Kremer v. Rural Cmty. Ins. Co., S-09-900, S-09-901.
| Citation | 280 Neb. 591,788 N.W.2d 538 |
| Decision Date | 17 September 2010 |
| Docket Number | No. S-09-900, S-09-901.,S-09-900, S-09-901. |
| Parties | Robert KREMER, appellant, v. RURAL COMMUNITY INSURANCE COMPANY, a corporation, appellee. Gary Moody, appellant, v. Rural Community Insurance Company, a corporation, appellee. |
| Court | Supreme Court of Nebraska |
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Syllabus by the Court
1. Arbitration and Award. Arbitrability presents a question of law.
2. Judgments: Appeal and Error. When reviewing questions of law, an appellate court resolves the questions independently of the lower court's conclusions.
3. Final Orders: Appeal and Error. Under Neb.Rev.Stat. § 25-1902 (Reissue 2008), an appellate court may review three types of final orders: (1) an order affecting a substantial right in an action that, in effect, determines the action and prevents a judgment; (2) an order affecting a substantial right made during a special proceeding; and (3) an order affecting a substantial right made on summary application in an action after a judgment is rendered.
4. Final Orders: Arbitration and Award. Motions to compel arbitration invoke a specific statutory remedy that is neither an action nor a step in an action. As such, the statutory remedy is a special proceeding under Neb.Rev.Stat. § 25-1902(2) (Reissue 2008).
5. Actions: Statutes. Special proceedings include civil statutory remedies, not encompassed in chapter 25 of the Nebraska Revised Statutes, that are not actions.
6. Actions: Statutes. Regardless of a statutory remedy's location within Nebraska's statutes, actions and special proceedings are mutually exclusive.
7. Federal Acts: Arbitration and Award: States: Appeal and Error. The Federal Arbitration Act's preemptive effect does not extend to state procedural rules for appeals that do not defeat the act's objectives.
8. Arbitration and Award: Appeal and Error. The list of appealable arbitration orders under Neb.Rev.Stat. § 25-2620 (Reissue 2008) is not exclusive.
9. Judgments: Arbitration and Award. An order compelling arbitration and staying judicial proceedings is a final determination of arbitrability.
10. Final Orders: Appeal and Error. An order affects a substantial right if the order affects the subject matter of the litigation, such as diminishing a claim or defense that the appellant had before the court entered the order.
11. Final Orders: Arbitration and Award. An order compelling arbitration or staying judicial proceedings pending arbitration is a final order under the second category of Neb.Rev.Stat. § 25-1902 (Reissue 2008): It affects a substantial right in a special proceeding.
12. Insurance: Contracts: Arbitration and Award. With certain exceptions, under Neb.Rev.Stat. § 25-2602.01(f)(4) (Reissue 2008), agreements to arbitrate future controversies concerning an insurance policy are invalid.
13. Federal Acts: Contracts: Arbitration and Award: States. The Federal Arbitration Act, 9 U.S.C. § 2 (2006), preempts inconsistent state laws that apply solely to the enforceability of arbitration provisions in contracts evidencing a transaction involving commerce.
14. Federal Acts: Insurance: States. Under the federal McCarran-Ferguson Act, state law regulating the business of insurance preempts federal law that does not specifically govern insurance.
15. Federal Acts: Insurance: States. Under the McCarran-Ferguson Act, there are three elements for determining whether a state law controls over (reverse preempts) a federal statute: (1) The federal statute does not specifically relate to the business of insurance; (2) the state law was enacted for regulating the business of insurance; and (3) the federal statute operates to invalidate, impair, or supersede the state law.
16. Federal Acts: Insurance: States. The primary concern for disputes under the first clause of 15 U.S.C. § 1012(b) (2006) is whether the state law regulates the core components of the business of insurance: the contractual relationship between the insurer and insured; the type of policy that can be issued; and its reliability, interpretation, and enforcement.
17. Statutes: Insurance: Contracts: Arbitration and Award. A statute precluding the parties to an insurance contract from including an arbitration agreement for future controversies regulates the insurer-insured contractual relationship. Thus, it regulates the business of insurance.
18. Federal Acts: Insurance: Contracts: Arbitration and Award. The Federal Arbitration Act does not preempt Neb.Rev.Stat. § 25-2602.01(f)(4) (Reissue 2008).
19. Insurance: Agriculture: Corporations. The Federal Crop Insurance Corporation is a wholly owned government corporation within the U.S. Department of Agriculture, established to regulate the crop insurance industry.
