Final Agency Determination: FAD-126

FAD-126

Subject: Request dated August 5, 2010, requesting a Final Agency Determination for the 2008 crop year regarding the interpretation of section 20(b)(1) 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 20 of the Basic Provisions states, as here pertinent:

20. Mediation, Arbitration, Appeal, Reconsideration, and Administrative and Judicial Review.

(a) If you and we fail to agree on any determination made by us except those specified in section 20(d), the disagreement may be resolved through mediation in accordance with section 20(g). If resolution cannot be reached through mediation, or you and we do not agree to mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA), except as provided in sections 20(c) and (f), and unless rules are established by FCIC for this purpose…

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(b) Regardless of whether mediation is elected:

(1) The initiation of arbitration proceedings must occur within one year of the date we denied your claim or rendered the determination with which you disagree, whichever is later;

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The Commercial Arbitration Rules of the AAA provide at Section R-4, Initiation under an Arbitration Provision in a Contract, as here pertinent:

R-4. Initiation under an Arbitration Provision in a Contract

(a) Arbitration under an arbitration provision in a contract shall be initiated in the following manner:

(i) The initiating party (the "claimant") shall, within the time period, if any, specified in the contract(s), give to the other party (the "respondent") written notice of its intention to arbitrate (the "demand"), which demand shall contain a statement setting forth the nature of the dispute, the names and addresses of all other parties, the amount involved, if any, the remedy sought, and the hearing locale requested.

(ii) The claimant shall file at any office of the AAA two copies of the demand and two copies of the arbitration provisions of the contract, together with the appropriate filing fee as provided in the schedule included with these rules.

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The requestor interprets section 20(b)(1) of the Basic Provisions to mean that a party wishing arbitration to resolve a dispute, in order to "initiate" arbitration, must actually file a demand for arbitration in accordance with the rules of the American Arbitration Association (AAA) with the AAA or other mutually agreed upon arbitration service within one year of the date the Approved Insurance Provider (AIP) informed the customer of the denial of the claim or the date the AIP rendered a determination with which the customer disagreed. It is not enough that the policyholder sent the AIP a letter(s) stating that they wished to arbitrate within one year of claim denial but then did not actually file a demand for arbitration with AAA or other mutually agreed upon arbitration service until several months beyond the date that is one year from denial of the claim. The policy requires that the demand for arbitration be on file with an arbitration service within one year of claim denial or adverse determination.

The Federal Crop Insurance Corporation (FCIC) agrees in part with the requestor's interpretation. Section 20(a) of the Basic Provisions policy requires the initiation of the arbitration proceedings within one year of the date the claim is denied or the date of any other disputed decision. Section 20(a) also states that the rules of the AAA will apply to arbitrations except as otherwise specified in sections 20(c) and (f). However, it is the rules of the AAA that require initiation of an arbitration to include filing at any office of the AAA two copies of the demand and two copies of the arbitration provisions of the contract. Since such rules are incorporated into the policy by reference, and there is no exception provided in the policy for this provision, the policyholder is required to file the demand for arbitration with the arbitration service within one year of the date of denial of the claim or the date in which the AIP rendered the determination with which the policyholder disagrees, whichever is later.

The requestor asked that the Final Agency Determination explicitly provide that the decision is applicable to the provisions of the Revenue Assurance (RA) policy since the language is identical or nearly identical. 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 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 2008 crop year. Any appeal of this decision must be in accordance with 7 C.F.R. § 400.768(g).

Date of Issue: Nov 2, 2010