Final Agency Determination: FAD-182

Request dated November 30, 2012, resubmitted to the Risk Management Agency on January 2 , 2013 requesting a Final Agency Determination for the 2012 crop year regarding the interpretation of section 17(e)(2) 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. part 400, subpart X.

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

1. Definitions

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Insured crop. The crop in the county for which coverage is available under your policy as shown on the application accepted by us.

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Late planted. Acreage initially planted to the insured crop after the final planting date.

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Prevented planting. Failure to plant the insured crop by the final planting date designated in the Special Provisions for the insured crop in the county, or within any applicable late planting period, due to an insured cause of loss that is general to the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant because of uninsured causes such as lack of proper equipment or labor to plant acreage, or use of a particular production method, is not considered prevented planting.

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Timely planted. Planted on or before the final planting date designated in the Special Provisions for the insured crop in the county.

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Section 17(e)(2) of the Basic Provisions states, in relevant part:

17. Prevented Planting

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(e) The maximum number of acres that may be eligible for a prevented planting payment for any crop will be determined as follows:

(1) The total number of acres eligible for prevented planting coverage for all crops cannot exceed the number of acres of cropland in your farming operation for the crop year, unless you are eligible for prevented planting coverage on double cropped acreage in accordance with section 17(f)(4). The eligible acres for each insured crop will be determined as follows:

(i) If you have planted any crop in the county for which prevented planting insurance was available (you will be considered to have planted if your APH database contains actual planted acres) or have received a prevented planting insurance guarantee in any one or more of the four most recent crop years, and the insured crop is not required to be contracted with a processor to be insured:

(A) The number of eligible acres will be the maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the four most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)).

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(2) Any eligible acreage determined in accordance with section 17(e)(1) will be reduced by subtracting the number of acres of the crop (insured and uninsured) that are timely and late planted, including acreage specified in section 16(b).

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Section 4 of the 2012 Prevented Planting Loss Adjustment Standards Handbook (PP LASH) states, in relevant part:

(1) Acreage eligible for PP must:

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(d) Not be Uninsurable. The adjuster (and/or other contractor or AIP employee designated by the AIP) must verify that the acreage claimed as PP is NOT uninsurable acreage.

Uninsurable acreage includes, but is not limited to, acreage:

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5 That is otherwise restricted by the CP [Crop Provisions] or SP [Special Provisions].

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The requestor interprets section 17(e)(2) of the Basic Provisions to mean that acres planted to an uninsurable crop (one without an available policy or approved written agreement) may not be deducted by an approved insurance provider (AIP) from a policyholder’s acres that are insured and otherwise eligible for a prevented planting payment.

This suggested interpretation is based on the conclusion that: 1) “the crop,” as is referenced in section 17(e)(2) of the Basic Provisions, references “the crop” insurable under the applicable policy; 2) the plain language and terminology found within section 17(e)(2) of the Basic Provisions contemplates that acres to be subtracted from eligible acreage must be insurable; and 3) section 18 of the Basic Provisions provides that a crop, uninsurable under available crop insurance policies, is not insurable under the Federal crop insurance program unless the Federal Crop Insurance Corporation (FCIC) approves a written agreement authorizing the insurance of the crop.

The requestor goes on to provide the following detailed explanations for each of the three supporting conclusions presented above.

1) Section 17(e)(2) of the Basic Provisions provides for a deduction of timely and late planted acres of “the crop”, (insured and uninsured),” from acres eligible for prevented planting insured under a crop insurance policy. This suggested interpretation of section 17(e)(2) of the Basic Provisions “subtraction” procedure is consistent with the plain meaning of “the crop” which is singular and exclusive, as used in this section.

