Case Name: Peter R. DAILEY, III, Appellant, v. AMERICAN GROWERS INSURANCE and American Agrisurance, Inc., Appellees
Court: Supreme Court of Kentucky
Jurisdiction: Kentucky
Decision Date: 2003-04-24
Citations: 103 S.W.3d 60
Docket Number: No. 2001-SC-0364-DG
Parties: Peter R. DAILEY, III, Appellant, v. AMERICAN GROWERS INSURANCE and American Agrisurance, Inc., Appellees.
Judges: COOPER, J., also concurs by separate opinion, with LAMBERT, C.J., GRAVES, JOHNSTONE, and KELLER, JJ„ joining the concurring opinion.
Reporter: South Western Reporter Third Series
Volume: 103
Pages: 60–72

Head Matter:
Peter R. DAILEY, III, Appellant, v. AMERICAN GROWERS INSURANCE and American Agrisurance, Inc., Appellees.
No. 2001-SC-0364-DG.
Supreme Court of Kentucky.
April 24, 2003.
James T. Harris, Lexington, for Appellant.
Guy Colson, Fowler, Measle & Bell, LLP, Lexington, R. Laubenthal, Paul Shotkoski, Council Bluffs, IA, R. Craig Reinhardt, Fowler, Measle & Bell, Katherine J. Hornback, Reinhardt & Associates, PLC, Lexington, for Appellees.

Opinion:
STUMBO, Justice.
Peter R. Dailey, III, a Kentucky tobacco farmer, brings the instant action against American Growers Insurance, an Iowa corporation that sells multiple peril crop insurance ("MPCI") policies reinsured by the Federal Crop Insurance Corporation ("FCIC"), and American Agrisurance, Inc., the marketing and service affiliate for American Growers' crop insurance business, in order to receive benefits due under a MPCI policy. The Court of Appeals below affirmed the Montgomery Circuit Court's decision granting summary judgment to American Growers. Dailey now appeals such judgment. For the reasons set forth in the remainder of this opinion, we reverse.
In 1995, American Growers issued Dai-ley a MPCI policy, number MP-284734, through its agent Town & Ranch Insurance Company ("Town & Ranch") of Winchester, Kentucky. MP-284734 was issued in Dailey's name, using Dailey's social security number as an identification number, and was renewed for the following year. The coverage level provided under MP-284734 was fifty-five percent (55%).
In 1996, American Growers issued Dai-ley a MPCI policy, number MP-325886, on two farms, which are both identified by a farm serial number ("FSN"), FSN 1354 and FSN 2654 respectively. Both farms are serviced through the Fayette County Farm Service Administration ("FSA") Office. FSN 1354 is located in Fayette County. While the majority of the acreage of FSN 2654 is situated in Bourbon County, a small strip lies in Fayette County and is serviced by the Fayette County FSA Office. MP-325886 was issued by Hoffman, Ison & Green, Inc. ("HIG"), an agent of American Growers located in Mount Sterling, Kentucky. MP-325886 was issued under the name "Dayland Farms," an unincorporated business entity run by Dailey, using an employer identification number ("EIN") as the identification number for the policy. The coverage level provided under MP-325886 was seventy-five percent (75%).
Dailey had obtained insurance through Town & Ranch for many years, but, like other area tobacco farmers, Dailey had grown dissatisfied with the service provided by Town & Ranch. Dailey contacted Henry Alton Stull, Jr., then an employee of Town & Ranch. At the same time, Stull was also an employee of a Mount Sterling tobacco warehouse, which made annual loans to Dailey based on his tobacco crop. With Stull's assistance, it was determined that Dailey needed to secure a higher level of insurance coverage on his tobacco crop in order to secure both himself and the local warehouse against any possible crop losses. Stull completed the appropriate forms for Dailey, and then referred Dailey to the HIG agency in Mount Sterling, which subsequently issued the American Growers MPCI policy, number MP-325886, to Dailey.
Later in 1996, Dailey's tobacco crop in FSN 1354 and FSN 2654 sustained severe damage from a hail storm. Dailey then filed a claim to recover under MP-325886. American Growers sent an adjuster, Wendell Doyle, to investigate the damage. Following the investigation, Doyle prepared the required appraisal and production worksheets. Claims personnel at American Growers subsequently determined that Dayland Farms was not an insurable entity, and then voided MP-325886 and transferred all coverage for FSN 1354 and FSN 2654 to MP-284734. American Growers then issued a payment based on the level of coverage provided by MP-284734. Dailey disagreed and asserted that the claim should have been paid per the level of coverage provided by MP-325886, which would have resulted in a heftier payment.
