Final Agency Determination: FAD-186

Subject: Request dated March 8, 2013, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2012 crop year regarding the interpretation of section 17(d)(1) 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.

Background:

In section 1 of the Basic Provisions, definition of “prevented planting” states:

Prevented planting - Failure to plant the insured crop with proper equipment by the final planting date designated in the Special Provisions for the insured crop in the county. You may also be eligible for a prevented planting payment if you failed to plant the insured crop with the proper equipment within the late planting period. You must have been prevented from planting the insured crop due to an insured cause of loss that is general in the surrounding area and that prevents other producers from planting acreage with similar characteristics.

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Section 17 of the Basic Provisions states, in relevant part:

17. Prevented Planting.

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(d) Prevented planting coverage will be provided against:
(1) Drought, failure of the irrigation water supply, failure or breakdown of irrigation equipment or facilities, or the inability to prepare the land for irrigation using your established irrigation method, due to an insured cause of loss only if, on the final planting date (or within the late planting period you elect to try to plant the crop), you provide documentation acceptable to us to establish:
(i) For non-irrigated acreage, the area that is prevented from being planted has insufficient soil moisture for germination of seed or progress toward crop maturity due to a prolonged period of dry weather. The documentation for prolonged period of dry weather must be verifiable using information collected by sources whose business it is to record and study the weather, including, but not limited to, local weather reporting stations or the National Weather Service; or

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Section 4(C)(3)1a(iii) of the 2012 Prevented Planting Loss Adjustment Standards Handbook (PP LASH) states, in relevant part:

4. PP COVERAGE AND ELIGIBLE ACREAGE

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C. CRITERIA FOR PP PAYMENTS

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(3) Prevented planting coverage will be provided for:

(a) Drought, failure of the irrigation water supply, failure or breakdown of irrigation equipment or facilities, or the inability to prepare the land for irrigation using the insured’s established irrigation method, due to an insured cause of loss only if, on the FPD (or within the LPP if the insured elected to try to plant the crop), the insured provides verifiable documentation acceptable to the AIP. Adjusters and AIPs are to consider the following when determining whether insureds qualify for a PP payment for the aforementioned causes of loss.
1 For non-irrigated acreage:
a To qualify for PP due to drought:
(iii) The acreage prevented from planting is located in an area where other producers with acreage with similar characteristics are also prevented from planting their crop and this can be verified by the AIP. However, other growers may anticipate a return of average precipitation and still plant while other growers may not. When both cases are considered to be good faring practices, RMA recognizes both planted and prevented planting acreage may exist in the same area.

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Interpretation Submitted

The requestor states this FAD request relates to the obligation of a policyholder to plant his crop during the times in which other producers in the surrounding area are planting for purposes of a prevented planting claim. The requestor believes that section 17(d)(1) of the Basic Provisions must be read in concert with the definition of prevented planting set forth in section 1 of the Basic Provisions and interpreted to mean that in order for a policyholder to be eligible for a prevented planting payment due to drought, then the cause of loss must “…prevent…other producers (in the surrounding area) from planting acreage with similar characteristics.” (section 1 of §457.8 emphasis added). Conversely, if drought does not “prevent... other producers (in the surrounding area) from planting acreage with similar characteristics” (id), then the prevented planting claim must be denied.

For example, if a prevented planting claimant fails to plant asserting “…insufficient soil moisture for germination of seed or progress toward crop maturity due to a prolonged period of dry weather” (section 17(d)(1)(i) of §457.8) as the cause of loss, yet every other producer in the surrounding area farming a like crop and practice does plant acreage “…with similar characteristics” (section 1 of §457.8), then the prevented planting claimant will not be eligible for a prevented planting payment and his prevented planting claim must be denied. The requestor believes this interpretation is consistent with section 4(C)(3)(a)1a(iii) of the 2012 PP LASH.

Final Agency Determination

FCIC disagrees in part with the requestor’s interpretation. While FCIC agrees that section 17(d)(1) must be read in concert with the definition of “prevented planting” set forth in section 1 of the Basic Provisions, it must also be read in concert with other applicable policy provisions related to prevented planting.

Specifically, FCIC issued FAD-167, published on RMA’s website September 14, 2012, which provides an interpretation for section 17(d)(2) of the Basic Provisions. Section 17(d)(2) states that if it is possible for a policyholder to plant when other producers in the area are planting and the policyholder does not, no prevented planting payment will be made. This requirement is not contained in section 17(d)(1). Therefore, the requirement to plant applies to causes other than drought, failure of the irrigation water supply, failure or breakdown of the irrigation equipment or facilities, or the inability to prepare the land for irrigation using the established irrigation method.

Drought is a unique cause of prevented planting because it does not physically prevent the policyholder from planting the crop. In drought situations there may be producers who believe that the drought will end in sufficient time to germinate and produce a crop and elect to plant the crop and other producers who do not believe the drought will end and elect not to plant the crop. Both situations may be good farming practices depending on the specific factors in the area. In section 4(C)(3)(a)1a(iii) of the 2012 PP LASH, RMA recognizes that both planted and prevented planting acreage may exist in the same area for acreage with similar characteristics. In this case, when a policyholder elects not to plant the crop when other policyholders are planting, the policyholder may still be eligible for a prevented planting payment if all the conditions in section 17(d)(1)(i) are met. For the purposes of the definition of “prevented planting,” when all the conditions of section 17(d)(1)(i) are met, other producers in the area are considered to have been prevented from planting even if they elect to take the risk and plant a crop.

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 8, 2013