Final Agency Determination: FAD-174

FAD-174

Subject: Request dated October 9, 2012, requesting a Final Agency Determination for the 2010 crop year regarding the interpretation of section 11(b) of the Tobacco Crop Provisions published at 7 C.F.R. 457.136. This request is pursuant to 7 C.F.R. part 400, subpart X.

The parties dispute the applicability of section 11(b) of the 2010 Tobacco Crop Policy Provisions in situations where that provision imposes an obligation on a producer which may conflict with their obligations under another USDA program. The parties request the Risk Management Agency (RMA) determine whether conflicting obligations under another USDA program can preclude any obligations imposed by the policy.

Section 11(b) of the Tobacco Crop Provisions provides:

11. Duties In The Event of Damage or Loss.

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(b) If you have filed a notice of damage, you must leave all tobacco stalks and stubble in the unit intact for our inspection. The stalks and stubble must not be destroyed until we give you written consent to do so or until 30 days after the end of the insurance period, whichever is earlier.

Section 12(c)(1)(i)(E) of the Tobacco Crop Provisions provides:

12. Settlement of Claim.

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(c) The total production to count (in pounds) from all insurable acreage on the unit will include:

(1) All appraised production as follows:

(i) Not less than the production guarantee (per acre) for acreage:

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(E) For any type of type of tobacco when the stalks and stubble have been destroyed without our consent under section 11(b);

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The first requester interprets the policy provisions concerning stalks and stubble as having been written without consideration of the restrictions of an individual’s USDA conservation plan. The first requester further interprets the policy to allow the insured to abide by an individual USDA approved conservation plan even if doing so may impede the insured’s duties in the event of damage or loss under the crop insurance policy.

The second requester interprets 11(b) of the Tobacco Crop Provisions to provide sufficient flexibility so as to not conflict with a USDA conservation plan requiring a producer to plant a cover crop after harvesting their insured tobacco crop. The requester interprets the terms of section 11(b) to apply regardless of any seemingly contrary requirements of other USDA programs. Section 12(c)(1)(i)(E) provides that failure to comply with the requirements of section 11(b) will result in the approved insurance provider (AIP) valuing all production at the harvest price, effectively denying quality adjustment. There is no provision in the policy or RMA’s guidance documents relieving a producer who farms under a USDA conservation plan from compliance with section 11(b) of the Tobacco Crop Provisions, which by the policy terms is not waivable. The preamble to the 2005 Common Crop Insurance Policy, Basic Provisions specifically prohibits “any employee of USDA” from waiving the policy terms, and therefore, requirements which another USDA agency imposes on a producer do not waive the policy terms. An insured’s self-created situation, where it is not possible for him to comply simultaneously with the terms of their policy and other USDA provisions, does not excuse the insured from their duties under the crop insurance policy. If, for example, an insured turns in a notice of loss when it is too late to allow inspection of the stalks and stubble as required by section 11(b) because the insured has already disked and planted over the stalks and stubble in accordance with their conservation plan, but they could have turned in a notice of loss in time to prevent the conflict, the insured has failed to comply with section 11(b), and the AIP must deny the claim. In such scenario, there is no conflict between the policy terms and conservation plan, because the insured could have avoided the dilemma by taking reasonable precaution.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees with the second requestor’s interpretation of section 11(b) of the Tobacco Policy Crop Provisions. Participation in the crop insurance program is optional and once the producer elects to participate, the producer is required to comply with all requirements in the policy, even if compliance would conflict with the requirements of another USDA program. FCIC also agrees that there is no inherent conflict between section 11(b) of the Tobacco Policy Crop Provisions and the conservation programs. Section 11(b) does not prevent planting of a cover crop after harvest. Section 11(b) simply requires that the tobacco stalks and stubble be left for a period of time so that it may be inspected. This time frame is controlled by the producer based on when the notice of loss is provided.

In accordance with 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 crop years the above stated provisions are in effect.

Date of Issue: Nov 13, 2012