Final Agency Determination: FAD-148

FAD-148

Subject: Request dated October 14, 2011, requesting a Final Agency Determination for the 2009 and succeeding crop years regarding the interpretation of sections 20(a) 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:

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Good farming practices. The production methods utilized to produce the insured crop and allow it to make normal progress toward maturity and produce at least the yield used to determine the production guarantee or amount of insurance, including any adjustments for late planted acreage, which are: (1) For conventional or sustainable farming practices, those generally recognized by agricultural experts for the area...

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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 except as provided in sections 20(c) and (f), and unless rules are established by FCIC for this purpose...

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(d) If you do not agree with any determination made by us or FCIC regarding whether you have used a good farming practice (excluding determinations by us of the amount of assigned production for uninsured causes for your failure to use good farming practices), you may request reconsideration by FCIC of this determination in accordance with the reconsideration process established for this purpose and published at 7 CFR part 400, subpart J (reconsideration). To resolve disputes regarding determinations of the amount of assigned production, you must use the arbitration or mediation process contained in this section.

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Section 40 of the 2009 Loss Adjustment Manual (LAM) Standards Handbook states, as here pertinent:

40. Irrigated Practice

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B. Irrigated Practice Guidelines

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(4) Failure to carry out a GOOD IRRIGATION PRACTICE on acreage properly insured under the irrigated practice will result in an appraisal for uninsured causes against such acreage, unless the failure was caused by unavoidable failure (due to a specific cause of loss contained in the crop provisions) of the irrigation water supply after insurance attached, or failure or breakdown of the irrigation equipment or facilities due to an insured cause of loss provided all reasonable efforts to restore the irrigation equipment facilities to proper working order within a reasonable amount of time were taken by the insured, unless the AIP determines it is not practical to do so. Cost will not be considered when determining whether it is practical to restore the equipment or facilities.

If a loss is evident, acreage reported as an irrigated practice that qualified as an irrigated practice at the time insurance attached cannot be revised to a non-irrigated practice after the ARD even if liability stays the same or decreases and even if the insured never applied any water. Refer to PAR. 29 A (1) (c) and (d).

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The requestor notes sections 20(a) and 20(d) of the Basic Provisions were not revised in effect beginning with the 2011 crop year.

Interpretation Submitted

The requestor states that section 40B of the Loss Adjustment Manual (LAM) Standards Handbook sets forth the procedures governing irrigated practices. More specifically, that section 40B(4) provides, in pertinent part, that an insured's "[f]ailure to carry out a GOOD IRRIGATION PRACTICE on acreage properly insured under the irrigated practice will result in an appraisal for uninsured causes against such acreage…" (Emphasis in original). However, section 40B does not state or indicate whether the failure to follow good irrigation practices constitutes a failure to follow good farming practices. Therefore, the requestor believes it is unclear whether a dispute relating to an Approved Insurance Provider's (AIP) determination that a policyholder failed to carry out a good irrigation practice involves the application of uninsured causes and is arbitrable under section 20(a) of the Basic Provisions; or, alternatively, whether such a determination involves a decision regarding what constitutes a good farming practice, which is not arbitrable and is subject to 20(d)(l) of the Basic Provisions.

The requestor interprets the term "good farming practices" to include "good irrigation practice," although the definition does not specifically mention the failure to carry out a good irrigation practice. Therefore, the requester contends that a policyholder's failure to carry out a good irrigation practice under section 40 B(4) of the LAM also constitutes the failure to follow a "good farming practice" as defined by section 1 of the Basic Provisions. Hence, the requestor submits that an AIP's decision that a policyholder did not carry out a good irrigation practice is not arbitrable under section 20(a) of the Basic Provisions but is, instead, subject to 20(d) of the Basic Provisions and 7 U.S.C. 1508(a)(3).

Final Agency Determination

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

In some farming operations, irrigation is one of the farming practices necessary to produce at least the yield used to determine the production guarantee for the crop. While FCIC has distinguished planting practices and made them an insurability issue under section 8(b) of the Basic Provisions, it has made no other distinctions. Therefore, whether the irrigation was correctly applied in time or amount is a good farming practice issue. This means that issues of good irrigation practice is subject to 20(d) of the Basic Provisions. Under section 20(d), if the policyholder does not agree with the determination made as to whether good farming practices were used, the policyholder is required to request reconsideration by FCIC of this determination in accordance with the reconsideration process established for this purpose and published at 7 CFR part 400, subpart J (reconsideration).

In accordance with 7 C.F.R. part 400.765 (c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2009 crop year and succeeding crop years the policy provisions are in effect. Any appeal of this decision must be in accordance with 7 C.F.R. part 400.768(g).

Date of Issue: November 21, 2011