BULLETIN NO.: MGR-95-008 TO: All Reinsured Companies CFSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Kenneth D. Ackerman Acting Deputy Administrator SUBJECT: Entity Determinations and Providing Proof of Insurance The following information provides revised guidelines for determining entities and how crop insurance policies will be written to ensure that producers meet the linkage requirements contained in the Federal Crop Insurance Reform Act of 1994. Multiple Landlords: Q: Many farms are operated by a single tenant-producer but are owned by multiple landlords each of which owns an undivided interest in the land. Often these undivided interests can be very small. If they purchase catastrophic coverage from a Consolidated Farm Service Agency (CFSA) office, must each of the multiple landlords obtain a separate policy and pay a separate $50 processing fee? A: If each landlord is considered a separate entity for purposes of the farm programs and receives a separate farm program payment, then yes, each must obtain a separate policy from the CFSA. However, the multiple owners can choose to combine their interests under the farm programs with a single partnership or joint venture tax identification number to obtain a single CFSA farm program payment. If they do so, then only a single policy and single $50 payment is required for CFSA. For catastrophic coverage (CAT) policies sold by reinsured companies. If a formal partnership exists, the policy will contain a partnership or joint venture tax identification number and be accompanied by substantial beneficial interest (SBI) records for the member partners. If an informal partnership exists, reinsured companies will need to advise the partnership that it must either "formalize" and obtain a partnership or joint venture tax identification number, or insure as individual entities with each individual policy-holder using his or her individual social security number. To maintain their farm program eligibility, members within informal partnerships must take action so that the entity with crop insurance is consistent with the entity receiving any farm program payment benefit. For buy-up policies sold by reinsured companies. Consistent with FCIC policies and procedures, informal partnerships do not need to "formalize" as discussed above. However, to maintain their farm program eligibility, members within informal partnerships must take action so that the entity tax identification number under the crop insurance policy is consistent with the entity tax identification number receiving any farm program payment benefit in order to assist in verifying linkage and prevent delay of program benefit payments. Husbands and Wives: Q: Many farms are operated by husbands and wives who own undivided interests in the operation but qualify to receive separate farm program payments. In this case, must the husband and wife each obtain a separate policy and pay a separate $50 processing fee? A: Under crop insurance rules, husband and wife are considered a single entity covered by a single policy unless they maintain fully separate operations requiring separate policy treatment. In the general case, CFSA offices may cover the husband and wife under a single policy, requiring payment of a single $50 processing fee. For policies issued after receipt of this notice, the policy should list the social security or tax identification numbers of both the husband and wife. For CFSA, since the computer software only allows for entry of one of the ID numbers, the other number may be handwritten or typed on the hard copy of the policy. For 1995 policies issued after this notice, private insurers can and are encouraged to list the spouse's number as an SBI entry in order to assist in verifying linkage and prevent delay in program benefits. For 1996, the spouse's tax identification number will be required to be listed as an SBI entry in these cases where the spouse owns a separate interest in the operation and, as a result, receives a separate program benefit. Note that this response reflects a change for CFSA offices. If separate policies for a husband and wife have already been written, the policies may be corrected and both spouses' interests may be covered under one policy at the request of the policyholders, and a refund of the administrative fee may be requested and provided. Tenants (landlords) insuring landlords (tenants): Q: For buy-up policies sold by reinsured companies where a tenant (landlord) purchases coverage for the landlord (tenant) other party on a single policy and the other party's name does not appear as an SBI entry, how will CFSA recognize the landlord (tenant) for linkage purposes? A: Linkage will be satisfied for both the tenant and the landlord under this arrangement. For 1995 policies issued after this notice, private insurers can and are encouraged to list the other party's number on the policy as an SBI entry in order to assist in verifying linkage and prevent delay in program benefits. Persons not identified by tax identification numbers associated with their policies will be required to provide proof of insurance at the county office in order to be eligible for program benefits. Proof of Linkage Compliance: Q: What documentation must a producer provide when signing up for a CFSA farm benefit program in order to demonstrate compliance with the linkage requirement? A: CFSA procedure (1-RM Amend.1, page 2-3) indicates that the producer must provide either a copy of the signed application from the private insurance company or a signed statement from the agent indicating the crop year, producer's name, tax identification number, and crops insured. Since 1-RM was issued, it has been agreed that any document provided by the agent to the policyholder indicating the above information will be sufficient to demonstrate compliance. County offices had been instructed to request lists of policyholders from agents to verify coverage; however, county offices are not authorized to request, nor are agents required to provide such lists. It is the producer's responsibility to obtain the information necessary from the agent to show that they have met the linkage requirement.