Final Agency Determination: FAD-203

Subject: Request dated November 8, 2013, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2010 crop year regarding the interpretation of section 10(a)(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. § 400, subpart X.

Background:

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

1. Definitions.

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Insured - The named person as shown on the application accepted by us. This term does not extend to any other person having a share or interest in the crop (for example, a partnership, landlord, or any other person) unless specifically indicated on the accepted application.

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Share - Your percentage of interest in the insured crop as an owner, operator, or tenant at the time insurance attaches. However, only for the purpose of determining the amount of indemnity, your share will not exceed your share at the earlier of the time of loss or the beginning of harvest.

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Section 10(a)(1) of the Basic Provisions states:

10. Share Insured.

(a) Insurance will attach only to the share of the person completing the application and will not extend to any other person having a share in the crop unless the application clearly states that:

(1) The insurance is requested for an entity such as a partnership or a joint venture; or

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The requestor states that identical or nearly identical language is set forth in the Crop Revenue Coverage (CRC) and Revenue Assurance (RA) insurance policies. Accordingly, they request this Final Agency Determination explicitly be made applicable to the CRC and RA policies and further requests that the interpretation be binding on all participants in the Federal crop insurance program for the crop years in which identical or nearly identical policy provisions are in effect.

The requestor interprets the above provisions as coverage would attach to the percentage share of the insured in a partnership following a transfer of coverage from the insured to a partnership in which the insured had disclosed a partnership interest. The requestor further interprets the percent insured subsequent to the transfer of coverage based upon the transferee’s percentage share of the partnership.

FCIC agrees, in part, with the requestor’s interpretation of section 10(a)(1) of the Basic Provisions that coverage attaches to the percentage share of the insured in a partnership following a transfer of coverage and right to an indemnity from the insured to the partnership in which the insured had disclosed a partnership interest. However, section 28 of the Basic Provisions makes it clear that only the liability that existed before the transfer can be transferred to the new entity. Therefore, consistent with FAD-202, since there is no liability before the acreage is planted, the transfer only covers acreage that has been planted and insurance has attached prior to the transfer. If coverage had not yet attached because the acreage had not been planted, there is no coverage for the insured to transfer to the new entity, regardless of whether the insured retained an interest in the new entity.

Even though 7 C.F.R. part 400, subpart X is only applicable to provisions of the Federal Crop Insurance Act and the regulations promulgated hereunder, and the CRC and RA policies are not codified in the Code of Federal Regulations, to the extent those provisions are identical or nearly identical, this Final Agency Determination applies accordingly to assure consistent, uniform, and equitable treatment to all policyholders insured under the same policy provisions.

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: January 16, 2014