Final Agency Determination: FAD-023

FAD-023

Subject: Request dated September 2, 2003, for Final Agency Determination of section 15(f)(2)(ii) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published as a Final Rule on June 25, 2003, 68 Fed. Reg. 37697, applicable for the 2004 and subsequent crop years, unless such provisions are revised. This request was submitted pursuant to 7 C.F.R. part 400, subpart X.

Background

Section 15(f)(2)(ii) of the Basic Provisions states:

15. Production Included in Determining an Indemnity and Payment Reductions.

(f) With respect to acreage where you were prevented from planting the first insured crop in the crop year, except in the case of double cropping described in section 15(h): . . .

(2) If a second crop is planted on the same acreage for harvest in the same crop year (you will pay the full premium and, if there is an insurable loss to the second crop, receive the full amount of indemnity that may be due for the second crop, regardless of whether there is a subsequent crop planted on the same acreage) and: . . .

(ii) Be responsible for a premium for the first insured crop that is commensurate with the amount of the prevented planting payment paid for the first insured crop.

The term "commensurate" in section 15(f)(2)(ii) is interpreted to mean 35 percent as it relates to the percent of the payment for the first insured crop, which means 35 percent of the premium due, and not the percent of liability. The requestor of the FAD states ". . . if an insured plants and insures a second crop and receives a full indemnity on that second crop, the insured is liable on the second crop for the full premium and on the first crop for a premium that is 35 percent of the full premium."

The Federal Crop Insurance Corporation agrees that the use of the term "commensurate" means 35 percent of the producer-paid premium for the first insured crop is applicable when the prevented planting payment for the first insured crop is 35 percent of the prevented planting guarantee. However, your interpretation creates the impression that the reduction in the prevented planting payment and premium for the first crop only applies if the second crop is insured and receives a full indemnity. This is not correct. Unlike section 508A(a) of the Federal Crop Insurance Act (Act) that refers to the consequences if there is no loss to the second crop, section 508A(b) of the Act, relating to prevented planting, contains no similar provision. Therefore, the reduction in the prevented planting to 35 percent of the prevented planting guarantee and in the premium to 35 percent of the producer-paid premium is applicable whenever the producer plants a second crop on acreage that had been prevented from being planted. It is immaterial whether the second crop is insured or has a loss.

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 for the 2004 and subsequent crop years, unless such provisions are revised.

Date of Issue: November 24, 2003