COOK v. FARMERS MUTUAL HAIL INSURANCE COMPANY OF IOWA

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

ROY COOK, )

)

Plaintiff, )

)

v. ) 1:23cv817

)

FARMERS MUTUAL HAIL INSURANCE )

COMPANY OF IOWA, )

)

Defendant. )

MEMORANDUM OPINION AND ORDER

This case comes before the Court on “Defendant’s Motion to

Dismiss” (Docket Entry 6) (the “Motion”).1 For the reasons that

follow, the Court will grant the Motion as specified herein.2

BACKGROUND

Alleging that Farmers Mutual Hail Insurance Company of Iowa

(the “Defendant” or “FMH”) engaged in unfair and deceptive trade

practices and negligent misrepresentation regarding his 2021 crop

insurance, Roy Cook (the “Plaintiff”) sued Defendant, seeking

“actual damages . . ., plus treble damages . . . and attorneys’

fees” (Docket Entry 5 (the “Complaint”), ¶ 29). (See generally

1 For legibility reasons, this Opinion omits all-cap, bold,

and underlined font in all quotations from the parties’ materials.

2 Pursuant to the parties’ consent, Chief United States

District Judge Catherine C. Eagles referred this case to the

undersigned United States Magistrate Judge for all proceedings.

(See Docket Entry 15 at 1.) [Docket Entry page citations utilize

the CM/ECF footer’s pagination.]

Docket Entry 5.)3 As exhibits to the Complaint, Plaintiff attached

a “Statement of Account” (Docket Entry 5-1 at 1) and associated

“Summary of Coverage” (Docket Entry 5-2 at 1) for his insurance

policy. According to the Complaint:

“Plaintiff operates a farm in Guilford County, North Carolina

where they grow inter alia tobacco crops.” (Docket Entry 5, ¶ 7.)

“As is their normal course of business, during crop year 2021,

Plaintiff engaged with Town and Country Insurance Company

(hereinafter ‘T&C’) as an agent/underwriter of FMH to procure crop

insurance for their 2021 Tobacco crop.” (Id., ¶ 8.) “In or about

March 2021, Plaintiff contracted with non-party Old Belt Tobacco

Sales, LLC [(‘OBTS’)] for the sale of their 2021 Tobacco crops

(‘the Sales Contract’).” (Id., ¶ 9.) “In or about March 2021,

Plaintiff contracted with FMH for crop insurance to cover the 2021

Tobacco crop (‘the Policy’).” (Id., ¶ 10.) “T&C was provided with

copies of the Sale Contract as part of procuring the Policy and

forwarded the Sales Contract to . . . FMH, which was accepted by

. . . FMH.” (Id., ¶ 11.) “On or about May 20, 2021, . . . FMH’s

employee . . . visited High Rock Farms for a spot check to ensure

all tobacco farms were compliant with farming practices.” (Id.,

¶ 12.) “In or about June 2021, Plaintiff provided to Defendant

crop reports for the 2021 crop year.” (Id., ¶ 13.) “Upon

3 Plaintiff initiated suit in North Carolina state court, but

Defendant removed the action to this Court on the basis of

diversity jurisdiction. (See, e.g., Docket Entry 1 at 1-2.)

2

Defendant’s acceptance of the Sales Contract and the crop reports,

Plaintiff began planting flue-cured tobacco in June, 2021.” (Id.,

¶ 14.)

“Due to natural conditions, the 2021 crop year resulted in a

loss for Plaintiff to which the Policy was applicable.” (Id.,

¶ 15.) “On or about August 5, 2021, Plaintiff made a claim for

loss to Defendant . . . .” (Id., ¶ 16.) “On or about August 24,

2021, Plaintiff received a Statement of Account that states

[Plaintiff] owed FMH the premium for $1.80 coverage in the amount

of $56,191.00.” (Id., ¶ 17 (citing “exhibit A”).) “On or about

August 25, 2021, Plaintiff received a ‘Summary of Coverage’

indicating that their respective tobacco crops were insured at the

rate of $1.80 per pound under the Policy.” (Id., ¶ 18 (citing

“exhibit B”).) “On or about December 19, 2021, Plaintiff was

advised that payment under the Policy had been reduced to $0.90 per

pound.” (Id., ¶ 19.) “On or about January 13, 2022, Plaintiff

received a revised ‘Summary of Coverage’ showing the coverage level

had been reduced to $0.90 per pound.” (Id., ¶ 20.) “On or about

January 17, 2022, Plaintiff received a revised premium letter which

included interest and late fees based on a premium coverage level

of $1.80 per pound, not the $0.90 per pound.” (Id., ¶ 21.) “As a

result of the change in coverage level, Plaintiff was subjected to

substantial hardship.” (Id., ¶ 22.) “Plaintiff detrimentally

relied upon [FMH’s] conduct in planting and cultivating the 2021

3

tobacco crop.” (Id., ¶ 23.) “As a result of [FMH’s] conduct,

Plaintiff has suffered damages . . . .” (Id., ¶ 24.)

“Defendant’s conduct amounts to an unfair and deceptive trade

practice in violation of Chapter 75 of the North Carolina General

Statutes.” (Id., ¶ 26.) “Defendant’s conduct is in and affecting

commerce.” (Id., ¶ 27.) “As a direct, actual and proximate result

of Defendant’s conduct, Plaintiff has suffered damages in an amount

to be determined at trial but in excess of $25,000.00.” (Id.,

¶ 28.) “Plaintiff is entitled to recover actual damages from

Defendant . . . , plus treble damages . . . and attorneys’ fees and

costs” under certain North Carolina statutes. (Id., ¶ 29.)