On August 11, 1997, Dailey filed a civil action in the Montgomery Circuit Court contending that his crop loss should have been paid under MP-325886, the policy in the name of Dayland Farms, and that American Growers neglected and refused to adjust his claim in a fair, prompt, and reasonable manner. Dailey further alleged that American Growers breached and violated the terms of KRS 304.12-230, Kentucky's Unfair Claims Settlement Practices Act ("UCSPA").
American Growers moved the circuit court to grant summary judgment in its favor. The circuit court sustained said motion finding that "[MPCI] policies are subject to the regulations of the [FCIC] and are not subject to state or local rules or regulations." As a result, the court determined that American Growers properly adjusted Dailey's claim and further held that American Growers did not breach or violate the UCSPA. In its opinion affirming, a split panel of the Court of Appeals adopted the circuit court's findings verbatim. Dailey then moved this Court for discretionary review, which motion was granted. This appeal followed.
The primary issue this Court must consider is whether the Court of Appeals erred in sustaining the circuit court's decision granting summary judgment to American Growers. In its order citing to 7 C.F.R. § 400.352, the circuit court determined that MPCI policies were not subject to state law. It must then be determined if the Federal Crop Insurance Act ("FCIA") and FCIC regulations preempt the laws of this state, thereby preventing Dailey from asserting his state law claims. We hold that they do not and reverse the judgment rendered by the Court of Appeals.
The FCIA was enacted in 1938 as part of the second President Roosevelt's "New Deal." Its main purpose was "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(a). The FCIA also established the FCIC. 7 U.S.C. § 1503. Farmers can obtain crop insurance under the FCIA by either being issued insurance directly through the FCIC, or by receiving insurance from a private company reinsured by the FCIC. 7 U.S.C. § 1508(a)(1). In the instant case, the policy was obtained from a private company, American Growers. In addition, all reinsured policies must comply with the requirements of the FCIA and the regulations of the FCIC. 7 C.F.R. § 400.164.
In its order granting American Growers' motion for summary judgment, the circuit court apparently relies on the following language from 7 C.F.R. § 400.352(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 [FCIC].
However, 7 C.F.R. § 400.352(b)(4) provides that "nothing herein is intended to preclude any action on the part of any authorized . State court or any other authorized entity concerning . the regulations, any contract or agreement authorized by the [FCIA] or by regulations or procedures issued by the [FCIC]." This language suggests to this Court that the circuit court below was not precluded from entertaining this action, which essentially is a bad faith breach of contract claim. "The simple fact that Congress has established an ordered regulatory scheme is insufficient to preempt all contract claims involving crop insurance." Agre v. Rain & Hail LLC, 196 F.Supp.2d 905, 911 (D.Minn.2002). Furthermore, 7 C.F.R. § 400.351 provides:
The regulations contained in this sub-part are issued pursuant to the [FCIA] . to prescribe the procedures for federal preemption of State laws and regulations not consistent with the purpose, intent, or authority of the [FCIA]. These regulations are applicable to all policies of insurance, insured or rein-sured by the [FCIC], contracts, agreements, or actions authorized by the [FCIA] and entered into or issued by FCIC. (Emphasis added)
Based on this statutory language, it is our opinion that only those state and local laws or regulations which are inconsistent with the "purpose, intent, or authority" of the FCIA will be preempted. Consequently, we do not believe that the claims Dailey presents are inconsistent with the FCIA or FCIC regulations.
While this Court has not previously addressed this issue, we find persuasive case law from other jurisdictions in support of the decision we reach today. A similar result was rendered in a recent South Carolina appellate case. In Lyerly v. American National Fire Insurance Company, 343 S.C. 401, 540 S.E.2d 469 (2000), the insured purchased insurance for his tobacco crop from a private insurance provider reinsured by the FCIC. The policy provided that if the insured brought suit for crop loss or damage, then the insured must do so within twelve months of the damage occurrence. Id. at 470. The insurance provider moved for summary judgment because the insured untimely filed suit thirteen months after his tobacco crop was damaged. Id. The insurance provider also argued that any state law causes of action were preempted by federal law and the insured's only remedy was the "construction and enforcement of the policies of insurance pursuant to the terms thereof." Id. The insured countered by arguing that the period for filing an insurance claim could not be contractually shortened under the applicable state statute. Id. at 471. The circuit court, however, agreed with the insurance provider and granted summary judgment based on its finding that the insured's action was not timely filed pursuant to the insurance policy. Id. The same court further determined that state law was not applicable because all laws governing the action were preempted by federal law. Id. The South Carolina Court of Appeals disagreed, holding that under the circumstances, state law was not inconsistent with the FCIA, and therefore, the insured's state claim was not preempted by federal law. Id. at 474.
