[Federal Register Volume 75, Number 60 (Tuesday, March 30, 2010)]
[Rules and Regulations]
[Pages 15778-15891]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6432]
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Part II
Department of Agriculture
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Federal Crop Insurance Corporation
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7 CFR Part 457
Common Crop Insurance Regulations, Basic Provisions; and Various Crop
Insurance Provisions; Final Rule
Federal Register / Vol. 75 , No. 60 / Tuesday, March 30, 2010 / Rules
and Regulations
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AB96
Common Crop Insurance Regulations, Basic Provisions; and Various
Crop Insurance Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the
Common Crop Insurance Regulations, Basic Provisions, Small Grains Crop
Insurance Provisions, Cotton Crop Insurance Provisions, Sunflower Seed
Crop Insurance Provisions, Coarse Grains Crop Insurance Provisions,
Malting Barley Crop Insurance Provisions, Rice Crop Insurance
Provisions, and Canola and Rapeseed Crop Insurance Provisions to
provide revenue protection and yield protection. The amended provisions
replace the Crop Revenue Coverage (CRC), Income Protection (IP),
Indexed Income Protection (IIP), and the Revenue Assurance (RA) plans
of insurance. These individual plans of insurance will no longer be
available. The intended effect of this action is to offer producers a
choice of revenue protection (protection against loss of revenue caused
by low prices, low yields or a combination of both) or yield protection
(protection for production losses only) within one Basic Provisions and
the applicable Crop Provisions to reduce the amount of information
producers must read to determine the best risk management tool for
their operation and to improve the prevented planting and other
provisions to better meet the needs of insured producers. In addition,
FCIC has revised the Texas Citrus Tree Crop Insurance Provisions, Pear
Crop Insurance Provisions, Sugarcane Crop Insurance Provisions,
Macadamia Tree Crop Insurance Provisions, Macadamia Nut Crop Insurance
Provisions, Onion Crop Insurance Provisions, Dry Pea Crop Insurance
Provisions, Plum Crop Insurance Provisions, and Cabbage Crop Insurance
Provisions to correct specific references to the revised Common Crop
Insurance Regulations, Basic Provisions. Further, FCIC has revised
certain provisions to incorporate provisions from previous rules
implementing the Food, Conservation, and Energy Act of 2008 (2008 Farm
Bill).
DATES: Effective Date: This rule is effective April 29, 2010.
Applicability date: The changes will apply for the 2011 and
succeeding crop years for all crops with a 2011 contract change date on
or after April 30, 2010, and for 2012 and succeeding crop years for all
crops with a 2011 contract change date prior to April 30, 2010.
FOR FURTHER INFORMATION CONTACT: Janice Nuckolls, Risk Management
Specialist, Product Management, Product Administration and Standards
Division, Risk Management Agency, United States Department of
Agriculture, P.O. Box 419205, Stop 0812, Room 421, Kansas City, MO
64141-6205, telephone (816) 926-7730. For a copy of the Cost-Benefit
Analysis, contact Leiann Nelson, Economist, at the office, address, and
telephone number listed above.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant for the purposes of
Executive Order 12866 and, therefore, it has been reviewed by the
Office of Management and Budget (OMB).
Cost-Benefit Analysis
A Cost Benefit Analysis has been completed and is available to
interested persons at the Kansas City address listed above. In summary,
the analysis finds the revised provisions in the final rule will have
positive potential benefits for producers and insurance providers. The
PayGo impact of changing the rapeseed price mechanism for revenue
coverage to make the harvest price equal to the projected price is
estimated at $5,233. The effect of this change is to reduce the risk,
which will lower the premium rate for MPCI coverage, lower the amount
of premium subsidy paid due to the lower premium, and decrease the
indemnity paid.
A misreported information penalty was put into place in the 2005
crop year. The misreporting penalty was based on any reported
information that resulted in liability greater than 110.0 percent or
lower than 90.0 percent of the actual liability determined for the
unit. The policy already provided a penalty for misreported acres and
yields and when the misreporting factor was also applied to the
indemnity, the penalty was overly harsh. In addition, the penalty was
difficult to determine and administer. The total indemnity withheld in
2005 due to the misreported information factor penalty was slightly
under $2.7 million and involved just over 608,000 acres.
Combining yield protection (protection for production losses only)
and revenue protection (protection against loss of revenue caused by
changes in prices, production losses or a combination of both) within
the current Basic Provisions and applicable Crop Provisions will
minimize the quantity of documents needed in the contract between the
producer and the insurance provider. A producer benefits because he or
she will not receive several copies of largely duplicative material as
part of the insurance contract if he or she elects to insure different
crops under different plans of insurance. Insurance providers benefit
because there is no need to maintain inventories of similar materials,
thus eliminating the potential for providing an incorrect set of
documents to a producer by inadvertent error. Benefits will accrue due
to avoided costs (the resources needed to duplicate and administer
contract documents), which are intangible in nature. The cost to
prepare, publish, store, and mail multiple copies of similar documents
is avoided.
Revisions to the prevented planting provisions will clarify certain
terms and conditions to reduce fraud, waste, and abuse. For example,
the prevented planting payment amount has been changed so that it will
not exceed the payment level for the crop prevented from being planted.
Current provisions allow payment based on another crop when there are
no remaining eligible acres for the crop prevented from being planted.
Previously, the payment was based on the other crop even when its value
was higher. The provisions still allow eligible acres for another crop
to be used but limit the payment amount to the crop prevented from
being planted.
The CRC, RA, IP, and IIP plans of insurance currently use a market-
price discovery method to determine prices. This final rule generally
uses the same method for determining the projected price for crops with
both revenue protection and yield protection. The benefits of this
action to FCIC are that it will no longer be required to make multiple
estimates of the respective prices for these crops. Insurance providers
benefit because they no longer will be required to process multiple
releases of the expected market price for a crop year. Producers also
benefit because the price at which they may insure the crops included
under yield protection should more closely approximate the market value
of any loss in yield that is subject to an indemnity. In addition, the
variation in prices between yield protection and revenue protection
will be reduced. There are essentially no direct costs to provide these
pricing benefits because
[[Page 15779]]
the pricing mechanisms to be used are essentially the same as those
currently being used for the revenue plans of insurance listed above.
All required data are available and similar calculations are currently
being made.
These changes will simplify administration of the crop insurance
program, reduce the quantity of documents and electronic materials
prepared and distributed, better define the terms of coverage, provide
greater clarity, and reduce the potential for fraud, waste, and abuse.
Many of the benefits and costs associated with this rule cannot be
quantified. The qualitative assessment indicates the benefits outweigh
the costs of the regulation.
Paperwork Reduction Act of 1995
Pursuant to the provisions of the Paperwork Reduction Act of 1995
(44 U.S.C. chapter 35), the collections of information in this rule
have been approved by OMB under control number 0563-0053. The revisions
made in this regulation may result in minor changes in how the
information is collected, but the fundamental nature of the information
collection is not changing.
E-Government Act Compliance
FCIC is committed to complying with the E-Government Act of 2002,
to promote the use of the Internet and other information technologies
to provide increased opportunities for citizen access to Government
information and services, and for other purposes.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA)
establishes requirements for Federal agencies to assess the effects of
their regulatory actions on State, local, and tribal governments and
the private sector. This rule contains no Federal mandates (under the
regulatory provisions of title II of the UMRA) for State, local, and
tribal governments or the private sector. Therefore, this rule is not
subject to the requirements of sections 202 and 205 of UMRA.
Executive Order 13132
It has been determined under section 1(a) of Executive Order 13132,
Federalism, that this rule does not have sufficient implications to
warrant consultation with the States. The provisions contained in this
rule will not have a substantial direct effect on States, or on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
Regulatory Flexibility Act
FCIC certifies that this regulation will not have a significant
economic impact on a substantial number of small entities. Program
requirements for the Federal crop insurance program are the same for
all producers regardless of the size of their farming operation. For
instance, all producers are required to submit an application and
acreage report to establish their insurance guarantees and compute
premium amounts, and all producers are required to submit a notice of
loss and production information to determine the amount of an indemnity
payment in the event of an insured cause of crop loss. Whether a
producer has 10 acres or 1000 acres, there is no difference in the kind
of information collected. To ensure crop insurance is available to
small entities, the Federal Crop Insurance Act authorizes FCIC to waive
collection of administrative fees from limited resource farmers. FCIC
believes this waiver helps to ensure that small entities are given the
same opportunities as large entities to manage their risks through the
use of crop insurance. A Regulatory Flexibility Analysis has not been
prepared since this regulation does not have an impact on small
entities, and, therefore, this regulation is exempt from the provisions
of the Regulatory Flexibility Act (5 U.S.C. 605).
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372, which require intergovernmental consultation with State and
local officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order 12988
This rule has been reviewed in accordance with Executive Order
12988 on civil justice reform. The provisions of this rule will not
have a retroactive effect. The provisions of this rule will preempt
State and local laws to the extent such State and local laws are
inconsistent herewith. With respect to any direct action taken by FCIC
or to require the insurance provider to take specific action under the
terms of the crop insurance policy, the administrative appeal
provisions published at 7 CFR part 11 must be exhausted before any
action against FCIC for judicial review may be brought.
Environmental Evaluation
This action is not expected to have a significant economic impact
on the quality of the human environment, health, or safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
Background
This rule finalizes changes to the Common Crop Insurance
Regulations; Basic Provisions, Small Grains Crop Insurance Provisions,
Cotton Crop Insurance Provisions, Sunflower Seed Crop Insurance
Provisions, Coarse Grains Crop Insurance Provisions, Malting Barley
Crop Insurance Provisions, Rice Crop Insurance Provisions, and Canola
and Rapeseed Crop Insurance Provisions to provide revenue protection
and yield protection in one policy and to make other changes that were
published by FCIC on Friday, July 14, 2006, as a notice of proposed
rulemaking in the Federal Register at 71 FR 40194-40252. The public was
afforded 60 days to submit written comments after the regulation was
published in the Federal Register. Based on comments received and
specific requests to extend the comment period, FCIC published a notice
in the Federal Register at 71 FR 56049 on September 26, 2006, extending
the initial 60-day comment period for an additional 30 days, until
October 26, 2006.
A total of 897 comments were received from 88 commenters. The
commenters were insurance providers, attorneys, trade associations,
State agricultural associations, agents, an insurance service
organization, producers, State departments of agriculture, grower
associations, agricultural credit associations, and other interested
parties.
The public comments received regarding the proposed rule and FCIC's
responses to the comments are listed below (under applicable subject
headings) identifying issues and concerns, and the changes made, if
any, to address the comments.
Commodity Exchange Price Provisions
FCIC received a number of comments regarding the Commodity Exchange
Price Provisions (CEPP). Numerous comments were received with respect
to the CEPP including, but not limited to, comments requesting: (1)
Reinstating revenue coverage for sunflowers; (2) Increasing the maximum
percentage the harvest price can move from 160
[[Page 15780]]
percent of the projected price to a larger amount; (3) Changing the
projected price discovery period to 30 days; and (4) Establishing an
earlier price discovery period to allow more time for sales.
The CEPP was provided for comment as a courtesy to the public and
it is not part of the regulation and will not be published in the Code
of Federal Regulations. Therefore, it is not subject to the formal
notice and comment rulemaking process. As a result, FCIC is not
publishing its responses to all of these comments in this final rule.
FCIC thanks the public for their assistance in reviewing the CEPP and
will consider all comments received and make appropriate changes in the
CEPP.
Basic Provisions--General
Comment: Many commenters commended FCIC for their efforts to
combine CRC, RA, IP, and Actual Production History (APH) into a single
policy. They stated it will strengthen the efficiency and integrity of
the program, simplify product selection, reduce unnecessary documents,
and facilitate producers' understanding of coverage options. The
commenters stated they were encouraged by many of the revisions
proposed by FCIC, as they believe these provisions will reduce program
vulnerabilities, resolve existing ambiguities and increase the
accountability and responsibility of the producers. They recognized the
high value of Federal crop insurance to producers and appreciated the
continuing efforts of FCIC to further improve the effectiveness and
administration of this important program. A commenter stated using the
same method for determining prices for both revenue and yield
protection is a move in the right direction. A commenter stated that
yield protection prices will more truly reflect expected market prices.
Another commenter stated that with the price being the same for the two
coverages, producers will be able to more easily compare revenue
protection against yield protection, thereby making a more informed
decision. The commenters stated the procedures proposed by FCIC should
provide a smooth transition. A commenter stated the combination policy
also eliminates potential conflicts and mistakes that occur when
individual plans of insurance are revised independently and
differently. A commenter stated the proposed rule will govern the
future terms and conditions by which producers will be insured against
price and production risks under the Federal crop insurance program,
and believed the ultimate success of the rule will be measured in
direct proportion to the level of attention paid to each and every
detail and the level of collaboration with insurance providers who
deliver these important risk management products. The commenter stated
careful avoidance of any unintended consequence, as well as substantive
and procedural changes that have not been thoroughly vetted, whether
such changes are express or implied, is absolutely critical.
Response: FCIC agrees combining the different plans of insurance
into one program will be beneficial. FCIC also agrees generally using
the same projected price by crop for both yield protection and revenue
protection for all crops for which revenue protection is available
should reflect expected market prices and assist the producer to make
an informed decision when choosing between revenue and yield
protection. However, the projected price for yield and revenue
protection may not always be the same because FCIC reserves the right
to set the projected price for yield protection to a price determined
by FCIC. FCIC also agrees the revisions will reduce program
vulnerabilities, resolve existing ambiguities, and increase the
accountability and responsibility of the producers. The regulation is
thoroughly reviewed to ensure the crop insurance program provides
producers with viable risk management tools and can be marketed
successfully.
Comment: A commenter stated the Federal crop insurance program is
unique among Federal programs. Insurance providers must market and sell
the products authorized under the program and farmers and ranchers, in
turn, must make significant financial investment in risk management
products most appropriate to their operations. Accordingly, the
commenter believed it is inappropriate to review the proposed rule in
the same context as an entitlement program, which is made available by
the government and received by beneficiaries free of cost and usually
without choices. Rather, the proposed rule should be reviewed to ensure
risk management products offered under the program can be effectively
marketed and sold by insurance providers in such a manner that
consumers can make prudent risk management investments based on
informed decisions.
Response: FCIC agrees that the Federal crop insurance program
should not be reviewed strictly as an entitlement program. Unlike
entitlement programs that are offered free of cost, most producers
invest their premium dollars in the purchase of insurance. However,
those premiums are also heavily subsidized by taxpayer dollars so FCIC
has a heightened duty to protect program integrity and ensure the
program operates in an actuarially sound manner and the review has been
conducted accordingly.
Comment: A commenter suggested the proposed regulation did not
simplify the regulations and they saw no benefit to the public. Another
commenter stated the proposed rule is a serious and complex proposal
that should be fully explained to companies, agents, and producers in
order for FCIC to get the maximum benefit from their input. The
commenter stated they have some concerns and reservations about the
effectiveness of the proposed rule in achieving its stated objectives
of providing greater simplification. The proposed rule presents new
definitions and new changes that could make things even more
complicated and difficult to learn than the present system. For
instance, for just corn and soybean producers, there are 51 changes and
32 new definitions. While they applaud FCIC's intent to simplify what
is nearly universally identified as an overly complex and burdensome
program, they believe the agency could use this major restructuring as
an opportunity to truly simplify the program for producers and agents
alike and not merely shift 5 complicated and complex coverages (APH,
RA, CRC, IP, and IIP) into one massively complicated and complex Basic
Provisions and the applicable Crop Provisions.
Response: Previously, CRC, RA, IP and IIP all provided revenue
coverage with different pricing mechanisms, varying unit structure,
different underwriting rules, different rating structures, and
different availability of crops and options. This meant that agents and
producers were required to examine the coverages and terms and
conditions, for each separate plan of insurance every year to determine
which plan of insurance offered the best risk management fit for the
producer. In this final rule, most of the differences between these
plans of insurance have been eliminated so that now there is only one
pricing mechanism for revenue coverage, the unit structures have been
standardized, the options have been standardized, and the rating
methodology has been standardized. This effort alone will eliminate
considerable complexity within the program. As a result, except for the
addition of revenue coverage, the policy terms remained substantially
the same because all the unit structures, options, etc., were already
available under the APH Basic Provisions. This should also simplify the
training of agents.
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Further, the changes made to incorporate the revenue plans of
insurance into the APH Basic Provisions and Crop Provisions should not
be confused with the other changes made to enhance coverage and protect
program integrity. While these changes will also have to be explained
to producers and agents, such changes were necessary regardless of
whether the revenue coverage was added to the APH Basic Provisions and
Crop Provisions. FCIC believes the additions and revisions in this
regulation simplify and improve the crop insurance program.
Comment: Several commenters urged FCIC to hold a public hearing or
a series of public hearings on the proposed rule and extend the public
comment period. They stated public hearings will further enable the
producer, agent, and insurance groups to fully understand the scope and
potential impact the proposed changes will have on the entire Federal
crop insurance program so they can offer additional comments to FCIC. A
commenter stated it is vital the agency provide adequate time for both
producers and private insurance providers to fully educate themselves
about the proposed changes. A commenter stated the comment period
established from July 14, 2006 to September 12, 2006 has come at the
busiest time for most farmers in the Pacific Northwest because it is
harvest season, then it is time to begin the fall seeding of winter
wheat. A few commenters believed it would improve the opportunity for
many more farmers to respond if the comment period could be extended
another 50-60 days. Growers across the country rely heavily on the
Federal crop insurance system and allowing them the opportunity to
provide direct input is vital to improving the effectiveness of this
program.
Response: FCIC determined that public hearings were not
appropriate. To provide meaningful participation of all program
participants, numerous meetings would have been required. Further, the
scheduling, implementation, and efforts to record and collect comments
would have required massive resources and could have delayed the
implementation of this rule by years. Instead of public hearings, FCIC
elected to reopen the comment period and on September 26, 2006, a
notice of reopening and extension of the comment period was published
in the Federal Register. Written comments and opinions on the proposed
rule were accepted until close of business on October 26, 2006.
Comment: A few commenters applauded FCIC for moving forward with
consultation of producer and insurance groups. They thanked FCIC for
engaging in this comprehensive review of the impact the proposed rule
could have on all participants in the crop insurance program.
Response: FCIC did not consult with producer groups or insurance
groups during the comment period. FCIC held requested informational
meetings where it provided explanations regarding the proposed
provisions. FCIC did not solicit or accept comments during these
informational meetings. FCIC hopes such meetings were helpful in
explaining the proposed changes so that audience members could provide
meaningful written comments through the rulemaking process.
Comment: A few commenters stated one issue that is not fully
explained, but that is of critical importance, is the impact these
changes may have on premium rates. If a significant level of re-rating
becomes necessary, it could have significant impacts on producers. A
commenter noted that, while not part of the proposed rule, the rating
of Group Risk Protection (GRP) and Group Risk Income Protection (GRIP)
policies nevertheless affect policies included in the proposed rule.
The commenter believed any rating method changes should be fully vetted
with insurance providers to ensure a complete understanding of the
proposed rule and its impact on farmers and ranchers. The commenter
strongly urged FCIC to clearly disclose and discuss rating methods and
impacts without which a full appreciation of the rule cannot be known
by companies, agents, or the producers they serve. By providing
additional information on this issue and others that will arise, FCIC
will assure the shift to the revised Basic Provisions and applicable
Crop Provisions is more transparent and will provide adequate
opportunity for producers to have additional input on issues that might
negatively impact them.
Response: Under this rule, one revenue protection approach will
replace the current multiple approaches contained in the RA, CRC, IP,
and IIP plans of insurance. The current revenue plans each have a
different rating methodology. Therefore, the change to a single rating
methodology for all revenue coverage under the revised Basic Provisions
and applicable Crop Provisions will make the premium rates less
variable. As with every crop insurance policy, the risk under such
policy must be assessed and premium must be calculated to cover that
risk. This will also occur under this final rule. A preliminary review
shows that the amount of premium will change by less than five percent
in the majority of states/crops as a result of the combination of these
plans of insurance.
