Great American Insurance Company v. Jonathan L. Russell

Jonathan Russell appeals the district court’s vacatur of the arbitration award

he received against his insurer, Great American Insurance Company, for wrongfully

denying his claim for damage to his 2013 corn crop. Because the arbitrators rendered

a sufficiently mutual, final, and definite award, vacatur was improper. We

accordingly vacate the district court’s judgment and remand for further proceedings.

I

Russell submitted claims to Great American for damage to his 2013 corn and

soybean crops in Atchison, Holt, and Nodaway counties in Missouri. Russell’s crop

insurance policy is governed by federal regulations; 7 C.F.R. §§ 457.8 and 457.113

(2013) form the policy’s essential terms. After Great American denied his claims,

Russell invoked the arbitration provision in § 457.8 ¶ 20. Although the regulations

impose certain limitations on the powers of arbitrators assessing federally-reinsured

crop insurance claims like Russell’s, arbitral awards are still governed by the Federal

Arbitration Act. See, e.g., J.O.C. Farms, L.L.C. v. Fireman’s Fund Ins. Co., 737 F.

App’x 652, 655 (4th Cir. 2018) (per curiam); Davis v. Producers Agric. Ins. Co., 762

F.3d 1276, 1283–85 (11th Cir. 2014).

Following an evidentiary hearing, the three-arbitrator panel awarded Russell

$1,433,008 for damage to his corn crop in the three counties but denied his soybean

claim. The panel found that Great American’s denial of Russell’s corn claim—based

on (1) Great American’s inability to substantiate an insurable cause of loss and

(2) Russell’s failure to provide adequate records to establish production “by

unit”—was erroneous. After reviewing the evidence, the panel concluded that

Russell’s accounts of insurable crop damage were independently verified but that

Great American had failed to conduct a timely on-site inspection until after harvest

was completed. The arbitrators credited testimony of witnesses that the crops in

question experienced significant damage from drought, rootworm, and heavy winds.

As to the second ground for denial, the panel noted that Great American had

“collaps[ed] all acres farmed by Russell into a single unit pursuant to policy

provisions.” The panel accepted the analysis of Russell’s damages expert, who

calculated the total damage to the corn crop as $1,433,008. Great American did not

challenge this calculation or offer a different calculation.

-2-

On May 25, 2016, Great American moved to vacate or modify the award. The

panel denied the motion as untimely because the award issued on February 23, 2016,

and the arbitration association’s rules require that any motion to correct computational

errors be filed within 20 days of the award. Great American then appealed the

award under 9 U.S.C. § 10(a)(4), which permits a district court to vacate an

arbitration award if “the arbitrators exceeded their powers, or so imperfectly executed

them that a mutual, final, and definite award upon the subject matter submitted was

not made.”

Great American argued that the arbitrators “imperfectly executed” their powers

because they failed to comply with the regulations governing the arbitration

proceeding. The applicable regulations required the panel to provide “a written

statement describing the issues in dispute, the factual findings, the determinations and

the amount and basis for any award and breakdown by claim for any award.”

7 C.F.R. § 457.8 ¶ 20(a)(2). “Failure of the arbitrator to provide such written

statement will result in the nullification of all determinations of the arbitrator.” Id.

Great American posited that the panel (1) did not break down the award by county,

which was required by the “breakdown by claim” language; (2) did not explain how

the award amount was calculated; and (3) made impermissible interpretations of

applicable regulations.

The district court agreed that the panel had failed to properly break down the

award “by claim,” nullifying the entire award. The court based its decision on

§ 457.113 ¶ 11(a), which states in part that the insurer “will determine [the insured’s]

loss on a unit basis,” and on § 457.8 ¶ 1, which defines an enterprise unit as “[a]ll

insurable acreage of the same insured crop . . . in the county in which you have a

share on the date coverage begins for the crop year.” Relying on this language, the

district court concluded that the arbitration panel was required to break down the

award into separate awards for each of the three counties to provide the required

“breakdown by claim.” It vacated the award and did not address Great American’s

-3-

argument that the panel made improper interpretations of the regulations. Because

the district court’s order deals entirely with questions of law, we review it de novo.

