Final Agency Determination: FAD-116

FAD-116

Subject: Request dated February 11, 2010, requesting a Final Agency Determination for the 2007 and subsequent crop years regarding the interpretation of 7 C.F.R. § 400.459 as it relates to persons being certified as ineligible when a debt is in dispute. This request is pursuant to 7 C.F.R. part 400, subpart X.

The submitter requests the Federal Crop Insurance Corporation (FCIC) provide clarification of how the repeal of 7 C.F.R. § 400.459 on January 20, 2009 (73 Fed. Reg. 76891) as part of the Risk Management Agency’s (RMA) enactment of the administrative sanctions regulations affects debt-related disputes in binding arbitration. Additionally, the submitter requests RMA to clarify whether the existence of an arbitration proceeding or other ongoing appeal process constitutes “adequate evidence to demonstrate that the debt is in dispute“, thereby precluding a submission of such debt record to the Ineligible Tracking System (ITS). The submitter also requests for RMA to provide an interpretation of section 7 of the Ineligible Tracking System Handbook in effect for the 2007 crop year in conjunction with the clarification provided for § 400.459.

7 C.F.R. § 400.459 states in pertinent part:

“If the person provides adequate evidence to demonstrate that the amount of the debt is in dispute, the person’s application will be accepted or their insurance will remain in effect, but no indemnity payment will be made, until the disputed issue is resolved between that person and FCIC or the approved insurance provider through available appeal process.“

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The requestor interprets 7. C.F.R. § 400.459 to require, prior to January 20, 2009, if an insured is disputing a debt through arbitration or ongoing appeals process, there is “adequate evidence to demonstrate the debt is in dispute“ and such debts may not be reported to the ITS until the dispute is resolved. The requestor interprets this provision to supersede the guidance provided in the 2001 ITS handbook regarding Reinsured Debt. Section 7A(2)(a) of the ITS Handbook provides that binding arbitration will not delay a person being certified to the Risk Management Agency (RMA) and listed as ineligible, if binding arbitration is not resolved by the termination date. Additionally, the requestor interprets FCIC’s repeal of § 400.459 to demonstrate that debt-related disputes initiated prior to January 20, 2009 are subject to § 400.459 and not the guidance provided by the ITS handbook.

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FCIC agrees with the requestor’s interpretation that a person disputing the debt through arbitration or an ongoing appeals process is adequate evidence to demonstrate the debt is in dispute. However, FCIC disagrees with the requestor’s interpretation that § 400.459 precludes disputed debts being reported to ITS. Section 400.459 provides that a person’s application will be accepted and no indemnity will be paid until a disputed debt is resolved. However, adequate evidence of a disputed debt would not preclude a person being reported to ITS to ensure payments are not made to such a person. If the dispute is resolved in favor of the insured, the insured can be removed from the ITS and any application that has been accepted may be processed or if insurance has continued the insured would be eligible for an indemnity. This is consistent with section 7A(2)(a) of the ITS Handbook.

FCIC agrees with the requestor’s interpretation that FCIC’s repeal of § 400.459 demonstrates that debt-related disputes initiated prior to January 20, 2009 are subject to § 400.459. Section 400.451(d) provides that 7 C.F.R. part 400, subpart R, in entirety, applies to any violation occurring on or after January 20, 2009.

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 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: May 12, 2010