Final Agency Determination: FAD-214

Subject: Two requests dated March 12, 2014, and March 26, 2014, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2011 crop year of section 17(e)(1)(i)(A) of the Common Crop Insurance Basic Provisions (Basic Provisions), published at 7 C.F.C 457.8. These requests are pursuant to 7 C.F.R. § 400, subpart X.

Background:

Section 1 definition of “Summary of Coverage” states:

1. Definitions

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Summary of Coverage - Our statement to you, based upon your acreage report, specifying the insured crop and the guarantee or amount of insurance coverage provided by unit.

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Section 17(e)(1)(i)(A) of the Basic Provisions states:

17. Prevented Planting

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(e) The maximum number of acres that may be eligible for a prevented planting payment for any crop will be determined as follows:

(1) The total number of acres eligible for prevented planting coverage for all crops cannot exceed the number of acres of cropland in your farming operation for the crop year, unless you are eligible for prevented planting coverage on double cropped acreage in accordance with section 17(f)(4). The eligible acres for each insured crop will be determined as follows:

(i) If you have planted any crop in the county for which prevented planting insurance was available (you will be considered to have planted if your APH database contains actual planted acres) or have received a prevented planting insurance guarantee in any one or more of the four most recent crop years, and the insured crop is not required to be contracted with a processor to be insured:

(A) The number of eligible acres will be the maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the four most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)).

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Section 4 F(3) of the 2011 Prevented Planting Loss Adjustment Standards Handbook (PP LASH) states, in relevant part:

4. PP COVERAGE AND ELIGIBLE ACREAGE

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F. ELIGIBLE ACRES

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(3) Maximum eligible acreage for each insured crop.

^2/crop year as defined in the applicable crop provisions.

First requestor’s interpretation:

The first requestor interprets section 17(e)(1)(i)(A) of the Basic Provisions to mean the insured received a Policy Declaration summary from the approved insurance provider (AIP) in one of the four most recent crop years, and that document established a coverage guarantee for certain acreage in the county, then the policyholder is entitled to use that coverage guarantee in establishing his maximum eligible acreage for prevented plant coverage in the current year.

The requestor states the Basic Provisions section 17(e)(1)(i)(A) will apply if the insured farmed a prevented planting eligible crop in the county at least once during the previous four crop years, whether the insured actually sought prevented planting coverage during that year or not. In the alternative, section 17(e)(1) will apply if the insured received a prevented planting insurance guarantee in any one of the four previous crop years, provided that the crop is not required to be contracted with a processor. Per the PP LASH, corn is not among the crops required to be contracted with a processor. The policyholder need not have farmed a qualifying crop during all four previous years for section 17(e)(1)(i) to apply, provided he farmed a qualifying crop in at least one of those years.

The requestor continues, to establish a policyholder’s maximum acres eligible for prevented planting coverage in any given insurance year under section 17(e)(1) of the Basic Provisions and section 4F(3) of the PP LASH, an AIP must examine the policyholder’s maximum number of acres certified for APH purposes during the most recent four years. The AIP must also examine the policyholder’s acres reported for insurance during that time period. The acres in question must be in the same county where the insured is seeking to farm in the current insurance year.

The requestor believes, the maximum eligible aces for each insured crop is either (1) the maximum number of acres certified for APH purposes in the last four years or (2) the maximum number of acres reported for insurance during the past four years, including prevented planting acreage. A Policy Declaration summary issued by a prior AIP for one of the four most recent prior crop years reflecting the crop year, the number of prevented planting acres reported, and the prevented planting guarantee is one permissible means of establishing the insured acres reported and the prevented planting insurance guarantee.

Second requestor’s interpretation:

The second requestor seeks a determination of whether “acres certified for APH purposes, or insured acres reported,” as used in section 17(e)(1)(i)(A) of the Basic Provisions, includes prevented planting acres reported by a policyholder in one of the four most recent crop years if those acres were not eligible for prevented planting on the reported crop.

The second requestor interprets the phrase “acres certified for APH purposes, or insured acres reported,” as used in section 17(e)(1)(i)(A) of the Basic Provisions, to not include acres reported for prevented planting in a previous year that did not meet prevented planting eligibility requirements for the reported crop. Such acres were not “certified for APH purposes” because these unplanted acres would not have been utilized to calculate the policyholder’s APH yield. Likewise, such acres were not “insured acres reported” because they were not insured as to the reported crop. Acres not eligible for prevented planting on the reported crop would only be insurable if these acres could be rolled to another crop, in which case the acres would be insured for purposes of the crop to which they were rolled. In order for prevented planting acres from one of the four most recent crop years to be counted for purposes of calculating the maximum eligible acreage for a particular crop, the acres must have been insured for that crop.

