Day et al v. Farmers Mutual Hail Insurance Company of Iowa
ORDER denying 87 First MOTION for Summary Judgment as to Allan Rands; H & S Partnership, by partner Shawn Spainhouer; H.D. & Carolyn Spainhouer, by partner, H.D. Spainhouer; L & S Partnership, by partner Larry Petty; Ken C. Holt Jr. Farm Partnershi p, by partner Kenneth Holt, Jr.; David Cox, doing business as David Cox Farms; Steve Stevens, doing business as S & D Farms; C.B. Stevens Farms, Inc.; Vonda Stevens Kirkpatrick, doing business as Rondo Farms; Jonathan Oldner, doing business as Jonathan Oldner Farms; and Kirk Hill. Signed by Judge James M. Moody on 4/12/11. (kpr)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
PINE BLUFF DIVISION
FARMS, ET. AL.
NO. 5:08CV0332 JMM - LEAD CASE
Consolidated with 5:08CV00333 & 5:08CV00334
FARMERS MUTUAL HAIL
Pending is the first motion for summary judgment filed by Farmers Mutual Hail Insurance
Company (“Farmers Mutual”). (Docket # 87). Plaintiffs have filed a response, Farmers Mutual
has filed a reply and Plaintiffs have filed a sur-reply. The Court entered an Order on May 18,
2010 severing the trials in this case. By Order entered June 9, 2010, the Court denied Farmers
Mutual’s first motion for summary judgment with respect to the claims of Robertson Brothers
Farms, Round Lake Planting Company, DE & K Farms Partnership, R & J Farms Partnership, by
partner Ricky Downen and Leo Bottoms (“the first Plaintiffs”). The Court will address the
motion for summary judgment with respect to the claims of Allan Rands; H & S Farms
Partnership, by partner Shawn Spainhouer; H.D. & Carolyn Spainhouer, by partner H.D.
Spainhouer; L & S Farm Partnership, by partner Larry Petty; Ken C. Holt Jr. Farm Partnership,
by partner Kenneth Holt, Jr.; David Cox, doing business as David Cox Farms; Steve Stevens,
doing business as S & D Farms; C.B. Stevens Farms, Inc.; Vonda Stevens Kirkpatrick, doing
business as Rondo Farms; Jonathan Oldner, doing business as Jonathan Oldner Farms; and, Kirk
Hill. (“the second Plaintiffs”) herein.
In 2005, Plaintiffs each purchased a crop hail policy from Farmers Mutual (collectively,
“the Policy”). The Policy was issued to Plaintiffs for the policy period including September 2425, 2005.
The Agreement to Insure clause of the Policy states: “In consideration of the premium
specified and subject to the policy provisions, [Farmers Mutual] does insure [Plaintiffs] against
all direct loss by hail . . . to only the specified growing crops on the premises described, in the
amount and for the term, all as stated in the Declarations portion of this policy, effective from the
date and hour fixed in the application.”
The “Requirements in Case Loss Occurs” clause sets forth the Plaintiffs obligations to
properly submit a claim under the Policy. Farmers Mutual asserts that the Plaintiffs were
required to notify it of their loss within ten days of the loss and within sixty days of the loss, to
provide Farmers Mutual with “a proof of loss, signed and sworn to by [the Plaintiffs] stating the
knowledge and belief of the Plaintiffs as to the following: the time and origin of the loss, the
interest of [the Plaintiffs] and all others in the property, the amount of the loss on each crop
insured, all other contracts of insurance, whether valid or not, covering any of said property, any
changes in the title, use, location, or insurable interest of said property since the issuing of [the
The Suit clause of the Policy sets the following conditions precedent to the Plaintiffs
filing a lawsuit against Farmers Mutual to collect under the Policy: “No suit or action on this
policy for the recovery of any claim against [Farmers Mutual] shall be sustainable in any court of
law or equity unless all requirements of this policy shall have been fulfilled.”
