BULLETIN NO.: MGR-96-056 TO: All Reinsured Companies FSA Headquarters, Program Delivery and Field Operations All Risk Management Field Offices FROM: Kenneth D. Ackerman Acting Administrator SUBJECT: Raisin Reconditioning and Value Determinations BACKGROUND: In recent years there has been increased inconsistency in the manner that raisin losses have been adjusted. A recent audit by the Office of Inspector General (OIG) and the Sacramento Compliance Office has identified the handling and valuing of raisins sold off-grade in alternative markets as a major area of concern. There are allegations that some raisin insureds are receiving more liberal treatment than others when losses are adjusted. ACTION: Prior to valuing and releasing rain damaged raisins to an alternative market, the loss adjuster must determine if the crop can be reconditioned. Either of two methods may be used for this determination: Boxed Sample Method and Field Sample Reconditioning. The method will depend on the intentions of the producer and condition of the crop. The claim may not be finalized until final disposition of the crop under either method is known. The policy states that we may require the producer to recondition up to a 10 ton sample to determine if they meet RAC standards for marketable raisins. The policy further states that, based on this outcome, we may require the grower to recondition all the raisins, or we may value such raisins at the insurance price. If the grower has boxed his crop but intends to sell them "AS IS", the Boxed Method provided below will be used to determine if they can be reconditioned and value the damaged crop. If the grower has not boxed the crop, but intends to sell the crop "AS IS", the company may require the insured to box up to a 10 ton sample to be reconditioned and base the claim on these results. If the grower refuses to box a 10 ton sample, for whatever reason, the Field Method will be used. Boxed Sample Method: -------------------- This procedure will be used when: A. The raisins have been boxed and it is the grower's intention to sell the production in an alternative use market. The producer must make efforts to protect the cop in the boxes or bins, once the crop has been removed from the field insurance ceases. B. The grower agrees to pick up and box up to 10 tons of raisins to be reconditioned. 1. If the crop has been boxed, the loss adjuster will randomly select 10 to 20 bins ( between 5 and 10 tons) of raisins to be reconditioned. If the crop has not been boxed, the loss asjuster will work with the grower to ensure a representative 10 to 20 bins are collected for reconditioning. The grower should be encouraged to have the packer recondition the sample. If the grower's packer cannot run the sample, another reconditioner will be contacted to run the sample. The loss adjuster will assist the grower in finding a reconditioning facility if necessary. 2. After the sample has been reconditioned, a USDA inspection will be completed to determine if they meet USDA grade for raisins. The USDA inspection results must be maintained in the grower's claim file. 3. If the sample fails to meet USDA grade for raisins, or if it is determined that 30% or less of the sample is recoverable, the company must work with the grower to determine the highest price available to the insured for the production. This value will be used for claim purposes. A. Prior to releasing the crop for an alternative-use market, the company should obtain the packer's release. Companies are to use the "Raisin Packer's Release of Insured Raisins Form" for this purpose. (See Exhibit 1). B. The company branch office will request that all parties bidding on the damaged crop provide the price on the "Alternative-use Market Value" form. (See Exhibit 2). Companies must attempt to get at least 3 bids. The form is to be issued directly to the branch office by the entity providing the bid. All forms are to be placed in the claim file to document the value used. C. Once the value has been established, the grower may dispose of the crop in any alternative-use market. The company representative will complete the "Raisin Release To An Alternative-use Market" form, obtain the insured's signature, and file a copy in the claim folder. (See Exhibit 3). After the raisins have been sold as alternative-use, finalize the claim. If the grower later markets the crop for alternative use and receives a higher value, the higher value will be used for claim purposes. D. If the grower changes his/her mind and reconditions the crop, the procedures contained in the Raisin Handbook will be followed and the claim finalized. 