Seventy years ago, in Screws v. United States, 325 U.S. 91 (1945), the U.S. Supreme Court declared that “[i]gnorance of the law is no excuse for men in general.”  It now appears that farmers who buy liability insurancemight be excepted from the general rule.  The plaintiffs in Parker v. Farm Bureau Prop. & Cas. Ins. Co., No. 6:15-cv-01204 (D. Kan. Nov. 16, 2015)intentionally sold a variety of grain that was the subject of an exclusive license.  But a federal court in Kansas held that their actions did not fall within the “intentional acts” exclusion of a liability policy, because they claimed they had no knowledge of the statute that created the license.

From a Small Seed a Mighty Trunk May Grow

Brett Parker is the “B” of D&B Parker Farms, a crop farm in Waterville, Kansas.  In September 2013, D&B began advertising a three-variety blend of wheat seed.  The blend included the “Fuller” variety—a breed with a “very good shattering reputation.”

As it turned out, the Fuller variety is covered by the Plant Variety Protection Act of 1970 (“PVPA”), 7 U.S.C. §§ 2321-2582.  The PVPA provides intellectual property protection to breeders of sexually-reproduced or tuber-propagated plant varieties (other than fungi or bacteria, of course) that are “new,” “distinct,” “uniform” and “stable.”  The exclusive license to make, use and sell the Fuller variety under the PVPA was held by the Kansas Wheat Alliance (“KWA”).

Responding to Mr. Parker’s advertisement, an investigator hired by the KWA bought 172 bushels of the three-variety blend. The Alliance then sued Mr. Parker and his company, invoking the treble damages provision of the PVPA.

I Meant To Do That

Both Mr. Parker and D&B were insured under a liability policy issued by Farm Bureau Property & Casualty Insurance Company, which provided coverage for “personal injury/advertising injury,” including “injuries caused by infringement or misappropriation of … title.”  The defendants tendered the KWA suit to Farm Bureau, but the insurer refused to defend.

In denying the claim, the insurer relied on the policy’s intentional acts exclusion, which provided:

There is no coverage for any loss [or] damages … ‘arising out of’ any act which is expected or intended by any ‘insured’ to cause injury to any ‘person’ or damage to any property belonging to … others.

The policy also stated that this exclusion applied to any act of an insured

that can reasonably be expected to cause a loss or injury, even if the ‘insured’ failed to … anticipate the injury or damage.

The insurer maintained that the exclusion applied, because it was undisputed that Parker and D&B had voluntarily and intentionally infringed the property rights of the KWA by advertising and selling Fuller seed.

Who Knew?

The insureds settled the suit and paid their own litigation costs, then brought a separate action against the insurer.  Among other things, their complaint alleged that, at the time he advertised and sold the Fuller seeds,

Parker had no idea of the existence of the PVPA or the protections that it grants to owners of varieties of seed wheat.

In response to the insurer’s motion to dismiss, therefore, the policyholders conceded that the sale of the seeds had been an “intentional act,” but they maintained that it was not an act which was “expected or intended … to cause injury” within the meaning of the exclusion.

The insureds also cited Thomas v. Benchmark Ins. Co., 285 Kan. 918 (2008).  The insured in Thomas hadunintentionally killed one passenger in her car and injured another—by trying to escape the police in a high-speed chase, after engaging in a gun fight.  The Kansas Supreme Court explained that the intentional acts exclusion in the insured’s automobile policy would apply under the following circumstances:

The insured must have intended both the act and to cause some kind of injury or damage.  Intent to cause the injury or damage can be actual or it can be inferred from the nature of the act when the consequences are substantially certain to result from the act.

The high court found that the driver’s intentional conduct of fleeing police at a high rate of speed was such that she knew, or should have known, it was substantially certain to result in injury.  It ruled in favor of the insurer, finding that the intentional acts exclusion applied to bar coverage.

It’s Not What You Know

In Parker, the federal court found that “the focus of the [intentional acts] exclusion is on whether the insured expected or intended to cause an injury.”  In ruling on a motion to dismiss (which required the allegations of the complaint to be read in a light favorable to the policyholder plaintiffs), the court was not prepared to find that Mr. Parker’s actions were comparable to those of the reckless driver in Thomas:

Under the allegations in the complaint, Parker did not intend his sales of wheat to cause injury.  Nor can it reasonably be said that injury to another’s property was substantially certain to result from the nature of his actions.  Engaging in a sale of wheat without knowledge that another person has a protected property interest in that variety cannot reasonably be characterized as causing ‘an expected or intended injury.’

The court’s decision undoubtedly had something to do with its sense that a federal law licensing the sale of sexually-reproduced or tuber-propagated plant varieties is not a matter of common knowledge.  In fact, the court opened its opinion this way:  “If you have never heard of the Plant Variety Protection Act, you are not alone.”

But it does not seem particularly far-fetched to propose that Kansas crop farmers, in the business of marketing seeds, could be charged with knowledge that at least some plant varieties are covered by laws that protect intellectual property–even if the details are obscure.  And, if that is the case, it can also be argued that advertising seed varieties for sale, without investigating their provenance, is an omission that, at a minimum, can “reasonably be expected to cause … injury” to the property rights of others.

The court probably would have been less reluctant to apply the intentional acts exclusion, for example, to a business that offered music for sale, without inquiring about copyrights.  In Parker, therefore, it appears that the rural insureds might have benefited from the soft bigotry of low expectations.