason Simms suffered a loss in tobacco crops in the 2000 crop year and filed a loss claim with his insurer, the Insurance Company of North America (ICNA). See id. After Simms filed his claim, an ICNA agent gave him permission to destroy the damaged tobacco crop. See id. ICNA denied Simms' claim because "he destroyed the crop without preserving a representative sample prior to inspection and appraisal of the loss by ICNA" in violation of the policy terms. Id. Simms argued that because he relied on the agent's actions, "ICNA should be equitably estopped from denying coverage . . . ." Id. at *2. ICNA argued that Simms was precluded from bringing an action under the policy since the policy was enforceable under the Federal Crop Insurance Act, 7 U.S.C. §§ 1501-1524, which provided that policy terms "may not be waived or varied in any way by the crop insurance agent or any other agent or employee of FCIC or the [private] company." Id. at *3 (quoting 7 U.S.C. § 1502(a)). Relying on Dailey v. American Growers Insurance, 103 S.W.3d 60, 64 (Ky. 2003), the court held that ICNA was subject to Simms' estoppel argument because "‘[t]he mere fact that the FCIC provides reinsurance coverage to private crop insurance companies and heavily regulates those companies does not entitle them to Merrill protection.'" Id. (citations omitted). The court further held that there was a genuine dispute of material fact as to whether the agent had apparent authority to authorize Simms to destroy his crop and therefore make ICNA liable for the agent's actions. See id. at *5-6. The decision of the lower court was vacated and the matter remanded for a new trial. See id. at *6.
The case was decided on October 14, 2005; this summary was posted Dec. 2, 2005.