Additionally, “[a]s set forth above, Defendant had a duty to

exercise reasonable care or competence in obtaining or

communicating information to Plaintiff concerning the Policy.”

(Id., ¶ 31.) “In the regular course of business, Defendant

supplied information to Plaintiff and/or Plaintiff’s agent and

intended for Plaintiff to rely on that information for its [sic]

farming operations during the 2021 crop year, including the

guidance or benefit of obtaining crop insurance.” (Id., ¶ 32.)

“Defendant made material misrepresentations or failed to exercise

reasonable care when they [sic] made material misrepresentations.”

(Id., ¶ 33.) “Defendant failed to exercise reasonable care or

competence in obtaining or communicating the acceptance of the OBTS

Agreement [sic].” (Id., ¶ 34.) “Plaintiff actually relied on

4

[FMH’s] conduct and Plaintiff’s reliance was reasonable and

justifiable.” (Id., ¶ 35.) “Plaintiff did not know that the OBTS

contract [sic] would be rejected and he would only be insured for

the non-contract price.” (Id., ¶ 36.) “As a sole and proximate

cause [sic] of Defendant[’s] negligent misrepresentations, . . .

Plaintiff has suffered damages . . . .” (Id., ¶ 37.)

Defendant moved to dismiss the “Complaint for failure to state

a claim upon which relief can be granted.” (Docket Entry 6 at 1.)4

In particular, Defendant maintains that

the Complaint seeks both compensatory damages based on

alleged misrepresentations by FMH and damages under North

Carolina statute. However, . . [federal] regulations

impose strict limitations on [Plaintiff’s] entitlement to

these damages. Because [Plaintiff] has not complied with

the requirements of section 400.352(b)(4) and [Paragraph]

20(i) of the Basic Provisions, [the C]omplaint must be

dismissed.

(Docket Entry 7 at 14.) Plaintiff opposes the Motion (see Docket

Entry 9 at 1-18), urging the Court to deny it on the grounds that:

(1) [Plaintiff] complied with the [relevant federal]

regulations by submitting his breach of contract claim

against FMH to arbitration; (2) [Plaintiff’s] state laws

claims are not preempted because they do not conflict

with the policy or [federal] regulations; and

4 Defendant erroneously moved to dismiss the Complaint

“pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil

Procedure.” (Id. at 1; see id. (bearing caption “N.C.G.S. § 1A-1,

Rule 12(b)(6)”); see also Docket Entry 7 at 1-2 (relying entirely

on North Carolina court decisions for applicable “Standard of

Review” for “‘motion[s] to dismiss under Rule 12(b)(6)’”).) The

Federal Rules of Civil Procedure, not the North Carolina Rules of

Civil Procedure, govern proceedings in this Court.

5

(3) [federal] regulations do not preempt state law tort

claims for extra-contractual damages.

(Id. at 18.)

DISCUSSION

I. Relevant Standards

A. Motions to Dismiss

A motion to dismiss pursuant to Rule 12(b) (6) of the Federal

Rules of Civil Procedure (the “Rules”) “tests the sufficiency of a

complaint,” but “does not resolve contests surrounding the facts,

the merits of a claim, or the applicability of defenses.”

Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.

1992). Accordingly, in reviewing a Rule 12(b) (6) motion, the Court

must “accept the facts alleged in the complaint as true and

construe them in the light most favorable to the plaintiff.”

Coleman v. Maryland Ct. of App., 626 F.3d 187, 189 (4th Cir. 2010),

aff’d sub nom., Coleman v. Court of App. of Md., 566 U.S. 30

(2012). The Court must also “draw all reasonable inferences in

favor of the plaintiff.” E.1T. du Pont de Nemours & Co. v. Kolon

Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (internal quotation

marks omitted).

To avoid Rule 12(b) (6) dismissal, a complaint must contain

sufficient factual allegations “to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Igbal, 556 U.S. 662, 678

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007)). To qualify as plausible, a claim needs sufficient factual

content to support a reasonable inference of the defendant’s

liability for the alleged misconduct. See id. Thus, “where the

well-pleaded facts do not permit the court to infer more than the

mere possibility of misconduct, the complaint” cannot “survive a

Rule 12(b)(6) motion.” Francis v. Giacomelli, 588 F.3d 186, 193

(4th Cir. 2009). “At bottom, determining whether a complaint

states . . . a plausible claim for relief . . . will ‘be a

context-specific task that requires the reviewing court to draw on

its judicial experience and common sense.’” Id. (quoting Iqbal,

556 U.S. at 679).

Moreover, in ruling on a Rule 12(b)(6) motion, “a court

evaluates the complaint in its entirety, as well as documents

attached or incorporated into the complaint.” E.I. du Pont, 637

F.3d at 448. The Court may also consider documents “attached to

the motion to dismiss, so long as they are integral to the

complaint and authentic.” Philips v. Pitt Cnty. Mem’l Hosp., 572

F.3d 176, 180 (4th Cir. 2009). Generally, a “court cannot go

beyond these documents” without “convert[ing] the motion into one

for summary judgment,” an action from which courts should refrain

“where the parties have not had an opportunity for reasonable

discovery.” E.I. du Pont, 637 F.3d at 448. Nevertheless, in

reviewing Rule 12(b)(6) motions, courts “may properly take judicial

notice of matters of public record.” Philips, 572 F.3d at 180.

