20. Mediation, Arbitration, Appeal, Reconsideration, and Administrative and Judicial Review.
(a) If you and we fail to agree on any determination made by us except those specified in section 20(d), the disagreement
may be resolved through mediation in accordance with section 20(g). If resolution cannot be reached through mediation, or you and we do not agree to mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA), except as provided in sections 20(c) and (f), and unless rules are established by FCIC for this purpose. Any mediator or
arbitrator with a familial, financial or other business relationship to you or us,
or our agent or loss adjuster, is disqualified from hearing the dispute.
***
(d) If you do not agree with any determination made by us or FCIC regarding whether you have used a good
farming practice (excluding determinations by us of the amount of assigned production for uninsured causes for
your failure to use good farming practices), you may request reconsideration by FCIC of this determination in
accordance with the reconsideration process established for this purpose and published at 7 CFR part 400, subpart
J (reconsideration). To resolve disputes regarding determinations of the amount of assigned production, you must
use the arbitration or mediation process contained in this section.
(1) You must complete reconsideration before filing suit against FCIC and any such suit must be
brought in the United States district court for the district in which the insured farm is located.
(2) Suit must be filed not later than one year after the date of the decision rendered in the reconsideration.
(3) You cannot sue us for determinations of whether good farming practices were used by you.
*****
Section 8 of the Prune Crop Provisions states, as here pertinent:
8. Insurance Period.
(a) In accordance with the provisions of section 11 of the Basic Provisions:
(1) Coverage begins for each crop year on March 1.
(2) The calendar date for the end of the insurance period for each crop year is:
(i) October 1 for California; or
***
(c) Notwithstanding paragraph (a)(1) of this section, for each subsequent crop year that the policy remains continuously in force, coverage begins on the day
immediately following the end of the insurance period for the prior crop year…
*****
Section 9 of the Prune Crop Provisions states, as here pertinent:
9. Causes of Loss.
(a) In accordance with the provisions of section 12 of the Basic Provisions, insurance is provided only against
the following causes of loss that occur during the insurance period:
(1) Adverse weather conditions;
***
(b) In addition to the causes of loss excluded in section 12 of the Basic Provisions, we will not i
nsure against damage or loss of production due to:
(1) Disease or insect infestation, unless adverse weather:
(i) Prevents the proper application of control measures or causes properly applied control measures
to be ineffective; or
(ii) Causes disease or insect infestation for which no effective control mechanism is available; or
*****
The Risk Management Agency (RMA) is requested to provide an interpretation of section 20(d) of the
Basic Provisions as to the effect of a good farming practice determination after it is issued in favor
of the insured by RMA after a denial of insurance coverage based on a lack of “good farming practices.”
Specifically, RMA is requested to clarify whether the good farming practice determination constitutes
a final determination on the issue of indemnity being due the insured (leaving only the issue of determination
of the amount of assigned production to be decided) or whether the insured still has the burden of proving that
any loss was directly due to an insured cause of loss and whether the approved insurance provider (AIP) may assert
any additional basis for the denial of indemnity not originally stated prior to the good farming practice
determination.
Interpretation Submitted
A joint request for a Final Agency Determination was submitted by two parties.
Both parties submitted their interpretation of the provisions.
The first requestor interprets these provisions to mean an RMA good farming practice determination
is a final determination on the issue of liability of the AIP for the claimed loss without further burden
on the part of the insured as to liability.
The Basic Provisions contain two separate resolution systems for claim disputes. One system is for matters
not concerned with good farming practices requiring arbitration, as set forth in the Basic Provisions at section
20(a), which requires arbitration by American Arbitration Association (AAA). The second system, contained in
section 20(d) of the Basic Provisions, is for matters concerning good farming practices,
which requires submission to RMA for a good farming practice determination.
If resolution is required by submission to RMA for a good farming practice determination, then the
determination is a final determination as to the AIP’s liability to pay the submitted claim for the
crop year in question. The only issue remaining to be determined by the AAA arbitrator would be the
amount of the loss, as is noted in the last sentence of section 20(d). To require otherwise would render
section 20(d) meaningless. To interpret section 20(d) otherwise would be a violation of the legal
principle of the one action rule and finality of judgment or decision. The only course available to
the AIP is to request reconsideration by FCIC of the determination
as is required of the insured in the event of an unfavorable ruling.
The first requestor further maintains a claim that has been denied and submitted for a good farming
practice, which is decided in favor of the insured, may not be subsequently denied on the AIP’s
additionally-stated basis for denial of indemnity. For instance, after a good farming practice
determination is issued in favor of the insured, the AIP may not subsequently deny the claim on
newly-stated basis such as the insured failed to follow good farming practices
in a different form, regarding different practices, or in another crop year.
