Final Agency Determination: FAD-220

Subject: Two requests dated May 7, 2014, and May 13, 2014, to the Risk Management Agency (RMA) requesting a Final Agency Determination (FAD) for the 2012 crop year regarding the interpretation of the section 1 definition of “prevented planting” and section 17(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. part 400, subpart X.

Background:

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

1. Definitions.

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Prevented planting - Failure to plant the insured crop by the final planting date designated in the Special Provisions for the insured crop in the county, or within any applicable late planting period, due to an insured cause of loss that is general to the surrounding area and that prevents other producers from planting acreage with similar characteristics. Failure to plant because of uninsured causes such as lack of proper equipment or labor to plant acreage, or use of a particular production method, is not considered prevented planting.

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

17. Prevented Planting.
(a) Unless limited by the policy provisions, a prevented planting payment may be made to you for eligible acreage if:
(1) You are prevented from planting the insured crop on insurable acreage by an insured cause of loss that occurs:
(i) On or after the sales closing date contained in the Special Provisions for the insured crop in the county for the crop year the application for insurance is accepted; or
(ii) For any subsequent crop year, on or after the sales closing date for the previous crop year for the insured crop in the county, provided insurance has been in force continuously since that date. Cancellation for the purpose of transferring the policy to a different insurance provider for the subsequent crop year will not be considered a break in continuity for the purpose of the preceding sentence;

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Special Provisions statement for counties in the Prairie Pothole National Priority Area states, in relevant part:

In accordance with section 17(f)(8) of the Basic Provisions, “physically available for planting” means land is free of trees, rocky outcroppings, or other factors that would prevent proper and timely preparation of the seedbed for planting and harvest of the crop for the crop year. Additionally, acreage not considered physically available for planting includes, but is not limited to, the following:

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5. Any acreage not planted to a crop that is insured under the authority of the Federal Crop Insurance Act, that is grown in the county on insurable acreage, and harvested in at least one of the four most recent crop years, using recognized good farming practices, unless such acreage was planted to an insured crop that was damaged by an insured cause of loss and adjusted for purposes of a claim under the Federal crop insurance program; or

6. Acreage that has any other condition, as determined by us, that would prevent the proper and timely planting of the crop when weather and other conditions are normal for the area in which the acreage is located. For example, acreage that is normally too wet to plant in the spring may be dry enough to till or plant and even insure a crop in the fall. Such acreage would not be available for planting a spring crop even though such acreage may have been tilled, planted and/or insured the previous fall.

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Interpretation Submitted

Two interpretations were submitted in this joint FAD request.

First requestor’s interpretation:

The first requestor states that section 17(a) of the Basic Provisions specifically pertains to prevented planting causes of loss occurring in consecutive years.

To more succinctly set forth its interpretation of these policy provisions, the first requester states:

1. If a cause of loss occurs prior to the beginning of the current prevented planting insurance period and the policyholder cannot prove, using available information that with normal weather conditions, the acreage would be expected to be planted during the current crop year, no prevented planting coverage would be available for this acreage in the current crop year. Here, the cause of loss that prevented planting during the current crop year would have occurred outside of (before) the current prevented planting insurance period. This would also hold true even if another insured cause of loss occurred during the current prevented planting insurance period that would have independently prevented the acreage from being planted.

2. On the other hand, if a cause of loss occurs prior to the beginning of the current prevented planting insurance period, but the policyholder can prove, using available information that with normal weather conditions, the acreage would be expected to be planted during the current crop year, prevented planting coverage may be available for this acreage for the current crop year (provided all other policy requirements are satisfied).

3. Finally, if an insured cause of loss occurs prior to the current prevented planting insurance period and the policyholder can prove, using available information that with normal weather conditions, some of his acreage would be expected to be planted during the current crop year, the acreage that would be expected to be planted may be available for prevented planting coverage in the current crop year (again, provided all other policy provisions are satisfied).

Second requestor’s interpretation:

The second requestor believes the applicable 2012 Special Provisions statement explains the requirements of “physically available for planting.” The “l-in-4” and “physically available for planting” rules within the Special Provisions were specifically designed to address the question of consecutive years of excessive moisture. For the 2012 crop year, the Special Provisions were revised to benefit certain counties within the states of Iowa, Minnesota, Montana, North Dakota, and South Dakota, the “Prairie Pothole National Priority Area.” According to a June 30, 2011 press release by USDA/RMA, the inclusion of the “available for planting” rules in the Special Provisions was “intended to assist farmers who have experienced difficulties due to excessive moisture in their fields over recent years.” Beginning with the 2012 crop year, a crop must be grown on the acreage at least one of the previous four years if a policyholder wishes to qualify. “The requirement to be able to bring an insured crop to harvest in one of four years improves program integrity,” said the press release. “It also helps to meet the needs of farmers in the Prairie Pothole region, where some acreage has not been available to plant since the 2008 crop year due to flooding and excessive moisture conditions.” These provisions were specifically adopted to address situations where policyholders were experiencing “prevented planting causes of loss occurring in consecutive years” by limiting the number of acres that are eligible to those that were planted and harvested in one of the last four years and meet all other conditions of the policy.