4. If the sample meets USDA grade for raisins, the loss adjuster will confirm the insured's intentions. If the crop will not be reconditioned, the claim will be completed by extrapolating the results of the sample to the entire crop. Allowance for reconditioning and production adjustments provided by the policy will be included in the claim determination. Field Sample Method: -------------------- The Field Sample method will be used to value raisins that have reached 16% moisture and if it is the grower's intent to sell the crop in an alternative-use market. Raisins that have not dried down to 16% moisture should be left in the field until they are dry enough to box, unless the grower can deliver the crop to cold storage or has immediate access to reconditioning. 1. The loss adjuster is to obtain the packer's release. Companies are to use the "Raisin Packer's Release of Insured Raisins Form" for this purpose. (See Exhibit 1) 2. The loss adjuster will select a representative sample of not less than ten gallons of raisins. 3. The adjuster will mix the sample, select the amount necessary for an inspection by the USDA, and deliver the sample for a USDA crop insurance inspection for mold, sand, and micro. The Agriculture Marketing Service (AMS) determination must be maintained in the claim file. 4. The loss adjuster will utilize the historic reconditioning yields contained in the Raisin Reconditioning Pool Agreement (NCIS-M715A, option A or FCI-551) to determine the extent of loss for crop insurance purposes. If the crop is not reconditioned, the claim will be computed by extrapolating the historic reconditioning percentage to the entire crop. Allowances for reconditioning and production adjustments provided by the policy will be included in the claim determination. 5. If the Raisin Reconditioning Pool Agreement indicates 30% or less recovery, the crop will be considered uneconomic to recondition. Follow the procedure provided in paragraph 3 of the Boxed Sample Method to establish the highest value available to the grower. 6. Once the historic reconditioning yields have been computed, the grower may dispose of the crop in any alternative use market. If the crop is reconditioned by the grower, the procedures in the Raisin Loss Adjustment manual will be followed. Do not finalize the claim until the insured's actual disposition of the crop is known. The raisin policy states that the grower must box and deliver all raisins that can be removed from the field. If it is the grower's decision not to box and deliver the raisins, he or she should be reminded that further rain damage would be considered an uninsured cause of loss and would not be covered by the policy. This procedure will become effective beginning with the 1996 crop year. Attached Forms: The attached forms are to be used by all insurance providers. These forms may be modified by using the company logo. ============================================================================= BULLETIN NO.: MGR-96-056 EXHIBIT 1 RAISIN PACKER'S RELEASE OF INSURED RAISINS INSURED NAME: _____________________________ POLICY NO.: ________________________________ UNIT NO.: ________ __________________________________ hereby releases approximately ___________ (Packer's Name) tons of off-grade _____________________________ raisins from the above stated (Variety) producer's contract. _________________________________________ ________________ Signature of Packer Representative Date ============================================================================= BULLETIN NO.: MGR-96-056 EXHIBIT 2 ALTERNATIVE-USE MARKET VALUE SHEET Name of Insured: __________________________________ Date: ________________ Policy Number: ___________________________________ Unit Number __________ Address of Insured: ________________________________________________________ Location of Unit: __________________________________________________________ I, _____________________________________ of _________________________________ (Name) (Company) hereby value, and agree to purchase and pay the above-stated insured $ _____________ per ton on approximately _____________ tons of off-grade raisins from the about unit if I am notified of acceptance of this bid by ______________________. (Date and time) Please send or fax this sheet to the following: ============================================================================= BULLETIN NO.: MGR-96-056 EXHIBIT 3 RAISIN RELEASE TO AN ALTERNATIVE-USE MARKET Insured Name: __________________________________ Policy No.: ____________________________________ Unit No.: ___________ The _________________________________ hereby authorizes the release of (Insurance Company) approximately ______________ tons of off-grade, ____________________ raisins from the above unit to an alternative-use market for the above stated insured. It is understood that these raisins will not be reconditioned on behalf of the insured. _____________________________________________ _________________ (Authorized Insurance Company Representative) (Date)