Final Agency Determination: FAD-122

FAD-122

Subject: Request dated May 14, 2010, requesting a Final Agency Determination for the 2009 crop year regarding an interpretation of section 10(a)(2) 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.

Background

The Risk Management Agency is requested to provide an interpretation of section 10(a)(2) of the Basic Provisions as it relates to the share of a landlord that may be insured under a tenant's policy or a tenant's share that may be insured under a landlord's policy.

Section 1 of the Basic Provisions states, as here pertinent:

1. Definitions

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Insured - The named person as shown on the application accepted by us. This term does not extend to any other person having a share or interest in the crop (for example, a partnership, landlord, or any other person) unless specifically indicated on the accepted application.

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Section 10 of the Basic Provisions states, in pertinent part:

10. Share Insured.

(a) Insurance will attach only to the share of the person completing the application and will not extend to any other person having a share in the crop unless the application clearly states that:

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(2) You as landlord will insure your tenant's share, or you as tenant will insure your landlord's share. In this event, you must provide evidence of the other party's approval (lease, power of attorney, etc.). Such evidence will be retained by us. You also must clearly set forth the percentage shares of each person on the acreage report. For each landlord or tenant that is an individual, you must report the landlord's or tenant's social security number. For each landlord or tenant that is a person other than an individual or for a trust administered by the Bureau of Indian Affairs, you must report each landlord's or tenant's social security number, employer identification number, or other identification number assigned for the purposes of this policy.

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Section 4C(1)(b) of the 2008 Crop Insurance Handbook (CIH) provides, in pertinent part:

4C Applications For Insurance.

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(1)(b) Landlord/Tenant. Separate applications/contracts are required for each person insured unless the application clearly states the landlord will insure the tenant's share, or the tenant will insure the landlord's share.

1 If the landlord or tenant has requested to insure the other person's share of the crop on the application by the applicable SCD, the percentage shares of both persons must be shown in the remarks section of the acreage report or documented and attached to the acreage report.

2 Evidence of the other party's approval (lease, power of attorney, etc.) must be provided to the AIP by the SCD, and retained.

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5 If a landlord or tenant's share is insured under the policy, the applicable identification number must be shown on the application, regardless of whether the landlord or tenant holds a SBI in the policy.

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Exhibit 32, section 3 of the 2008 CIH provides, in pertinent part:

3 LANDLORD/TENANT

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3A The application must clearly state the tenant will insure the landlord's share or landlord will insure the tenant's share; otherwise, the landlord or tenant must have separate policies. Evidence of the other party's approval (lease, power of attorney, etc.) must be provided to the Insurance Provider and placed in the insured's file.

3B The landlord(s) or tenant(s) insured by a person must be listed as an SBI on the entity's application even if their share is less than 10%. Additionally, the percentage shares of all persons must be shown in the remarks section of the acreage report or documented and attached to the acreage report.

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Paragraph 14E(3) of the Loss Adjustment Manual (LAM) Standards Handbook provides, in pertinent part:

(3) Landlord/tenant

Any entity (individual, partnership, corporation, etc.) may insure a landlord's and/or tenant's share(s). However, if the tenant or landlord has a separate policy for that crop/county, they cannot be insured under another person's policy. For example, a landlord's share cannot be insured under a tenant's policy if the landlord has his own individual policy for that crop/county. Only one application/policy is allowed per person (entity), per crop, per county. When insuring another person's share:

(a) The application must clearly state the tenant will insure the landlord's share or landlord will insure the tenant's share; otherwise, the landlord or tenant must have separate contracts. Evidence of the other party's approval (lease, power of attorney, etc.) must be provided to the AIP and placed in the insured's file.

(b) The landlord(s) or tenant(s) insured by an entity must be listed as an SBI on the entity's application, even if their share is less than 10%. Additionally, there is only a one-line entry on the acreage report showing a 100% share, and the percentage shares of all entities (e.g., tenant's share = 75%; landlord's share = 25%) must be shown in the remarks section of the acreage report or documented and attached to the acreage report.

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The requestor states that identical or nearly identical language is set forth in the Crop Revenue Coverage (CRC) and Revenue Assurance (RA) policies and requests this Final Agency Determination (FAD) be made applicable to both policies.

Interpretation Submitted

The requestor interprets section 10(a)(2) of the Basic Provisions to mean that in order for a landlord to insure his tenant's share or for a tenant to insure his landlord's share, the insured must satisfy four criteria:

1. The application must clearly state that the landlord will insure the tenant's share or that the tenant will insure the landlord's share.

2. For each landlord or tenant, the application must report:

a. For each landlord or tenant that is an individual - each landlord's or tenant's social security number; and

b. For each landlord or tenant that is not an individual or for a trust administered by the Bureau of Indian Affairs - each landlord's or tenant's social security number, employer identification number, or other identification number assigned for the purpose of the Federal crop insurance coverage, as applicable.

3. The insured must provide written evidence of the other party's approval by the sales closing date. This evidence may include, but is not limited to, lease agreements and powers of attorney.

4. The acreage report must clearly set forth the percentage share for each person.

In summary, it is the requestor's interpretation of section 10(a)(2) of the Basic Provisions that a landlord insured must satisfy each of the four above-referenced requirements in order to insure his tenant's share. Likewise, a tenant insured must satisfy each of the four above-referenced requirements in order to insure his landlord's share. If each of the four criteria is not satisfied, a landlord would not be allowed to insure his tenant's share and a tenant would not be allowed to insure his landlord's share.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor's interpretation.

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

Date of Issue: Aug 10, 2010