United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

______

Nos. 07-6027/6029

______

In re: *

 *

Acceptance Insurance Companies Inc., *

 *

Debtor. *

_______________________________ * 

 *

Granite Reinsurance Company Ltd., *

 *

Plaintiff–Appellant *

 –Cross-Appellee, *

 *

v. *

 *

Acceptance Insurance Companies, Inc., *

 *

Debtor–Appellee *

 –Cross-Appellant. *

_______________________________ *

 * Appeals from the United States

Granite Reinsurance Company Ltd., * Bankruptcy Court for the

 * District of Nebraska

Plaintiff–Appellant *

 –Cross-Appellee, *

 *

v. *

 *

Acceptance Insurance Company, a *

Nebraska Corporation, *

 *

Defendant–Appellee *

 –Cross-Appellant. *
2

_______________________________ * 

 *

Acceptance Insurance Companies, Inc., *

 *

Plaintiff–Appellant, *

 *

v. *

 *

Granite Reinsurance Company Ltd., *

 *

Defendant–Appellee. *

______

Submitted: February 13, 2008

Filed: March 12, 2008

______

Before KRESSEL, Chief Judge, SCHERMER and VENTERS, Bankruptcy Judges.

______

KRESSEL, Chief Judge.

The appeals and cross-appeals in these cases involve a reinsurance contract

between several companies in the crop insurance business and an off-shore

reinsurance company. We affirm the bankruptcy court’s judgment that the debtor’s

subsidiaries were parties to the reinsurance contract and that the debtor was not

entitled to the return of $6 million in premiums that it had paid. We reverse the

bankruptcy court’s judgment that the reinsurance company was not entitled to receive

the balance of its $15 million premium.

BACKGROUND

The debtor, Acceptance Insurance Companies, Inc., is a Delaware corporation

with its principal place of business in Iowa. It is the parent company of Acceptance

Insurance Company, a Nebraska corporation whose principal place of business is in
3

Iowa, and of American Growers Insurance Company, a Nebraska corporation. The

debtor is an insurance holding company that is not a licensed insurer and does not

issue insurance policies. Acceptance is primarily a property and casualty insurance

company that sometimes issues crop insurance. American Growers is exclusively a

crop insurance company. Granite Reinsurance Company, Ltd. is a Barbados

corporation with its principal place of business in Bermuda. IGF Insurance Company

is a crop insurance company whose parent company is Goran Capital. Alan Symons

was or is an executive of Granite Re, IGF Insurance Company, and Goran Capital. 

In 1999 and 2000, IGF sustained major losses due to a poor growing season in

California. Because of these losses, the Federal Crop Insurance Corporation advised

IGF that unless it put $30 to $40 million into its crop insurance business, the FCIC

would not allow IGF to continue to write crop insurance in 2001. Therefore, IGF

made plans to sell its crop insurance business to the debtor. 

On May 23, 2001, the debtor, Acceptance, American Growers, and American

Agrisurance, Inc., entered into an asset purchase agreement with Goran Capital Inc.,

Symons International Group, Inc., IGF Holdings, Inc., and IGF Insurance Company.

The agreement was signed by John Martin on behalf of the debtor and Symons on

behalf of Goran Capital, Symons International Group, Inc., IGF Holdings, Inc., and

IGF Insurance Company. The agreement stated that it was “entered into by and

among ACCEPTANCE INSURANCE COMPANIES, INC. . . . for itself and on

behalf of ACCEPTANCE INSURANCE COMPANY, . . . AMERICAN GROWERS

INSURANCE COMPANY, . . . and AMERICAN AGRISURANCE INC.” It also

stated that it was a valid and binding agreement which was enforceable against the

debtor, Acceptance, American Growers, and American Agrisurance.
1

MPCI stands for multi-peril crop insurance, which insures against weather-related crop

losses and other unavoidable perils.

2

The actual text of the contract reads, “[t]his Contract shall become effective as of July 1,

2000 and shall remain in full force and effect with respect to all Covered Business risks in force

or attaching from that date through June 30, 2005.”

