FindACase | Stewart v. Armtech Insurance Service, Inc.
Stewart v. Armtech Insurance Service, Inc.
A farmer who participated in the federal crop insurance program appeals the trial court's confirmation of an arbitration award given when he was retroactively determined to be ineligible to participate in the program for failure to pay the premium and, as a consequence, was required to repay the payment he had received for a loss sustained under another policy. The arbitrator held that the contract upon which the claim was paid was void and that the insurance company was entitled to recover the amount paid on the claim. The trial court affirmed the arbitrator's award, and the policyholder appeals. Finding no basis upon which to conclude that the arbitrator exceeded its authority, we affirm the judgment.
Brian O. Bowhan, Smyrna, Tennessee, for the appellant, Derwood Stewart.
Jeffrey S. Dilley, Clarksdale, Mississippi, for the appellee, Armtech Insurance Service, Inc.
Richard H. Dinkins, J., delivered the opinion of the court, in which Frank G. Clement, Jr., P.J., M.S., and Andy D. Bennett, J., joined.
This case involves crop insurance provided to farmers and ranchers pursuant to the Federal Crop Insurance Act, 7 U.S.C. §1501 et. seq. Section 1503 of the Act created the Federal Crop Insurance Corporation ("FCIC"), which administers the crop insurance program and regulates the private sector insurance companies that sell and service the multiple peril crop insurance ("MCPI") policies. The FCIC is supervised by the United States Department of Agriculture's Office of Risk Management, 7 U.S.C. § 6933, which is authorized to administer the program on behalf of FCIC. 7 C.F.R. § 400.701. The FCIC pays a portion of the yearly policy premium, leaving the remainder for the farmer to pay. Per the FCIC's regulations in effect at the time period relevant in this case, failing to pay the premiums caused all policies in which the farmer is the sole insured to be void until the delinquency was paid. See 7 C.F.R. §400.681 (2010).
Derwood Stewart is a farmer who does business as Stewart Nursery and Farms in Warren County. According to the allegations of the complaint, he had purchased crop insurance through an insurance agency not a party to this suit in 2009, but did not pay the full premium for the policy. He subsequently purchased crop insurance from Armtech Insurance Services, Inc. ("Armtech") for 2010 and 2011; at issue in this case is the policy he purchased for crop year 2010. The premium for that policy was $44, 251, of which the federal government's portion was $26, 998, and Mr. Stewart's was $17, 568.80. When he suffered a loss that year, Armtech paid Mr. Stewart $42, 708 for his loss, which represented the crop loss of $58, 159.00, less the balance of his premium due of $12, 699.68.
In 2012, Mr. Stewart was denied eligibility to purchase crop insurance for that year due to his failure to pay the premiums for his 2009 crop insurance; upon learning that he was not eligible, he paid the balance of the 2009 premium. Mr. Stewart was also informed that he would be ineligible to participate in the federal crop insurance program until he repaid the payment he had received for his loss in 2010. Armtech initiated efforts to recover the entire amount it paid to Mr. Stewart in 2010.
Mr. Stewart filed a declaratory judgment action in Warren County Chancery Court on February 28, 2014, seeking a declaration that Armtech was not due a refund because the insurance contract entered into for the 2010 crop year was valid, that he had been compensated for his loss in accordance with the contract, and that the parties' becoming aware that he was ineligible to participate in the crop insurance program after the payment was made was irrelevant. In the alternative, he asked that if the court held that the contract was void, that the premiums paid be used to set off any refund due, which would result in no money being due to Armtech.
On May 1, 2014, the court granted the parties' motion to stay the action while they participated in arbitration, as required by the crop insurance policies. The case was submitted to the arbitrator to decide "whether [the 2010] policy is void, and, if so, whether Armtech is entitled to a return of net benefits paid to Stewart in the amount of $42, 708, plus interest." The arbitrator issued a decision determining that the 2010 contract was void and that Armtech was entitled to recover the sum of $42, 708 plus interest, for a total of $52, 146.78. Of particular importance to Mr. Stewart's argument on appeal, the arbitrator held that "[t]he parties have agreed, by the express terms of their contract, to be bound by the Federal Crop Insurance Act (7 USC 1501 et seq.) and the regulations promulgated thereunder" and that the contract was "to be interpreted and enforced in accordance with the Federal Crop Insurance Act [ ] and regulations promulgated thereunder."