7

B. Federal Crop Insurance

This matter involves a “federal crop insurance polic[y], which

[Defendant] sold pursuant to the Federal Crop Insurance Act ([the

‘Act’ or ]‘FCIA’), 7 U.S.C. §§ 1501–1524, 1531, and accompanying

regulations issued by the [Federal Crop Insurance Corporation (the

‘FCIC’)],” Williamson Farm v. Diversified Crop Ins. Servs., 917

F.3d 247, 249 (4th Cir. 2019). (See Docket Entry 5, ¶¶ 8-11; see

also Docket Entry 7 at 2 (asserting that “FMH is an Approved

Insurance Provider ([at times, an ]‘AIP’), which ‘is a private

insurance provider that has been approved by the FCIC to provide

insurance coverage to producers participating in the Federal crop

insurance program within the meaning of the Act,’” and that, “[f]or

the 2021 crop year, [Plaintiff] was an FMH policyholder insuring

flue-cured tobacco . . . under a federally reinsured [multi-peril

crop insurance (an ‘MPCI’)] policy” (brackets omitted)); Docket

Entry 9 at 1-2 (asserting that, “[i]n March of 2021, FMH (an

approved insurance provider for the federal crop insurance program)

issued tobacco crop insurance to [Plaintiff], for which he was to

pay a premium for coverage at the rate of $1.80 per pound based on

his contract with a third-party to purchase his tobacco,” that FMH

subsequently reduced Plaintiff’s coverage because it “‘determined’

that [his] sales contract did not meet the conditions for issuing

coverage at the rate of $1.80 per pound,” and that Plaintiff

“followed the federal crop insurance program’s procedure and

8

submitted a breach of contract claim regarding this determination

to arbitration”).) “[Such] policies are not typical private

insurance agreements, so a brief discussion of the federal

government’s role in crop insurance agreements is necessary.”

Williamson Farm, 917 F.3d at 249. In that regard:

The federal crop insurance program provides farmers

and agricultural entities in the United States with crop

insurance protection, a venture that was considered too

risky for traditional private insurers when the FCIA was

enacted in 1938. As the Supreme Court explained, “the

Government engaged in crop insurance as a pioneer.

Private insurance companies apparently deemed all-risk

crop insurance too great a commercial hazard.” Fed. Crop

Ins. Corp. v. Merrill, 332 U.S. 380, 383 (1947).

To provide this protection to farmers, the FCIA

established the FCIC, a government corporation within the

United States Department of Agriculture’s Risk Management

Agency [(the “RMA”)] that administers the federal crop

insurance program. 7 U.S.C. § 1503. The FCIC does not

directly issue crop insurance policies to farmers.

Instead, it relies on “approved insurance providers” —

private insurers such as [Defendant] — to issue federal

crop insurance policies to farmers like [Plaintiff]. 7

U.S.C. § 1502(b)(2). Then, when certain eligibility

conditions are met, the FCIC reinsures the approved

insurance providers’ losses and reimburses their

administrative and operating costs.

In order to qualify for reinsurance through the

FCIC, approved insurance providers must comply with the

FCIA and the accompanying regulations issued by the FCIC

governing the sale, issuance, and servicing of federal

crop insurance policies. 7 C.F.R. § 400.168; see also

Felder v. Fed. Crop Ins. Corp., 146 F.2d 638, 640 (4th

Cir. 1944); Davis v. Producers Agric. Ins. Co., 762 F.3d

1276, 1284 (11th Cir. 2014). Accordingly, “even though

the crop insurance policy is between the farmer and an

approved insurance provider,” the FCIA “establishes the

terms and conditions of insurance.” Davis, 762 F.3d at

1284 (citation omitted).

9

Indeed, all approved insurance providers issue a

uniform policy drafted by the FCIC known as the “Common

Crop Insurance Policy,” the text for which is provided at

7 C.F.R. § 457.8. . . . Additionally, the FCIC sets

premium rates for each county and crop insured,

subsidizes and receives premiums, and pays claims. In

short, the FCIC is extensively involved in and exerts

control over all aspects of the federal crop insurance

program.

Williamson Farm, 917 F.3d at 249-50 (footnote and parallel

citations omitted).

Thus, “in cases involving federally reinsured crop insurance,

the insurance contract forms only one part of the agreement between

the parties. The statutes and regulations associated with the

federal crop insurance scheme also [govern] . . . .” Id. at 255

(brackets and internal quotation marks omitted); see also General

Administrative Regulations, Catastrophic Risk Protection

Endorsement; Group Risk Plan of Insurance Regulations for the 2004

and Succeeding Crop Years; and the Common Crop Insurance

Regulations, Basic Provisions, 69 FR 48652-01, 48726 (Aug. 10,

2004) (the “FCIC Response to Comments”) (explaining that “the Act,

regulations and the policy have binding and preemptive effect”).

In other words,

[b]ecause insurance policies issued by private

insurers must comply with the FCIA and accompanying

regulations to qualify for reinsurance through the FCIC,

“the FCIA generally establishes the terms and conditions

of insurance even though the crop insurance policy is

between the farmer and an approved insurance provider.”