Of the federal courts which have considered issues relating to the FCIA preempting state law, the majority have held that the FCIA and FCIC regulations do not totally preempt state law or state law causes of action. For example, the Eleventh Circuit Court of Appeals held that insureds retained traditional contract remedies against private insurance companies which issued FCIC reinsured policies. Williams Farms of Homestead, Inc. v. Rain & Hail Ins. Services, Inc., 121 F.3d 630, 635 (11th Cir.1997). In addition, the Tenth Circuit determined that the FCIA does not preempt all state law claims in suits against private insurance companies on reinsured policies. Meyer v. Conlon, 162 F.3d 1264, 1269-70 (10th Cir.1998). The Fifth Circuit held likewise when it could find no "clear manifestation of congressional intent to displace all state law claims by insureds against crop insurance agents." Rio Grande Underwriters, Inc. v. Pitts Farms, Inc., 276 F.3d 683, 686 (5th Cir.2001). Federal district courts have reached similar findings as well. See, e.g., Nobles v. Rural Community Ins. Services, 122 F.Supp.2d 1290 (M.D.Ala.2000); Halfmann v. USAG Ins. Services, Inc., 118 F.Supp.2d 714 (N.D.Tex.2000); Bullard v. Southwest Crop Ins. Agency. Inc., 984 F.Supp. 531 (E.D.Tex.1997).
While a majority of federal courts have found state law causes of action are not completely preempted by federal law, we note that some have concluded the contrary. See Owen v. Crop Hail Management, 841 F.Supp. 297 (W.D.Mo.1994); Brown v. Crop Hail Management, 813 F.Supp. 519 (S.D.Tex.1993). However, the prevailing view among the federal courts is that Congress did not intend to preempt all state laws or state law causes of action. Furthermore, and as previously mentioned in the opinion herein, we do not believe that Dailey's claims below are inconsistent with the purpose of the FCIA.
It is abundantly clear that only those state and local laws or regulations which are inconsistent with the "purpose, intent, or authority" of the FCIA will be preempted. In the circuit court below, one of the issues Dailey advanced was that American Growers violated the UCSPA. We fail to see in what way the UCSPA is inconsistent with the FCIA, much less the regulations of the FCIC. The circuit court found that there was no violation of the UCSPA because Dailey's claim "was adjusted according to the FCIC regulations and the adjusting standards employed in the crop insurance industry." The Court of Appeals adopted the same. This was error. The issue of whether or not there was a violation of the UCSPA needs to be argued before a trier of fact during a trial. In addition, we observe that the manner in which American Growers adjusted Dailey's claim is a valid point of contention between the parties, which should also be put before a trier of fact. As a result, it is our view that there exist genuine issues of material fact warranting a trial on the merits.
We hold that Dailey's claims are not inconsistent with the FCIA or the regulations of the FCIC. It was error to award summary judgment to American Growers. "[T]he proper function of summary judgment is to terminate litigation when, as a matter of law, it appears that it would be impossible for the respondent to produce evidence at the trial warranting a judgment in his favor." Steelvest, Inc. v. Scansteel Service Center, Inc., Ky., 807 S.W.2d 476, 480 (1991). Since it has been determined that Dailey's claims based on Kentucky law are not prohibited by the federal regulations, we cannot say that it would be impossible for Dailey to produce the pertinent evidence.
Accordingly, we hereby reverse the decision of the Court of Appeals and remand this case to the Montgomery Circuit Court for further proceedings in conformity with this opinion.
All concur.
COOPER, J., also concurs by separate opinion, with LAMBERT, C.J., GRAVES, JOHNSTONE, and KELLER, JJ" joining the concurring opinion.
. Hereinafter American Growers Insurance and American Agrisurance, Inc. will be referred to collectively as "American Growers."