MidAmerican Energy Co. v. Int’l Bhd. of Elec. Workers Local 499, 345 F.3d 616,

619 (8th Cir. 2003).

II

The Federal Arbitration Act “is a congressional declaration of a liberal federal

policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983). Accordingly, a court’s review of an arbitration

award is “very limited.” Gas Aggregation Servs., Inc. v. Howard Avista Energy,

LLC, 319 F.3d 1060, 1064 (8th Cir. 2003). “[A]s long as the arbitrator is even

arguably construing or applying the contract and acting within the scope of his

authority, that a court is convinced he committed serious error does not suffice to

overturn his decision.” United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29,

38 (1987).

We are not convinced that the arbitration panel’s failure to break down the

award by county means that it “so imperfectly executed” its powers such that it

rendered no “mutual, final, and definite award.” 9 U.S.C. § 10(a)(4). The award

needed only to “describ[e] the issues in dispute, the factual findings, the determinations

and the amount and basis for any award and breakdown by claim for any

award.” 7 C.F.R. § 457.8 ¶ 20(a)(2). “Claim for indemnity” is defined as “[a] claim

made on [the insurer’s] form that contains the information necessary to pay the

indemnity.” Id. ¶ 1. Russell submitted a single claim covering both his corn and

soybean crops, and Great American assigned it a single claim number. Nothing in the

regulations required the panel to segregate this claim into multiple separate claims.

Great American correctly notes that applicable regulations require the insurer

to “determine [the] loss on a unit basis,” § 457.113 ¶ 11(a), and units cannot cover

-4-

more than one county, § 457.8 ¶ 1 (defining “enterprise unit”). But the arbitration

panel was obligated to break down its award only by claim, not by unit, and Great

American points to no regulation equating claims and units. Moreover, the arbitration

panel concluded that Great American had “collaps[ed] all acres farmed by Russell

into a single unit pursuant to policy provisions.” There appears to be no reason why

the arbitration panel could not accept Great American’s decision to treat Russell’s

claim as singular when rendering its decision. Indeed, it appears that Great American

raised no objection to this approach until its untimely motion to vacate or modify the

award.

Although few cases analyze the applicable crop insurance regulations in depth,

those that do support the panel’s approach. In one case, the arbitrator combined its

analysis for twenty-three farming units into three groups, and denied the claims for

each group on different grounds. See Farm Mgmt. Co. v. Rural Cmty. Ins. Agency,

No. 14-CV-5024-EFS, 2015 WL 1809789, at *2 (E.D. Wash. Apr. 21, 2015). The

reviewing court found no error with this approach, even though the arbitrator did not

break down its analysis unit-by-unit. See id. at *6.

We also find that the panel’s written explanation for the award amount was

adequate. Although the panel simply adopted the calculation of Russell’s expert,

Great American failed to contest this calculation or provide its own alternative at the

evidentiary hearing. Other courts have affirmed arbitral awards issued under the

same regulations even though the arbitrator did not provide any calculations

supporting its award amount. See, e.g., Great Am. Ins. Co. v. Doan, No.

5:11-CV-342-OC-34PRL, 2012 WL 13098715, at *13–14 (M.D. Fla. Sept. 25, 2012);

Garnett v. NAU Country Ins. Co., No. 5:09-CV-00144-R, 2009 WL 3644762, at *3

(W.D. Ky. Oct. 27, 2009). There is no requirement that the arbitrator’s decision be

particularly detailed; so long as it adequately explains the disposition of each claim

at issue, it should be upheld. See Green v. Ameritech Corp., 200 F.3d 967, 976 (6th

Cir. 2000).

Accordingly, the district court’s decision vacating the arbitration award is

vacated. The case is remanded for further consideration of Great American’s

alternative argument that the arbitration panel’s decision rests on improper

interpretations of the applicable regulations, which the district court did not address in the first instance.