Final Agency Determination: FAD-109

FAD-109

Subject: Request dated November 10, 2009, requesting a Final Agency Determination for the 2008 and 2009 crop years regarding the interpretation of section 17(a) 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 17 of the Basic Provisions states, as here pertinent:

17. Prevented Planting.

(a) Unless limited by the policy provisions, a prevented planting payment may be made to you for eligible acreage if:

(1) You were prevented from planting the insured crop (Failure to plant when other producers in the area were planting will result in the denial of the prevented planting claim) by an insured cause that occurs:
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Section 9(a) of the Northern Potato Crop Provisions states:

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 within the insurance period:

(1) Adverse weather conditions;
(2) Fire;
(3) Insects, but only if sufficient and proper pest control measures are used;
(4) Plant disease, but only if sufficient and proper disease control measures are used;
(5) Wildlife;
(6) Earthquake;
(7) Volcanic eruption; or
(8) Failure of the irrigation water supply, if caused by an insured peril that occurs during the insurance period (see section 9(a)(1) through (7)).

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In regards to section 17(a)(1) of the Basic Provisions, sections 9(a)(1) through (8) of the Northern Potato Crop Provisions, and specifically section 9(a)(3) of the Northern Potato Crop Provisions, the requestor interprets the provisions to mean that the cause of loss (insects) must directly prevent the insured from completing the planting operation (e.g., assuming sufficient and proper pest control measures were used, there were so many insects (such as potato cyst nematodes) in the soil that the tractor could not get enough traction to pull the planter through the field).

The requestor further interprets the provisions to mean that insects would not be an insured cause of loss for prevented planting if their presence resulted in the acreage being placed in quarantine (despite the use of typical pest control procedures) so that an eradication process (such as fumigation) could be completed, thereby preventing any planting until the eradication process was complete. In that scenario, insects only indirectly prevented the planting of the crop, and the insured is therefore not entitled to a prevented planting payment under section 17(a)(1) of the Basic Provisions.

Alternatively, the requestor interprets section 9(a)(3) of the Northern Potato Crop Provisions to mean that if acreage requires an eradication process, then the insurer must conclude that the insured did not use “sufficient” pest control procedures up to that time, and that therefore, the insects are not an insured cause, since the insured did not comply with section 9(a)(3) of the Northern Potato Crop Provisions (“but only if sufficient and proper pest control measures are used”).

The requestor also interprets the rest of section 9(a) of the Northern Potato Crop Provisions to have similar meaning in that the stated cause of loss must directly prevent the planting of the crop and cannot be an indirect cause (except for section 9(a)(8), under which failure of the irrigation source must be the result of another insured peril).

The requestor understands that 7 C.F.R. part 400, subpart X applies only the provisions of the Federal Crop Insurance Act and the regulations promulgated thereunder. However, to the extent that provisions identical, or nearly identical to those quoted above appear in other types of policies, including revenue products, and Crop Provisions, and in policy provisions for years other than those indicated above, the requestor asks that FCIC confirm that equivalent wording has the same meaning in order to ensure consistent, uniform, and equitable treatment to all producers insured under the same policy provisions.

FCIC agrees in part with the requestor’s interpretation. In section 1 of the Basic Provisions, “prevented planting” is defined as:

Failure to plant the insured crop with proper equipment by the final planting date designated in the Special Provisions for the insured crop in the county. You may also be eligible for a prevented planting payment if you failed to plant the insured crop with the proper equipment within the late planting period. You must have been prevented from planting the insured crop due to an insured cause of loss that is general in the surrounding area and that prevents other producers from planting acreage with similar characteristics.

Under section 17(a)(1) of the Basic Provisions, to receive prevented planting coverage, the prevented planting must be caused by an insurable cause of loss. Sections 17(a)(1)(i) and (ii) of the Basic Provisions state:

(i) On or after the sales closing date contained in the Special Provisions for the insured crop in the county for the crop year the application for insurance is accepted; or

(ii) For any subsequent crop year, on or after the sales closing date for the previous crop year for the insured crop in the county, provided insurance has been in force continuously since that date. Cancellation for the purpose of transferring the policy to a different insurance provider for the subsequent crop year will not be considered a break in continuity for the purpose of the preceding sentence;

Taken together, there must be an insurable cause of loss that is general to the surrounding area that prevents other producers with similar acreage from planting their crops and the insurable cause of loss must have occurred within the applicable time period.

With respect to prevented planting for insect damage: (1) the proper pest control measures must have been used and adverse weather conditions prevented application or caused properly applied control measures to be ineffective; (2) the insect infestation must be general to the surrounding area; (3) the insect infestation must have occurred after the sales closing date for the current crop year for new insureds and after the previous sales closing date for carry-over insureds; and (4) producers with similar acreage must also have been prevented from planting due to the insect infestation.

Unless the producer can prove that all of these conditions are met, the acreage does not qualify for prevented planting due to insect infestation. If all the criteria are met, it still must have been the insect infestation that caused the acreage to be prevented from being planted. Quarantine is not a covered cause of loss.

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 Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2008 and 2009 crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Feb 2, 2010