Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02347/USCOURTS-ca8-03-02347-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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1

 The Honorable Donovan W. Frank, United States District Judge for the

District of Minnesota.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2347

___________

The Alliance Insurance Company; * 

Farmers Alliance Mutual Insurance * 

Company, * 

* 

Appellants, * 

* Appeal from the United States

v. * District Court for the 

* District of Minnesota.

Glenn R. Wilson, Jr., in his official * 

capacity as Commissioner of the * 

Minnesota Department of Commerce, * 

* 

Appellee. *

___________

Submitted: March 10, 2004

Filed: September 24, 2004

___________

Before SMITH, HANSEN, and COLLOTON, Circuit Judges.

___________

SMITH, Circuit Judge.

The Alliance Insurance Company and Farmers Alliance Mutual Insurance

Company (collectively "Alliance") appeal the district court's1

 order granting summary

judgment to the Commissioner of the Minnesota Department of Commerce (the

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2 This provision is designed to ensure that insurance companies handle their

policy holders' claims in a reasonable manner.

3

 Bernstein has since been succeeded as Commissioner by Glenn R. Wilson.

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"Commissioner") and denying summary judgment to Alliance on its claim for

declaratory relief. The district court found that the Federal Crop Insurance Act

("FCIA") did not preempt certain general regulatory provisions contained in state

insurance law. We affirm. 

I. 

Alliance issues crop insurance policies to a number of sugar beet farmers in

southern Minnesota. The policies are reinsured by the Federal Crop Insurance

Corporation ("FCIC"), a wholly-owned government corporation established within

the Department of Agriculture. The policies are regulated by the FCIA. 7 U.S.C. §

1501 et seq. A large group of Minnesota sugar beet farmers suffered substantial losses

when a series of freezes and thaws damaged sugar beets in 2000. After the losses, the

sugar beet farmers submitted claims to Alliance. Alliance declined coverage to the

farmers based on the farmers' alleged noncompliance with Alliance's submission

requirements. Predictably, the farmers disagreed with Alliance's finding of

noncompliance. 

The Commissioner initiated a market conduct examination of Alliance to

determine whether Alliance complied with Minnesota Statutes Chapter 72A2

 in

responding to the growers' claims. Alliance filed a complaint against the

Commissioner in district court on August 15, 2002, asserting that Commissioner

James C. Bernstein3

 did not have legal authority to undertake the examination

because the FCIA alone regulates FCIC crop insurance policies and the FCIA

preempts any state law regulating such insurance. Alliance and the Commissioner

filed cross motions for summary judgment.

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On April 16, 2003, the district court granted the Commissioner's motion for

summary judgment and dismissed the case with prejudice. The district court found

that under Minnesota law the Commissioner is not precluded from enforcing state

regulatory standards designed to ensure that insurance companies handle their policy

holders' claims in a reasonable manner. The court determined that under 7 U.S.C. §

1506(l), Congress preempted only those state insurance statutes that are inconsistent

with FCIA, and not all state insurance laws, as argued by Alliance. Relying on

Minnesota Statute § 60A.031, the court reasoned that the Commissioner is permitted

to examine Alliance's insurance affairs, practices, and conditions as it would any

other insurance company doing business in Minnesota. Alliance filed a timely notice

of appeal on May 14, 2003.

II. 

Congress enacted the FCIA in 1938 "to promote the national welfare by

improving the economic stability of agriculture through a sound system of crop

insurance and providing the means for the research and experience helpful in devising

and establishing such insurance." 7 U.S.C. § 1502 (1994). Under the original scheme

of the FCIA, only the FCIC issued crop insurance policies and processed claims

based on those policies. When the FCIA was amended, Congress authorized the FCIC

to utilize private insurance companies in providing crop insurance to the nation's

farmers. 7 U.S.C. § 1508(a). Currently, the FCIC insures farmers directly and

reinsures private companies that insure farmers. Williams Farms of Homestead, Inc.

v. Rain and Hail Ins. Serv., Inc., 121 F.3d 630, 634 (11th Cir. 1997).

Alliance, a private insurance company, argues that the Commissioner's

examinations designed to investigate Alliance's treatment of Minnesota farmers are

expressly preempted by the FCIA and its accompanying regulations. Specifically,

Alliance contends that the FCIA comprehensively regulates FCIC crop insurance and

directly conflicts with state regulatory procedures. Alliance asserts that the

Commissioner's market conduct examination would indisputably "affect or govern"

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Alliance's "agreements, contracts, or actions" in violation of the FCIA. In contrast,

the Commissioner argues that the FCIA does not preempt state law entirely but only

to the extent that state laws are inconsistent with the FCIA and certainly not when a

company is acting outside its authority as provided by the FCIA. 