The actual premium rating methodology is a complex process that
could not be adequately explained in a proposed rule. To the extent
that persons are interested in FCIC's ratemaking process, information
is available and can be requested from FCIC. FCIC does not know the
basis of the commenter's assertion that the premium rating assessment
under GRP and GRIP will affect the premium under this rule. GRP and
GRIP offer a significantly different type of coverage than is provided
under this rule (area versus individual coverage).
Comment: A commenter stated modern producers need individualized
risk management and individually rated policy premiums. County data,
individual production history, and loss ratio data is available. The
commenter stated that low loss ratios and stable yields get the
discounts and high loss ratios and variable yields pay the higher price
and that regardless of the cause for excessive loss (bad farming,
fraud, or bad luck), those policies should pay a recapture premium. The
commenter stated that like T-yields, high-risk areas would only need to
be identified until the actual data was sufficient to take over. The
actual data should drive the premium. The commenter asserted that
producers also need a guarantee based on the ability to produce a crop
in an average year, which is not the same as an average yield. Other
lines of insurance rely on comparable, not simple, averages. The
commenter stated the combo process may also be applied to GRP and GRIP.
The commenter stated that from his desire to provide the best
individual coverage and premium possible, he saw little reason to waste
time on group policies. The commenter stated that the term ``group'' is
misleading (should be called ``County Risk Plan''), because these plans
do not identify loss nor indemnify for loss and, therefore, the word
``insurance'' should never be allowed when referencing these plans. The
commenter provided additional details regarding the problems of product
misrepresentation brought on by these plans. The commenter stated
rather than combining county plans, he would just as soon scrap them. A
lottery (with house odds) is not a proper substitute for insurance.
Response: Premium rates use actual data and reflect the producer's
loss history because the lower the yield average, the higher the
premium rate. If the commenter is suggesting that
[[Page 15782]]
premium rates be developed for each individual producer, such an effort
would be impossible given the number of insureds and the variability in
information at the individual level.
With respect to GRP and GRIP, since FCIC did not propose any
changes to GRP or GRIP, no changes can be made in the final rule.
Comment: A commenter was concerned about the implementation
timeline of the new policy. The commenter stated insurance providers
will need to receive the final version of the revised Basic Provisions
and applicable Crop Provisions in adequate time to make the necessary
system changes, rewrite the agent and adjuster training materials and
procedure manuals, and then train agents, adjusters, underwriters, etc.
The commenter asked if there is a timeline available that FCIC plans to
follow to provide insurance providers adequate time to make the
required changes and provide training for implementing the new policy.
The commenter also asked what information FCIC will provide insurance
providers to assist with implementation.
Response: At this time, FCIC expects the final rule to be
implemented for the 2011 crop year. To accomplish this, FCIC will work
diligently to get the final rule published in the Federal Register in
time for insurance providers to make system changes, prepare procedural
documents, and train underwriters, loss adjusters and agents.
Comment: A commenter recommended creating an insurance policy like
hail insurance so the producer could insure each crop by field for a
certain amount of dollars an acre.
Response: The commenter is proposing a substantive change that
would require considerable research, development, and notice and
comment rulemaking. Further, FCIC does not currently have plans to
conduct a feasibility study for such a policy. However, the commenter
can develop such a policy and submit it under section 508(h) of the
Act.
Comment: A commenter stated Congress passed the Agricultural Risk
Protection Act of 2000 (ARPA) with a clear intent of expanding crop
insurance availability, improving coverage levels, and encouraging
planting flexibility. The commenter urged FCIC to carefully consider
and assure changes made through this rule are not contradictory to the
intent of ARPA and/or diminish producer program participation.
Response: Before provisions are proposed, changes are reviewed with
consideration given to potential impacts on participation. FCIC does
not believe that any of the final changes will adversely affect program
participation, available coverage levels, or planting flexibility. The
elimination of program complexity may encourage more producers to
participate.
Comment: A commenter stated acreage reporting dates for FCIC and
Farm Service Agency (FSA) should be the same. The commenter believes
different acreage reporting dates pose a problem for insurance
providers, agents, and producers and the matter should be revisited to
ensure the dates are the same (or at least closer) and appropriate. The
commenter would support making the FSA date closer to or the same as
the FCIC date.
Response: Acreage reporting dates are listed in the Special
Provisions, not in the regulations. Further, no changes have been
proposed regarding the acreage reporting dates. Therefore, no change
can be made as a result of this comment. However, FSA and FCIC are
already reviewing acreage reporting dates with the goal of making them
the same when practical.
Comment: A commenter stated FCIC is only meeting the needs of a
small segment of the economy, rather than meeting the needs of the
American citizens, as a whole. The commenter stated crop insurance is
being paid out when there is no damage to the crop. The agency does not
physically go out and check what is reported to them by agribusiness;
it just issues checks from the U.S. Treasury. This kind of payout is
completely unacceptable. The commenter also stated the agency needs
regular and close auditing to ascertain only actual losses are paid.
Response: FCIC takes its program oversight responsibilities very
seriously. However, given the large magnitude of the crop insurance
program and FCIC's limited resources, it is impossible for it to review
all or even a large portion of the claims. FCIC has no choice but to
rely on the activities and audits of insurance providers to ensure that
claims are properly paid. Further, the Risk Management Agency (RMA)
Compliance Division conducts routine audits and reviews of the
insurance providers, taking corrective actions as appropriate. FSA also
assists this effort by monitoring producers whose losses have been
outside the norm and notifying RMA when there is suspected fraud,
waste, or abuse.
Comment: A commenter questioned whether the premium discount for
good experience will be applicable to the revised Basic Provisions and
applicable Crop Provisions. Under CRC, IP, and RA, the good experience
discount was suspended but retained by the insurance provider in the
event the insured would change back to APH coverage, at which time the
experience would be reinstated and applicable. The commenter asks
whether the good experience discount will now apply to both yield and
revenue coverage since the new combo product offers both yield and
revenue coverage.
Response: Many years ago, FCIC offered a good experience discount
for producers. This discount was eliminated from the 1985 through 1998
Crop Provisions as they were revised. However, FCIC allowed those
producers who had previously qualified for the discount under those old
policies to continue to receive such discount as long as they continued
to qualify. There are very few producers who continue to qualify for
such discounts and they can only qualify for the discount under the
same terms and conditions that were in effect for the last year such
discount was available for the crop. Although the good experience
discount is only available to crops that were insurable at the time the
discount was offered, the good experience discount did not apply to the
revenue plans of insurance. Therefore, the discount will be available
to previously insured crops that now have yield protection, but will
not be applicable to revenue protection.
Comment: A commenter stated it was their understanding once the
proposed rule is finalized, there are plans to combine the GRIP and GRP
plans of insurance into an area plan revenue and yield product. There
are some significant changes being recommended in this proposed rule
that will likely carry over to the area plan products (i.e., removal of
the misreporting information factor). It would be advantageous to
everyone who works with these programs that the implementation
timeframes be as close as possible so that multiple systems and
different ways of handling things will be minimized.
Response: FCIC has not proposed any revisions to the GRIP and GRP
plans of insurance in this rule. Therefore, no changes have been made.
However, FCIC hopes to propose changes to the GRIP and GRP plans of
insurance as soon as practicable.
Comment: A commenter stated there appears to be a geographic
discrimination favoring southern U.S. farmers that should be addressed,
if not in the hearings for the proposed rule, at least by RMA/USDA,
perhaps via administrative directive. Southern farmers have a distinct
advantage in terms of evaluating the growing season prior to
determining whether to
[[Page 15783]]
purchase crop insurance. For instance, the closer to planting time a
decision can be made to buy crop insurance, the better off the farmer
is in making a sound decision. In Wisconsin, the sales closing date is
March 15 for corn and soybeans. This date was previously April 1 and
was changed to March 15 some time ago with no justifiable reason
provided. It is also 27 days prior to when corn can first be planted.
The further south you go, the closer those days become (Illinois is 22
days, Kentucky is 16 days, Mississippi is 11 days, Alabama is 1 day).
Obviously, this is very discriminatory and should be corrected by FCIC.
Response: There are locations where the number of days between the
sales closing date and planting varies. However, section 508(f)(2)(B)
of the Act limits FCIC's ability to change sales closing dates because
it requires sales closing dates to be established 30 days earlier than
the sales closing dates in effect for the 1994 crop year. In addition,
section 508(f)(2)(C) of the Act specifies that if the revised sales
closing date would be earlier than January 31, the spring sales closing
dates will be January 31. This means that there are locations where
FCIC cannot change the sales closing dates to make the number of days
between sales closing and planting more consistent. No change has been
made.
Comment: A few commenters stated they disagree with the proposed
elimination of revenue protection to the producers of sunflowers,
canola, rapeseed, and corn silage. If market and/or agronomic decisions
suggest producers should produce these crops, Federal crop insurance
should not create a disincentive. They urged FCIC to provide revenue
protection for these crops in the final rule.
Response: There was never an intent to provide a disincentive to
produce a particular crop. However, FCIC has an obligation to ensure
that the revenue prices reflect the market price as accurately as
possible. To determine the revenue price, these products rely on
commodity exchange prices for the crop or methodology based on a
commodity exchange price for another crop that would produce a price
that closely reflects the market price. There is no commodity exchange
price for the crop or methodology based on a commodity exchange price
for another crop that has proven to reflect the price of corn silage.
Therefore, there is no basis upon which to offer protection against a
change in price for corn silage. With respect to canola, there is a
commodity exchange price for canola so coverage against a change in
price will still be offered. With respect to rapeseed, there is no
commodity exchange price available for rapeseed and the methodology
previously used based on the canola commodity exchange price has proven
to no longer be adequate in reflecting the market price for rapeseed.
Additionally, commenters have provided suggested methodologies to be
used to reflect the market price for sunflowers and FCIC has studied
these methodologies. FCIC has determined that there is a sunflower
pricing methodology that can reflect the market price for sunflowers so
protection against a change in price can be offered. Even though
protection against a change in price is not available for rapeseed and
corn silage, they may be insured under revenue protection in order to
preserve the existing whole-farm units currently available under RA.
Comment: A commenter stated they are not sure how the Texas citrus
tree and Texas citrus fruit policies are classified (i.e., yield policy
or revenue policy) and, therefore, are concerned how these policies may
be affected by the amended Common Crop Insurance Policy even though
these policies may not be the primary target for the changes.
Response: The revenue protection discussed in the proposed rule
will only be applicable to the crops that previously had CRC, IP, IIP,
or RA coverage. Texas citrus trees and Texas citrus fruit were not
included in any of these plans of insurance. Therefore, Texas citrus
trees and Texas citrus fruit will not be affected by the revenue
protection or yield protection provisions. However, Texas citrus trees
and Texas citrus fruit will be affected by other applicable changes in
the Common Crop Insurance Policy Basic Provisions.
Comment: A commenter cautioned that the Crop Insurance Handbook and
the Loss Adjustment Manual will interpret the new policy language and
write them into rules to which Standard Reinsurance Agreement holders
have to adhere. The commenter stated it is vital the proposed policy
enhancements for simplification, integrity and efficiency are carried
over into both the Crop Insurance Handbook and Loss Adjustment Manual.
The commenter stated these improvements cannot be lost in the
interpretation.
Response: One purpose of the changes is to simplify the program.
This should be reflected in the reduction in the number of underwriting
rules needed to administer the program. The appropriate procedural
documents will be revised as necessary to reflect the changes made in
the policy provisions.
Comment: A commenter recommended extending the sales closing date
from March 15th to March 30th to give them more time to sell the
product with accurate prices/rates.
Response: FCIC cannot extend the sales closing date to March 30.
Section 508(f)(2) of the Act requires sales closing dates to be
established 30 days earlier than the applicable sales closing date for
the 1994 crop year. The current March 15 sales closing date was
previously April 15 in 1994. Therefore, no change can be made.
Comment: A few commenters stated they greatly appreciated the
agency's extension of the comment period for the proposed rule to allow
more time to study the provisions.
Response: The extended comment period served its purpose in
providing the public additional time to study the provisions and offer
comments.
Comment: A few commenters stated they believe the issues are
significant enough to warrant an interim final rule rather than a final
rule.
Response: Even though the issues may be significant, they did not
require such major changes to the proposed rule to warrant the
necessity for an interim final rule. The public was afforded additional
time to comment and FCIC has considered all of the comments and made
appropriate revisions in accordance with the recommendations.
As stated more fully below, there were many comments recommending
changes to provisions where no changes were proposed. Since changes
were not proposed, the public was not afforded an opportunity to
comment. FCIC considered addressing those comments that may not be
substantive in nature but this was too subjective because there may be
disagreement with respect to what is considered substantive. Therefore,
as a general rule, these recommended changes were not considered unless
they were addressing conflicting provisions or program integrity
issues.
The Application and Policy
Comment: A few commenters stated it appears coverage equivalent to
the producer's current coverage will be provided to the producer
without having to get a new signature from the producer, when the
current programs are rolled into the Basic Provisions and applicable
Crop Provisions. The commenters stated that, though this process will
not be without pitfalls, not requiring a cancel and rewrite of all
revenue policies should help provide a seamless transition to the new
provisions. The commenters were supportive of this proposal as it will
[[Page 15784]]
help in administering the conversion of all carryover policyholders to
the Basic Provisions and applicable Crop Provisions. Another commenter
stated they were interested in the details underlying this process (for
example, the revisions to plans of insurance, insurance choices, and
premium calculations).
Response: Given the number of policies affected by this rule, it
was impractical to require cancellation and rewriting of all of these
policies. It will be imperative that agents explain the affects of
these changes to the policyholder and assist them in their selection of
the most appropriate risk management tool. However, without the
additional paperwork burden, agents should have more time to fulfill
these responsibilities. FCIC will release the details of the transition
process and any other necessary information in time to allow insurance
providers to take appropriate actions.
Section 1 Definitions
Comment: A commenter stated the definition of ``acreage reporting
date'' was not proposed to be revised but it would read better by
either putting the phrase ``contained in the Special Provisions or as
provided in section 6'' in parentheses or rearranging as ``The date by
which you are required to submit your acreage report, and which is
contained * * *''
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A few commenters suggested adding something in the
definition of ``actual yield'' about the possibility of actual yields
being reduced (or adjusted) instead of in the definition of ``average
yield'' (and elsewhere as well). The commenters suggested two
possibilities for consideration: (1) Add language to the end of the
first sentence so it reads something like ``The yield per acre for a
crop year calculated from the production records or claims for
indemnities and reduced [or ``adjusted'' if this refers to anything
besides the maximum yield edits] if required * * *''; and (2) Add a
sentence at the end such as ``* * * Actual yields may be reduced as
required * * *''
Response: The producer's actual yield is and should be the yield
per acre for a crop year calculated from the production records or a
claim for indemnity and determined by dividing the producer's total
production by planted acres. The producer's yield would not be an
actual yield if it were adjusted. No change has been made.
Comment: A few commenters recommended FCIC consider whether the
term and/or definition of ``actuarial documents'' should be revised
since the intended implementation of eWA will result in actuarial
``information'' (rather than ``documents'') being made available on the
RMA Web site. A commenter also questioned whether the ``actuarial
documents'' include the Special Provisions, or just everything else.
Response: FCIC believes the defined term of ``actuarial documents''
will still be appropriate with the implementation of a new information
technology system because even though the actuarial information will be
filed electronically on RMA's Web site, the information still can be
printed out as a hard-copy document. The definition of ``actuarial
documents'' contains information that is found in the Special
Provisions. However, because the Special Provisions contain the terms
and conditions of insurance, it is provided to the insured with the
Common Crop Insurance Policy Basic Provisions and Crop Provisions. No
change has been made.
Comment: A commenter stated the existing, unrevised definition of
``administrative fee'' reads as though one fee applies to both levels
of coverage, or possibly even that one fee serves to provide both
catastrophic risk protection (CAT) and buy-up coverage on the same
crop/county. They suggested revising this definition to read: ``The
applicable amount you must pay for either catastrophic risk protection
or additional coverage * * *'' At a minimum, ``and'' should be changed
to ``or.''
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: Several comments were received regarding the definition of
``agricultural experts.'' A commenter stated FCIC defines
``agricultural experts'' to include ``other persons approved by FCIC'',
however, the Basic Provisions do not indicate how an insurance provider
may learn the identity of such experts. The commenter believed FCIC has
an obligation to inform the public of the persons who qualify as
experts and should amend the definition of ``agricultural experts'' to
state: ``A list of the agricultural experts approved by FCIC is
published on RMA's Website.'' A commenter requested that FCIC identify
guidelines they will use to determine who is an approved agricultural
expert and the process by which an individual will become an FCIC
approved agricultural expert. The commenter stated guidelines do not
belong within the Basic Provisions, but insurance providers, agents,
and insureds have a right to know the standards and guidelines used to
determine who an agricultural expert is and the process by which they
are determined. A commenter disagreed with using the Cooperative
Extension System in the definition of ``agricultural experts.'' The
commenter also suggested the RMA Regional Offices (ROs) put together a
list of agricultural experts that can be used as a resource. The
commenter stated that, according to the recent Good Farming Practices
Bulletin, there is a need in the field for unbiased and experienced
resources. A few commenters stated they believe Certified Crop Advisers
(CCAs) should also be included in the definition of ``agricultural
experts'' given their required training and expertise and their
widespread use in the field. A commenter stated the definition of
``agricultural experts'' should be expanded to read as follows:
``Persons who are employed by the Cooperative Extension System or
agricultural departments at universities; persons approved by FCIC,
whose research or occupation is related to the specific crop or
practice for which such expertise is sought; and other persons, whether
or not approved by FCIC, whose research or occupation is related to the
specific crop or practice for which such expertise is sought and whose
experience is equivalent to persons approved by FCIC.'' The proposed
revision recognizes there may be persons with recognized expertise in
addition to employees of the Cooperative Extension System and
agricultural departments in universities, as well as any persons
approved by FCIC. The proposed revision also is desirable because it
gives insurance providers the option of consulting with and utilizing
the skills of persons in addition to those set forth in the definition
as written. When time is critical, having this option would be
important.
Response: FCIC has developed procedures that can be used to
determine who qualifies as agricultural experts in Manager's Bulletin
MGR-05-010. Insurance providers and producers can use these procedures
in selecting their experts. However, it is not practical to list all
FCIC approved ``agricultural experts'' on RMA's Web site or for the ROs
to maintain such a
[[Page 15785]]
listing because it would be impossible to list the name of every
potential agricultural expert and it would be impossible to keep it up-
to-date. In MGR-05-010, agricultural experts are not listed by name but
by categories of people who are currently approved by FCIC to be
agricultural experts. Any person who falls within the category is
considered approved by FCIC. CCAs are included as a category of experts
approved by FCIC. There is no basis to exclude Cooperative Extension
System from categories of approved agricultural experts. These persons
have experience in the production of the crop in the area. The phrase
``whether or not approved by FCIC'' should not be included in the
definition. There must be a clear standard set for who qualifies as an
agricultural expert and FCIC has established that through MGR-05-010.
If insurance providers or producers know of other persons that should
qualify as agricultural experts but they are not included in one of the
listed categories, they may submit the person's name to FCIC for
approval. If approved, FCIC will include the category of such person in
the Bulletin. No change has been made.
Comment: A commenter stated the third sentence in the definition of
``application'' is problematic. As worded, it suggests that any time a
policy is canceled or terminated, ``* * * a new application must be
filed for the crop.'' Certainly, this is true if the producer is
willing and eligible to reinstate the canceled/terminated coverage, but
not if the application would be unacceptable because the entity is
ineligible.
