Greenwich Insurance Company v. MS Windstorm Underw ( 2015 )


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  •      Case: 15-60405   Document: 00513308786    Page: 1   Date Filed: 12/15/2015
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT
    No. 15-60405                   United States Court of Appeals
    Summary Calendar                          Fifth Circuit
    FILED
    December 15, 2015
    GREENWICH INSURANCE COMPANY,                                     Lyle W. Cayce
    Clerk
    Plaintiff - Appellant
    v.
    MISSISSIPPI WINDSTORM UNDERWRITING ASSOCIATION,
    Defendant - Appellee
    Appeal from the United States District Court
    for the Southern District of Mississippi
    Before REAVLEY, SMITH, and HAYNES, Circuit Judges.
    REAVLEY, Circuit Judge:
    We must decide whether, under the facts of this case, reporting deadlines
    imposed by the Mississippi Windstorm Underwriting Association are
    preempted by federal law. They are not.
    The Mississippi Windstorm Underwriting Association (“MWUA”) was
    created by Mississippi’s state legislature “to provide an adequate market for
    windstorm and hail insurance in Mississippi’s six coastal counties: George,
    Hancock, Harrison, Jackson, Pearl River, and Stone.”         Miss. Windstorm
    Underwriting Ass’n v. Union Nat. Fire Ins. Co., 
    86 So. 3d 216
    , 220 (Miss. 2012).
    Insurance companies offering essential property insurance in Mississippi must
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    No. 15-60405
    be MWUA members. 1 
    Id. “[M]embers that
    voluntarily offer wind and hail
    coverage receive credit for each voluntary premium written.” 
    Id. At the
    time
    Hurricane Katrina hit the Gulf Coast, “MWUA had secured $175 million in
    reinsurance.” 
    Id. That reinsurance
    was woefully inadequate in the face of
    Hurricane Katrina, which cost MWUA more than $700 million. 
    Id. “After the
    reinsurance was applied, MWUA had a $545 million loss” and “assessed its
    members to cover the loss.” 
    Id. Those assessments
    were based on premiums
    collected in 2003.
    Plaintiff Greenwich Insurance Company (“Greenwich”) is a MWUA
    member and also sells Multiple Peril Crop Insurance (“MPCI”). Insuring crops
    comes with risks of its own. Indeed, once upon a time, “[p]rivate insurance
    companies apparently deemed all-risk crop insurance too great a commercial
    hazard,” and so refused to provide such coverage. Fed. Crop Ins. Corp. v.
    Merrill, 
    332 U.S. 380
    , 384, 
    68 S. Ct. 1
    , 3 n.1 (1947). Accordingly, Congress
    created the Federal Crop Insurance Corporation (“FCIC”), a Department of
    Agriculture agency. See 7 U.S.C. § 1503.
    Thus, Greenwich is required to participate in two somewhat similar
    programs—one a state program, the other a federal program. In the ordinary
    course, dual participation presents no problems. Indeed, the parties agree that
    MWUA was not permitted to base the post-Katrina assessments on MPCI
    premiums collected by Greenwich.
    MWUA’s assessment efforts were hampered by complaints of several
    insurance companies that they had incorrectly reported information regarding
    premiums collected. In an effort to provide its members an opportunity to
    ensure accurate reporting, MWUA conducted a “true-up”—i.e., an opportunity
    1“Insurance companies are no longer called members,” Miss. Windstorm
    Underwriting 
    Ass’n, 86 So. 3d at 220
    (citing Miss. Code Ann. § 83–34–3(2)), but we follow the
    Supreme Court of Mississippi’s lead and use the term here.
    2
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    to submit corrected 2003 premium data.           The true-up procedure was
    challenged in state court and ultimately approved of by the Mississippi
    Supreme Court. As that Court saw it, “[t]he true-up was not an effort on behalf
    of MWUA to make a new rule; it was simply a remedy to the property-
    insurance chaos caused by Hurricane Katrina.”             Mississippi Windstorm
    Underwriting 
    Ass’n, 86 So. 3d at 223
    . The Mississippi Supreme Court further
    recognized that “MWUA, and any entity for that matter, must have enforceable
    deadlines to operate properly.” 