On September 24-25, 2005, the Plaintiffs allegedly sustained a covered loss due to hail
damage. The second Plaintiffs provided the first required notice of loss to Farmers Mutual
within ten days but each subsequently executed a Withdrawal of Claim form which stated in part:
NOW THEREFORE, having read the above, and with full knowledge that
this withdrawal of claim will result in the relinquishment of a valuable right of
[Farmers Mutual] to obtain impartial evidence of damage or absence of damage at
a time when it could be definitely ascertained, the undersigned INSURED hereby
withdraws and releases [FARMERS MUTUAL] from any liability for and waives
the claim referred to above, being convinced and having agreed, after inspection,
that there is no measurable hail damage that can be attributed to that storm or any
subsequent storm to the date of this agreement.
Farmers Mutual claims that after obtaining a Withdrawal of Claim, it set its file on these
claims aside and did no further work to investigate the claims. Further, these Plaintiffs never
notified Farmers Mutual that they had decided to attempt to renew their claims or rescind their
withdrawals. Farmers Mutual claims that Plaintiffs failure to follow the terms of the Policy,
along with their lack of proof to support their claims, entitle it to the entry of summary judgment
in its favor.
The second Plaintiffs contend that notice of loss was given within ten days as required by
the Policy and that the release or withdrawal relied upon by Farmers Mutual does not bar their
claims. Plaintiffs claim that they were induced to sign the withdrawals based on representations
made by the Defendants’ adjusters, the withdrawals are not supported by consideration and are
contracts of adhesion. Further, Plaintiffs argue that Farmers Mutual did not rely on these
withdrawals to support their subsequent actions as it treated these Plaintiffs the same as plaintiffs
who did not execute withdrawals. Plaintiffs submit that genuine issues of material fact preclude
the entry of summary judgment.
Standard for Summary Judgment
Summary judgment is appropriate only when there is no genuine issue of material fact, so
that the dispute may be decided solely on legal grounds. Holloway v. Lockhart, 813 F.2d 874
(8th Cir. 1987); Fed. R. Civ. P. 56. The Supreme Court has established guidelines to assist trial
courts in determining whether this standard has been met:
The inquiry performed is the threshold inquiry of determining
whether there is a need for trial -- whether, in other words, there
are genuine factual issues that properly can be resolved only by a
finder of fact because they may reasonably be resolved in favor of
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
The Eighth Circuit Court of Appeals has cautioned that summary judgment should be
invoked carefully so that no person will be improperly deprived of a trial of disputed factual
issues. Inland Oil & Transport Co. v. United States, 600 F.2d 725 (8th Cir. 1979), cert. denied,
444 U.S. 991 (1979). The Eighth Circuit set out the burden of the parties in connection with a
summary judgment motion in Counts v. M.K. Ferguson Co., 862 F.2d 1338 (8th Cir. 1988):
[T]he burden on the moving party for summary judgment is only to
demonstrate, i.e., ‘[to] point out to the District Court,’ that the
record does not disclose a genuine dispute on a material fact. It is
enough for the movant to bring up the fact that the record does not
contain such an issue and to identify that part of the record which
bears out his assertion. Once this is done, his burden is discharged,
and, if the record in fact bears out the claim that no genuine dispute
exists on any material fact, it is then the respondent’s burden to set
forth affirmative evidence, specific facts, showing that there is a
genuine dispute on that issue. If the respondent fails to carry that
burden, summary judgment should be granted.
Id. at 1339. (quoting City of Mt. Pleasant v. Associated Elec. Coop., 838 F.2d 268, 273-274 (8th
Cir. 1988) (citations omitted)(brackets in original)). Only disputes over facts that may affect the
outcome of the suit under governing law will properly preclude the entry of summary judgment.
Anderson, 477 U.S. at 248.
