VOLUME 15, NUMBER 6, WHOLE NUMBER 175 APRIL 1998 Io w a Supreme Court signif icantly w eakens county home rule pow er in hog confinement case

The regulation of livestock confinement operations is a matter of growing public debate across the country. A critical issue is whether counties and other local governments can regulate large livestock facilities and operations, or whether the NSI DE sole source of any regulation lies with the state legislature. A significant Iowa I Supreme Court decision of early March addressed this issue with the result that local regulation of livestock confinement facilities was significantly weakened. Goodell v. Humboldt County, No. 312/97-790, 1998 Iowa Sup. LEXIS 37 (Mar. 5, 1998). • Beware the bold In October of 1996, the Humboldt County, Iowa board of supervisors adopted four ordinances applicable to “large livestock confinement feeding facilities.” Regulated print: livestock confinement facilities were those where the livestock were or could be confined to insurance coverage areas which were totally roofed and where the animal weight capacity was more issues than 500,000 pounds for cattle; more than 300,000 pounds for swine; more than 300,000 pounds for chickens; and more than 500,000 pounds for turkeys. Each • Federal Register ordinance addressed a different matter of concern to the county. One ordinance imposed a permit requirement before construction or operation of in brief a regulated facility could begin. Application for the permit had to be filed with the Humboldt County auditor and contain specified information. The auditor was required to forward the application to the Humboldt County Environmental protec- tion Officer who would then conduct an independent investigation to insure the proposed facility “complies with all applicable statute, ordinances, and regulations.” If deemed to be in compliance, the application would be forwarded to the county board of supervisors and neighboring property owners would be informed of the pending application. After a thirty-day period for public comment, the board would Solicitation of articles: All AALA issue a permit if the ordinance requirements had been satisfied. Beginning construc- members are invited to submit tion or operation of a regulated facility without the requisite permit was subject to articles to the Update. Please in- a civil penalty of up to $100 per day of violation. The county could also seek to have the defendant abate or cease the violation, or take direct action to correct the clude copies of decisions and leg- violation with the cost of any abatement or correction assessed against the defen- islation with the article. To avoid dant. duplication of effort, please no- Another ordinance established financial security requirements designed to make tify the Editor of your proposed sure that the funds necessary to meet the costs of cleanup and remediation for on- article. site and off-site contamination were available if needed. The financial assurance required by the ordinance could be in the form of a surety bond, insurance, or self- insurance. Violation was subject to a civil penalty up to $100 per day of violation. The IN FUTURE Continued on page 2 I SSUES Citiz en suits: r ef orm needed The 1990s has become the era of citizen suits and private enforcement actions have exploded under the Clean Water Act, Clean Air Act, the Resource Conservation and Recovery Act, and the Emergency Planning and Community Right-to-Know Act. • FSA Emergency Loans Citizen suits provisions were added to environmental statutes “to goad the and FSA disaster responsible agencies to more vigorous enforcement of anti-pollution standards and, if the agencies remained inert, to provide an alternative enforcement mechanism.” set-aside In February, I spoke to Washington state dairy farmers targeted by citizen suits for alleged Clean Water Act violations. The citizen suits against the dairy producers are typical of those now routinely filed against livestock producers and others accused of environmental violations. Citizen suits are inherently unfair to those Continued on page 2 COUNTY HOME RULE/CONTINUED FROM PAGE 1 county could also order the defendant to the county could order the defendant to tent with existing state regulation. Con- abate or cease the violation, or directly abate or cease the violation or take direct versely, the hog farmers argued that the abate or correct the violation with the action to abate or correct the violation ordinances regulated a matter of state- costs of such abatement or correction with the costs of such abatement or cor- wide concern and that the comprehen- being assessed against the defendant. rection assessed against the defendant. sive nature of the Iowa laws regulating A third ordinance implemented ground- A fourth ordinance governed odors from animal feeding operations indicated the water protection policies by requiring a regulated facilities by prescribing the legislature’s intent to prevent counties regulated facility to obtain a permit from minimum distance that a regulated facil- from enacting their own requirements. the county’s environmental protection ity could be located from any residence or The county district court ruled that officer to apply livestock manure on land public use area if the facility was not able there was no conflict between three of the draining into agricultural drainage wells to confine odors on site. The ordinance ordinances and state law, only invalidat- or sinkholes. The ordinance also required also prohibited regulated facilities from ing a part of the fourth ordinance that that a regulated facility obtain a permit any off-site emission of hydrogen sulfide required a minimum distance be main- from the county’s Environmental Protec- concentrations in excess of a specified tained between residents and livestock tion Officer to apply livestock manure on level. If emissions exceeded the specified operations. Another part of the fourth land draining into agricultural drainage level, the facility owner or operator would ordinance establishing standards for air wells or sinkholes. Under the ordinance, be required to redesign the project, add quality near large operations was up- the county was directed to annually test abatement equipment, or close the facil- held, but was deemed unenforceable. The such wells and sinkholes to insure they ity. Violation of this ordinance was pun- court held that the provision of the ordi- had not