Final Agency Determination: FAD-032

FAD: 032

Subject: Request dated June 4, 2004, for Final Agency Determination for the 2004 and subsequent crop years, regarding the interpretation of section 509 of the Federal Crop Insurance Act (Act) (7 U.S.C. 1509).

7 U.S.C. 1509, which is entitled "Exemption of Indemnities from Levy," states:

Claims for indemnities under this chapter shall not be liable to attachment, levy, garnishment, or any other legal process before payment to the insured or the deduction on account of the indebtedness of the insured or the estate of the insured to the United States except claims of the United States or the Corporation arising under this chapter.

The requestor interprets section 509 of the Act to allow deduction of private policy crop hail premiums from indemnity payments made under the Act.

The Federal Crop Insurance Corporation (FCIC) disagrees with the requestor's interpretation of 7 U.S.C. 1509. Private policy crop hail premiums cannot be deducted from indemnity payments made under the Federal Crop Insurance Act. Such hail premiums are owed under a private contract between the insured and the insurance company and are not a debt owed to the United States, or FCIC. Further, hail insurance does not arise under the Act. Therefore, deduction of a hail premium from a crop insurance indemnity is expressly precluded under section 509 of the Act.

In accordance with 7 C.F.R. 400.765 (d) this constitutes the Final Agency Determination and is binding on all participants in the Federal crop insurance program unless such provisions are revised.

Date of Issue: September 3, 2004