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Moss v. American Alternative Insurance Corp.

November 1, 2006


The opinion of the court was delivered by: J. Leon Holmes United States District Judge


This is an insurance coverage dispute. Jimmy Moss and Moss Farms, Inc., brought claims for breach of contract, fraudulent misrepresentation, and bad faith against American Alternative Insurance Corporation ("AAIC") after AAIC's managing general agent, Agriserve, Inc.,*fn1 denied claims for hail damage to a cotton crop. AAIC filed a motion for partial summary judgment as to the issues of fraudulent misrepresentation, bad faith, and punitive damages. For the following reasons, AAIC's motion is granted in part and denied in part.


A court should grant summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis of its motion and identifying the portions of the pleadings, depositions, answers interrogatories and admissions on file, together with the affidavits, if any, that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Group Health Plan, Inc. v. Philip Morris USA, Inc., 344 F.3d 753, 763 (8th Cir. 2003). When the moving party has carried its burden under Rule 56(c), the non-moving party must "come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1985) (quoting FED. R. CIV. P. 56(e)).

The non-moving party sustains this burden by showing that there are "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson, 477 U.S. at 250. When a non-moving party cannot make an adequate showing on a necessary element of the case on which that party bears the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323. In deciding a motion for summary judgment, the court must view the facts and inferences in the light most favorable to the party opposing summary judgment. Boerner v. Brown & Williamson Tobacco Corp., 260 F.3d 837, 841 (8th Cir. 2001) (citing Rabuska v. Crane Co., 122 F.3d 559, 562 (8th Cir. 1997)). If the evidence would allow a reasonable jury to return a verdict for the non-moving party, summary judgment should be denied. Derickson v. Fidelity Life Assoc., 77 F.3d 263, 264 (8th Cir. 1996) (citing Anderson, 477 U.S. at 248).


According to its answer, AAIC issued one policy of crop hail insurance to Moss and two policies of crop hail insurance to Moss Farms, Inc., covering their cotton crops grown in Desha County, Arkansas. The policies provided coverage for loss to the insured cotton crops caused by hail but did not cover loss due to rain, wind, or other weather conditions.

On or around September 24, 2005, a storm passed through Desha County. Moss contacted his insurance agent, Bruce Gasaway, on Monday, September 26, and reported that his crops were damaged by hail during the storm. On that day a notice of loss for each policy was submitted to Agriserve, notifying it of a claim on the Moss policies.

On October 4, 2005, Mickey Mahon, an adjuster, inspected Moss's fields. Moss and Mahon have given different accounts of Mahon's inspection that day. Mahon testified in his deposition that he inspected several plants but did not see any damage due to hail. Mahon admitted that "there was a lot of cotton on the ground there," but stated that he did not measure the percentage of loss because he did not see that there was a payable loss due to hail. When Mahon informed Moss of his opinion, Moss became angry and disagreed with him. Mahon testified that he informed Moss that Moss could have another adjuster look at it and instructed Moss to "save some check-strips" in the fields for future inspection.

Moss testified that Mahon walked about 20 or 25 steps into a field and, as he was walking, stated, "Well, you're not going to want to hear what I've got to say." When Moss asked, "Well, what is that," Mahon replied, "I see no hail damage." Moss testified that Mahon made these statements without examining any of the plants. When Moss disagreed with him, Mahon told Moss that Moss's next option was arbitration and explained the arbitration process. Moss testified that Mahon's explanation of the arbitration process was that the company would send another adjuster to look at the crop and that Moss would have to get an appraiser to look at it. If the adjuster and the appraiser did not agree, then the parties would get an umpire whose decision would be final.

After Mahon's visit to Moss's farm, Moss went to Gasaway's office and asked what to do next. Moss testified that Gasaway prepared three letters for Moss to sign, one for each insurance policy, stating Moss's contention that the crop damage was caused by hail and requesting "a reappraisal of the loss." Moss signed them, and Gasaway faxed them to Agriserve on October 6, 2005.

The following day, Agriserve Executive Vice President, Forrest Armstrong, sent two letters to Moss. One of the letters referenced Moss's claims on his three insurance policies and stated:

The denial of loss on these claims determined by us was unacceptable by you. Therefore, it is necessary that this claim be arbitrated and that the arbitration process be explained.

Under the General Provisions, Part 6 -- APPRAISAL, 2002-NCIS 3 policy it states:

"If you and we fail to agree on the percentage the loss caused by one of the insured perils, the following procedure will be used:

a. One of us will demand in writing that the percentage of loss be set by appraisal.

b. Each of us will select a competent appraiser and notify the other of the appraiser's identity within 10 days after the receipt of the written demand.

c. The two appraisers will then select a competent, impartial umpire. If within 10 days of the selection of the appraisers, the two appraisers are unable to agree upon an umpire, you or we can ask a judge of a court of record, in the state which the insured crop is grown, to select an umpire. If the court fails to act on the request within 30 days, you or we can ask the American Arbitration Association to select an umpire.

d. The appraisers will then set the percentage of loss. The appraisers' written agreement will be final and binding upon you and us.

e. If the appraisers fail to agree within 10 days, they will submit their difference to the umpire. Written agreement signed by any two of these three will set the percentage of loss. This written report of an agreement will be final and binding upon you and us.

f. In the event you or we fail to select an appraiser within the time allowed herein, the appraiser selected by the other party will set the percentage of loss and his written report will be final and binding upon you and us.

g. The determination of the percentage of loss rendered by these procedures may be entered in any court of competent ...

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