The terms and conditions of the MPCI policies are

promulgated by the FCIC as regulations. . . . [T]he

Common Crop Insurance Policy ([at times, the “Basic

Provisions” or ]“CCIP”), codified at 7 C.F.R. § 457.8,

10

applies to policies insuring most crops. As the terms

and conditions of the CCIP are promulgated in the Federal

Register, they are “binding on all who s[eek] to come

within the [FCIA], regardless of actual knowledge of what

is in the Regulations or of the hardship resulting from

ignorant innocence.”

J.O.C. Farms, L.L.C. v. Fireman’s Fund Ins. Co., 737 F. App’x 652,

654 (4th Cir. 2018) (certain brackets in original) (citations

omitted) (first quoting Davis, 762 F.3d at 1284; then quoting

Merrill, 332 U.S. at 385).

“The FCIC provides, as necessary, interpretations of the

statute and regulations to interested parties. The FCIC’s

interpretations, issued in the form of Final Agency Determinations

(‘FADs’), are ‘binding on all participants in the Federal crop

insurance program.’” Davis, 762 F.3d at 1285 (quoting 7 C.F.R.

§ 400.765(c)). As the FCIC has explained, “[it] is the only one

who can render interpretations” of applicable “policies [and]

procedures” because

[f]ederal crop insurance is a national program with all

producers receiving the same policy for the same crop and

insurance providers are required to use procedures issued

by FCIC in the service and adjustment of such policies to

ensure that all producers are treated alike and none

receive special benefits or treatment because of the crop

they produce, the insurance provider that insures them,

or who hears their disputes.

FCIC Response to Comments, 69 FR at 48715.

Facilitating this national uniformity, “Congress has

authorized the preemption of state laws or rules that conflict with

regulations promulgated and contracts authorized by the FCIC.”

11

J.O.C. Farms, 737 F. App’x at 654 (citing 7 U.S.C. § 1506(l) &

(o)). “Pursuant to this authority, the FCIC has promulgated

regulations, applicable to all insurance policies that it

reinsures, preempting ‘[s]tate laws and regulations not consistent

with the purpose, intent, or authority of the [FCIA].’” Id.

(brackets in original) (first quoting 7 C.F.R. § 400.351; then

citing 7 C.F.R. § 400.352).

Additionally, “[t]he FCIA’s implementing regulations and the

CCIP provisions contain several limitations on an insured’s pursuit

of litigation against the insurer,” id., including that the

insurance provider and insured first submit any unresolved dispute

regarding the provider’s policy determinations to arbitration, see

id. at 654-55. “The CCIP and regulations also create a condition

precedent to an insured’s pursuit of damages, expenses, and fees

from the insurer ([at times, ]the ‘FCIC []determination

requirement’).” Id. at 655. In this regard, the CCIP first

specifies that, “[e]xcept as provided in [Paragraph] 20(i), no

award or settlement in mediation, arbitration, appeal,

administrative review or reconsideration process or judicial review

can exceed the amount of liability established or which should have

been established under the policy, except for interest awarded in

accordance with [Paragraph] 26.” 7 C.F.R. § 457.8, ¶ 20(h). In

turn, Paragraph 20(i) specifies:

In a judicial review only, [the insured] may recover

attorney’s fees or other expenses, or any punitive,

12

compensatory or any other damages from [the insurer] only

if [the insured] obtain[s] a determination from FCIC that

[the insurer], [its] agent or loss adjuster failed to

comply with the terms of this policy or procedures issued

by FCIC and such failure resulted in [the insured]

receiving a payment in an amount that is less than the

amount to which [the insured] wl[as] entitled.

7 C.F.R. § 457.8, 20(1); accord J.0.C. Farms, 737 F. App’x at

655.°

Reinforcing this approach, the regulations specify that

States:

[cannot llevy fines, judgments, punitive damages,

compensatory damages, or judgments for attorney fees or

other costs against companies, employees of companies

including agents and loss adjustors, or Federal employees

arising out of actions or inactions on the part of such

individuals and entities authorized or required under the

[FCIA], the regulations, any contract or agreement

authorized by the [FCIA] or by regulations, or procedures

issued by the [FCIC] (Nothing herein precludes such

damages being imposed against the company if a

determination is obtained from FCIC that the company, its

employee, agent or loss adjuster failed to comply with

the terms of the policy or procedures issued by FCIC and

such failure resulted in the insured receiving a payment

in an amount that is less than the amount to which the

insured was entitled) ....

7 C.EF.R. § 400.352 (b) (4) (emphasis added).

II. Analysis

A. Preliminary Matters

At first glance, some ambiguity exists regarding the precise

contours of Defendant’s dismissal argument. (See, e.g., Docket

5 By contrast, “[u]nder no circumstances can [an insured]

recover any attorney’s fees or other expenses, or any punitive,

compensatory or any other damages from FCIC.” 7 C.F.R. § 457.8,

20(e) (3).

13

Entry 7 at 8 (arguing that “the Complaint must be dismissed[]

because [Plaintiff’s] causes of action are preempted by federal

law, and he has not complied with the regulatory requirements for

pursuing state law claims and recovering extra-contractual

damages”).) Defendant does not, however, maintain that federal law

preempts and precludes Plaintiff’s claims in all circumstances.

