Kimberley v. Crop Risk Servs., Inc.

572 F.Supp.3d 677

Grant R. KIMBERLEY, Kimberley Farms, Inc., and GRK, Inc., Plaintiffs,

v.CROP RISK SERVICES, INC., and Stratford Insurance Co., Defendants.

Dimit Farms, Inc. ; Dimit Family Farms, LLC; Janet Dimit; Edit M. Parmley; and Jay Hardeman, Plaintiffs,

v.Crop Risk Services, Inc., and Stratford Insurance Co., Defendants.

Douglas Stadler and Trish Stadler, Plaintiffs,

v.Crop Risk Services, Inc., and Stratford Insurance Co., Defendants.

Muckler Farms, L.L.C., Plaintiff,

v.Crop Risk Services, Inc., and Stratford Insurance Co. Defendants.

No. 4:21-cv-00151-JAJ-SBJ

No. 4:21-cv-00152-JAJ-SBJ

No. 4:21-cv-00153-JAJ-SBJ

No. 4:21-cv-00154-JAJ-SBJ

United States District Court, S.D. Iowa, Central Division.

Signed November 16, 2021

John Corey Wagner, John G. Daufeldt, John C. Wagner Law Offices, P.C., Amana, IA, for Plaintiffs.

Thomas H. Boyd, Kyle Robert Kroll, Pro Hac Vice, Winthrop & Weinstine, P.A., Minneapolis, MN, for Defendants.

OPINION AND ORDER REGARDING DEFENDANTS’ MOTION TO DISMISS

JOHN A. JARVEY, Chief Judge These cases, involving contract and misrepresentation claims, arise from the plaintiff farmers’ purchase of private supplemental crop insurance products from the defendant insurers that were offered at rates so low that they were rejected by the Iowa Insurance Division. These cases are now before the court on the insurers’ essentially identical August 27, 2021, Motions To Dismiss First Amended Petition At Law With Prejudice. The farmers filed essentially identical Resistances on October 15, 2021, and the insurers filed essentially identical Replies on October 29, 2021. Although both the insurers and the farmers requested oral arguments on the Motions To Dismiss, the court finds that the parties’ briefing is sufficient for disposition of these Motions. For the reasons stated below, the insurers’ Motions To Dismiss First Amended Petition At Law With Prejudice in these cases are GRANTED .

I. INTRODUCTION

A. Factual Background

The facts set out, here, are drawn primarily from the allegations in the Farmers’ July 23, 2021, First Amended Petitions, or documents attached to them, in these cases.

The plaintiffs in Kimberley v. Crop Risk Services, Inc. , are record titleholders to farmland located in Jasper, Polk, and Story Counties in Iowa. The plaintiffs in Dimit Farms, Inc. v. Crop Risk Services, Inc. , are record titleholders to farmland located in both Jasper and Poweshiek Counties. The plaintiffs in Stadler v. Crop Risk Services, Inc. , are record titleholders to farmland located in Benton, Tama, and Poweshiek Counties. The plaintiff in Muckler Farms, L.L.C. v. Crop Risk Services, Inc. , is record titleholder to farmland located in Poweshiek County. Where necessary, the cases and the plaintiffs will be distinguished as "Kimberley," "Dimit," "Stadler," and "Muckler," but the plaintiffs will be identified collectively as "the Farmers."

Defendant Crop Risk Services, Inc., (CRS) is a foreign corporation with a registered agent in Iowa. Defendant Stratford Insurance Co. (Stratford) is a foreign corporation with its principal place of business in New Jersey. Stratford was authorized to write crop insurance, and CRS was an affiliated program administrator for Stratford. CRS and Stratford will be identified collectively as "the Insurers."

The crop insurance products sold by the Insurers at issue, here, are sold as endorsements to "private" crop-hail policies, which are not part of the Federal Crop Insurance Program. Instead, the "private" crop-hail policies and the endorsements to them are provided directly through private insurers. Federal Crop Insurance covers up to 85% of a farmer's acreage yield loss or revenue loss, while these private insurance products cover the "gap" in coverage between that percentage and a farmer's full loss or the level of the farmer's choosing. The crop insurance products at issue, here, are called (1) Production Wind and (2) Wind/Green Snap/Extra Harvest. Collectively, they will be called "the Crop-Hail Products."

