Failure to Fulfill Material Condition Defeats Crop Insurance Claim

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Sunset Ranches, Inc. (Sunset) purchased a multiple peril crop insurance policy covering 10 acres of cherry orchard crops for the 2014 harvest season. The policy was issued by defendant and respondent NAU Country Insurance Company (NAU) and reinsured by the Federal Crop Insurance Corporation (7 U.S.C. § 1503), an agency established pursuant to the Federal Crop Insurance Act. Sunset filed an indemnity claim, which was denied by NAU. Sunset then sued NAU, among others, alleging negligence, breach of contract, and unfair insurance practices.  In Sunset Ranches, Inc. v. NAU Country Insurance Company, F078916, California Court of Appeals, Fifth District (August 16, 2021) Sunset sought avoidance of federal law and application of California Bad Faith law.
ZALMA OPINION

So-called insurance backed by the U.S. Government must be strictly construed as it was by the California Court of Appeal. The insured breached two material conditions of the policy: giving notice late and destroying the crop before it could be inspected by the insurer. The arbitrator found no coverage and the trial court agreed there could be no contract claim and since there is no contract claim there can be no claim for the tort of bad faith.