    Id. Additionally, “a
    change to one member’s
    assessment would affect all other members,” meaning “[t]he process would be
    harmed if it were to remain open for years.” 
    Id. at 227.
          Greenwich was apparently among those insurers for which MWUA had
    faulty data. Nonetheless, for whatever reason, it did not take advantage of the
    true-up process. Instead, it repeatedly represented to MWUA that all figures
    were accurate. Specifically, Greenwich confirmed the contents of an annual
    statement showing it had collected no MPCI premiums in 2003. Based on those
    representations, MWUA assessed Greenwich $4.1 million.
    That assessment finally prompted Greenwich to take a closer look at the
    reported figures. According to its brief, Greenwich “immediately began an
    investigation into the now decade-old data and discovered that MPCI
    premiums had been misclassified as assessable premiums.” Relying on this
    alleged error, Greenwich objected to the assessment more than a year after the
    reporting deadline had passed. MWUA overruled the objection and enforced
    its deadline. Greenwich paid the assessment under protest and filed suit.
    Both parties moved unsuccessfully for summary judgment, but after
    additional briefing, the district court certified the question of preemption for
    interlocutory appeal pursuant to 28 U.S.C. 1292(b). We granted permission
    to appeal the interlocutory order. We review de novo certified orders denying
    summary judgment. Castellanos-Contreras v. Decatur Hotels, LLC, 
    622 F.3d 3
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    No. 15-60405
    393, 397 (5th Cir. 2010) (en banc). “[O]ur appellate jurisdiction under § 1292(b)
    extends only to controlling questions of law, thus, we review only the issue of
    law certified for appeal.” Tanks v. Lockheed Martin Corp., 
    417 F.3d 456
    , 461
    (5th Cir. 2005). The issue considered here is whether MWUA’s enforcement of
    the true-up deadline is preempted by federal law.
    While the parties agree that this case presents one discrete legal issue,
    they frame that issue in vastly different ways.       According to Greenwich,
    MWUA based its assessment in part on MPCI premiums and therefore plainly
    violated controlling federal law. According to MWUA, there is no conflict in
    the law, and Greenwich is simply using preemption arguments in an attempt
    to escape the consequences of its own incompetence.
    Under the Supremacy Clause, Congress has authority to preempt state
    law. See U.S. Const., Art. VI, cl. 2. “When a federal law contains an express
    preemption clause, we ‘focus on the plain wording of the clause, which
    necessarily contains the best evidence of Congress’ preemptive intent.’”
    Chamber of Commerce of U.S. v. Whiting, 
    563 U.S. 582
    , 
    131 S. Ct. 1968
    , 1977
    (2011) (quoting CSX Transp., Inc. v. Easterwood, 
    507 U.S. 658
    , 664, 
    113 S. Ct. 1732
    , 1737 (1993)). “The burden of persuasion in preemption cases lies with
    the party seeking annulment of the state statute.” AT&T Corp. v. Pub. Util.
    Comm’n of Texas, 
    373 F.3d 641
    , 645 (5th Cir. 2004).
    “Federal regulations can have a preemptive effect equal to that of federal
    laws.” O’Hara v. Gen. Motors Corp., 
    508 F.3d 753
    , 758 (5th Cir. 2007). To find
    that a federal regulation preempts state law, we must be satisfied that such
    preemptive effect was both intended and “within the scope of the agency’s
    delegated authority.” First Gibraltar Bank, FSB v. Morales, 
    42 F.3d 895
    , 898
    (5th Cir. 1995).     Greenwich relies on the following express preemption
    regulation:
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    No. 15-60405
    No State or local governmental body or non-governmental body
    shall have the authority to promulgate rules or regulations, pass
    laws, or issue policies or decisions that directly or indirectly affect
    or govern agreements, contracts, or actions authorized by this part
    unless such authority is specifically authorized by this part or by
    the Corporation.
    7 C.F.R. § 400.352(a).
    According to Greenwich, because enforcement of the true-up deadline
    means it must pay an assessment based on otherwise non-assessable MPCI
    premiums, the true-up deadline “directly or indirectly affect[s] MPCI” and is
    therefore preempted. 2
    The first question before us is whether the FCIC intended to preempt
    MWUA’s authority to set internal administrative deadlines for its members.
