Final Agency Determination: FAD-110

FAD-110

Subject: Two requests dated December 3, 2009, and December 14, 2009, requesting a Final Agency Determination for the 2008 and succeeding crop years regarding the interpretation of section 17(a)(1) and 17(f) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8. These requests are pursuant to 7 C.F.R. part 400, subpart X.

The preamble to the Basic Provisions states, as here pertinent:

This insurance policy is reinsured by the Federal Crop Insurance Corporation (FCIC) under the provisions of the Federal Crop Insurance Act (Act) (7 U.S.C. 1501 et seq.). All provisions of the policy and rights and responsibilities of the parties are specifically subject to the Act. The provisions of the policy may not be waived or varied in any way by us, our insurance agent or any other contractor or employee of ours or any employee of USDA unless the policy specifically authorizes a waiver or modification by written agreement. We will use the procedures (handbooks, manuals, memoranda and bulletins), as issued by FCIC and published on the RMA Web site at www.rma.usda.gov or a successor Web site, in the administration of this policy, including the adjustment of any loss or claim submitted hereunder. In the event that we cannot pay your loss because we are insolvent or are otherwise unable to perform our duties under our reinsurance agreement with FCIC, your claim will be settled in accordance with the provisions of this policy and FCIC will be responsible for any amounts owed. No state guarantee fund will be liable for your loss.

Throughout this policy, “you” and “your” refer to the named insured shown on the accepted application and “we,” “us,” and “our” refer to the insurance company providing insurance. Unless the context indicates otherwise, use of the plural form of a word includes the singular and use of the singular form of the word includes the plural.

AGREEMENT TO INSURE: In return for the payment of the premium, and subject to all of the provisions of this policy, we agree with you to provide the insurance as stated in this policy. If there is a conflict between the Act, the regulations published at 7 CFR chapter IV, and the procedures as issued by FCIC, the order of priority is as follows: (1) The Act; (2) the regulations; and (3) the procedures as issued by FCIC, with (1) controlling (2), etc. If there is a conflict between the policy provisions published at 7 CFR part 457 and the administrative regulations published at 7 CFR part 400, the policy provisions published at 7 CFR part 457 control. If a conflict exists among the policy provisions, the order of priority is: (1) The Catastrophic Risk Protection Endorsement, as applicable; (2) the Special Provisions; (3) the Crop Provisions; and (4) these Basic Provisions, with (1) controlling (2), etc.
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Section 1 of the Basic Provisions states, as here pertinent:

1. Definitions
Prevented Planting- 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.
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Section 9 of the Basic Provisions states, as here pertinent:

9. Insurable Acreage
(a) Acreage planted to the insured crop in which you have a share is insurable except acreage:

(1) That has not been planted and harvested or insured (including insured acreage that was prevented from being planted) in at least one of the three previous crop years unless you can show that:

(i) Such acreage was not planted:

(A) In at least two of the previous three crop years to comply with any other USDA program;
(B) Because of crop rotation, (e.g., corn, soybeans, alfalfa; and the alfalfa remained for four before the acreage was planted to corn again); or
(C)Because a perennial tree, vine, or bush crop was grown on the acreage;
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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
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Our Duties
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(d) We recognize and apply the loss adjustment procedures established or approved by the Federal Crop Insurance Corporation.
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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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(f) Regardless of the number of eligible acres determined in section 17(e), prevented planting coverage will not be provided for any acreage:
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(8) That exceeds the number of eligible acres physically available for planting;
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Section 20 of the Basic Provisions states, as here pertinent:

20. Mediation, Arbitration, Appeal, Reconsideration, and Administrative and Judicial Review.
(b) ***

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(4) In any suit, if the dispute in any way involves a policy or procedure interpretation, regarding whether a specific policy provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy provision or procedure, an interpretation must be obtained from FCIC in accordance with 7 CFR part 400, subpart X or such other procedures as established by FCIC. Such interpretation will be binding.

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Section 4F of the 2008 Prevented Planting Loss Adjustment Standards Handbook (PP LASH) defines eligible acres as meeting all of the following conditions:

F. ELIGIBLE ACRES

(1) Acreage eligible for PP must be:

(a) Insurable. The adjuster (and/or other contractor or AIP employee designated by the AIP) must verify that the acreage claimed as PP is NOT any of the uninsurable acreage listed below:
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(b) Available for planting. Available for planting means land is free of trees, rocky outcroppings, or other factors that would prevent proper and timely preparation of the seedbed for planting and harvest of the crop for the crop year. Acreage not considered available for planting includes, but is not limited to, the following:

