Final Agency Determination: FAD-008

FAD-008

Subject: Section 17(d)(1) of the Basic Provisions, pursuant to 7 C.F.R. part 400, subpart X.

On June 5, 2001, the Risk Management Agency was asked for a final agency determination for the 2000 and 2001 crop years, on Section 17(d)(1) of the Basic Provisions,7 C.F.R. 457.8, which states:

(d) Drought or failure of the irrigation water supply will be considered to be an insurable cause of loss for the purposes of prevented planting only if on the final planting date (or within the late planting period if you elect to try to plant the crop):

(1) For non-irrigated acreage, the area that is prevented from being planted has insufficient soil moisture for germination of seed and progress toward crop maturity due to a prolonged period of dry weather. Prolonged precipitation deficiencies must be verifiable using information collected by sources whose business it is to record and study weather, including, but not limited to, local weather reporting stations of the National Weather Service; or . . .

1. Once insufficient soil moisture has been verified, a prolonged period of dry weather is automatically assumed.

A. If, due to dry conditions, a National Resources and Conservation Service (NRCS) advisory has been issued and is in effect on the final planting date (or the late planting period), indicating that soils should not be disturbed in order to guard against wind erosion, "insufficient" will be adequately verified. Prevented planting due to drought will be considered payable provided all other policy provisions are met and, the following:

a. The advisory must encompass the area where the affected insured unit is located, as determined by the provider.

b. The claims representative must verify and document that conditions on the insured unit are consistent with conditions in the area described by the NRCS issuance, that drought conditions are general in the surrounding area, and other producers with similar characteristics are prevented from planting.

B. In the absence of NRCS evidence as cited in "A" above, and provided all other policy provisions are met, prevented planting due to drought will be considered payable and sufficiently verified in accordance with the following documentation:

a. Soil moisture will be considered inadequate if:

i. Local reporting stations of the National Weather Service (NWS) documentation exists that establishes, to the providers satisfaction, inadequate rainfall occurred during the ‘soil bank" period to provide sufficient germinating moisture at the final planting date (or within the Late Planting Period), and

ii. Claims representative observations will be considered sufficient to confirm (provided the claim is annotated accordingly) that conditions on the insured unit are consistent with:
• NWS indications,
• Drought conditions are general in the surrounding area,
• Other producers with similar characteristics are prevented from planting, and

iii. At least one documentation source, acceptable to the insurance provider, establishes conditions on the insured unit are consistent with i and ii above. Documentation sources may include but are not limited to:
• Local rainfall records (local weatherman, farm records, etc.)
• Anecdotal documentation (such as newspaper reports)
• Written opinion from the Cooperative State Education and Extension Service (CSREES) stating that there was insufficient soil moisture for germination of seed and progress toward crop maturity
• Soil moisture indices document demonstrating that conditions in the general area (region) are extremely dry (e.g. Palmer, Crop Moisture Index, etc.)

2. Determinations are based upon soil moisture at the final planting date or within the late planting period, as applicable, without regard to the rainfall that may subsequently fall, or be expected to fall, on the insured acreage.

3. A determination to pay prevented planting due to drought for one producer does not preclude accepting another producer's planted acreage for insurance when both are located in the same area and have similar characteristics.

The interpretation submitted by the requestor is not in accordance with the terms of the policy. Under section 17(d)(1) and the definition of "prevented planting" in the Basic Provisions, to qualify for prevented planting due to drought, the acreage must (1) have insufficient soil moisture for germination of seed and progress toward crop maturity; (2) have a prolonged period of dry weather that is general to the area; and (3) be located in an area where other producers with acreage with similar characteristics are also prevented from planting their crop. Each of these elements must be proven separately.

Therefore, the requestor's conclusion that once insufficient moisture has been verified, a prolonged period of dry weather is automatically assumed is incorrect. Reinsured companies must obtain evidence of the prolonged period of dry weather. Under section 17(d)(1) of the Basic Provisions, such evidence must be obtained from a source whose business it is to record and study weather, such as the National Weather Service (NWS).

Further, the requestor states that if a NRCS advisory has been issued, insufficient soil moisture will be adequately verified. Section 17(d)(1) of the Basic Provisions states that there must be insufficient moisture for the germination of the seed and to allow the crop to reach maturity. Unless the NRCS advisory specifically states that the soil is too dry for the germination or production of the crop, it cannot be used to verify these elements.

The requestor also alleges that if NRCS evidence is not available, prevented planting will be considered sufficiently verified if local reporting stations of the NWS have documentation that inadequate rainfall occurred during the period preceding the normal planting period in which moisture is normally accumulated in the soil profile to provide sufficient germinating moisture. The question of the amount of rainfall needed to permit sufficient soil moisture to allow germination and crop production is determined by experts based on the crop, area in which it is grown, and other relevant factors. Once this amount is known, reinsured companies can use NWS data in the area to determine whether there was adequate rainfall to provide sufficient soil moisture.

Additionally, the requestor claims that documentation sources may include local rainfall records from local weather forecasters and farm records, newspaper reports, written opinions from CSREES, and soil moisture indices. Depending on the element sought to be verified, these sources may or may not be acceptable. If the reinsured company is seeking to verify that soil moisture was insufficient for germination, as stated above, once the amount of rainfall needed for germination and production is known, local NWS data may be used. Further, the soil moisture indices may be adequate evidence. The U.S. Drought Monitor should generally show severe drought or worse (D2, D3, or D4) on the final planting date or during the late planting period. However, the reinsured company must still verify that the insured acreage experienced the same drought conditions or level of rainfall.

However, as stated above, to verify whether the dry weather has been prolonged, section 17(d)(1) of the Basic Provisions explicitly states that only records from a source whose business it is to record and study the weather may be used. Therefore, NWS records or records of other entities that record and study weather, such as universities that record and study the weather, may be used. However, farm records, written opinions from CSREES, and the soil moisture indices cannot be used because these sources are not in the business of recording and studying weather. Certain anecdotal information may be used, such as reports from local weather forecasters, since their business is to record and study weather. Reinsured companies need to obtain the source data of such reports. Newspaper reports should not be used.

The requestor is correct that the reinsured companies must verify that drought conditions are general to the surrounding area and producers with acreage with similar characteristics are prevented from planting. Local NWS rainfall data or soil moisture indices should be used to determine the area affected by the drought and whether the insured acreage falls within that area.

The requestor is correct that determinations of prevented planting are based on the soil moisture at the final planting date or within the late planting period, regardless of whether rain subsequently falls or is expected to fall.

Lastly, the requestor states that a determination to pay a prevented planting claim for one producer does not preclude accepting another producer's planted acreage for insurance when both are located in the same area and the acreage has similar characteristics. This is not correct. One of the elements to be established is that other producers in the area with acreage with similar characteristics were also prevented from planting. If producers with acreage in the area with similar characteristics are able to plant, prevented planting claims should not be paid.

In accordance with 7 C.F.R. § 400.765(c), this constitutes the final agency determination and is binding on all participants in the Federal crop insurance program.

Date of Issue: August 9, 2001