Final Agency Determination: FAD-120

FAD-120

Subject: The Risk Management Agency (RMA) received two requests, one dated April 5, 2010, that was resubmitted and received by RMA on May 20, 2010, and one dated April 15, 2010, for a Final Agency Determination for the 2008 crop year requesting an interpretation of Section 17(e)(1) of the Common Crop Insurance Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8. The requests are pursuant to 7 C.F.R. part 400, subpart X.

Section 17 of the Basic Provisions states, as here pertinent:

17. Prevented Planting

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(e) The maximum number of acres that may be eligible for a prevented planting payment for any crop will be determined as follows:

(1) The total number of acres eligible for prevented planting coverage for all crops cannot exceed the number of acres of cropland in your farming operation for the crop year, unless you are eligible for prevented planting coverage on double cropped acreage in accordance with section 17(f)(4). The eligible acres for each insured crop will be determined in accordance with the following table.

Type of Crop

Eligible acres if, in any of the 4 most recent crop years, you have planted any crop in the county for which prevented planting insurance was available or have received a prevented planting insurance guarantee

(i) The crop is not required to be contracted with a processor to be insured

(A) The maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the 4 most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)). The number of acres determined above for a crop may be increased by multiplying it by the ratio of the total cropland acres that you are farming this year (if greater) to the total cropland acres that you farmed in the previous year, provided that you submit proof to us that for the current crop year you have purchased or leased additional land or that acreage will be released from any USDA program which prohibits harvest of a crop…

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RMA is requested to provide an interpretation of the policy language setting the maximum number of acres on which prevented planting payments may be made. RMA is also requested to provide an interpretation of the term “previous year“ in the table in section 17(e)(1) of the Basic Provisions.

As stated above, RMA received two requests for a Final Agency Determination for the 2008 crop year regarding interpretation of section 17(e)(1) of the Basic Provisions. Both parties submitted their interpretation of the provisions as follows:

The first requestor proposes the following interpretation:

In the instance of a prevented planting claim, the maximum number of acres on which a claim may be paid is limited to the maximum number of acres planted in any of the four (4) crop years preceding the claim. This maximum number may only be increased for added land by multiplying the maximum number of acres by the ratio of the total cropland acres the policyholder is farming in the current crop year (if greater) to the total cropland acres the policyholder planted the crop in the immediately preceding year. The immediate preceding year is the most recent crop year, and not any of the prior four crop years.

The second requestor interprets the term “previous year“ in section 17(e)(1)(i)(A) of the Basic Provisions to mean “any one of the four most recent crop years“ in which the “maximum number of acres“ was “reported for insurance for the crop“ as indicated by the first sentence in section 17(e)(1)(i)(A). This proper interpretation of “the previous year“ means that if one were to have not planted any acreage for the immediately preceding two years, but did previously plant acreage three years ago, “the previous year“ would be deemed to be the third year for purposes of the calculation set forth in section 17(e)(1) of the Basic Provisions.

The Federal Crop Insurance Corporation (FCIC) agrees with the first requestor’s interpretation that the term “previous year“ is the most recent crop year prior to the current crop year, i.e., the year immediately before the current crop year. The term “previous year“ must be given its common meaning and “previous“ means the “occurring before“ and the term “year“ is singular, which would mean the year before. This interpretation is supported by the fact that the previous sentence refers to one of the 4 most recent crop years. If FCIC intended one of the 4 most recent years to apply to the added land, it could have used the same terminology but it elected not to. Further, FCIC does not agree with the first requestor’s interpretation that a policyholder’s eligible prevented planting acres are limited to the maximum number of acres “planted to the crop in any one of the four previous years, and that added land may only be used to increase this maximum number of acres if the crop was planted in the immediately preceding crop year.“

Provisions contained in section 17(e)(1)(i)(A) of the Basic Provisions state the number of acres eligible for prevented planting coverage for each insured crop will be the maximum number of acres “certified for APH purposes, or insured acres reported, for the crop in any one of the 4 most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)).“ These provisions do not specifically require the acreage to have been “planted“ in one of the four previous crop years. For example, if a policyholder met all eligibility requirements for a prevented planting payment in one of the four previous crop years, the number of insured prevented planting acres reported on the acreage report in one of the four previous crop years may be used when determining the maximum number of acres for the current crop year.

Further, the provisions contained in section 17(e)(1)(i)(A) allow the approved insurance provider (AIP) to increase a crop’s eligible prevented planting acres. Provided the requirements specified in section 17(e)(1)(i)(A) have been met, eligible acres for a crop may be increased by multiplying it by the ratio of the total cropland acres the policyholder is farming in “the current crop year“ to the total cropland acres farmed “the previous year.“ It is not limited to acreage planted for the specific crop but is based on the total cropland acreage farmed in the current and previous crop year. For example, if the producer farmed 200 acres the previous crop year and 250 acres in the current crop year, the eligible prevented planting acreage could be increased by a factor of 1.25 (250 ÷ 200).

FCIC does not agree with the second requestor’s interpretation that provisions contained in section 17(e)(1)(i)(A) mean the number of acres eligible for prevented planting coverage may be determined based on the number of acres “reported for insurance for the crop“ in any one of the four most recent crop years. The provisions require the number of acres eligible for prevented planting coverage to be determined based on the maximum number of acres certified for APH purposes, or “insured“ acres reported. On the acreage report, producers report both insured and uninsured acreage and only the insured acreage reported would be used.

The requestors stated identical or nearly identical language is set forth in the Revenue Assurance (RA) and Crop Revenue Coverage (CRC) policies. Accordingly, they request this Final Agency Determination explicitly be made applicable to those policies. 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 RA and CRC policies have not yet been codified in the C.F.R., to the extent these provisions are identical or nearly identical, the 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 crop year. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: Jul 15, 2010