                 United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 15-2202
                         ___________________________

                            Bruhn Farms Joint Venture

                        lllllllllllllllllllll Plaintiff - Appellant

                                            v.

                        Fireman's Fund Insurance Company

                       lllllllllllllllllllll Defendant - Appellee
                                      ____________

                     Appeal from United States District Court
                   for the Northern District of Iowa - Sioux City
                                  ____________

                           Submitted: February 11, 2016
                              Filed: May 25, 2016
                                 ____________

Before SHEPHERD, BEAM, and KELLY, Circuit Judges.
                           ____________

BEAM, Circuit Judge.

      Bruhn Farms Joint Venture (Bruhn) appeals the district court's grant of
summary judgment in favor of Fireman's Fund Insurance Company (Fireman's) in this
insurance dispute over the adjusted value of hail-damaged crops in northwest Iowa.
 Because a factual dispute remains regarding the adjustment of this claim, we reverse
and remand to the district court for further proceedings.
I.     BACKGROUND

       Rural Community Insurance Services (RCIS), acting as managing general agent
for Fireman's, issued a policy of crop-hail insurance to Bruhn. The policy afforded
coverage during the 2012 crop year for direct loss due to hail and certain other
specified perils. Bruhn sustained a significant hail loss on September 11, 2012, and
reported that loss to RCIS. Adjustment of the loss was assigned to RCIS adjuster
Galen Sornson. Although the loss occurred in early September, Bruhn had still not
heard from RCIS or its adjusters in mid-October. Accordingly, Bruhn requested and
obtained approval from RCIS to harvest its crops and leave check strips for the
adjusters. Because the loss potentially involved more than 5,000 acres, a six-person
team was assembled to work the loss. The team of adjusters did not arrive at the
Bruhn farm until October 29, 2012,1 more than a month after receiving notice of the
loss, during which time harvest had occurred and volatile weather conditions
persisted in Iowa. Indeed, according to Alan Bruhn (Alan), a partner of Bruhn,
weather conditions were cold and windy on the two days that the adjusters were in the
fields counting check strips, and the adjusters spent a considerable amount of time in
the barn and in their trucks, trying to warm up. Bruhn's expert opined that the
adjusters could not have spent a sufficient amount of time in the fields over those two
days to properly adjust a claim covering the number of acres over which Bruhn had
reported damage.

        Nonetheless, the adjusters purportedly completed their counts using the check
strips that had been left in the fields and reported that sufficient check strips were left
in each field to complete the adjustment process. According to their survey sheets,

      1
        Fireman's contends the field inspection occurred a week earlier, on October
22-23. Given that Bruhn is the nonmovant, we accept Bruhn's version of the factual
record and note that the record indicates that at least two adjusters who completed the
field review (including Sornson) stated that the adjustment occurred on October 29-
30.

                                           -2-
the adjusters determined that 4,120.5 acres of soybeans had payable hail losses.
Based on the crop-hail loss-adjustment procedures set forth in the respective National
Crop Insurance Services (NCIS) manuals, the RCIS adjusters found losses ranging
from 2.3% to 71.4%. On October 30, Sornson completed the proof of loss for the
September 11 claim. Sornson attempted to meet with Alan to discuss the claim on
October 30 before leaving the Bruhn farm, but Alan was sick and unable to meet.
Sornson faxed a copy of the proof of loss to Alan on November 5, 2012.

       Bruhn did not agree with the adjusters' calculations and Alan refused to sign
the proof of loss. Sornson's supervisor conducted a review of the Bruhn claim in late
November 2012 and determined that the loss had been properly adjusted in
accordance with NCIS crop-hail procedures. On November 28, 2012, despite Bruhn's
disagreement and without its approval or Alan's signature, RCIS issued payment to
Bruhn for the amount RCIS had determined was payable for the losses: $417,636 for
the loss, less a premium credit of $184,578, for a net payment of $233,058. A check
in that amount was delivered to Alan's residence via FedEx on December 4, 2012.