The requestor states “the crop,” as contained in section 17(e)(2) of the Basic Provisions, must be restricted to the crop insurable under applicable policy provisions to be consistent with the entirety of section 17 of the Basic Provisions. As eligible acres calculated under section 17(e)(1) of the Basic Provisions are calculated “for each insured crop” the section 17(e)(2) of the Basic Provisions reduction/subtraction “of acres of the crop (insured and uninsured),” must be a reference to the crop insurable under the policy. Any other interpretation opens the door for great uncertainty as to what acreage and what crops can be deducted from acreage of the insured crop, by an AIP. An FCIC interpretation that “the crop” includes varieties of a crop which are not stated in the policy and are uninsurable, under the policy, opens the door to unanticipated section 17(e)(2) of the Basic Provisions reductions. For instance, should 10 acres planted to edamame soybeans (assumed to be uninsurable) by a producer be deducted from a separate 100 acre farm operated by this same policyholder, which would otherwise be eligible for prevented planting coverage on insured conventional soybeans?

The requestor believes FCIC has designated certain crop varieties, production practices, etc., as uninsurable. The question of whether these crops should also be considered a different “crop” for section 17(e)(2) of the Basic Provisions eligible acreage reductions should be resolved by a binding FCIC interpretation that certain crop varieties, which are uninsurable under the policy provisions and regulations, are not “the crop” insured under the policy or referenced under this term. Consistency within the regulations and Basic Provisions require that when FCIC deems a crop variety as uninsurable, that this crop should be considered a distinct and separate crop, only insurable if approved by written agreement.

The requestor suggests that an interpretation allowing a collective grouping of uninsurable crop varieties with insurable crop varieties contradicts and disregards FCIC regulations and policy provisions which currently distinguish uninsurable varieties from insurable crops, under crop insurance policy provisions. A simple interpretation of “the crop” in section 17(e)(2) of the Basic Provisions, as the crop insurable under the policy, alleviates this confusion and uncertainty as to what planted “crops” should be deducted from eligible prevented planting acreage for the insured crop. If, on the other hand, “the crop” is to include crop varieties which are uninsurable, then section 17(e)(2) of the Basic Provisions has become a provision that requires an unintended and potentially ever- expanding “bundling” of uninsurable crops which have been previously distinguished by FCIC regulations as crops not insured under the policy. As such, the requestor suggests that “the crop” must be a reference to the crop insurable under applicable policy provisions.

As a result, the requestor asks that FCIC confirm the suggested interpretation which holds that acres planted to an uninsurable crop (one without an available policy or approved written agreement) may not be deducted, by an AIP, from acres insured and otherwise eligible for a prevented planting payment.

2) The plain language and terminology used within section 17(e)(2) contemplates that acres to be subtracted from PP eligible acreage must be insurable.

The requestor continues that above-referenced suggested interpretation for section 17(e)(2) of the Basic Provisions is also based on a determination that the procedure for reducing eligible acreage does not allow an AIP to subtract planted acreage, which is uninsurable, from separate acreage that is otherwise eligible for prevented planting payments. Again, section 17(e)(2) of the Basic Provisions provides that acreage eligible for prevented planting coverage in accordance with section 17(e)(1) of the Basic Provisions “will be reduced by subtracting the number of acres of the crop (insured and uninsured) that are timely and late planted.” This provision is clear that acres of a crop do not have to be insured to be subtracted from eligible acreage. However, the plain language and terminology found within this section also indicate that the acreage subtracted from the total prevented planting eligible acreage, pursuant to section 17(e)(2) of the Basic Provisions, should be insurable.

The requestor states the use of the terms “timely and late planted,” in section 17(e)(2) of the Basic Provisions, demonstrates that the crop acreage to be deducted must have a policy providing planting dates. Uninsurable crop varieties do not have policy provisions with applicable planting dates, unless a policy is formed under an FCIC approved written agreement. A crop which is not insurable under policy provisions or an approved written agreement lacks the formal planting dates which are clearly described in section 17(e)(2) of the Basic Provisions. The language within section 17(e)(2) of the Basic Provisions and the inclusion of the terms “timely and late planted” in section 17(e)(2) of the Basic Provisions supports the interpretation that the policy procedure anticipates prevented planting acreage reductions only for insurable acreage planted to the crop insurable under the applicable policy.