    See 
    Moore, 867 F.2d at 244
    .            “[T]he exact scope of the FCIC’s intended
    preemption” is not clear from the face of the regulation.               See Rio Grande
    Underwriters, Inc. v. Pitts Farms, Inc., 
    276 F.3d 683
    , 687 (5th Cir. 2001)
    (holding that the preemption regulation at issue here, 7 C.F.R. § 400.352(a),
    does not demonstrate an intent to completely preempt the field of crop
    insurance regulation); see also Alliance Ins. Co. v. Wilson, 
    384 F.3d 547
    , 552
    (8th Cir. 2004)      (“[T]he FCIA did not intend to preempt all state-based
    regulation of companies that sell federally reinsured crop insurance.”).
    “[W]hen the text of a pre-emption clause is susceptible of more than one
    plausible reading, courts ordinarily ‘accept the reading that disfavors pre-
    emption.’” Altria Grp., Inc. v. Good, 
    555 U.S. 70
    , 77, 
    129 S. Ct. 538
    , 543 (2008)
    (quoting Bates v. Dow Agrosciences LLC, 
    544 U.S. 431
    , 449, 
    125 S. Ct. 1788
    ,
    2 Greenwich also cites 7 U.S.C. § 1511 (2012) for the proposition that MPCI is exempt
    from state and local taxes and 7 C.F.R. § 400.351(b)(2) and (5) for the proposition that
    MWUA’s post-Katrina assessments could not be based on MPCI premiums. Neither of these
    propositions is in dispute, and we therefore undertake no close analysis of these preemption
    clauses.
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    1801 (2005)).   Given the states’ “traditional role of regulating insurance,”
    Sanger Ins. Agency v. HUB Int’l, Ltd., 
    802 F.3d 732
    , 741 (5th Cir. 2015), that
    presumption is particularly important in this case, see Wyeth v. Levine, 
    555 U.S. 555
    , 565, 
    129 S. Ct. 1187
    , 1194 (2009) (explaining that the presumption
    against preemption applies with particular force when federal law encroaches
    on “‘a field which the States have traditionally occupied’” (quoting Medtronic,
    Inc. v. Lohr, 
    518 U.S. 470
    , 485, 
    116 S. Ct. 2240
    , 2250 (1996))).
    We hold that the FCIC did not intend to preclude MWUA from imposing
    and enforcing its true-up deadline. Written to prevent state interference with
    MPCI, 7 C.F.R. § 400.352(a) is undoubtedly a broad preemption clause. But
    the interpretation urged upon us by Greenwich exceeds these textual bounds.
    The challenged deadline did not directly or indirectly affect MPCI
    because the deadline did not trigger an assessment improperly based on MPCI
    premiums. Indeed, strictly speaking, even Greenwich’s failure to abide by the
    deadline did not trigger the improper assessment.         Rather, Greenwich’s
    independent actions—specifically, its repeated affirmative statements that the
    2003 premium data was correct—triggered the assessment.              Greenwich
    reported $0 in “Multiple peril crop” premiums on its annual statement.
    (ROA.717.) It alleges it should have reported $4,756,021 in MPCI premiums.
    (ROA.675.)
    Thus, “in reality,” Greenwich’s complaint “is directed at the actions of
    private parties, not the operation of” MWUA deadlines. See New Orleans &
    Gulf Coast Ry. Co. v. Barrois, 
    533 F.3d 321
    , 335 (5th Cir. 2008). Because the
    fault lies not with any law or rule but rather with the acts of a private third
    party, we cannot say that the true-up-deadline affects MPCI. Cf. 
    id. at 334
    (“The fatal defect in the Railroad’s argument is that the Railroad fails to
    establish that any unreasonable interference with railroad operations is
    caused by operation or application of the Louisiana state law as opposed to the
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    independent actions of private parties.”). Here, the source of Greenwich’s
    trouble is not the acts of just any private parties; Greenwich’s own acts are to
    blame. And, the actions themselves are not just any actions; they are acts of
    unjustifiable incompetence. The FCIC did not intend to hamstring MWUA’s
    basic operations (or the operations of state programs like it) simply to protect
    inattentive insurers from their own mistakes.
    AFFIRMED.
    7