Howard v. Federal Crop

United States District Court · Contracts

ContractsInsuranceConditions and Forfeiturecrop insurancecondition precedentcondition subsequentforfeiturepromissory warranty

Facts

FCIC issued three tobacco crop insurance policies to the Howards covering six farms for the 1973 crop year. The Howards alleged heavy rains damaged their tobacco crop, and after harvesting and selling the diminished crop they timely filed notice and proof of loss. Before FCIC inspected the fields, however, they plowed under the remaining tobacco stalks and planted rye. The policy's Tobacco Endorsement provided that tobacco stalks on acreage for which a loss is claimed "shall not be destroyed until the Corporation makes an inspection."

Issue

Whether the insureds' compliance with the policy provision prohibiting destruction of tobacco stalks before FCIC inspection was required for recovery on their claimed crop losses. More specifically, the question was whether violation of that provision barred recovery even though paragraph 5(f) did not itself use the words "condition precedent."

Rule

Under this FCIC tobacco policy, the requirement that tobacco stalks on acreage for which a loss is claimed not be destroyed until the Corporation inspects them is enforceable as part of the insured's obligation to furnish information necessary to establish the manner and extent of loss. Noncompliance with that requirement works a forfeiture of policy benefits for the claimed loss.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Elena Ruiz insured her cigar-wrapper tobacco crop through Prairie Valley Crop Assurance on farms near Lexington, Kentucky. After a hailstorm reduced yields, she harvested what remained, filed a timely notice of loss, and then shredded all tobacco stalks before the insurer's adjuster arrived, even though the endorsement stated that stalks on acreage for which a loss is claimed shall not be destroyed until inspection.

If Elena sues for policy benefits, which is the strongest argument for the insurer under the majority rule?

Explanation. The majority treated the no-destruction-before-inspection clause as enforceable because the insurer's opportunity to inspect the stalks is part of the information needed to establish the manner and extent of loss. Noncompliance works a forfeiture of benefits for the claimed loss, even if notice and proof were otherwise timely.