(See, e.g., id. at 13 (conceding that the FCIA “does not completely

preempt all state law claims against an insurance company”).)6

Instead, Defendant asserts that federal regulations “preempt[] the

North Carolina statutes on which [Plaintiff] has predicated his

claim for compensatory and statutory damages and costs unless

Plaintiff obtains a determination from FCIC that FMH failed to

comply with FCIC policy or procedures. To date, [Plaintiff] has

neither requested nor received such a determination from FCIC.”

(Id. at 12 (emphasis in original).)7

6 In any event, such an argument would lack merit. See,

e.g., FAD-282, https://www.rma.usda.gov/policy-procedure/final-

agency-determinations/final-agency-determination-fad-282 (Nov. 28,

2018) (explaining that “[c]laims arising from misrepresentations,

negligence, etc. would be considered equitable” and that, in

certain circumstances, federal regulations “authorize courts to

consider equitable claims and award attorney’s fees, expenses, or

compensatory, punitive, or other extra-contractual damages”).

7 Defendant’s memorandum in support of the Motion also

contains a section purporting to provide a “Statement of Undisputed

Facts” (id. at 4) derived from the parties’ previous arbitration,

which Defendant maintains “are binding on [Plaintiff]” (id. at 5).

(See id. at 4-8.) Although Defendant’s memorandum asserts that,

“[h]aving lost the arbitration, [Plaintiff] now seeks to nullify

the Award of Arbitrator by pursuing litigation that involves the

same facts and legal principles that were adjudicated in the

14

The latter assertion — that, “[t]o date, [Plaintiff] has

neither requested nor received such a determination from FCIC”

(id.) — appears neither in the Complaint nor in anything the

Complaint references or relies upon. (See generally Docket Entries

5 to 5-2.) As such, the Court ordinarily could not consider this

assertion in resolving the Motion. See, e.g., E.I. du Pont, 637

F.3d at 449 (“[S]tatements by counsel that raise new facts

constitute matters beyond the pleadings and cannot be considered on

a Rule 12(b) (6) motion.”). However, Plaintiff’s opposition to the

Motion neither disputes this contention — upon which Defendant’s

entire dismissal argument rests — nor contests the Court’s

authority to consider this assertion in resolving the Motion. (See

generally Docket Entry 9.) Instead, it maintains that Plaintiff

arbitration” (id. at 8), Defendant fails to develop any argument

regarding the purportedly binding nature of the asserted “facts and

conclusions of law” (id. at 5). (See id. at 1-15.) Thus,

Defendant waived any argument in this regard. See, e.g., Grayson

O Co. v. Agadir Int’l LLC, 856 F.3d 307, 316 (4th Cir. 2017)

(explaining that “[a] party waives an argument by failing to

present it in its opening brief or by failing to develop its

argument — even if its brief takes a passing shot at the issue”

(brackets and internal quotation marks omitted)). Moreover,

Defendant’s insinuation that Plaintiff has acted improperly in

pursuing this action after arbitration misses the mark. See, e.g.,

FAD-282 (explaining that “[c]laims arising from misrepresentations,

negligence, etc. would be considered equitable and an arbitrator is

not authorized to consider such claims,” that, “[i]n accordance

with its plain meaning, FCIC interpreted [CCIP Paragraph] 20(i) to

authorize courts to consider equitable claims and award attorney’s

fees, expenses, or compensatory, punitive, or other

extra-contractual damages,” and that “FCIC acknowledges that there

may be a need for both arbitration and judicial review when there

are both contract and equitable claims”).

15

does not need to obtain an FCIC determination to prevail in this

matter. (See id.)

By failing to contest this allegation, Plaintiff concedes it.

see, e.g., Kinetic Concepts, Inc. v. Convatec Inc., No. 1:08cv918,

2010 WL 1667285, at *6-9 (M.D.N.C. Apr. 23, 2010) (explaining that

party concedes opponent’s argument by failing to address it in

party’s response and collecting cases). In addition, he has waived

any argument against the Court’s consideration of this assertion in

resolving the Motion. See, e.g., Grayson O Co. v. Agadir Int’l

LLC, 856 F.3d 307, 316 (4th Cir. 2017) (explaining that “[a] party

waives an argument by failing to present it in its opening brief”).

For purposes of resolving the Motion, therefore, the Court accepts

that Plaintiff has not sought or obtained the specified FCIC

determination.

B. FCIC determination requirement

Defendant seeks dismissal of Plaintiff’s Complaint for failure

to comply with the FCIC determination requirement. (See, e.g.,

Docket Entry 7 at 14.) Plaintiff responds that he does not need to

comply with the FCIC determination requirement because it does not

apply to his claims. (See Docket Entry 9 at 10-18.) Plaintiff’s

position cannot prevail.

Relying on Pelzer v. ARMtech Insurance Services, Inc., 928 F.

Supp. 2d 1071 (E.D. Ark. 2013), and J.O.C. Farms, Plaintiff first

maintains that his claims “are not preempted because they do not

16

conflict with the Policy or FCIC regulations” (Docket Entry 9 at

10). (See id. at 10-14.) More specifically, Plaintiff relies on

Pelzer for the proposition that “‘[s]tate tort claims for

negligence, misrepresentation, and fraud do not arise from the

policy of insurance itself but from alleged tortious actions taken

prior to the agreement being made or that occur outside the scope

of the policy.’” (Id. at 11 (quoting Pelzer, 928 F. Supp. 2d at

1078-79).) Plaintiff then maintains that “[t]he Fourth Circuit has

cited the Pelzer decision with approval.” (Id. at 13 (citing

J.0O.C. Farms, 737 F. App’x at 656).) Accordingly, Plaintiff urges:

Here, as in Pelzer and J.O.C. Farms, [Plaintiff’s] claims

pursuant to North Carolina’s Unfair and Deceptive Trade

Practice Act and negligent misrepresentation are not

preempted because they are not based on a “determination”

under the Policy. Rather, these claims arise from FMH’s

misrepresentations prior to the issuance of the Policy.

