BULLETIN NO.: MGR-97-021 TO: All Reinsured Companies All Risk Management Field Offices FSA Headquarters, Program Delivery and Field Operations FROM: Kenneth D. Ackerman Administrator SUBJECT: Establishing Insurance Coverage for Sugar Beets involving Joint Ventures, Limited Partnerships, and Late Filed Requests for Sugar Beet Insurance BACKGROUND: Under some circumstances, finalizing arrangements to secure the rights to deliver sugar beets under a processor contract result in the formation of a joint venture or limited partnership entities. For various reasons, primary among them being the excess moisture/flooding in the upper Midwest this year, such entities may be formed after the sugar beet sales closing date. Additional instructions are needed to inform insurance providers about insurance coverage options available for sugar beet acreage grown under the entities formed after the sales closing date. In addition to the formation of new entities, due to excess moisture/flooding in the Red River Valley of North Dakota and Minnesota, as a means of coping with these conditions, some insureds will have to plant sugar beets on land in a different county in order to fulfill their sugar beet contracts. These insureds did not know they would have to plant sugar beets in a different county, prior to the sales closing date, and did not submit applications for insurance in the new counties. Consequently, they will be uninsured unless Risk Management Agency (RMA) permits applications for sugar beet insurance after the sales closing date for qualifying insureds. ACTION: 1 The following instructions provide the proper procedure for insuring sugar beet acreage grown under a joint venture or limited partnership formed after the sales closing date. A Applications for joint ventures (joint operations) and limited partnerships that have been formed after the sales closing date cannot be accepted, unless the new entity meets ALL of the requirements for a successor-in-interest application (see Par.C below). B An individual under an "individual" entity policy must insure his or her share in a joint venture or limited partnership if the joint venture or limited partnership does not have a separate policy. (Refer to Individual Entity, Exhibit 29 in the Catastrophic Risk Protection (CAT) Handbook or Exhibit 32 in the Crop Insurance Handbook (CIH). Example : Fred Jones, the operator, has an "individual" entity insurance policy in Adams County. After the sales closing date, a new limited partnership is formed. Fred has a 90 percent share in the limited partnership. Fred must insure his share in the limited partnership under the existing policy and report his 90 percent share on the acreage report. If the other individual in the limited partnership does not have an existing insurance policy (as an individual entity) in effect at this time, the remaining 10 percent share will be uninsured. C If there is a joint venture or limited partnership policy and there is a change in one or more of the parties composing the entity after the sales closing date, a successor-in-interest application may be taken to insure the new entity for the crop year if it meets all successor-in-interest requirements. See successor-in-interest requirements in Section 4, Par. B(11) of the CIH or Section 4, Par. K of the CAT Handbook. Example: An insurance policy for a "joint venture" entity (composed of Bert Adams, Bob Brown, and Ted Smith) was in effect on the March 15 sales closing date. Sometime after March 15, a new joint venture composed of Bert Adams (operator), Bob Brown, and Jeff Smith (Jeff participated in the previous operation as the farm manager) was formed. In this case, the newly formed joint venture met the criteria for a successor-in-interest, and a successor-in-interest application can be taken to insure the newly formed joint venture. D A transfer of a right to indemnity may be used if during the insurance period, the insurable acreage or share changes. Refer to the applicable procedures on this subject. 2 The sales closing date for sugar beets has not been extended; however, coverage for a current sugar beet policyholder may be provided for sugar beets in a county for which there is not an existing sugar beet policy if: A Land in a new county is obtained to fulfill a sugar beet processor contract, the insured files an application for that county on or before June 6, 1997, and all of the following conditions are met. (1) The application must be for a county with a sugar beet program; (2) The applicant must have been prevented from planting sugar beets by an insured peril in the county originally insured; (3) The coverage level and the price elected must not exceed those elected in the county originally insured and coverage must be with the SAME Insurance Provider; (4) The insured must sign a statement that waives prevented planting coverage in the county for which late coverage is being requested and modifies the eligible prevented planting provisions contained in the sugar beet policy. Sample Statement: "I agree that acreage in "the New" County will not be eligible for a prevented planting production guarantee and that eligible prevented planting acreage in "the Original" County will be limited to the number of acres under contract on the acreage reporting date that I had a reasonable expectation of planting when the contract was executed. The number of acres planted to sugar beets in either county will be subtracted from the number of acres eligible for a prevented planting production guarantee. All prevented planting guarantees will be based on the production guarantee applicable in "the Original" County. Signed Dated Example: 200 total acres were contracted in Walsh County (the county originally insured). The insured was prevented from planting 150 acres in Walsh County. The sugar beet contract was rewritten to indicate 50 acres in Walsh County and 150 acres in Grand Forks County. The insured was able to plant 50 acres in Walsh County, signed an application for Grand Forks County (the new county), and was able to plant 120 acres in Grand Forks County. The insured was prevented from planting the remaining 30 acres; however, the 30 acres eligible for prevented planting coverage must be reported in Walsh County and the prevented planting guarantee calculated accordingly. (5) The statement must be signed by the insured at the time the application is taken. B Approved Actual Production History (APH) yields for new counties will be calculated using ONLY standard APH procedures for which applicants qualify (many may qualify for new producer procedures in the new county). (1) Since the sales closing date has passed and to simplify the APH process at this late date, applicants will not be allowed to request Master Yields for the 1997 crop year. For the 1998 crop year any applicable APH procedures, including requests for Master Yields, will apply separately for each county insured. (2) If the applicant has produced sugar beets in the new county during a previous crop year(s), he or she has until June 6, 1997, to file the required production reports. C Standard Reinsurance Agreement (SRA) instructions for Data Acceptance System (DAS) purposes. A sugar beet policy for which a late request for insurance is accepted according to paragraph 2A must be: (1) Placed in the SAME risk pool as the policy in the county originally insured and coded accordingly on the type 14 record. If the policy is to be placed into the Assigned Risk Fund more than 30 days after the sales closing date, the company must insert the code "2" in field 17 of the type 14 record. (2) Coded as a company approved late request for insurance by entering "1" in field 18 of the type 14 record.