Howard v. Federal Crop Ins. Corp.

Brief Fact Summary.

Plaintiff-Appellants sued the Federal Crop Insurance Corporation (FCIC) to recover for losses to their 1973 tobacco crop due to alleged rain damage, and recovery was denied because they plowed the fields prior to inspection by the FCIC adjustor.  

Synopsis of Rule of Law.

The Restatement of the Law of Contracts, §261, states: “Where it is doubtful whether words create a promise or an express condition, they are interpreted as creating a promise; but the same words may sometimes mean that a party promises a performance and that the other party’s promise is conditional on that promise.” 

The Restatement gives the following example involving a promise:

“2. A, an insurance company, issues to B a policy of insurance containing promises by A that are in terms conditional on the happening of certain events. The policy contains this clause: ‘provided, in case differences shall arise touching any loss, the matter shall be submitted to impartial arbitrators, whose award shall be binding on the parties.’ This is a promise to arbitrate and does not make an award a condition precedent of the insurer’s duty to pay.” 

Facts.

Under the policy, 5(b) stated: “It shall be a condition precedent to the payment of any loss that the insured establish the production of the insured crop on a unit and that such loss has been directly caused by one or more of the hazards insured against…” 

5(f) provided that the tobacco stalks were not to be destroyed until the Corporation made an inspection.  However, the Plaintiff-Appellants plowed the fields before the adjustor came in order to prepare for a rye crop and preserve the soil 

The district court granted summary judgment to the Defendants, holding that 5(f) was a condition precedent to recovery

Issue.

            Was compliance with 5(f) a condition precedent to recovery?

Held.

No.  The district court erroneously held, on the motion for summary judgment, that subparagraph 5(f) established a condition precedent to the Plaintiffs’ recovery which forfeited the coverage.

·         5(f) of the policy fits with illustration 2 of the Restatement, and does not state any conditions under which the insurance shall “not be payable,” or use any words of like import.

·         Plowing or disking under the stalks did not of itself operate to forfeit coverage under the policy. 

Dissent.

None.

Concurrence.

None.

Discussion.

The phrase “condition precedent” appeared in 5(b), not in 5(f), so recovery for the crop was not dependent on the insured’s compliance with their promise not to plow the crop before inspection.  Plowing was necessary in order to preserve the soil