Response: New applications must always be made after a policy has
been canceled or terminated. The insurance provider should not accept
the application if the applicant is ineligible. No change has been
made.
Comment: A commenter stated the definition of ``approved yield'' is
not revised in the proposed rule but requested FCIC to see their
comments to the definitions of ``actual yield'' and ``average yield''
regarding the term ``actual yield.''
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A few comments were received regarding the definition of
``assignment of indemnity.'' A commenter questioned the meaning of the
term ``legitimate'' and whether FCIC intends on setting forth the
standards by which an insurance provider is to determine whether an
assignment of indemnity is legitimate. The commenter stated it is
noteworthy that section 29, entitled ``Assignment of Indemnity,'' does
not employ the term ``legitimate.'' The commenter stated FCIC must
provide additional guidance in this regard. Another commenter opposed
FCIC's proposal that would restrict a producer's ability to assign an
indemnity to a third party other than ``legitimate creditors.'' The
commenter stated their opposition is based on the fact that some
companies have worked to create programs that directly incorporate crop
insurance and marketing plans into one comprehensive program. For
example, their company has worked with their grain division to create a
cash grain contract that guarantees a producer a dollar per acre
amount. It is a ``production contract'' as opposed to a typical
``bushel'' contract. The producer can sell the total production to the
elevator at a guaranteed minimum (dollar/acre) and maintain the upside
on price. This instrument is very sophisticated. It involves over-the-
counter options, the assignment of indemnity to the elevator, and a
cash delivery obligation of the producer. FCIC's educational efforts
encourage these sorts of integrated programs. The private marketplace
has responded by creating them. The commenter stated they will not work
without an assignment of indemnity and they encourage FCIC to
reconsider this change.
Response: FCIC agrees it may be difficult for an insurance provider
to determine if a creditor is legitimate. Therefore, FCIC has removed
the word ``legitimate'' and instead has specified the producer may
assign his or her right to an indemnity for the crop year only to
creditors or other persons to whom the producer has a financial debt or
other pecuniary obligation. The insurance provider will have the
ability to request that the producer show proof of the debt or
pecuniary obligation before accepting the assignment of indemnity. FCIC
also agrees assignments used in pricing/delivery agreements should be
allowed. Such agreements would be considered ``pecuniary obligations.''
Comment: A few comments were received regarding the definition of
``average yield.'' A commenter stated the definition is confusing and
needs to be clarified. The commenter noted the definition states ``* *
* including actual yields reduced * * *'', and later states ``* * *
prior to any yield adjustments.'' Another commenter suggested instead
of adding the phrase ``* * * (including actual yields reduced in
accordance with the policy) * * *'' to ``clarify the reference to
actual yields'', they suggested revising the definition of ``actual
yield.'' Otherwise, the commenter believes it would be necessary to add
a similar phrase in the definition of ``approved yield'' and in other
references to actual yields throughout the policy provisions. A
commenter suggested the remainder of the phrase proposed in the
``average yield'' definition, ``* * * in accordance with the policy,''
needs to be reconsidered. The commenter stated the maximum yield
procedure does not appear to be addressed in the Basic Provisions. The
commenter added since the Basic Provisions are part of the ``policy''
any reference should be to the specific provisions, or to the procedure
(which might be preferable instead of including detailed procedures in
the policy that cannot easily be revised if and as needed).
Response: FCIC agrees the definition may be confusing and has
revised it by removing references to ``adjusted yields'' (except
adjusted transitional yields) and ``actual yields adjusted in
accordance with the policy.'' The revised definition includes actual
yields, assigned yields in accordance with redesignated sections
3(f)(1) (failure to submit a production report), 3(h)(1) (excessive
yields) and 3(i) (second crop without double cropping records for
prevented planting), and adjusted and unadjusted transitional yields.
The definition of ``actual yield'' should not be revised because it
refers to the actual production produced in the unit. As revised, these
actual yields will become a component of the ``average yield.''
Comment: A few comments were received regarding the definition of
``catastrophic risk protection.'' A commenter recommended the first
sentence in the definition that states ``The minimum level of coverage
offered by FCIC that is required before you may qualify for certain
other USDA program benefits'' be verified with the Farm Service Agency
(FSA). The commenter stated he has received information from FSA
stating the minimum level of coverage required for linkage is one level
above CAT. A commenter stated catastrophic risk protection is not
available for revenue protection under the definition of ``catastrophic
risk protection'', however, under section 523(c)(2)(B) of the Crop
Insurance Act (Act) it states, ``Revenue insurance under this
subsection shall offer at least a minimum level of coverage that is an
alternative to catastrophic crop insurance.'' To date, the commenter is
unaware of any product offered by FCIC,
[[Page 15786]]
which addresses this provision and the commenter suggested FCIC
consider this aspect in the Basic Provisions. A commenter stated they
respectfully oppose the proposed regulations for the simple reason the
proposed pricing structure creates a disincentive for producers to
cover their risks by purchasing the least amount of crop insurance
required to accept Federal disaster assistance. A commenter suggested
that levels of crop insurance below 65 percent be eliminated from the
policy. The commenter stated CAT policies in particular require the
same amount of paperwork and have no real value and many producers with
lower levels would buy up. A few commenters stated the proposed rule
allows CAT coverage under yield protection. They requested CAT coverage
be eliminated, or, at the least, be subject to the same actuarial
parameters for calculation of premiums to which other coverage levels
are held. A commenter requested a paper drafted by another person be
submitted into the record and thoroughly analyzed prior to the adoption
of the final rule pertaining to the Basic Provisions. A commenter asked
why there is no revenue coverage available on catastrophic risk
protection policies. Many producers need the revenue coverage on high
risk ground, where premiums are too high to be insured on their other
policy, which may have revenue protection. The commenter asked if there
has been any thought given to allowing a producer to have revenue
coverage on a catastrophic risk policy if the companion policy is
revenue protection.
Response: FCIC agrees the phrase ``that is required before you may
qualify for certain other USDA program benefits'' is no longer
appropriate. Many current FSA programs do not require linkage. Some
past disaster programs have required crop insurance coverage, however,
each disaster program stipulates its own criteria and catastrophic risk
protection may not be the level of coverage required. The definition
has been revised accordingly. Section 523 of the Act contains
provisions applicable only to pilot programs and FCIC implemented this
section when it offered the IP policy. However, the statutory mandate
in section 523(c) of the Act to require CAT was only for the 1997
through 2001 crop year. When combining all the revenue products in this
rule, FCIC declined to include revenue coverage in CAT policies because
it would provide a disincentive for producers to purchase additional
levels of coverage. CAT was only intended to be a minimal coverage risk
management tool and not compete with the additional coverage policies.
Therefore, as stated in the background section of the proposed rule,
the definition of ``catastrophic risk protection'' is revised to
preclude producers who elect revenue protection from obtaining CAT
coverage because revenue protection is considered an option and CAT
policies are not eligible for optional coverage. Since the paper
referenced by the commenter was not submitted to FCIC as a comment to
this rule, FCIC cannot consider the individual comments or
recommendations contained in the paper in finalizing this regulation.
FCIC does not have the authority to eliminate CAT coverage. Such
coverage is mandated by section 508(b) of the Act and cannot be
eliminated without a change in the law. Questions remain with respect
to whether coverage levels less than 65 percent can be eliminated.
However, since FCIC has not proposed or sought comments on such a
change, it cannot be considered in this rule.
Comment: A commenter stated they recommend additional clarification
for the definition of ``claim for indemnity'' because it is often
confused with a notice of loss. The commenter stated additional
language might include ``Additionally, you must provide any documents
required by the policy to determine the amount of indemnity, including
but not limited to, harvested production records, crop input records,
documents needed for verification of reported information, etc., as
stated in section 14.'' Alternatively, this could be included in
section 14 rather than the definition.
Response: Notice of loss is simply a written notice, or an oral
notice followed up with a written notice, that damage has occurred or
production has been reduced. A claim for indemnity is a document
executed by the producer and loss adjuster that contains the
information necessary to pay the indemnity as specified in the
applicable procedures. While the claim for indemnity must be supported
by the production records, etc., as required by section 14, such
records are not generally transmitted to the insurance provider. FCIC
will clarify that the claim for indemnity is the document that contains
the information necessary to pay the claim.
Comment: A comment was received regarding the definition of
``Commodity Exchange Price Provisions (CEPP).'' A commenter requested
FCIC explore the possibility of determining and releasing the projected
price 20 to 30 days prior to the end of the sales period versus the
current 15 days (approximate). The commenter stated they believe the
current methodology to determine the price is good, but with the
current projected price release date; there is a significant time
crunch to properly service insureds. They believe the change in release
dates will not materially change the projected price offered.
Response: The definition of ``Commodity Exchange Price Provisions
(CEPP)'' does not contain any discovery period dates or commodity
exchanges. The dates, commodity exchanges and other relevant
information are located in the actual CEPP. However, FCIC has reviewed
all comments related to the CEPP and will consider changes to provide
additional time between the price release date and the sales closing
date if reliable prices can be established and it is in the best
interests of producers.
Comment: A few comments were received regarding the definition of
``common land unit.'' A commenter recommended adding the phrase ``as
determined by FSA'' to the end of the definition of ``common land
unit'' because it helps to clarify the common land unit is determined
by FSA and is not a determination made by the insurance provider. A few
commenters questioned whether the term ``common land unit'' should be
defined and used in the Basic Provisions at this point before the
implementation issues between FCIC and FSA have been resolved. The
commenters suggested keeping the definition rather generic, such as
``The smallest unit of land as defined by FSA'' if it is added. A
commenter stated it appears the definition would define corn and
soybean acreage in the same field on the same farm as being different
common land units. The commenter questioned if that was the intent. The
commenter also questioned if this definition matches FSA's definition
of common land unit. A commenter strongly opposed use of a ``common
land unit'' without a meaningful definition that specifies the
insurance unit definition of what it constitutes for a unit at the farm
level. The commenter stated that, unless the summary of protection
reflects the insurance guarantee for each unit, the producer does not
have a basis for determining whether crop damage constitutes a covered
loss. Furthermore, without knowing the insurance guarantee by unit, the
producer cannot fulfill the notice of damage reporting requirements.
Therefore, when USDA decides to allow producers to file a common
acreage report for both FCIC and FSA programs, the commenter strongly
recommended that the common
[[Page 15787]]
units for each agency become FSA tract numbers. A commenter stated they
are concerned about the definition of ``common land unit'' since citrus
in south Texas has a rather unique legal description. The commenter
stated he hopes the new definition does not place citrus growers at a
disadvantage.
Response: There are several issues that need to be resolved before
the definition of ``common land unit'' is included in the policy
provisions. Therefore, the proposed definition will not be retained in
the final rule. However, it is possible that common land unit numbers
may be used by FSA and provided to producers. If this occurs, such
numbers may be utilized for the purposes of crop insurance. Therefore,
FCIC has added a reference to common land unit numbers in section 6
with respect to the reporting of acreage but made it clear that such
information need only be reported if a common land unit number has been
provided to the producer by FSA and it is required to be reported by
the acreage report form.
Comment: A commenter questioned whether the definition of
``conventional farming practice'' needed both phrases ``* * * for
producing an agricultural commodity * * *'' and ``* * * that is
necessary to produce the crop * * *'' The commenter was concerned that
there were so many separate phrases in this sentence as it is. The
commenter questioned if a producer really has to ``* * * conserve or
enhance natural resources and the environment * * *'' in order for it
to be considered a conventional farming practice.
Response: There is no need to include the provisions regarding to
``* * * conserve or enhance natural resources and the environment * *
*'' because this language is contained in the definition of
``sustainable farming practices. '' Therefore, FCIC is revising the
definition to remove the language. FCIC is also removing the redundancy
regarding the production of the crop.
Comment: A few comments were received regarding the definition of
``Cooperative Extension System.'' A commenter supported the proposed
definition and stated the issue of who should be considered
``agricultural experts'' has been a tricky one and adding this
definition would help to make it clearer. Another commenter stated the
definition of ``Cooperative Extension System'' refers to ``* * *
offices staffed by one or more agronomic experts * * *'' instead of the
defined term ``agricultural experts.'' The commenter stated if there is
a distinction, perhaps a definition of ``agronomic experts'' might be
needed as well.
Response: The references to ``Cooperative Extension System'' are
more accurate than ``Cooperative State Research, Education and
Extension Service (CSREES)'' because the agricultural experts may not
have been employees of CSREES but they worked in cooperation with
CSREES. Further, the term ``agricultural experts'' should be used
instead of ``agronomic experts'' to be consistent with other provisions
in the policy. Therefore, this change has been made in the final rule.
Comment: A few comments were received regarding the definition of
``delinquent debt.'' A few of the commenters suggested delinquent debt
be defined in the policy to alleviate the chance of misunderstanding
between the insurance provider and the insured on what constitutes a
delinquent debt. A commenter stated current procedures allow a
corporation not to pay the premium and then the substantial beneficial
interests (SBIs) of the corporation get insurance via an individual
policy. The commenter recommended the wording be changed to the
following: A delinquent debt for any policy will make you (as an
individual) or a person with a substantial beneficial interest in you,
ineligible to obtain crop insurance authorized under the Act for any
subsequent crop year and result in termination of all policies in
accordance with section 2(f)(2). A commenter stated there could be
misunderstandings of certain details that are included in the current
definition--whether administrative fees are included in a delinquent
debt, when it is considered delinquent (not postmarked versus not
received), etc. Some of this information should be retained in the
Basic Provisions, whether in this definition or in section 24 [Amounts
Due Us]. A few commenters stated FCIC has cited the definition
contained in 7 CFR part 400 subpart U, but they suggested it is
unlikely that many insureds have access to the Code of Federal
Regulations. The commenters stated simply referring to the regulations
does not seem very helpful to insureds, who need to know exactly what
is included in their contracts. A commenter stated the insurance
providers could put the CFR link on their Web sites to make it easier
for their policyholders to locate the referenced regulations; however,
if a difference of opinion results in a legal dispute, there might be
some question as to whether something not specified in the policy
itself would be considered something the policyholder should be
expected to know and understand.
Response: FCIC understands the commenters concerns of referring the
readers to another document for the definition of ``delinquent debt.''
However, it is not uncommon for the Basic Provisions to contain cross
references to other provisions in 7 CFR part 400 (e.g., definition of
``actual production history (APH)'' refers to 7 CFR part 400, subpart
G). Further, these regulations are part of the policy as it is defined.
Maintaining one definition of ``delinquent debt'' in 7 CFR part 400,
subpart U and a cross reference in the Basic Provisions will prevent
any conflicts between the Basic Provisions and subpart U. Further, the
definition of ``Code of Federal Regulations (CFR)'' specifies the Web
address where the applicable CFR can be found. In addition, FCIC has
added a link on RMA's Web site to 7 CFR part 400, so that interested
parties may have access. With respect to the issue of postmarked versus
received, these terms go to the core of the definition of ``delinquent
debt'' and will be addressed in subpart U. No change has been made in
response to these comments.
Comment: A commenter suggested it might be helpful in the
definition of ``disinterested third party'' to list the people who have
a familial relationship in a sequential order (generational or
relational, where spouse would come before children).
Response: FCIC has considered this change but it does not
substantially clarify the rule or improve readability. No change has
been made.
Comment: A comment was received regarding the definition of
``earliest planting date.'' The commenter stated the defined term is
``earliest'' but the Special Provisions refer to ``initial'' planting
date. The commenter asked why not choose one or the other to make it
consistent; then the definition could begin ``The date in the Special
Provisions * * *''.
Response: The Special Provisions now refer to the earliest planting
date so the provisions are consistent. No change has been made.
Comment: A commenter questioned whether the definition of
``economic significance'' should be updated to refer to ``agricultural
commodity'' instead of ``crop'' or if the definition is still needed.
Response: The definition of ``crop of economic significance'' is
not in the Basic Provisions in 7 CFR part 457. No change has been made.
Comment: A commenter agreed with moving most of the details from
the definition of ``enterprise unit'' to proposed section 34(a)(2)(i)
but stated a reference to that section would be helpful.
Response: FCIC has changed the provision accordingly.
[[Page 15788]]
Comment: A commenter questioned whether the term ``agricultural
commodity'' is necessary in the definition of ``first insured crop''
when the rest of the definition uses ``crop'' and makes it clear we are
talking about the first crop ``planted'' (so it is not going to be
livestock as ``first insured'' followed by soybeans as the ``second'').
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A commenter suggested the definition of ``good farming
practices'' is not proposed to be changed but contains a serious
deficiency. Specifically, the language in clause (1) relating to
practices ``generally recognized by agricultural experts for the area''
and in clause (2) relating to ``generally recognized by the organic
agricultural industry for the area'' should be modified. The deficiency
becomes apparent in those situations in which a processor is either the
exclusive or dominant determiner of farming practices in a geographic
area. Such processors generally specify the acceptable seed varieties
to plant, cultivation practices (including inputs necessary to produce
a crop), harvesting times and practices, and storage practices. The
commenter stated insurance providers are concerned that the definition,
as written, effectively delegates to processors the determination of
good farming practices with respect to the crop to be processed simply
by repetition of past practices. Under the definition, a processor's
routine practices simply become ``good'' because they have been
repeated yearly in the local area. In short, once a processor's
practices become routine, they become a self-fulfilling embodiment of
``good'' practices no matter how inadequate or outdated they are and no
matter how poorly implemented. The commenter stated this issue is an
important one, as it potentially affects several crops with high dollar
values such as sugar beets, green peas, hybrid seed corn, sweet corn,
processing beans, processing tomatoes, dry peas, and dry beans. The
problem identified in the existing definition can be solved by adding
the term ``conditions in the'' after the word ``for'' and preceding the
word ``area'' in each clause of the definition. Making this change
eliminates the ``closed circle'' approach of the existing definition.
The change would permit utilization of comparative practices involving
similar conditions from comparable geographic areas in determining
whether a good farming practice has been applied. Stated bluntly, the
change would eliminate the situation in which a processor's negligence
in failing to update its requirements based on new research, testing,
or experience, or its negligence in administering its requirements for
planting, growing, and harvesting a crop, divests an insurance
provider, and ultimately, FCIC from determining what constitutes a good
farming practice for loss adjustment purposes.
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A few comments were received regarding the definition of
``harvest price exclusion option.'' A commenter stated that allowing
producers to exclude the Harvest Price Option rather than having to
elect to receive it helps avoid the potential for producers not
receiving a benefit. They urged FCIC to maintain this provision in the
final rule. A commenter suggested language be added to indicate and
clarify the projected price will be used to determine the guarantee and
further clarify the harvest price will be used in the calculation of
revenue to count for indemnity purposes. A commenter stated FCIC
proposes that the revised policy provide coverage for both an increase
and decrease in price, unless the producer selects the harvest price
exclusion option. If a producer is allowed to eliminate coverage for
upward price protection, the commenter asks why they should not also be
allowed to eliminate downward price protection, if they so choose. This
may be a viable additional option for many producers given the downward
price protection already built into the current farm program provisions
such as the counter-cyclical payments and loan deficiency payments.
Many producers also cover their downward price risk through use of
hedges, hedge-to-arrive contracts, forward contracts, and options.
Response: It is not necessary to include the uses of the projected
price and harvest price in the definition of ``harvest price
exclusion'' because the definitions of ``harvest price'' and
``projected price'' and section 3 already specify how each price will
be used. Since the option to exclude downside price protection was not
proposed, no changes were required as a result of conforming
amendments, and the public was not provided an opportunity to comment
on the recommended change, the recommendation cannot be incorporated in
the final rule. All references to ``option'' have been removed because
it was redundant with the ability of the producer to elect to exclude
the upward price protection.
Comment: A few commenters suggested the definition of ``insurable
interest'' be expanded to further clarify and define the term as used
in the Crop Insurance Handbook (CIH) and Loss Adjustment Manual (LAM).