4

The asset purchase agreement anticipated the execution of several ancillary

agreements. One of the ancillary agreements was the MPCI1

 Stop Loss Reinsurance

Contract. The purpose of the reinsurance contract was to reinsure the debtor’s

subsidiaries’ multi-peril crop insurance policies in order to gain the FCIC’s approval

for the transaction. Of the debtor’s subsidiaries, America Growers was primarily

responsible for MPCI policies, although Acceptance wrote MPCI policies in states in

which America Growers was not licensed to do business. The preamble of the

reinsurance contract provided that: 

In consideration of the mutual covenants hereinafter contained and

subject to all the terms and conditions herinafter set forth, GRANITE

REINSURANCE COMPANY, LTD, do [sic] hereby indemnify, as

herein provided, ACCEPTANCE INSURANCE COMPANIES INC.

Wherever the word “Company” is used in this Contract, such term shall

be held to include any and/or all of the subsidiary companies which are

or may hereafter come under the management of the Company, provided

that notice be given to the Reinsurer of any such subsidiary companies

which may hereafter come under the management of the Company as

soon as practicable. 

The contract term ran from July 1, 2000 to June 30, 2005.2

 Under the

reinsurance contract, the debtor would pay $15 million over the five-year term of the

contract with at least $6 million due at signing, nothing due the next year, and at least

$3 million due each year for the remaining three years. The text of the contract which

refers to the premium states: “The Company [the debtor and its subsidiaries] will pay

the Reinsurer [Granite Re] a minimum and deposit premium of $6,000,000 at the
3

Crop years run from July to July. For instance crop year 2001 runs from July 1, 2000 to

July 1, 2001. 

5

signing of this treaty for the crop year3 2001 and 2002 and shall pay a minimum

deposit premium of $3,000,000 on January 1, 2003, a minimum deposit of $3,000,000

on January 1, 2004, and a minimum deposit of $3,000,000 on January 1, 2005.”

In return for its payment, Granite Re reinsured the debtor’s subsidiaries losses

on their MPCI policies at the 140%-150% loss level, up to $40 Million, and provided

an additional $9 Million in legacy coverage for any past claims. The contract defined

Granite Re’s obligation: “[Granite Re] shall be liable for 100% of the subject ultimate

net loss in excess of. . .140% but not greater than 150% of the Company’s subject net

retained premium income for each crop year.” The term “subject ultimate net loss”

was defined as the “subject net retained premium on business the subject of this

Contract, classified by the Company as MPCI.” The contract separately defined the

term “subject net retained premium income” as “the net retained premium on Covered

Business the subject of this Contract, classified by the Company as MPCI.” 

On May 29, 2001, Alan Symons, the President and Chief Executive Officer of

Goran and the person who negotiated the reinsurance contract between the debtor and

Granite Re, sent a letter to the Indiana Department of Insurance which stated “[Granite

Re] will reinsure $40 million of risk for MPIC layer 140% to 150% for five years. .

. .[Granite Re] will be paid $3,000,000 per year for the duration of the risk. [Five year

maximum].” On June 4, 2001, Acceptance ratified the asset purchase agreement and

the ancillary agreements.

In June of 2001 the debtor paid Granite Re $6 million of the $15 million

reinsurance premium. Due to significant financial losses, on December 20, 2002,

American Growers was placed in statutory rehabilitation. On February 28, 2005, it

was placed in statutory liquidation. American Growers ceased issuing insurance

policies upon the entry of the order for supervision. The Nebraska Department of
4

Case number 05-80059.

5

Adversary proceeding number 06-08015.

6

Adversary proceeding number 06-8115.

6

Insurance also placed Acceptance under supervision on December 20, 2002, but it is

not currently in receivership. Acceptance stopped writing insurance in the fourth

quarter of 2001, except for a few small policies which were issued in 2002. Because

Acceptance and American Growers did not write significant insurance business after

2001, and therefore had minimal risk of insurance losses, the debtor did not pay

Granite Re the remaining $9 million premium on the reinsurance contract. 

