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Final Agency Determination: FAD-156

FAD-156

Subject: Request dated February 29, 2012, requesting a Final Agency Determination for the 2010 crop year regarding the interpretation of section 2(f) 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. part400, subpart X.

Background:

Section 1 of the Basic Provisions states, in relevant part:

1. Definitions.

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Delinquent debt - Any administrative fees or premiums for insurance issued under the authority of the Act, and the interest on those amounts, if applicable, that are not postmarked or received by us or our agent on or before the termination date unless you have entered into an agreement acceptable to us to pay such amounts or have filed for bankruptcy on or before the termination date; any other amounts due us for insurance issued under the authority of the Act (including, but not limited to, indemnities, prevented planting payments or replanting payments found not to have been earned or that were overpaid), and the interest on such amounts, if applicable, which are not postmarked or received by us or our agent by the due date specified in the notice to you of the amount due; or any amounts due under an agreement with you to pay the debt, which are not postmarked or received by us or our agent by the due dates specified in such agreement.

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Section 2(f) of the Basic Provisions states, in relevant part:

2. Life of Policy, Cancellation, and Termination

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(f) A delinquent debt for any policy will make you ineligible to obtain crop insurance authorized under the Act for any subsequent crop year and result in termination of all policies in accordance with section 2(f)(2).

(1) With respect to ineligibility:

(i) Ineligibility for crop insurance will be effective on:

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(C) The termination date for the crop year prior to the crop year in which a scheduled payment is due under a payment agreement if you fail to pay the amount owed by any payment date in any agreement to pay the debt;

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(2) With respect to termination:

(i) Termination will be effective on:

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(D) For execution of an agreement to pay any amounts owed and failure to make any scheduled payment, the termination for the crop year prior to the crop year in which you failed to make the scheduled payment;

1. Definitions.

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(iii) Once the policy is terminated, it cannot be reinstated for the current crop year unless the termination was in error. Failure to timely pay because of illness, bad weather, or other such extenuating circumstances is not grounds for reinstatement in the current year;

(3) To regain eligibility, you must:

(i) Repay the delinquent debt in full;

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(4) After you become eligible for crop insurance, if you want to obtain coverage for your crops, you must submit a new application on or before the sales closing date for the crop (Since applications for crop insurance cannot be accepted after the sales closing date, if you make any payment after the sales closing date, you cannot apply for insurance until the next crop year);

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Interpretation Submitted

The requestor interprets section 2(f) of the Basic Provisions to mean if a policyholder enters into a payment agreement with an Approved Insurance Provider (AIP) and is late in paying one of the scheduled installment payments; the AIP is required to certify the policyholder to the Risk Management Agency (RMA) for Ineligible Tracking System (ITS) purposes. The requestor asserts that this would be true even if the payment was only one or two days late or if the policyholder immediately thereafter paid off the entire remaining balance on the debt. Moreover, it is the requestor's interpretation of the referenced policy provision that the policyholder will be deemed ineligible to participate in the Federal crop insurance program effective on the termination date for the crop year prior to the crop year in which the payment was missed. Once the debt is paid in full, the policyholder may submit a new application and purchase Federal crop insurance coverage for any upcoming sales closing dates, but cannot get coverage for the current crop year (if the applicable sales closing date had passed at the time the debt was paid). The requestor submitted an example through which their interpretation may best be explained.

  • Farmer A owes his AIP $5,000 for premium and administrative fees relating to corn coverage for the 2009 crop year.
  • The billing date for crop year 2009 corn is October 1, 2009.
  • The crop year 2009 corn termination date and the sales closing date for 2010 corn is February 28, 2010.
  • The policyholder enters into a payment agreement with the AIP on February 25, 2010. The agreement calls for an immediate up-front payment of $2,000 and installment payments of $1,000 due on April 1, May 1, and June 1, 2010.
  • The initial payment of $2,000 is made timely.
  • The installment payment of $1,000 due on April 1, 2010, is made timely.
  • The installment payment of $1,000 due on May 1, 2010, is not paid until May 5, 2010.
  • The policyholder paid the full remaining balance of the debt on May 10, 2010.

The requestor states that under the scenario described above, since the payment due on May 1 was not paid timely (although it was only five days late), the AIP is required to certify the policyholder to RMA for purposes of the ITS list. The policyholder will be deemed ineligible for Federal crop insurance beginning February 28, 2010. As the policyholder paid the debt in full prior to the 2011 sales closing date, he may apply for and purchase crop insurance coverage for the 2011 crop year. However, the policyholder cannot go back and get coverage for the 2010 crop year.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees in part with the requestor's interpretation of section 2(f) of the Basic Provisions.

FCIC agrees that where a policyholder enters into a payment agreement with an AIP and is late in paying one of the scheduled installment payments, the policyholder becomes ineligible to participate in the Federal crop insurance program effective on the termination date for the crop year prior to the crop year in which the payment was missed. However, an AIP or agent receiving the payment after the due date does not necessarily render the payment as late. The definition of "delinquent debt" makes it clear that as long as the payment is postmarked by the due date, the payment is considered as timely paid even if the payment is not received until days later.

FCIC agrees that if the payment is not postmarked or received by the due date, the AIP is required to submit electronic records to the ITS certifying to RMA the policyholder's delinquent debt and cancellation of insurance policy. Under 7 C.F.R. 400.680, RMA verifies the delinquency of the debt and then issues a Notice of Ineligibility informing the policyholder of their placement on ITS and ineligibility to participate in the Federal crop insurance program.

All payment agreements where a payment is postmarked and received after the scheduled payment date, albeit only one or two days late, will be rendered null and void and the policyholder must be reported to ITS for a period of ineligibility retroactive to the specified policy termination date. A policyholder paying the remaining balance after the initial due date will again become eligible to participate in the Federal crop insurance program as of the date of receipt of payment. However, under 7 C.F.R. 4 00.681(a)(1) and 400.682(d), to again participate in the Federal crop insurance program, the producer must apply for crop insurance for the next crop year and for the current crop year for those crops with a sales closing date on or after the date the debt was paid.

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 crop years the applicable 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: April 12, 2012