(1) acreage enrolled in CRP;
(2) perennial crop acreage; i.e., trees or vines still on the acreage or not removed in time to plant;
(3) pasture or forage acreage is in place (established). Refer to section 4 I and 4 K(2) (a) for what constitutes established pasture or forage acreage that is in place; and
(4) Acreage that in normal weather patterns is normally wet throughout the final and late planting period and that would only be available to plant in abnormally dry conditions. Because of the normally wet conditions from year to year on such acreage, this acreage is likely to have well established cattails, perennial weeds, and perennial grasses that increase the likelihood of the acreage being unavailable for planting even in the driest year.
Unavailability of such land increases in this situation because of the time, expense, and labor needed to remove the well-established cattails, weeds, and grasses in time to plant the insured crop.
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On May 29, 2007, the Risk Management Agency (RMA) issued Informational Memorandum IS-07-007 which states, as here pertinent:

Acreage that is not available for planting according to FCIC-issued procedure, or does not otherwise comply with policy provisions, is not considered eligible acreage.

RMA is requested to provide an interpretation of the eligibility for prevented planting criteria defined in section 17(a)(1) specifically the exclusions from eligible prevented planting acres defined in section 17(f) of the Basic Provisions that clarifies whether or not a field is “available for planting” would exclude a policyholder from being eligible for prevented planting coverage.

Interpretation Submitted

As stated above, RMA received two requests for a Final Agency Determination for the 2008 and succeeding crop years regarding the interpretation of section 17(a)(1) and 17(f) of the Basic Provisions. The second request for the Final Agency Determination was a joint request submitted by two parties. Both parties submitted their interpretation of the provisions. Therefore, a total of three interpretations were submitted as follows:

The first requestor understands the Basic Provisions supersede the PP LASH and published Informational Memorandum IS-07-007. However, since the Basic Provisions are silent as to whether the “available for planting” requirement impacts a policyholder’s eligibility for prevented planting coverage and based on the specific direction received from RMA that acreage that is not available to plant is not eligible for prevented planting coverage, the first requestor is seeking a Final Agency Determination clarifying the meaning of “available for planting.” The first requestor specifically requests an interpretation of section 17 of the Basic Provisions based on the conflicting standards in section 17 of the Basic Provisions, the PP LASH, and IS-07-007. The first requestor states the policy does not mention the “available for planting” standard; the PP LASH and IS-07-007 do.

Based on the specific direction previously received from RMA regarding the “available to plant” standards and the language from section 9(a) of the Basic Provisions regarding insurable acreage, the first requestor interprets section 17(f) of the Basic Provisions as requiring approved insurance providers (AIPs) to exclude acres from prevented planting coverage if the acres have not been available to plant.

Based on the above, the first requestor interprets the “available to plant” definition as acreage that has not been planted or harvested in one of the three previous crop years. Furthermore, based on past RMA direction, the first requestor interprets the availability to plant standard to be an exclusion to prevented planting eligibility even though it is not included in section 17(f) of the Basic Provisions. The first requestor believes because the policy incorporates RMA handbooks by reference, coverage exclusions in such handbooks apply regardless of whether they also are stated in the policy.

The second requestor maintains section 4F(1)(b)4 of the PP LASH is entirely consistent with section 17(f)(8) of the Basic Provisions which does not allow for prevented planting coverage on acreage that is not “physically available for planting.” Merriam-Webster’s Online Dictionary defines the term “available” as “present or ready for immediate use.” Acreage which, in normal weather patterns, is normally wet throughout the final and late planting period cannot be said to be acreage that is present or ready for the immediate use of planting. Therefore, section 4F(1)(b)4 of the PP LASH does not conflict with the policy. As a result, under the second requestor’s interpretation of section 17(f)(8), “acreage that in normal weather patterns is normally wet throughout the final and late planting period and that would only be available to plant in abnormally dry conditions,” is not acreage that is “available for planting.”

The second requestor believes the interpretation above is entirely consistent with Informational Memorandum (IS-07-007). The fact that section 17(f)(8) of the Basic Provisions was not cited in this memo in no way suggests section 4F(1)(b)4 of the PP LASH conflicts with the policy. The purpose of an Informational Memorandum is simply to convey information. As a result, RMA routinely issues Informational Memorandums that quote loss adjustment procedures without also quoting every policy provision that may be related to the procedure. Furthermore, given that section 4F(1)(b)4 was added to the version of the PP LASH released on November 29, 2005, the suggestion that section 4F(1)(b)4 of the PP LASH was created solely to address drought conditions existing in the summer and fall of 2006 is clearly misplaced.