The commenters stated ``share'' is defined in the proposed rule as
``Your percentage of insurable interest in the insured crop * * *''
while ``insurable interest'' is defined as ``The value of your interest
in the crop * * *'' This suggests ``share'' is only the percentage
figure (not sure this is the intent), while the ``insurable interest''
is a value amount (not entirely clear on this either). The commenters
requested FCIC to consider whether it is intended for ``share'' to
apply to ``the insured crop'' while ``insurable interest'' applies to
``the crop'' (insured or not). The commenters stated the last sentence
of each definition addresses the maximum share or insurable interest
for loss purposes but they do not match exactly. For ``share,'' it
reads ``* * * your share will not exceed your share at the earlier of
the time of loss or the beginning of harvest.'' For ``insurable
interest,'' it reads ``* * * The maximum indemnity payable to you may
not exceed the indemnity due on your insurable interest at the time of
loss'' and does not include the reference to ``* * * or the beginning
of harvest.'' If both definitions are kept, one of these sentences
probably should be deleted; keep the one that is most accurate. A
commenter stated it is unclear how one would pinpoint ``* * * the time
of loss.''
Response: The applicable procedures will be revised to conform to
the definitions in the policy. Further, it is intended that both the
definition of ``insurable interest'' and ``share'' refer to the
producer's percent interest in a crop so the definition of ``insurable
interest'' is revised to refer to the percentage of the insured crop
that is at financial risk and the definition of ``share'' is revised to
cross-reference ``insurable interest'' to eliminate any conflicts. Both
the definitions of ``insurable interest'' and ``share'' were intended
to refer to the insured crop and the definitions have been revised
accordingly. There was an apparent conflict between ``insurable
interest'' and ``share'' with respect to the time each was determined.
FCIC has revised the definition of ``insurable interest'' to remove all
references to timing because it was intended to determine the
percentage of the crop that was at risk. The definition of
[[Page 15789]]
``share'' still refers to the time of loss or the beginning of harvest.
Comment: A few comments were received regarding the definition of
``insurable loss.'' The commenters asked if it would be considered an
insurable loss if the insured did not accept payment.
Response: In accordance with the definition of ``insurable loss,''
if the insured does not accept an indemnity payment, the loss will not
be considered to be an insurable loss under the policy.
Comment: A few comments were received regarding the definition of
``liability.'' A commenter had some concerns with this revised
definition since ``* * * determined in accordance with the claims
provisions * * *'' instead of referring to the ``premium computation''
takes share out of the equation. This would seem to have implications
for when misreported information is corrected, second crop (for
prevented planting purposes) and data processing. The commenter also
recommended the reference should be to ``* * * the Settlement of Claim
provisions * * *'' rather than ``* * * the claims provisions * * *''
Response: The liability is based on the total value of the crop for
the unit, not the producer's share of the crop. For the purpose of
determining a claim, the total production to count is subtracted from
this total liability and the result is multiplied by the share to
obtain the producer's share of the indemnity. This is because all
determinations are done on a unit basis, which would include the whole
value, all production, etc., for the unit, not just the producer's
share. If the liability were to refer to the premium computation, it
would result in a double reduction for the share, once in the
determination of liability and again in the indemnity calculation. This
means it is not necessary to take share into consideration when
determining misreporting or prevented planting payment reductions for
second crops or for data processing because share is factored into any
payments. FCIC agrees ``the claims provisions'' should be ``the
Settlement of Claim provisions'' and has modified the definition
accordingly.
Comment: A commenter stated ``optional unit'' is not defined in the
definitions, yet ``basic unit'', ``enterprise unit'' and ``whole-farm
unit'' are defined. The commenter suggested that either all types of
units should be defined in the definitions, or all should be addressed
in section 34.
Response: It is not practical to define the term ``optional unit''
because there are a large number of variations available and FCIC has
determined that such variations are best left in section 34 of the
Basic Provisions and the applicable Crop Provisions. No change has been
made.
Comment: A commenter requested the defined term of ``organic
agricultural industry'' be changed to ``organic agricultural experts''
to reflect the meaning of the definition as given. This would also be
consistent with the new term ``agricultural experts'' that is proposed
in the rule. The commenter noted the industry is composed of a broad
variety of businesses and believe the industry as a whole should not be
confused with those who are expert in organic agriculture. In addition,
they would hope experiment stations would be eligible to be the
employers of ``organic agricultural experts'' along with the other
institutions listed. The commenter stated they appreciate the
consideration given to organic farming methods, especially the
recognition that organic farming practices may vary from non-organic
practices.
Response: The commenter is correct and ``organic agricultural
industry'' is a misnomer and the definition really describes organic
agricultural experts in the same manner as agricultural experts.
Therefore, the name has been changed, along with the other references
in the policy.
Comment: A comment was received regarding the definition of
``perennial crop.'' A commenter stated that with the implementation of
the Basic Provisions it would be an appropriate time to include some
kind of qualifier such as ``* * * that has an expected life span of
more than one year'' or ``* * * that normally has a life span * * *''
to the definition of ``perennial crop.'' This revision would make the
``perennial crop'' definition consistent with the one for ``annual
crop.''
Response: Since no change to this definition was proposed and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A commenter questioned if the definition of ``policy''
should be revised. They requested FCIC to note their comments regarding
whether ``* * * the Commodity Exchange Price Provisions, if applicable
* * *'' must be provided to policyholders along with the Basic, Crop
and Special Provisions or whether information can be made available on
the web site or in the agent's office like the other actuarial
documents.
Response: The CEPP, if applicable, is a part of the policy so the
definition of ``policy'' must be revised to include those provisions.
Like the Basic Provisions, Crop Provisions and Special Provisions, the
insurance provider will be responsible for providing to producers who
purchase revenue or yield protection those pages of the CEPP that
correspond to the crops the producer insures. The CEPP will also be
available on RMA's Web site. In subsequent years, the insurance
provider will only be required to provide the producer with changes to
the CEPP. FCIC has revised section 4(c) to specify changes to the CEPP
must be provided in writing to the insured not later than 30 days prior
to the cancellation date for the insured crop. The CEPP will be
formatted so that the page(s) applicable to the crop and sales closing
date can be printed exclusive of other information.
Comment: A commenter recommended the definition of ``premium
billing date'' be revised as follows: ``The earliest date upon which
premium and/or administrative fees are due for insurance coverage based
on your acreage report. The premium billing date is contained in the
Special Provisions.'' This has been an issue on reviews by FCIC
regarding the wording needed on premium billings and notices.
Response: The premium billing date is not the date the premium is
due. It is the date that premium bills are to be sent to the producers
by insurance providers. Premium is due thirty days after the premium
billing date. No change has been made.
Comment: A few comments were received regarding the definition of
``prevented planting.'' A commenter stated the second sentence of the
definition of ``prevented planting'', which addresses ``[t]he failure
to plant the insured crop within the late planting period,'' is
misleading in light of the final sentence of section 17(d)(2). To wit,
an insured who initially seeks to plant during the late planting period
will not receive a prevented planting payment if other producers had
planted prior to the late planting period. The commenter stated this
inconsistency must be reconciled. A commenter stated they view as
positive the prevented planting provisions being changed to clarify
prevented planting coverage is not available because of lack of
equipment or labor or failure to plant when others in the area are
planting. A commenter stated FCIC proposes to revise the definition of
prevented planting to clarify failure to plant because of lack of
equipment or labor is not considered prevented planting because lack of
equipment or labor are not insured causes of loss. The commenter noted
prevented planting claims, which implicate the issue of
[[Page 15790]]
inputs such as manpower and equipment, are always very difficult. The
commenter stated while the proposed amendment to the definition goes a
long way in clarifying this troublesome issue, it may not go far enough
to encompass other often-recurring problems associated with uninsured
causes of loss. The commenter stated with minimum, and particularly no-
till, farming practices becoming more and more prevalent, insurance
providers are often met with an argument from insureds that ``my land
was wet because I am a no-till farmer. My neighbor's land was drier and
he was able to plant because he follows a conventional tillage
method.'' The commenter stated a farming practice such as no-till or
minimum till is not a characteristic of the land; rather, it is a farm
management decision. Consequently, a decision relative to a farming
practice is not an insured cause of loss for prevented planting
purposes. The commenter stated the definition of prevented planting
should be revised to clarify this increasingly encountered problem.
Response: FCIC has revised the definition of ``prevented planting''
by combining the first and second sentences. This clarifies the
provisions regarding a cause of loss general to the surrounding area
and that prevents other producers from planting acreage with similar
characteristics is applicable to both situations in which planting is
prevented by the final planting date and during any applicable late
planting period. This revision also removes any potential conflict
between the definition and section 17(d)(2). FCIC also has clarified
that the use of a particular production method does not constitute an
insured cause of loss. Management decisions are never an insured cause
of loss.
Comment: A commenter stated FCIC should consider whether the
definition of ``production guarantee (per acre)'' should be identified
as for yield protection only (unless it also applies to revenue
protection).
Response: The definition of ``production guarantee (per acre)''
should not specify for yield protection only. The definition of
``revenue protection guarantee (per acre)'' includes a reference to the
``production guarantee (per acre),'' so the term is applicable to both
yield and revenue production. No change has been made.
Comment: A comment was received regarding the definition of
``production report.'' The commenter suggested that ``* * * planted
acreage and harvested production'' is not necessarily wrong, but may be
somewhat outdated now that yields are assigned for prevented planting
acreage when a second crop is planted and there is no double cropping
history and sometimes appraised production. The commenter also
recommended replacing the ``or'' before ``* * * by measurement of farm-
stored production'' with a comma to set off the three separate phrases.
Response: The definition is not totally accurate because there are
situations where yields are assigned for prevented planting acreage
when a second crop is planted and there is no double cropping history
and appraised yields may be used. However, there are also situations
where there are appraised yields but they are not used, such as
appraisals for uninsured causes. Therefore, to eliminate any potential
conflict with other policy provisions and FCIC issued procedures, FCIC
is removing the term ``harvested.'' Further, FCIC has removed the term
``or'' and added a comma in its place.
Comment: A commenter stated the definition of ``projected price''
is potentially ambiguous. Because ``[a] price'' is singular, and the
reference is to the plural ``all crops,'' it could be read to mean that
an identical price is used for each insured crop. Thus, we recommend
rewriting this definition.
Response: FCIC has revised the definition to specify that the price
is for each crop.
Comment: A few comments were received regarding the definition of
``replanted crop.'' The commenters referenced Bulletin No. MGR-06-008--
Grain Sorghum Planting in South Texas that was issued on June 9, 2006.
A commenter stated it is their understanding the position taken in the
bulletin was developed as a result of the following portion of the
language in the ``replanted crop'' definition ``* * * if the replanting
is specifically made optional by the policy and you elect to replant
the crop and insure it * * *;'' The commenter understands this portion
of the definition was only intended to address winter wheat or barley,
which is damaged under the Wheat or Barley Winter Coverage Endorsement.
In this situation the insured has the option not to replant, and be
paid based on the appraisal. This language was not intended to address
grain sorghum or any other crops as indicated in the bulletin. The
commenter recommended additional language be added to clarify whenever
an insured plants the same crop back on the same acreage in the same
crop year this is always considered being a replanted crop. Another
option would be to remove the above referenced language from the
definition and redefine replanted crop in either the Small Grains Crop
Provisions or the Wheat or Barley Winter Coverage Endorsement to
include this language where it was intended. The commenter also
questioned if the definition is intended to exclude the use of this
term for a second crop. Another commenter stated the bulletin indicated
a crop replanted to the same crop after it was no longer practical to
replant the damaged first insured crop would be considered an
uninsurable second crop. Although the bulletin addressed grain sorghum,
the provisions cited were all from the Basic Provisions. The commenter
believes the bulletin was written such that its direction will lead to
unintended consequences and should not have cited provisions applicable
equally to all crops and should not have triggered solely on a
determination of whether or not it was practical to replant. The
commenter recommended the definition be rewritten so it is clear that,
if a crop is replanted back to the same crop on the same acreage in the
same crop year, it is always considered the same original crop unless
specified otherwise in the Crop Provisions. Then, particular issues
such as the grain sorghum issue dealt with in MGR-06-008 could be
better addressed in the Crop Provisions.
Response: Section 508A(a)(2) of the Act makes it clear that a
second crop can be the same crop as the first crop unless such crop
qualifies as a replanted crop. Section 508A(a)(3) of the Act defines a
replanted crop as ``any agricultural commodity replanted on the same
acreage as the first crop for harvest in the same crop year if the
replanting is required by the terms of the policy of insurance covering
the first crop.'' Therefore, unless replanting is required under the
policy, a second planting of the same crop has to be considered a
second crop. This would apply to all crops. However, there are only
certain crops where it is appropriate to allow replanting to be
optional. FCIC has previously revised the Basic Provisions to specify
that if the policy makes replanting optional and the producer elects to
replant (i.e., replanting spring wheat after the failure of winter
wheat and continue carrying insurance on the winter wheat under the
Winter Coverage Endorsement), the second planting is considered a
replanted crop. Therefore, the Basic Provisions should contain the rule
and the Crop Provisions the exception. No change has been made in this
rule.
Comment: A comment was received regarding the definition of
``revenue protection.'' A commenter suggested replacing the first
``or'' in both sentences with a comma and making other
[[Page 15791]]
changes as follows: ``* * * against production loss, price decline/
increase, or a combination of both * * * only against production loss,
price decline, or a combination of both.''
Response: FCIC has revised the definition to remove each ``or''
between ``production loss'' and ``price decline'' and added commas.
Additionally, FCIC has revised the ``Causes of Loss'' sections in the
Crop Provisions to clarify that a price change is an insurable cause of
loss as long as the cause of the price change is not determined to be
an uninsurable cause of loss. This change is consistent with the
definition of ``revenue protection'' which states both price declines
and increases are covered.
Comment: A commenter stated the defined term is ``RMA's Web site.''
This is sometimes referred to as ``RMA's Web site'' and other times as
``the RMA Web site'' in the Basic Provisions. It would be helpful to
use one term consistently.
Response: FCIC has revised the provisions to consistently use the
defined term.
Comment: A commenter suggested deleting the parentheses in the
definition of ``section'' and beginning ``For the purposes of unit
structure, a unit of measure * * *''.
Response: FCIC has revised the provision as suggested because it
could be perceived that the parenthetical was not actually part of the
definition.
Comment: A commenter recommended revising the third sentence in the
definition of ``second crop'' for clarification.
Response: FCIC has considered this change but does not know how to
write the provision any clearer. If there are specific suggestions,
FCIC will consider them when it next revises the Basic Provisions. No
change has been made.
Comment: A few commenters stated clarifying the definition of
``share'' is appropriate, especially since the proposed rule adds a
definition of ``insurable interest,'' which speaks to the ``value of
your interest in the crop.'' The definition of ``share'' is relevant to
performing calculations in the sale and service of the MPCI policies.
The definition can be improved, therefore, by changing it to read as
follows: ``Your insurable interest in the insured crop, expressed as a
percentage, as an owner, operator, or tenant at the time insurance
attaches. However, only for the purpose of determining the amount of
indemnity, your share will not exceed your share at the earlier of the
time of loss or the beginning of harvest.'' This minor change makes the
definition consistent with its utilization in the program, and it
avoids creating any ambiguity when this definition is read along with
the definition of ``insurable interest.'' The commenter referred FCIC
to their comments above to the proposed new definition of ``insurable
interest'' and asked whether they match and/or are redundant. Also
consider changing ``* * * your share will not exceed your share * * *''
to ``* * * your share will not exceed your insurable interest * * *''
Response: As stated above, FCIC revised the definition of
``insurable interest'' in response to other comments to specify that
``insurable interest'' is expressed as a percentage. Therefore, it is
no longer necessary to clarify ``share'' is expressed as a percentage.
FCIC revised the definition of ``share'' to remove the reference to
percentage and only refer to insurable interest.
Comment: A few comments were received regarding the definition of
``substantial beneficial interest.'' A commenter stated the proposed
rule amends the definition to provide, in part, that a ``spouse * * *
will be considered to have a substantial beneficial interest unless the
spouse can prove they are legally separated or otherwise legally
separate * * *''. In its explanatory discussion portion of the proposed
rule (71 FR 40215), FCIC states this change is to clarify ``that
spouses are presumed to share in the spouse's share.'' If, as it seems,
FCIC's intention is to create a presumption, then the definition of
``substantial beneficial interest'' should reflect this. Moreover, the
terms ``presumed'' and ``presumption'' create an evidentiary standard
that will be relevant to a legal action involving this issue. For this
reason, the commenter urged FCIC to amend the definition to state that
a ``spouse will be presumed to have a substantial beneficial interest
unless the spouse can prove they are legally separated or otherwise
legally separate * * *''. In addition, a commenter questioned the
continued inclusion of the phrase ``legally separated or otherwise
legally separate under applicable State dissolution of marriage laws.''
The 2007 Crop Insurance Handbook (CIH), specifically Exhibit 32 section
2G(l), sets forth seven criteria that, if met, entitle a spouse to a
separate policy regardless of marital status. Thus, there appears to be
an inconsistency between the Basic Provisions and the CIH, as currently
written. A few commenters recommended FCIC consider if the definition
of ``substantial beneficial interest'' is affected by the proposed
changes in sections 10(a) & (b), where the interest of any children or
other household members are to be included as well as the interest of
the spouse. The commenters also suggested FCIC might need to clarify
whether a ``child'' is limited to minor children, or to offspring
residing with the individual insured, or in some other way.
Response: FCIC has revised the definition to use the term
``presumed.'' There appears to be confusion regarding SBI and separate
shares for the purposes of having separate policies. SBI is only
applicable to identify those persons who are required to provide their
social security numbers because of their interest in the applicant or
insured. This is different than insurable interest or share because
those refer to the interest in the crop. To have a separate share or
separate policies, there must be an insurable interest in the crop.
Therefore, the phrase ``legally separated or otherwise legally separate
under the applicable State dissolution of marriage laws'' should be
included in the definition because it is necessary to specify when a
spouse is no longer considered to have a SBI in the producer. The term
``child'' is intended to take its common meaning, which would include a
child of any age. For the purposes of SBI, no child is presumed to have
a SBI in the insured. To have a SBI, a child must have some other legal
relationship to the insured, such as entering into a partnership of
some other entity. However, FCIC has revised section 10 to clarify that
although a child can be of any age, only children who reside in the
same household as the insured are considered to be included in the
insured's share. Children who reside outside of the insured's household
are not included in the insured's share and can only obtain insurance
if they have a separate share of the crop and obtain a separate policy.
Comment: A few comments were received regarding the definition of
``whole-farm unit.'' The commenters asked why it could not also be
applied to a producer who only requests yield protection coverage for
all of his/her insurable crops in the county.
Response: The definition just described whole-farm units. The
restriction of the applicability of whole-farm units is contained in
section 34. Currently whole-farm units are only available under the
Revenue Assurance plan of insurance and are incorporated into revenue
protection. However, a rating methodology has not yet been developed
for whole-farm unit coverage under yield protection. To allow greater
flexibility, FCIC has revised section 34 to allow the Special
Provisions to include a whole-farm unit for policies other than revenue
protection in the
[[Page 15792]]
event rating methodology is developed in the future.
Comment: A few commenters stated it is unclear why the definition
of ``yield protection'' should be restricted to those crops/counties
for which revenue protection is available (whether elected or not). It
would seem to be appropriate terminology also for crops/counties where
revenue protection is not available (instead of having to distinguish
between ``yield protection'' and ``APH coverage''). In that case, this
definition should be revised to something like ``Insurance coverage
that provides protection against a production loss only.'' [delete the
phrase ``* * * for crops for which revenue protection is available but
was not elected'']. If this is not done, it would seem to be necessary
to add a definition of ``APH coverage'' (the term used in the
``Background'' of the Proposed Rule) for those other crops/counties;
otherwise, it could be interpreted that the Basic Provisions apply only
to those crops/counties that have the choice.
