BULLETIN NO.: MGR-96-049 TO: All Reinsured Companies FSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Kenneth D. Ackerman Acting Administrator SUBJECT: Acreage Determination and Other Loss Adjustment Verifications for Multiple Peril Crop Insurance for the 1996 Crop Year ONLY BACKGROUND: Current loss adjustment procedures allow "certified acres" at local Farm Service Agency (FSA) offices to be considered as "determined acres" to pay claims if certain criteria in the Loss Adjustment Manual (LAM) are met. The procedures also require verification of shares and entities at the local FSA office for insureds participating in programs administered by FSA. FSA acreage certification information also includes crop share. The Federal Agriculture Improvement and Reform Act of 1996 requires far less acreage certification at local FSA offices than in the past. Due to reduced producer acreage certification requirements at local FSA offices, there have been inquiries about whether the Risk Management Agency (RMA) will authorize alternatives for establishing determined acres. There are also concerns about verification of shares, entities, other verifications that normally have been done at local FSA offices, and what information can still be obtained from local FSA offices. Because of the decreased availability of certified acreage information and questions involving the validity of voluntary certified acreage information at local FSA offices, Risk Management is authorizing an alternative to using acreage information from local FSA offices for claim purposes. ACTION: The following modifications of procedures contained in the FCIC-30010 LAM are effective for the 1996 crop year ONLY, upon issuance of this bulletin. 1 Items, forms, and services available from local FSA offices for the 1996 crop year are: (1) Aerial photos, (2) official field measurement; i.e., boundaries of field have not changed, (3) fly overs of growing crops (may not be as comprehensive as in the past), and (4) measurement service. Farm Serial Numbers will continue to be maintained showing the owner/operator and crop land acres. The FSA-423, -424, and -425 will continue to be provided to insurance providers free of charge along with aerial photos, and other forms needed to perform loss adjustment duties. Acreage determinations that can be made by local FSA county offices (e.g., planimeter measurement of a partial field) may be requested by reinsured companies. 2 Determined acres. Determined acres are required on some preliminary claims and all final claims as specified in the crop handbooks. Insurance providers are to either follow the current procedures in the "Acreage Determination" section of the LAM or substitute the following procedures in this paragraph for subparagraphs A, B, C, and D in the "Acreage Determination" section of the LAM. If the following procedures in this paragraph are used, all other subparagraphs in the "Acreage Determination" section of the LAM apply. A Measured acres. Measured acres will be used if "reasonably accurate" (within 5 percent of what the acreage would measure). Measured acres are considered to be the following: (1) crop acres measured by the FSA, a reinsured company, or other firm engaged in the business of land measurements, and these measurements have been made by using measurement methods described in the "Acreage Determination" section of the LAM. In addition to acceptable measurement methods described in the LAM, surveying devices, global positioning systems (GPS), remote sensing devices used in conjunction with aerial photos or satellite imagery, etc., may be used if accuracy is comparable to the measurement methods listed in the LAM. (2) prior year(s) measurements of a field by an insurance provider, local FSA office, or firm engaged in land measurement services, provided: (a) the entire field is planted to a single crop (same practices or types if there are separate guarantees), and (b) the field boundaries have not changed. B Acres not measured. If measured acres as described in 2A above are not available: (1) If the insured is required to certify acreage to the FSA for other USDA programs, the acreage certified to the FSA will be considered "determined acres" for claims purposes. (2) If the insured has voluntarily certified acreage to the FSA (i.e., the insured is not required to certify acreage for other USDA programs) OR the insured has not certified acreage to the FSA, the insured's acreage reported on the crop insurance acreage report may be considered "determined acres" for claim purposes IF: (a) the insured has signed the acreage report indicating certification of the reported information; and (b) the loss adjuster can determine through visual inspection of the acreage and the use of aerial photos (obtained from the local FSA office or other acceptable sources), landmarks, etc., that the acreage would measure within 5 percent of the acreage reported on the acreage report. (3) When a determination is made that differs from the reported (certified) acreage, even within the 