Owens v. International Business and Mercantile Reassurance Co.
| Decision Date | 26 July 1991 |
| Docket Number | Nos. 89-2242,89-2271,s. 89-2242 |
| Parties | Unpublished Disposition NOTICE: Tenth Circuit Rule 36.3 states that unpublished opinions and orders and judgments have no precedential value and shall not be cited except for purposes of establishing the doctrines of the law of the case, res judicata, or collateral estoppel. Donnie OWENS, Stuart Anderson, doing business as Anderson Farms, Plaintiff-Appellees, v. INTERNATIONAL BUSINESS AND MERCANTILE REASSURANCE COMPANY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Before JOHN P. MOORE and BALDOCK, Circuit Judges, and ANDERSON, District Judge. *
Defendant-appellant International Business and Mercantile Reassurance Company (International) appeals from a jury verdict awarding compensatory and punitive damages to plaintiffs-appellees Donnie Owens (Owens) and Stuart Anderson (Anderson). Our jurisdiction in this diversity case arises under 28 U.S.C. Sec. 1291. We affirm.
Plaintiff Owens cultivated ten farms in the Estancia Valley in central New Mexico. Nine of these farms (Ashcroft, Bass, Carrejo, Kalo, Knox, Montoya, Stephens, Vaughan and H. Vaughan) were operated by Owens. The tenth farm (Schwebach) was operated by Owens and Anderson as a joint venture. Most of Owen's farming effort was devoted to the cultivation of silage to fulfill a supply contract with the Valley Gold dairy. In spring 1986, Owens and Anderson attended a sales presentation by International's representative, Lee Looney. International offered two types of crop insurance, hail and multiperil. Hail insurance is wholly-private insurance which compensates farmers for hail damage to crops, in excess of five-percent of the crop. Multiperil insurance is federally-subsidized insurance in which the federal government reimburses private insurers for claims paid. Multiperil coverage insures against a host of problems which can affect farm production in a given year by guaranteeing up to seventy-five percent of the insured's production.
A key factor in the adjustment of multiperil losses is the method of calculating production losses. At the sales presentation, plaintiffs expressed concern that, in determining production under the multiperil policy, International would use county per-acre averages, rather than the much-higher yields from their own farms. According to plaintiffs, Looney assured them that production guarantees would be calculated on the basis of past production on individual farms, or, if past figures were not available, by production on adjacent farms. Plaintiffs claim that, in reliance on these assurances, they purchased both crop hail and multiperil policies from International.
In June 1986, a hail storm caused extensive damage to the Schwebach and Vaughan farms and less extensive damage to the other farms. The hail resulted both in direct physical damage to the plant tissue as well as severe soil compaction. International's adjuster originally concluded that no compensable damage had occurred on the Schwebach farm. The adjuster convinced Owens to sign a claim withdrawal form, although Owens never intended to withdraw his claims. The parties disputed the extent of the damage and the calculation of production guarantees under the multiperil policy, including 1986 production yields. Owens sought to cease cultivation of the heavily-damaged Schwebach farm and declare the farm a total loss, but International never provided the necessary assurances. With the exception of a partial payment for casualty losses, International never paid plaintiffs for the 1986 crop damage.