been contaminated by livestock ishable by a civil penalty not to exceed nance concerning air standards was un- manure. Upon the presence of contami- $100 for each day of violation. In addi- enforceable until Humboldt County had nation, the facility’s permit for land ap- tion, the county could order the defen- complied with an Iowa law requiring plication of livestock manure would be dant to abate or cease the violation, or local governmental entities to obtain a automatically suspended. Violation of this could take direct action to abate or cor- certificate of acceptance from the De- ordinance was punishable by a civil pen- rect the violation with the costs of such partment of Natural Resources for any alty of up to $100 per day of violation, or abatement or correction assessed against local air pollution control program. See the defendant. Hog farmers that resided Iowa Code section 455B.145 (1997). in the county who planned to construct a On appeal, the Iowa Supreme Court regulated facility sued, claiming that the reversed the county district court and ordinances were invalid. held that the Humboldt County ordi- At the heart of the case was a legal nances did more than merely establish principle known as county home rule more stringent standards to regulate con- authority. Many states have a constitu- finement operations. Goodell v. Humboldt tional provision (Iowa amended its con- County, No. 312/97-790, 1998 Iowa Sup. VOL. 15, NO. 6, WHOLE NO. 175 April 1998 stitution in this respect in 1978) giving LEXIS 37 (Mar. 5, 1998) Instead, the counties the power to regulate their own court held that the county ordinances AALA Editor...... Linda Grim McCormick Rt. 2, Box 292A, 2816 C.R. 163 local affairs to protect and preserve the revised the state regulatory scheme in a Alvin, TX 77511 rights, privileges and property of the manner inconsistent with state law. For Phone/FAX: (281) 388-0155 E-mail: [email protected] county or of its residents as long as the example, with respect to the county per- local regulation doesn’t “conflict” with mit requirement, the court held that the Contributing Editors: John D. Copeland, National Center for Agricultural Law Research and Information, state law. That is the limit on county ordinance created a right in the county to Fayetteville, AR; Roger A. McEowen, Kansas State home rule power. abate a violation of state law by making University, Manhattan, KS; Linda Grim McCormick, What if a state has laws impacting compliance with state law a condition of Alvin, TX. confinement livestock operations; can a obtaining a permit. Iowa law prevents For AALA membership information, contact county place more restrictions on these the DNR from pursuing an enforcement William P. Babione, Office of the Executive Director, Robert A. Leflar Law Center, University of Arkansas, operations in addition to state law? It is action against an animal feeding opera- Fayetteville, AR 72701. clear that a particular county cannot set tion without prior approval from the En-

Agricultural Law Update is published by the standards and requirements that are less vironmental Protection Commission, American Agricultural Law Association, Publication stringent than those imposed by state unless it seeks to enforce a civil penalty office: Maynard Printing, Inc., 219 New York Ave., Des law, but a county may set standards and of $3,000 or less. But, under the county Moines, IA 50313. All rights reserved. First class postage paid at Des Moines, IA 50313. requirements that are more stringent ordinance, if a facility is operated in than those imposed by state law unless violation of state law and without the This publication is designed to provide accurate and authoritative information in regard to the subject state law provides otherwise. For in- required county permit, the county can matter covered. It is sold with the understanding that stance, a state legislature may have spe- bring a civil action to enjoin operation the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice cifically prohibited local action with re- without obtaining the commission’s prior or other expert assistance is required, the services of spect to certain issues, but if the legisla- approval or without giving the DNR no- a competent professional should be sought. ture has not clearly stated, any local tice of its intent to file an action if the Views expressed herein are those of the individual authors and should not be interpreted as statements of regulation must be consistent with state violation was not abated. Thus, the court policy by the American Agricultural Law Association. law by not prohibiting an act permitted held that the ordinance allowed the county Letters and editorial contributions are welcome and by state law or permitting an act prohib- to do indirectly what state law directly should be directed to Linda Grim McCormick, Editor, ited by state law. prohibited. Rt. 2, Box 292A, 2816 C.R. 163, Alvin, TX 77511. In the Iowa case, Goodell v. Humboldt With respect to the county ordinance Copyright 1998 by American Agricultural Law County, No. 312/97-790, 1998 Iowa Sup. requiring a regulated facility to post fi- Association. No part of this newsletter may be LEXIS 37 (Mar. 5, 1998), Humboldt nancial assurance before commencing reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, County claimed the ordinances were operations, the court held that the ordi- recording, or by any information storage or retrieval within its home rule authority because nance conflicted with another Iowa law system, without permission in writing from the publisher. the Iowa legislature had not expressed establishing a manure storage indem- its intention to pre-empt local regulation nity fund for the purpose of “indemnify- of livestock confinement facilities and that the county ordinances were consis- Continued on page 3