On January 7, 2005, the debtor filed its chapter 11 petition in the District of

Nebraska.4

 Granite Re filed a proof of claim on May 6, 2005 for approximately $10.9

million, which was the balance of the premium due under the reinsurance contract plus

interest. The debtor objected on the basis that the reinsurance premium was due on

an annual basis for coverage received in that year. Because it could no longer issue

crop insurance policies, the debtor contended that it no longer needed reinsurance

coverage and was not obligated to continue making payments under the contract.

On September 22, 2005, Granite Re filed a complaint against Acceptance in

the U.S. District Court for the District of Nebraska which sought $9 million in unpaid

reinsurance premiums plus interest. Acceptance contended that it was not a party to

the reinsurance contract, and was thus not liable for the premium. The parties

stipulated to removal and on January 23, 2006 the district court referred this

proceeding to the bankruptcy court.5

 Granite Re, Acceptance and the debtor jointly

made a motion to consolidate the claim objection and the lawsuit. The bankruptcy

court granted the motion.

On October 26, 2006, the debtor brought a complaint against Granite Re that

sought return of the $6 million it had paid to Granite Re for reinsurance coverage.6
7

The complaint alleged that the reinsurance contract lacked consideration because the

definition of “subject ultimate net loss” as the “subject net retained premium” made

it impossible that the subject ultimate net loss could equal more than 100% of the

subject net retained premium because the two terms were equivalent. The parties

moved to consolidate this proceeding with the other two. The bankruptcy court

granted the motion and consolidated all three proceedings on December 5, 2006. 

On December 31, 2006, the debtor and Acceptance filed a motion for summary

judgment. Granite Re resisted the motion. On February 15, 2007, the bankruptcy

court denied the motion. 

The bankruptcy court held a trial on February 27-28, 2007. On May 9, 2007,

the bankruptcy court held that the debtor, Acceptance, American Growers and

Granite Re were all parties to the reinsurance contract. The court further held that

Acceptance and the debtor were not responsible for the $9 million balance owed on

the reinsurance contract because the premium was due on an annual basis and only

in the years in which the debtor faced potential losses in its MPCI insurance business.

Because the debtor and its subsidiaries did not require coverage beyond the first two

years of the contract, they asserted that they were under no obligation to continue

making payments on the contract. Therefore, the bankruptcy court entered judgment

in favor of Acceptance in adversary proceeding number 06-08015. Granite Re

appealed and Acceptance cross-appealed this judgment. On the basis of these same

findings, the bankruptcy court sustained the debtor’s objection to Granite Re’s claim

in bankruptcy case number 05-80059. Granite Re appealed and the debtor crossappealed this judgment. Finally, the court found that Granite Re was entitled to

retain the initial $6 million premium payment because the reinsurance contract did

not lack consideration. The court entered judgment for Granite Re in adversary

proceeding number 06-08115 and dismissed the debtor’s complaint. The debtor

appealed from this judgment. 

 
8

Standard of Review

We review the bankruptcy court’s factual findings for clear error and its

conclusions of law de novo. Debold v. Case, 452 F.3d 756, 761 (8th Cir. 2006); In

Re Vondall, 364 B.R. 668, 670 (B.A.P. 8th Cir. 2007). “To the extent a court's

construction of a contract relies on the contract terms and not on extrinsic evidence,

its interpretation is a conclusion of law over which we have plenary review.” Frank

B. Hall & Co. v. Alexander & Alexander, Inc., 974 F.2d 1020, 1023 (8th Cir. 1992).

To the extent that the meaning of the contract depends on disputed extrinsic evidence,

it constitutes a finding of fact, which is subject to review on appeal under the clearly

erroneous standard. Towers Hotel Corp. v. Rimmel, 871 F.2d 766, 771-72 (8th Cir.

