Final Agency Determination: FAD-106

FAD-106

Subject: Request dated October 27, 2009, resubmitted, (received by the Risk Management Agency (RMA) November 30, 2009) requesting a Final Agency Determination for the 2007 and 2008 crop years regarding the interpretation of section 21(g) 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 21 of the Basic Provisions states, as here pertinent:

21. Access to Insured Crop and Records, and Record Retention.

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(f) Failure to maintain or provide records will result in:

(1) The imposition of an assigned yield in accordance with section 3(e)(1) and 7 CFR part 400, subpart G for those crop years for which you do not have the required production records to support a certified yield;
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(g) If the imposition of an assigned yield under section 21(f)(1) would affect an indemnity, prevented planting payment or replant payment that was paid in a prior crop year, such claim will be adjusted and you will be required to repay any overpaid amounts.
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The requestor’s interpretation of the above quoted provisions is that the only instances in which an approved insurance provider (AIP) may go back and claim overpaid indemnities for crop years prior to the current or most recent crop year will be those instances quoted above in section 21(f)(1) of the Basic Provisions. Section 21(f)(1) provides, yields are assigned by an approved insurance provider or the RMA where actual production cannot be proven by the policyholder through production records or production reports verified by the AIP or RMA. The requestor questioned how many years may the AIP claim overpayments and demand repayments under the provisions of section 21 of the Basic Provisions. The requestor’s interpretation is that the standard three year retention period applies here, as the general heading for section 21 of the Basic Provisions states, “Access to Insured Crop and Records, and Record Retention.” and cites a three year retention period.

The Federal Crop Insurance Corporation (FCIC) disagrees with the requestor’s interpretation that the only instances in which an AIP may go back and claim overpaid indemnities for prior crop years will be those in which the imposition of an assigned yield under section 21(f)(1) would affect an indemnity, prevented planting payment, or replant payment. This is only one instance where an AIP may go back and claim overpaid indemnities as a result of the use of assigned yields because the policyholder does not have the requisite records. However, there are numerous other provisions of the policy where non-compliance would affect the existence or amount of an indemnity paid. Non-compliance with any of these other provisions could entitle the AIP to collect any amounts that may have been overpaid as a result of such non-compliance. For example, incorrect yields, uninsurable acres reported on the acreage report, overstated acreage, incorrect share, etc., that are discovered must be corrected, and if such correction results in an overpaid indemnity or any other debt, it is subject to collection from the policyholder.

Further, a policyholder is required by the terms of the policy to maintain records for three years after the end of the crop year for which the policyholder initially certified such records, unless such records have already been provided to the AIP. This could require records to be kept for more than three years. In the example provided in the policy, if the policyholder’s approved yield for the 2003 crop year was based on production records certified for the 1997 through 2002 crop years, the policyholder must retain all such records through the 2006 crop year, unless such records have already been provided to the AIP. Further, nothing in section 21 precludes evidence from other sources from being used to identify misreporting of information or errors from being discovered and corrected beyond three years. This evidence can be from third parties (e.g., transportation records, records from a buyer of the insured crop, or other records obtained by the AIP, FCIC, or any person acting on behalf of the AIP or USDA authorized to investigate or review any matter relating to Federal crop insurance).

When overpayments are discovered as a result of non-compliance with any policy provision, the policyholder may be required to repay such overpaid amounts.

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 2008 crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Jan 21, 2010