BULLETIN NO.: MGR-96-010 TO: All Reinsured Companies FSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Kenneth D. Ackerman Deputy Administrator SUBJECT: Potato Loss Adjustment for the 1996 Crop Year BACKGROUND: The potato policy does not provide insurance for any loss of production due to, among other specified causes, damage that occurs or becomes evident after the potatoes have been placed in storage. In recent years, administration of these provisions has been complicated by increased infestations by diseases, particularly late blight, for which visual identification of tuber symptoms at harvest is often restricted or precluded. Procedures for handling loss adjustment have been revised and strengthened annually since the 1992 crop year, as more information has been gained in both the scientific community and the crop insurance industry. The purpose of this bulletin is to transmit the standards for adjusting 1996 crop year potato losses due to soft rot, wet breakdown, late blight tuber rot, or other tuber rot conditions. These standards will be incorporated into the 1996 crop year potato loss adjustment standards and procedures issued and approved by the Federal Crop Insurance Corporation. ACTION: Insurance providers are to handle claims as follows when, due to an insurable cause within the insurance period, 5 percent or more of potatoes (by weight) have soft rot, wet breakdown, late blight tuber rot (as defined in the United States Standards for Grades of Potatoes) or other tuber rot condition, exclusive of freeze damage (follow Potato Handbook instructions), hollow heart, or other physiological disorders. Hereafter, soft rot, wet breakdown, late blight tuber rot, and other pathological tuber rot conditions will be referred to as "tuber rot." 1 Notification Required from Insurance Providers Insurance providers must advise all insureds in writing: (a) to notify the provider immediately of any potato fields that are suspected of being affected by organisms or conditions that may result in tuber rot. (b) to use recommendations from the Cooperative State Research, Education, and Extension Service (CSREES), local universities, State Department of Agriculture, or other recognized pest management specialists for controlling conditions, such as late blight, that may later lead to tuber rot. (c) that failure to provide such notification may result in appraisals for uninsured causes of loss if it jeopardizes the ability of the insurance provider to: determine that the loss is due to insurable causes, determine the percentage of potatoes affected, ensure that severely affected areas have been and /or are being properly handled separately, and determine that other recognized good potato farming practices have been followed to minimize the loss. (d) that if, at the time of inspection, the tubers are not showing symptoms of tuber rot, insureds must advise the insurance provider when they are going to harvest so that the insurance provider can have the opportunity to inspect the potatoes before they are placed into storage. 2 Notification Required from Insureds Insureds must notify the insurance provider as stated in paragraph 1 (a) and (d) above. 3 Field Inspections A When insurance providers receive notification from insureds, they are to: (1) inspect the fields prior to harvest to detect whether tuber rot, or organisms or conditions that lead to tuber rot are present, and (2) document the findings of this inspection in the policyholder's file. However, if disease or conditions are general and widespread in the area and this creates such a heavy workload that it prevents the insurance provider from making a timely inspection prior to harvest, the inspection can be made during or immediately after harvest, provided representative samples can be obtained prior to potatoes being placed in storage. If a heavy workload (or if access to fields is being restricted to avoid spreading disease to other fields) is going to prevent insurance providers from being able to obtain samples prior to potatoes being placed in storage, contact the Regional Service Office (RSO) for further instructions. See paragraph 3 D below for documentation requirements. (1) Severely affected areas must be marked off and handled separately from the rest of the field. If the insured intends to harvest these areas separately, insurance providers are to inform the insured to keep the production from the affected areas separate from production from unaffected areas. (2) If resources and conditions permit, the adjuster is to dig representative samples as indicated in B below. However, if vine kill prevents visual detection of vine infestation and/or it has been recommended not to dig samples at this time to avoid spreading disease to the tubers, insurance providers are to use any practical means to verify the infestation (e.g., obtaining or verifying copies of chemical receipts and spraying records to substantiate efforts taken to control the cause of the infestation). (3) If, at the time of the field inspection, harvest has not occurred and no samples have been taken (or tubers from samples do not show physical symptoms of tuber rot), instruct the insured to notify the insurance provider of the date potatoes are going to be harvested so that the insurance provider can have the opportunity to inspect the potatoes prior to their being placed in storage. B Representative Samples (1) If tuber-rot symptoms are evident, loss adjusters are to take representative samples from heavily-infested areas in which the potatoes are left in the field (or storage facility if this is an inspection of stored potatoes) to determine the percentage of tuber rot. (2) If the tubers show no symptoms of tuber rot at the time of inspection but disease or other insurable conditions that may later lead to tuber rot are evident in the vines or field, document this fact and inform the insured to notify the insurance provider immediately if symptoms of tuber rot are subsequently discovered. Instruct the insured to notify the insurance provider immediately if symptoms become evident in stored potatoes within 60 calendar days of harvest. Upon the insured's notification, the loss adjuster is to immediately obtain representative samples from infected lots of stored potatoes to verify and document the percentages of tuber rot caused by insured causes of loss. Note: Recognized serological assay techniques or