Reinsurance Focus

The D.C. district court recently addressed whether the Federal Crop Insurance Corporation (“FCIC”) had authority to promulgate two federal regulations relating to the administration of its reinsurance agreements, and if so, whether they also had authority to promulgate an amendment to those regulations. Plaintiffs, agricultural insurance providers, alleged the FCIC’s unilateral amendments to their reinsurance agreements constituted a breach of contract.

Following a lengthy procedural path, the plaintiffs filed their claim with the Department of Agriculture Board of Contract Appeals. The Board concluded that plaintiffs’ claims were time barred pursuant to a federal regulation that mandated a 45-day period for bringing administrative claims. Plaintiffs subsequently filed a complaint in the D.C. district court requesting the court conclude that the agency lacked jurisdiction to hear the plaintiffs’ claims and to overturn the agency’s interpretations of the contract and relevant statutes and regulations. Plaintiffs also sought a determination that the agency’s procedures and final decision violated the Constitution. Both parties filed motions for summary judgment.

Applying the “Chevron deference” analysis, the court concluded that the FCIC had authority to promulgate both regulations. With respect to the amendment, the court concluded that it qualified as an “interpretive rule,” and therefore was not required to comply with the notice and comment requirements under the APA. As such, the rule was valid, and the court granted the defendant’s motion for summary judgment as to several of plaintiff’s claims. The court remanded some of plaintiffs’ claims to the Board to address what action triggered the limitations period and whether the 45-day limitations period was controlling in light of a conflicting 6-year statutory limitation period.

Finally, the court dismissed plaintiffs’ constitutional claims stating that they were “without merit” and dismissed plaintiffs’ contract and unjust enrichment claims for failure to exhaust administrative remedies. Ace Property and Casualty Ins. Co. v. Federal Crop Ins. Corp., Case No. 06-1430 (RMU) (D.D.C., Sept. 28, 2007).