Plaintiffs sued International alleging breach of contract, promissory estoppel, negligent misrepresentation, fraudulent misrepresentation, bad faith and violation of the New Mexico Unfair Trade Practices Act, N.M.Stat.Ann. Secs. 57-12-1 to 57-12-15 (1987 Repl.Pamp. & 1990 Cum.Supp.), and the Unfair Insurance Practices Act, N.M.Stat.Ann. Secs. 59A-16-1 to 59A-16-30 (1988 Repl.Pamp. & 1990 Cum.Supp.) In addition to payment under the policy, Owens sought consequential damages for lost business opportunities, loss of credit, loss of equipment due to repossession, loss of the Valley Gold dairy contract, loss of his feed store and loss of his farming operation. He also sought punitive damages. Anderson sought consequential damages for lost business opportunities due to the loss of the Schwebach joint venture and Valley Gold contract, and punitive damages. By special interrogatories, the jury returned a verdict for the plaintiffs on all claims except fraudulent misrepresentation. The jury awarded damages to each plaintiff as follows:
Owens
Casualty losses under crop hail policy $ 107,454
Casualty losses under multiperil policy 148,740
Losses from futile cultivation of Schwebach 17,500
Damages resulting from repossessed equipment 215,869
Damages from lost credit 120,000
Damages from lost Valley Gold contract 350,000
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Subtotal $ 959,563
Punitive Damages 1,500,000
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Total $2,459,563
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Anderson
Casualty losses under crop hail policy $ 64,410
Casualty losses under multiperil policy 40,707
Losses from futile cultivation of Schwebach 17,500
Damages from lost Valley Gold contract 150,000
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Subtotal $ 272,617
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Punitive Damages 500,000
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Total $ 772,617
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I. Coverage Under Crop Hail Policy
The crop hail policy provided coverage for "direct loss" of insured crops caused by hail. International argued that a "direct loss" only occurs when hail physically damages the tissue of the crop. Plaintiffs countered that soil compaction caused by hail was a compensable "direct loss" under the policy. The district court rejected International's argument and instructed the jury in pertinent part as follows:
The Court has determined as a matter of law that, for crop damage to be a covered loss under the Crop Hail Policy, the damages must be a direct consequence of hail. The Policy does not require that the crop damage have resulted from direct impact of hail upon the plants.
I R. doc. 397, instr. 13a. International argues that this instruction is based upon misinterpretation of the contract.
We review the district court's state law determinations de novo. Salve Regina College v. Russell, 111 S.Ct. 1217, 1225 (1991). Under New Mexico law, the words in an insurance contract must be given their ordinary meaning. Safeco Ins. Co. v. McKenna, 565 P.2d 1033, 1037 (N.M.1977). The test is not what the insurer intended its words to mean, but what a reasonable person in the position of the insured would understand those words to mean. Ivy Nelson Grain Co. v. Commercial Union Ins. Co., 453 P.2d 587, 588 (N.M.1969). Any ambiguity in the insurance contract is resolved against the insurer. Id. at 589. Construction of a contract, insurance or otherwise, poses a question of law for the court to decide; only when construction of a contract depends on extrinsic evidence is a factual issue created for the jury's resolution. See Valdez v. Cillessen & Son, Inc., 734 P.2d 1258, 1264 (N.M.1987).
All losses directly traceable to hail are comprehended under a hail insurance policy. 5 J. Appleman, Insurance Law and Practice, Sec. 3148 at 476 (1970); 10A G. Couch, Couch on Insurance, Sec. 42:364 at 480 (2d ed. 1982). A "direct loss" under a hail insurance policy "is one proximately caused by the hazard insured against." Southall v. Farm Bureau Mut. Ins. Co., 632 S.W.2d 420, 421 (Ark.1982). See, e.g., Harris v. Michigan Mutual Hail Ins. Co., 173 N.W. 533, 537 (Mich.1919) (); Stephanie v. Consumers Mut. Ins. Co., 74 N.W.2d 116, 118 (Minn.1955) (); Strother v. North Carolina Farm Bureau Mut. Ins. Co., 370 S.E.2d 82, 83-84 (N.C.App.1988) (), review denied, 373 S.E.2d 556 (N.C.1988); Reeves v. National Fire Ins. Co., 170 N.W. 575, 577 (S.D.1919) (). Here, plaintiffs contended that the Schwebach farm soil was compacted by the hail, resulting in a restricted air supply to the corn plants which inhibited root development. Such damages, if proven, would be a direct and proximate result of the hail storm; no intervening causes are alleged to have caused the soil compaction. Construing the term "direct loss" according to its ordinary meaning, we therefore conclude that a reasonable person in the position of the insured would understand the term to encompass soil compaction directly traceable to hail. See Safeco, 565 P.2d at 1037; Ivy Nelson Grain, 453 P.2d at 588. Thus the district court correctly construed the crop hail policy to encompass soil compaction. See Appleman, Sec. 3148 at 476; Couch, Sec. 42:364 at 480.
II. Sufficiency of Evidence
International argues that insufficient evidence exists to support the jury's determination and calculation of damages, and that the district court should have granted its motion for judgment notwithstanding the...
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