State of Kan., Ex Rel. Todd v. United States

791 F. Supp. 1491, 1992 U.S. Dist. LEXIS 8760, 1992 WL 119084
CourtDistrict Court, D. Kansas
DecidedMay 6, 1992
Docket91-4016-C
StatusPublished
Cited by6 cases

This text of 791 F. Supp. 1491 (State of Kan., Ex Rel. Todd v. United States) is published on Counsel Stack Legal Research, covering District Court, D. Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State of Kan., Ex Rel. Todd v. United States, 791 F. Supp. 1491, 1992 U.S. Dist. LEXIS 8760, 1992 WL 119084 (D. Kan. 1992).

Opinion

MEMORANDUM AND ORDER

CROW, District Judge.

The case comes before the court on cross motions. Defendants move for judgment on the pleadings or, in the alternative, for summary judgment (Dk. 13). Plaintiff moves for summary judgment (Dk. 17). Plaintiff filed this action seeking declaratory and injunctive relief, in particular, an order invalidating and enjoining the enforcement of 7 C.F.R. §§ 400.351 and 400.-352 (1991). The principal issue in this suit is the authority of the Federal Crop Insurance Corporation (“FCIC”) to adopt these regulations which expressly preempt all state or local laws, rules or regulations “that directly or indirectly affect or govern,” § 400.352, “all policies of insurance, insured or reinsured by the Corporation, contracts, agreements, or action authorized by the Act [Federal Crop Insurance Act] and entered into or issued by FCIC,” § 400.351.

Summary judgment is appropriate when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Even though there is some dispute over what facts are relevant, the parties do agree that the issues are appropriately presented for the court to decide at summary judgment.

Through the Federal Crop Insurance Act, 7 U.S.C. §§ 1501 et seq., Congress created the FCIC in 1938 for the purpose of “improving the economic stability of agriculture through a sound system of crop insurance.” 7 U.S.C. §§ 1502 and 1503. In 1945, the administration of the FCIC was transferred to the Secretary of Agriculture. In 1980, Congress amended the FCIA with the intention of making federally subsidized crop insurance available for all producers and commodities. The FCIC subsidizes the rates at which the insurance is offered and establishes the terms and conditions for the insurance. 7 U.S.C. § 1508.

The FCIC delivers crop insurance through three vehicles. Licensed private insurance agents and brokers sell policies issued by the FCIC and are compensated from the premiums paid. 7 U.S.C. § 1507(c)(3). The FCIC provides reinsurance to insurers which sell crop insurance policies issued in the insurer’s name. 7 U.S.C. § 1507(c); § 1508. County offices of the Agricultural Stabilization and Conservation Service (ASCS) also directly provide federal crop insurance. 7 U.S.C. § 1508(a).

*1493 On policies reinsured by the FCIC, its Board determines if the policies will adequately protect the producers’ interests and then approves the policies for sale at such rates, terms and conditions that it deems appropriate. 7 U.S.C. § 1508(b)(3). To insure fairness and equity between producers, the FCIC pays a portion of the producer’s premium for the insurance that is reinsured. 7 U.S.C. § 1508(h). The FCIC is also required to pay the operating and administrative costs of the insurers on which reinsurance is provided to the same extent that those costs would be covered by the FCIC on FCIC-issued policies. 7 U.S.C. § 1508(h). All policies issued by the private insurers include language explaining that the FCIC has reinsured the policy and that all terms, conditions, rights and responsibilities thereto are subject to the FCIA and the FCIC’s regulations.

After the notice and comment period, the FCIC published the final regulation on June 6, 1990, which, in part, prescribed the rules for federal preemption of inconsistent state laws or regulations. The regulation was made applicable to all policies, issued or reinsured by the FCIC, and all contracts or actions authorized by the Act and entered into or issued by the FCIC. The regulation expressly precluded state and local governments from taxing premiums and exercising approval authority over the insurance policies.

In the supplementary information published with the proposed regulations, the FCIC identified the policy reasons behind its actions. To insure equal treatment of all insurance recipients, the FCIC announced its intention of having one set of regulations with one common policy which would govern all insurance policies whether issued by the FCIC or by a private insurer under a FCIC reinsurance agreement. The FCIC believed its preemptive authority needed clarifying and defining because of problems encountered with state laws and regulations. The FCIC cited the example where state regulation required changes to federally approved policies thereby causing disparate levels of assistance to recipients based on whether their policy was issued by the FCIC or by a private insurer and based on where the recipients lived. Another example is that many states have been taxing premiums on reinsured policies. Even though the FCIC is exempt from state taxes, 7 U.S.C. § 1511, it must reimburse the private insurers for their expenses, 7 U.S.C. § 1508(h). Consequently, the incidence of these taxes has fallen to the FCIC which estimates that it paid over $15 million in the 1989 as reimbursements for state premium taxes. 1 The FCIC also noted that punitive or multiplication of damage awards under state law claims had been entered against private insurers because of their actions in compliance with the FCIA or the FCIC’s procedures and regulations. Since private insurers cannot accept the risk of these damage awards unless the FCIC promises repayment, this means the funds appropriated from Congress will be used for a purpose that bears no relation to the insured loss which has occurred. The FCIC hopes by limiting such regulatory authority to one level that the interests and purposes of the federal crop insurance program will be served through consistent and direct federal administration.

Because the plaintiff is challenging the constitutional validity of FCIC’s regulations, the court will take the issues from plaintiff’s brief. 2 Plaintiff has not filed a response to defendants’ motion. For this reason, the court will treat those issues raised in defendants’ motion that were not addressed or discussed in plaintiff’s motion as uncontested. D.Kan.

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Cite This Page — Counsel Stack

Bluebook (online)
791 F. Supp. 1491, 1992 U.S. Dist. LEXIS 8760, 1992 WL 119084, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-of-kan-ex-rel-todd-v-united-states-ksd-1992.