2 AGRICULTURAL LAW UPDATE APRIL 1998 Home rule/Cont. from p. 2 ing a county for expenses related to clean- were designed to promote the expansion Iowa case, but the Supreme Court held ing up the site of the confinement feeding of animal agriculture in Iowa by protect- that the ordinances were an exercise of operation.” Because furnishing financial ing those engaged in the care and feeding the county’s police power and were not assurance was made a condition of law- of animals. As such, Iowa law prevented county zoning. As a result, the agricul- ful operation of the large livestock con- an injunction against an animal feeding tural exemption did not apply. The court finement facility by county ordinance, operation based on odors unless certain pointed out that the challenged ordi- the court determined that a facility au- conditions were met, but the county ordi- nances regulated an activity that applied thorized to operate under state law could nance allowed an injunction or abate- uniformly across the county, irrespective be prohibited by the county ordinance. ment without requiring the county to of district classifications which charac- As a result, the ordinance was irreconcil- meet the conditions of the state statute. terize zoning. able with and pre-empted by state law. As such, the court held that there was a Arguably, the Iowa Supreme Court’s The county ordinance prohibiting the direct and irreconcilable conflict between decision is incorrect. Home rule author- application of livestock manure on land the ordinance and Iowa nuisance law and ity is generally construed broadly and it draining into an agricultural drainage was invalid. does allow counties to adopt ordinances well or sinkhole that resulted in contami- The issue of home rule authority is that impose more stringent requirements nation of groundwater unless a permit important to livestock agriculture. As than state law. What the Iowa court has was obtained from the county was held to livestock confinement operations expand said is that ordinances may impose a be in conflict with a state law expressly in size and scope across the country, it higher standard than state law, but must making the DNR exclusively responsible can be expected that counties will at- also be consistent with state law. That is for regulating the disposal of livestock tempt to address potential problems an- a lower standard than being irreconcil- waste from confinement facilities. As ticipated by the existence of such opera- able with state law. Usually, only a high such, the court held that the state had tions in their locality. Absent express degree of inconsistency with state law removed any home rule authority of the statutory language giving counties the will invalidate a local ordinance. In any county to control the land application of authority to address such issues locally, event, the regulation of confinement live- manure from confinement operations. county home rule power may be chal- stock operations will continue to remain The county ordinance restricting odors lenged in court. In addition, in Iowa, as a front burner issue in agriculture for from regulated facilities gave the county in a number of other states (such as years to come. the right to enjoin and abate an animal Kansas), “agricultural activities” are ex- —Roger A. McEowen feeding operation upon a mere showing empt from county zoning. As a result, Associate Professor of Agricultural the operator failed to comply with the affected parties may claim that county Economics and Extension Specialist, county’s standards. However, Iowa law ordinances amount to county zoning and Agricultural Law and Policy, Kansas places limitations on nuisance lawsuits that, consequently, their proposed facili- State University, Manhattan, KS. against animal feeding operations which ties are exempt. That issue arose in the

Citizen suits/Cont. from p. 2 sued and major legislative reform is a lawsuit if he or she can establish (1) finance an environmental mitigation needed to “level the playing field.” that they have suffered an actual or project, the defendant is still vulnerable In citizen suits, individuals act as “pri- threatened injury as a result of the to a citizen suit because some courts have vate attorneys general.” Theoretically defendant’s actions; (2) the injury is “fairly held that such a payment is not a penalty such suits permit citizens to stand in an traceable” to the defendant’s actions; for the purpose of diligent prosecution. agency’s shoes and bring a suit when the and (3) the injury will likely be redressed And certainly an agency decision not to agency responsible for enforcing environ- if the individual prevails in the lawsuit. prosecute a violation provides no defense mental statutes is unwilling or unable to An organization can file suit on behalf of against a citizen suit. do so. To some extent the citizen suits its members if some of its members are Citizen suits are aided by the concept filed in Washington State are a response injured. Citizen suits have been permit- of strict liability. Liability under the to recent state legislation favorable to ted where an organization’s members major environmental statutes can be es- those accused of environmental viola- claimed harm as to aesthetic, environ- tablished without any showing of negli- tions. In 1996, the Washington legisla- mental or recreational interests. gence or fault on the defendant’s behalf. ture passed a law limiting the power of At least sixty days prior to filing suit, The plaintiffs merely need prove that the the state’s ecology department to issue the citizens must notify the alleged viola- defendant has an unexcused violation of penalties for first-time violations. The tor and responsible enforcement agency a standard or permit requirement. For law also permitted companies to request of the planned filing. The sixty-day no- example, in the Washington State citizen compliance assistance inspections in tice serves two purposes. First, the notice suits against dairy producers it is alleged which they would be immune from sanc- allows the alleged violator to come into that the dairies are point sources of pol- tions except in extreme circumstances. compliance. Second, it allows the agency lution and that as such they are required Washington State residents, especially to step in if enforcement is appropriate. to have National Discharge Elimination some in the Yakima Valley, decided that Citizen suits are not appropriate if an System (NPDES) permits. Since they do the states’s response to claims of envi- agency is already diligently prosecuting not have the requested permits, the suits ronmental pollution was inadequate. the alleged violator. What constitutes allege that the Clean Water Act has been Aided by environmental groups from diligent prosecution, however, is not en- violated. Oregon, twenty-five citizens initiated citi- tirely clear. Most courts have held that Persons who file citizen suits have little zen suits. in order to bar a citizen suit, the action or no financial exposure. The plaintiffs There exist very few limitations to the against the alleged violator must be filed routinely form a non-profit organization filing of citizen suits. The citizens of in court. This means that settlement in whose name the lawsuit is brought. course must establish standing to file negotiations with agency enforcement For example, in Washington state the their lawsuit. Citizen suits, however, personnel do not count as diligent pros- citizen suits are filed on behalf of the have a low threshold requirement as to ecution. Even if the alleged violator Community Association for the Restora- standing. An individual has a right to file reaches an agreement with the agency to Continued on p. 7