On or about January 31, 2020, CRS filed rates with the Iowa Insurance Division (IID) on behalf of Stratford for both Crop-Hail Products. The IID initially approved the 1/31/20 Rates for the Crop-Hail Products, but on or about February 28, 2020, the IID notified CRS that those rates did not comply with Bulletin 18-02, which sets out "Rules for Crop-Hail Insurance Rate and Form Filings." On or about March 6, 2020, CRS submitted revised rates for Crop-Hail Products to the IID, and the IID approved the revised rates on or about March 9, 2020. The 3/6/20 Revised Rates also did not comply with Bulletin 18-02, however, because those rates had a -75.6% deviation from the Final Average Loss Cost (FALC) determined by National Crop Insurance Services (NCIS). Consequently, on or about March 14, 2020, the IID notified CRS that the 3/6/20 Revised Rates were still noncompliant with Bulletin 18-02. CRS submitted modified rates, again, on or about March 17, 2020, but the 3/17/20 Revised Rates were still noncompliant, allegedly because CRS had failed to use the correct loss cost modification factors (LCMFs). On or about April 1, 2020, CRS submitted a fourth set of revised rates for Crop-Hail Products with the correct LCMFs, and the IID approved those rates on or about April 9, 2020. The Farmers have not alleged any of the specific rates, but they do allege that the 4/1/20 Revised Rates were considerably higher than the original 1/31/20 Rates.

The Farmers allege that each of them or their representatives signed Applications for Crop-Hail Products with CRS and obtained coverage through Stratford based upon the quoted premium rates, that is, rates lower than the 4/1/20 Revised Rates finally approved by the IID. The Farmers do not allege what specific rates they were quoted or what specific rates their Applications were based on, the Farmers have not identified any part of their Applications that contain such information, and the court has not found such information in any of the Applications attached to the First Amended Petitions. The Farmers do allege, however, that, prior to their execution of the Crop-Hail Applications, the Insurers did not inform them that the initially quoted rates for the Crop-Hail Products were subject to approval by the IID. They also allege that their decisions to obtain crop insurance coverage through the Insurers was based on the initially quoted rates. The Applications attached to the various First Amended Petitions show that the Kimberley plaintiffs and CRS's agent signed Applications dated March 3, 2020; the Dimit plaintiffs and CRS's agent signed Applications dated March 5, 2020; one of the Stadler plaintiffs and CRS's agent signed an Application dated March 11, 2020; and the Muckler plaintiff's agent and CRS's agent signed an Application dated March 9, 2020. Pursuant to the terms of the Crop-Hail Applications, insurance coverage attached for the 2020 crop year.

The Farmers allege that, after their Applications "bound" their insurance coverage, the Insurers unilaterally raised the Farmers’ rates for Crop-Hail Products on at least two separate occasions. Furthermore, they allege that they were forced either to pay the increased rates, to reduce their coverage, or to forego Crop-Hail Products coverage altogether, because their purchase of federal crop insurance from the Insurers meant that they were "locked-in" to the Insurers’ private insurance and could not purchase Crop-Hail Products from another carrier. They also allege that CRS expressly indicates on its website that the last day for the purchase of Crop-Hail Products is March 15th of each year. The Farmers allege that they ended up with less coverage than they would have had if the Insurers had honored the coverage and rates the Farmers were quoted.

On or about August 10, 2020, a devastating weather event—called a "Derecho" windstorm—damaged the Farmers’ crops. The Farmers allege that, because they were underinsured or not fully insured, they suffered financial damages.

The Insurers’ conduct in regard to pricing of the Crop-Hail Products at issue in this case was addressed by proceedings of the Iowa Insurance Commissioner. On December 21, 2020, the Iowa Insurance Commissioner entered an Order and Consent to Order (the Consent Order), which is attached to each of the First Amended Petitions. That Consent Order states, in its preamble,

NOW THEREFORE , upon motion of the Iowa Insurance Division ("Division") and by the consent of Respondent Stratford Insurance Company , pursuant to the provisions of Iowa Code chapter 507B—Insurance Trade Practices and Iowa Administrative Code chapter 20—Property and Casualty Insurance, the Commissioner enters the following Order and Consent to Order ("Consent Order").

Consent Order, Pl.s’ First Amend. Pets., Ex. 2 (emphasis added).

Although the Farmers quote in their First Amended Petitions several parts of the Consent Order that are consistent with their own allegations, the court finds that the most pertinent parts of the Consent Order are the following:

On behalf of Stratford, CRS filed rates with the Division that failed to comply with Bulletin 18-02. These noncompliant rates gave CRS an unfair competitive advantage because the rates were markedly lower than the compliant rates filed by their competitors.

Stratford, acting through its affiliated program administrator, misrepresented the terms of the Crop-Hail policies by quoting premium rates which failed to comply with Bulletin 18-0 2. Iowa Farmers selected to obtain coverage through Stratford, in large part, due to the low, quoted rates. These rates increased twice after many of these Farmers already submitted signed applications and coverage was bound....

* * *

Stratford's acts and practices have been in violation of Iowa Code §§ 507B.3 and 507B.4(3) subjecting Stratford to the imposition of a civil penalty, an order requiring Stratford to cease and desist from engaging in such acts or practices, the imposition of costs of the

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