Final Agency Determination: FAD-035

FAD: 035

Subject: Request dated June 10, 2004, for Final Agency Determination for the 2003 crop year, regarding interpretation of section 10 of the Guaranteed Tobacco Crop Insurance Provisions (7 CFR 457.136)

Section 10 of the Guaranteed Crop Provisions states:

10. Causes of Loss

In accordance with the provisions of section 12 of the Basic Provisions, insurance is provided only against the following causes of loss that occur during the insurance period:

(b) Fire

The requestor interprets the aforementioned language in section 10 as requiring fire to be caused by an act of nature in order to be considered a covered (insured) cause of loss. The requestor provided an example that if a man-made fire, or equipment catching fire, causes damage to the crop, then the fire would not be an insured cause of loss. You claim that, section 508(a) of the Federal Crop Insurance Act (Act) supports your interpretation of the following:

Section 508(a)(1) of Act which states in relevant part: "…To qualify for coverage under a plan of insurance, the losses of the insured commodity must be due to drought, flood, or other natural disaster (as determined by the Secretary);

Further, you claim your interpretation is supported by section 508(a)(3)(A)(i) of the act, which states: "Exclusions-Insurance provided under this subsection shall not cover losses due to: (i) the neglect or malfeasance of the producer…"

Lastly, you claim your interpretation is supported by section 12 of the Basic Provisions (7 C.F.R. 457.8), which states:

"The insurance provided is against only unavoidable loss of production directly caused by specific causes of loss contained in the Crop Provisions. All other causes of loss, including but not limited to the following, are NOT covered: (a) Negligence, mismanagement, or wrongdoing by you [the producer], any member of your family or household, your tenants, or employees…"

The Federal Crop Insurance Corporation agrees with the interpretation provided. Read together, the Act, Basic Provisions, and the Guaranteed Tobacco Crop Insurance Provisions specify that fire is an insurable cause of loss when circumstances causing the fire are unavoidable and when the insured can establish that the ignition source of the fire is due to a natural cause or natural disaster.

In accordance with 7 C.F.R. 400.765 (c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2004 and subsequent crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Last Revision: September 28, 2004

Date of Issue: September 3, 2004