Final Agency Determination: FAD-015

FAD-015

Subject: Interpretation of sections 7, 8 and 9 of the Potato Certified Seed Endorsement (7 C.F.R. 457.145).

In a letter dated November 27, 2002, the Risk Management Agency was asked to make a Final Agency Determination for the 2001 crop year, regarding section numbers 7, 8, and 9 of the Potato Certified Seed Endorsement, which state:

7. All potatoes insured for certified seed production must be produced and managed in accordance with standards, practices, and procedures required for certification by the State's certifying agency and applicable regulations.

8. If due to insurable causes occurring within the insurance period, the amount of certified seed you produce is less than your certified seed production guarantee, we will settle your claim by:

9. You must notify us of any loss under this endorsement not later than 14 days after you receive notice from the State certification agency that any acreage or production has failed certification. Nothing herein extends the insurance period beyond the time period specified in section 8 of the Northern Potato Crop Provisions or section 11 of the Basic Provisions.

Some State seed certification programs employ both a summer test(s) and a winter test. Several of these States do not require potato production to pass the winter test as part of the State's certification program. That is, potato production can still be considered "certified" despite the failure to pass the winter test. These States require the winter test for "recertification" purposes and not for certified seed to grow a subsequent commercial crop.

The requestor interprets the above policy provisions to mean that only potato production that fails to qualify as "certified" (as opposed to "recertified") is eligible for indemnity, pursuant to the terms of the Potato Certified Seed Endorsement. Simply put, if failure to pass the winter test does not cause the potato production to lose its "certification" status, failure to pass the winter test is not relevant to a claim determination under the Potato Certified Seed Endorsement.

For example, assume that a farmer grows certified seed potatoes in a State in which the State's certified seed program does not require passing a winter test in order for the potato production to be "certified." One hundred percent of the farmer's production qualifies as "certified" under the State's certified seed program, but 60 percent of the production fails winter testing and is not "recertified." Further assume that the quantity of the farmer's production met or exceeded his or her production guarantee. In this instance, there would be no payable claim under the Certified Seed Endorsement, as none of the potatoes failed to meet the State's certification standards.

In summary, if the State's seed certification program does not require the passing of a winter test in order to be "certified," the failure to pass the winter test would not trigger or give rise to a claim under the Potato Certified Seed Endorsement. The requestor believes that its interpretation is consistent with that expressed in a memorandum on this subject issued by RMA on May 21, 2002.

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor's interpretation in part. FCIC agrees production meeting the standards for certification for potatoes that will be used to produce a commercial potato crop will be counted as certified seed for purposes of the endorsement, even though the production may not meet the standards for seed used to produce a subsequent seed crop. However, failure of the winter test is relevant to claims involving potatoes used to produce a subsequent seed crop, if failure to pass the winter test also results in the production failing to meet the standards for potatoes used to produce a commercial potato crop.

Section 1 of the Northern Potato Crop Insurance Provisions defines "certified seed" as "potatoes for planting a potato crop in a subsequent crop year that have been found to meet the standards of the public agency that is responsible for the seed certification process within the State in which they are grown." There is nothing in this provision that limits insurance to potatoes for planting a commercial potato crop the following year. Therefore, potatoes grown to produce a future generation seed would be covered since those potatoes would be used to plant a potato crop in a subsequent crop year.

Further, section 4 of the endorsement states "all potatoes grown on insurable acreage and that are entered into the potato seed certification program administered by the State in which the seed is grown must be insured unless limited by section 5 below." Section 1 of the endorsement states "In the event of a conflict between the Northern Potato Crop Provisions and this endorsement, this endorsement will control."

Even if the definition of "certified seed" in the Northern Potato Crop Insurance Provisions could be interpreted to limit certified seed coverage only to potatoes grown to produce a commercial crop, section 4 of the endorsement overrides any such limitation because it requires that all potatoes entered into a potato seed certification program be insured under the endorsement. Section 2 of the endorsement defines "potato seed certification program" as "the State program administered by the public agency responsible for the seed certification process within the State in which the seed is produced." Therefore, under these provisions, since the winter test may be considered as a part of the State seed certification process, potatoes required to be winter tested by the State are covered through the winter testing process.

For the purposes of section 8 of the endorsement, the issue is whether at the time the potatoes fail any required winter test, they would also fail the certification standards for seed used to produce a commercial crop. It does not matter whether the potatoes passed certification at an earlier time. If the potatoes pass the certification standards for commercial certified seed at the time they fail the winter test required for certification of seed used to produce a subsequent seed crop, they must be counted as certified seed under section 8 of the endorsement. However, if at the time of winter testing, the potatoes fail both the winter test and certification standards for commercial certified seed, then the potatoes would not qualify as certified seed under section 8 of the endorsement, provided the insured could prove that the failure to meet standards was the result of an insured cause of loss that occurred during the insurance period.

In accordance with 7 C.F.R. 400.765(c), this Final Agency Determination is binding for the 2001 crop year on all participants in the Federal crop insurance program.

Date of Issue: February 24, 2003