Ace Property and Cas. Ins. v. Federal Crop Ins.
| Decision Date | 16 March 2006 |
| Docket Number | No. 05-2321.,05-2321. |
| Citation | 440 F.3d 992 |
| Parties | ACE PROPERTY AND CASUALTY INSURANCE COMPANY, formerly known as Cigna Property and Casualty Insurance Company; Alliance Insurance Companies; American Agricultural Insurance Company; American Growers Insurance Company, In Rehabilitation; Country Mutual Insurance Company; Farm Bureau Mutual Insurance Company, of Iowa; Farmers Alliance Mutual Insurance Company; Great American Insurance Company; Hartford Fire Insurance Company; Nau Country Insurance Company; Producers Lloyds Insurance Company; Rural Community Insurance Company; Farmers Mutual Hail Insurance Company of Iowa, Plaintiffs-Appellants, v. FEDERAL CROP INSURANCE CORPORATION, A Corporation within the United States Department of Agriculture; Risk Management Agency, An Agency within the United States Department of Agriculture, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
P. John Owen, argued, Overland Park, KS (Michael E. Tucci, Washington, D.C., on the brief), for appellant.
Jane W. Vanneman, Senior Trial Counsel, DOJ, argued, Washington, D.C., for appellee.
Before MURPHY, HANSEN, and SMITH, Circuit Judges.
This breach of contract action was brought by a group of thirteen insurance companies1 who provide federal crop insurance, alleging that the Federal Crop Insurance Corporation (FCIC) breached two provisions of the 1998 Standard Reinsurance Agreement (SRA). The FCIC moved to dismiss for lack of jurisdiction, and the district court granted the motion on that ground, but ruled in the alternative that dismissal was also warranted because the insurers had neither exhausted their administrative remedies nor established any exception to the exhaustion requirement. The insurers appeal, and we affirm on the alternate ground.
The Federal Crop Insurance Act (FCIA), 7 U.S.C. §§ 1501-1524, established a federal crop insurance program in 1938 to be administered and regulated by the FCIC. 7 U.S.C. § 1503. Originally the FCIC directly provided crop insurance coverage to eligible farmers, but in 1980 Congress revised the FCIA to require the FCIC "to contract with private companies" for insurance "to the maximum extent possible." 7 U.S.C. § 1507(c). The FCIC was to "reimburse such companies. . .for [their] administrative and program expenses," id., and provide reinsurance "to the maximum extent practicable" to cover catastrophic loss. 7 U.S.C. §§ 1508(k)(1), 1508(b)(1). The FCIC now offers most federal crop insurance through private insurers which it then reinsures.
The federal reinsurance program is governed by a contract between the FCIC and participating insurance providers entitled Standard Reinsurance Agreement (SRA). 7 C.F.R. § 400.164. The SRA is renewed annually, and a company may terminate the agreement by not submitting a Plan of Operation for the next reinsurance year by the date specified in the SRA. The FCIC may only terminate the SRA by giving notice at least 180 days prior to the date of renewal of its intent to terminate.
At issue between the FCIC and these insurers are two provisions of the 1998 SRA which provide Catastrophic Risk Protection (CAT) coverage. The Administrative Fee provision in the 1998 SRA allowed insurers to retain a portion of the administrative fee charged by the FCIA, and the Loss Adjustment Expenses (LAE) provision permitted insurers to recoup 14% of an imputed premium for each CAT policy provided to a farmer. These provisions were affected by congressional action in 1998. In that year Congress enacted the Agricultural Research Extension and Education Reform Act (AREERA), Pub.L. No. 105-185, 112 Stat. 523 (1998), which eliminated the right of private insurance companies to retain any administrative fees and capped LAE reimbursement at 11%. Then in 2000 Congress enacted the Agricultural Risk Protection Act (ARPA), Pub.L. No. 106-224, 114 Stat. 358 (2000), further lowering the LAE cap to 8%.
The FCIC amended the SRA to implement AREERA and ARPA. Amendment No. 1 was effective at the start of the 1999 fiscal year, and it eliminated the right of private insurers to retain any administrative fees and capped LAE reimbursement at 11%. Amendment No.3 was effective at the start of fiscal year 2000, and it reduced the LAE cap to 8%. When the FCIC notified the insurers of each amendment, it informed them that their SRA would be terminated if they failed to execute either amendment within 10 days of receipt. Appellants all executed the amendments, but they reserved the right to sue the FCIC for damages.