The second requestor disagrees with the contention that section 17(f)(8) of the Basic Provisions only addresses non-cropland acres, such as acreage that is used for conservation purposes, intended to be left unplanted under any program administered by the USDA or other government agency (i.e. CRP) or required to be left unharvested under the terms of the lease or any other agreement; or acreage that is pasture land or land with forage crop in place or land for which planting history or conservation plans indicate would remain fallow for crop rotation purposes. Sections 17(f)(3) and 17(f)(6) of the Basic Provisions contain limitations on prevented planting coverage that specifically address the examples of acreage which the insureds characterize as non-cropland. The Basic Provisions clearly set forth section 17(f)(8) as a limitation on prevented planting coverage that is separate and distinct from the limitations contained in sections 17(f)(3) and 17(f)(6). Furthermore, in order to qualify for prevented planting coverage, it is not enough for the acreage to simply be characterized as cropland. Instead the acreage must be cropland which also meets the specific criteria established by FCIC for determining whether the cropland is available for planting. See e.g., PP LASH page 59, which states, “The term “cropland” as used in this example includes ONLY cropland that is available for planting. Also, see subsection 4F(1)(b) for more information regarding cropland acreage that is available for planting.”

Finally, the second requestor also disagrees with the suggestion that this proposed interpretation would somehow eliminate all prevented planting claims. The only acreage affected by the second requestor’s proposed interpretation would be acreage that does not satisfy the specific criteria for availability set forth in section 4F(1)(b)4 of the PP LASH.

The third requestor contends section 4F(1)(b)4 of the PP LASH conflicts with the terms of the Basic Provisions by imposing a stricter standard through additional terms and requirements which are not included or required by the policy.

The definition of “prevented planting” in section 1 of the Basic Provisions and section 17 does not include an “available for planting” requirement. The insurance policy is clean and unambiguous that prevented planting is the failure to plant the “insured crop” by the final planting date due to an insured cause of loss that is general in the area and prevents other producers from planting. Section 17(e) of the Basic Provisions identifies the maximum number of acres that may be eligible for a prevented planting payment.

FAD-051 addresses the issue of how to determine the total number of acres that may be eligible for prevented planting. FCIC, in FAD-051 explained that:

Section 17(e)(1) of the Basic Provisions clearly states that the total number of acres that may be eligible for prevented planting is the “number of acres of cropland in your farming operation”. Under this provision it is immaterial how the insured acquired the acreage or whether it had a previous history of prevented planting. If the acreage qualifies as cropland and is included in the insured’s farming operation, it may be included in the total number of acres eligible for prevented planting (emphasis added). The actual amount of eligible acreage for each insured crop is determined by the table in section 17(e)(1) of the Basic Provisions.

The third requestor states, there is no mention of section 17(f)(8) of the Basic Provisions in FAD-051, because section 17(f)(8) addresses non-cropland, whereas section 17(e) addresses “eligible prevented planting acres.”

The third requestor believes it is unreasonable to interpret section 17(f)(8) of the Basic Provisions to require prevented planting acreage to be “physically available for planting” because, by definition, prevented planting is a failure to plant. If the acreage was “physically available to plant”, the insured is required to plant by the final planting date. Therefore, there would never be a prevented planting claim under the interpretation that section 17(f)(8) requires all prevented planting acreage to be “physically available to plant.”

Section 4F(1)(b) of the PP LASH is not an interpretation of section 17(f)(8) of the Basic Provisions. Section 17(f)(8) addresses non-cropland acres, such as acreage that is used for conservation purposes, intended to be left unplanted under any program administered by the USDA or other government agency (i.e. CRP), or required to be left unharvested under the terms of the lease or any other agreement (section 17(f)(3)); or acreage that is pasture land or land with a forage crop in place or land for which planting history or conservation plans indicate would remain fallow for crop rotation purposes (section 17(f)(6)). RMA has taken the position in the past that section 17(f)(8) is non-cropland such as roads and farmsteads.

Moreover, the third requestor states section 17(f)(8) of the Basic Provisions has existed since 1998 to present. Section 4F(1)(b) of the PP LASH was recently created in 2006. It is therefore illogical to say that section 4F(1)(b) of the PP LASH is related to section 17(f)(8) of the Basic Provisions. If it is, the third requestor questioned what section 17(f)(8) meant all the years prior to 2006. This would be an interpretation that is contrary to law or reason.

There is no language in the Basic Provisions that requires prevented planting acreage to first be “available for planting” as identified in paragraph 4F(1)(b) of the PP LASH before it is eligible for a prevented planting payment. The PP LASH conflicts with the insurance policy by creating an additional requirement for a prevented planting payment. When there is a conflict between the terms of the policy and the loss adjustment procedures, the terms of the policy control. See FAD-05 and Davidson v. Glickman, 169 F.3d 996 (5th Cir. 1999).