In relevant part, the FCIC's regulations provide: 

(a) No State or local governmental body or non-governmental body shall

have the authority to promulgate rules or regulations, pass laws, or issue

policies or decisions that directly or indirectly affect or govern

agreements, contracts, or actions authorized by this part unless such

authority is specifically authorized by this part or by the Corporation.

(b) The following is a non-inclusive list of examples of actions that State

or local governmental entities or non-governmental entities are

specifically prohibited from taking against the Corporation or any party

that is acting pursuant to this part. Such entities may not:

(1) Impose or enforce liens, garnishments, or other similar actions

against proceeds obtained, or payments issued in accordance with the

Federal Crop Insurance Act, these regulations, or contracts or

agreements entered into pursuant to these regulations;

(2) Tax premiums associated with policies issued hereunder;

(3) Exercise approval authority over policies issued;

(4) Levy fines, judgments, punitive damages, compensatory damages,

or judgments for attorney fees or other costs against companies,

employees of companies including agents and loss adjustors, or federal

employees arising out of actions or inactions on the part of such

individuals and entities authorized or required under the Federal Crop

Insurance Act, the regulations, any contract or agreement authorized by

the Federal Crop Insurance Act or by regulations, or procedures issued

by the Corporation (nothing herein is intended to preclude any action

on the part of any authorized State regulatory body or any State court

or any other authorized entity concerning any actions or inactions on

the part of the agent, company or employee of any company whose

action or inaction is not authorized or required under the Federal Crop

Insurance Act, the regulations, any contract or agreement authorized by

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4

 This statute allows the Commissioner to enforce the reasonableness standards

identified in Minnesota Statutes Chapter 72A through examinations of insurance

companies and "all aspects of the examinee's affairs, practices, and conditions." Minn.

Stat. § 60A.031, subd. 2a. 

5

 U.S. Const. art. VI, cl. 2.

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the Federal Crop Insurance Act or by regulations or procedures issued

by the Corporation); or

(5) Assess any tax, fee, or amount for the funding or maintenance of any

State or local insolvency pool or other similar fund.

The preceding list does not limit the scope or meaning of paragraph (a)

of this section.

7 C.F.R. § 400.352 (emphasis added). 

In the present case, the Commissioner maintains that in order to determine

whether Alliance acted outside of its authority in addressing the Minnesota sugar beet

farmers' claims, he must be able to conduct examinations of Alliance's affairs,

practices, and conditions pursuant to Minnesota Statute § 60A.031.4

The Supremacy Clause5 enables Congress, in the exercise of its legislative

authority, to preempt state law. Louisiana Public Serv. Comm'n v. FCC, 476 U.S. 355,

368 (1986). To do so, Congress must either expressly state its intention or legislate

so comprehensively that no room is left for state legislation in the subject area. Id.

There are several methods by which courts may discern whether Congress intends to

preempt state law when it enacts certain federal legislation.

First, a federal law may expressly preempt a state law. Next, preemption

will occur of necessity if a state law and a federal law are in direct

conflict. When compliance with both federal and state regulations is a

physical impossibility or when a state law stands as an obstacle to the

accomplishment and execution of the full purposes and objectives of

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Congress, then the state law is preempted. Also, congressional intent to

preempt may be inferred from enactment of federal laws that are so

pervasive as to make reasonable the inference that Congress left no

room for the States to supplement it. In addition, preemption will be

presumed if the subject matter of the legislation concerns a field in

which the federal interest is so dominant that the federal system will be

assumed to preclude enforcement of state laws on the same subject, or

if the objective of the federal law or the duties it imposes reveal the

same purpose.

Heart of America Grain Inspection Serv., Inc. v. Missouri Dept. of Agriculture, 123

F.3d 1098, 1103 (8th Cir. 1997) (internal quotations and citations omitted).

"[Preemption] may result not only from action taken by Congress itself; a federal

agency acting within the scope of its congressionally delegated authority may

[preempt] state regulation." Louisiana Public Serv. Com'n, 476 U.S. at 369. 

The FCIA provides that state law applies to FCIA contracts, with two

exceptions: (1) when FCIC contracts provide that state law does not apply or (2)

when state law is inconsistent with FCIC contracts. 7 U.S.C. § 1506(l). Neither

exception applies in this case. 