The second requestor states this purpose and interplay is also evident from a comprehensive review of Informational Memorandum IS-11-009 and IS-12-004 published on RMA’s website on July 28, 2001, and .August 7, 2012, respectively. IS-11-009 is a June 28, 2011 memo that informed Approved Insurance Providers (AIP) of the implementation of prevented planting provisions into the Special Provisions for 2012. A review of IS-11-009 as a whole demonstrates that the 2012 Special Provisions were specifically tailored and implemented to address the concurrent wet years experienced by policyholders in the Prairie Pothole National Priority Area by establishing a standard that the acreage must be physically available for planting to qualify for prevented planting coverage. A larger and clearer picture of the Special Provisions arises when the Memo, the RMA publications, the “available for planting” provisions, and the FADs are considered together and as part of a broad policy change. IS-11-009 ties each element of the policy together and reiterates the language of FAD-110, FAD-119, FAD-179, and FAD-201 (published on RMA’s website on Feb 25, 2010, Jul 15, 2010, Jan 8, 2013, January 8, 2014.)

The second requestor continues, the “available for planting” framework anticipates the impossibility of establishing for each and every policyholder from one wet year to the next which specific acres are available on a given day, for example, Fall 2010 or on March 14, 2011 (the last day of the 2011 insurance period) and instead limits the eligible acres to those that have been planted in one of the last four years and are typically available to plant in years of “normal weather.” The two issues of continuous or multiple cause of loss and availability for planting are not separate and distinct, but are inextricably intertwined and addressed by the “available for planting” framework.

The second requestor provides for FAD-119, the AIP carries the burden of proof to support a denial of prevented planting coverage on the basis that the acreage is not available for planting. See also FAD-201, p. 1, “If the AIP establishes that the only time the acreage is available for planting is when the area is abnormally dry then the acreage is not eligible for prevented planting.” This directly contradicts assertions that the policyholder is required to prove “that with normal weather conditions the acreage would be expected [available] to be planted during the current crop year.” There are no policy provisions supporting the interpretation that the policy allows an AIP to deny coverage for prevented planting losses when the AIP suspects continuous or multiple causes of loss when the policyholder has demonstrated a cause of loss within the insurance period. That is because no authority exists under which an AIP may deny acreage solely on the basis that the acreage has a continuous or multiple cause of loss. The attempt to ignore the analysis under 17(f)(8) and the Special Provisions and deny the acreage solely based on a continuous or multiple cause of loss is contrary to the terms of the policy and the procedure set forth within the Basic Provisions, Special Provisions, and PP LASH. Instead, the proper analysis for determining the eligibility of specific acreage when a cause of loss has been established is under Section 17(f)(8) and the applicable Special Provisions.

Final Agency Determination

FCIC agrees with the first requestor’s interpretation that if a cause of loss occurs prior to the beginning of the current prevented planting insurance period, and the policyholder cannot prove, using available information, that with normal weather conditions the acreage would be expected to be planted during the current crop year, no prevented planting payment would be paid for this acreage in the current crop year. Additionally, if a determination is made the acreage was not expected to be planted under normal weather conditions, no prevented planting payment would be paid, even if there was another insured cause of loss during the current insurance period that independently prevents the acreage from being planted. Fundamentally, the acreage has to be capable of being planted before it can be eligible for a prevented planting payment. This means that during normal weather conditions, the acreage is available for planting and it is only when weather is not normal that the acreage is prevented from being planted.

FCIC agrees, in part, with the second requestor that the AIP must identify the basis for the denial of any prevented planting payment, including when the basis is that the acreage is not available for planting. However, under section 14 of the Basic Provisions, the burden is on the policyholder to establish that the policyholder has met all the requirements in the policy and one of those requirements is that the acreage be physically available for planting.

FCIC disagrees with the second requestor that the proper analysis for determining eligibility of specific acreage when a cause of loss has been established falls under section 17(f)(8) of the Basic Provisions and the applicable Special Provisions. The prevented planting policy provisions and Special Provisions must be read in conjunction. There is a two part process. Before any acreage is eligible for prevented planting, it must be physically available for planting. If this condition is not met, no prevented planting payment can be made regardless of any subsequent insurable cause of loss. Therefore, if the AIP determines the cause of loss occurs outside of the prevented planting insurance period, or is a continuous cause of loss that prevents the acres from being planted, no prevented planting payment is available for that acreage. Acreage that continues to be unavailable for planting due to prior weather events beyond the two-year period provided in section 17(a ) of the Basic Provisions for carryover policyholders is not eligible for continued prevented planting payments because under normal weather conditions it cannot be planted throughout the final and late planting period.

If it is established that the acreage is physically available for planting, the other conditions for prevented planting eligibility must still be met before any prevented planting payment can be made. There must be a cause of loss that occurs during the prevented planting insurance period, the insured cause of loss must be general to the surrounding area and that prevents other producers from planting acreage with similar characteristics, and the policyholder must be unable to plant the acreage due to that cause of loss.

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: July 7, 2014