APRIL 1998 AGRICULTURAL LAW UPDATE 3 Bew are the bold print: li vestock insurance coverage issues By John D. Copeland accidental loss; (7) sinkhole collapse; (8) storm. The policy excluded, however, A farmer recognizes the importance of volcanic action; (9) vandalism; (10) theft; losses caused by “dampness of the atmo- protecting the well-being of his or her (11) collision causing death of covered sphere or extremes of temperature.” 8 The livestock. But regardless of how much livestock; (12) earthquake; and, (13) insured’s calves were killed during a care a farmer provides, some losses are flood. 3 There are, however, limitations on violent storm that produced not only high bound to occur from accidents, disease, the extent of the foregoing coverages. In winds, but also snow and muddy field predators, or acts of God. Recent televi- addition, livestock insurance policies con- conditions. Expert testimony indicated sion coverage of hundreds of exhausted tain a number of critical exclusions that that the calves died from a combination dairy cattle dying in confinement areas further limit coverage for livestock losses. of wind, cold temperatures, snow, the turned into muddy quagmires by El Niño The general exclusion clause typically size and age of the cattle, muddy field rains is a grim reminder of the need for states “[w]e will not pay for a ‘loss’ caused conditions, and the lack of adequate wind livestock insurance coverage. directly or indirectly by any of the follow- protection. Because of the combination of Property insurance coverage for farm ing….” The named perils for which there insured and uninsured perils that caused animals can be obtained through a broad is no coverage commonly include: (1) earth the calves’ deaths, the insurer refused to coverage policy which covers livestock, movement; (2) governmental action, such pay the farmer’s claim. 9 farm machinery, structures, and other as a governmental order to seize or de- Applying Iowa law, the trial court in- personal property; or by means of a sepa- stroy property (except where property is structed the jury to decide if the wind- rate livestock coverage policy. Both policy destroyed to prevent the spread of a fire); storm was the dominant or proximate forms are similar in their coverages and (3) intentional loss; (4) nuclear hazard; cause of the loss, regardless of the other exclusions. The policies define livestock (5) disruption of utility service; (6) ne- contributing factors. Upon determining as cattle, sheep, swine, goats, horses, glect; (7) war and military action; and, (8) that the windstorm was the dominant mules, and donkeys. All other animals water. 4 cause of the insured’s loss, and that wind- are excluded from coverage. 1 When a coverage dispute arises be- storm was a covered peril, the jury re- Some types of animals are ineligible tween an insured and the insurer, a court turned a verdict for the insured. 10 for coverage. Livestock commonly ex- must concern itself with the policy’s in- On appeal, the insurer challenged the cluded include: (1) horses, mules, or don- suring clause and the exclusionary trial court’s instructions. The insurer keys used or bred exclusively for racing, clauses. The first step in any coverage admitted that, if the wind had blown the show, or delivery; (2) cattle and sheep analysis is to determine whether the barn down and the cattle had been killed while on ranges, including livestock be- insured’s losses are within one of the as a result, the loss would have been ing fed on winter crops at range loca- perils described in the insuring clause. If covered. But the insurer contended that tions; (3) livestock being transported to, they are not, the analysis stops. If they the result of the barn being blown down or from, or while at stockyards or com- are, then the court focuses its analysis on was the exposure of the calves to cold air mercial feedlots; and, (4) livestock while the policy’s exclusionary clauses. and snow. But for the excluded cause of in public stockyards, sales barns, sale “extreme temperature” the calves would yards, or packing plants or slaughter Multiple causation not have died. 11 houses. 2 A good example of the complexity of The appellate court, however, upheld determining whether coverage exists for the verdict. The appellate court concluded Covered and excluded perils a farmer’s livestock losses can be found that the wind, among all the causes, was A property insurance policy typically in the coverage for losses caused by a the dominant cause of the calves’ deaths. states that “the policy insures against all windstorm or hail. For example, while Besides destroying the barn, the wind direct loss caused by” specified perils. losses from windstorm or hail are cov- enhanced the effect of all other causes, Livestock coverage insures the farmer or ered, losses due to “winter range” perils, including the intolerable and extremely rancher as to injuries or deaths of live- such as freezing or smothering in bliz- cold temperatures. 