823 F.3d 1161
8th Cir.2016Background
- Bruhn Farms purchased crop-hail insurance from Fireman's (issued/managed by RCIS) covering 2012; suffered hail loss on September 11, 2012, and reported it promptly.
- RCIS assembled adjusters who inspected fields in late October (after harvest and adverse weather); Bruhn left check strips for adjustment; adjusters reported payable losses on 4,120.5 acres and used NCIS procedures to calculate percentage losses.
- RCIS/Fireman's prepared a proof of loss and, despite Bruhn's refusal to sign and continued dispute, issued payment in late November/early December 2012 for a net amount Bruhn considered insufficient.
- Bruhn and its agent sought reconsideration; RCIS personnel reviewed the claim, discussed historical yields, and ultimately concluded the original adjustment was correct in January 2013.
- Bruhn sued for breach of contract and bad faith in Iowa state court; Fireman's removed to federal court. The district court granted summary judgment for Fireman's, but the Eighth Circuit reversed and remanded, finding genuine factual disputes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether tendering payment without insured's agreement violated policy §3(b)(2) (duty to pay) | Bruhn: Payment was issued without agreement, judgment, or appraisal — breaching §3(b)(2) | Fireman's: §3(b)(2) sets a payment deadline, not a condition precedent to paying | Court: Genuine dispute exists whether issuance without agreement breached the contract; denial of summary judgment on this issue |
| Whether an appraisal should have been invoked under policy §6 when parties disagreed on percentage loss | Bruhn: RCIS/Fireman's conduct and representations dissuaded Bruhn from demanding appraisal; appraisal opportunity was lost once check strips were destroyed | Fireman's: Bruhn could have demanded appraisal at any time; no obligation on insurer to invoke appraisal | Court: Factual dispute who should have invoked appraisal and whether representations prevented Bruhn from demanding it; issue for factfinder |
| Whether adjusters followed NCIS shatter-loss procedures in calculating percentage loss | Bruhn: Adjusters performed rushed/insufficient field work in bad weather and misapplied procedures, producing underpayment | Fireman's: Adjustment followed NCIS manuals and its review confirmed correct adjustment | Court: Court did not resolve the procedural-calculation dispute at summary judgment; remand for factual determination (dispute remains) |
| Whether bad-faith claim survives given the denial/underpayment | Bruhn: Underpayment and insurer conduct (delay, misleading communications, spoliation of evidence) support bad-faith claim | Fireman's: Position was fairly debatable; no unreasonable denial | Court: Because breach issues are contested and material facts (delay, destroyed evidence, communications) support inference of bad faith, bad-faith claim survives summary judgment |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine issue of material fact standard)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment, view evidence for nonmovant)
- Hornick v. Owners Ins. Co., 511 N.W.2d 370 (Iowa 1993) (insurer must define policy terms clearly)
- Dolan v. Aid Ins. Co., 431 N.W.2d 790 (Iowa 1988) (elements of bad-faith claim)
- Chadima v. Nat'l Fid. Life Ins. Co., 55 F.3d 345 (8th Cir. 1995) (bad-faith claim can proceed where insurer underpays)
- A.W.G. Farms, Inc. v. Fed. Crop Ins. Corp., 757 F.2d 720 (8th Cir. 1985) (insurer leading insured down a "primrose path" can support bad-faith theory)