The requestor states “timely planted” is defined as “planted on or before the final planting date designated in the Special Provisions for the insured crop in the county.” “Late Planted” is defined as “acreage initially planted to the insured crop after the final planting date.” The Basic Provisions define the “insured crop” as “the crop in the county for which coverage is available under your policy as shown on the application accepted by us.” Regardless of whether the planted crop acreage to be deducted from eligible acreage is actually insured under a policy, section 17(e)(2) of the Basic Provisions requires that the crop be the same crop as the “insured crop” which means that “coverage must be available under your policy.” Consequently, FCIC regulations require that a crop variety be insurable before acreage planted to that crop variety may be deducted from acreage otherwise eligible for prevented planting coverage under section 17(e)(1) of the Basic Provisions.

The requestor states in order to comply with the plain language requirements of section 17(e)(2) of the Basic Provisions, planted acres of a crop must be insurable, under the crop insurance policy, prior to any AIP subtraction of planted acres from otherwise eligible prevented planting acres. As a result, the requestor asks that FCIC confirm the suggested interpretation which holds that acres planted to an uninsurable crop (one without an available policy or approved written agreement) may not be deducted, by an AIP, from acres insured and otherwise eligible for a prevented planting payment.

3) Section 18 of the Basic Provisions provides that a crop, otherwise uninsurable under available crop insurance policies, may not be insured under the Federal crop insurance program unless FCIC approves a written agreement authorizing the insurance of the crop.

The requestor states, finally, the suggested interpretation is in compliance with policy provisions and FCIC regulations which provide that uninsurable acreage is acreage planted to a crop which lacks an available crop insurance policy or an approved written agreement of insurance. This is relevant to the request for an interpretation of the “subtraction” procedure, embodied within section 17(e)(2) of the Basic Provisions, as this section appears to contain a requirement that acreage of “the crop,” to be subtracted from prevented planting eligible acreage by the AIP, be insurable under a crop insurance policy or approved written agreement. If planted acres are uninsurable, then they should not be deducted from insurable prevented planting acreage.

The requestor quotes the PP Loss Adjustment Handbook (LASH) section 4F(1)(d)(5) states “Uninsurable Acreage includes, but is not limited to, acreage…That is otherwise restricted by the CP or SP.”

The requestor states since FCIC has a right of rejection over written agreement requests, the possibility of written agreement approval does not necessarily convert an uninsurable crop, to an insurable crop. Section 18 of the Basic Provisions specifically state that written agreements for insurance must be approved by FCIC and are not effective unless approved by the FCIC.

As a result, the requestor suggests that for an interpretation of the section 17(e)(2) of the Basic Provisions eligible acreage subtraction procedure to be consistent with the written agreement provisions found in section 18 of the Basic Provisions, then a written agreement must have been approved by FCIC for the crop, before acres planted to that uninsured crop can be subtracted from insured acreage otherwise eligible for a prevented planting payment under section 17(e)(1) of the Basic Provisions.

The requestor concludes, due to the fact that a written agreement must be approved by FCIC before a specifically uninsurable crop may be insured, FCIC should confirm the suggested interpretation of section 17(e)(2) of the Basic Provisions which holds that acres planted to an uninsurable crop (one without an available policy or approved written agreement) may not be deducted, by an AIP, from acres insured and otherwise eligible for a prevented planting payment.

The Federal Crop Insurance Corporation (FCIC) agrees as specified herein.

FCIC agrees that acres planted to an uninsurable crop cannot reduce eligible prevented planting acres of another insurable crop for which acres exist. In order for planted acres to reduce eligible prevented planting acres of a crop, the planted acres must be of the same crop for which the eligible prevented planting acres exist. A planted crop will be the same crop for which eligible prevented planting acres exist when both crops are the same crop for which a premium rate is provided in the actuarial documents. The planted crop must meet all definitions and descriptions of the crop found in the policy and Special Provisions, as well as the requirements of the Insured Crop section of the policy and any applicable portions of the Special Provisions. If the crop is uninsurable, no premium rate is provided.