12 stock from the perils of: (1) fire or light- zards or snowstorms, are not. 5 Excluded In an interesting 1995 Nebraska case, ening; (2) windstorm or hail; (3) explo- are losses caused directly or indirectly by the Nebraska Supreme Court used mul- sion; (4) riot and civil commotion; (5) snow or sleet, whether wind driven or tiple causation in a rather unique way to aircraft; (6) smoke, causing sudden and not. If a confinement facility collapses compensate a swine producer for a herd from snow accumulation, there is no cov- infected with pseudorabies. The swine erage for the animals injured or killed by became infected after a tornado carried John D. Copeland is Director of the the collapse. A major snowstorm, how- the virus to the producer’s swine-raising National Center for Agricultural Law ever, is frequently accompanied by high operation. The producer’s property in- Research and Information, Fayetteville, winds and the question then becomes one surance insured against windstorms and AR of which peril caused the building to did not specifically exclude infectious This article is to be used as an education collapse—wind or accumulated snow. diseases. The insurance company con- tool and research aid. The use of these State law determines whether the in- tended, however, that the immediate, materials by any individual constitutes sured will be able to collect money from dominant, and proximate cause of the an agreement to hold harmless the author, the insurance company for the loss. Some swine producer’s loss was pseudorabies the National Center for Agricultural Law states permit a recovery where the loss is and not windstorm. The company also Research and Information, the University caused by concurrent perils, so long as contended that, since the airborne trans- of Arkansas, and the United States one of the concurrent perils is covered mission of an infectious disease was not Department of Agriculture for any liability under the policy and the covered peril is a covered peril, there was no liability claims, damages, or expenses that may be the dominant cause of the loss. 6 under the policy. incurred as a result of reference to or In Shinrone v. Insurance Co. of North The Nebraska Supreme Court, how- reliance on the information contained in America, 7 the insured’s policy insured ever, held that the insurance company’s this article. against livestock losses caused by wind- definition of loss from windstorm was too

4 AGRICULTURAL LAW UPDATE APRIL 1998 narrow. It is not necessary that a wind- excluded cause. The court stated the gen- ence of theft had been justified under the storm pick up and throw swine to the eral rule that, if an insured peril com- evidence. 24 earth to constitute a direct cause for the bines with a hazard expressly excluded In contrast to the two foregoing theft loss. If windstorm materials, including a from policy coverage to produce the loss, cases, the insureds were not successful in virus, occasion a loss, the loss is the the insured may not recover.” 17 establishing theft in the South Dakota direct result of the windstorm, because To protect themselves from courts find- case of Insurance Co. of North America v. the windstorm is the dominant cause. ing in favor of insureds where concurrent Sandy and Allen Schultz. 25 Ruling against The court upheld a verdict in favor of the causes are involved, insurers have re- the insureds, the court noted that the swine producer, including $128,732.38 cently added a new provision to their insureds had never reported any unusual in veterinarian expenses to prevent fur- standard exclusion clause. The new pro- occurrences on or around their farm dur- ther damage to the herd related to the vision denies coverage any time an unin- ing the time the insured’s hogs were testing, treating, and management of the sured peril combines with an insured allegedly stolen. The insureds also never pseudorabies. peril to cause a loss. The following is noticed the gradual reduction in their Off-premises power failures certainly typical of the new language: “we will not number of hogs or, consequently, any pose a risk to dairy farmers, pork produc- pay for a ‘loss’ caused directly or indi- decreased income from hog sales. 26 ers, and poultry growers who raise or rectly by any of the following. Such ‘loss’ Unfortunately for many farmers, the keep animals in confined areas and are is excluded regardless of any other cause first time they realize that livestock has dependent upon proper ventilation for or event that contributes concurrently or been stolen is when they take inventory the health of those animals. As a general in any sequence to the ‘loss.’ (emphasis of their livestock. The peril of theft does rule, if power is lost to a “brownout” or added). 18 not include theft discovered upon taking because of the failure of a major trans- inventory. 27 former off the property owner’s premises, Theft or mysterious disappearance and animals die because a ventilation A livestock insurance policy insures Embezzlement and wrongful conver- system fails, then those deaths are not against losses from theft. It excludes, sion covered. 13 But in some cases, the proxi- however, coverage for mysterious disap- When selling livestock, insureds need mate cause of the loss of electrical power pearances. Although the insured has the to be careful as to how they are paid may be a covered peril. burden of proof as to theft, circumstan- because property insurance does not cover In one case a raccoon climbed an elec- tial evidence is often sufficient for a court losses from embezzlement or conversion. trical pole and shorted out a transformer to find coverage. For example, an Ala- Typical of such cases is the Nebraska fuse. As a result, electrical power to the bama court permitted an insured to re- case of Roth v. Farmers Mutual Ins. Co. 28 swine-producer’s confinement facility was cover after cattle disappeared from the The insured had contracted with a third lost and a substantial number of hogs insured’s commercial feedlot. 19 The evi- party to raise pigs for a monthly fee. In died from heat exhaustion. 14 The insur- dence established that searches of the return, the third party was to directly ance company denied that the deaths surrounding countryside, investigations sell some of the pigs and share the pro- b were caused by an insured peril. The by law enforcement personnel, and the ceeds with the insured. The third party producer, however, had purchased a wild insured’s offer of a reward all proved also contracted to purchase some pigs animal endorsement, which protected futile in finding the cattle. Also, testi- from the insured. The third party wrote him from herd losses caused by wild mony was given that an unmarked empty checks to the insured in excess of $11,000 animals. The court held that the endorse- truck had been seen traveling towards from the sale of some of the pigs, but the ment applied because the raccoon was the feedlot on several occasions in the checks were returned as insufficient. The the proximate, although indirect, cause early morning hours. In addition, the insured was neither paid for the pigs nor of the death of the hogs. The court further company did not have a history of trouble did he receive any money from the sale of m held that the policy did not specifically with straying or escaping cattle. 