tuber samples incubated at preferred climatic conditions may be used to expedite quantification of the actual infection percentage. If laboratory facilities are needed for testing, please contact the RSO for a list of available facilities. (3) The percentage of potatoes having tuber rot will be determined (by weight), as follows: divide the weight of infected potatoes in the sample by the total weight (infected and non-infected potatoes) of the sample. C Production Adjustment (1) If 5 percent or more of the sampled tubers have been affected within the insurance period and the insured does not harvest, the appraised production from the sampled area will be considered zero. Follow instructions in the Loss Adjustment Manual for completing and leaving certification forms with insureds. Include the following statement on the certification form: "Failure to use recognized, recommended methods to destroy unharvested or discarded potatoes to assure destruction of pathogenic organisms may result in the same type of disease being considered uninsurable the next crop year." When certifications are received from insureds certifying that they have destroyed production, claims can be finalized. (2) If an insured elects to harvest tubers from areas with a 5 percent or greater incidence of tuber rot or where loss adjusters have documented that the infection was in the field or unit before harvest, a period of 60 calendar days from the time the potatoes are harvested may be authorized for the insured to make disposition of the affected tubers. Loss adjustment will be handled as follows: (a) For harvested potatoes sold or utilized (or that are destroyed but could have been sold or utilized) within 60 calendar days of harvest, determine the adjusted production as the lesser of : (i) total dollar value received or that could have been received for the production divided by the highest price election designated in the Special Provisions for the insured potato type, or (ii) the actual production. A minimum value of $0.80 per hundredweight will be used for any production utilized on the farm or that the insurance provider determines could have been sold or utilized for any purpose. Example: Samples from 1000 hundredweight indicate that the production has 6 percent soft rot. Assume the production is sold for $3 per hundredweight (a total of $3000) and that the highest price election is $4.50 per hundredweight. The amount of production to count would be 666.7 hundredweight ($3000 ö $4.50 = 666.7). Note: If production is sold for a price lower than a value which is reasonable, appropriate, and representative of prices paid by buyers for similar potatoes (recognizing the variable usage of potatoes by variety, condition, etc.), the insurance provider is to establish the value based on a price that could have reasonably been expected to be received for similar potatoes, expected usage, etc. Prices used will be those in the local market area in which the insured normally markets the crop to the extent feasible. (b) For harvested production that cannot be sold or utilized and is discarded within 60 days of harvest, zero production will be counted. Follow the instructions about certification forms in paragraph 3 C (1). (c) For any unsold production after the 60-day period, finalize the claim as soon as possible, and use the sound (nondecayed, noninfected) tuber (weight basis) appraisal that was made prior to harvest or completed at the time symptoms became apparent. For example, if 6 percent of the potatoes are affected, 94 percent of the production by weight, will be counted. (3) If less than 5 percent of the sampled tubers are infected, a tuber-by-tuber appraisal must be made as outlined in approved potato loss adjustment procedure using sound (nondecayed, noninfected) tuber weights to determine production to count. For example, if 3 percent of the potatoes are affected, 97 percent of the production, by weight, will be counted. D Documentation Document the following at the time of field inspections, telephone contacts, and storage facility inspections: (1) date of each inspection or telephone contact, (2) producer's management practices, (3) fields and units where organisms and/or conditions causing tuber rot were present, (4) extent of tuber rot discovered (indicate the percentage and type of infection in each sample taken), (5) date of harvest and date of storage, and (6) any other pertinent information. 4 Other Loss Adjustment Considerations A Waiver of Production Assessed for Early Digging Some Special Provisions state that appraisals will be made for any reduction in production that resulted from harvesting prior to the date specified in the Special Provisions. Where this is the case, no additional production (appraisal) will be assessed on potatoes (having tuber rot caused by insurable causes) that have been harvested before the date shown on the Special Provisions, provided the insured killed the vines and harvested early in order to minimize the effects of organisms or conditions causing tuber rot. B Insured's Awareness of Disease Problem in Previous Year When preparing claims involving damage resulting from disease, such as late blight, follow the standards and guidelines in the Loss Adjustment Manual in the paragraph entitled "Claims Involving Severe Insect, Disease, or Weed Infestation" to determine whether appraisals for uninsured causes of loss are applicable. For example, if it is determined that the insured was aware of the late blight problem in the preceding crop year but did not follow recognized good farming practices, some or all of the loss will be considered an uninsured loss. Failure to follow recognized, good farming practices might include, but is not limited to the following: (1) failure to adequately dispose of infected potatoes from prior year's production according to methods recommended by representatives from CSREES, local universities, and/or the State Department Agriculture, or (2) failure to apply appropriate fungicides. C Promoting Awareness of Recommended Practices Insurance providers should promote to their personnel and loss adjusters an awareness of recommended production practices (such as the use and application of appropriate fungicides) for the control of organisms and conditions causing tuber rot by providing to them materials from CSREES, local universities, and/or State Department of Agriculture representatives.