Final Agency Determination: FAD-029

FAD: 029

Subject: Request dated March 8, 2004, requesting a Final Agency Determination for the 2001 and succeeding crop years, regarding the interpretation of section 26 (b) of the Basic Provisions, as published at 7 C.F.R. 457.8. This request is pursuant to 7 C.F.R. part 400, subpart X.

As a prefatory matter, section 14(c) of the Basic Provisions states:
14. Duties in the Event of Damage or Loss.

Your duties -
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(c) In addition to complying with all other notice requirements, you must submit a claim for indemnity declaring the amount of your loss not later than 60 days after the end of the insurance period. This claim must include all the information we require to settle the claim.
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Section 26(b) of the Basic Provisions states:
26. Payment and Interest Limitations.

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(b) We will pay simple interest computed on the net indemnity ultimately found to be due by us or by a final judgment of a court of competent jurisdiction, from and including the 61st day after the date you sign, date, and submit to us the properly completed claim on our form. Interest will be paid only if the reason for our failure to timely pay is NOT due to your failure to provide information or other material necessary for the computation or payment of the indemnity. . . .

1. A "properly completed claim" as referenced in paragraph 26(b) of the Basic Provisions is a document or series of documents that meet all requirements of paragraph 14(c), set forth the exact dollar amount of the net indemnity, and includes all additional information requested or required under paragraph 14 of the Basic Provisions.

2. If a "properly completed claim" contains multiple signatures from the same insured, on one or more documents, the sixty (60) day time period is only triggered by the insured's signature on the date when the documents first meet all the requirements of paragraph 14 (c), set forth the exact dollar amount of the net indemnity, and include all additional information requested or required under paragraph 14 of the Basic Provisions.

3. Regardless of the submission by the insured of a "properly completed claim" the insured will only be entitled to interest, and the company will only be required to pay interest, from the 61st day after the adjuster or approved officer signs and dates the properly completed claim if a Certification Form has been issued on the unit, the insured is an absentee insured, or the claim is controversial or unusual.

4. A "properly completed claim" is not a proof of loss, an appraisal, a production worksheet, or any other document unless the document meets all of the requirements of paragraph 14(c), sets forth the exact dollar amount of the net indemnity, and includes all additional information requested or required under paragraph 14 of the Basic Provisions.

5. Until a producer provides all of the information and documents requested or required under paragraph 14 of the Basic Provisions, interest will not accrue under paragraph 26(b) and the sixty (60) day time period referenced in paragraph 26(b) is tolled.

6. If the reinsured company generated a "properly completed claim" and the insured never signs and dates the same, interest will accrue on the 61st day after the company provides the insured with a copy of the properly completed claim.

The Federal Crop Insurance Corporation (FCIC) agrees in part with the interpretation in items 1, 2, 4, and 5. FCIC disagrees that a "properly completed claim" must 'set forth the exact dollar amount of the net indemnity." A "properly completed claim" must have all information needed to calculate the exact dollar amount of the indemnity but is not required to show the exact dollar amount of the indemnity. Therefore, a "properly completed claim" is a document or series of documents that meet all requirements of section 14(c), contain all information needed to calculate the exact dollar amount of the indemnity, and include all additional information requested or required under section 14 of the Basic Provisions.

Item 3 of this interpretation is not an interpretation of policy provisions. Therefore, the Final Agency Determination process contained in 7 C.F.R. part 400, subpart X, is not applicable. FCIC agrees the procedures cited in item 3 are consistent with FCIC approved procedures.

FCIC disagrees with the interpretation submitted in item 6. Section 26(b) of the Basic Provisions states: "We will pay simple interest computed on the net indemnity ultimately found to be due by us. . . . from and including the 61st day after the date you sign, date, and submit to us the properly completed claim on our form . . . ." If the insured has never signed a properly completed claim, interest is not due. The only exception to this is if a Transfer of Coverage and Right to Indemnity or an Assignment of Indemnity is in effect, which allows allows the transferee or assignee to sign and submit a properly completed claim form as stated respectively in sections 28 and 29 of the Basic Provisions.

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 2001 and subsequent crop years, unless the provisions are revised. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: June 4, 2004