It is undisputed that the second Plaintiffs provided the first required notice of loss to
Farmers Mutual within ten days of the alleged loss but subsequently executed a Withdrawal of
Claim Form. Farmers Mutual claims that it relied on these withdrawals, the Plaintiffs failure to
renew their claims and the fact that the Plaintiffs failed to timely provide the sworn proof of
claim within sixty (60) days to set aside its claim files and cease any investigation into the
claims. Farmers Mutual argues that the withdrawal of claim forms and violations of the
conditions precedent of the Policy preclude a finding of coverage under the Policy.
In the Court’s Order denying summary judgment as to the first Plaintiffs entered June 9,
2010, the Court set forth the following statement of the law governing Farmers Mutual’s proof of
The Eighth Circuit Court of Appeals recently examined Arkansas law and
held that language similar to the language used in the Policy at issue makes the
giving of notice a condition precedent to coverage under a policy. Further,
Arkansas law does not require a showing of prejudice to the insurer when the
insured fails to give the insurer notice of loss, and the giving of notice was a
condition precedent to coverage. AIG Centennial Ins. Co. v. Fraley-Landers, 450
F.3d 761 (8th Cir. 2006). But, an insurance company by its conduct may waive the
requirements of proof of loss. Farmers Union Mut. Ins. Co. v. Denniston, 237
Ark. 768, 376 S.W.2d 252 (1964). “Additionally, . . . [i]t is well settled that the
denial of liability by the insurer is effective as a waiver of formal proof of loss.”
Colonial Life and Accident Ins. Co. v. Whitley, 10 Ark. App. 304, 664 S.W.2d 488
(1984), see also, Decker v. Government Employees Ins. Co., 511 F. Supp 563, 564
(1981) (“It is well settled that when an insurer . . . denies liability or refuses to
pay, such conduct constitutes a waiver of policy requirements as to notice and
proofs of loss when such denial is not predicated on insured’s failure to give
notice or file proofs of loss.”)
The record demonstrates that following the storms of September 24-25, 2005 the second
Plaintiffs each contacted Kathy Ferguson to report their hail damage claims. After the insurance
adjusters looked at the cotton, the second Plaintiffs’ testimony reflects that the adjusters stated
that they did not find hail damage and requested the Plaintiffs sign a withdrawal of claim.
Plaintiff Kirk Hill testified that he was told by the adjuster that the withdrawal of claim form
was “to show [the adjuster’s] boss that he’d been there.” (Hill Dep. 31:13-15, December 6,
2009). Plaintiff Ken Holt testified that he signed the withdrawal of claim form after the adjusters
told him there was no hail damage, he relied on the adjusters as experts. (Holt Dep. 42: 24-25,
43:1-20, December 7, 2009). Plaintiff Jonathan Oldner testified that the adjusters were in a
hurry and told him he had to sign the document to get insurance the next year. ( Oldner dep.
43:21-25, 44:1-13, December 9, 2009). Plaintiff Larry Petty testified that he refused to sign the
withdrawal form at first, but signed the form after he was told that it was not legally binding and
“it was just more or less to acknowledge that [the adjuster had] been there and looked at it”
(Petty Dep. 32:19-25, 33:1-12, December 10, 2009). Plaintiff Allen Rands testified that he
signed the form in reliance on the adjusters’ statement that there was no hail damage. (Rands
Dep. 46:20-25, 47:18-25, December 8, 2009). Plaintiffs Shane and H.D. Spainhouer and Steve
Stevens testified that they signed the withdrawal of claim form after the adjusters represented that
they needed the form to show that they had been to the farms and that the agreement would not
prevent the farmers from pursuing their claims. (Spainhouer, Shane Dep. 14: 17-25, 42:1-6,
December 8, 2009) (Spainhouer, H.D. Dep. 67:9-24, December 10, 2009) (Stevens Dep. 62:7-25,
63:1-11, December 11, 2009). Plaintiff David Cox testified that he signed the form after the
adjusters told him that there had been no hail damage and that the adjusters needed the signed
form to show that they had come to his farm. (Cox Dep. 32:2-25, 33:1-5, December 11, 2009).