5 percent tolerance, the determined acreage must be used on the claim. Note: The following is an example of a situation where the reported acreage is within the 5 percent tolerance, but cannot be used as the determined acreage: Previous measurement = 80 acres (field boundaries have not changed). Crop insurance acreage report = 80 acres of corn Entire field planted to boundaries, but about 2 acres are oats. In this instance, the reported acres cannot be used as the determined acres. Either an actual measurement must be made (e.g., wheeled) OR because the reported acreage is within the 5 percent tolerance, the acreage can be determined as follows: estimate the oat acreage and deduct from the reported corn acreage. Determined corn acres = 78 acres (80 2 = 78). (4) Acreage must be measured (or re-measured, as applicable) IF it fails to meet the criteria described in 2A or 2B (1) and (2) above OR: (a) part of a unit is released and that part released will lose its field identity (i.e., there will be no way to establish the amount of acres at the time of a final loss inspection because of the loss of field identity), (b) the insurance provider or the insured has reason to question the accuracy of the measurement or does not agree with the previously measured acres, or (c) acres of varying practices, types, appraisals, etc. (as appropriate to separate on the claim) are not separated. C Insurance providers must select "2 percent" of claims assigned for loss adjustment inspections. (1) The selection may be made based upon either: (a) a random 2 percent selection of claim units, or (b) random selection of a sufficient number of policies with claims to result in 2 percent of the claim units. (2) During the loss adjustment inspection process of these selected units, the acreage must be measured if: (a) part of a unit is released and that part released will lose its field identity, (b) acreage has not been previously measured for the crop year or DOES NOT fit the criteria for measured fields as described in 2A, (c) measured acreage is not acceptable or there is reason to question the accuracy of the measurement, (d) the insured does not agree with the measured acreage, or (e) acres of varying practices, types, appraisals, etc. (as appropriate to separate on the claim), are not separated, (3) The loss units selected will be identified in a way that the units selected can be identified for compliance/audit review. NOTE: In addition to the 2 percent selection of policies/units outlined in 2C above, acreage in loss units that do not meet the criteria set forth in 2 A and B must also be measured during loss inspections. D For ALL claim inspections requiring determined acres, the method of acreage determination and any calculations used to arrive at the determined acres must be documented in the narrative of the claim or on a special report attached to the claim; e.g., determined acres using crop insurance acreage report - would measure within 5 percent. E Whenever acreage measurements are required, measurements must be made by the FSA, a reinsured company, or other firm engaged in the business of land measurements, and these measurements must be made by using any of the measurement methods described in the "Acreage Determination" section of the LAM or additional methods described in paragraph 2 A (1) above. 3 Shares/Entities/Owner/Operator and Crop Acreage Verifications. A Insurance providers are responsible for verifying crop share, entity, and crop acreage. These verifications may be done, but are not required to be done, through information obtained from local FSA offices, if such information is available. Insurance providers can choose sources other than local FSA offices to make these verifications. (1) Insurance providers are cautioned that share arrangements recorded on documents other than the FSA-424 (FSA-578) may be on a contract-payment basis rather than on a crop-share basis. The share arrangements recorded on the FSA-424 (FSA-578) will be on a crop-share basis. (2) If the crop share or entity is not verifiable through the local FSA office or the insurance provider chooses not to verify this information at the local FSA office, loss adjusters must follow the share and entity verification procedures in the LAM for insureds who are not participating in programs administered by the FSA. (3) Although not required, insurance providers are encouraged to obtain the FSA-424 (if available) as a source for determining total crop land acres for the Farm Serial Number. (4) Insurance providers are also encouraged to use aerial photos (obtained from the local FSA office or other acceptable source) to verify with the insured acreage planted, insured as well as uninsured acreage. The following notations on aerial maps are also suggested to determine, if applicable, whether policy requirements for crop rotation have been met from crop year to crop year: The insured's name, policy number, and crop year should be notated on the map and the crop, practice/type, etc., should be notated on each field planted.