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Bruhn Farms Joint Venture v. Fireman's Fund Insurance Co.

United States Court of Appeals, Eighth Circuit

May 25, 2016

Bruhn Farms Joint Venture, Plaintiff - Appellant
v.
Fireman's Fund Insurance Company, Defendant - Appellee

         Submitted February 11, 2016.

          For Bruhn Farms Joint Venture, Plaintiff - Appellant: Donald G. Beattie, Beattie Law Firm, Des Moines, IA; Bradley J. Nelson, Norelius & Nelson, Denison, IA; Scott H. Peters, Peters Law Firm, Council Bluffs, IA.

         For Fireman's Fund Insurance Company, Defendant - Appellee: Elizabeth T. Bufkin, Jeffrey Scott Dilley, W. Kurt Henke, Henke & Bufkin, Clarksdale, MS; Michael W. Ellwanger, Rawlings Law Firm, Sioux City, IA.

         Before SHEPHERD, BEAM, and KELLY, Circuit Judges.

          OPINION

         BEAM, Circuit Judge.

         Bruhn Farms Joint Venture (Bruhn) appeals the district court's grant of summary judgment in favor of Fireman's Fund Insurance Company (Fireman's) in this insurance dispute over the adjusted value of hail-damaged crops in northwest Iowa. Because a factual dispute remains regarding the adjustment of this claim, we reverse and remand to the district court for further proceedings.

         I. BACKGROUND

         Rural Community Insurance Services (RCIS), acting as managing general agent for Fireman's, issued a policy of crop-hail insurance to Bruhn. The policy afforded coverage during the 2012 crop year for direct loss due to hail and certain other specified perils. Bruhn sustained a significant hail loss on September 11, 2012, and reported that loss to RCIS. Adjustment of the loss was assigned to RCIS adjuster Galen Sornson. Although the loss occurred in early September, Bruhn had still not heard from RCIS or its adjusters in mid-October. Accordingly, Bruhn requested and obtained approval from RCIS to harvest its crops and leave check strips for the adjusters. Because the loss potentially involved more than 5,000 acres, a six-person team was assembled to work the loss. The team of adjusters did not arrive at the Bruhn farm until October 29, 2012,[1] more than a month after receiving notice of the loss, during which time harvest had occurred and volatile weather conditions persisted in Iowa. Indeed, according to Alan Bruhn (Alan), a partner of Bruhn, weather conditions were cold and windy on the two days that the adjusters were in the fields counting check strips, and the adjusters spent a considerable amount of time in the barn and in their trucks, trying to warm up. Bruhn's expert opined that the adjusters could not have spent a sufficient amount of time in the fields over those two days to properly adjust a claim covering the number of acres over which Bruhn had reported damage.

         Nonetheless, the adjusters purportedly completed their counts using the check strips that had been left in the fields and reported that sufficient check strips were left in each field to complete the adjustment process. According to their survey sheets, the adjusters determined that 4,120.5 acres of soybeans had payable hail losses. Based on the crop-hail loss-adjustment procedures set forth in the respective National Crop Insurance Services (NCIS) manuals, the RCIS adjusters found losses ranging from 2.3% to 71.4%. On October 30, Sornson completed the proof of loss for the September 11 claim. Sornson attempted to meet with Alan to discuss the claim on October 30 before leaving the Bruhn farm, but Alan was sick and unable to meet. Sornson faxed a copy of the proof of loss to Alan on November 5, 2012.

         Bruhn did not agree with the adjusters' calculations and Alan refused to sign the proof of loss. Sornson's supervisor conducted a review of the Bruhn claim in late November 2012 and determined that the loss had been properly adjusted in accordance with NCIS crop-hail procedures. On November 28, 2012, despite Bruhn's disagreement and without its approval or Alan's signature, RCIS issued payment to Bruhn for the amount RCIS had determined was payable for the losses: $417,636 for the loss, less a premium credit of $184,578, for a net payment of $233,058. A check in that amount was delivered to Alan's residence via FedEx on December 4, 2012.

         After the check was delivered, Alan directed his insurance agent, Terry Nielsen, to inquire as to how he could dispute the paid amount. Nielsen, in turn, contacted Rod Nelson, the manager of RCIS's Regional Service Office. According to Nielsen, Nelson suggested that in order to reconsider the loss determination, the insurance company would look at records of historical yields. It was Nelson's recollection that Nielsen was the one who suggested looking at historical yields, although Nelson agreed in his deposition that looking at historical yield numbers would be part of the process. The next incident of note occurred on December 15, 2012, when Nielsen inquired of Nelson about the status of the claim, and Nelson responded via text message that they were " one drink away" from settling Bruhn's claim. However, when contacted the next day, Nelson stated that there was nothing further RCIS could do with regard to Bruhn's claim.

         Following this news from Nelson, Alan met with Larry Burkhart, RCIS's Crop-Hail/Named Peril Field Claims Manager, on December 18, 2012. During the meeting, Burkhart also advised Alan that he would conduct a review of the claim and would, among other things, look at Bruhn's historical yields. Alan contended that his historical yield records would result in a much higher payment. During the meeting, Alan contends Burkhart told him to be patient while they gathered information and considered the claim, because the claim had been mishandled. Nielsen alleges that several weeks later, Burkhart advised him they were about $25,000 apart on the claim, somewhere in the neighborhood of $900,000. Nielsen relayed this information to Alan, who directed him to settle for the lower number. However when Nielsen contacted Burkhart to tell him Alan was willing to take the lower number, Burkhart retreated, and instead informed Nielsen that after reviewing the available information, he concluded that RCIS's original loss determinations were correct. On January 25, 2013, Burkhart sent a letter to Bruhn indicating that RCIS had completed the review and determined that the claim was properly adjusted and paid.

         Bruhn commenced this action in Iowa state court on October 3, 2013, against Fireman's. The petition alleged a breach of contract and also contended that punitive damages were appropriate due to the bad-faith refusal to pay the claim. Fireman's removed the case to federal court, invoking the court's diversity jurisdiction pursuant to 28 U.S.C. § 1332(a). The parties unanimously consented to trial, disposition and judgment by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c)(3). Upon motion, the court granted summary judgment in favor of Fireman's, finding that it had not breached the contract because Fireman's followed NCIS guidelines in determining the amount of loss, and that in any event, Bruhn did not ask for an independent appraisal as provided for in the insurance contract. The court additionally held that in the absence of a breach of contract, Fireman's position with respect to the claim was fairly debatable, and thus the claim for bad faith failed. Bruhn appeals.

         II. ...


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