1989). The determination of whether a contract is ambiguous is a question of law

that we review de novo. Papio Keno Club, Inc. v. City of Papillion (In re Papio Keno

Club, Inc.), 262 F.3d 725, 731 (8th Cir. 2001). The asset purchase agreement

stipulates that Iowa law applies to any dispute arising out of it or the ancillary

agreements, and the parties do not dispute that Iowa law applies.

DISCUSSION

The Reinsurance Contract Is Enforceable Against the Debtor.

The duty of a court when interpreting a contract is to give effect to the

intention of the parties. Iowa National Mutual Ins. Co. v. Fidelity and Casualty Co.

of New York, 128 N.W. 2d 891, 893 (Iowa 1964). To do this, the court should

construe the contract as a whole and give the unambiguous language its plain

meaning. Id. No part should be assumed to be superfluous. The interpretation that

gives a reasonable, lawful, and effective meaning to all terms is preferred to an

interpretation that leaves a portion of the agreement of no effect. Smith Barney, Inc.

v. Keeney, 570 N.W.2d 75, 78 (Iowa 1997). 
9

Ambiguity may be said to appear when, after application of certain rules of

interpretation to the face of the instrument, a genuine uncertainty results as to which

one of two or more meanings is the proper one. Iowa Fuel & Minerals, Inc. v. Iowa

State Board of Regents, 471 N.W.2d 859, 862-63 (Iowa 1991). If the language is

found to be ambiguous, extrinsic evidence is admissible as an aid of interpretation of

the contract. Dickson v. Hubble Realty Co., 567 N.W.2d 427, 430 (Iowa 1997). 

When we look to the contract in its entirety, we agree with the bankruptcy

court that it is clear that the parties intended the contract to provide legacy

reinsurance coverage and coverage at the 140% to 150% loss level. Neither party

intended the contract provide no coverage. Although the definition of “subject

ultimate net loss” as the “subject net retained premium on business the subject of this

Contract” is confusing, we conclude that this is the result of careless drafting rather

than an intent by the parties to create a meaningless contract. The parties most likely

meant to define “subject ultimate net loss” as “the ultimate net loss on business the

subject of this Contract, classified by the Company as MPCI” because “subject net

retained premium income” was defined as “the net retained premium on Covered

Business the subject of this Contract, classified by the Company as MPCI.” We

doubt that the parties intended “subject ultimate net loss” and “subject net retained

premium” to have virtually identical definitions, especially because the plain meaning

of the words “net loss” and “net retained” are antonymic. The best interpretation of

the contract is one that reflects the obvious intentions of the parties and gives a

reasonable, lawful meaning to the entire contract. Because the contract read in its

entirety indicates that the parties intended the reinsurance contract to have

consideration, and an interpretation to that effect gives the contract a more reasonable

meaning, we conclude that the contract did not lack consideration.

Although we conclude that the contract on its face is unambiguous, and

therefore there is no need to consider extrinsic evidence, we think that the extrinsic

evidence reveals that the parties intended to provide consideration for the contract.
10

Representatives from both the debtor and Granite Re testified that they intended the

contract to provide reinsurance coverage, and the conduct of both parties is consistent

with the belief that the contract provided coverage. In addition, the debtor could not

have intended the contract to lack enforceability or it would have been in violation

of federal crop insurance regulations which require reinsurance coverage. Thus, we

can find no evidence that the parties intended the contract to be void for lack of

consideration and we affirm the bankruptcy court’s decision on this issue.

The Reinsurance Contract Is Enforceable Against Acceptance.

We also agree with the bankruptcy court that Acceptance is a party to the

MPCI reinsurance contract and is liable for its premium. Under the contract, the term

“Company” refers to the debtor and to all of the debtor’s subsidiaries–present and

future. At the time the reinsurance contract was entered into, Acceptance was one of

the debtor’s subsidiaries. The contract does not limit the term subsidiaries to only

those companies which provide multi-peril crop insurance, and even if it did,

Acceptance wrote some multi-peril crop insurance business and retained some risk

from its crop business. This would make Acceptance a subsidiary under the contract

regardless of whether the contract was limited to only those subsidiaries which wrote

multi-peril crop insurance. Thus, Acceptance is included in the definition of

“Company.” 

