BULLETIN NO.: MGR-97-012 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 1997 Crop Year BACKGROUND: The acreage determination verification procedures in effect for the 1996 crop year have been revised to reflect a need for higher levels of review to assess program vulnerability and producer responsibility in reporting acreage for insurance. As in 1996, the Risk Management Agency (RMA) continues to recognize that the Federal Agriculture Improvement and Reform Act of 1996 requires far less acreage certification at local Farm Service Agency (FSA) offices than in the past. As in 1996, because of the decreased availability of certified acreage information and questions involving the validity of voluntary certified acreage information at local FSA offices, RMA authorizes the following as a modified continuation of the alternative to using acreage information from local FSA offices for claim purposes. ACTION: The following modifications of procedures will be incorporated into the FCIC-30010 LAM for 1997 and are effective upon issuance of this bulletin. 1 Items, forms, and services available from local FSA offices for the 1997 crop year are: (1) Copies of 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 reinsured companies free of charge through October 1, 1997, along with copies of 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. To make acreage determinations, substitute the following procedures in this paragraph for subparagraphs A, B, C, and D in the "Acreage Determination" section of the LAM, and use all other subparagraphs in the "Acreage Determination" section of the LAM. A Measured acres. Previously measured acres will be used, if available. 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 a reinsured company, 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) 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, the use of FSA certified acreage reports or aerial photo copies (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. (2) 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). (3) 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 reinsured company 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 Reinsured companies must select "5 percent" of claims assigned for loss adjustment inspections. (1) The selection may be made based upon either: (a) a random 5 percent selection of claim units, or (b) random selection of a sufficient number of policies with claims to result in 5 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 5 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 Reinsured company reporting and follow-up. A Reinsured companies will submit a report to RMA at the end of the 1997 crop year indicating the results of the random acreage reviews conducted for 1997. These reports will include the following information. (1) The number of loss units reviewed. (2) The number of acreage reporting discrepancies identified in four categories. (a) Units reviewed with no acreage discrepancies. (b) Units reviewed with acreage discrepancies between 0.1 and 5.0 percent. (c) Units reviewed with acreage discrepancies between 5.1 and 10.0 percent. (d) Units with discrepancies exceeding 10.0 percent. B Discrepancies will include both over or under-reported acres. In addition, policyholders will be required to provide a written explanation for any unit which is over or under-reported by more than 10.0 percent. The written explanation shall be reviewed and signed by the reinsured company and placed in the policy file. C. RMA will pursue regulatory changes for succeeding crop years to require policyholders to measure all policy acreage at their own expense in succeeding crop years if they exceed a specified tolerance for acreage discrepancies. RMA will also continue to assess the legal implications of determining a policyholder to have misrepresented a material fact in order to meet the burden of proof needed to void the policy if policy discrepancies exceed a specified tolerance. 4 Shares/Entities/Owner/Operator and crop acreage verifications. A Reinsured companies 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. Reinsured companies can choose sources other than local FSA offices to validate these verifications. (1) Reinsured companies 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 reinsured company 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) Reinsured companies are encouraged to obtain the FSA-424 (if available) as a source for determining total crop land acres for the Farm Serial Number. (4) Reinsured companies are also encouraged to use aerial photos copies (obtained from the local FSA office or other acceptable source) to verify with the policyholder. The acreage planted and 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.