Final Agency Determination: FAD-049

Subject: Request dated December 20, 2004, requesting a Final Agency Determination for the 2005 crop year (for crops with a contract change date on or after August 31, 2004) and subsequent crop years, regarding the interpretation of "legally separated" and "legally separate" as used in the definition of 'substantial beneficial interest" contained in the Common Crop Insurance Policy Basic Provisions (Basic Provisions).

Section 1 Definitions, of the Basic Provisions states in part: Substantial beneficial interest - An interest held by any person of at least 10 percent in you. The spouse of any individual applicant or individual insured will be considered to have a substantial beneficial interest in the applicant or insured unless the spouses can prove they are legally separated or otherwise legally separate under state law.

The requestor interprets "legally separated" and "legally separate" to address two distinct situations. The former term, "legally separated" applies to a husband and wife that have dissolved or are in the process of dissolving the marriage and have legally separated under state law. In this regard, the requestor considers a married couple that has agreed to a divorce a mensa et thoro* to be legally separated. As per the terms of the Basic Provisions, if the separated spouses prove that they are "legally separated", the non-policyholder spouse is not considered to have a substantial beneficial interest.

The latter term, "legally separate", applies to a scenario in which the spouses have legally separate identities for purposes of the farming operation and the purchase of crop insurance. In this situation, the spouses remain married but have separate legal identities for insurance purposes. Under the terms of the Basic Provisions, if married spouses prove that they are "legally separate", the non-policyholder spouse is not considered to have a substantial beneficial interest.

The Federal Crop Insurance Corporation (FCIC) agrees in part with the interpretation of "legally separated" in that it applies to a husband and wife that have dissolved or are in the process of dissolving the marriage and have legally separated under state law. In this regard, FCIC considers a married couple that has agreed to a divorce a mensa et thoro* to be legally separated. As per the terms of the Basic Provisions, if the spouses prove that they are "legally separated", the non-policyholder spouse is not considered to have a substantial beneficial interest.

As per the terms of the Basic Provisions, if the spouses prove that they are otherwise considered to be legally separate under their state law; the non-policyholder spouse is not considered to have a substantial beneficial interest.

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 2005 and subsequent crop years. Any appeal of this decision must be in accordance with 7 C.F.R. § 400.768(g).

*This is a partial or qualified divorce in which the spouses are separated and forbidden to cohabitate but the marriage itself is not affected.

Date of Issue: June 1, 2005