The second requestor also states the fact that a policyholder was issued a Summary of Coverage (sometimes also referred to as a “schedule of insurance”) in a prior year reflecting reported prevented planting acres is not necessarily determinative of “acres certified for APH purposes, or insured acres reported.” As reflected in section 1 of the Basic Provisions, a Summary of Coverage is “Our statement to you, based upon your acreage report, specifying the insured crop and the guarantee or amount of insurance coverage provided by unit.” Thus, if a policyholder certifies prevented planting acreage for a crop on his acreage report, that policyholder may receive a Summary of Coverage showing the prevented planting guarantee and premium estimate for those reported acres. However, a Summary of Coverage is not a final determination of insurability. If the AIP ultimately determined that the reported acres were not eligible for prevented planting as to the reported crop, these acres would not be considered “acres certified for APH purposes, or insured acres reported.”

The second requestor believes this interpretation is supported by FAD-120, issued July 15, 2010 on RMA’s website, in which the FCIC observed as follows:

“Provisions contained in section 17(e)(1)(i)(A) of the Basic Provisions state the number of acres eligible for prevented planting coverage for each insured crop will be the maximum number of acres “certified for APH purposes, or insured acres reported, for the crop in any one of the 4 most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)).” These provisions do not specifically require the acreage to have been “planted” in one of the four previous crop years. For example, if a policyholder met all eligibility requirements for a prevented planting payment in one of the four previous crop years, the number of insured prevented planting acres reported on the acreage report in one of the four previous crop years may be used when determining the maximum number of acres for the current crop year.”

“FCIC does not agree with the second requestor’s interpretation that provisions contained in section 17(e)(1)(i)(A) mean the number of acres eligible for prevented planting coverage may be determined based on the number of acres “reported for insurance for the crop” in any one of the four most recent crop years. The provisions require the number of acres eligible for prevented planting coverage to be determined based on the maximum number of acres certified for APH purposes, or “insured“ acres reported. On the acreage report, producers report both insured and uninsured acreage and only the insured acreage reported would be used. (emphasis added)”

The requestor states in FAD-120, FCIC found that “acres certified for APH purposes, or insured acres reported” did not equate to prevented planting acres reported by the producer and specifically found that “only the insured acreage reported would be used” to determine the number of acres eligible for prevented planting coverage. (emphasis added). There is no logical reason that a Summary of Coverage, which is based on information contained in the acreage report, should be determinative of “acres certified for APH purposes, or insured acres reported.” As suggested in FAD-120, only prevented planting acres that were both reported and insured for the reported crop should be utilized in determining the maximum eligible acreage.

Federal Crop Insurance Corporation (FCIC) agrees with the second requestor’s interpretation.

The number of eligible acres will be the maximum number of acres certified for APH purposes, or insured acres reported, for the crop in any one of the four most recent crop years (not including reported prevented planting acreage that was planted to a second crop unless you meet the double cropping requirements in section 17(f)(4)). The phrase “acres certified for APH purposes” does not include prevented planting acres that did not meet the prevented planting eligibility requirements for the reported crop because such acres are not used in the APH. Further, “insured acres reported,” as used in section 17(e)(1)(i)(A) of the Basic Provisions, does not include acres reported for prevented planting in a previous year that did not meet prevented planting eligibility requirements for the reported crop because they were not insured for the reported crop. Therefore, prevented planting acres that do not meet the eligibility required for prevented planting for the reported crop are not used in calculating the maximum prevented planting acres.

Consistent with FAD-120 published on RMA’s website on July 15, 2010, if a policyholder met all eligibility requirements for a prevented planting payment in one or more of the four previous crop years, the number of insured prevented planting acres reported on the acreage report in one of the previous four crop years may be used when determining the maximum number of acres for the current crop year. Additionally, the number of acres eligible for prevented planting coverage must be determined based on the maximum number of acres certified for APH purposes, or “insured” acres reported. Policyholders report on the acreage report both insured and uninsured acreage, and only the insured acreage is used.

FCIC disagrees with the first requestor’s interpretation that a Policy Declaration reflecting the crop year, the number of prevented planting acres reported, and the prevented planting guarantee is one permissible means of establishing the insured acres reported and the prevented planting insurance guarantee. A Policy Declaration as described in Exhibit 12 the 2011 Document and Supplemental Standards Handbook (FCIC-24040) is a form an AIP issues to the insured after the AIP accepts the completed application, but prior to insurance attaching. Insurance attaches at the time of planting. Therefore, the minimum standards for a Policy Declaration form do not include all requirements in section 17(e)(1)(i) of the Basic Provisions to establish the maximum number of acres that may be eligible for a prevented planting payment for any crop.

The AIP may combine a Policy Declaration with the Summary of Coverage. If the Policy Declaration issued by the AIP and the Summary of Coverage contains the required information from the policyholder’s APH database, including actual planted acres or evidence that the insured has received a prevented planting insurance guarantee, and other required information in accordance with section 17(e)(1) of the Basic Provisions, it may be possible to use the Policy Declaration summary to determine prevented planting eligible acreage. However, the Summary of Coverage is not a final determination of insurability. The Summary of Coverage simply contains information reported by the producer. If the AIP ultimately determines that the reported acres were not eligible for prevented planting as to the reported crop, these acres would not be considered “acres certified for APH purposes, or insured acres reported”.

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: April 8, 2014