While reinsured companies should not be exposed to state

law damages because they have followed the FCIC’s

mandated terms and procedures, they should be held

accountable for their own tortious conduct arising prior

to or outside the scope of the contract.

(Id. at 14.) This argument misses the mark.

To begin, J.O.C. Farms cited Pelzer solely for the proposition

that “claims arising from an insurer’s determination under the

policy are preempted.” J.O.C. Farms, 737 F. App’x at 656

(concluding that district court properly dismissed breach of

contract, bad faith refusal to settle, and unfair settlement

practices claims). Thus, J.0.C. Farms does not signify the United

States Court of Appeals for the Fourth Circuit’s embrace of

17

Pelzer’s assertion that, “[a]s the Tennessee Court of Appeals

explained in Plants[, Inc. v. Fireman’s Fund Ins. Co., No.

M2011–02063–COA–R3–CV, 2012 WL 3291805 (Tenn. Ct. App. Aug. 13,

2012)], by virtue of the[] policy provisions and regulations,

contract claims against private insurers are preempted but tort

claims are not,” Pelzer, 928 F. Supp. 2d at 1077; see also id. (“At

present, federal crop insurance regulations ‘reveal no conflict

with state law claims for negligence, misrepresentation, or

fraud.’” (quoting Plants, 2012 WL 3291805, *10)). Moreover, in

J.O.C. Farms, the plaintiff waived appellate review of the district

court’s dismissal of its remaining claims (which Plaintiff

identifies as for “unfair and deceptive trade practices and fraud”

(Docket Entry 9 at 13)), so J.O.C. Farms sheds no light on whether

the FCIC determination requirement also applies to those claims.

See J.O.C. Farms, 737 F. App’x at 656-57.

Second, as a neighboring court recently explained:

Pelzer relied on an earlier decision from the Tennessee

Court of Appeals, Plants . . . . While these cases

distinguish between contract and tort, they make

determinations regarding whether representations are made

within or outside the policy. However, since those cases

were decided, the Plants position has been written out of

and is no longer in accord with standard policy terms and

regulations[.]

In re Dupree Farms, LLC, No. 18-216-5, 2024 WL 3633272, at *10

(Bankr. E.D.N.C. Aug. 1, 2024). For instance, FAD-240 states,

inter alia:

18

The requester interprets 7 CFR § 400.176(b) (and the

equivalent language in [Paragraph] 20(i) of the Basic

Provisions to the extent that it contains a similar

requirement) to preempt any state law claims for

extra-contractual damages that FCIC has not approved,

since any requests for such damages must include an FCIC

determination.

Alternatively, the requester interprets 7 CFR

§ 400.176(b) to require the [p]laintiff in a state court

proceeding to obtain a determination from FCIC before any

claim for compensatory damages or therein [sic] can be

awarded, even when those extra-contractual damages claims

are based upon state law tort claims. In other words, if

a policyholder asserts a tort claim that relates in any

way to a Federally-reinsured crop insurance policy, such

as misrepresentation regarding policy requirements, the

policyholder must obtain an FCIC determination before he

may recover any extra-contractual damages.

The requester is aware that FAD-99 addressed a

similar request, but recent case law from the Tennessee

Court of Appeals (Plants, Inc. v. Fireman’s Fund Ins.

Co., 2012 Tenn. App. LEXIS 561 (Tenn. Ct. App. Aug. 13,

2012)), as well as another civil action between the same

two parties, Plants, Inc. v. Fireman’s Fund Ins. Co.,

2012 Tenn. App. LEXIS 562 (Tenn. Ct. App. Aug. 13, 2012))

addressing similar issues have held that neither 7 C.F.R.

§ 400.176(b) nor Basic Provisions [Paragraph] 20(i)

preempts state law claims for misrepresentation, finding

that no FCIC determination is necessary for a Federal

crop insurance program participant to seek

extra-contractual damages for misrepresentation in state

court. The requester believes that these court decisions

are incorrect because they are counter to 7 CFR § 400.176

and the policy terms.

FAD-240, https://legacy.rma.usda.gov/regs/533/2015/fad-240.html

(Aug. 26, 2015).

In response to this proposed interpretation, the “FCIC

agree[d] with the requestor. Any claim, including a claim for

extra-contractual damages solely arising from a condition related

to policies of insurance issued pursuant to the [FCIA], may only be

19

awarded if a determination was obtained from FCIC in accordance

with [Paragraph] 20(i) of the Basic Provisions and § 400.176(b).”

FAD-240.8 The FCIC further agreed

that 7 CFR § 400.176(b), and the equivalent language in

[Paragraph] 20(i) of the Basic Provisions preempts any

state law claims that are in conflict. That means that

to the extent that State law would allow a claim for

extra-contractual damages, such State law is pre-empted

and extra-contractual damages can only be awarded if FCIC

makes a determination that the AIP, agent or loss

adjuster failed to comply with the terms of the policy or

procedures issued by the [FCIC] and such failure resulted

in the insured receiving a payment in an amount that is

less than the amount to which the insured was entitled.