Disputes regarding the SRA are governed by the Federal Crop Insurance Reform and Department of Agriculture Act of 1994, Pub.L. 103-354, 7 U.S.C. §§ 6901-7014 (1994) (Reorganization Act), which created a mandatory administrative appeals process for SRA matters. Under the Reorganization Act, a party who believes that its SRA rights have been violated may request a final agency determination, which can then be appealed to the Department of Agriculture Board of Contract Appeals (the Board). Although the Act grants exclusive jurisdiction to federal district courts, 7 U.S.C. § 1506(d), parties are to exhaust their administrative remedies before pursuing a claim in federal court. 7 U.S.C. § 6912(e).
In February 2003 the insurers brought an action against the United States in the Court of Federal Claims for breach of contract, duress, and unjust enrichment resulting from the implementation of AREERA and ARPA. The government moved to dismiss, arguing that under § 6912(e) exhaustion of administrative remedies was a prerequisite to subject matter jurisdiction, and alternatively that § 1506(d) required complaints to be filed in federal district court. The insurers responded that neither § 1506(d) nor the exhaustion requirements contained in the SRA were binding; they did not directly address § 6912(e) because their suit was against the United States rather than the FCIC. In March 2004 the Court of Federal Claims dismissed the action for lack of jurisdiction under § 6912(e) because the insurers had not exhausted their administrative remedies, and alternatively because § 1506(d) grants federal district courts exclusive jurisdiction over suits against the FCIC. Ace Property & Cas. Ins. Co. v. United States, 60 Fed.Cl. 175, 184-85 (Fed.Cl.2004). Its decision was affirmed by the Federal Circuit on June 1, 2005, on the ground that the case had been properly dismissed since § 1506(d) provides for exclusive jurisdiction in the federal district courts and that there was therefore "no reason to revisit [the court's] superfluous finding regarding exhaustion of administrative remedies." Ace Property & Cas. Ins. Co. v. United States, 138 Fed.Appx. 308, 309 (Fed.Cir.2005).
After the Federal Circuit's decision, the insurers sought a final administrative determination from the FCIC. The FCIC declined because their request had not been made within 45 days after notice of the disputed action. See 7 C.F.R. § 400.169(a). The insurers then appealed to the Board, which did not issue its decision until shortly before oral argument on the appeal in this court.
While their appeal was still pending before the Federal Circuit, the insurers filed this action against the FCIC in the Southern District of Iowa seeking damages for the breach of the 1998 SRA. The FCIC moved to dismiss, arguing that the district court lacked subject matter jurisdiction under § 6912(e) because appellants had failed to exhaust their administrative remedies. The insurers responded that the statute did not deprive the federal district court of jurisdiction and that exhaustion should not be required because it would be futile since neither the FCIC nor the Board has the authority to award the relief sought and the issues involved are legal questions better resolved by courts than agencies. The district court dismissed their complaint in February 2005, holding that it had no jurisdiction over the dispute because the insurers had not exhausted their administrative remedies as required by § 6912(e). Alternatively the court held that even if it had jurisdiction, their failure to exhaust was not excused under the traditional exceptions. The insurers now appeal, arguing that § 6912(e) is not a jurisdictional statute and that exhaustion is not required because in this case it would be futile and because the complaint raises only legal issues unsuitable for administrative resolution.
Subsequently on December 21, 2005, the Board rendered its decision on the insurers' administrative appeal. Ace Property & Cas. Ins. Co., AGBCA No.2004-173-F, 2005 WL 3485623 (December 21, 2005). The Board found that it had jurisdiction over the dispute and possessed the authority to issue whatever relief might be necessary to remedy any breach of contract, including the power to award money damages. It also gave examples of instances in the past where it had awarded such relief. Although it upheld the 45 day rule for bringing administrative claims, it decided that the rule should not have been applied retroactively. Thus it affirmed the agency determination that the insurers' claims for the 2001 and 2002 reinsurance years were time barred for failing to bring them within 45 days of notice of the disputed action, but it remanded the claims for the 1999 and 2000 reinsurance years for further administrative proceedings.
On their appeal from the dismissal of their action, the insurers complain that the district court erred in concluding that exhaustion of administrative remedies was a prerequisite to subject matter jurisdiction. The FCIC responds that the language of § 6912(e) is jurisdictional when considered within the context of the statutory scheme so appellants' failure to exhaust administrative remedies means there is no subject matter jurisdiction over this action.
The Supreme Court has indicated that a statute requiring plaintiffs to exhaust...
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