Court Opinion

ID: 3035821
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:53:16.373825+00
Date Added: 2024-06-11T11:40:53.548454
License: Public Domain

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

      1
         The Honorable Donovan W. Frank, United States District Judge for the
District of Minnesota.
"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.

      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.

                                         -2-
       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"

                                        -3-
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

                                         -4-
      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

      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.

                                         -5-
      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).

                                           -6-
      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

      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-
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

                                         -8-
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

                                          -9-
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.

                                         -10-
      (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).
                                         -11-
        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.

                                         -12-
       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

      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
                                         -13-
       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

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.
                                          -14-
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 claims-
handling 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

                                         -15-
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.
                      ______________________________

                                         -16-