Section 15(e) of the Basic Provisions states:
15. Production Included in Determining an Indemnity and Payment Reductions.
. . .
(e) With respect to acreage where you have suffered an insurable loss to
planted acreage of your first insured crop in the crop year, except in the case of double
cropping described in section 15(h):
(1)You may elect to not plant or to plant and not insure a second crop on the
same acreage for harvest in the same crop year and collect an indemnity payment that is
equal to 100 percent of the insurable loss for the first insured crop; or
(2) You may elect to plant and insure a second crop 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:
(i) Collect an indemnity payment that is 35 percent of the insurable loss for the
first insured crop;
(ii) Be responsible for a premium for the first insured crop that is commensurate with the
amount of the indemnity paid for the first insured crop; and
(iii) If the second crop does not suffer an insurable loss:
(A) Collect an indemnity payment for the other 65 percent of insurable loss that was not
previously paid under section 15(e)(2)(i); and
(B) Be responsible for the remainder of the premium for the first insured crop that you did
not pay under section 15(e)(2)(ii).
Interpretation Submitted
Section 15(e) was first interpreted to mean that if the insured suffers an insurable loss
to the first crop, elects to plant and elects to insure a second crop, and suffers an insurable
loss on the second crop, the insured receives an indemnity that is 35 percent of the insurable
loss on the first crop and an indemnity that is 100 percent of the insurable loss on the second
crop. The insured cannot pick and choose which crop, the first or second, is to receive the
100-percent indemnity and which is to receive the 35-percent indemnity.
Section 15(e) was also interpreted to mean that when an insured suffers an insurable loss to
both the first and second crop acreage within the same crop year, the insured has no option but
to take the second crop loss and forfeit the remaining 65 percent of the first crop loss. The
requestor provided an example of an insured who suffered a $25,000 loss on a first crop and a
$3,000 loss on a second crop on the same acreage in the same crop year, and stated that in this
case the insured would be limited to payments of $8,750 for the first crop ($25,000 X 0.35) and
$3,000 for the second crop loss. The requestor further stated that the $3,000 loss for the
second crop could not be rejected in order to receive 100 percent ($25,000) of the loss for the
first crop.
Final Agency Determination
The Federal Crop Insurance Corporation (FCIC) agrees with the first interpretation, provided
the insured accepts the indemnity for the second crop. If the producer elects to plant and
insure the second crop, the producer can only be paid an indemnity that is 35 percent of the
insurable loss on the first crop. If the producer does not suffer an insurable loss on the
second crop, the producer will receive the other 65 percent of the insurable loss on the first
crop. If the producer accepts an indemnity for the second crop, the producer receives an
indemnity for 100 percent of that insurable loss. The producer cannot elect to receive an
indemnity that is 35 percent of the insurable loss for the second crop and 100 percent of the
insured loss for the first crop. Further, the producer cannot receive 100 percent of the
insurable loss for the first crop and wait to see whether the second crop has an insurable
loss. As soon as the producer elects to plant and insure a second crop, the producer can only
receive 35 percent of the insurable loss for the first crop.
FCIC does not agree with the second interpretation provided. While neither the Basic
Provisions nor the Agricultural Risk Protection Act of 2000 (ARPA) defines the term "insurable
loss," the provisions of ARPA are clearly intended to address multiple indemnity payments on the
same acreage in the same crop year. The Joint Explanatory Statement of the Committee of
Conference states, "If the producer is not paid an indemnity on the second crop, then the
producer will receive an additional indemnity payment equal to the total calculated indemnity
on the first crop less the initial indemnity payment. If an indemnity is paid with respect to
the second crop, then the producer is not entitled to receive the additional indemnity payment
with respect to the first crop" [emphasis added].
Further, if the term "insurable loss" is used in relation to both the first and second crops,
with respect to the first crop, it can only mean when the insured receives an indemnity.
Otherwise, the 35 percent cap on such a payment would be meaningless. RMA sees no rational
basis to define the term differently with respect to the second crop. Therefore, an insurable
loss is considered to have occurred when the insured receives an indemnity payment for the
second crop.
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 the provisions are revised.
Date of Issue: November 24, 2003
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