Greenwich Insurance Company v. MS Windstorm Underw

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.
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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
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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 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.
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