Response: There is apparently some confusion about yield protection
and its relationship to revenue protection and APH coverage. FCIC has
clarified in section 3 that yield protection is a different plan of
insurance than APH, revenue protection and any of the other plans of
insurance, such as the dollar amount plan of insurance. Further,
revenue protection and yield protection will be available for the
applicable crops in all counties with actuarial documents for such
crops. Once revenue protection and yield protection plans of insurance
are available for a crop, the APH plan of insurance will not be
available for the crop. Because yield protection and APH are different
plans of insurance, the definition of yield protection cannot simply
refer to protection against loss of production. The most important
distinction between yield protection and APH is that the yield
protection pricing mechanism is based on a projected price determined
in accordance with the CEPP. Therefore, yield protection and revenue
protection will be available for the same crops in the same counties.
For this reason, yield protection correctly references the crops for
which revenue protection is available. FCIC has clarified in the
definitions of ``yield protection'' and ``revenue protection'' that
they are separate plans of insurance. In this rule, the distinction is
only made between revenue protection, yield protection and all other
plans of insurance. Therefore, it is not necessary to include separate
definitions for these other plans of insurance. Their terms and
conditions are very well explained in the Crop Provisions, Special
Provisions, and actuarial documents.
Comment: A few comments were received regarding the definition of
``yield protection guarantee (per acre).'' Some commenters recommended
deleting the phrase ``* * * for a crop that has revenue protection
available'' so this applies to any crop/county not insured under
revenue protection. Some commenters recommended deleting this
definition since yield protection coverage would be addressed by the
existing definition of ``production guarantee (per acre)'', or group
the definitions of ``production guarantee (per acre),'' ``revenue
protection guarantee (per acre)'' and ``yield protection guarantee (per
acre)'' as subparagraphs under the overall general definition of
``guarantee (per acre)'' to clarify the distinctions and similarities
between the three. Commenters also suggested that FCIC might also need
to add something for the non-revenue protection crops that are insured
under a dollar amount plan rather than under an APH/yield plan.
Response: As stated above, the ``dollar amount plan of insurance,''
``APH plan of insurance,'' and ``revenue protection plan of insurance''
are separate and distinct. The phrase ``for a crop for which revenue
protection is available'' cannot be deleted because this definition is
only applicable to the yield protection plan of insurance, which is
only available for crops for which revenue protection is available. It
is not applicable to the dollar amount plan of insurance or the APH
plan of insurance. Further, the definition cannot be deleted because,
under yield protection, the guarantee is based on both the yield and
the price to obtain the dollar value of the insurance coverage. Under
the APH plan, the guarantee is only based on the yield. FCIC does not
need to add additional definitions or terms for the dollar amount plans
of insurance since their guarantees are explained in the Crop
Provisions. No change has been made in response to these comments.
Minor editorial changes were made for clarity.
Section 2 Life of Policy, Cancellation, and Termination
Comment: A commenter stated they agree the social security numbers
(SSN), employer identification number (EIN), or identification numbers
must be provided on the application.
Response: FCIC has retained the provisions requiring identification
numbers on the application.
Comment: A commenter stated proposed section 2(b) indicates the
applicant must provide a SSN if the applicant is an individual or an
EIN if the applicant is a person other than an individual. However, the
Crop Insurance Handbook (CIH) (Exhibit 32) and Appendix III of the
Standard Reinsurance Agreement (SRA) do allow individual entities to be
insured using an EIN and some entities other than individuals to use an
SSN. The commenter stated a literal reading of this policy language
would not seem to support how these entities are currently being
administered per the CIH and Appendix III. The commenter recommended
the policy language be rewritten to support how these entities are
currently being insured. They suggested the provision could indicate
something to the effect that the applicant must provide a SSN or EIN,
whichever is applicable. Another commenter stated because proposed
section 2(b)(1)(i) refers to ``* * * SSN, EIN or identification
number,'' the first sentence of (b) should refer to that third
possibility as well.
Response: EINs can still be included on the application for any
entity. However, under the Basic Provisions, the CIH, and Appendix III,
all individuals with a SBI in the entity must also provide the SSNs for
such individuals. For example, a producer who operates a farm and has
an EIN, can report the EIN on the application but the producer must
also provide their SSN. The provisions have been clarified to allow
EINs to be used as long as the SSNs are also provided. However, the
producer cannot be allowed to make the election of whether to provide
the EIN or the SSN because EINs can change and it would be impossible
to track the producer for the purposes of eligibility and yield
history. FCIC has removed all references to ``or identification
number'' in section 2(b)(1), (2), (3) and (5) and added a new section
2(b)(10) to specify a person who is not eligible to obtain a SSN or EIN
must request an assigned number.
Comment: Several commenters disagreed with the provisions proposed
in section 2(b)(1)(ii) (redesignated section 2(b)(5)(ii)) that specify
no insurance will be provided if the SSN, EIN, or identification
numbers are not corrected prior to any indemnity being paid. A
commenter stated if the producer is eligible for insurance, there
should be no penalty for misreporting. The commenter believes
corrections should be allowed without loss of program benefits. A few
commenters stated errors can occur at virtually every stage of
information transfer. They believe producers should not automatically
have their coverage canceled, as is now the case, if they
[[Page 15793]]
inadvertently provide, through their mistake or someone else's, an
inaccurate SSN, EIN, or ID Number. The commenter believes this is an
overly harsh punishment for what is usually an inadvertent clerical
error and the provisions should be revised. The commenter stated the
only necessary exception to this would be when, upon further
investigation, the numbers provided identify the producer as being
ineligible to participate in programs under the Federal Crop Insurance
Act or shows them to be listed on the Ineligible Tracking System (ITS).
A few commenters stated they believe an erroneous SSN or other number
should not automatically cause coverage to cancel unless the number or
numbers indicate the person is ineligible to participate in the
program. A commenter stated as an alternative, a less draconian penalty
other than complete denial of coverage should be meted out to those who
make an error in providing a SSN or other ID number. A commenter
supported the ability to correct an EIN/SSN before payment.
Response: Section 506(m)(1) of the Act requires the producer to
provide a SSN as a condition of eligibility. This means a correct SSN.
Therefore, failure to provide a correct SSN makes the producer
ineligible for insurance and FCIC does not have the discretion to
change this requirement. However, there may be instances producers may
not be aware that they provided the incorrect SSN because application
was made years ago. Therefore, FCIC is revising the provisions to allow
a producer to correct errors the producer can prove were inadvertent.
While FCIC is allowing a small amount of leeway with respect to a
producer's eligibility for past years, producers must be aware that a
producer's certification of incorrect identification numbers generally
constitutes a false statement that can subject the producer to
criminal, civil and administrative sanctions and if a claim has been
paid there may be additional consequences. FCIC has revised the
provisions to notify the producer that the submission and certification
of an incorrect identification number may subject the producer to
civil, criminal or administrative sanctions. FCIC has left in the
requirement that if a producer provides and certifies an incorrect
identification number and fails to correct it, that producer is
ineligible for insurance for any year for which the incorrect
information was used and any payments made during such period must be
repaid. Further, the provisions are revised to state that, even if the
identification number information is corrected, the producer will still
be ineligible for insurance for any year for which the incorrect
information was used (and any payments made during such period must be
repaid) if the producer received a disproportionate benefit, was
otherwise ineligible for crop insurance, or avoided any obligation or
requirement under any State or Federal law.
Comment: A commenter stated FCIC proposes to revise section 2(b) to
better define the ramifications for an applicant or insured whose
application either does not include the requisite SSNs, EINs or other
identification numbers or includes erroneous information for persons
that have a SBI in the policy. Further and more specifically, proposed
section 2(b)(2)(ii) (redesignated section 2(b)(5)(ii)) addressed
situations in which the subject person is not eligible for insurance
and provides, with one exception, that such policy is void and no
indemnity is due. With regard to the premium and fees, FCIC
distinguished between policies for which the premium and fee are paid
and those policies for which they are not. The former is entitled to a
refund less 20 percent of the premium; the latter is not liable for any
premium. The commenter did not understand and did not agree with FCIC's
application of differing penalties. The commenter added that
presumably, the work expended by the insurance provider in reviewing an
application does not vary based on whether or not premium is paid.
Thus, the commenter believes if the 20 percent premium charge is
intended to offset expenses incurred by the insurance provider, such
compensation is warranted regardless of whether the premium is paid.
The commenter stated that likewise, if the 20 percent assessment is a
punitive measure, there is no reasonable basis to distinguish between
persons who pay premium early and those who do not. The commenter
believes the disparate treatment set forth in proposed section
2(b)(2)(ii)(A) and (B) may encourage insureds to delay the payment of
premium until the last possible minute. The commenter recommended FCIC
eliminate the arbitrary distinction underlying sections 2(b)(2)(ii)(A)
and (B)), and amend section 2(b)(2)(ii) to provide that 20 percent of
the premium is due on any policy for which the subject person is
ineligible for insurance. Another commenter stated administrative fees
and 20 percent of the premium should be applicable regardless if the
premium has or has not been paid by the producer prior to the policy
being voided. The commenter believes the insurance provider should have
the option to bill for these amounts and the producer and SBIs should
be considered ineligible if these debts are not paid by the termination
date.
Response: There is no basis to treat producers who have previously
paid the premium different from producers who have not paid the
premium. The retention of 20 percent of the premium was intended to
offset the expenses of the approved insurance provider, not be punitive
in nature. FCIC has revised redesignated section 2(b)(7)(ii) to require
all producers to pay 20 percent of the premium the producer would
otherwise be required to pay if the policy is voided.
Comment: A commenter recommended proposed section 2(b)(1)(ii)
(redesignated section 2(b)(7)(iii)) be clarified in more detail
regarding whether or not the return of premium applies to only the
current year or all previous years when the application has the wrong
SSN. For example, a producer reported the wrong SSN to an insurance
provider and paid the premium for the last three years with no loss. If
in the fourth year, the producer is paid a small payment and later it
is determined the producer reported the incorrect SSN, would the
insurance provider return the prior three years premium or does the
return of premium only apply to the year the loss was paid. If it
applies to all four years, the program runs the risk of a producer
intentionally misreporting his SSN in hopes of receiving a small claim
payment, then notifying the insurance provider of the wrong SSN. The
producer would have to repay the small payment, but the insurance
provider would have to return the prior three years premium.
Response: If an incorrect identification number is provided and it
would result in the application not being acceptable, no insurance
would have been, or considered to have been, in place, and the policy
is voided under the revised provisions. Therefore, any crop policies
associated with that application would be void for all crop years for
which such identification number was incorrect. If the policy is void,
it has been the practice of FCIC to only require the producer to pay 20
percent of the premium to offset costs (see sections 23 and 27). There
is no basis to change this practice for these producers who similarly
have their policies voided. There should not be a significant risk that
producers will seek to have their policies voided for the return of
premium because it presumes that the producer will know that there
[[Page 15794]]
will be a number of good years in which no indemnity will be due and
only a small claim made in later years. This is unlikely to occur. FCIC
has clarified that if the policy is void, no insurance is considered to
have attached for any year in which the incorrect identification number
has been provided, and the producer would be responsible for 20 percent
of the premium for all years covered by the application. FCIC has also
moved provisions regarding the effect of voidance to a new section
2(b)(7). Additionally, the provisions in section 27(b) have been
clarified to specify the amount of premium that can be retained by the
insurance provider when a policy is void is 20 percent of the premium
amount the producer would otherwise be required to pay. Current
provisions in section 27(b) do not specify whether the 20 percent of
premium is based on producer paid premium or the total premium under
the policy (producer paid premium plus subsidy). All other sections of
the policy that referred to retention of 20 percent of the premium were
clear that it is based on the amount paid by the producer. FCIC has
revised section 27 to specify the 20 percent is applied to the producer
paid portion of the premium.
Comment: A commenter stated they agree with the intended change in
proposed sections 2(b)(1)(ii) and (ii)(A) through (C) but are concerned
implementation could be problematic since the application would have
been accepted long before the time a claim payment could be made, and
there could be data processing issues as well. The commenter stated
these subsections need to be rewritten for clarity. For example, FCIC
could delete ``If the information is not corrected,'' at the beginning
of (A) since the lead-in already makes this clear.
Response: As stated above, FCIC has revised the provisions to
reduce the impact on producers who have made inadvertent errors and
have received absolutely no benefit from using the incorrect
identification number. Further, the reference to correction by the
claim payment has been removed because many incorrect identification
numbers are discovered after the claims have been paid and the 1099 tax
forms are issued. However, there will still be some impact on the
program because, if the conditions exist that result in an unacceptable
application and the policy is voided, previously paid indemnities must
be refunded and the correct premium owed reconciled.
Comment: A few comments were received regarding the provision
proposed in section 2(b)(1)(ii) (redesignated section 2(b)(5)(ii)). A
commenter stated they view as positive allowing the correction of
incorrect SSNs or EINs before any claim payment is made. A commenter
stated since the proposed policy language will allow correction of
SSNs, EINs or other identification numbers to be made, they assume the
RMA Data Acceptance System will now allow these corrections to be made
without a late sales reduction applying. Another commenter stated they
expect FCIC will amend Appendix III to the SRA so insurance providers
are not penalized for corrections that occur prior to the payment of an
indemnity or a replant or prevented planting payment.
Response: As stated previously, the provisions have been revised to
allow revisions upon discovery of errors and removed the reference to
the payment date as the deadline for corrections. If corrections to the
identification number are allowed by the revised provisions, the
insurance provider cannot be penalized for the correction unless the
correction was necessary because of agent or insurance provider error.
Comment: A commenter stated they disagree with the proposed
provision in section 2(b)(2)(i), which states the amount of coverage
will be reduced proportionately by the percentage interest of such
persons. The commenter believes that if the person with a SBI is
eligible for insurance, there should be no penalty for misreporting and
that corrections should be allowed without loss of program benefits.
Response: To be consistent, coverage should not be reduced if the
correct identification number is provided. As indicated above, the
provisions have been revised to allow correction of an inadvertent
error. However, if it is determined that the person with the SBI is
otherwise ineligible or the incorrect number would have allowed the
producer to obtain disproportionate benefits under the crop insurance
program, or avoid an obligation or requirement under any State or
Federal law, the policy will be void. FCIC is maintaining those
provisions that specify that if an identification number is not
provided for any SBI holder, the policy will be void. This is because
the SBI holder will be presumed to be ineligible. The identification
numbers are required to ensure eligibility and the proper
administration of the program. These provisions have been moved to
section 2(b)(6).
Comment: A few commenters stated the added phrase ``* * * (presumed
to be 50 percent for spouses of individuals) * * *'' in section
2(b)(2)(i) (redesignated section 2(b)(6)(i)) could be problematic when
taken together with section 10(a) and (b). They stated the spouse's
interest in the insured entity may be presumed to be half when the
spouses are the only ones with such an interest in the entity. If
children and/or other household members will be considered to be part
of the insured entity as well (as proposed), that leaves less than 50
percent for the actual named insured. Another commenter expressed
concern regarding including children and other household members as
being among those with a SBI in the insured entity [as proposed in
section 10(a) & (b)]. The commenter stated that, with respect to this
subsection, such a change would enlarge the pool of people whose
eligibility must be determined though they are not officially part of
the insured entity.
Response: There appears to be confusion between having an interest
in the insured (SBI) and having an interest in the crop (share). SBI is
only for the purpose of determining who must report identification
numbers. Spouses are presumed to have an interest in the insured but
are not presumed to have an interest in the crop. To have an interest
in the crop, the spouse must show a legitimate risk of loss. It is
possible that a spouse may not have a share of the crop. Further,
simply because a person has a share of the crop does not mean the
person has a SBI in the insured. For example, a landlord and tenant can
insure their shares under separate policies and unless there is another
type of legal relationship, i.e., partnership, etc., the landlord does
not have to be reported as a person with a SBI in the tenant. The
definition of ``substantial beneficial interest'' clearly states that
children are not considered to have a SBI in the producer unless the
child has a separate legal interest in the person. Such interest could
include a family trust or the child could be a partner in the insured.
No change has been made.
Comment: A commenter stated they agree with the proposed provision
in section 2(b)(2)(ii) (redesignated section 2(b)(6)(ii)), which states
the policy is void if the person is not eligible for insurance.
Response: FCIC agrees that policies should be void when the person
with a SBI is not eligible for insurance.
Comment: A commenter suggested deletion of the words ``authorized
under the Act'' in section 2(e).
Response: Since no changes to these provisions were proposed and
the public was not provided an opportunity to comment, the
recommendation cannot be incorporated in the final rule. No change has
been made.
Comment: A commenter asked if the language in section 2(e)(2) means
the
[[Page 15795]]
date for the Ineligible Tracking System is the date the claim is
completed by the adjuster and signed by the insured, the date the
insurance provider processes the claim, or the date the claim is
submitted to the insurance provider.
Response: Consistent with the revised definition of ``claim for
indemnity,'' the payment date is the date the form containing all the
information necessary to pay an indemnity is submitted to the insurance
provider.
Comment: A commenter stated section 2(f)(2)(i)(C) has caused
problems in areas where the crop has a termination date that is
different than the sales closing date. For example, wheat in Montana
(with the exception of the four spring only counties) has a sales
closing and cancellation date of September 30 and a termination date of
November 30. If the insured purchases wheat by September 30, 2005 for
the 2006 crop year, and does not pay the premium by the termination
date of November 30, 2006, per the provision contained in section
2(f)(2)(i)(A), the wheat coverage would be terminated and no coverage
should be effective for the 2007 crop. However, the interpretation the
commenter has received from the FCIC is that per the language in
section 2(f)(2)(i)(C), if the wheat had already been planted prior to
November 30, 2006, so that insurance had already been considered to
have attached for the 2007 crop year, the wheat could not be terminated
until November 30, 2007. Under this interpretation, the insured would
be able to insure wheat for two years without having paid a single
dollar of premium. The commenter stated it had always been their
understanding the intent of this item was to apply to ``other'' crops
insured by the policyholder, not to the insured crop, which is indebted
(wheat in the above example). The commenter recommended the policy
language be revised so this item is only applicable to ``other'' crops
insured on the policy and not the crop causing the indebtedness. The
commenter provided two different recommendations as follows: (1) ``For
each policy for which insurance has attached before you become
ineligible (excluding the crop(s) with unpaid administrative fees or
premiums), the termination date immediately following the date you
become ineligible;'' and (2) The commenter suggested deletion of this
item as it becomes administratively difficult to determine if insurance
has attached or not on all of the other crops on the policy. This would
then default back to item 2(f)(2)(i)(A). The commenter stated that
policyholders with unpaid amounts should not get a free grace period of
a year of coverage simply because the termination date falls after the
cancellation date.
Response: FCIC has clarified the provision because it never
intended to allow continued coverage for the crop for which premium was
not paid by the termination date. The purpose of the difference in the
termination and sales closing dates was to allow producers who have
both spring and winter varieties of the same crop to only have one
billing date. It was most practical to move the billing date for the
winter variety to coincide with the spring. After the billing date
there must be sufficient time to allow for payment and due process
before making the producer ineligible and terminating the policy.
However, it is not practical to move the sales closing date to coincide
with the termination date because it is too close to the date of
planting and could lead to adverse selection. FCIC has revised the
provision to specify that if the sales closing date is prior to the
termination date, and the amount owed is not paid by the termination
date, termination is retroactive to the previous sales closing date and
insurance is considered not to have attached to the crop for the crop
year.
