Final Agency Determination: FAD-170

FAD-170

Final Agency Determination: FAD-170

Subject: Request dated August 23, 2012, requesting a Final Agency Determination for the 2011 and subsequent crop years regarding section 7(a) of the Cabbage Crop Insurance Provisions, published at 7 C.F.R. 457.171. This request is pursuant to 7 C.F.R. part 400, subpart X.

Background

Section 1 of the Cabbage Crop Insurance Provisions states in relevant part:

Damaged cabbage production - Fresh market cabbage that fails to grade U.S. Commercial or better in accordance with the United States Standards for Grades of Cabbage, or processing cabbage that fails to grade U.S. No. 2 or better in accordance with the United States Standards for Grades of Cabbage for Processing due to an insurable cause of loss.

Section 7(a) of the Cabbage Crop Insurance Provisions states, in relevant part:

7. Insured Crop (a) In accordance with the provisions of section 8 of the Basic Provisions, the crop insured will be all the cabbage types in the county for which a premium rate is provided by the actuarial documents, in which you have a share, and that are:

***

(4) Planted to be: (i) Harvested and sold as fresh cabbage; or (ii) Grown and sold as processing cabbage in accordance with the requirements of a processor contract executed on or before the acreage reporting date and not excluded from the processor contract at any time during the crop year; and

(5) Unless allowed by the Special Provisions: (i) Not interplanted with another crop; and (ii) Not sold by direct marketing.

Section 13(b) of the Cabbage Crop Provisions states in relevant part:

***

(b) The extent of any damaged cabbage production must be determined not later than the date the cabbage is placed in storage if the production is stored prior to sale, or the date the cabbage is delivered to a buyer, wholesaler, packer, processor, or other handler if production is not stored.

Section 11(b) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions) states in relevant part:

11. Insurance Period.

***

(b) Coverage ends on each unit or part of a unit at the earliest of: (1) Total destruction of the insured crop; (2) Harvest of the insured crop; (3) Final adjustment of a loss on a unit; (4) The calendar date contained in the Crop Provisions or Special Provisions for the end of the insurance period; (5) Abandonment of the insured crop; or (6) As otherwise specified in the Crop Provisions.

Section 9(b)(1) of the Cabbage Crop Insurance Provisions states, in relevant part:

9. Insurance Period

***

(b) In addition to the provisions of section 11 of the Basic Provisions, the end of the insurance period will be the earlier of: (1) The date the crop should have been harvested; or …

Interpretation Submitted

The requestor states section 7(a) lists two categories of cabbage: fresh cabbage and processing cabbage.

The requestor also states the Cabbage Crop Insurance Provisions do not contain a definition of “fresh cabbage” or “processing cabbage.” There are, however, guideline requirements for insurable fresh cabbage in section 7(a)(4) of the Cabbage Crop Insurance Provisions.

The requestor interprets section 7(a) to mean that the crop insured as fresh cabbage must be “(4) [p]lanted to be: (i) [h]arvested and sold as fresh cabbage.” The “planting” component is satisfied by the proper filing of the acreage report with the Farm Service Agency, evidencing that an insurable, fresh market variety of cabbage has been planted. The “harvested” component is satisfied as per the policy’s definition, to wit:

Harvest – Cutting of the cabbage plant to sever the head from the stalk.

The “sold as fresh cabbage” component is satisfied when sold to a buyer as marketable cabbage, which is defined in section 1 of the Cabbage Crop Insurance Provisions.

Once harvested, the insured crop of cabbage is no longer insured because the policy’s insurance period has ended, in accordance with section 9(b)(1) of the Cabbage Crop Insurance Provisions.

The requestor states when a buyer of fresh cabbage directs such cabbage to another market, use or purpose other than fresh market and such decision is not controlled by the insured, the insurable status of the fresh cabbage does not change as the insurance period has ended and such post-harvest events are not under the control of the insured.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees in part with the requestor. FCIC agrees that the Cabbage Crop Insurance Provisions do not define “fresh” or “processing” cabbage. FCIC agrees that the Cabbage Crop Insurance Provisions have other requirements for cabbage to qualify as “fresh.” One of those requirements is that the cabbage must be planted to be harvested and sold as fresh cabbage. This is a requirement for insurability, not a determination when an indemnity is due. Further, FCIC disagrees that the “planting” component is satisfied by the proper filing of an acreage report with the Farm Service Agency (FSA). The planting component is satisfied by planting the crop. However, the phrase “planted to be” means the question of insurability is determined by the intended use at the time of planting. FCIC agrees that the intended use of the cabbage can be determined by review of FSA acreage reports. Therefore, if the producer plants the crop for harvest and sale as fresh cabbage, it is insured as fresh cabbage.

However, this is separate from the issue of whether the cabbage has been damaged by an insurable cause and eligible for an indemnity. The Cabbage Crop Insurance Provisions defines “damaged production” as fresh cabbage that fails to grade U.S. Commercial or better. In accordance with section 13(b) of the Cabbage Crop Insurance Provisions, damage is determined at the time the cabbage is delivered to the buyer. If the cabbage is sold to the buyer as fresh cabbage, the cabbage is presumed to grade U.S. Commercial or better at the time of delivery. Further, in accordance with section 9 of the Cabbage Crop Insurance Provisions and section 11(b) of the Basic Provisions, the insurance period ends at the time the cabbage is harvested. Therefore, any subsequent use of the cabbage by the buyer is not material to the question of insurability or whether the cabbage qualified as damaged cabbage because the insurance period ended at the initial delivery of the cabbage and damage that occurred while in the possession of the buyer or the buyers decisions regarding disposition of the cabbage is not a covered cause of loss. In accordance with the 7 C.F.R. 400.765(c), this constitutes the final agency determination and is binding on all participants in the Federal crop insurance program for the 2011 crop year.

Date of Issue: Oct 4, 2012