The Court finds that the second Plaintiffs have presented sufficient proof to create a
genuine issue of material fact as to whether Farmers Mutual waived the Policy requirement of
proof of loss by denying coverage for the loss at the time the adjusters inspected the Plaintiffs’
fields. The Court finds that the Withdrawal of Claim Form has no binding effect as
the farmers have presented sufficient evidence that they believed the claims to have been denied
at the time of the inspection and that they were induced to sign the agreements based upon false
statements made by the adjusters. Finally, Farmers Mutual did not rely on the Withdrawal of
Claim Form as evidenced by the testimony of Larry Ewart, Vice-President Claims Manager. Mr.
Ewart stated that the inspection and adjustment of a claim is the same for those who sign a
release or withdrawal and those who do not. Mr. Ewart agreed that there “wouldn’t be anything
different or additional done ” on the claims. Ewart Dep. 51:25, 52:1-11, January 14, 2010).
By separate Order, the Court has denied Farmers Mutual’s motions in limine seeking to
exclude the testimony of Messrs. Earnest, Foresman and Lee. The Court finds that the testimony
of these individuals creates a genuine issue of fact precluding the entry of summary judgment
with respect to whether Plaintiffs’ crops suffered hail damage.
Finally, Farmers Mutual argues that the Plaintiffs’ breach of contract claims should be
dismissed because the Plaintiffs cannot meet their burden of proof with respect to the amount of
damages they allegedly sustained. Farmers Mutual challenges the calculation of damages used by
Ken C. Holt, Jr. Farm Partnership and Kirk Hill because they calculate damages by comparing
the average yield of the field in the 2005 crop year to the average yield of their fields in the 2002
- 2004 crop years. Farmers Mutual challenges the calculation of damages used by H & S Farms
Partnership and H.D. & Carolyn Spainhouer Farms because they calculate damages by
comparing the average yield of their respective fields in the 2005 crop year to the average yield
of their fields in the 2004 crop year. Farmers Mutual challenges the remaining Plaintiffs’
damage calculations arguing that the attempt to prove their damages by comparing the 2005 yield
of their allegedly damaged farms to the 2005 yield of other undamaged farms does not rise
beyond the speculative level unless the comparator farms are “nearby.”
In order to prove crop damage, the Arkansas Court of Appeals has held that “evidence as
to the average yield per acre for the prior years is not reliable in computing damages in light of
weather conditions and other factors that vary annually.” McCorkle Farms, Inc. v. Thompson 79
Ark. App. 150, 164, 84 S.W.3d 884, 892 (Ark. App. 2002), citing, J.L. Wilson Farms, Inc. v.
Wallace, 267 Ark. 643, 590 S.W.2d 42 (Ark. App. 1979). However, “a comparison between the
yield from the damaged land and the yield from adjacent but undamaged land during the same
season, for the same crop, [is] substantial evidence to support an award of damages.” Id.
The Court will limit testimony and evidence of crop damage accordingly. Further, the
Court will determine at the time of trial if Plaintiffs have presented sufficient evidence of
comparison crops during the same season to support their claims for damages. The Court cannot
state at this time that no genuine issue remains on the issue of damages.
Wherefore, the motion for summary judgment, document #87 is denied as to Allan
Rands; H & S Partnership, by partner Shawn Spainhouer; H.D. & Carolyn Spainhouer, by partner
H.D. Spainhouer; L & S Partnership, by partner Larry Petty; Ken C. Holt Jr. Farm Partnership, by
partner Kenneth Holt, Jr.; David Cox, doing business as David Cox Farms; Steve Stevens, doing
business as S & D Farms; C.B. Stevens Farms, Inc.; Vonda Stevens Kirkpatrick, doing business
as Rondo Farms; Jonathan Oldner, doing business as Jonathan Oldner Farms; and, Kirk Hill
IT IS SO ORDERED this 12th day of April, 2011.
James M. Moody
United States District Judge
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