Final Agency Determination: FAD-205

Subject: Request dated December 4, 2013, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2012 crop year regarding the interpretation of section 35(b)(2)(ii) 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 35(b)(2)(ii) of the Basic Provisions states, in relevant part:

35. Multiple Benefits.

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(b) Any amount received for the same loss from any USDA program, in addition to the crop insurance payment, will not exceed the difference between the crop insurance payment and the actual amount of the loss, unless otherwise provided by law. The amount of the actual loss is the difference between the total value of the insured crop before the loss and the total value of the insured crop after the loss.

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(2) For crops for which revenue protection is available and:

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(ii) You elect revenue protection:

(A) The total value of the crop before the loss is your approved yield times the higher of the applicable projected price or harvest price for the crop (If you have elected the harvest price exclusion, the applicable projected price for the crop will be used); and

(B) The total value of the crop after the loss is your production to count times the harvest price for the crop.

The requestor seeks a determination as to how the calculation promulgated by the regulation applies with respect to a policyholder who elected revenue protection with the harvest price exclusion for the 2012 crop year.

It is the requestor’s interpretation that, for a policyholder who elected revenue protection with the harvest price exclusion for the 2012 crop year, the total value of the crop before the loss is the policyholder’s approved yield times the applicable projected price; and the total value of the crop after the loss is the policyholder’s production times the applicable projected price.

FCIC agrees with the requestor’s interpretation that for a policyholder who elected revenue protection with the harvest price exclusion for the 2012 crop year, the total value of the crop before the loss is the policyholder’s approved yield times the applicable projected price.

FCIC does not agree with the requestor that for a policyholder who elected revenue protection with the harvest price exclusion for the 2012 crop year, the total value of the crop after the loss is the policyholder’s production times the applicable projected price. The producer still elected revenue protection. In accordance with section 1 of the Basic Provisions “revenue protection” is defined as “A plan of insurance that provides protection against loss of revenue due to a production loss, price decline or increase, or a combination of both. If the harvest price exclusion is elected, the insurance coverage provides protection only against loss of revenue due to a production loss, price decline, or a combination of both.” In accordance with section 1 of the Basic Provisions “harvest price exclusion” is defined as revenue protection with the use of the harvest price excluded when determining your revenue protection guarantee. This means that when a policyholder elects to exclude the harvest price under revenue protection their insurance guarantee is not increased if the harvest price is higher than the projected price. However, the harvest price is still used to value the crop (production to count) for the purposes of establishing the indemnity.

For the purposes of section 35(b)(2)(ii)(B) of the Basic Provisions, this means that regardless of whether a policyholder elected revenue protection or revenue protection with the harvest price exclusion, the total value of the crop after the loss is the policyholder’s production times the harvest price for the crop. The only difference is that to determine the final value of the crop, before the loss, revenue coverage uses the harvest price and the revenue coverage with the harvest price exclusion uses the projected price.

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