Final Agency Determination: FAD-150

FAD-150

Subject: Request received October 19, 2011, requesting a Final Agency Determination for the 2010 crop year regarding the interpretation of section 11(c)(1)(iv) of the Coarse Grains Crop Insurance Provisions, published at 7 C.F.R. 457.113. This request is pursuant to 7 C.F.R. part 400, subpart X.

Background:

Section 11 of the Coarse Grains Crop Provisions states in relevant part:

11. Settlement of Claim

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(c) The total production in bushels (tons for corn silage) (see subsection 11(d)) to count from all insurable acreage on the unit will include:

(1) All appraised production as follows:

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(iv) Potential production on insured acreage you want to put to another use or you wish to abandon and no longer care for, if you and we agree on the appraised amount of production. Upon such agreement the insurance period for that acreage will end if you put the acreage to another use or abandon the crop. If agreement on the appraised amount of production is not reached:

(A) If you do not elect to continue to care for the crop we may give you consent to put the acreage to another use if you agree to leave intact, and provide sufficient care for, representative samples of the crop in locations acceptable to us (The amount of production to count for such acreage will be based on the harvested production or appraisals from the samples at the time harvest should have occurred. If you do not leave the required samples intact, or you fail to provide sufficient care for the samples, our appraisal made prior to giving you consent to put the acreage to another use will be used to determine the amount of production to count.); or

(B) If you elect to continue to care for the crop, the amount of production to count for the acreage will be the harvested production, or our reappraisal if additional damage occurs and the crop is not harvested; and

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Section 8 of the 2010 Loss Adjustment Manual (LAM) Standards Handbook states in relevant part:

8 LOSS ADJUSTMENT RESPONSIBILITIES

A General Information.

(1) The following responsibilities and procedures throughout this handbook apply to whoever is performing loss adjustment whether it is an AIP employee whose primary duty and title is not adjuster or a person under contract or employed with an AIP specifically as an adjuster.

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B Loss Adjustment Responsibilities. Responsibilities include (but are not limited to) the following:

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(7) During farm visit:

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(h) Appraise potential production and grant written consent to replant or put insured acreage to another use when the insured is not going to carry the crop to harvest as described in PAR's 85 and 88.

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Section 85 of the 2010 Loss Adjustment Manual (LAM) Standards Handbook states, as here pertinent:

85 APPRAISALS

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B Appraisals are made when:

(1) The insured requests consent to put acreage to another use or to replant to the same crop originally planted if a replant payment will be claimed.

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D When appraisals are made, inform the insured of the following:

(1) The method used to determine potential production and how the appraisal will be used if an indemnity is claimed. If at all possible, the insured or an authorized representative of the insured should accompany you on the entire appraisal. Encourage the insured or authorized representative to participate in determining the appraisal.

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(3) The appraisal determination. (Never advise the insured whether or not to harvest the crop; this must be the insured's decision.)

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The Risk Management Agency (RMA) is requested to provide an interpretation as to whether an approved insurance provider (AIP) must first provide a policyholder with the appraisal of potential production it has calculated on insurable acreage before it can require the policyholder to make a decision between: 1) agreeing with the appraised amount of potential production (which is unknown to the policyholder); and 2) electing to leave representative samples of the crop.

The requestor states that identical or nearly identical language is set forth in both the Crop Revenue Coverage (CRC) Policy at section 11(d)(1)(iv) and the Common Crop Insurance Regulations - Coarse Grains Crop Insurance Provisions set forth in 7 C.F.R. Section 457.113 and, therefore, requests this Final Agency Determination (FAD) be made applicable to both provisions.

Interpretation Submitted

The requestor interprets section 11(c)(1)(iv) of the Coarse Grains Crop Provisions to set forth a specific "if -then" procedure for an AIP adjuster to follow in working with a policyholder to determine the appropriate potential production for insurable acreage. Specifically, an AIP adjuster must provide the policyholder with an appraisal of potential production on the insured acreage and determine whether the policyholder agrees with the appraisal. If there is no agreement, then the AIP should allow the policyholder the opportunity to elect the options set forth in 11(c)(1)(iv)(A) and (B). If the AIP adjuster does not provide an appraisal of potential production to the policyholder, then there cannot be any agreement or disagreement with regard to the potential production calculated by the AIP adjuster. Until an appraisal of potential production is presented to the policyholder, it is inappropriate to require the policyholder to choose between accepting an unknown appraised amount of potential production and electing to leave representative samples of the insured crop. This is particularly true when the AIP requires the policyholder to make such a decision before he will be given permission to replant the insured acreage.

The requestor interprets the options set forth in section 11(c)(1)(iv)(A) - (B) as alternatives to accepting an AIP adjuster's appraisal of potential production. By requiring policyholder to choose between accepting an AIP adjuster's unknown appraisal of potential production and the options set forth in 11(c)(1)(iv)(A)-(B), the policyholder effectively loses the opportunity to make an informed decision about which method will be in his best interest.

The requestor believes this interpretation is consistent with section 8(B)(7)(h) of the LAM which states that an AIP adjuster has the responsibility to appraise potential production during a farm visit and grant written consent to replant or put insured acreage to another use when the policyholder is not going to carry the crop to harvest. This section indicates that an appraisal should be performed before granting written consent to replant.

The requestor believes this interpretation is also consistent with section 85(B) and 85(D) of the LAM which states, in pertinent part, that appraisals should be made when the policyholder requests consent to put acreage to another use or to replant. It further states that when appraisals are made, the policyholder should be informed of the appraisal determination and that an AIP adjuster should "never advise the policyholder whether or not to harvest the crop." This indicates that the appraisal determination should be given to the policyholder before he is asked to decide whether to harvest the crop.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor's interpretation as submitted. Section 11(c)(1)(iv) makes it clear that clauses (A) and (B) only apply if agreement is not reached on the amount of the appraised production. Therefore, there needs to be an appraisal made and the amount of such appraisal must be provided to the insured to determine whether or not the insured agrees with the appraisal. There can be no agreement if the amount of the appraisal is not provided to the insured. The requestor is correct that this interpretation is consistent with the procedures in the LAM regarding appraisals and providing consent to put the acreage to another use.

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 hereunder, and the Crop Revenue Coverage and Revenue Assurance policies are not 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 2010 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. 400.768(g).

Date of Issue: January 30, 2012