Eighth Circuit reverses dismissal of government's False Claims Act allegations in crop insurance case

by Ben Vernia | August 25th, 2010

In an August 23 decision in United States v. Hawley, the Eighth Circuit Court of Appeals reversed a man’s summary judgment victory in a suit brought by the United States. The government’s complaint alleged that the defendant, a private crop insurance agent in Iowa, fraudulently obtained crop insurance on behalf of two brothers who had no insurable interest in the crops, and who received payment following losses.

The court concluded:

  • Under prior section 3729(a)(1), that a genuine issue of material fact existed whether the private crop insurance company which issued the policies had submitted claims for the losses to the federal government;
  • Under prior section 3729(a)(2), that the defendant’s long experience selling federally subsidized crop insurance permitted a reasonable inference that he knew that a natural and foreseeable consequence of his submission of false insurance applications and acreage reports to the private insurer would be that the company would use those records to get the government to pay its claims (and for a similar reason, a genuine issue of fact existed for a conspiracy claim under former section 3729(a)(3); and
  • That under Iowa common law fraud, a jury could find that the defendant had reason to expect that the insurance company would pass on his alleged misrepresentations to the government, and that they would rely on them.

Comment: The court’s reference to Iowa’s common law of fraud seems to be erroneous. The federal government’s common law fraud claims are governed by federal common law, not law borrowed from the state in which the suit is brought. The issue was not briefed by the parties here, and was apparently not material to the outcome.

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