Final Agency Determination: FAD-97

FAD-97

Subject: Request dated September 5, 2008, requesting a Final Agency Determination for the 2006 crop year regarding the interpretation of sections 14(a), (b), (d), (e) and (h) (Your Duties) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. § 457.8. This request is pursuant to section 7 C.F.R. part 400, subpart X.

Section 14 of the Basic Provisions states, as here pertinent:

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

(1) Protect the crop from further damage by providing sufficient care;
(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;
(3) If representative samples are required by the Crop Provisions, leave representative samples intact of the unharvested crop if you report damage less than 15 days before the time you begin harvest or during harvest of the damaged unit (The samples must be left intact until we inspect them or until 15 days after completion of harvest on the unit, whichever is earlier. Unless otherwise specified in the Crop Provisions or Special Provisions, the samples of the crop in each field in the unit must be 10 feet wide and extend the entire length of the row, if the crop is planted in rows, or if the crop is not planted in rows, the longest dimension of the field. The period to retain representative samples may be extended if it is necessary to accurately determine the loss. You will be notified in writing of any such extension); and
(4) Cooperate with us in the investigation or settlement of the claim, and, as often as we reasonably require:

(i) Show us the damaged crop;
(ii) Allow us to remove samples of the insured crop; and
(iii) Provide us with records and documents we request and permit us to make copies.

(b) You must obtain consent from us before, and notify us after you:

(1) Destroy any of the insured crop that is not harvested;
(2) Put the insured crop to an alternative use;
(3) Put the acreage to another use; or
(4) Abandon any portion of the insured crop. We will not give consent for any of the actions in sections 14(b)(1) through (4) if it is practical to replant the crop or until we have made an appraisal of the potential production of the crop.

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(d) You must:

(1) Provide a complete harvesting and marketing record of each insured crop by unit including separate records showing the same information for production from any acreage not insured. In addition, if you insure any acreage that may be subject to an indemnity reduction as specified in section 15(e)(2) (for example, you planted a second crop on acreage where a first insured crop had an insurable loss and you do not qualify for the double cropping exemption), you must provide separate records of production from such acreage for all insured crops planted on the acreage. For example, if you have an insurable loss on 10 acres of wheat and subsequently plant cotton on the same 10 acres, you must provide records of the wheat and cotton production on the 10 acres separate from any other wheat and cotton production that may be planted in the same unit. If you fail to provide such separate records, we will allocate the production of each crop to the acreage in proportion to our liability for the acreage; and
(2) Upon our request, or that of any USDA employee authorized to conduct investigations of the crop insurance program, submit to an examination under oath.

(e) You must establish the total production or value received for the insured crop on the unit, that any loss of production or value occurred during the insurance period, and that the loss of production or value was directly caused by one or more of the insured causes specified in the Crop Provisions.

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(h) It is your duty to prove you have complied with all provisions of this policy.

(1) Failure to comply with the requirements of section 14(c) (Your Duties) will result in denial of your claim for indemnity or prevented planting or replant payment for the acreage for which the failure occurred. Failure to comply with all other requirements of this section will result in denial of your claim for indemnity or prevented planting or replant payment for the acreage for which the failure occurred, unless we still have the ability to accurately adjust the loss (Even though no indemnity or other payment is due, you will still be required to pay the premium due under the policy for the unit); and
(2) Failure to comply with other sections of the policy will subject you to the consequences specified in those sections.

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The requestor’s interpretation of the above quoted provisions is that if the insured fails to adhere to the obligations and requirements established by section 14 (Your Duties) as set forth above and, as a result, the approved insurance provider (AIP) is not able to accurately adjust the loss, the AIP is required to deny the claim for indemnity. For example, if the insured fails to leave representative samples as required by section 14(a)(3) (Your Duties) (assuming representative samples are required by the applicable Crop Provisions) and the AIP is not able to accurately adjust the loss, no indemnity can be paid. Similarly, if the insured fails to provide timely notice of damage in accordance with section 14(a)(2) (Your Duties) or harvest/marketing records as required by section 14(d) (Your Duties) and the AIP is consequently not able to accurately adjust the loss, no indemnity can be paid.

The requestor stated that identical or nearly identical language is set forth in the Crop Revenue Coverage (CRC) and the Revenue Assurance (RA) insurance policies. Accordingly, they request this Final Agency Determination explicitly be made applicable to the CRC and RA policies as well.

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor’s interpretation of sections 14(a), (b), (d), (e) and (h) (Your Duties) of the Basic Provisions. Section 14(h)(1) (Your Duties) of the Basic Provisions makes it very clear that if the producer fails to comply with any provision except section 14(c) (Your Duties) of the Basic Provisions, the indemnity will be denied for the acreage for which the failure occurred if the AIP is not able to accurately adjust the loss. In such circumstances, the producer is still required to pay premium for such acreage.

Even though 7 C.F.R. part 400, subpart X is only applicable to provisions of the Federal Crop Insurance Act and the regulations promulgated thereunder, and the CRC and RA policies have not yet been codified in the Code of Federal Regulations, to the extent those provisions are identical or nearly identical, this Final Agency Determination applies accordingly to assure consistent, uniform, and equitable treatment to all producers insured under the same policy provisions.

In accordance with 7 C.F.R. 400.765(c), this constitutes the Final Agency Determination and is binding on all participants in the Federal crop insurance program for the 2006 and succeeding crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Dec 3, 2008