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Zimmerman AG & Cattle Co., LLC v. NAU Country Insurance Co.

United States District Court, D. Montana, Billings Division

December 30, 2019




         Plaintiffs Zimmerman Ag (“Zimmerman”) and Randy Nunn (“Nunn”) filed this action against Defendant NAU Country Insurance Company (“NAU”) arising out of NAU's denial of coverage for crop hail damage. (Doc. 7.) Plaintiffs assert claims for breach of contract, declaratory relief, and violation of Montana's Unfair Trade Practices Act. (Id. at 7-8.)

         Presently before the Court is Plaintiffs' Motion for Partial Summary Judgment. (Doc. 31.) NAU filed a response and Plaintiffs in turned filed a reply. (Docs. 35 & 39.) After considering the parties' submissions, Plaintiffs' motion is DENIED.


         Zimmerman and Nunn each purchased crop hail insurance policies from NAU on July 10, 2017, insuring wheat that Zimmerman farmed on parcels belonging to Zimmerman and Nunn. NAU issued individual “Schedules of Insurance” to Zimmerman and Nunn, reflecting such information as the insured's name and address, policy effective date, crops covered, and locations of the crops. Zimmerman's schedule itemized four separate wheat crops of varying acreages; each designated the number of acres, the insurance per acre ($400), and a corresponding insurance limit, consisting of the number of acres multiplied by the insurance per acre. From each amount a rate was assigned to determine the cost of the premium for that crop. Nunn's schedule only featured one itemized wheat crop, which set forth the number of acres, the insurance per acre ($166) and the corresponding insurance limit. The Schedules of Insurance also conspicuously directed the insured to “Access Your Hail Provisions online” and provided a URL address to do so.

         Crop hail insurance policies can generally be bound on two hours' notice, and before any premium is actually paid. In this case, for example, premiums were not due on the Plaintiffs' hail insurance until October 1, 2017. NAU did not send agents or employees to assess the value of the Plaintiffs' wheat crop at the time the policy was issued, nor was the value discussed with NAU at the time of application for coverage. Zimmerman and Nunn simply provided NAU's agent with the amount of insurance they desired. Zimmer explained that he arrived at the value of $400 per acre because “I just bought max coverage. I bought what I could for it.”

         After the policies were issued, Plaintiffs contend that their crops were damaged by hail, and they submitted a Notice of Loss to NAU on July 19, 2017. NAU subsequently notified Plaintiffs it was denying coverage on September 25, 2017. In addition to reasons for the denial, the notification letter also advised Zimmerman and Nunn of several adjustments to their policies, including adjustments to the actual acreage planted.[2] Paramount to the instant motion, however, is NAU's downward adjustment of the amount of insurance payable per acre. NAU explained in its letter that the amount payable was adjusted to reflect the actual cash value of the insured crop. This resulted in downward adjustment of the amount of insurance on Zimmerman's four parcels from $400 per acre to $175, $74, $209, and $175 per acre. The insurance per acre was also reduced on Nunn's parcel from $166 per acre to $37 per acre.[3] NAU stated that its determination of the actual cash value of the damaged crop was based on “our field appraisals, the local market price at the time of application, and visual field inspections.” (Doc. 7 at 13, 18.) This adjustment is the underlying issue in the present motion.


         A. Standard of Review

         A court will grant summary judgment if the movant can show “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the initial burden to submit evidence demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable fact-finder to return a verdict for the nonmoving party. Id. If the movant meets its initial responsibility, the burden shifts to the nonmoving party to establish a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         B. Montana Insurance Law

         The Court's jurisdiction over this action is based on diversity of citizenship. Therefore, the Court must apply the substantive law of Montana. In re Cty. of Orange, 784 F.3d 520, 523-24 (9th Cir. 2015). In Montana, the interpretation of an insurance contract is a question of law. Scentry Biologicals, Inc. v. Mid-continent Cas. Co., 319 P.3d 1260, 1264 (Mont. 2014). A court interpreting an insurance policy is to read the policy as a whole and, to the extent possible, reconcile the policy's various parts to give each meaning and effect. O'Connell v. Liberty Mut. Fire Ins. Co., 43 F.Supp.3d 1093, 1096 (D. Mont. 2014) (citing Newbury v. State Farm Fire & Cas. Ins. Co. of Bloomington, Ill., 184 P.3d 1021 (Mont. 2008)). The terms and words used in an insurance policy are to be given their usual meaning and construed using common sense. Hardy v. Progressive Specialty Ins. Co., 112, 67 P.3d 892, 896 (Mont. 2003). Any ambiguities in the insurance contract are construed against the insurer and in favor of extending coverage. Revelation Indus., Inc. v. St. Paul Fire & Marine Ins. Co., 206 P.3d 919, 929 (Mont. 2009). “An ambiguity exists when the policy, taken as a whole, is reasonably susceptible to two different interpretations.” Heggem v. Capitol Indem. Corp., 154 P.3d 1189, 1193 (Mont. 2007). But a court should not “seize upon certain and definite covenants expressed in plain English with violent hands and distort them so as to include a risk clearly excluded by the insurance contract.” Travelers Cas. & Sur. Co. v. Ribi Immunochem Research, Inc., 108 P.3d 469, 474 (Mont. 2005). Moreover, “a court may not create an ambiguity where none exists, nor may a court rewrite an insurance policy by ignoring clear and unambiguous language to accomplish a ‘good purpose.'” Heggem, 154 P.3d at 1193.


         At issue is whether the policies that Zimmerman and Nunn purchased from NAU are “valued” or “open policies.” A valued policy is “one in which the parties agree on the value of the subject matter of insurance.” Billmayer v. FarmersUnion Property and Cas. Co,404 P.2d 322, 324 (Mont. 1965) (citing 44 C.J.S. Insurance § 48). A valued policy must clearly indicate the insurer's intention to value the risk and loss, in whatever words expressed. Am. Ins. Co. v. Gentile ...

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