The contract provides that “[t]he Company will pay the Reinsurer the payment

due under the reinsurance contract.” Because “Company” encompassed Acceptance,

the reinsurance contract obligated it to pay the insurance premium to Granite Re.

Although Acceptance did not separately sign the reinsurance contract, its parent did

sign on its behalf and Acceptance ratified the signature of the debtor’s representative

on the asset purchase agreement and the ancillary agreements, which included the

reinsurance contract. Thus, we conclude that Acceptance is a party to the MPCI

reinsurance contract.
11

Granite Re is Entitled to the Entire $15 Million Reinsurance Premium.

Although insurance policies must be construed as a whole and their words

given their ordinary, not technical, meaning to achieve a practical and fair

interpretation, where the meaning of terms in an insurance policy is susceptible to

two interpretations, the one favoring the insured is adopted. North Star Mut. Ins. Co.

v. Holty, 402 N.W.2d 452, 454 (Iowa 1987). However, the mere fact that parties

disagree on the meaning of terms does not establish ambiguity. Id. There must be

real ambiguity in the terms of the policy. “A strained or unreasonable construction

of the language used, where there is no real ambiguity, should not be indulged in.

And it is well settled that if there is no ambiguity in the contract there is no right or

duty on the part of the court to write a new contract of insurance between the parties.”

Stover v. State Farm Mut. Ins. Co., 189 N.W.2d 588, 591 (Iowa 1971).

The MPCI reinsurance contract is not ambiguous with respect to the contract’s

term and premium. The contract defines its term: “[T]his Contract shall become

effective as of July 1, 2000 and shall remain in full force and effect with respect to

all Covered Business risks in force or attaching from that date through June 30,

2005.” There is nothing ambiguous about this provision. There is no contract

provision which provides for an early termination, and no indication that either party

can terminate the contract prior to June 30, 2005. Therefore, we are left with a firm

conviction that the contract term begins on July 1, 2000 and ends on June 30, 2005

with no possibility for early termination by either party. 

In addition, the contract unambiguously states that its premium is $15 million

payable over five years. The debtor and Acceptance have the option of paying the

contract premium in installments, but are not required to do so. The contract does not

indicate that the installment payments are yearly renewal premiums or that the debtor

may opt out of the contract to avoid paying any of the installments. 
12

Finally, the contract provided a maximum of $40 million in coverage plus $9

million in indemnity coverage for five years regardless of the year in which the losses

occurred. The fact that the contract provided a cumulative $40 million in coverage

rather than provide $40 million coverage per year indicates that the parties intended

the contract to have a fixed five-year term rather than a renewable one-year term. All

of these provisions unambiguously indicate that Granite Re and the debtor intended

the contract to provide $40 million of coverage for 5 years, plus legacy coverage, for

a $15 million premium. 

Again, there is no need to consider extrinsic evidence in order to determine the

meaning of the contract because the contract is unambiguous on its face. However,

the extrinsic evidence likewise indicates that the parties intended to provide coverage

for the term of 5 years at a cost of $15 million with no exceptions for early

termination or a loss of business. The debtor and Acceptance base their argument

that the parties intended the contract to provide coverage renewable on a yearly basis

on Alan Symons’s letter to the Indiana Board of Insurance. The letter states that

“[Granite Re] will be paid $3,000,000 per year for the duration of the risk. [Five year

maximum].” However, Symons also states in the same letter that “[Granite Re] will

reinsure $40 million of risk for MPIC layer 140% to 150% for five years.” When the

letter is read in its entirety, it confirms that the parties intended to create a five-year

contract with a $15 million premium, with a $3 million minimum payment due per

year. Thus, we conclude that the bankruptcy court’s consideration of extrinsic

evidence as to whether the contract premium was due on an annual basis was in error

because the contract contains no ambiguity for which extrinsic evidence is needed to

resolve, and in any case, its interpretation of that extrinsic evidence was clearly

erroneous 
13

The Bankruptcy Court’s Denial of Summary Judgment Is Not Appealable

After Trial on the Merits.

