Final Agency Determination: FAD-223

Subject: A joint request for a Final Agency Determination, dated May 28, 2014, was submitted by two parties, along with their separate interpretations of the same policy provision requesting a Final Agency Determination for the 2012 crop year regarding the interpretation of section 3(g) 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 3(g) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions (7 C.F.R. § 457.8)) states, in relevant part:

3. Insurance Guarantees, Coverage Levels, and Prices

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(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)(l) 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)(l ), unless the incorrect information was the result of our error or the error of someone from USDA.

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Interpretation Submitted

Two interpretation were submitted in this joint FAD request.

The first requestor interprets this regulation to require that in situations where verifiable records do not support the yield certified by the producer for a given year, an assigned yield of no more than 75 percent of the yield used to determine the producer's coverage for the previous crop year will be substituted for that year.

The second requestor interprets this regulation to require that in situations where the producer has verifiable records that support a yield that is less than the yield certified by the producer for a given year, the approved yield will be corrected, subject to the provisions regarding misreporting contained in the policy. Specifically, the second requestor believes that sections 3(g)(2) and (4) plainly state that a producer's approved yield is subject to correction based on the information determined to be accurate. In contrast, section 3(g)(3) applies to situations where there are no verifiable records, which is why a producer receives an assigned yield. Put another way, if section 3(g)(3) applied in all situations where the existing written verifiable records did not match the certified yield, sections 3(g)(2) and (4) would never apply and would be rendered meaningless.

The second requestor believes this interpretation is supported by the applicable provisions of 7 CFR, Subpart G, Actual Production History. In particular, 7 CFR § 400.53(b) provides that "production reports and supporting records are subject to audit or review to verify the accuracy of the information certified," including in the event that "a claim for indemnity is submitted on the insured crop." The regulation further provides that "the reported yield is subject to revision, if needed, so that the claim conforms to the records submitted at that time." Consistent with these regulations, the second requestor interprets section 3(g) of the Basic Provisions to require that the approved yield, as reported, will be corrected based the verifiable records provided. If no verifiable records are provided, a yield will be assigned.

The second requestor also believes this interpretation is consistent with and required by the applicable provisions of the 2012 Crop Insurance Handbook ("2012 Handbook"). In particular, Section 19 of the 2012 Handbook, entitled "Reviewing and Correcting APH Yields," specifically provides that if at "any time it is discovered that an insured has misreported any material information used to determine the approved APH yield or the APH yield is not correct," the approved APH yield "must" be corrected "for the crop year such information is not correct." See 2012 Handbook at 459. In such a situation, the insured "will be subject to the misreporting provisions contained in the policy." Id. Section 19 of the 2012 Handbook further requires a revised production report and a revised APH database if it is determined that there is a difference between the yield certified and the yield verified. Id. at 460.

The second requestor believes that these required procedures apply in this case, where the insured has verifiable records that support a lesser yield than the certified yield. In such a case, the APH yield must be corrected or revised - not thrown out altogether and replaced with an assigned yield - subject to the misreporting sections of the Basic Provisions.

Final Agency Determination

The Federal Crop Insurance Corporation (FCIC) agrees, in part, with both the first and second requestors’ interpretations. The 2012 FCIC 18010 Crop Insurance Handbook (CIH) specifies acceptable production evidence by crop as requiring either verifiable production evidence or farm management records to support the insured’s certification on the production report.

FCIC agrees in part with the first requestor. If a crop requires verifiable records in accordance with the CIH, assigned yield procedures apply if the insured does not provide verifiable production records that support the yield certified on an acceptable production report. However, some crops are authorized to use farm management records as acceptable records. If an insured files an acceptable production report supported by acceptable farm management records, e.g. a bin measurement, during an APH review, assigned yields may not apply. For example, during an APH review it is determined that more accurate verifiable records exist, e.g. delivery records, consistent with the farm management records supporting the production report. In this situation, assigned yields would not apply and the actual yield would be corrected in accordance with section 19B of CIH.

FCIC agrees, in part, with the second requestor. Section 3(g)(3) applies to situations where the verifiable records do not support the certification by the insured on the production report, it does not mean that the producer does not provide “any” support. If no consequences resulted from inaccurate certification, then the insured could inflate actual yields on the production report and would only result in a correction when identified and would only be corrected to what should have been initially reported. In addition to Section 3(g)(3), Section 3(g)(2) may also result in additional misreporting penalties for an insured and Section 3(g)(4) applies when correction to the approved APH yield is applicable, such as an assigned yield replacing the production report for an actual yield contained within an APH database.

Following an APH review, an insured may submit a corrected production report by the next available production reporting date which will be used in establishing the approved APH yield in subsequent crop years in accordance with section 19 of the CIH.

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: August 21, 2014