According to Alliance, when the FCIA regulations standardized crop insurance,

they simultaneously compelled exclusive federal jurisdiction. Although an issue of

first impression in this circuit, our sister circuits deciding the question agree that the

FCIA does not displace state insurance law regulations. Williams Farmers of

Homestead, Inc., 121 F.3d at 634 (holding that Congress did not draft "FCIA to

expressly preempt state law, nor does the wording of the statute or its legislative

history evince an intent to preempt state law"); Meyer v. Conlon, 162 F.3d 1264, 1270

(10th Cir. 1998) (reasoning that the FCIA does not preempt state law). 

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6

 Federal law preempts state law with which it actually "conflicts." Such a

conflict exists if either (1) compliance with both the state and federal laws is a

physical impossibility or (2) state law stands as an obstacle to the accomplishment of

the purposes of Congress. Boggs v. Boggs, 520 U.S. 833, 844 (1997).

-7-

Alliance suggests that the following federal regulatory language preempts state

regulatory law: 

(a) No State . . . shall have the authority to promulgate regulations . . .

that directly or indirectly affect or govern agreements, contracts, or

actions authorized by . . . by the . . . [FCIC]. 

7 C.F.R. § 400.352. However, the regulation continues: 

Nothing herein is intended to preclude any action on the part of any

authorized State regulatory body . . . concerning any actions or inactions

on the part of the . . . company whose action or inaction is not

authorized or required under the [FCIC] or . . . authorized by the [FCIA].

7 C.F.R. § 400.352. This language "permits lawsuits based on agents' actions not

authorized by the FCIA or the FCIC, negating [Alliance's] argument that the

regulations interpret the FCIA as wholly preemptive." Meyer, 162 F.3d at 1269. We

hold that the FCIA did not intend to preempt all state-based regulation of companies

that sell federally reinsured crop insurance. 

We find no conflict6

 between the FCIA and Minnesota state law authorizing

the Commissioner's market conduct examinations. Alliance, relying on 7 C.F.R. §

400.352(a), argues that because the examinations "directly or indirectly affect" the

manner in which Alliance handles its claims, the examinations are preempted.

Specifically, Alliance contends that the Commissioner's examinations are at odds–an

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obstacle–with Congress's purpose in establishing crop insurance uniformly

throughout the United States. We find this argument unpersuasive.

Here, the parties concede that, at its present stage, the Commissioner's

examination is purely investigatory. To the extent the examinations do not impose

any duty or obligation upon Alliance as crop insurers to process claims in a certain

way, Alliance may comply with both state and federal law. The Commissioner's

proposed examination may well serve a useful purpose and disclose material

differences between the two systems. It may even expose substantial potential

deficiencies, shortcomings, and unfairness in the claims procedures dictated by the

regulations promulgated by the federal corporation. If, in fact, the "FCIC, as always,

remains open to suggestions from any person, including State insurance regulatory

bodies, on ways to improve the program including changes in policy terms of [sic]

conditions," 55 Fed. Reg. 23066-01, 23067(June 6, 1990), one might think that it and

the appellants would welcome the Minnesota Commissioner's investigation instead

of spending time going to federal court to try to stop it.

Should the Commissioner attempt to impose claims handling duties or

obligations upon Alliance in the performance of crop insurance policies, the

circumstances would be altered substantially. The district court found that, to the

extent the Commissioner discovers violations of Minnesota law authorized or

required by FCIA, his authority to regulate Alliance is preempted. We hold likewise.

Thus far, the Commissioner has only sought to inquire into the actions of a private

insurance company's treatment of Minnesota crop insurance policyholders. We find

that the Commissioner's inquiry is not inconsistent with FCIA; therefore, it is not

preempted to the extent it is limited in scope and does not stand as an obstacle to the

accomplishment of the purpose of the FCIA.

Alliance also argues that the Commissioner's market conduct examinations are

improper because the Commissioner seeks to require Alliance to pay the

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Commissioner's expenses for conducting the regulatory investigation. The

Commissioner urges that it is not the purpose of the examinations to impose duties

or obligations. See Minn. Stat. § 60A.03, subd. 2 (charging the Commissioner with

the duty of enforcing Chapter 72A); Minn. Stat. § 60A.031, subd. 2a (authorizing

examinations so Commissioner can fulfill his duty to enforce Chapter 72A).

Alliance's concern has merit. Should the Commissioner attempt to require Alliance

to pay the cost of the Commissioner's investigation, then the Commissioner might

well be imposing the type of individual state obligation that uniform federal

legislation is designed to avoid. 

