Ledford Farms, Inc. v. Fireman's Fund Ins. Co., 013132CIVHIGHSMITH.

• Decision Date: 24 October 2001
• Docket Number: No. 013132CIVHIGHSMITH.,013132CIVHIGHSMITH.
• Citation: 184 F.Supp.2d 1242
• Parties: LEDFORD FARMS, INC., Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Florida

184 F.Supp.2d 1242

LEDFORD FARMS, INC., Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant.

No. 013132CIVHIGHSMITH.

United States District Court, S.D. Florida.

October 24, 2001.

Eric L. Stettin, Kuvin & Stettin, P.A., Fort Lauderdale, FL, for plaintiff.

Christienne Sherouse, Gaebe, Murphy, Mullen & Antonelli, P.A., Miami, FL, for defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS AND GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION AND STAY FURTHER COURT PROCEEDINGS

HIGHSMITH, District Judge.

THIS CAUSE is before the Court upon Defendant Fireman's Fund Insurance Company's motion to dismiss or, in the alternative, to compel arbitration and to stay court proceedings (DE 3). For the reasons that follow, the motion to dismiss is denied and the motion to compel arbitration and stay further court proceedings is granted.

I. Background

Defendant Fireman's Fund Insurance Company ("Fireman's Fund"), a private insurance company, issued a Multiple Peril Crop Insurance ("MPCI") policy to plaintiff Ledford Farms, Inc. ("Ledford"). MPCI is federally regulated and subsidized insurance made available to farmers pursuant to the Federal Crop Insurance Act of 1939.¹ MPCI policies indemnify farmers against certain perils inflicted upon their crops. The terms and conditions of a MPCI policy are mandated by the Federal Crop Insurance Corporation² ("FCIC") and are published in the Code of Federal Regulations. See, 7 C.F.R. pt. 457 (1998). MPCI policies are issued three different ways; the preferred method has the FCIC reinsuring private insurers that issue the policies to farmers.

The MPCI policy issued to Ledford indemnified it against losses to its fresh market bean crop grown in Dade County. Like all other MPCI policies, Ledford's policy contains the following provision which excludes coverage for acreage "[o]n which the insured crop is damaged and it is practical to replant the insured crop, but the insured crop is not replanted." See, 7 C.F.R. § 451.8. The policy defines "practical to replant" as follows:

Our determination, after loss or damage to the insured crop, based on all factors, including, but not limited to moisture availability, marketing window, condition of the field, and time to crop maturity, that replanting the insured corp will allow the crop to attain maturity prior to the calendar date for the end of the insurance period. It will not be considered practical to replant after the end of the late planting period, or the final planting date if no late planting period is applicable, unless replanting is generally occurring in the area. Unavailability of seed or plants will not be considered a valid reason for failure to replant.

Id. The policy also contains the following arbitration clause: "If [Ledford] and [Fireman's Fund] fail to agree on any factual determination, the disagreement will be resolved in accordance with the rules of the American Arbitration Association." Id. Accordingly, Ledford's policy mandates that any disagreement regarding factual determinations be submitted to arbitration. The policy, however, contemplates litigation and provides that Ledford "may not bring legal action against [Fireman's Fund] unless [Ledford][has] complied with all of the policy provisions." Id.

Ledford submitted a claim to Fireman's Fund alleging that rain destroyed its fresh market bean crop. Fireman's Fund denied coverage on the ground that Ledford failed to replant the crop although it was practical to do so. Thereafter, Ledford commenced this declaratory judgment action in state court. Fireman's Fund removed the action to federal court on the basis of diversity jurisdiction. Subsequently, Ledford amended its complaint to add state-law causes of action for breach of contract and breach of implied obligation of good faith. Fireman's Fund has moved to dismiss Ledford's amended complaint or, in the alternative, to compel the parties to arbitrate and stay all court proceedings until the arbitration process is completed. The parties have fully briefed the motion and it is ripe for adjudication.

II. Analysis

The application and scope of the arbitration clause contained in all MPCI policies has been the subject of only one reported case. In Nobles v. Rural Community Ins. Serv., 122 F.Supp.2d 1290 (M.D.Ala.2000), the insured's cotton crop was destroyed; however, the insurer denied the farmer's claim on the ground that an exclusionary provision contained in the MPCI policy barred coverage for a portion of the insurable acreage. That particular provision excludes coverage if the insurable acreage had not been planted and harvested within one of the three previous crop years.

As in the present case, the insured brought suit asserting various state-law claims and the insurer moved to compel arbitration and for a stay of all court proceedings. The Nobles court held that the insured:

must submit to binding arbitration the factual question of whether their 5,000 acres of land were covered by the policy. The arbitrator may award relief as permitted by federal statutes and regulations. After that dispute is resolved, and in keeping with the arbitrator's findings and awards that are entitled to preclusive effect, Plaintiff's may then elect to pursue their common law claims in this forum.

Id. at 1293. Consequently, the court retained jurisdiction over the state-law claims because the FCIC "never intended to extinguish state law causes of action that may arise from tortious conduct by private companies selling [FCIC]-approved reinsurance contracts." Id. at 1294 (citing Williams Farms of...