Final Agency Determination: FAD-62

FAD-62

Subject: On August 15, 2006, the Risk Management Agency received a request for a Final Agency Determination for the 2005 crop year regarding the interpretation of section 14 (Your Duties) (a)(2) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8 This request is pursuant to 7 C.F.R. part 400, subpart X.

Section 14(a)(2) states:

14. Duties in the Event of Damage, Loss, Abandonment, Destruction, or Alternative Use of Crop or Acreage.

Your Duties-

(a) In case of damage to any insured crop you must:

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(2) Give us notice within 72 hours of your initial discovery of damage (but not later than 15 days after the end of the insurance period), by unit, for each insured crop;

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The requestor interprets section 14(a)(2) to mean that discovery of reduced production at the end of packing is the “initial discovery” of “damage,” defined in section 1 of the Basic Provisions as “injury, deterioration, or loss of production of the insured crop due to insured or uninsured causes,” and that a report within 72 hours of “initial discovery of damage” and within fifteen days after the end of the insurance period, defined by section 11(b)(2) of the Basic Provisions as the end of harvest and by section 11(b)(4) of the Basic Provisions and the Peach Crop Provisions as September 30.

In the request for a final agency determination, the requestor describes a specific factual situation regarding an arbitration case. In accordance with section 400.768(a) of 7 CFR part 400, subpart X, the Federal Crop Insurance Corporation (FCIC) will not interpret any specific factual situation or case. FCIC will only interpret the specific provision of the regulation identified in the request for a final agency determination.

FCIC agrees in part with the requestor’s interpretation. FCIC agrees that in accordance with section 14 (Your Duties) (a)(2), a notice of loss given within 72 hours of “initial” discovery of damage is considered a timely notice of loss, provided it is given no later than 15 days after the end of the insurance period, unless an earlier notice of loss is required by any other policy provision.

Section 11(b) of the Basic Provisions specifies the insurance period ends at the “earliest” of: (1) total destruction of the insured crop on the unit; (2) harvest of the unit; (3) final adjustment of a loss on a unit; (4) the calendar date contained in the Crop Provisions for the end of the insurance period; (5) abandonment of the crop on the unit; or (6) as otherwise specified in the Crop Provisions.

Assuming harvest of the unit was the first of the events to occur under section 11(b) of the Basic Provisions, the insurance period would end on the date harvest of the unit was complete. Therefore, in accordance with section 14(a)(2) of the Basic Provisions, if a producer did not “initially” discover any damage or loss until after the crop was harvested, notice of loss would be considered timely if it was given within 72 hours of initial discovery, provided it was given no later than 15 days after the date the crop was harvested, unless any other policy provision required an earlier notice of loss. If a producer waited to give notice until after the calendar date for the end of the insurance period, which was later than 15 days after harvest, the notice would not be timely./P>

Even though a producer may have given timely notice of loss in accordance with section 14(a)(2) of the Basic Provisions, section 12(f) of the Basic Provisions specifies that any cause of loss resulting in damage that is not evident or would not have been evident during the insurance period, including, but not limited to, damage that only becomes evident after the end of the insurance period, is not covered unless expressly authorized in the Crop Provisions.

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 crop year. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: November 13, 2006