We conclude that the district court did not err in finding that the FCIA and

regulations promulgated pursuant to it do not wholly preempt regulatory insurance

standards contained in Minnesota Statutes Chapter 72A or the Commissioner's

jurisdiction under Minnesota Statute § 60A.031 to examine Alliance's insurance

affairs, practices, and conditions. However, we, as did the district court, note that the

Commissioner must tread carefully in its investigation to "avoid running afoul of the

FCIA."

III.

We affirm the district court's grant of summary judgment in favor of the

Commissioner.

COLLOTON, Circuit Judge, dissenting.

The Federal Crop Insurance Corporation (FCIC), acting pursuant to authority

delegated to it by Congress in the Federal Crop Insurance Act (FCIA), 7 U.S.C.

§ 1506(p), has adopted a regulation stating that "[n]o State . . . shall have the

authority to promulgate rules or regulations, pass laws, or issue policies or decisions

that directly or indirectly affect or govern agreements, contracts, or actions

authorized by this part unless such authority is specifically authorized by this part or

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by the [FCIC]." 7 C.F.R. § 400.352(a) (emphasis added). Because I believe the

opinion of the court does not recognize the preemptive force of this broad regulation,

I respectfully dissent.

Federal regulations, like federal statutes, may preempt state law, if the

regulations are intended to have preemptive effect, and the agency is acting within the

scope of authority delegated to it by Congress. Capital Cities Cable, Inc. v. Crisp,

467 U.S. 691, 699 (1984); Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141,

153-54 (1982). Neither the court nor the Commissioner disputes that the FCIC had

the authority to promulgate § 400.352(a), or that preemption of the Commissioner's

market conduct examinations would be within the scope of the agency's broad

delegated authority, if the FCIC so intended. See 7 U.S.C. § 1506(k); Kansas ex rel.

Todd v. United States, 995 F.2d 1505, 1510-11 (10th Cir. 1993); Preemption of State

Laws and Regulations, 55 Fed. Reg. 23,066, 23,067 (June 6, 1990) (The FCIC "has

consistently interpreted 7 U.S.C. § 1506(k) to allow FCIC to preempt any state

insurance rules or regulations regarding crop insurance that may apply to . . . any

insurance company with which FCIC has an agreement."). Therefore, whether the

regulation preempts the Commissioner's authority to order market conduct

examinations of Alliance, insofar as they concern Alliance's participation in the

federal crop insurance program, is a question of regulatory intent. Capital Cities

Cable, 467 U.S. at 700; Fid. Fed. Sav. & Loan Ass'n, 458 U.S. at 154.

The plain wording of the FCIC's regulation necessarily contains the best

evidence of the agency's preemptive intent. The regulation at issue provides as

follows:

(a) No State or local governmental body or non-governmental body shall

have the authority to promulgate rules or regulations, pass laws, or issue

policies or decisions that directly or indirectly affect or govern

agreements, contracts, or actions authorized by this part unless such

authority is specifically authorized by this part or by the Corporation.

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(b) The following is a non-inclusive list of examples of actions that State

or local governmental entities or non-governmental entities are

specifically prohibited from taking against the Corporation or any party

that is acting pursuant to this part. Such entities may not:

(1) Impose or enforce liens, garnishments, or other similar actions

against proceeds obtained, or payments issued in accordance with the

Federal Crop Insurance Act, these regulations, or contracts or

agreements entered into pursuant to these regulations;

(2) Tax premiums associated with policies issued hereunder;

(3) Exercise approval authority over policies issued;

(4) Levy fines, judgments, punitive damages, compensatory damages,

or judgments for attorney fees or other costs against companies,

employees of companies including agents and loss adjustors, or federal

employees arising out of actions or inactions on the part of such

individuals and entities authorized or required under the Federal Crop

Insurance Act, the regulations, any contract or agreement authorized by

the Federal Crop Insurance Act or by regulations, or procedures issued

by the Corporation (nothing herein is intended to preclude any action

on the part of any authorized State regulatory body or any State court

or any other authorized entity concerning any actions or inactions on

the part of the agent, company or employee of any company whose

action or inaction is not authorized or required under the Federal Crop

Insurance Act, the regulations, any contract or agreement authorized by

the Federal Crop Insurance Act or by regulations or procedures issued

by the Corporation); or

(5) Assess any tax, fee, or amount for the funding or maintenance of any

State or local insolvency pool or other similar fund.

The preceding list does not limit the scope or meaning of paragraph (a)

of this section.

