Final Agency Determination: FAD-86

FAD-86

Subject: Request received on February 4, 2008, requesting a Final Agency Determination for the 2007 crop year regarding the interpretation of section 6 and section 14(b)(3) of the Apple Crop Insurance Provisions, published at 7 C.F.R. 457.158. This request is pursuant to 7 C.F.R. part 400, subpart X

Section 1 of the Apple Crop Insurance Provisions states in part:

Fresh apples - Apple production:
(1) That is sold, or could be sold, for consumption without undergoing any change in its basic form, such as peeling, juicing, crushing, etc.; and
(2) From acreage that is reported as fresh apples on the acreage report.
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Processing apples - Apple production:
(1) That is sold after it had undergone a change to its basic structure such as peeling, juicing, crushing, etc.; and
(2) From acreage designated as processing apples on the acreage report.

Section 6 of the Apple Crop Insurance Provisions states:

6. Report of Acreage

In addition to the requirement contained in section 6 of the Basic Provisions, you must report and designate all acreage by type by the acreage reporting date. Blocks of apple acreage grown for processing are not eligible for the Optional Coverage for Fresh Quality Adjustment option contained in section 14 of these Crop Provisions

Section 14 (b)(3) of the Apple Crop Insurance Provisions states:

14. Optional Coverage for Fresh Fruit Quality Adjustment

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(b) In return for payment of the additional premium designated in the actuarial documents, this option provides for quality adjustment of fresh apple production as follows:
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(3) This option will apply to all your apple acreage designated in your acreage report as grown for fresh apples and that meets the insurability requirements specified in the Apple Crop Insurance Provisions, except any acreage specifically excluded by the actuarial documents. Any acreage designated in your acreage report as grown for processing apples is not eligible for coverage under this option.

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The requestor interprets these provisions to mean the insured grower cannot insure apples that fall under the definition of “processing apples” under the “Optional Coverage for Quality Adjustment” if the apples would not or will not meet the criteria. The requestor further interprets the acreage of apples not qualifying as “fresh apples” would have to be listed separately on the acreage report.

If a grower has insured “processing apples” under the “Optional Coverage for Quality Adjustment,” the Approved Insurance Provider (AIP) should reduce the acreage not qualifying and revise the acreage report accordingly with any applicable misreporting information factors (MIF) that would apply. The requestor further interprets that proof of apples qualifying as “fresh apples” would be past sales records demonstrating the type of apples insured have been sold as “fresh apples” in the past.

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor’s interpretation. In accordance with sections 6 and 14(b)(3) of the Apple Crop Provisions processing apples are not eligible to be insured under the Optional Coverage for Quality Adjustment. If the AIP determines any acreage has been misreported (e.g., acreage listed as fresh production on the acreage report is actually processing acreage), the producer will be subject to the consequences in section 6(g) of the Basic Provisions.

Further, section 14(h) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions) places the burden on the producer to show that the producer has complied with all policy provisions. Section 1 of the Basic Provisions defines “policy” to include the Crop Provisions. Therefore, to insure the apples as fresh, the burden is on the producer to show that the apples are produced as fresh. One way to show this is through past sales records showing the sale of fresh apples. However, this could also be established through a contract with a buyer or a statement from a buyer to buy fresh apples from the producer.

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 2007 and succeeding crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: March 27, 2008