Final Agency Determination: FAD-059

FAD-059

Subject: Request for interpretation of section 8 of the Cotton Crop Insurance Provisions (7 C.F.R. §457.104) and section 6B(2)(b) of the AUP and ELS Cotton Loss Adjustment Standards for the 2005 and Succeeding Crop Years (Loss Adjustment Standards) regarding determination of “live plants” that can contribute to lint cotton and whether the procedure allows for separate loss adjustment for disease related losses. This request is pursuant to section 20(a)(1) of the Common Crop Insurance Policy Basic Provisions (7 C.F.R. §457.8) and a decision by the National Appeals Division.

Section 8 of the Cotton Crop Insurance Provisions states in relevant part:

In accordance with the provisions of section 12 (Causes of Loss) of the Basic Provisions (§ 457.8), insurance is provided only against the following causes of loss which occur within the insurance period:

(a) Adverse weather conditions;

* * *

(d) Plant disease, but not damage due to insufficient or improper application of disease control measures;

Section 6B(2)(b) of the Loss Adjustment Standards states in relevant part:

6. Appraisal Methods

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B. Stand Reduction Method

(2) Row Width and Sampling

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(b) Second, determine row width:

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2 Select, from the chart below, the applicable representative sample method based on how the cotton is planted and the average row width measured.

IF the AUP or ELS cotton is planted…	THEN consider as…	AND select each representative sample as…
as two narrow rows, in a single bed of normal row width	one row	100-feet and measure the skips between “live”* plants.
as single rows, with row spacings 16 inches or more apart (including drilled rows or other narrow row planting methods for UNRC)	separate rows	100-feet and measure the skips between “live”* plants.
With a drill or other narrow row planting methods for UNRC with row spacings less than 16 inches apart	UNRC	One square yard and count the number of “live”* plants.

*NOTE: “Live” plants are plants that are capable of recovery and can timely contribute lint cotton to the ultimate yield at the time of harvest.

According to the information provided by the producer, the producer interprets the provisions in section 6B(2)(B) as follows:

… the definition of a “live” plant in the stand reduction method on page 16 of the Loss Adjustment Standards handbook, does not say that it is “any green plant”. Furthermore, it does not authorize a claims adjustor or his supervisor to arbitrarily pull up and discard plants they deem “viable” and “not viable”. The handbook does, however, make allowances for diseased plants in that diseased plants have a compromised ability to be “capable of recovery” and a compromised ability to timely contribute lint…” Correctly interpreting the meaning of a live plant with substantiated laboratory results by an Agricultural Expert should allow adjustment for diseased plants.

When there is Agricultural Expert evidence of disease throughout a unit, with or without a quantifiable amount, deference should be given to the expert opinion and therefore to the insured. Presently, deference is given to the claims adjustment process which causes an increased monetary risk on the producer. This opposes the producer’s position of protection for which he bought the policy. The policy gives no right to the insurance company to increase the risk of the cotton producer. As it stands now, when the insurance claims process does not defer to the producer holding evidence, he is in effect charging the producer two deductibles. The first deductible is the agreed upon APH reduction through the selection of the coverage level) The second deductible comes when the insured is required by the insurer to pay for the remaining maintenance and harvest of a crop that potentially has no more worth at harvest than it did on the day of the claim.

Coincidentally, their argument is the same as mine, except for the opposing resolutions. Their position is that no one, not even experts, can accurately predict the yield of diseased plants, therefore they want to go to harvest for accurate yields. Ironically, I too believe that not one, not even experts, can accurately predict yield of diseased plants, therefore first, since I have proof of diseased plants that qualify for specific cause of loss, I should not have my risk increased by the additional farm operating costs from claim date forward. Second, since neither I, nor anyone else, can definitively know if diseased plants will fully recover for a normal yield, I should not have to be forced by RMA and the insurance provider to take a chance on any unit with compromised plants for which I own disease insurance.

Risk Management Agency Determination

While it is not clear, it appears that the producer is stating that since disease is a separate cause of loss under section 8 of the Cotton Crop Insurance Provisions (7 C.F.R. §457.104), the policy allows each cause of loss to be adjusted separately. The producer claims to have suffered hail and disease damage and that both causes of loss must be adjusted.

It also appears that the producer is claiming that live plants do not mean any plant that is still alive but that it also means plants that have the ability to contribute lint cotton in a timely manner. The producer seems to claim that if there is competent evidence of disease, the plants should be presumed to not timely contribute lint cotton because they have a compromised ability to recover and that requiring the producer to maintain and harvest the crop is effectively reducing the coverage provided.

RMA agrees with the producer if there are multiple insurable causes of loss, they each must be taken into consideration during loss adjustment. RMA further agrees that only plants that timely contribute lint cotton count as live plants for the purpose of section 6B(2)(b) of the Loss Adjustment Standards.

However, RMA disagrees with the producer’s interpretation that because disease is a cause of loss, which can compromise the ability of plants to recover and timely contribute lint cotton, the existence of the disease is sufficient to establish the loss. This interpretation is not in accordance with section 508(a) of the Federal Crop Insurance Act (Act) (7 U.S.C. 1508(a)), which states that coverage is only provided for loss of production or prevented planting due to a flood, drought or other natural disaster. This means that the producer is indemnified for the loss of production or the inability to plant the crop, not simply the existence of an insurable cause of loss. This is consistent with section 12 of the Basic Provisions, which states in relevant part “The insurance provided is against only unavoidable losses directly caused by specific causes of loss contained in the Crop Provisions.” Producers are indemnified for disease that reduces production, not just the existence of disease.

This is reflected in sections 10(a), (b), and (c) of the Cotton Crop Insurance Provisions, which state that all appraised and harvested production is to be included as production to count against the insurance guarantee. These same provisions also specify any potential production on acreage the producer wishes to put to another use must be counted. This is the manner in which it is determined whether a loss of production has occurred. Section 6B(2)(b) of the Loss Adjustment Standards provides a means to calculate the appraised production used to determine the production to count. Live plants are considered when determining the amount of production to count because they may timely contribute lint cotton.

FCIC further disagrees that the producer cannot be required to further care for the crop after a cause of loss has occurred. To be in compliance with section 508(a) of the Act, loss adjusters must be able to determine whether a loss of production has occurred. Section 14(c) (Our Duties) of the Basic Provisions states that loss adjustment may be deferred until the amount of the loss can be determined. When loss adjustment is deferred, section 14(a)(1) (Your Duties) of the Basic Provisions requires the producer to provide sufficient care of the crop to prevent further damage. In those situations where the producer wants to put the acreage to another use or abandon or no longer care for the crop, section 10(c)(1)(iv) of the Cotton Crop Insurance Provisions specifies that if agreement is reached on the appraisal of the production, the insurance period ends and the loss, if any, is paid. However, if agreement is not reached, the producer has the choice to continue to care for the crop or put the acreage to another use as long as the producer leaves and cares for representative samples of the crop. In this event, the production to count is based on the production that is harvested or appraised from the samples at the time harvest should have occurred. Therefore, requiring the producer to continue to care for the crop or leave representative strips of the crop until it is possible to determine the amount of the loss is consistent with the requirements of the Act, the Basic Provisions, and the Cotton Crop Insurance Provisions.

In accordance with section 20(a) of the Basic Provisions, this interpretation is binding in any mediation or arbitration. Any appeal of this interpretation must be in accordance with 7 C.F.R. part 400.768(G).

Date of Issue: September 21, 2006