“[T]he denial of summary judgment is interlocutory in nature and not

appealable after a full trial on the merits; judgment after a full trial on the merits

supersedes earlier summary judgment proceedings.” Bakker v. McKinnon, 152 F.3d

1007, 1010 (8th Cir. 1998).

The debtor and Acceptance ask us to review the bankruptcy court’s denial of

their summary judgment motion. We cannot review the bankruptcy court’s decision

on summary judgment with respect to those issues which it decided after trial on the

merits because the judgment after trial supercedes the denial of summary judgment.

However, as part of their appeal from the final judgment we can review the issue of

frustration of purpose as additional grounds for reversal argued by the debtor and

Acceptance.

The Purpose of the Contract Was Not Frustrated.

The Restatement (Second) of the Law of Contracts § 265 describes frustration

of purpose as:

Where, after a contract is made, a party’s principal purpose is

substantially frustrated without his fault by the occurrence of an event,

the non-occurrence of which was a basic assumption on which the

contract was made, his remaining duties to render performance are

discharged, unless the language or the circumstances indicate the

contrary. 

Iowa law is in accord with the Restatement and requires three circumstances to be

met prior to discharge due to supervening frustration: 1) the purpose that is frustrated

must have been a principal purpose of that party in making the contract; 2) the
14

frustration must be substantial; and 3) the non-occurrence of the frustrating event

must have been a basic assumption on which the contract was made. Mel Frank Tool

& Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802, 806-07 (Iowa 1998).

The debtor and Acceptance claim that one of two events frustrated the purpose

of the contract: 1) the losses sustained by American Growers in its multi-peril crop

insurance business; or 2) the Nebraska Department of Insurance’s supervision of

American Growers. Neither event frustrated the purpose of the contract. First,

American Growers’ losses did not frustrate the purpose of the contract because the

debtor anticipated that it might sustain crop insurance losses. The anticipation of

these losses compelled the debtor to reinsure its potential losses with Granite Re in

the MPCI reinsurance contract. The debtor cannot now claim that the occurrence of

substantial crop losses frustrated the purpose of the contract because this is precisely

the reason the debtor entered into the contract with Granite Re. Because the

reinsurance contract anticipated potential crop losses, its purpose cannot be frustrated

by the occurrence of these losses. 

Second, the purpose of the contract is not frustrated because of the Nebraska

Department of Insurance’s supervision of American Growers. The losses American

Growers experienced in its multi-peril crop insurance business caused the

Department of Insurance to place American Growers under supervision due to

inadequate capital levels. American Growers could have avoided being placed in

supervision if it had maintained adequate levels of capital, but it failed to do so. The

parties to the reinsurance contract should have been aware that failure to abide by the

insurance regulations of Nebraska would induce the Department of Insurance to take

those actions which Nebraska law allows, including entry into supervision and

liquidation. This is a reasonably foreseeable event which the contract should have

anticipated and is the fault of the insured party, American Growers, for maintaining

inadequate capital. Thus, it is not grounds to void the reinsurance contract due to

frustration of purpose.
15

CONCLUSION

1. We reverse the disallowance of Granite Re’s claim in case number 05-

80059.

2. We affirm the bankruptcy court’s judgment that dismissed the debtor’s

complaint against Granite Re in adversary proceeding number 06-8115.

3. We affirm the bankruptcy court’s judgment in favor of Acceptance and

against Granite Re in adversary proceeding number 06-08015 to the extent it found

Acceptance liable for the insurance premium but reverse the judgment to the extent

it found that liability to be zero.

4. We dismiss the debtor’s and Acceptance’s appeal from the bankruptcy

court’s denial of summary judgment for lack of jurisdiction.