FAD-240; see also, e.g., FAD-251, https://legacy.rma.usda.gov

/regs/533/2015/fad-251.html (Dec. 17, 2015) (holding that “any

claim, including a claim for extra-contractual damages, that arises

under or is related to a Federal crop insurance policy issued

pursuant to the [FCIA] may only be awarded if a determination is

obtained from FCIC in accordance with [Paragraph] 20(i) of the

[CCIP] Basic Provisions and §400.352” (emphasis added)). Per the

FCIC, “[t]o the extent that State courts have awarded

extra-contractual damages without first obtaining a determination

from FCIC, such awards are not in accordance with the law.” FAD-

240.

8 Plaintiff notes that “7 C.F.R. § 400.176 was repealed on

October 11, 2018.” (Docket Entry 9 at 6 n.2.) However, “the

equivalent language in [Paragraph] 20(i) of the Basic Provisions,”

FAD-240, still applies, see, e.g., 7 C.F.R. § 457.8, ¶ 20(i).

20

Moreover, the FCIC has explicitly held that the FCIC

determination requirement applies to “[c]laims arising from

misrepresentations, negligence, etc.,” FAD-282,

https://www.rma.usda.gov/policy-procedure/final-agency-

determinations/final-agency-determination-fad-282 (Nov. 28, 2018),

which it has described as equitable claims that seek extra-

contractual damages, see, e.g., FAD-282.9 See also, e.g., In re

Dupree Farms, 2024 WL 3633272, at *13 (“Per the regulations, a

determination from the FCIC is the pre-requisite for eligibility to

pursue extra-contractual damages.”); FCIC Response to Comments, 69

FR at 48726 (“[Paragraph] 20 now states no award in litigation can

exceed contractual damages unless FCIC determines the insurance

provider, agent, or loss adjusters failed to follow FCIC approved

policy or procedure.”). As the FCIC explained in a recent amicus

brief:

According to the clear language of the policy, any

extra-contractual damages, including damages arising from

state claims, [a]re only available after [a c]ourt [i]s

asked to review [an] arbitrator’s award. See 7 C.F.R.

§ 457.8, ¶ 20(i). As noted by FCIC, any

extra-contractual claims (i.e. negligence, breach of

fiduciary duty, constructive fraud, unfair and deceptive

practices) and attorneys’ fees are limited solely to

instances where FCIC has determined the insurance

provider violated its policies and procedures and such

9 Extra-contractual damages include attorney’s fees and

awards “based on state law claims including negligence, breach of

fiduciary duty, constructive fraud, and unfair and deceptive trade

practices.” Williamson Farm v. Diversified Crop Ins. Servs., No.

5:17-cv-513, 2018 WL 1474068, at *5 (E.D.N.C. Mar. 26, 2018),

aff’d, 917 F.3d 247 (4th Cir. 2019).

21

violation had a monetary impact on the payment of the

claim. See FCIC Response to Comments, 69 Fed. Reg.

48652-01, 48717 (Aug. 10, 2004). Thus, the plain and

unambiguous terms of [Paragraph] 20(i) of the policy (7

C.F.R. § 457.8, ¶ 20(i)), together with the plain and

unambiguous language of 7 C.F.R. § 400.176(b) and 7

C.F.R. § 400.352(b)(4), unequivocally dictate that a

party can only be awarded extra-contractual damages and

attorneys’ fees upon petitioning th[e c]ourt for review

of the arbitrator’s award and then only after obtaining

a determination from FCIC.

Williamson Farm, 917 F.3d at 254 (internal quotation marks omitted)

(emphasis added).

Nevertheless, Plaintiff maintains that the FCIC did not intend

the regulations (and particularly Section 400.352) to apply in this

context, suggesting that the FCIC determination requirement serves

no useful purpose here. (See Docket Entry 9 at 14-18.) According

to the FCIC, though,

insurance providers may have been at risk for punitive or

extra contractual damages in litigations even though they

may not have violated FCIC’s policies or procedures.

This risk poses a considerable program integrity issue

since it can affect the manner in which insurance

providers manage their litigations and could result in

increased costs to taxpayers. Therefore, FCIC has

revised [Paragraph] 20, and made conforming amendments to

7 CFR 400.176(b) and 400.352(b)(4), to limit the

imposition of punitive and other extra contractual

damages, attorney[’s] fees and other costs to those

situations where FCIC has determined the insurance

provider violated its policies and procedures and such

violation had a monetary impact on the payment of the

claim. FCIC will be making the determinations because,

as authors of the policy or procedure, FCIC is in the

best position to know whether an action constitutes a

violation and to ensure the uniform application of the

policies and procedures.

FCIC Response to Comments, 69 FR at 48717.

22

Further, under the regulations, an insured cannot “recover any

attorney’s fees or other expenses, or any punitive, compensatory or

any other damages from [the] FCIC.” 7 C.F.R. § 457.8, ¶ 20(e)(3).

Upon the FCIC’s determination that an insurer failed to comply with

FCIA policies and procedures, however, a court can award an insured

attorney’s fees, punitive, and other extra-contractual damages

against an insurer. See, e.g., Williamson Farm, 917 F.3d at 257.

