Final Agency Determination: FAD-75

FAD-75

Subject:: By request dated January 11, 2007, the Risk Management Agency was asked for a Final Agency Determination for the 2005 and succeeding crop years, regarding the interpretation of section 10(a)(1) of the Grape Crop Provisions as published at 7 C.F.R. 457.138. This request is pursuant to 7 C.F.R. part 400 subpart X.

Background

Section 10(a)(1) of the Grape Crop Provisions states:
10. Cause of Loss

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

(1) Adverse weather conditions

If a grower fails to harvest the grapes because “adverse weather” conditions prevent them from reaching expected mature brix levels, may the insured make a claim due to the “adverse weather” conditions outlined in the Grape Crop Provisions?

If adverse weather prevents grapes from being harvested at contracted brix levels, the insured may make a claim.

The Federal Crop Insurance Corporation (FCIC) disagrees with the proposed interpretation. If there is an insurable cause of loss, such as adverse weather, that causes a loss of production, the insured may make a claim. Such loss of production can be as a result of the actual reduction in grape production or a reduction in quality which, under the policy, is converted to a reduction in grape production.

Generally, brix levels do not affect actual production of the crop. Brix level affects the quality of the crop. This means the issue is whether the failure of the crop to reach specific brix levels would result in a reduction of production to count under the quality provisions in the Grape Crop Provisions. The Grape Crop Provisions do not guarantee the grapes making a contracted brix level. Therefore, even though the grapes may fail to make the contracted brix level, the crop may still have reached sufficient brix levels for the variety and area such that the grapes are not eligible for a quality adjustment. However, failure to harvest grapes because they did not reach a specific contracted brix level does not mean a claim is payable. To determine if quality adjustment is applicable, the provision in section 12(e) of the Grape Crop Provisions must be followed.

12. Settlement of Claim

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(e) Mature marketable grape production may be adjusted for quality deficiencies as follows:

(1) Production will be eligible for quality adjustment if, due to insurable causes, it has a value of less than 75 percent of the average market price of undamaged grapes of the same or similar variety. The value per ton of the qualifying damaged and the average market price of undamaged grapes will be determined on the earlier of the date the damaged production is sold or the date of final inspection for the unit. The average market price of undamaged production will be calculated by averaging the prices being paid by usual marketing outlets for the area during the week in which the damaged grapes were valued.

(2) Grape production that is eligible for quality adjustment, as specified in subsection 12(e)(1) will be reduced by:

(i) Dividing the value per ton of the damaged grapes by the maximum price election available for such grapes to determine the quality adjustment factor; and

(ii) Multiplying this result (not to exceed 1.000) by the number of tons of the eligible damaged grapes.

If, after the application of section 12(e) of the Grape Crop Provisions, the production to count is less than the production guarantee, the producer may be eligible for a claim for indemnity.

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

Date of Issue: April 4, 2007