Comment: A few commenters stated sections 2(f)(2)(i)(E) and
2(f)(3)(iii) should be revised to tie regaining eligibility to the
discharge of a bankruptcy petition instead of the filing of a
bankruptcy petition. The commenters stated that allowing individuals
that have merely filed for bankruptcy to participate in the program
creates a program vulnerability that should be stopped. The commenters
understand that FCIC adopted the filing of a bankruptcy petition as the
trigger for regaining eligibility based upon concerns that denying
participation until discharge would violate 11 U.S.C.A. 525(a). The
commenters stated that this is not true. Section 525(a) provides: (a) *
* * a governmental unit may not deny, revoke, suspend, or refuse to
renew a license, permit, charter, franchise, or other similar grant to,
condition such a grant to, discriminate with respect to such a grant
against, deny employment to, terminate the employment of, or
discriminate with respect to employment against, a person that is or
has been a debtor under this title or a bankrupt or a debtor under the
Bankruptcy Act, or another person with whom such bankrupt or debtor has
been associated, solely because such bankrupt or debtor is or has been
a debtor under this title or a bankrupt or debtor under the Bankruptcy
Act, has been insolvent before the commencement of the case under this
title, or during the case but before the debtor is granted or denied a
discharge, or has not paid a debt that is dischargeable in the case
under this title or that was discharged under the Bankruptcy Act.
The courts of appeals that have approached the question have read
the statute's reach narrowly, focusing upon the specific language of
the statute. See, e.g., Watts v. Pennsylvania Hous. Fin. Co., 876 F.2d
1090, 1093-94 (3d Cir. 1989); In re Goldrich, 771 F.2d 28, 30 (2d Cir.
1985). Watts involved an emergency mortgage assistance program designed
by the State of Pennsylvania to prevent imminent mortgage foreclosures
by providing for loans to distressed borrowers in the form of direct
payments to their mortgage lenders, keeping their mortgages current.
When plaintiff borrowers filed for bankruptcy, the program suspended
these payments for the duration of the Bankruptcy Code's automatic
stay. Plaintiffs contended this suspension violated Sec. 525(a). In
response, the court of appeals noted that a loan from the Pennsylvania
program simply was not a ``license, permit, charter [or] franchise,''
and that since those terms ``are in the nature of indicia of authority
from a governmental unit to pursue some endeavor,'' the term ``similar
grant'' should be given the same meaning. Watts, 876 F.2d at 1093.
Similarly, the court in In re Goldrich concluded that Sec. 525(a) did
not prohibit consideration of prior bankruptcies in credit decisions,
since ``the language of section 525 may not properly be stretched so
far beyond its plain terms.'' Goldrich, 771 F.2d at 29.
The items enumerated in the statute-licenses, permits, charters,
and franchises are unrelated to insurance. They reveal that the target
of Sec. 525(a) is government's role as a gatekeeper in determining who
is authorized to pursue certain livelihoods. It is directed at
governmental entities that might be inclined to discriminate against
former bankruptcy debtors in a manner that frustrates the ``fresh
start'' policy of the Bankruptcy Code, by denying them permission to
pursue certain occupations or endeavors. The intent of Congress
incorporated into the plain language of Sec. 525(a) should not be
transformed by employing an expansive understanding of the ``fresh
start'' policy to insulate a debtor from all adverse consequences of a
bankruptcy filing or discharge. Toth v. Michigan State Housing
Development Authority, 136 F.3d 477 (6th Cir. 1998) (housing authority
did not violate Bankruptcy
[[Page 15796]]
Code's antidiscrimination provision when it denied debtor's home
improvement loan solely because she had received discharge within three
years of application).
The commenters stated that alternatively, if FCIC remains concerned
that denying participation until discharge would violate 11 U.S.C.A.
Sec. 525(a), the commenters suggest that 2(f)(2)(i)(E) must be changed
to make the ``termination date'' the date of dismissal of the
bankruptcy. If disallowing participation during the pendancy of a
bankruptcy violates 11 U.S.C.A. Sec. 525(a), which the commenters do
not believe is true, then back dating the termination is also a
violation as participation is denied ``during the case but before the
debtor is granted or denied a discharge.''
Response: Since no changes to these provisions were proposed and
the public was not provided an opportunity to comment, the
recommendation cannot be incorporated in the final rule. No change has
been made.
Comment: A commenter recommended addressing the situation in
section 2(g) regarding when an insured passes away within 30 days of
the sales closing date and the insured's holdings convert to an estate,
or in the event the death is a family member like a child, etc.
Response: There are situations where an individual may die, etc.,
and the estate may not pass on to a spouse or the spouse may not meet
all the criteria. Provisions have been added in section 2(g) to address
these issues. A child's death would be covered under the provisions
regarding either the individual insured whose beneficiary is the
spouse, the entity insured, or the new provisions regarding an
individual insured if the beneficiary is someone other than the spouse,
whichever is applicable.
Comment: Many commenters stated the proposed rule states if a
married insured dies or is declared incompetent, the policy
automatically converts to the spouse's name and will continue in effect
until canceled by the spouse. This is a positive change and they urged
FCIC to retain it in the final rule.
Response: FCIC has retained the provision in the final rule.
Comment: Many comments were received regarding the provision
proposed in section 2(g)(1) that specifies the policy will
automatically convert to the name of the spouse if the insured
individual dies, disappears, or is judicially declared incompetent. A
commenter asked if the policy will convert to the name of the surviving
spouse, no matter when the insured dies. In other words, if they die
anytime during the insurance period, can the insurance provider make
this change? A commenter stated the concept in section 2(g)(1) of
allowing coverage to convert to the surviving spouse (if listed as SBI
holder) should alleviate some of the problems that have been
encountered, but there may be some concerns with implementation. For
example, the spouse might not be the heir to the farming operation in
all cases, yet this proposed language would make that the default. The
commenter believes this might be workable as long as other cases, such
as a son inheriting the farm, can be handled through the procedures for
a successor-in-interest or transfer of right to an indemnity. A
commenter stated while theoretically a positive change, there may be
situations in which a spouse dies and the farming operation is taken
over by a child of the deceased, the deceased's estate, or another
farming operation. The commenter stated an option should, therefore, be
provided to convert the deceased spouse's coverage over to these
individuals or entities. A commenter stated the provision sets forth
two conditions under which the policy automatically will convert to the
spouse's name. However, the provision does not specify what occurs if
either or both of these conditions are not satisfied. The commenter
asked if the policy is terminated or if it is void. The commenter asked
whether the policy is void, is it void ab initio. The commenter
questioned if the insurance provider is obligated to provide a premium
refund for a policy that is voided. The commenter asked if, for
example, the death occurs after the filing of notice of loss but before
the issuance of an indemnity check, if the claim is extinguished. The
commenter stated that arbitration and litigation will not arise if the
surviving spouse satisfies the criteria in subsection (1)(i) and (ii)
but what happens when he or she does not. The commenter suggested FCIC
provide guidelines applicable to this eventuality. The commenter
stated, in light of the existing procedures relating to successors-in-
interest, the Basic Provisions should expressly state that a new
application is not required. The commenter added that FCIC must amend
Appendix III to ensure that an insurance provider is not penalized when
it changes the SSN from that of a deceased policyholder to that of the
surviving spouse.
Response: FCIC has revised the provisions to add the situation
where the beneficiary of the insured's estate may be someone other than
a spouse or the spouse does not meet the specified criteria. The same
terms and conditions that relate to when a member of an entity dies,
etc., apply. The policy is never voided. The policy either (1)
continues in the spouse's name, or in all other situations, (2) is
canceled as of the cancellation date for the current crop year if the
event occurs more than thirty days prior to such cancellation date, or
(3) continues in effect for the crop year if the event occurs within
thirty days of the cancellation date. Even successor in interest must
file a new application that will allow the use of the previous
experience. Appendix III of the SRA will be made consistent with the
Basic Provisions as necessary.
Comment: A commenter stated in each of subsections 2(g)(1) through
(3), FCIC employs the term ``automatically'' to describe the end result
of certain occurrences, e.g., ``automatically converts,''
``automatically dissolves'' and ``automatically canceled.'' However, a
condition precedent to the automatic consequence assumed by section
2(g) is notice to the insurance provider. For example, without notice
that a married individual has died, an insurance provider cannot
``automatically convert'' the policy to the name of the surviving
spouse. Therefore, the commenter recommended FCIC amend section 2(g) to
provide: ``In cases where we have received notice that there has been a
death, disappearance, or judicial declaration of incompetence * * *''
Response: FCIC has added a provision that requires notice in any
case except where the beneficiary is the spouse and the spouse is
listed as a SBI holder and has a share of the crop. If the beneficiary
is such spouse, the policy automatically converts and there is no
penalty if notice is not provided. The insurance provider should
correct the documents whenever notice is provided. In all other
instances, notice is required but whether it is provided timely or not
does not change the fact that the policy is cancelled by the date
specified in section 2(g). This means that if notice is not provided
until three years later, the policy is still considered to have been
canceled by the specific date and any indemnities, replant payments,
prevented planting payments, administrative fees and premium paid in
the interim must be repaid.
Comment: Several comments were received regarding the provisions
proposed in section 2(g)(2). A few commenters urged FCIC to consider
revising the provision regarding surviving partners, members, and
shareholders, to maintain the policy if the death occurs within 45,
rather than 30, days of the sales closing date. A
[[Page 15797]]
commenter stated a 30-day time limit seems rather narrow because there
are obviously a number of matters, both personal and business related,
which must be handled in short order following the death of a partner
in a partnership. The commenter believes that requiring the submission
of a new application within a short 30 day window following the death
may be asking a bit much from the remaining partners. They stated a 45-
to 60-day window would seem more reasonable. A commenter stated section
2(g)(2) states if any partner, member, shareholder, etc., of an insured
dies * * * it automatically dissolves the entity. The commenter added
it depends on when the insured dies to determine if the policy will be
canceled or if it continues. The commenter asked if a partner, member,
shareholder, etc., dies, and it only changes the entity but does not
dissolve the entity, how should this be handled.
Response: FCIC believes 30 days provides an adequate amount of time
for needed changes and has retained the proposed provisions. There is
not a single date that can be established by which all estates would be
settled. However, in farming situations, there is usually someone
carrying on the farming operations and 30 days should provide
sufficient time. If no one is carrying on the farming operations, then
insurance is not required and there is no harm if the policy is
canceled. If a partner, member, shareholder, etc., dies and the entity
does not dissolve, the policy would continue in force. Any changes in
persons having a SBI would be submitted in accordance with the
provisions in redesignated section 2(b)(9). The provision has been
clarified to indicate that death, dissolution or declaration of
incompetence must be an event that results in dissolution of an entity.
Comment: A few commenters recommended FCIC consider putting
``dissolution'' of an insured entity into a separate subsection in
section 2(g), to make it clearer that it is handled differently. The
commenters stated in fact, (g)(2) might be better addressed by
referring first to this being an issue of the dissolution of the
insured entity rather than the death, disappearance or declaration of
incompetence of any of its members, adding that grouping (2) and (3)
together might eliminate some of the duplicate language.
Response: Whether another basis for dissolution or death,
disappearance, etc., is referred to first or second does not change the
meaning of the provisions or provide any additional clarity. As
revised, it makes more sense to keep the existing order because FCIC
has added provisions regarding when the beneficiary is other than a
spouse or the beneficiary spouse does not meet all the criteria for
automatic conversion to the spouse's name and the consequences are the
same for both the entity and such beneficiary when the insured, dies,
disappears, etc. Dissolution for reasons other than death,
disappearance or judicially declared incompetence is covered by the
provisions in redesignated section 2(g)(4). Different timeframes are
required for cases in which there is a death, disappearance or
judicially declared incompetence because of the additional personal
matters that generally must be attended to in such cases. These
different timeframes should be addressed in separate sections because
combining them would result in more complex and confusing provisions.
No changes have been made in response to this comment.
Comment: A commenter stated they disagree with the provisions
proposed in section 2(g)(2) establishing a more or less than 30-day
time period for required actions prior to the sales closing deadline.
The commenter stated although 30 days prior to the sales closing date
seems to be adequate time to take appropriate action, these situations
are typically discovered much later. The commenter believes corrections
based on these circumstances should be handled similar to section
2(g)(1) for spouses.
Response: FCIC understands some cases of dissolution are not
discovered in a timely manner but business relationships should not be
treated like spouses. FCIC is considering not only the personal nature
but the relationship of the parties under the policy. As stated above,
FCIC has clarified that the automatic conversion only applies when the
spouse is listed as a SBI holder and has a share of the crop to be
insured. In such cases, the spouse is the only possible insured so
there is no basis for requiring a new application and novation is
permitted. However, with respect to business relationships, if the
entity is dissolved, it is unknown who will continue to have a share of
the crop or who will be the insured. Therefore, a new application is
necessary. FCIC has revised the provision to clarify that it is only
when the entity is dissolved that the policy will be canceled. If the
entity is not dissolved, insurance continues in the entity name and
only those persons with a SBI need to revise the application in
accordance with redesignated section 2(b)(9). FCIC has also added
provisions requiring notice be provided to the insurance provider by
the remaining persons in the dissolved entity or beneficiary. No change
has been made in response to this comment.
Comment: A commenter stated in section 2(g)(2), allowing coverage
to continue when the insured entity is dissolved due to death, etc., of
one of its members less than 30 days before the sales closing date
would alleviate some of the problems that currently exist, but it might
create some confusion for those who do not want coverage to continue.
The commenter stated this provision seems to run counter to current
procedures that consider coverage to have ceased upon death or
dissolution of the insured entity. The commenter stated the language in
section 2(g)(2)(ii) (redesignated section 2(g)(3)(ii)) needs to be
tweaked somewhat. For example, if the entity dissolves ``Less than 30
days before the sales closing date, * * * the policy will continue in
effect through the crop year * * *'' but which crop year? If this
occurs before the cancellation date, the ``continued'' coverage will be
only for less than 30 days. Similar concerns need to be addressed with
regard to the language in section 2(g)(2)(ii)(A) (redesignated
2(g)(3)(ii)(A)): ``prior to the sales closing date for coverage for the
subsequent crop year * * *'' These ``crop years'' will be different
years depending on whether the occurrence affecting the insured entity
happened before or after the sales closing/cancellation date. The
commenter stated FCIC also needs to consider what other policy or
procedure language is affected and might require revision. The proposed
language requiring the remaining party(ies) to sign a timely
cancellation request might still present difficulties if the entity
dissolution took place only a day or so before the cancellation date.
FCIC also should consider those crops where the cancellation date is
not the same as the sales closing date.
Response: The 30-day provisions were added because even businesses
need some time to handle the details necessary when a member dies.
However, even if less than 30 days, and insurance could automatically
continue, there is a provision included in redesignated section
2(g)(3)(ii) that would allow for a voluntary cancellation by the
cancellation date. These provisions are clear and should not result in
any confusion. FCIC issued procedures will be updated to reflect the
new provision. As proposed, if the death, disappearance, or judicially
declared incompetence occurred within 30 days of the sales closing
date, it was intended that coverage be provided for the crop year
immediately following the sales closing date. However, to reduce
[[Page 15798]]
confusion associated with crop programs having more than one sales
closing date, the provisions have been changed to reference the
cancellation date instead of the sales closing date. The provisions
have also been clarified in redesignated sections 2(g)(3)(ii) and
2(g)(4)(ii) to indicate the crop year covered is the crop year
immediately following the cancellation date. Clarifying these sections
with regard to the year coverage is provided makes it unnecessary to
clarify the provisions in redesignated section 2(g)(3)(ii)(A) regarding
the subsequent crop year. If death occurs very close to the
cancellation date, there would be a very limited time to cancel
coverage. However, the cancellation date cannot be extended because it
could allow situations where producers could adversely select against
the program. Since the provisions have been changed to reference the
cancellation date, concerns involving different sales closing and
cancellation dates are resolved because insurance does not attach
before the cancellation date.
Comment: A commenter stated they agree with the proposed action in
section 2(g)(3) (redesignated section 2(g)(4)) if the insured entity is
dissolved.
Response: FCIC has retained the provision in the final rule.
Comment: A commenter stated that, in section 2(g)(3)(ii)
(redesignated section 2(g)(4)(ii)), presumably the phrase ``* * *
unless canceled by the cancellation date prior to the start of the
insurance period'' refers to crops with a cancellation date later than
the sales closing date; otherwise, this would not be possible when the
insured entity dissolved ``On or after the sales closing date * * *''
Response: As stated above, FCIC revised the provision so that the
30 days now refers to the cancellation date. Therefore, cases in which
the sales closing date and cancellation date are different should no
longer be an issue.
Comment: A commenter suggested that section 2(k) be revised by
changing ``* * * any applicable consequences * * *'' to ``* * * any
other applicable consequences * * *'' to clarify that these would be in
addition to ``* * * the consequences in section 6(g) * * *''
Response: FCIC has revised the provision as recommended because
there may be other consequences, such as voidance of the policy under
section 27, disqualification and civil fines under 7 CFR part 400,
subpart R, or other applicable civil, criminal or administrative
sanctions, if information has been misreported.
Section 3 Insurance Guarantees, Coverage Levels, and Prices
Comment: A few comments were received regarding section 3(b). A few
commenters did not think the first parenthetical, which relates to CAT
was necessary. A commenter stated the definition of CAT already
provides that revenue coverage is not available for CAT. Another
commenter stated if FCIC is insistent on restating this exclusion, then
a separate subsection would be more appropriate. A commenter stated the
provisions could be rewritten to reduce the length and to improve
clarity. Since section 3(b) makes no reference to the same price
percentage, presumably it is intended to address ``the same coverage''
(level and type of protection) but with the added phrases, it is not
clear. Instead of indicating a choice between CAT and additional
coverage, and then a choice of additional coverage level, consider
simply requiring the same level of coverage (which will be either CAT
or one of the additional levels). The commenter requested FCIC consider
their other comments about clarifying the terminology for the different
choices of protection (amount of insurance, yield coverage for those
crops for which revenue protection is not available, yield protection,
or revenue protection). The commenter questioned if it is necessary to
distinguish between ``yield coverage'' and ``yield protection.'' A
commenter stated FCIC employs the term ``yield coverage'' which is not
a defined term. The Basic Provisions define the term ``coverage.'' If
``yield coverage'' and ``coverage'' are synonymous, FCIC should use the
defined term, i.e., ``coverage.'' If the terms are not identical in
meaning, the commenter stated FCIC must define ``yield coverage.'' This
provision is unnecessarily confusing and, perhaps, should be further
subdivided. A commenter stated the current Crop Provisions require
producers to purchase the same levels of coverage on both irrigated and
non-irrigated units. It is the commenter's position this provision is
unnecessarily restrictive and that producers who grow both irrigated
and non-irrigated crops should be allowed to purchase different levels
of insurance to better match coverage to the overall level of risk
associated with each practice. By not providing producers the
flexibility to match coverage to a specific practice, the agency forces
producers to underinsure their irrigated crops due to the costs
associated with insuring non-irrigated crops at higher levels.
Producers should be allowed to select a single level of coverage for
irrigated units and a different coverage level for non-irrigated units
insured on their policy. To safeguard against possible abuse of this
provision, a producer's choice for non-irrigated coverage should be
limited to the same level or lower than the coverage level selected for
irrigated units. The commenter urged FCIC to include this change in the
final rule and provide producers the flexibility to select appropriate
levels of coverage for their crops.
Response: The provisions have been revised by removing the first
parenthetical phrase regarding CAT coverage, separating the provisions
into subsections, and removing other unnecessary information for
clarity. Additionally, the provisions have been revised to clarify the
producer must select the same plan of insurance (e.g., yield
protection, revenue protection, actual production history, amount of
insurance, etc.), the same level of coverage (all catastrophic risk
protection or the same level of additional coverage), and the
percentage of the applicable price. Further, the term ``yield
coverage'' has been removed from the provisions because it was
confusing with the term ``yield protection.'' Therefore, no definition
is required. Since no change was proposed to allow separate coverage
levels for irrigated and non-irrigated acreage, and the public was not
provided an opportunity to comment on the recommended change, the
recommendation cannot be incorporated in the final rule.