20. Insurance: Agriculture: Corporations. The Federal Crop Insurance Corporation's regulations require applicants to apply on one of the corporation's prescribed policy forms, which contain arbitration provisions for all policies reinsured by the corporation.
21. Constitutional Law: Federal Acts: States. Under the Supremacy Clause of the U.S. Constitution, state law that conflicts with federal law is invalid.
22. Federal Acts: States: Intent. Federal law preempts state law when it conflicts with a federal statute or when the U.S. Congress, or an agency acting within the scope of its powers conferred by Congress, explicitly declares an intent to preempt state law. Preemption can also impliedly occur when Congress has occupied the entire field to the exclusion of state law claims.
23. Federal Acts: Insurance: Agriculture: Corporations: States. The Federal Crop Insurance Act and the Federal Crop Insurance Corporation's regulations express an intent to preempt state law that conflicts with the corporation's regulations.
24. Insurance: Agriculture: Corporations: Statutes: Contracts: Arbitration and Award. The Federal Crop Insurance Corporation's regulations requiring arbitration and the preclusion of arbitration agreements under Neb.Rev.Stat. § 25-2602.01(f)(4) (Reissue 2008) conflict because they cannot both be enforced.
25. Federal Acts: Insurance: Agriculture: Statutes: Contracts: Arbitration and Award. Under the McCarran-Ferguson Act, Neb.Rev.Stat. § 25-2602.01(f)(4) (Reissue 2008) does not reverse preempt federal law under the Federal Crop Insurance Act because the Federal Crop Insurance Act specifically relates to the business of insurance.
26. Federal Acts: Insurance: Agriculture: Corporations: Contracts: Agents. An agent's or loss adjuster's statement cannot bind the Federal Crop Insurance Corporation when the statement is inconsistent with governing federal law.
Kent E. Rauert, of Svehla, Thomas, Rauert & Grafton, P.C., York, for appellants.
Charles W. Campbell, of Angle, Murphy & Campbell, P.C., L.L.O., York, and Jeffrey S. Dilley, of Henke-Bufkin, P.A., for appellee.
Robert Kremer and Gary Moody, two insureds, appeal from the district court's decisions in their actions to enforce compromise and settlement agreements with their crop insurer, Rural Community Insurance Company (RCIC). In each case, the insured alleged that RCIC's adjuster agreed to pay specified amounts to the insureds. In both cases, RCIC moved to dismiss the action or, alternatively, to compel arbitration and stay the proceedings. In both cases, the court compelled arbitration and stayed judicial proceedings.
We are asked to decide two issues: Whether this court has jurisdiction to review an order that stays judicial proceedings and compels arbitration; and whether federal law preempts Neb.Rev.Stat. § 25-2602.01(f)(4) (Reissue 2008), which precludes arbitration agreements for future controversies relating to insurance policies. We conclude that the orders are final and that we have jurisdiction. We also conclude that federal regulations under the Federal Crop Insurance Act (FCIA) 1 preempt § 25-2602.01(f)(4). Thus, the district court did not err in compelling the insureds to arbitrate their disputes with RCIC.
The court found that RCIC issued the “Multiple Peril Crop Insurance” (MPCI) policies under the FCIA and that the Federal Crop Insurance Corporation is the reinsurer for all MPCI policies. The court determined that all MPCI policies contain a dispute resolution provision like the following paragraph from the policies at issue:
20. Mediation, Arbitration, Appeal, Reconsideration, and Administrative and Judicial Review.
(a) If you and we fail to agree on any determination made by us except those specified in section 20(d), the disagreement may be resolved through mediation.... If resolution cannot be reached through mediation, or you and we do not agree to mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA), except as provided in sections 20(c) and (f), and unless rules are established by [the Federal Crop Insurance Corporation] for this purpose.
(Emphasis omitted.)
The court rejected the insureds' argument that they were attempting to enforce their settlement agreement instead of seeking relief under the policy. The court declined to decide whether their alleged agreement with the adjuster was enforceable. It determined that their claim was directly attributable to their policy and therefore within the scope of their arbitration provision. In each case, it sustained RCIC's motion to compel arbitration and issued a stay of judicial proceedings pending arbitration.
The insureds assign that the court erred in (1) sustaining RCIC's motions to compel arbitration and stay the proceedings because their dispute does not fall within the scope of the arbitration provisions and (2) not deciding whether the parties had reached enforceable compromise and settlement agreements.
Arbitrability presents a question...
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