20 In up- other pigs. The plaintiff filed a claim exclude coverage for deaths from heat holding a jury verdict for the insured, the under his property insurance coverage exhaustion. 15 appellate court stated “to hold that the for theft. The insurer denied the claim on Not all jurisdictions, however, look to jury could not have reasonably inferred the basis that a theft had not occurred, determine the dominant cause of a loss from this evidence that the cattle were but instead the insured’s losses resulted where insured and uninsured causes con- stolen would render meaningless the rule from wrongful conversion. 29 In holding cur in destroying property. Using what is that the insured could prove theft through for the insurer, the court explained that often described as a very conservative circumstantial evidence.” 21 conversion constitutes an unauthorized approach, such jurisdictions deny cover- The Iowa case of Wylie v. United Fire wrongful act of dominion exerted over age whenever an uninsured peril com- and Casualty Co. 22 also centered around another’s property which deprives the bines with an insured peril to cause a whether the insured’s livestock were sto- owner of his property permanently or for loss, regardless of which peril is domi- len or mysteriously disappeared. The an indefinite period of time. 30 The court nant. For example, in the 1971 Nebraska insured contended that the mysterious noted that the agreement between the case of Lydick v. Insurance Co. of North disappearance clause applied because insured and the third party did not strip America,16 the insured’s livestock policy there was no evidence of a theft. The the insured of ownership of the pigs, but covered damages caused by windstorm, plaintiff, however, was successful in es- only gave the third party possession of but excluded damage caused directly or tablishing a circumstantial case of theft the pigs. 31 As a result, the insured was indirectly by cold weather or ice. The when he offered evidence that the live- the victim of a wrongful conversion and insured’s cattle were killed when they stock were normally fenced in, neighbors not of theft. Even though the court noted descended into a sheltered area around a never saw the livestock leave the insured’s that conversion is a type of theft in some frozen pond seeking protection from wind barn, the gates to the insured’s farm instances, the court felt it necessary to and cold and fell through the ice on the were never locked, and neighbors ob- construe theft in the context of the con- pond and drowned. The Nebraska Su- served an unfamiliar truck on the version exclusion specified in the insur- preme Court upheld a summary judg- insured’s farm late at night. 23 The trial ance policy and therefore denied the ment for the insurer because collapse of court ruled in favor of the insured and the insured’s claim. 32 the ice on which the cattle stood was an appellate court held that the jury’s infer- Continued on page 6

APRIL 1998 AGRICULTURAL LAW UPDATE 5 Livestock insurance coverage issues/Continued from page 2

Vandalism and malicious mischief carrier’s policy for compensation. There decide whether to use blanket coverage Many farmers have suffered the wan- is, however, coverage for livestock in- or to schedule individual animals. When ton destruction of livestock through acts jured or killed as the result of an accident coverage is blanketed, a limit of liability of vandalism and malicious mischief. Long involving a farmer’s own vehicle in which is indicated for each applicable livestock before drive-by shootings became a part livestock are being transported, so long class—cattle, sheep, swine, goats, horses, of the urban experience, farmers knew as the collision is not with another ve- mules, or donkeys. In addition, a per- the frustration of having their livestock hicle owned or operated by the insured. A animal limit is also assigned. If an ani- injured or killed by such random acts of livestock policy, however, does cover the mal is killed, the producer gets the cash violence. Livestock coverage for vandal- loss of the insured’s vehicle. 41 value of the animal or its assigned per- ism is common in property policies. Dis- Coverage is also provided as to live- animal limit, whichever is less. 46 putes, however, have frequently arisen stock struck by vehicles while livestock In some instances the farmer is better between insureds and their insurance are moving along or standing on a public off scheduling individual animals. This companies as to whether acts of vandal- road. 42 It is important for the insured to is especially true as to animals with an ism must also be malicious in order for remember that property coverage for live- especially high dollar value, such as prime insureds to collect under their policies, stock killed in a collision with a vehicle or champion breeding stock. It is possible especially since some policies provide cov- does not provide the insured with cover- to have blanket coverage as to most of a erage for vandalism or malicious mis- age for any liability claims that the farmer’s livestock and to combine that chief . For example, in Cole v. Country vehicle’s driver or passengers may file with scheduled coverage as to a number Mutual Ins. Co.,33 the insureds lost a against the insured for negligently fail- of particularly valuable animals. substantial number of hogs when elec- ing to keep livestock off the highway. When livestock coverage is written on tricity to the swine barn was turned off a scheduled basis and additional live- by an unknown person pulling the mas- Disease stock are acquired during the policy term, ter lever. The swine suffocated in ap- In purchasing livestock coverage a the newly acquired animals are auto- proximately one hour after the electrical farmer should question her insurance matically covered for up to thirty days. fans ceased operating and temperatures company and agent as to whether the During that thirty-day period the farmer increased in the confinement area with policy covers losses caused by disease, or must get the animals scheduled in order accompanying high levels of carbon diox- if an endorsement to cover disease is for the coverage to continue. 