Comment: A few comments were received regarding high-risk land. A
commenter requested other coverage levels be allowed for high-risk
land, not just catastrophic risk protection. The commenter suggested
the producer be given the choice of any level of coverage up to the
buy-up level of coverage the producer selected for the non high-risk
land. Another commenter stated if the producer chose revenue protection
on non high-risk ground, then the producer should have the choice of
either revenue protection or non revenue protection on the excluded
high-risk ground. If the producer did not choose revenue protection on
the non high-risk ground, they should not be able to select it on their
excluded high-risk ground. Requiring the level and type of coverage on
the excluded high-risk ground to be the same or lower than what is
allowed on the non high-risk ground alleviates any concern of the risk
of adverse selection. This would not affect the producer that farms all
non high-risk ground (Producer A) or the producer who farms all high-
risk ground (Producer B). These producers can
[[Page 15799]]
consider the cost and coverage and arrive at a level and revenue/non
revenue selection that best fits their circumstances. The commenter
stated there is a large number of producers (the commenter called this
group Producer C) who have ground in the same county that is rated both
high-risk and non high-risk. Currently and as part of the proposed
rule, this group of producers has two choices: insure all high-risk and
non high-risk at the same level and type of coverage, or insure the non
high-risk ground on a buy-up policy and exclude the high-risk ground
and not insure it or only insure it at the catastrophic level. Producer
A in this county who farms all non high-risk ground might choose 70-80
percent coverage while Producer B who farms all high-risk ground might
choose 55-65 percent coverage (high-risk premium rates are from 1-to-3
times higher--sometimes even higher--than non high-risk rates for the
same level and type of coverage). The commenter stated, for example, in
Wayne County located in southern Illinois using a 120-bushel APH on
corn and 2006 crop year rates: Producer A (non high-risk ground)
chooses 70 percent RA coverage, which costs $11.24 per acre and
provides $217.56 coverage per acre. Producer B (all high-risk ground
classified AAA) chooses 55 percent CRC coverage, which costs $15.57 per
acre and provides $170.94 coverage per acre. Producer C, whose farming
location is 50 percent non high-risk and 50 percent high-risk under the
proposed rule has four choices: (Option 1) insure all of their farm at
70 percent RA coverage (like Producer A) incurring premium on their non
high-risk ground of $11.24 per acre and coverage of $217.56 per acre;
but their high-risk rate is $30.47 per acre for the same $217.56 per
acre coverage (three times higher than non high-risk ground); (Option
2) insure all of their farm at 55 percent RA (like Producer B)
incurring premium on their non high-risk ground of only $5.22 but
lowering their coverage to $185.19, which makes their entire policy a
lot less responsive to drought and revenue losses at this lower
coverage level on higher elevation farm ground; (Option 3) Producer C
can insure their non high-risk ground at 70 percent RA coverage and
request a High-Risk Land Exclusion Option and not insure their high-
risk ground, which gives them no coverage on their high-risk ground; or
(Option 4) insure their high-risk ground with a high-risk CAT policy,
which will only cost them the $100 administrative fee for all of their
high-risk acres but only providing them with coverage of $66 per acre
and they would not be provided optional units or replant coverage.
Neither Option 3 nor Option 4 offers the producers much coverage.
Option 1 makes the cost of the high-risk ground prohibitive and would
cause some producers to insure high-risk ground at a higher level than
they would have had they had the option of choosing a lower level on
their high-risk ground. Option 2 lowers the coverage on the non high-
risk ground to a less responsive area not really covering them well in
a drought or low revenue loss. All Producer C wants is to be able to
make the same choice Producer A was able to make on their non high-risk
ground and Producer B was able to make on their high-risk ground. The
commenter stated there are more acres of high-risk land than total
acres covered by the several different specialty crops or other
provisions provided for practices such as organic farming. Thus, there
are a lot more producers with the dilemma of having high-risk ground
and non high-risk ground than producers who are affected by organic
practices or producers who grow a lot of different insured specialty
crops. The commenter stated if high-risk rates are actuarially sound,
(it appears if they are anything, they are too high when compared to
non high-risk ground) giving producers the choice of the same or a
lower level of coverage and the same or a lower type of coverage on
their high-risk ground compared to their non high-risk ground should
not be giving FCIC or the insurance providers any more exposure than
they already have because this choice is already given to the producer
who only has high-risk ground and reduces the risk of producers
carrying an unduly higher level of coverage on their high-risk ground
because they want or need a higher level of coverage on their non high-
risk ground. Administratively, this choice should not be a big change
because a producer is already given a choice of a High-Risk Land
Exclusion Option on their high-risk ground with the option of buying a
high-risk CAT policy. This proposal would only let the producer have
additional choices of type and levels of coverage above the
catastrophic policy on their excluded high-risk land but the same or
below the level or type of coverage carried on their non high-risk
ground.
Response: Since CAT coverage is not available with revenue
protection, a clarification was added in the proposed rule to specify
if the producer has revenue protection and excludes high-risk land; the
CAT coverage will be yield protection only for the excluded high-risk
land. With respect to allowing differing additional coverage levels for
non high-risk and high-risk land when the high-risk land is excluded,
FCIC did not propose the change and the public was not provided an
opportunity to comment on the recommended change. Therefore, the
recommendation cannot be incorporated in the final rule. No change has
been made.
Comment: A commenter stated FCIC establishes two standards
throughout the Basic Provisions: one applies to crops for which revenue
protection is not available and the other to crops for which revenue
protection is available, apparently without regard to whether the
insured selects yield protection or revenue protection. The commenter
questions FCIC's penchant for this classification. If an insured
selects yield protection for a specific crop, regardless of whether
revenue protection is also available, the commenter contends the
standards applicable in that situation should be comparable to those
that apply if revenue protection is not available, i.e., the insured
must purchase yield protection. FCIC should establish one set of
guidelines for yield protection, regardless of whether it was one of
two options or the only option. The commenter stated the confusion
engendered by this distinction is well-illustrated in sections 3(c) and
(d). The commenter contended it is more logical to differentiate
between policies for which the insured selects yield protection and
those for which the insured selects revenue protection. If revenue
protection is not available, the insured automatically will default
into the former category; if revenue protection is available, then the
insured's election is dispositive.
Response: FCIC has revised and separated the provisions to clarify
that yield protection and revenue protection are separate plans of
insurance that are available for the same crops. FCIC has also
clarified that the other plans of insurance (i.e., APH, dollar amount
of insurance, etc.) are available for those crops for which revenue
protection is not available. Now within each plan of insurance or
category of plans of insurance, there are provisions regarding the
changes to coverages, prices, etc. The provisions regarding yield
protection and revenue protection refer to ``if available for the
crop'' to allow flexibility in the expansion of these plans of
insurance. As stated above, yield protection is not synonymous with APH
because the pricing mechanisms are different between the two and they
are considered as separate plans of insurance.
Comment: A few comments were received regarding the proposed
Harvest
[[Page 15800]]
Price Option. A commenter stated they support allowing producers to
exclude the Harvest Price Option rather than having to elect to receive
it. This helps avoid the potential for producers not receiving a
benefit they ultimately wished to have and the commenter urged FCIC to
include this change in the final rule. The commenter also suggested
producers should be able to elect to receive the Harvest Price Option
without having to purchase revenue protection and urged FCIC to also
make this modification in the final rule. The commenter quoted another
person as stating, ``This would provide growers with replacement
coverage that would replace lost bushels at their current market value
and growers could then cover lower prices with forward contracts,
futures, options, and FSA commodity programs.'' While this proposed
revision offers producers yet another risk management option to
consider, its viability is predicated on appropriate rating. Another
commenter stated they are concerned about the proposed changes that
potentially diminish the protection and overall value of coverage. The
provision that limits the harvest price option to crops with revenue
protection, in their view, is overly restrictive. To enhance a
producer's ability to better compliment their crop insurance coverage
with other farm program support and private risk management tools, the
commenter recommends the producer be allowed the flexibility to select
the harvest price exclusion with the option to purchase an upside price
replacement coverage endorsement.
Response: Allowing producers to elect the harvest price exclusion
rather than producers having to elect to receive the harvest price will
be advantageous to many producers. In the past, the vast majority of
producers elected this additional coverage. FCIC will retain this
provision in the final rule. It is not possible to have a harvest price
with a yield protection or APH plan of insurance because it would be
revenue coverage. Further, the harvest price is based on commodity
exchanges and for many crops, such exchanges are not available. FCIC
has revised the provisions to allow expansion of revenue coverage as
the ability to determine projected and harvest prices are developed. If
there are private insurance products available for supplemental price
protection, producers are not precluded from purchasing such policies,
provided that such policies have been determined by FCIC to not shift
any risk to the underlying policy. Private supplemental policies or
other policies submitted and approved under section 508(h) of the Act,
may be utilized to provide additional insurance protection both for
crops covered under revenue protection and those that are not. No
change has been made.
Comment: A commenter stated the references in sections 3(c)(2), (i)
& (ii) to ``* * * percentage of the price election or amount of
insurance * * *'' suggest policyholders may choose a percentage of the
amount of insurance on dollar plan crops. Because this is contrary to
the Crop Insurance Handbook Section 8A(2), which states the producer
may ``* * * select one of several dollar amounts of insurance * * *'',
they suggested revising it to ``* * * the amount of insurance or the
percentage of the price election * * *'' or at least adding ``the''
before ``* * * amount of insurance'' to separate it from ``price
election,'' and rewriting (i) and (ii) since the amount of insurance
would not be multiplied by a percentage.
Response: As a general rule, the commenter is correct that for
dollar amount of insurance plans, the producer selects a percentage of
the dollar amount of insurance, akin to the level of coverage, not the
percentage of price election. Therefore, in the provisions relating to
plans of insurance other than revenue and yield protection, they have
been revised to distinguish between amounts of insurance and percentage
of the price elections.
Comment: A commenter proposed changing language in section 3 to ``*
* * at the 100 percent of the projected price or price election for
crops for which revenue protection is not available or equivalent
coverage * * *'' The commenter stated as currently written, 100 percent
price election would only apply to crops in which revenue protection is
not available. The current price election definition only refers to
crops for which revenue protection in not available.
Response: As stated above, FCIC has revised section 3 to clearly
distinguish between revenue protection, yield protection, and all other
plans of insurance. A commenter requested that revenue coverage only
receive 100 percent of the projected price and harvest price. During
the review of this comment, FCIC determined that the commenter was
correct and that only 100 percent of the projected price and harvest
price could be used because of rating issues. Therefore, FCIC has
clarified that under revenue protection, the producer will receive 100
percent of the projected price and harvest price. Under yield
protection and all other plans of insurance, producers may select a
percentage of the applicable prices or dollar amounts of insurance.
Comment: A commenter stated as a prefatory note, section 3(c)(2)
provides that, for a crop for which revenue protection is not
available, an insured ``may change the coverage level or percentage of
the price election or amount of insurance * * *'' However, section
3(d)(1), which applies to a crop for which revenue protection is
available, an insured may change the ``coverage level.'' By
implication, if revenue coverage is available the insured may not
change the percentage of the price election. However, section 3(d)(2)
refers to ``the percentage of projected price and harvest price
selected'' by the insured, thereby suggesting that the insured may
choose a percentage of the price if revenue protection is selected. A
similar reference appears in section 3(d)(3). This seemingly
conflicting language is confusing. The commenter recommended that FCIC
clarify subsection (d) and, in particular, state clearly, that an
insured who purchases revenue protection may not select a percentage of
the price; 100 percent of the price should be the only option.
Response: As stated above, redesignated section 3(c) has been
revised to only allow 100 percent of projected and harvest prices under
revenue protection. Producers will be able to choose a percent of the
projected price under redesignated section 3(d) relating to yield
protection and all other plans of insurance.
Comment: A few commenters stated periods of extended drought or
other recurring loss events can erode producers' individual yield
history to unusable levels. The commenters encouraged FCIC to develop a
solution to this problem. Producers affected by successive years of
disastrous weather are also those who can least afford to be
underinsured. The commenters were aware FCIC has been researching the
problem for several years, but this important deficiency is not
addressed in the proposed rule. Another commenter stated basic crop
insurance works okay until one hits a number of consecutive years of
bad crops due to drought and hail. The resulting lowering of APH makes
this insurance ineffective and also affects any disaster relief due to
lowering APH and National Agricultural Statistical Service (NASS)
yields in a prolonged drought area. The commenter states this problem
needs to be fixed. The commenter proposed excluding the years of a
disaster declaration from the APH calculation and stated until this is
done, Federal crop insurance will always fall short of covering the
needs
[[Page 15801]]
of production agriculture. The commenter provided information from his
farm in drought stricken South Central Montana and hoped it would be of
some use to show the effect of declining yields.
Response: FCIC is continuing to look at ways to improve the program
to benefit producers and solve problems such as the affects of
declining yields. When it discovers such an improvement, FCIC will take
such action as necessary for implementation.
Comment: A commenter stated FCIC's record-keeping requirements for
grain type crops, for both APH records and loss claims are not
attainable for policies with optional units on farms with central
drying or storage. The requirement of disinterested third party
determinations is unworkable in all parts of the U.S. for these kinds
of operations. Authority similar to the new flexibility in the 2007
Crop Insurance Handbook for APH records (page 217, section 10) needs to
be expanded to apply to multiple unit policies for both APH and claims
for this category of crops.
Response: Redesignated section 3(g)(3) requires producers to
maintain written verifiable records by unit. ``Verifiable records'' is
defined as ``contemporaneous records of acreage and production provided
by the insured, which may be verified by FCIC through an independent
source, and which are used to substantiate the acreage and production
that have been reported on the production report.'' The requirement for
disinterested third parties relates to quality adjustment and that
requirement should not adversely affect any producer who utilizes a
central storage facility because it involves the person who is
authorized to pull the samples, not maintain the records.
Comment: A commenter recommended changing the production deadline
in section 3(e) (redesignated section 3(f)) to be the sales closing
date and not the earlier of the acreage reporting date or 45 days after
the cancellation date. The commenter also recommended adding the
additional clarification of ``If production is not reported by the
production reporting deadline, we are not able to update until the
following crop year.''
Response: Since no changes to these provisions were proposed and
the public was not provided an opportunity to comment, the
recommendation cannot be incorporated in the final rule. No change has
been made.
Comment: A commenter stated the added phrase in section 3(e) (about
the possibility of a different production reporting deadline when a
written agreement is requested) (redesignated section 3(f)) results in
two different exceptions to the usual deadline. They suggested either
putting parentheses around the first exception [``* * * (unless
otherwise stated in the Special Provisions), except as specified * *
*''] or changing ``* * * except as specified * * *'' to ``or as
specified * * *''
Response: There are two exceptions to the stated deadlines and FCIC
has clarified this language for readability. Further, FCIC has revised
the provision to correct the citation in the proposed language. The
correct cite should only refer to section 18 regarding requests for
written agreements, which must include a completed APH form, and must
be submitted by the sales closing date or acreage reporting date, as
applicable.
Comment: A few commenters stated they supported the provisions in
section 3(f) (redesignated section 3(g)), which permit producers to
correct misreported data by the production reporting dates without
penalty, and they urged FCIC to retain this proposed provision in the
final rule. Another commenter suggested with the added ``However * *
*'' phrase in section 3(f)(2) (redesignated section 3(g)(2)), FCIC
should consider if it is still correct for the first sentence to state
``* * * you will be subject to the provisions * * *'' The commenter
suggests changing it to read ``* * * 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 * * *''
Response: FCIC has retained the provision in the final rule. FCIC
has also revised redesignated section 3(g)(2) as suggested.
Comment: A commenter questioned if the reference to ``and 7 CFR
part 400, subpart G'' in sections 3(f)(3) and 3(g)(1) (redesignated
sections 3(g)(3) and 3(h)(1) respectively)) are necessary in addition
to the reference to section 3(e)(1) (redesignated section 3(f)(1)).
Response: The references to 7 CFR part 400, subpart G are necessary
because redesignated section 3(f)(1) only applies when no production
report is provided and it states that not more than 75 percent of the
producer's previous year's yield will be used. This provides the
maximum yield that can be assigned under redesignated sections 3(g)(3)
and (h)(1). For example, with respect to the failure to have written
verifiable records in redesignated section 3(g)(3), 7 CFR part 400,
subpart G, states that the yield will be a percentage of the
transitional yield depending on the number of years of verifiable
records that are provided. This yield may be less than the maximum
allowed in redesignated section 3(f)(1), in which case, the yield
determined in accordance with subpart G would apply. If the yield were
higher, the maximum in redesignated section 3(f)(1) would apply. No
change has been made.
Comment: A few comments were received regarding proposed section
3(f)(4). A commenter questioned if the provision means as a result of
an APH review or does this mean if the producer brings in hard copy
production and acreage information after the initial report of
production and acres, the insurance provider would need to consider
this information or the insured would incur a misreporting penalty. The
commenter questioned if the ``production reporting date'' of the policy
would be superseded if the production and acreage information were
being provided to correct misreported information. The commenter also
questioned if not required by an APH review, whether an insured could
submit information to correct a yield after an indemnity is paid and if
so, would the APH need to be corrected for the current year and the
indemnity revised. The commenter asked whether the allowance for an
insurance provider to correct the APH the following year provided the
tolerance was not exceeded is being removed from procedure. A few
commenters suggested the proposed revisions state the insurance
provider will make any corrections necessary ``* * * any time we
discover you have misreported any material information * * *'' but it
is not clear exactly how this will apply, such as whether the
corrections are subject to the APH tolerances in procedure. Perhaps the
intention to follow APH tolerance procedures is covered by the
statement ``* * * the following actions may be taken'' although this is
somewhat confusing since the ``following actions'' all use the word
``will'': ``We will correct * * *'' and ``You will be subject * * *''
[Maybe these details belong in procedure rather than in the policy, but
it needs to be clarified.] The potential confusion between ``may'' and
``will'' also extends to the linking ``and'' between (ii) and (iii)--
``and'' could suggest that all three subsections ``will'' apply rather
than ``may'' apply. A commenter stated that perhaps it could be deleted
and the semicolons changed to periods. One of the commenters stated
that changing ``may'' to ``will''
[[Page 15802]]
sends a stronger program integrity message.
Response: The phrase ``At any time we discover'' in redesignated
section 3(g)(4) means whenever the insurance provider becomes aware of
the error. It would not matter if it was a result of an APH review or
an insured providing corrected information. The production reporting
date is not superseded. The production report still must be provided by
the production reporting date and all corrections must be made by the
production reporting date or the consequences in section 6(g) will
apply. If a producer corrects a production report after the production
reporting date and the correction would result in a higher liability,
the liability will not be increased for that crop year but the
correction will apply to succeeding years. If the correction would
result in a lower liability, the producer's liability will be reduced
for the current crop year. FCIC has revised the provisions to require
the insurance provider to correct approved yields if they are not
correct, to correct the unit structure, and apply the provisions in
section 6 regarding misreporting, as applicable. It does not matter
whether this discovery occurs in the same crop year or subsequent crops
years. The insurance provider will correct the information and take the
appropriate actions. FCIC has changed the provision to specify ``will''
instead of ``may'' to make it clearer. The procedures will be changed
to conform to the policy provisions. However, when there are
inadvertent inconsistencies, the preamble to the Basic Provisions
states that the procedures will apply to the extent that they are not
in conflict with the policy provisions.