Informational Memorandum (IS-07-007) clearly explains the purpose behind section 4F (eligible acres) of the PP LASH as a response to the abnormally dry to moderate drought conditions that have been experienced in Minnesota, North Dakota, and South Dakota. The background of memo explains, “The continued dry/drought conditions allowed farmers to perform tillage and/or chemical fallow during the summer or fall in 2006 on acreage that is generally too wet to till and plant (i.e., potholes in low lying areas). Approved Insurance Provider(s) (AIP) and the Risk Management Agency (RMA) have been informed that these acres may have been specifically worked up in order to claim spring 2007 prevented planting when normally occurring precipitation fills the potholes in low lying areas.” The third requestor believes there is absolutely no reference to section 17(f)(8) of the Basic Provisions in Informational Memorandum IS-07-007 for section 4F of the PP LASH. This is because section 4F of the PP LASH is not interpreting section 17(f)(8) of the Basic Provisions, but instead was created to address the recent dry/drought conditions identified in Informational Memorandum IS-07-007.

The preamble to the Basic Provisions clearly states, “The provisions of the policy may not be waived or modified in any way by us, your insurance agent or any employee of the USDA unless the policy specifically authorizes a waiver or modification by written agreement” 7 CFR §457.8. “We agree with you to provide the insurance as stated in this policy. If there is a conflict between the Act, the regulations published at 7 CFR Chapter IV, and the procedures issued by us, the order of priority is as follows: (1) The Act; (2) the regulations; and (3) the procedures…If there is a conflict between the policy provisions and regulations, “the policy provisions published at 7 CRF part 457 control.” Accordingly, section 17 of the policy controls over section 4F of the PP LASH.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees with the interpretation that the Basic Provisions control any procedures or bulletins, including the PP LASH and Informational Memorandum IS-07-007. However, FCIC does not agree there are conflicting standards between section 17 of the Basic Provisions, section 4F of the PP LASH, and Informational Memorandum IS-07-007. In accordance with section 17(f)(8) of the Basic Provisions, prevented planting coverage will not be provided for any acreage that exceeds the number of eligible acres physically available for planting. There is nothing in this provision that suggests that it is limited to non-cropland acreage. FCIC is giving the language its plain meaning by interpreting it to mean that the number of acres eligible for prevented planting is limited to the number of acres that are physically available for planting.

However, section 17(f)(8) of the Basic Provisions does not define acres “physically available for planting.” Therefore, clarification was necessary and section 4F(1)(b) of the PP LASH provides that clarification. It provides a basic definition and examples regarding when acreage is not considered physically available for planting. Even the list of examples is not exclusive, as demonstrated by the use of the phrase “includes, but not limited to.” One specific example of acreage not considered to be available for planting contained in the PP LASH is “acreage that in normal weather patterns is normally wet throughout the final and late planting period and that would only be available to plant in abnormally dry conditions,” is not acreage that is “available for planting”. Such acreage is not considered “available for planting” because under normal weather conditions it remains too wet to plant.

Therefore, section 4F(1)(b) of the PP Lash is not in conflict with the Basic Provisions. It is merely a clarification of section 17(f)(8) of the Basic Provision. This clarification of acreage “available for planting” is also consistent with the definition of “prevented planting” contained in section 1 of the Basic Provisions, which requires an insured cause of loss that occurred within the insurance period to have prevented planting, and section 508(a)(1) the Federal Crop Insurance Act (Act), which states in part “To qualify for coverage under a plan of insurance, the losses of the insured commodity must be due to drought, flood, or other natural disaster (as determined by the Secretary).” Normal weather conditions are not a covered cause of loss.

FCIC does not agree with the first requestor’s interpretation that “available to plant” means acreage that has not been planted or harvested in one of the three previous crop years as stated in section 9 of the Basic Provisions. The provisions of section 9 must be met for acreage to qualify as insurable. To accept the first requestor’s interpretation that section 9 determines available to plant would make section 17(f)(8) of the Basic Provisions meaningless because if the acreage is not insurable, certainly it would not be eligible for prevented planting. Section 17(f)(8) provides a distinction between the insurability of the acreage versus the availability of a particular coverage. To be covered for prevented planting, the acreage must be physically available for the planting. Further, as stated above, section 4F(1)(b) of the PP LASH merely provides a clarification of section 17(f)(8) of the Basic Provisions.

Further, the fact that neither the Informational Memorandum nor the definition of “prevented planting” specifically references section 17(f)(8) or the phrase “physically availability to plant” has no significance. Section 17(f)(8) of the Basic Provisions is part of the policy and specifically refers to acreage physically “available for planting.” The clarification, as stated above, is fully consistent with the policy and the Act.

FCIC does not agree with the third requestor’s interpretation which states “there is no language in the Basic Provisions that requires prevented planting acreage to first be “available for planting” and that “The PP LASH conflicts with the insurance policy by creating an additional requirement for a prevented planting payment.” As stated above, section 17(f)(8) of the Basic Provisions limits prevented planting acreage to acreage that is physically available for planting and the PP LASH specifically addresses the meaning of available for planting. There is no conflict between the PP LASH and the policy provisions.

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 Crop Revenue Coverage (CRC) and Revenue Assurance (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 succeeding crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Feb 25, 2010