INFORMATIONAL MEMORANDUM: R&D-97-055 TO: All Reinsured Companies All Risk Management Field Offices FROM: Tim B. Witt /s/ Tim B. Witt 07/18/97 Deputy Administrator SUBJECT: 1998 Grape Crop Insurance Provisions Attached is a copy of the Grape Crop Provisions that will be effective for the 1998 and succeeding crop years. The following is a brief description of the significant changes to these provisions. The provisions are also available on the Reporting Organization (RO) Server. Please refer to the provisions for more complete information. - Section 1 added definitions for the terms "days," "FSA," "good farming practice," "graft," "interplanted," "irrigation practice," "production guarantee," "set out," "USDA," "varietal group," and "written agreement" for the purpose of clarification. - Section 2 clarifies that records used to qualify for optional units must be reported by the production reporting date. - Section 3(a) for California, allows a different coverage level and price election for each grape variety in the county. - Section 3(b) for Idaho, Oregon, and Washington, specifies that an insured may select only one coverage level and only one price election for all the grapes insured in the county unless the Special Provisions provide different price elections by varietal group, in which case the insured may select one price election for each varietal group designated in the Special Provisions. The price election chosen for each varietal group is not required to have the same percentage relationship to the maximum price offered for each varietal group; however, if the Catastrophic Risk Protection level of insurance is chosen for any varietal group, that level of coverage will be applicable to all insured grapes in the county. - Section 3(c) for all other states, specifies that an insured may select only one coverage level and only one price election for all the grapes insured in the county unless the Special Provisions provide different price elections by varietal group, in which case the insured may select one price election for each varietal group designated in the Special Provisions. The price election selected for each varietal group must have the same percentage relationship to the maximum price offered for each varietal group. - Section 3(d) specifies that in California only, an insured may apply for a written agreement to establish a price election for a specific variety they wish to insure, when that specific variety does not have a separate price election on the Special Provisions. - Section 3(e) specifies that the insured must report damage, removal of bearing vines, change in practices, or any other circumstance that may reduce expected yields below the yield upon which the insurance guarantee is based. For the first year of insurance for acreage interplanted with another perennial crop or anytime the planting pattern of such acreage is changed, the insured must also report the age and type, if applicable, of the interplanted crop, its planting pattern, and any other information needed to establish the approved yield. If the insured fails to notify the insurance provider of factors that may reduce yields from previous levels, the insurance provider will reduce the production guarantee at any time the insurance provider becomes aware of damage, removal of vines, or change in practices. - Section 5 specifies that the cancellation and termination date in all states except California is November 20. Currently, the policy states January 31 in California, and December 10 in all other states except Idaho, Oregon, and Washington. The change in some states from December 10 to November 20 was made to standardize the perennial crop policies. For the 1998 crop year, carry-over insureds in all states except California, Idaho, Oregon, and Washington have until December 10, 1997, to cancel their policy(s). - Section 7(e) specifies that at least an average of two tons of grapes per acre must have been produced during at least 1 of the 3 crop years immediately preceding the insured crop for the crop to be insured, unless the insurance provider inspects such acreage and gives their approval in writing. Previous endorsement required a minimum of two tons per acre but did not clearly state that the minimum must have been produced in 1 of the 3 most recent crop years. - Section 8 allows insurance on grapes interplanted with another perennial crop to make insurance available on more acreage and reduce reliance on the noninsured crop disaster assistance program (NAP) for crop loss protection. - Section 9(a)(1) specifies that insurance attaches on November 21 in all states except California. This change was made to be consistent with other perennial crops. Clarifies that for the year of application, if an application is received after January 22 but prior to February 1 in California, or after November 11 but prior to November 21 in all other states, insurance will attach on the 10th day after the properly completed application is received in the insurance provider's local office, unless the insurance provider inspects the acreage during the 10 day period and determines that it does not meet insurability requirements. - Section 9(a)(2) specifies that the end of the insurance period is October 10 in Mississippi and Texas; November 1 in Idaho, Oregon, and Washington; November 10 in California; and November 20 in all other states. - Section 9(b) adds provisions to clarify insurability when an insurable share is acquired or relinquished on or before the acreage reporting date. Also clarifies that acreage acquired after the acreage reporting date is not insurable, and that a person to whom coverage is transferred must be eligible for insurance. - Section 10(b) adds provisions to provide coverage against disease and insect infestation unless proper control measures are not utilized. This change was made to conform to the coverage provided for most other crops. Damage caused by phylloxera is not covered regardless of cause. Clarifies that failure of the irrigation water supply is a covered loss only if caused by an insured peril that occurs during the insurance period. - Section 11(b) adds provisions that require the insured to notify the insurance provider of damage prior to harvest to permit a timely appraisal. Also adds provisions that prohibit the insured from destroying a damaged crop which is not marketed in normal commercial channels, until the insurance provider gives written consent. Failure to meet this requirement will result in all such production to be considered undamaged and included as production to count. - Section 12(c) adds provisions for converting grape production harvested and dried for raisins to a fresh weight basis. - Section 12(e) adds provisions indicating that the average market price will be determined in all states by averaging the prices being paid by usual marketing outlets for the area during the week in which the damaged grapes were valued. In the current grape endorsement, in California the average market price is the price shown by the Federal State Market News California Wine Report for the same week in which the damaged grapes were valued. Add provisions indicating that the value per ton of the qualifying damaged production and the average market price of undamaged grapes will be determined on the earlier of the date the damaged production is sold or the date of final inspection for the unit. The current grape endorsement does not list a specific time. - Section 13 adds provisions for providing insurance coverage by written agreement. FCIC has a long-standing policy of permitting certain modifications of the insurance contract by written agreement. This amendment allows FCIC to tailor the policy to a specific insured in certain instances. The new section will cover the procedures for and duration of written agreements. Attachment - will follow in the mail