Final Agency Determination: FAD-206

Subject: Request dated January 2, 2014, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2011 and 2012 crop years regarding the interpretation of section 3 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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Production report - A written record showing your annual production and used by us to determine your yield for insurance purposes in accordance with section 3. The report contains yield information for previous years, including planted acreage and production. This report must be supported by written verifiable records from a warehouseman or buyer of the insured crop, by measurement of farm-stored production, or by other records of production approved by us on an individual case basis in accordance with FCIC approved procedures.

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Section 3 of the Basic Provisions states, in relevant part:

3. Insurance Guarantees, Coverage Levels, and Prices.

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(f) You must report all production of the crop (insured and uninsured) to us for the previous crop year by the earlier of the acreage reporting date or 45 days after the cancellation date, unless otherwise stated in the Special Provisions or as specified in section 18:

(1) If you do not provide the required production report, we will assign a yield for the previous crop year. The yield assigned by us will not be more than 75 percent of the yield used by us to determine your coverage for the previous crop year. The production report or assigned yield will be used to compute your approved yield for the purpose of determining your coverage for the current crop year.

(2) If you have filed a claim for any crop year, the documents signed by you which state the amount of production used to complete the claim for indemnity will be the production report for that year unless otherwise specified by FCIC.

(3) Production and acreage for the prior crop year must be reported for each proposed optional unit by the production reporting date. If you do not provide the information stated above, the optional units will be combined into the basic unit.

(4) Appraisals obtained from only a portion of the acreage in a field that remains unharvested after the remainder of the crop within the field has been destroyed or put to another use will not be used to establish your actual yield unless representative samples are required to be left by you in accordance with the Crop Provisions.

(g) It is your responsibility to accurately report all information that is used to determine your approved yield.

(1) You must certify to the accuracy of this information on your production report.

(2) If you fail to accurately report any information or if you do not provide any required records, you will be subject to the provisions regarding misreporting contained in section 6(g), unless the information is corrected:

(i) On or before the production reporting date; or

(ii) Because the incorrect information was the result of our error or the error of someone from USDA.

(3) If you do not have written verifiable records to support the information on your production report, you will receive an assigned yield in accordance with section 3(f)(1) and 7 CFR part 400, subpart G for those crop years for which you do not have such records.

(4) At any time we discover you have misreported any material information used to determine your approved yield or your approved yield is not correct, the following actions will be taken, as applicable:

(i) We will correct your approved yield for the crop year such information is not correct, and all subsequent crop years;

(ii) We will correct the unit structure, if necessary;

(iii) Any overpaid or underpaid indemnity or premium must be repaid; and

(iv) You will be subject to the provisions regarding misreporting contained in section 6(g)(1), unless the incorrect information was the result of our error or the error of someone from USDA.

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PART 1 of the 2011 Loss Adjustment Manual (LAM) states, in relevant part:

GENERAL INFORMATION

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4 ABBREVIATIONS OR ACRONYMS

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PW - Production Worksheet (also known as claim for indemnity form or claim form)

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Exhibit 1 of the 2011 LAM states, in relevant part:

Exhibit 1.

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Claim Form - An insurance document used to record appraisals of potential or assessed production, unharvested and harvested production to count, guarantees, and acres by practice and type from which an indemnity will be computed.

Claim for Indemnity - A claim made on the AIPs form that contains the information necessary to pay the indemnity as specified in the applicable FCIC issued procedures, and complies with the requirements in section 14 of the BP.

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Section 4 of the 2011 LAM states, in relevant part:

SECTION 4 ESTABLISHING PRODUCTION

83 GENERAL INFORMATION

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B Establishing Total Production on Damaged Units

The adjuster establishes total production for each damaged unit from appraisals of unharvested production, appraisals for uninsured causes, prorated production from unreported units, measuring farm-stored production, and from verifying harvested production from the insured's records, as described in the following subparagraphs for the type of disposition. The TOTAL production for the entire damaged unit is the insured's production share plus the production share of each person sharing in the unit. If the insured has not kept acceptable records separate by unit (whether stored, fed, or sold), the production is considered commingled. Refer to PAR. 126.

C. Establishing Total Production from Non-Loss Units

Obtain and document an estimate of production per acre for each undamaged unit of the indemnified crop from the insured or the insured's authorized representative and record as instructed in the crop handbook.

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Section 10G Item Number 13 of the 2011 Forage Production Loss Adjustment Standards Handbook (Forage Production LASH) states, in relevant part:

10. CLAIM FORM ENTRIES AND COMPLETION PROCEDURES

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G. FORM ENTRIES AND COMPLETION INFORMATION

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13. Est. Prod. Per Acre:

PRELIMINARY AND REPLANT: MAKE NO ENTRY.

FINAL:

Forage Seeding - Estimated average plant population per square foot for each non-loss unit for the crop at the time of final inspection.

Forage Production - Estimated yield per acre, in tons to tenths, of all non-loss units for the crop at the time of final inspection.

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The requester states that under section 3(f)(2) of the Basic Provisions, an Approved Insurance Provide’s (AIP) claim for indemnity form that is signed by the policyholder and that states the amount of production used to complete a claim for indemnity on a loss unit will be used as the policyholder’s production report on the loss unit for the year of the claim, unless otherwise specified by FCIC. Estimated production from non-loss units that a policyholder provides to an adjuster during the loss adjustment process is not used to complete a claim for indemnity form that is signed by a policyholder; therefore, such estimated production does not satisfy the production reporting requirements of section 3 of the Basic Provisions. The requestor believes this interpretation is consistent with the provisions of the 2011 LAM and Forage Production LASH:

The requester states the loss adjustment procedures quoted above clearly distinguish between production from loss units that has been verified by an adjuster (and signed to by a policyholder on claim for indemnity form) and estimated production from non-loss units. Estimated production from non-loss units described in the loss adjustment procedures has neither been verified by an adjuster nor signed to by a policyholder on a claim for indemnity. Therefore, such estimated production does not satisfy the production reporting requirements of section 3 of the Basic Provisions.

The Federal Crop Insurance Corporation (FCIC) agrees with the requestor’s interpretation. Only the documents signed by the insured which state the amount of production used to complete the claim for indemnity will be used as the production report for the next crop year year. Estimated production gathered by a loss adjuster from non-loss units does not contain the amount of production used to complete the claim. Only production from the loss unit is used to complete the claim. Therefore, estimated production from non-loss units are not considered a production report for the purposes of section 3 of the Basic Provisions. The definition of “production report” in section 1 of the Basic Provisions provides that a production report must be supported by written verifiable records from a warehouseman or buyer of the insured crop, by measurement of farm-stored production, or by other records of production approved by the approved insurance provider on an individual case basis in accordance with FCIC approved procedures. Unless supported by written verifiable records, estimated production from even a loss unit is not an acceptable record to support the production report in accordance with section 3 of the Basic 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: February 19, 2014