Final Agency Determination: FAD-108

FAD-108

Subject: Request dated November 24, 2009, requesting a Final Agency Determination for the 2005 through 2009 crop years regarding the interpretation of section 15(f) 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.

The submitter requests the Risk Management Agency (RMA) provide an interpretation of the requirement that a prevented planting payment must be reduced by 65 percent if a second crop is planted after the claimed prevented planting crop’s final planting date or late planting period, as applicable.

Section 15 of the Basic Provisions states, as here pertinent:

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(f) With respect to acreage where you were prevented from planting the first insured crop in the crop year, except in the case of double cropping described in section 15(h):

(1) If a second crop is not planted on the same acreage for harvest in the same crop year, you may collect a prevented planting payment that is equal to 100 percent of the prevented planting payment for the acreage for the first insured crop; or

(2) If a second crop is planted on the same acreage for harvest in the same crop year (you will pay the full premium and, if there is an insurable loss to the second crop, receive the full amount of indemnity that may be due for the second crop, regardless of whether there is a subsequent crop planted on the same acreage) and:

(i) Provided the second crop is not planted on or before the final planting date or during the late planting period (as applicable) for the first insured crop, you may collect a prevented planting payment that is 35 percent of the prevented planting payment for the first insured crop; and

(ii) Be responsible for premium that is 35 percent of the premium that you would otherwise owe for the first insured crop.

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The requestor interprets section 15(f) of the Basic Provisions to mean if a second crop is planted after the prevented planting crop’s final planting date or late planting period (as applicable), the prevented planting payment must be reduced by 65 percent if the second crop is harvested. For instance, a policyholder is prevented from planting corn on certain acreage. The policyholder plants this acreage to soybeans after the corn late planting period. The policyholder maintains he planted the soybeans only for erosion control and/or conservation purposes. However, the policyholder harvests and sells the soybean production. The requestor interprets this provision to mean the soybeans would be a second crop “planted on the same acreage for harvest in the same crop year” which would require that the corn prevented planting payment be reduced by 65 percent.

The requestor provides, paragraph 5A(1)(c)(6) of the Prevented Planting Loss Adjustment Standards Handbook states “A crop harvested for grain, seed, etc., is presumed not to have been grown for conservation or soil improvement purposes and the policy provisions for second crops and crops planted prior to the end of the late planting period, as applicable, will apply.” The requestor further supports his position with section 15(g) of the Basic Provisions which states, in part:

(g) The reduction in the amount of indemnity or prevented planting payment and premium specified in sections 15(e) and 15(f), as applicable, will apply:

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(3) For prevented planting only:

(i) If a volunteer crop or cover crop is hayed or grazed from the same acreage, after the late planting period (or after the final planting date if a late planting period is not applicable) for the first insured crop in the same crop year, or is otherwise harvested anytime after the late planting period (or after the final planting date if a late planting period is not applicable) (Emphasis added).

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The Federal Crop Insurance Corporation (FCIC) agrees with the requestor’s interpretation with respect to crops claimed to have been planted for other than harvest after the first crop on the acreage. If a crop is planted for harvest after the first crop is prevented from being planted, it is considered a second crop and the prevented planting payment is reduced regardless of whether the second crop is harvested. Section 15(g)(3) of the Basic Provisions clarifies that this reduction also applies when a cover crop is hayed or grazed or is otherwise harvested on the same acreage in the same crop year after the late planting period (or after the final planting date if a late planting period is not applicable) for the insured crop that was prevented from being planted, or when a cover crop is harvested anytime after the late planting period (or after the final planting date if a late planting period is not applicable). This means that if a policyholder was prevented from planting a first insured crop then plants a crop that is claimed not to be for harvest but is later harvested, on the same acreage in the same crop year, that crop is considered a second crop and the first insured crop prevented planting payment will be reduced by 65 percent if such second crop was planted after the end of the late planting period (or after the final planting date if a late planting period is not applicable) for the first insured crop. There is an exception to this rule when double cropping requirements are met.

The definition of “second crop” contained in section 1 of the Basic Provisions states a cover crop that is hayed or grazed during the crop year, or that is otherwise harvested, is considered to be a second crop. Further, RMA posted FAD-036-R on its website on December 14, 2004, which states that a crop harvested for grain, seed, etc. is presumed not to have been grown for conservation or soil improvement purposes and the policy provisions for second crops or crops planted prior to the end of the late planting period, as applicable, will apply.

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 policyholders insured under the same policy provisions.

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 through 2009 crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Jan 26, 2010