A planted crop, crop type, or crop practice may have a premium rate provided in the actuarial documents but the acreage it is planted on may be uninsurable under the terms and conditions necessary for the premium rate to apply. Section 17(e)(2) of the Basic Provisions does not distinguish why the acreage may be uninsured. It may be uninsured because the policyholder chose not to insure an insurable crop, or the acreage may be uninsurable due to not meeting one of the policy requirements required for it to be insurable. In such cases, the uninsurable planted acres are still considered to be of the same crop for which the premium rate is provided, and will reduce eligible prevented planting acreage of that crop. For example, acreage of corn planted after the late planting period is normally uninsurable (unless the reason the corn was planted after the late planting period was due to an insured cause that prevented the corn from being planted during the late planting period). Even though the planted corn acres do not meet all insurability requirements, eligible prevented planting corn acres will still be reduced by the number of corn acres planted.

When a crop is planted as a cover crop (at the appropriate seeding and fertilizing rate, etc.), those acres will not reduce the crop’s eligible prevented planting acres, unless it is harvested for grain, or as otherwise allowed in the Special Provisions. Additionally, if planted acres of a crop that are normally uninsurable under any Crop Provisions or Special Provisions are insured via written agreement, or have contributed to a crop’s eligible prevented planting acres, the normally uninsurable acres will be considered to be of the same crop as that for which the eligible prevented planting acres exist.

FCIC provides the following different types of examples to illustrate:

Example 1: Edamame soybeans will not be considered the same crop as soybeans since Edamame soybeans are not insured as soybeans and no premium rate is provided in the actuarial documents to insure Edamame soybeans. Therefore, planted Edamame soybean acres will not reduce eligible prevented planting soybean acres.

Example 2: A silage variety of corn planted for silage in a corn-for-grain only county is uninsurable without a written agreement, and no premium rate is provided for the crop. It is not considered the same crop as corn for grain, for which a premium rate is provided, and will not reduce any eligible prevented planting corn-for-grain acres that may exist.

Example 3: A non-irrigated crop, planted in a county in which the only practice insurable is irrigated, will not reduce eligible prevented planted acres of the irrigated crop. Because no premium rate is provided for a non-irrigated practice, the planted non-irrigated crop will not be considered the same as the irrigated crop for prevented planting purposes.

Example 4: A non-irrigated crop, planted in a county where premium rates are provided for both irrigated and non-irrigated practices will reduce both the non-irrigated crop’s individual eligible prevented planted acres, as well as the total eligible acres for the crop when the policy requires that all acreage of the crop be insured. For example, a producer has a history of planting 200 acres of non-irrigated corn and 200 acres of irrigated corn, but has only planted 300 total acres of corn in any given year. If 100 acres of non-irrigated corn are planted this year, then 100 acres of non-irrigated prevented planting corn eligibility and 200 total acres of corn prevented planting eligibility will remain since the producer has never planted more than 300 total acres of corn in any given year.

Example 5: Each dry bean type has its own premium rate, but under the Dry Bean Crop Provisions all dry bean types able to be insured must be insured, and are thus subject to the overall eligible prevented planting acreage limitation for that crop. For example, a producer has a prevented planting history for 200 acres of pinto beans, and 200 acres of navy beans, but has only planted 300 total acres of dry beans in any given year. This year 100 acres of navy beans are planted, leaving the insured with 100 acres of navy bean prevented planting eligibility, and 200 total acres of dry bean prevented planting eligibility.

Example 6: When the applicable Crop Provisions allow the option to separately insure individual crop types or varieties, the individual crop types or varieties will not be considered to be the same crop for prevented planting purposes. For example, planted flue cured tobacco will not reduce eligible prevented planted acres of burley tobacco.

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 2012 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).