Final Agency Determination: FAD-216

Subject: Request dated March 14, 2014, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2013 crop year regarding the interpretation of section 17(h) 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. part 400, subpart X.

Background:

The preamble to the Basic Provisions states, in relevant part:

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Throughout this policy, “you” and “your” refer to the named insured shown on the accepted application and “we,” “us,” and “our” refer to the insurance company providing insurance.

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Section 17(h) of the Basic Provisions states, in relevant part:

17. Prevented Planting.

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(h) If you are prevented from planting a crop for which you do not have an adequate base of eligible prevented planting acreage, as determined in accordance with section 17(e)(1), we will use acreage from another crop insured for the current crop year for which you have remaining eligible prevented planting acreage.

(1) The crop first used for this purpose will be the insured crop that would have a prevented planting payment most similar to the payment for the crop that was prevented from being planted.

(i) If there are still insufficient eligible prevented planting acres, the next crop used will be the insured crop that would have the next closest prevented planting payment.

(ii) In the event payment amounts based on other crops are an equal amount above and below the payment amount for the crop that was prevented from being planted, eligible acres for the crop with the higher payment amount will be used first.

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Section 11(E)(6) of the 2013 Prevented Planting Loss Adjustment Standards Handbook (PP LASH) states, in relevant part:

11. VERIFYING ELIGIBLE PP ACREAGE

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E. PREVENTED FROM PLANTING – NOT ENOUGH ELIGIBLE ACREAGE FOR THE CROP

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(6) When crops are insured with more than one AIP, and it is necessary for one AIP to use eligible acres from other crops they insure to pay a PP payment, the AIP should use remaining eligible acres from the crops they insure first. If all remaining eligible acres from other crops are exhausted, and the other AIP insures a crop(s) that has remaining eligible PP acres and the PP payment for this crop would be less than the PP payment the crop/unit prevented from planting, the other AIP may (but is not required to) process the PP claim using these remaining eligible acres, provided they agree with the determinations, causes of loss, etc., that the other AIP made.

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The request relates to when a policyholder has crops insured with more than one approved insurance provider (AIP). The requestor is seeking clarification on what order prevented planting payments are made when the crop the policyholder is prevented from planting, does not have an adequate base of eligible prevented planting acreage and the policyholder has one other crop insured with the same AIP and one crop insured with a second AIP.

The requestor interprets section 17(h)(1) of the Basic Provisions to require an AIP to use eligible acres from an insured crop with the closest prevented planting payment regardless of what AIP the crop is insured with when a policyholder does not have enough eligible acres for the crop they are prevented from planting but have remaining eligible prevented planting acres of another crop.

FCIC disagrees with the requestor’s interpretation. Section 17(h) of the Basic Provisions provides if the policyholder insures both corn and grain sorghum and they are prevented from planting the corn, but they do not have enough eligible prevented planting acres of corn, they can use the eligible prevented planting acres of the grain sorghum, if there are any remaining, and the policyholder would receive a prevented planting payment for both corn and grain sorghum. The problem occurs when the two crops are insured by different AIPs. An AIP cannot be required to pay a prevented planting claim based on liability they have not insured. Each AIP is only responsible for the liability on the acreage they insure. Therefore, the AIP insuring the grain sorghum cannot be required to pay a prevented planting claim when the crop that was prevented from being planted was corn. A prevented planting claim with one AIP does not have to be paid using remaining eligible acres from a crop insured by a policy held by another AIP.

In accordance with section 11(E)(6) of the 2013 PP LASH when crops are insured with more than one AIP, and it is necessary to use eligible acres from other crops in order to pay a prevented planting payment, the AIP should use remaining eligible acres from crops for which they insure. If all remaining eligible acres from the crops insured by the AIP are exhausted, and another AIP insures crops that has remaining eligible prevented planting acres with a prevented planting payment that is less than the prevented planting payment of the crop that was prevented from being planting, the other AIP has the authority to process the prevented planting claim using these remaining eligible acres, provided they agree with the determinations, causes of loss, etc., that the other AIP made but they are under no obligation to do so. This is solely a decision of the AIP.

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: June 10, 2014