Final Agency Determination: FAD-199
Subject:Joint request dated November 14, 2013, and November 18, 2013, requesting a Final Agency Determination for the 2012 and succeeding crop years regarding the interpretation of section 11 of the Nursery Crop Insurance Provisions, published at 7 C.F.R. §457.162. This request is pursuant to 7 C.F.R. part 400, subpart X.
Background:
Section 9(b) of the Nursery Crop Insurance Provisions states, as here pertinent:
9. Insurance Period
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(b) Insurance ends at the earliest of:
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(2) Removal of bare root nursery plant material from the field;
(3) Removal of all other insured plant material from the nursery; or
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Section 11 of the Nursery Crop Insurance Provisions states, as here pertinent:
11. Duties in the Event of Damage or Loss
(a) In addition to your duties contained in Section 14 of the Basic Provisions,
(i) Destroying, selling or otherwise disposing of any plant inventory that is damaged; or
(ii) Changing or discontinuing your normal growing practices with respect to care and maintenance of the insured plants.
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(b) Failure to obtain our written consent as required by section 11(a)(1) will result in denial of your claim.
Interpretation Submitted
The first requestor interprets section 11 to mean that uprooting and removal of plants from one location in a nursery and placing them in another location without the prior consent of the approved insurance provider (AIP) requires the AIP to deny an insured’s claim for indemnity on the uprooted plants. Furthermore, section 11(b) contains no exceptions. Therefore, any claim for indemnity on the uprooted plants must be denied even if an inspection of the uprooted plants conducted after they were uprooted reveals presence of an insured cause of loss.
The first requestor argues its interpretation is entirely consistent with the prior interpretation provided by the Federal Crop Insurance Corporation (FCIC) in Final Agency Determination FAD-169, which FCIC stated, with the requestor’s emphasis added:
The Federal Crop Insurance Corporation (FCIC) agrees with the requestor. Insurance ends at the earliest of removal of bare root nursery plant material from the field, removal of all other insured plant material from the nursery, or other events as contained in section 9(b). FCIC also agrees that if the insured removes the nursery material from the nursery after damage has occurred; the nursery material removed may not be entitled to an indemnity.
Section 11 of the Nursery Crop Insurance Provisions states, in relevant part:
11. Duties in the Event of Damage or Loss
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(b) Failure to obtain our written consent as required by section 11(a)(1) will result in denial of your claim.
Therefore, if the insured fails to obtain written consent from the AIP before the insured destroys, sells, or otherwise disposes of any plant material that is damaged or before the insured changes or discontinues normal growing practices, any claim for damage to such plant material must be denied.
The second requestor interprets section 11 to mean that if an insured removes plant material and moves it to another location, which does not impair the ability of the AIP to conduct a proper adjustment, that such removal does not constitute “destroying, selling, or otherwise disposing” of the plant material and that, consequently, no consent of the AIP is required.
Final Agency Determination
FCIC agrees with the first requestor that section 11 requires the insured to obtain written consent prior to performing either action contained in section 11(a)(1)(i) or (ii). FCIC agrees with the first requestor that the insured must obtain written consent prior to uprooting and removing plants from one location of the nursery and placing them in another location if this action is a change or discontinuance of the insured’s normal growing practices with respect to care and maintenance of the insured plants, as addressed in section 11(a)(1)(ii). If the producer can establish that uprooting the plants and moving them to another location in the nursery is a normal practice, then no written consent is required.
While FCIC agrees with the second requestor that uprooting and removing plants from one location of the nursery and placing them in another location does not constitute destroying, selling, or otherwise disposing of the plant material, if the insured cannot establish that uprooting and moving the plants to another location in the nursery is a normal growing practice consent before such action would be required.
Consistent with section 11(b), if the insured fails to obtain written consent from the insurance company before the insured destroys, sells, or otherwise disposes of any plant material that is damaged, or before the insured changes or discontinues normal growing practices, any claim for damage or loss to such plant material must be denied.
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 2012 crop year.
Date of Issue: December 24, 2013
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