       After the check was delivered, Alan directed his insurance agent, Terry
Nielsen, to inquire as to how he could dispute the paid amount. Nielsen, in turn,
contacted Rod Nelson, the manager of RCIS's Regional Service Office. According
to Nielsen, Nelson suggested that in order to reconsider the loss determination, the
insurance company would look at records of historical yields. It was Nelson's
recollection that Nielsen was the one who suggested looking at historical yields,
although Nelson agreed in his deposition that looking at historical yield numbers
would be part of the process. The next incident of note occurred on December 15,
2012, when Nielsen inquired of Nelson about the status of the claim, and Nelson
responded via text message that they were "one drink away" from settling Bruhn's
claim. However, when contacted the next day, Nelson stated that there was nothing
further RCIS could do with regard to Bruhn's claim.



                                         -3-
       Following this news from Nelson, Alan met with Larry Burkhart, RCIS's Crop-
Hail/Named Peril Field Claims Manager, on December 18, 2012. During the meeting,
Burkhart also advised Alan that he would conduct a review of the claim and would,
among other things, look at Bruhn's historical yields. Alan contended that his
historical yield records would result in a much higher payment. During the meeting,
Alan contends Burkhart told him to be patient while they gathered information and
considered the claim, because the claim had been mishandled. Nielsen alleges that
several weeks later, Burkhart advised him they were about $25,000 apart on the
claim, somewhere in the neighborhood of $900,000. Nielsen relayed this information
to Alan, who directed him to settle for the lower number. However when Nielsen
contacted Burkhart to tell him Alan was willing to take the lower number, Burkhart
retreated, and instead informed Nielsen that after reviewing the available information,
he concluded that RCIS's original loss determinations were correct. On January 25,
2013, Burkhart sent a letter to Bruhn indicating that RCIS had completed the review
and determined that the claim was properly adjusted and paid.

       Bruhn commenced this action in Iowa state court on October 3, 2013, against
Fireman's. The petition alleged a breach of contract and also contended that punitive
damages were appropriate due to the bad-faith refusal to pay the claim. Fireman's
removed the case to federal court, invoking the court's diversity jurisdiction pursuant
to 28 U.S.C. § 1332(a). The parties unanimously consented to trial, disposition and
judgment by a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c)(3).
Upon motion, the court granted summary judgment in favor of Fireman's, finding that
it had not breached the contract because Fireman's followed NCIS guidelines in
determining the amount of loss, and that in any event, Bruhn did not ask for an
independent appraisal as provided for in the insurance contract. The court
additionally held that in the absence of a breach of contract, Fireman's position with
respect to the claim was fairly debatable, and thus the claim for bad faith failed.
Bruhn appeals.



                                         -4-
II.   DISCUSSION

       Summary judgment is appropriate when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue of material fact and that the moving party is entitled to a
judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A
material fact is one that might affect the outcome of the case. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). We review the evidence in the light most
favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). Because the basis for our jurisdiction is diversity of the
parties, Iowa law controls, and we review the district court's interpretation of Iowa
law and its grant of summary judgment de novo. Praetorian Ins. Co. v. Site
Inspection, LLC, 604 F.3d 509, 513, 515 (8th Cir. 2010).

      Bruhn currently contends2 Fireman's breached the contract in three ways: by




      2
        Fireman's argues that Bruhn did not advance these arguments before the
district court, and we thus cannot consider them on appeal. However, we find that
these theories were pleaded in the complaint. See Pl.'s Compl. ¶ 24, J.A. 11. And
having examined the record, we find there is more than sufficient evidence adduced
at the summary judgment stage to reveal a factual dispute about whether a breach of
contract occurred based upon these theories. Numerous excerpts of deposition
testimony in the record tend to support Bruhn's theory that the claim adjustment
process was unduly delayed, that Bruhn never agreed to the amount that was paid,
and that by the time it was clear there would be no agreement between the insurance
company and Bruhn, the opportunity for an independent appraisal had passed.
Further, Bruhn introduced an expert report addressing the substance of these
arguments. Even if that were not the case, in certain instances we have discretion to
consider arguments not advanced below, and we exercise that discretion in this case.


