Final Agency Determination: FAD-159

FAD-159

Subject: Request dated March 1, 2012, requesting a Final Agency Determination for the 2009 crop year regarding the interpretation of section 28 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. 400, subpart X.

Background:

Section 1 definitions of "coverage" and "policy" of the Basic Provisions states:

1. Definitions.

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Coverage - The insurance provided by this policy, against insured loss of production or value, by unit as shown on your summary of coverage.

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Policy - The agreement between you and us to insure an agricultural commodity and consisting of the accepted application, these Basic Provisions, the Crop Provisions, the Special Provisions, other applicable endorsements or options, the actuarial documents for the insured agricultural commodity, the Catastrophic Risk Protection Endorsement, if applicable, and the applicable regulations published in 7 CFR chapter IV. Insurance for each agricultural commodity in each county will constitute a separate policy.

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Section 28 of the Basic Provisions states:

28. Transfer of Coverage and Right to Indemnity.

If you transfer any part of your share during the crop year, you may transfer your coverage rights, if the transferee is eligible for crop insurance. We will not be liable for any more than the liability determined in accordance with your policy that existed before the transfer occurred. The transfer of coverage rights must be on our form and will not be effective until approved by us in writing. Both you and the transferee are jointly and severally liable for the payment of the premium and administrative fees. The transferee has all rights and responsibilities under this policy consistent with the transferee's interest.

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Section 4F(4) of the 2007 FCIC 18010-01 Crop Insurance Handbook (CIH), applicable to the 2009 crop year, states, in relevant part:

4 GENERAL RULES

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4F Service Forms And Administrative Requirements

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F(4) Transfer of Right to an Indemnity. Use a Transfer of Right to an Indemnity Form developed according to RMA approved standards to transfer coverage and the right to any subsequent indemnity from one insured entity to another entity. This form is used when the transfer of part or all of the ownership/share of the insured crop occurs during the insurance period.

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This request relates to the transfer of coverage for a crop by way of a transfer of coverage and right to indemnity form as contemplated by section 28 of the Basic Provisions.

The requestor states that identical or nearly identical language is set forth in the Crop Revenue Coverage (CRC) and Revenue Assurance (RA) insurance policies. Accordingly, they request this Final Agency Determination explicitly be made applicable to the CRC and RA policies as well.

Interpretation Submitted

The requestor interprets section 28 to mean that since each agricultural commodity insured constitutes a separate policy, a transfer of coverage and right to indemnity must be completed and filed on a per crop basis. For instance, a transfer of coverage and right to indemnity form that identifies the crop interest being transferred as corn cannot operate to transfer an interest in any acreage planted to soybeans. If an interest in soybeans is to be transferred, the crop of soybeans must be specifically identified on the transfer of coverage and right to indemnity form.

The requestor believes that its interpretation is consistent with the procedures established in section 4F(4) of the Crop Insurance Handbook.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor's interpretation that a transfer of coverage and right to indemnity must be completed and filed on a per crop basis. This is consistent with the definition of "share" as set forth by the Basic Provisions, which states "your percentage of interest in the insured crop". When a transfer of coverage and right to indemnity takes place, the share transferred is the percentage of interest in the insured crop. If only one crop is listed as the crop for which the insurable share is transferred, only that named crop's interest is transferred. If the insured wants to transfer the interest in another crop, a separate transfer of coverage and right to indemnity form must be completed.

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 CRC and RA 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 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: May 7, 2012