47 ide. 34 available. Two recent cases involving Although the evidence clearly estab- Porcine Reproductive and Respiratory Conclusion lished that the only interference with the Syndrome (PRRS) should concern all Properly insuring against livestock swine barn’s electrical service had to be swine producers. In each case the swine losses can be a difficult task given the from human activity, the insurance com- producer unknowingly purchased swine exclusions contained in livestock policies pany refused to pay the insureds for their infected with the PRRS virus. 43 In one of and judicial interpretations of both in- losses, arguing that there was no proof the cases, the producer expressly told the cluded and excluded perils. The case ex- that anyone had acted maliciously to- seller that he wanted to keep his herd amples contained in this article are just ward the insureds. 35 The court, however, free of PRRS and that he had been reluc- a sampling of the issues that can be held that malicious human activity could tant to change swine suppliers for that raised concerning livestock coverage. be inferred from the building’s open door reason. The company’s agent replied: The insurance industry also modifies and the fact that it took six to ten pounds “Well, that is a pretty good reason to stay standard policies on a routine basis, and of pressure to pull the master lever. The with us.” 44 what losses may have been covered un- court found that the record sufficiently Each of the swine producers suffered der an earlier policy obtained by an in- established a circumstantial case of van- substantial financial losses from PRRS sured may not be covered under a re- dalism and malicious mischief. 36 infecting their herds, and they sued their newed or new policy. Insureds are often In Larsen v. Firemen’s Fund Ins. Co. ,37 suppliers. Unfortunately, the sales con- not aware of these changes. A good ex- the court held malice to be an essential tracts all contained warranty disclaim- ample of a recent change is the addition part of malicious mischief and that com- ers stating that the buyer purchased the of “neglect” as an exclusion. After prop- pensation for damage from vandalism swine “as is” and that the sellers specifi- erty is damaged, an insured has an obli- could not be awarded without proof of cally disclaimed any warranties of mer- gation to take all reasonable steps to malicious conduct. The insured lost 2,000 chantability or fitness of the products for protect the covered property. But the turkeys by suffocation when a low flying any particular purpose. The courts up- “neglect” exclusion may extend beyond airplane frightened them. 38 Although the held the warranty disclaimers and the an “after the fact” undertaking. The ex- insurance policy did not define malicious producers were unable to recover dam- clusion implies that an insured must mischief, the court held malice to be ages from their suppliers. 45 take action to protect the property prior obviously material to malicious mischief. In such a situation, a swine producer’s to a loss. 48 The court found there was no evidence only opportunity to recover his or her It is critical that a farmer know exactly from which a jury could infer that the financial losses lies in a property policy what his livestock insurance policy actu- pilot was prompted by evil motives. 39 The that covers losses from contagious dis- ally covers. Insureds are obligated to court held that the mere fact that the ease. Animal coverage policies, however, read and understand their own policies. plane was flying extremely low did not do not normally list disease as a covered A farmer should not be reluctant to ask rise to the level of malicious mischief. 40 peril. In fact, most policies specifically his insurance agent about any policy pro- exclude coverage if a government agency visions the farmer does not understand, Transportation of livestock and col- orders livestock destroyed to protect other and he should get explanations in writ- lision coverage animals or the public from contagious ing from the agent or home office. The Transportation and collision coverage disease. financial stakes are too high for any are worth noting. As a general rule, there farmer to be inadequately insured against is no coverage for animals injured or Blanket coverage vs. scheduled livestock losses. killed while in a common carrier’s pos- animals session. The farmer must look to her In insuring livestock a farmer must C ontinued on page 7

6 AGRICULTURAL LAW UPDATE APRIL 1998 LIVESTOCK INSURANCE COVERAGE ISSUES/Continued from page 6 31. Id. 1. Fire Casualty and Surety Bulletins, Farms, Assoc., et al, 619 N.E.2d 1222 (Ct. Of Comm. 32. Id. at 615-16. February, 1998, at C.2-1 (1998, The National Pleas Ohio 1993). 33. 282 N.E.2d 216 (Ill. App. Ct. 1972). Underwriter Company) (hereinafter FC&S Bulle- 15. Id. at 1223, 34. Id. at 217. tins). 16. 187 N.W.2d 602 (Neb. 1971). 35. Id. 2. Id. at C.2-2. 17. Id. at 605 (even if the court had used the 36. Id. at 219. 3. Id. at V.2-2-3. dominant cause rule, the insurer would have still 37. 139 N.W.2d 174 (Iowa 1965). 4. Id. at C.2-5-6. probably prevailed because arguably falling through 38. Id. at 175. 5. Id. at C.2-3. the ice was the dominant cause). 39. Id. at 176. 6. Shinrone, Inc. v. Insurance Co. of North 18. FC&S Bulletins, supra note 1, at C.2-5. 40. Id. at 177. America, 570 F.2d 715 (8th Civ. 1978). 19. Coastal Plains Feeders, Inc. v. Hartford Fire 41. FC&S Bulletins, supra note 1, at C.2-3. 7. 570 F.2d 715. Insurance Co., 545 F.2d 448 (5th Cir. 1977). 42. Id. 8. Id. at 717. 20. Id. at 450. 43. Rayle Tech, Inc. v. Dekalb Swine Breeders, 9. Id. 21. Id. at 453. Inc., 133 F.3d 1405 (11th Cir. 1998); Pig Imp. Co., 10. Id. at 718. 22. 220 N.W.2d 635 (Iowa Ct. App. 1974). Inc. v. Middle States Holding Co., 943 F.Supp. 392 11. Id. 23. Id. (D. Del. 1996). 12. Id., see also Graham v. Public Employees 24. Id. at 637. 44. Rayle Tech, Inc., supra note 43, at 1408. Mutual Insurance Co., 656 P.2d 1077 (Wash. 25. 441 N.W.2d 686 (S.D. 1989). 45. Id. at 1411-12; Pig Imp. Co., Inc., supra note 1983) (en banc) (court used dominant cause ana- 26. Id. at 688-89. 43, at 396-97, 407. lytical approach as to losses caused by 1980 27. FC&S Bulletins, supra note 1, at C.2-3. 46. FC&S Bulletins, supra note 1, at C.2-1, C.2- eruption of Mt. St. Helens). 28. 371 N.W.2d 289 (Neb. 1985). 7. 13. FC&S Bulletins, supra note 1, at C.2-6. 29. Id. at 613. 47. Id. at C.2-10. 14. Lochtefeld, et al v. Marion Mutual Insurance 30. Id. at 614. 48. Id. at C.2-6-7.

