Hudson Insurance Company v. Bruce Gamble Farms, Jim Gamble Farms, Brian Jones Farms, & Crop Guard Group, Inc.
13-15-00098-CV
| Tex. App. | Nov 5, 2015Background
- Hudson issued multiple-peril crop insurance policies that tracked federal "Basic Provisions" (7 C.F.R. § 457.8) and included an arbitration clause governed by the FAA.
- Farmer appellees (Bruce Gamble Farms, Jim Gamble Farms, Brian Jones Farms) bought coverage through CropGuard Group, Hudson’s agent, and later filed prevented-planting claims that Hudson denied under the Basic Provisions.
- Farmer appellees sued Hudson and CropGuard for breach of contract, bad faith, Insurance Code and DTPA violations, alleging higher premiums and lost prevented-planting benefits.
- Hudson moved to compel arbitration as to the Farmer appellees (attacking unconscionability and conspicuousness defenses) and separately moved to compel CropGuard to arbitrate under a 2009 Independent Crop Insurance Agency Agreement (and related 2012 commission schedules).
- The trial court denied both motions; Hudson appealed. The court of appeals reviewed whether the arbitration clauses were enforceable and whether CropGuard, a non-signatory, must arbitrate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration clause was unconscionable (procedural/substantive) | Farmer appellees: unconscionable because they lacked the full contract/Basic Provisions when agreeing | Hudson: signings and policy declarations put farmers on notice; no proof of unconscionability | Court: Not unconscionable; farmers failed to meet burden to show procedural unconscionability (presumption signatory aware of terms) |
| Whether arbitration clause was insufficiently conspicuous under Texas law | Farmer appellees: clause not sufficiently prominent; relied on a repealed statutory conspicuity requirement | Hudson: statute repealed and inapplicable | Court: Trial court erred to the extent it relied on the repealed conspicuity statute; arbitration clause enforceable on that ground |
| Whether CropGuard (non-signatory) must arbitrate CropGuard’s indemnity/third-party claims | CropGuard: not bound because it wasn’t signatory to 2009 Agreement; 2012 Schedule was a standalone agreement, not subject to arbitration | Hudson: CropGuard stepped into CGIA’s role, received commissions under 2009 Agreement, and seeks direct benefits—estoppel binds it to arbitration | Court: CropGuard is bound under direct-benefits estoppel; it received substantial benefits and insisted on being treated as party, so must arbitrate |
| Whether the 2012 commission schedule was a standalone contract creating agency/commission obligations | CropGuard: 2012 Schedule independently created agency and commission rights | Hudson: 2012 Schedule is a rate schedule under the 2009 Agreement and not a standalone contract | Court: 2012 Schedule did not stand alone; it assumed the 2009 Agreement and its definitions, supporting Hudson’s position |
Key Cases Cited
- In re D. Wilson Constr. Co., 196 S.W.3d 774 (Tex. 2006) (two-step arbitration inquiry: existence and scope)
- In re Poly-Am., L.P., 262 S.W.3d 337 (Tex. 2008) (federal presumption favoring arbitration; resolve doubts in favor)
- In re Odyssey Healthcare, Inc., 310 S.W.3d 419 (Tex. 2010) (party resisting arbitration bears burden of affirmative defenses)
- In re Palm Harbor Homes, Inc., 195 S.W.3d 672 (Tex. 2006) (substantive vs. procedural unconscionability)
- Nat'l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015) (presumption that signatory knew contract terms)
- EZ Pawn Corp. v. Mancias, 934 S.W.2d 87 (Tex. 1996) (signing a contract implies awareness of arbitration clause)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (direct-benefits estoppel can bind non-signatories to arbitration)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (treating non-signatory as party during contract life supports estoppel)
- Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014) (contract interpretation principles and parol evidence limits)
- ENGlobal U.S., Inc. v. Gatlin, 449 S.W.3d 269 (Tex. App.—Beaumont 2014) (non-signatory estopped from avoiding arbitration if it sought direct benefits)