United States District Court, D. Kansas
MEMORANDUM AND ORDER
D. CRABTREE UNITED STATES DISTRICT JUDGE
Kevin Struss, Struss Farms, L.L.C., and Struss & Cook
Farms bring several tort claims and a breach of contract
claim against defendants Rural Community Insurance Company
(“RCIC”) and Scott Laaveg, RCIC's claims
representative. These claims generally arise from a
contractual relationship between the parties. Namely, RCIC
insured plaintiffs' crops under several insurance
contracts issued under a federal crop insurance program. The
Complaint alleges that defendants breached the insurance
contract, defamed plaintiffs, committed false light invasion
of privacy, acted negligently, and tortiously interfered with
plaintiffs' prospective business advantage or
defendants ask the court to dismiss the Complaint under
Fed.R.Civ.P. 12(b)(3) and 12(b)(6), and, alternatively, to
compel arbitration (Doc. 7). In their Response to
Defendants' Motion to Dismiss, plaintiffs recite that
they are willing to proceed to arbitration (Doc. 16).
Separately, plaintiffs made a “counter-motion” to
compel arbitration (Doc. 18). For reasons explained below, the
court grants, in part, the parties' requests that the
court compel arbitration. See Doc. 18 at 4-8
(plaintiffs' Response to Defendants' Motion to
Dismiss and Counter-Motion to Compel Arbitration to Proceed
Immediately); Doc. 20 at 11-14 (defendants' Reply in
Support of Motion to Dismiss and Response to Plaintiffs'
Counter-Motion to Compel Arbitration to Proceed Immediately).
But the court denies plaintiffs' request to compel
arbitration to begin immediately (Doc. 18 at 4-8) and
defendants' request to stay arbitration (Doc. 20 at 2-3).
The court also grants plaintiffs' motion to stay
proceedings in this court case (Doc. 18 at 8), including
claims plaintiffs have asserted against defendant Scott
Laaveg. And the court denies defendants' request to
dismiss plaintiffs' extra-contractual tort claims. Doc.
20 at 4-12.
court takes the following facts from the Complaint (Doc. 1).
The court accepts the facts asserted in the Complaint as true
and views them in the light most favorable to plaintiffs.
Burnett v. Mortg. Elec. Registration Sys., Inc., 706
F.3d 1231, 1235 (10th Cir. 2013) (citing Smith v. United
States, 561 F.3d 1090, 1098 (10th Cir. 2009)).
issued plaintiffs seven policies of federally reinsured crop
insurance for the 2016 crop season. These policies insured
plaintiffs' 2016 corn crop. Plaintiffs experienced a loss
to their 2016 corn crop because of drought. So, plaintiffs
timely submitted claims under their seven insurance policies
through their agent.
investigated the claims and issued a letter to plaintiffs on
April 18, 2017. This letter denied plaintiffs' claims,
and defendant Scott Laaveg signed the letter on RCIC's
behalf. This letter accused plaintiffs of failing to comply
with the terms of their policies, intentionally concealing or
misrepresenting material facts about the policy, making
misrepresentations, and committing fraud, waste, or abuse of
the federal crop insurance program. The letter also accused
plaintiffs-falsely, they contend-of failing to: (1) report
the claims timely; (2) provide production records; and (3)
explain yield variances.
Complaint also asserts that defendants did not follow the
requirements of the Risk Management Agency's Loss
Adjustment Manual (“LAM”). Those requirements
included questions about plaintiffs' perceived
shortcomings in production records and corrected claims
necessary to reflect an accurate production count. Though
defendants alleged that plaintiffs had failed to provide
production records for one policy and for one claim,
defendants denied plaintiffs' claims on their six other
policies. The Risk Management Agency (“the
Agency”) has interpreted its policy to permit insurers
to deny claims only when an insured has failed to comply with
certain terms. Also, the Complaint alleges, the Agency has
interpreted its policy to prohibit insurers from using
non-compliance with one policy as a reason to deny claims
based on other policies. Despite this interpretation,
plaintiffs contend, defendants have refused to pay claims
made under plaintiffs' other six policies. No. adequate
justification or excuse supports defendants' refusal to
pay the claims, the Complaint asserts.
allege that they were required to share Mr. Laaveg's
April 18 letter with their banks, lenders, suppliers,
tenants, other insurers, and landlords. Plaintiffs assert
that the letter has harmed their reputations with those third
parties and thereby caused them to sustain damages. These
damages include: (1) loss of financing for their farming
operations for the 2017 crop season and beyond; (2) loss of
revenue from farming in 2017; (3) damaged credit; (4) loss of
leases; (5) loss of farmland; (6) loss of equipment; and (7)
for plaintiff Kevin Struss, mental, emotional, and physical
considering the parties' motions, the court also
considers the Common Crop Insurance Policy Basic Provisions,
found in 7 C.F.R. § 457.8. These Basic Provisions,
published as a federal regulation, serve as the
“umbrella policy” covering plaintiffs' crops.
Doc. 8 at 4; see also Doc. 16 at 5.
Specifically, the parties direct the court to Section 20(a),
titled “Mediation, Arbitration, Appeal,
Reconsideration, and Administrative and Judicial
Review.” Doc. 8 at 4, Doc. 16 at 5. Section 20(a)
includes the following provision:
If [the insured] and [the insurance company] fail to agree on
any determination made by [the insurance company] except
those specified in section 20(d) or (e), the disagreement may
be resolved through mediation in accordance with section
20(g). If resolution cannot be reached through mediation, or
[the insured] and [the insurance company] do not agree to
mediation, the disagreement must be resolved through
arbitration in accordance with the rules of the American
Arbitration Association (AAA) . . . .
7 C.F.R. § 457.8 subsec. 20(a).
begin, the parties agree that the insurance contract between
plaintiffs and RCIC contains an arbitration agreement. And
both plaintiffs and defendants have asked the court to compel
arbitration and stay these proceedings. Docs. 7, 18. But
after that, the parties' positions diverge. First, the
parties disagree about which claims should go to the
arbitrator. Plaintiffs assert that only their breach of
contract claims-and not their tort claims-should go to
arbitration. In contrast, defendants contend that only the
arbitrator has jurisdiction to decide which claims are
arbitrable. And second, plaintiffs ask the court to order
arbitration to proceed immediately. But defendants ask this
court to stay ...