                                          -5-
paying the loss without reaching agreement with Bruhn, in violation of § 3(b) of the
policy; by failing to invoke the appraisal procedure, in violation of § 6 of the policy;
and by failing to follow the NCIS shatter loss procedures when determining
percentage of the loss, in violation of policy § 3(c). We find that there is a factual
dispute with respect to at least the first two of these contentions.

       In a breach-of-contract claim, the complaining party must prove the existence,
terms, and conditions of the contract, that he has performed all of the terms and
conditions required under the contract, but that the defendant breached the contract
and caused him damages. Molo Oil Co. v. River City Ford Truck Sales, Inc., 578
N.W.2d 222, 224 (Iowa 1998). A party breaches when he fails to perform part of the
contract without legal excuse. Id. Section 3(b)(2) of the policy states that it is the
insurance company's duty to "[p]ay the loss within 30 days after we reach agreement
with you, entry of a final judgment, or the filing of any appraisal award with us."
Section 6 of the policy states that if the insured and insurer "fail to agree on the
percentage of loss," then "[o]ne of us will demand in writing that the percentage of
loss be set by appraisal." Reading these provisions together, we find there is a factual
dispute about whether Fireman's breached its obligations to its insured in this case.

      Bruhn contends Fireman's breached the agreement by tendering payment for
the loss without first reaching agreement with Bruhn, without entry of a final
judgment, and without the filing of any appraisal award, in violation of policy §
3(b)(2). Fireman's contends that the provision merely provides a payment deadline,


See Warren v. City of Lincoln, 864 F.2d 1436, 1439 (8th Cir. 1989) (en banc)
(holding that while we generally do not consider arguments not advanced below, we
may do so where the record is fully developed); see also United States v. Lucas, 499
F.3d 769, 789 (8th Cir. 2007) (en banc) (Beam, J., dissenting) (noting that the
majority rested its holding in part upon theories and arguments raised for the first
time in a petition for rehearing en banc).


                                          -6-
not a condition precedent to payment issuance. We disagree that the section provides
only a deadline to pay, as it is the only instance in the contract mentioning Fireman's
duty to pay. Reading this section as only providing a deadline would thus effectively
eliminate the duty to pay. And, when read in connection with the appraisal provisions
of § 6, it seems that the policy's framework ideally intends for the insured and the
company to come to an agreement without the need to resort to litigation. Instead of
coming to an agreement, however, Fireman's unilaterally tendered a payment to
Bruhn. Nielsen testified in his deposition that he had not known an insurance
company to issue a check without the agreement or approval of the insured in his
thirty-five years in the insurance agent business. Bruhn's expert also indicated that
remitting payment without the insured's agreement was an unusual procedure. Thus,
Fireman's attempt to pay the claim without the agreement of Bruhn speaks to the
irregularity of proceedings that occurred in processing this claim.

      Once Fireman's tendered payment well below Alan's expectations, Alan and his
agent immediately let RCIS officials know that he disagreed with the loss
calculations. This was likely sufficient to trigger an appraisal. However, discussions
between RCIS officials and Bruhn or its agent Nielsen continued from early
November into January. While Bruhn did not specifically demand an appraisal, it
claims this is because it was led to believe that Fireman's adjuster would change the
amount after reviewing the historical yields. By the time Bruhn realized this would
not occur, it was too late for an appraisal and the workable evidence (check strips)
had, by that time in late January, been naturally destroyed. Alan testified that he was
under the impression the loss would be reworked and reevaluated up until the time
when it was finally denied in mid-to-late January. The policy does not place the
burden exclusively upon Bruhn to invoke the appraisal procedure. Nor does the
policy specifically place the burden on Fireman's. But, Fireman's drafted the policy,
and at the very least there is a factual dispute over who should have invoked the
policy's language regarding the appraisal procedure. Hornick v. Owners Ins. Co., 511



                                         -7-
N.W.2d 370, 374 (Iowa 1993) (holding that it is the insurer's duty to define terms in
clear and explicit language).