Yet, “[i]f an insurance provider and its agent and loss adjuster

have followed FCIC’s policy and procedures in handling the policy,

there is no basis to deny reinsurance . . . . It is only where the

insurance provider, agent or loss adjuster committed an error or

omission that reinsurance is at risk.” FCIC Response to Comments,

69 FR at 48716. As such, by ensuring that an insured can only

recover extra-contractual damages and attorney’s fees in situations

where the insurer failed to adhere to the FCIC’s policies and

procedures, the FCIC determination requirement serves a useful

function even in cases, such as this one, raising equitable claims

against an insurer.

In sum, under binding authority, the FCIC determination

requirement applies to all claims seeking extra-contractual damages

related to a federally reinsured crop insurance policy. Here,

Plaintiff alleges that Defendant engaged in negligent

misrepresentation that adversely affected his recovery under the

Policy and that, through its actions regarding the Policy,

23

Defendant committed unfair and deceptive trade practices. (See

generally Docket Entries 5 to 5-2.)10 Thus, Plaintiff seeks

recovery of extra-contractual damages related to a federally

reinsured crop insurance policy, triggering the FCIC determination

requirement. See, e.g., FAD-282.

As discussed above, Plaintiff does not dispute that he failed

to obtain such determination before initiating this action.

However, “FCIC determinations are only required during judicial

review involving extra-contractual damages,” Williamson Farm, 917

F.3d at 256 n.7, and can only be sought after initiating court

action, see, e.g., FAD-193, https://legacy.rma.usda.gov/regs/533/

2013/fad-193.html (Oct. 21, 2013) (rejecting suggestion that “the

FCIC determination . . . must be obtained prior to the insured

filing a petition in a court of competent jurisdiction”). As the

FCIC has explained:

The reference to “judicial review only” [in Paragraph

20(i)] is to clarify that such damages can only be sought

during an appeal to the courts, after an FCIC

determination has been obtained, and cannot be awarded in

arbitration. To obtain a determination that will enable

10 Notably, this case does not involve a situation “where

misrepresentations or negligence on the part of the insurance agent

before the policy was issued left the claimant effectively

uninsured under the federal crop insurance program. Here,

[Plaintiff] sought contractual damages and participated in

arbitration pursuant to the insurance policy.” Williamson Farm,

917 F.3d at 256 n.8; see id. (“not[ing] that [the Fourth Circuit’s]

decision . . . does not address whether a claimant could recover

purely tort damages against a private insurance company without

such an FCIC determination [under those circumstances]”).

24

the insured to recoup attorney’s fees, expenses, or

damages from the AIP, the insured must send a request for

a determination to the RMA Deputy Administrator of

Compliance after the insured has filed an appeal for

judicial review. The procedural timing of when the

insured must request the determination when they are

seeking judicial review depends upon when the insured

requests attorney’s fees and the rules of the court for

such requests.

FAD-193.

Defendant tacitly acknowledges that Plaintiff’s failure to

obtain this determination prior to filing suit does not preclude

this action. (See, e.g., Docket Entry 13 at 1 (“Unless and until

[Plaintiff] satisfies the conditions precedent established by FCIC

for the recovery of extra-contractual damages, the causes of action

set forth in the Complaint are preempted, and the Complaint must be

dismissed.”).)11 Nevertheless, Defendant seeks dismissal of the

Complaint due to Plaintiff’s failure to “satisf[y] this threshold

requirement.” (Docket Entry 7 at 14.) Notably, though, Plaintiff

did not oppose the Motion on the grounds that he had sought or

needed time to seek the necessary FCIC determination. (See

generally Docket Entry 9); cf. In re Dupree Farms, 2024 WL 3633272,

11 Conversely, Plaintiff incorrectly suggests that such

determination must occur prior to the filing of any suit. (See

Docket Entry 9 at 2 (“FMH is ‘immune’ from state rules,

regulations, laws, policies or decisions if there is no

determination by the FCIC prior to the policyholder filing suit

that the insurer failed to comply with the FCIC’s mandatory policy

terms and procedures. This is to ensure that FCIC’s policies and

procedures are enforced uniformly nationwide. FMH is not ‘immune’

from fraud committed to procure the policy or that occurred outside

the scope of the policy.”).)

25

at *4 (explaining that, after the defendant sought summary judgment

on the grounds that the plaintiff had failed to comply with the

FCIC determination requirement, “[the plaintiff] requested the FCIC

to authorize extra-contractual damages”). Given that Plaintiff

cannot recover on his claims without the requisite FCIC

determination, the Court will order Plaintiff to show cause why the

Complaint should not be dismissed pending compliance with the FCIC

determination requirement.

CONCLUSION

The FCIC determination requirement applies to Plaintiff’s

claims.

IT IS THEREFORE ORDERED that the Motion (Docket Entry 6) is

GRANTED insofar as the Court concludes that the FCIC determination

requirement applies to Plaintiff’s negligent misrepresentation and

unfair and deceptive trade practices claims.

IT IS FURTHER ORDERED that, by October 15, 2024, Plaintiff

must SHOW CAUSE why the Court should not dismiss this action

pending compliance with the FCIC determination requirement.

Defendant may file a response within 21 days of any filing by

Plaintiff, and Plaintiff may file a reply thereto within 7 days.

Upon completion of this briefing or on November 13, 2024, whichever

26

occurs earlier, the Clerk shall refer this matter back to the

undersigned.

This 23rd day of September, 2024.

/s/ L. Patrick Auld

L. Patrick Auld

United States Magistrate Judge

27