The Basic Provisions provide in section 20(a)(1)(i) that “Any interpretation by FCIC will be binding in
any mediation or arbitration.” Therefore, pursuant to that section, an AIP may not, after a good farming
practice determination favorable to the insured is issued, again challenge any basis for its liability for
the claim. The finding of “good farming practices” pursuant to its definition establishes that the crop
has been cared for to “produce at least the yield used to determine the production guarantee or amount of
insurance.” The only remaining issue is the amount of lost
production based on the production guarantee as set forth in section 20(d).
The second requestor interprets these provisions to mean even after a favorable good farming
practice determination is made regarding the “good farming practices” of an insured for a specific
crop year on which an indemnity is sought, that the other mandates of the Basic Provisions and
Prune Crop Provisions (and other applicable statutes, regulations, and guidelines) must still be
followed. A good farming practice determination in favor of the insured, by itself, is not a
final determination that indemnity is due the insured. A good farming practice determination
does not, in and of itself without further consideration, waive other
mandates of the policy provisions, statutes, regulations, and guidelines.
Although an insured may obtain a good farming practice determination in his favor, the only effect
of the good farming practice determination is to relieve the insured from the specific basis for the denial
of indemnity which leads to the request for a good farming practice determination finding. The insured is
not relieved from the burden
of establishing that any loss was directly due to an insured cause of loss.
The second requestor maintains the AIP may deny indemnity after a good farming practice determination in
favor of the insured is issued on a different basis than that originally asserted. That denial may be based on,
amongst other things, information learned after the request for the good farming practice determination was
submitted or information learned from the contents of the good farming practice determination.
Specifically, and as an example, after a good farming practice determination is issued in favor of an
insured, before an insured may be eligible for payment on a claim for indemnity, the second requestor maintains
the insured must follow the mandates of the Basic Provisions and Prune Crop Provisions with respect to the
insured’s applicable duties set forth in section 14 of the Basic Provisions.
As a further example, after a good farming practice determination is issued in favor of an insured, before
an insured may be eligible to be paid on a claim for indemnity, the second requestor maintains the loss must be
an unavoidable loss directly caused by one of the specific causes of loss contained in section 9
of the Prune Crop Provisions and section 12 of the Basic Provisions.
As a final example, after a good farming practice determination is issued in favor of an insured, before an
insured may be eligible to be paid on a claim for indemnity, the second requestor maintains the loss and the
insured cause of the loss must have occurred during the insurance period for the crop year for which the indemnity
is sought as is set forth in section 8 of the Prune Crop Provisions and sections 11 and 12(f) of the Basic
Provisions.
These suggested interpretations are supported by prior requests for Final Agency Determination that have
consistently held that the insured maintains the duty to establish any loss was directly due to an insured cause.
In summation, there is no rule relieving the insured from the burden of proof of an insured cause of loss
during the insurance period, even if the insured successfully challenges an AIP’s determination of lack of
good farming practices during the crop year in question. Likewise, there is no rule that restricts the AIP
from asserting there were other uninsured causes of loss after a good farming practice determination is issued
in favor of an insured during the crop year in question, including an additional claim of a lack of good farming
practices in another crop year that influenced the crop year in question and/or an
additional claim that the cause of loss was outside the crop year in question.
Final Agency Determination
The Federal Crop Insurance Corporation (FCIC) agrees with the second requestor’s interpretation of section
20(d) of the Basic Provisions. A good farming practice determination which rules in favor of the insured does
not imply the insured will automatically qualify for an indemnity. A good farming practice determination only
applies to whether or not the production methods in question utilized to produce the insured crop will be considered
to be “good farming practices.” Following good farming practices is only one of the many requirements of the policy
that must be met under the terms of the policy. Further, failure to follow good farming practices is an uninsurable
cause of loss that affects the amount of an indemnity but may not disqualify a person from receiving an indemnity.
Besides looking at whether good farming practices have been followed, the AIP has to make sure that there has been
an insurable cause of loss that occurred within the insurance period and that the producer’s loss was due to such
cause of loss. Losses, due to causes of loss that occurred in prior insurance periods would not be covered,
regardless of whether the producer used a good farming practice in the current crop year. Further, the requestor
is correct that it is possible that a failure to follow a good farming practice in a previous year may contribute
to the loss in the current year and it may not have been part of FCIC’s review of the current year’s good farming
practices. The AIP is required to ensure that all policy provisions have been complied with before paying any
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 2006 crop year.
Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).
Date of Issue: Nov 9, 2009
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