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Posted by: Tanja Trezise on Aug 14, 2012

Court: TN Court of Appeals

Attorneys 1:

Mickey Hall, Winchester, Tennessee, for the appellant, Plants, Inc.

Attorneys 2:

Jeffrey S. Dilley, Clarksdale, Mississippi, for the appellees, Fireman’s Fund Insurance Company, Rural Community Insurance Company, Rural Community Insurance Services, Wheeler Insurance Agency, Inc., and Louis M. Wheeler, individually, and as agent for other defendants.

Judge(s): CLEMENT

At issue is the scope of a binding arbitration clause in a federally-reinsured multiple peril crop insurance policy and the scope of federal preemption of common law claims. The insured, a nursery in Warren County, Tennessee, suffered a catastrophic loss of stock, primarily trees and shrubs, due to a tornado on April 7, 2006. The insured submitted a claim in excess of a million dollars. The adjuster determined, due to “under-reporting of inventory”, that the insured was only entitled to recover $195,225. The insured demanded arbitration; the arbitrator ruled that the insured was due no additional payment. Thereafter, the insured filed this action asserting common law claims against the insurer, its adjustment firm, and the independent insurance agency that solicited the policy, for breach of contract, negligence, breach of the duty of care, negligent misrepresentation, and statutory bad faith. The trial court summarily dismissed the claims against the insurer and its adjustment firm finding the claims were barred by collateral estoppel and res judicata because the issues were decided at arbitration and that the insured’s only remedy was judicial review of the arbitration decision. On appeal, the insured contends that its state law claims were not barred by the doctrines of collateral estoppel and res judicata. Appellees disagree and additionally assert that the insured’s common law claims are preempted by federal law. We have determined the claims for breach of contract, breach of duty of care, and statutory bad faith are preempted by federal law; however, the claims for negligence and negligent misrepresentation are not preempted by federal law and are not barred by the doctrines of collateral estoppel or res judicata. Therefore, we affirm in part, reverse in part, and remand this action for further proceedings in accordance with this decision.