Citizen suits/Continued from page 3 tion of the Environment, Inc. or CARE. permits sanctions to be levied, including Citizen suits were never intended to be Those who file citizen suits are usually attorneys fees, against plaintiffs who file fund raising mechanisms for self-ap- assisted by some environmental organi- frivolous law suits. Unfortunately , fed- pointed environmental watchdogs. zation. In Washington state, CARE is eral courts have traditionally been reluc- —John D. Copeland, Director, Nat.l represented by the Western Environmen- tant to impose Rule 11 sanctions against Center for Agricultural Law Research tal Law Center and the Columbia Basin plaintiffs. and Information, Fayetteville, AR Institute. Some commentators have questioned This article is to be used an educational tool For environmental organizations, citi- the constitutionality of citizen suits. They and research aid. The use of these materials by zens suits are a windfall. A citizen suit contend that citizen suits constitute an any individual constitutes an agreement to hold gives the organization widespread, and unconstitutional encroachment by Con- harmless the author, the National Center for often favorable, publicity, that can trans- gress on the Executive Branch’s author- Agricultural Law Research and Information, the University of arkansas, and the United late into donations and increased mem- ity. Citizen suits remove the power of States Department of Agriculture for any liabil- bership. If successful in obtaining a prosecutorial discretion from the Execu- ity claims, damages, or expenses that may be judgment or settlement, the citizen group, tive branch and transfer it to private incurred as a result of reference to or reliance on and thus its attorneys, are entitled to citizens. Private citizens are empowered the ineofmraiton contained in this article. collect attorneys’ fees and court costs to not only seek injunctive relief but also from the defendant. Even more impor- fines on behalf of the treasury. For tantly, as part of a settlement the ac- example, in the Washington state dairy cused polluter may be forced to make a cases citizens are seeking fines of up to F ederal Register substantial financial contribution to an $27,000 per violation per day. environmental organization (such as one Thus far, however, the courts have in brief that brought the suit) or fund an environ- rejected all constitutional attacks on the The following is a selection of items that mental project. These so-called “supple- citizen suit provisions of the various fed- were published in the Federal Register mental environmental projects” (SEPs) eral environmental statutes. The only from February 23 to March 26, 1998. enable financially strapped environmen- means of controlling the increasing num- 1. CCC; Procurement of processed ag- tal organizations to utilize citizen suits ber of citizen suits is legislative reform. ricultural commodities for donation un- as fund raisers. A critical reform measure would be a der Title II, P.L. #480; shipment through And what happens if the group bring- “winner take all” provision that would Great Lakes ports; final rule; effective ing the litigation loses the lawsuit and a permit the prevailing party in environ- date 4/6/98. 63 Fed. Reg. 11101. verdict is returned for the defendant? mental litigation to collect attorneys’ fees 2. NRCS; Notice of proposed changes Are the members of the plaintiff non- and court costs from the losing side. in NRCS National Handbook of Conser- profit organization required to pay the There is no legitimate reason for expos- vation Practices for review and comment; defendant’s attorneys’ fees or court costs? ing defendants only to the payment of all comments due 5/18/98. 63 Fed. Reg. The answer is an unequivocal no. Under attorneys’ fees and court costs. 13166. the current federal law, only winning Restraints on supplemental environ- 3. Agricultural Marketing Service; To- plaintiffs are entitled to be reimbursed mental projects also need to be imposed. matoes grown in Florida; imported toma- for attorneys’ fees and court costs. De- Environmental organizations should not toes; final rule to change minimum grade fendants, win or lose, must bear all of be able to obtain financial windfalls from standards; effective date 3/30/98. 63 Fed. their own costs. Obviously, this further pursuing citizen suit claims on behalf of Reg. 12396. tilts an already uneven playing field to- private individuals and organizations. It 4. APHIS; Fruit fly cooperative eradi- ward the plaintiffs. should be enough that such environmen- cation program environmental impact The only redress that defendants have tal organizations receive attorneys’ fees statement; comments due 4/20/98. 63 against plaintiffs is Rule 11 of the Fed- and court costs if they are successful in Fed. Reg. 13614. eral Rules of Civil Procedure. Rule 11 bringing legal action against a violator. —Linda Grim McCormick, Alvin, TX

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