7 C.F.R. § 400.352 (2004) (emphasis added). 

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Alliance argues that the market conduct examinations "directly or indirectly

affect or govern agreements, contracts, or actions authorized by" FCIC regulations,

and that they are thus preempted by § 400.352(a). The court appears to reject this

contention on two grounds. First, the court says that "[t]o the extent the examinations

do not impose any duty or obligation upon Alliance as crop insurers to process claims

in a certain way, Alliance may comply with both state and federal law." Ante, at 8.

That Alliance may comply with both state and federal law, however, means only that

the Commissioner's regulatory order and examination is not preempted on the basis

that it "conflicts" with federal law under one prong of "conflict preemption" analysis.

See English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990) ("state law is pre-empted to the

extent that it actually conflicts with federal law," such as "where it is impossible for

a private party to comply with both state and federal requirements."). This conclusion

about conflict preemption does not address whether the Commissioner's authority is

expressly preempted by § 400.352(a), even though an insurance company might be

able to comply with both federal and state law. Of course, Congress not infrequently

intends or authorizes preemption of state law that does not actually conflict with

federal law in order to ensure uniform regulation or governance. E.g., Ray v. Atl.

Richfield, 435 U.S. 151, 168 (1978); Campbell v. Hussey, 368 U.S. 297, 300-01

(1961); Northern Natural Gas Co. v. Iowa Utils. Bd., 377 F.3d 817, 822-23 (8th Cir.

2004); Gibson v. Am. Bankers Ins. Co., 289 F.3d 943, 948-49 (6th Cir. 2002).

The court also appears to accept the Commissioner's contention that the

parenthetical proviso found in § 400.352(b)(4) modifies the preemptive force of

§ 400.352(a). Ante, at 7. Apparently applying a portion of the proviso rather than

§ 400.352(a), the court holds that the Commissioner's authority to regulate Alliance

is preempted only to the extent that any violation of Minnesota law committed by

Alliance was "authorized or required by FCIA." Ante, at 8. I disagree with this

textual analysis.

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7

Not insignificantly, the FCIC has published an amendment to the proviso of

§ 400.352(b)(4), effective August 30, 2004, that deletes the reference to "any action

on the part of any authorized State regulatory body." The new proviso provides only

that:

Nothing herein precludes such damages being imposed against the

company if a determination is obtained from FCIC that the company, its

employee, agent or loss adjuster failed to comply with the terms of the

policy or procedures issued by FCIC and such failure resulted in the

insured receiving a payment in an amount that is less than the amount to

which the insured was entitled.

General Administrative Regulations, 69 Fed. Reg. 48,652, 48,730 (Aug. 10, 2004) (to

be codified at 7 C.F.R. § 400.352(b)(4)). The FCIC commented that it was clarifying

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The proviso of § 400.352(b)(4) -- "nothing herein is intended to preclude any

action on the part of any authorized State regulatory body or any State court or any

other authorized entity concerning any actions or inactions on the part of the agent,

company or employee of any company whose action or inaction is not authorized or

required under the Federal Crop Insurance Act, the regulations, any contract or

agreement authorized by the Federal Crop Insurance Act or by regulations or

procedures issued by the Corporation" -- modifies only the example of prohibited

action listed in the body of § 400.352(b)(4). The placement of the proviso within a

subsection of § 400.352(b) demonstrates that the term "herein" refers to the preceding

example, not to the broad statement of preemption in the separate subsection of

§ 400.352(a). The independent force of § 400.352(a) is underscored by the last

sentence of § 400.352(b), which makes clear that "[t]he preceding list does not limit

the scope or meaning of paragraph (a) of this section." In short, the proviso of

§ 400.352(b)(4) merely limits the scope of an example in a list which itself does not

limit the scope of § 400.352(a). The proviso shows that the example in

§ 400.352(b)(4) does not preclude certain state regulatory action described in the

proviso, but any such action is still subject to the overriding requirement of

§ 400.352(a) that it may not "directly or indirectly affect or govern agreements,

contracts, or actions authorized" by FCIC regulations.7

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the proviso so that "damages, fees and costs are preempted unless FCIC determines

the insurance provider, agent, or loss adjusters failed to follow FCIC approved policy

or procedure." Id. at 48,726.