       To the extent that Fireman's again complains that this theory was not advanced
below, we note that in Bruhn's answer to interrogatory number eleven, which the
district court heavily relied upon in granting summary judgment, Bruhn alleges that
"the company denied Bruhn the opportunity to have an independent appraisal of the
loss which is afforded under the policy." Fireman's alleges Bruhn was free to pursue
the appraisal option at any point. However, given the allegedly misleading
adjustment activity by Fireman's after the check strips were destroyed, a factfinder
should decide whether, how, and who should have invoked the appraisal procedure,
which invocation would have allowed the parties to come to an agreement over the
amount of the September 11, 2012, hail loss.

       This leave us with Bruhn's claim for bad-faith refusal to pay. Bad-faith claims
require proof of the absence of a reasonable basis for an insurance company's denial
of the claim, and that the company had knowledge or recklessly disregarded
knowledge that its denial was without reasonable basis. Dolan v. Aid Ins. Co., 431
N.W.2d 790, 794 (Iowa 1988). The first element is objective, and the second,
subjective. Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa
2005). An insurance company has the right to dispute claims that are fairly debatable
without being subject to a bad-faith tort claim. Gardner v. Hartford Ins. Accident &
Indem. Co., 659 N.W.2d 198, 206 (Iowa 2003). Although Fireman's did not
completely refuse to pay the claim, its payment of less than the full amount, if that
occurred, can also be the subject of a bad-faith claim. See Chadima v. Nat'l Fid. Life
Ins. Co., 55 F.3d 345, 346, 350 (8th Cir. 1995) (applying Iowa law, allowing bad-
faith claim to be decided by the factfinder when the insurance company paid about
$91,000 on a claim alleged to be worth over $136,000).




                                         -8-
       Because we decide that there is an issue of fact as to whether Fireman's
breached the insurance contract, and because the factual issues in the breach claim are
relevant to the bad-faith claim, this claim survives summary judgment as well.
Numerous instances of conduct by the insurance representative and adjusters at the
very least raise jury issues on bad faith, most specifically the delay in adjusting the
fields and then, for the next several months, leading Bruhn to believe that the claim
would be favorably settled without having to go through the hassle of a joint
appraisal. See A.W.G. Farms, Inc. v. Fed. Crop Ins. Corp., 757 F.2d 720, 728-29 (8th
Cir. 1985) (holding that the federal crop insurance agency led farmers down a
"primrose path" that ultimately resulted in the defeat of the insurance claim, contrary
to the covenant of good faith and fair dealing implied in every contract). There was
also evidence that RCIS officials and adjusters found it difficult to get in touch with
Alan, and that he had been difficult to work with on past claims. Alan and his agent
Nielsen claim that they were readily available and were aggravated throughout the
month of October that the adjusters had not yet inspected his fields. Although
Fireman's argues that the delay in adjusting the claim was due to Alan's conduct,
Sornson's notes indicate that the insurance company had to wait for help from more
adjusters, and this caused a delay in adjusting the fields. All of the foregoing points
to the myriad factual disputes running through this case. Specifically with regard to
bad faith, however, given that the evidence in the fields was subject to spoliation, and
the fact that the claim was not finally decided until January when the evidence was
necessarily gone, there remains a factual dispute on that issue. See Chadima, 55 F.3d
at 350 (holding there was sufficient evidence from which a reasonable jury could
decide that the insurer had no reasonable basis for underpaying the claim).

III.   CONCLUSION

       We reverse and remand for further proceedings.
                      ______________________________



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