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I am left, therefore, with a question that neither the court nor the district court

has answered directly: whether the Commissioner's market conduct examinations

"directly or indirectly affect or govern agreements, contracts, or actions authorized"

by FCIC regulations. The examinations concern the manner in which Alliance has

handled claims made under federally-reinsured crop insurance policies sold to sugar

beet farmers in Minnesota. Every term of every such policy is mandated by the

FCIC's regulations. See 7 C.F.R. §§ 457.8, 457.109. As a result, each of the

agreements or contracts that is the subject of the Commissioner's examinations is an

"agreement" or "contract" authorized by FCIC regulations within the meaning of

§ 400.352(a).

I also believe that the Commissioner's orders and examinations "directly or

indirectly affect or govern" these agreements or contracts. There is no allegation by

the Commissioner that Alliance has failed to comply with policies or procedures of

the FCIC. The Commissioner's pleadings make clear that the purpose of the

examinations is to determine whether Alliance has violated independent provisions

of Minnesota law relating to the handling of insurance claims. In particular, the

Commissioner believes that Alliance may have "fail[ed] to acknowledge and act

reasonably promptly upon communications with respect to claims arising under

insurance policies," Minn. Stat. § 72A.20 subd. 12(2), "refus[ed] to pay claims

without conducting a reasonable investigation," Minn. Stat. § 72A.20 subd. 12(4),

and "fail[ed] to complete its investigation and inform the insured . . . of acceptance

or denial of a claim within 30 business days after receipt of notification of [such]

claim . . . ." Minn. Stat. § 72A.201, subd. 4(3). The Commissioner also seeks to

inquire whether Alliance has "fail[ed] to adopt and implement reasonable standards

for the prompt investigation of claims arising under insurance policies," Minn. Stat.

§ 72A.20 subd. 12(3), or "fail[ed] to promptly provide a reasonable explanation of the

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basis in the insurance policy in relation to the facts or applicable law for denial of a

claim or for the offer of a compromise settlement." Minn. Stat. § 72A.20 subd.

12(14).

The federally-mandated terms of federally-reinsured crop insurance policies,

however, already impose a set of requirements for handling claims. Each policy

specifies the "duties" of an insurer in the event of damage or loss. Under the policy

terms prescribed by the FCIC, for example, an insurer must pay an insured's loss

within 30 days after (1) the insurer and the insured reach an agreement regarding the

claim, (2) arbitration and any appeals are completed, or (3) a final judgment regarding

the claim is entered. 7 C.F.R. § 457.8 ¶ 14 ("Our Duties"). The policy terms also

provide that the insurer must give notice if a claim cannot be paid within 30 days, and

they permit insurers to defer loss adjustments "until the amount of loss can be

accurately determined." Id. The federal regulations prohibit an insurer from paying

on a claim unless the insured has complied with all of the federally-mandated terms

of the contract that impose duties on the insured. Id. §§ 457.7, 457.8 ¶ 14 ("Your

Duties"). 

When the FCIC promulgated § 400.352(a), one of the reasons cited for

adoption of such a broad regulation was the frequent occurrence of state agencies

requiring changes in federally-approved insurance policies with the result that

policyholders living in different States were treated differently. Gen. Admin. Regs.,

55 Fed. Reg. at 23,066. The claims-handling duties imposed by the FCIC do not

include the requirements set forth in Minnesota law. By imposing new claimshandling duties that the FCIC has not seen fit to include in the federally-mandated

policy terms, therefore, the Commissioner would affect or govern agreements or

contracts authorized by the FCIC.

The Commissioner also argues that because the examinations are simply an

inquiry, the examinations themselves cannot affect "agreements, contracts, or actions

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authorized" by the FCIC. Under this view, even if the Commissioner is precluded

from taking any regulatory action at the end of the examination (because regulation

of Alliance's claims-handling would affect agreements, contracts, or actions

authorized by the FCIC), the Commissioner may nonetheless subject Alliance to the

examination. This is an unlikely interpretation of the FCIC's intent, and I believe the

examinations are better understood as an effort to "indirectly affect or govern" the

crop insurance policies that underlie this dispute. If, moreover, the market conduct

examinations do not technically "affect or govern," because they only gather

information (while presumably imposing attendant burdens on the insurer), then they

present an example of state regulatory action that is implicitly preempted, because it

stands as an "obstacle" to the accomplishment and execution of the federal objective

of uniform national crop insurance. See Geier v. Am. Honda Motor Co., 529 U.S.

861, 881 (2000). Where the only purpose of the market conduct examinations is to

establish a basis for potential state regulation that is expressly preempted by

§ 400.352(a), I think it is implicit in the FCIC's statement of express preemption that

such preliminary regulatory activity is also preempted.

For the foregoing reasons, I would reverse the judgment of the district court.

______________________________

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