Comment: A commenter questioned whether it is FCIC's intent that
only data will be corrected (for example, APH databases), in section
3(f)(4)(i) (redesignated section 3(g)(4)(i)) but financial changes
(premiums, indemnities) will not be corrected. If it is FCIC's intent
that financial changes be made, making corrections for years subsequent
to the year for which there was incorrect information will likely be
difficult in some cases. For example, if an insurance provider gets a
policy via transfer in 2009, and an error is discovered relating to the
2007 year, the insurance provider will likely not have all necessary
information to correct claims, which may have occurred in 2007 or 2008.
Multiple insurance providers could be involved, and the insurance
provider that has the policy now may not be owed money but another
insurance provider may be owed money. Further, section 7 U.S.C. 1515
prohibits FCIC from imposing financial changes on insurance providers
after three years. Thus, the commenter assumed the proposed language
addresses data but not financial changes. Is this correct?
Response: Redesignated section 3(g)(4) provides provisions
regarding the insured's responsibility to provide accurate information
used to determine approved yields, and the actions that may be taken
when such data is found to be incorrect. FCIC has revised the
provisions to specify that if correct information would result in an
overpayment of premium or indemnity such amounts must be repaid. FCIC
has a responsibility to ensure that taxpayer dollars are spent properly
so it must require the repayment of overpaid amounts. However, FCIC
recognizes that this could be difficult if the producer has switched
insurance providers. FCIC procedures require the insurance provider to
make the corrections for the year for which they insured the policy and
collect the amounts owed. If the discovery of the incorrect information
is outside the three-year period specified in section 515 of the Act,
the insurance provider would have to collect the amounts owed from the
producer and submit the amounts owed to FCIC.
Comment: A commenter recommended that section 3(g)(1) (redesignated
section 3(h)(1)) be revised to allow insurance providers the ability to
revise yields that exceed the lower level yield edits in the same
manner as excessive yields if the insurance provider determines there
is not a valid basis to support the differences in the yields.
Response: FCIC is not aware of any lower level yield edits. Major
disasters can result in zero yields and they have to be accepted by the
system. Further, there is no benefit to producers to underreport their
yields since it has the effect of reducing their guarantee. If there
are instances where producers are shifting their production, which
results in a high yield on one unit and a very low yield on another,
redesignated section 3(h) specifies that the high yield may be adjusted
but the low yield would remain the same. To allow adjustment of the low
yield would result in no consequences for shifting production and
adversely impact program integrity.
Comment: A commenter recommended additional language be added in
section 3(g)(2)(ii) (redesignated section 3(h)(2)(ii)), such as the
following: ``Appraisals for yields in excess of 400% of T-Yields cannot
be accepted as production evidence for following years.''
Response: Since no changes to these provisions were proposed and
the public was not provided an opportunity to comment, the
recommendation cannot be incorporated in the final rule. No change has
been made.
Comment: A few comments were received regarding the phrase ``valid
basis'' in section 3(g)(2)(iii) (redesignated section 3(h)(2)(iii)). A
commenter stated FCIC should consider defining ``valid basis.''
Producers are confused when records can be provided to support yields
that are being reduced due to no valid basis. Another commenter
recommended the provisions be reworded to remove the term ``valid
basis.'' ``Valid basis'' has been defined to mean a difference in
yields from one farm to another for purposes of the excessive yield
procedure. This term is not appropriate for use with inconsistent
approved APH yield procedures. This procedure does require that the
inconsistent approved APH yield be higher than the others but the
primary qualification is the acreage triggers must also be met. APH
reviews are required for excessive yield situations but are not
required when an inconsistent approved APH yield meets the acreage
triggers.
Response: FCIC does not agree the phrase ``valid basis'' needs to
be defined because it intends for the common meaning to apply. The term
``valid'' commonly means there is a legitimate, sound, well-founded
reason. In this case, there must be a valid reason for the inconsistent
yields. For example, can the difference in yield be attributed to
significantly different soil types, microclimates, different
topography, etc. There must be some verifiable reason, agronomically
based, that would support the difference in yields. FCIC has added the
term ``agronomic'' for clarity.
Comment: A few comments were received regarding the hail and fire
exclusion. A commenter supported FCIC for making the hail and fire
exclusion available for revenue protection. The commenter hoped the
discount for excluding hail and fire for MPCI will be equitable to what
is charged in the private sector. With the increased subsidies and
lowered credit for the hail and fire exclusion, the dollar amount for
the exclusion becomes much less important to the producer and fewer
producers exclude hail and fire perils because the benefit is so small.
A producer with a 75 percent coverage level policy receives 55 percent
subsidy. If they decide not to exclude hail and fire, 100 percent of
the hail and fire producer expense is subsidized, but only 55 percent
of the producer hail loss
[[Page 15803]]
cost is subsidized. Therefore, a producer receives less of a benefit by
excluding hail and fire from a MPCI policy. The more hail and fire
exclusions that are encouraged and excluded will reduce premiums paid
by policyholders and reduce FCIC's liability and subsidy payments. The
commenter stated it is important to note the hail and fire exclusion
was created to provide producers an option to substitute private hail
and fire coverage for such risk covered in the MPCI policy. It was not
the intent of Congress for FCIC to be in direct competition with the
wholly private crop hail insurance industry. Another commenter stated
although it is a basic principle of crop insurance that it should not
duplicate products or services that are available in the private
sector, the current approach does not fully honor that principle. This
approach allows a modest reduction or offset in MPCI premium rates for
producers who opt out of a single hazard such as hail or fire by buying
a private policy, but the method used to calculate that amount is
flawed and allows for a far smaller reduction than would be truly
justified by the decrease in likelihood of an indemnity. The commenter
stated they understand FCIC has contracted a study to analyze the
existing methodology that establishes the private hail/fire offset, and
to suggest ways to improve that methodology. Since FCIC intends to
complete implementation of the combined policy by the 2009 reinsurance
year, the commenter believes this process also provides an opportune
time to implement recommendations from the pending study and adjust the
private hail/fire offset provisions in the Basic Crop Insurance
Provisions, as well.
Response: FCIC can only reduce the premium for the hail/fire
exclusion in an amount commensurate with the risk. FCIC has previously
evaluated that risk but FCIC has contracted for a study of hail and
fire rate reductions and will implement appropriate changes based on
the results of the study. Further, the amount of subsidy is set by the
Act and FCIC does not have the discretion to change the manner in which
it is applied. Provisions allowing the exclusion of hail and fire
protection under revenue protection are retained in the final rule.
However, some additional study is needed to determine if hail and fire
coverage can be excluded from whole-farm units. Therefore, provisions
have been added indicating hail and fire coverage can be excluded from
whole-farm units only if allowed by the Special Provisions.
Comment: Many comments were received regarding the provisions in
section 3(k)(1) that address the availability of revenue protection if
someone, either the Secretary of Agriculture, Administrator of the Risk
Management Agency or other designated staff of the Risk Management
Agency believes market conditions are significantly different than
those used to rate or price revenue protection. A few commenters stated
they are particularly concerned that the rule contains three instances
where revenue protection could be denied and withdrawn. First,
producers are denied price protection whenever USDA believes a third
party has created unexpected market conditions. The rule states revenue
protection will not be available in the event of an occurrence that
``results in market conditions significantly different than those used
to rate or price revenue.'' The provision would create a considerable
amount of uncertainty in the reliability of revenue protection. Any
effort to determine how much, if any, change in price is attributable
to an act of a third person is speculative and would lead to
significant uncertainty relative to the reliability of revenue
protection. They urged this provision be deleted in the final rule or
that FCIC define the term ``significantly different'' to better
delineate the conditions upon which FCIC would terminate revenue
protection. A commenter believed FCIC should avoid taking on the
responsibility of imposing such a severe recourse and explore less
drastic options. One possible option to avoid this result may be to
reserve authority to simply look back at the requisite number of market
days prior to the event in question in order to establish an
appropriate price for revenue protection. A commenter opposed these
provisions on the basis that producers, who purchased revenue
protection in good faith, are being forced to suffer the consequences
of such catastrophic exogenous market events. It is unreasonable to
offer price protection to producers and then reserve the right to
withdraw the protection if the market suddenly moves unfavorably,
regardless of the source. Their position is based on the widely
accepted notion that no individual producer has the ability to
influence market prices. A commenter recognized that the Secretary of
Agriculture and FCIC must have the discretion to suspend revenue
protection in order to safeguard the ``Federal fisc'' and ensure the
financial integrity of the crop insurance program. However, the line
between discretion and caprice is a fine one. Moreover, given the
sensationalism endemic in the media, many news reports that suggest a
dire outcome often prove to be premature or hyperbolic. For this
reason, the commenter suggested that FCIC define the term
``significantly different'' or FCIC should delineate the conditions
upon which FCIC will terminate revenue protection. A commenter stated
when a producer has already purchased revenue protection it does not
seem fair that it can be reverted to yield protection if deemed
necessary by the Secretary of Agriculture or the RMA Administrator. The
commenter stated they understand the logic with preventing producers
who have not already purchased revenue protection from now doing so
with the new information, but to automatically switch those who have
already purchased the protection does not seem appropriate. It would
seem that an alternative solution could be developed and still protect
the pricing strategy developed by FCIC. A commenter believed more
information must be provided about the circumstances under which this
authority would be invoked. It could arbitrarily withdraw critical
coverage. For example, if the Secretary had possessed such authority in
2005, the commenter questioned whether it would have been invoked in
the aftermath of the market disruption that occurred with the
bottleneck in the Mississippi River transportation system in the wake
of hurricanes Katrina and Rita. If that is the case, such a decision
would cause grave harm to farmers who rely upon having revenue coverage
when engaging in forward marketing or similar transactions. A commenter
stated they have grave concerns about the proposed provisions. They are
confused by FCIC's comment stating the use of commodity exchanges is
relatively new. They stated that commodity exchanges have existed for
hundreds of years. The Chicago Board of Trade has been in existence
since 1848 and these marketplaces are incredibly stable and have
efficient methods of assimilating information and translating that
information into the value of commodities. The commenter stated FCIC's
comment that commodity exchanges can respond significantly and quickly
is correct. The commenter stated they would propose that ``the market''
has greater knowledge and information than RMA or the Secretary of
Agriculture. The commenter stated that to say the USDA can simply
nullify the program when they see fit, would be the same as a private
company (such as State Farm) telling their insureds the same thing.
Would someone purchase a
[[Page 15804]]
policy if they thought it might not be there later? The commenter
stated this provision seems to undermine the integrity of the program
and they believe it is unworkable. The commenter stated it is hard to
imagine how eliminating revenue protection during periods of price
volatility can be a positive element of the program. Producers
understand the elements of purchasing crop insurance. They understand
(after years of education) how the policies work and they know that
price volatility is part of the equation. Still, they see the
overwhelming benefit of purchasing policies. To set up a system where
agents and companies have to tell them that they are purchasing
something that may ``or may not'' be there later is inconceivable. The
commenter stated they strongly urge FCIC to eliminate this line of
thought in developing the Common Crop Insurance Policy. A commenter
stated the language allowing the suspension of revenue insurance if the
markets are deemed ``significantly'' different from those used to rate
the policy is vague, unnecessary, and undermines the purpose of revenue
protection. The commenter stated Revenue Assurance was developed in
1997 to protect pre-harvest marketing activities. In a bad year,
farmers rely on the policy to help fill pre-harvest contracts with
bushels provided through insurance valued at the current harvest rate.
Over the years, revenue insurance participation has increased because
producers find value in its stability. However, the proposed
``significant'' language introduces uncertainty which will destroy
producers' confidence. If the product's availability to protect pre-
harvest marketing activities is questionable, then producers will not
buy it and will just as soon revert to accepting delivery price at the
elevator than to purchase puts and calls through a broker. The
commenter understood the author of the proposed rule is trying to avoid
a replay of the Christmas Eve ``BSE Experience''; however, a suspension
of revenue insurance would affect about one million policyholders with
over twenty-three billion dollars of liability. On the contrary, there
were fewer than 5,000 livestock policies sold in 2006. When the
livestock policy is ``turned back-on,'' the producer can purchase a
policy the next business day. In contrast, revenue protection cannot be
purchased until the next crop year. The commenter argued that revenue
price discovery is based on a period of average daily settlements. A
``hiccup'' in trading would be absorbed over the discovery period
lessening the effects of a ``significant'' event. Likewise, the
commodity exchange has trading-limit safety valves which would
naturally limit the effects of a ``significant'' event. To ensure the
certainty of revenue protection providing protection for pre-harvest
marketing activities, the commenter opposed any language that
arbitrarily and vaguely gives the power to suspend the product or
revert it to yield protection. A commenter stated if an insured buys
this policy before an announcement he or she will have revenue
protection, but if after the announcement he or she will have only
yield protection. This will seriously weaken FCIC in insured's eyes.
The commenter asked what is the person making this decision going to
base it on. Markets can go up or down a great deal based on not only
crop production but world events. The commenter questioned if it is
possible for the decision maker to stop sales and then turn them back
on if the market returns to normal. Many farm loans are based on
insurance coverage. If the producer obtains a loan based on revenue
protection and then revenue protection is suspended before the producer
obtains insurance the lender may not honor the loan agreement. A
commenter stated FCIC is proposing to set the projected price for a
crop if there is insufficient price information and no revenue
protection will be available. Producers who elected revenue protection
will automatically have yield protection, unless the policy is canceled
or the producer changes the plan of insurance by the cancellation date,
and the projected price determined by FCIC will be used to establish
the value of the guarantee and production to count. The commenter
stated they understand the use of a projected price for a crop, but
what protection does a customer have if they chose to insure both yield
and revenue and FCIC drops them to a yield policy with no revenue
coverage. The commenter asked if they should not have the opportunity
to elect not to carry the coverage if FCIC cannot offer the product.
The commenter questioned if FCIC should provide a deadline for the
issuance of the price. A commenter stated they are concerned that FCIC
reserves the right to convert previously purchased revenue protection
into yield protection without due consideration for the additional risk
shifted to producers as a result. Moreover, in differentiating between
events that occur before the announcement of the projected prices and
those that occur after, FCIC will create an administrative quagmire and
expose the program to abuse, such as backdating of applications. To
alleviate the burdens that always accompany the disparate treatment of
policyholders, the commenter suggested that, in the event section
3(k)(1) is triggered, all policies convert to yield protection. A
commenter stated section 3(k)(1)(ii) will be difficult for insurance
providers to administer. The commenter stated FCIC should consider
applying procedures outlined in section 3(k)(1)(i) to all producers if
conditions in section 3(k)(1) exist. A commenter stated both sections
3(k)(1)(i) and (ii) refer to announcements that occur before the sales
closing date. As this term is uniform for both subsections, it should
be incorporated into subsection (1). In this regard, the commenter
believes FCIC should delete the reference to the sales closing date. It
is axiomatic that an insured cannot elect coverage after the sales
closing date. Moreover, section 3(k)(1) does not refer to announcements
that occur after the sales closing date. What happens in such
instances? If such announcements do impact the operation of the policy,
the policy should so state. A commenter stated that in section
3(k)(1)(i) & (ii) the use of ``announcement'' in the lead-in to (1) and
in the subparts creates a source of potential ambiguity. The word, when
used in the subparts, suggests some form of governmental declaration,
which differs from use of the same word in the lead-in. To promote
clarity, the lead-in should read: ``If there has been an event that
occurs during or after trading hours, including but not limited to a
news report, which is believed * * *''
Response: The provisions that were initially proposed in section
3(k) have been moved to redesignated section 3(c). With respect to
proposed section 3(k)(1), there may be difficulties in determining when
market conditions are significantly different than those used to
determine the rates. Therefore, FCIC has removed these provisions. To
ensure actuarial soundness, a price volatility factor is included and
FCIC has capped the amount the price can change in the CEPP. This will
allow FCIC to determine the maximum liability for the purposes of
rating. With respect to proposed section 3(k)(2), FCIC also removed the
proposed provisions that would set the harvest price equal to the
projected price if the required data were not available to set the
harvest price. Instead, in section 3(c), FCIC has included provisions
that specify that revenue protection will continue to be provided but
FCIC will establish the harvest price. If the projected price cannot be
established, FCIC will
[[Page 15805]]
establish the projected price but revenue protection will not be
provided. The producer will receive yield protection unless the policy
is canceled by the cancellation date or the producer changes the plan
of insurance by the sales closing date. However, the Act is very clear
that only losses due to natural disasters are covered. This would
include the market price. Therefore, if FCIC can establish that the
change in the market price was due to an uninsured cause of loss, such
price change cannot be covered under the policy.
Comment: A few comments were received regarding section 3(k)(2). A
few commenters stated the proposed language states if the projected
price cannot be calculated, the policy reverts back to a yield
protection policy. This could leave only 10 days for an agent to
contact all of their policyholders. This could create a logistical
nightmare for the agent needing to contact a large number of
policyholders so they would be notified their revenue policy was
switching to a yield policy and not allow them ample opportunity to
change their coverage levels or cancel their policy. A few comments
were received regarding section 3(k)(2)(ii), which specifies in the
event that the fall harvest price cannot be calculated by the
procedures outlined in the CEPP, the harvest price will be set equal to
the projected price. The premium rates will reflect this risk so no
adjustment to the premium rates will be made if such action occurs.
They stated this language constitutes the denial of revenue protection
to the grower after the fact and further denies the grower the right to
a premium refund for coverage he or she does not receive. They stated
neither of these situations is fair to the producer that purchased
revenue protection to protect them from changes in the market
environment. They recommended rather than canceling the affected
revenue insurance contract, in the event of insufficient price
information, a provisional adjustment to the CEPP be made. They believe
that significant additional effort needs to be put forth to develop
reasonable alternatives short of arbitrarily denying revenue coverage
to the producer. FCIC should develop methods for looking back at a
sufficient number of trading days in order to capture the market
activity needed to establish either a projected or a harvest price that
ensures revenue protection is always available. In the event of a
potentially market altering occurrence, they see no reason why FCIC
cannot simply look back at market activity in the days prior to this
market changing event to establish the projected price if it is not
deemed appropriate to include days affected by the event. They also do
not consider adjustments to premium rates sufficient in the event that
price protection is denied. However, if provisional adjustment fails to
establish a fall price, it is the commenters' position that, at the
very least, the producer should be rebated the premium difference
between revenue protection and yield protection products. A commenter
also stated the projected price is not always appropriate for
determining both the value of the production guarantee and the value of
the production to count for indemnity purposes.
Response: FCIC understands there may be very little time for agents
to notify their policyholders if revenue protection is suspended. Based
on historical trading, it is unlikely this will occur. However, setting
the pricing period earlier to allow more time between the release of
the price and the sales closing date may result in a reduction in the
accuracy of the price. FCIC has determined that the benefit obtained by
the additional time is more than offset by the potential for a price
that does not accurately reflect the market price at the time insurance
is purchased. If FCIC later determines that moving the price discovery
period does not adversely affect the accuracy of the pricing, FCIC will
revise the discovery period at that time. With respect to the
calculation of the projected price, the CEPP contains information
regarding the prices to be used for each crop's projected price and
allows for additional daily settlement prices to be included based on
alternative contracts if enough prices are not available in the
specific contract applicable to the crop. As stated above, FCIC will
consider all comments and make appropriate revisions when the
provisions of the CEPP are finalized. The producer should not be
required to pay premium for revenue protection if revenue protection is
suspended. Therefore, the provisions have been revised to specify if
the harvest price cannot be calculated by the procedures outlined in
the CEPP, FCIC will determine the harvest price and revenue protection
will continue to be effective. Additionally, the proposed provision
that specified the premium would not be reduced has not been retained
in the final rule. It is appropriate to include a provision in the
policy clarifying revenue protection will not be available for the crop
year if the required data for establishing the projected price cannot
be calculated in accordance with the CEPP. If the projected price
cannot be determined, then appropriate premium rates for revenue
protection cannot be calculated.
Comment: A comment was received regarding section 3(k)(2)(i)(A) &
(B). The commenter stated since (i) states ``* * * no revenue
protection will be available'', the opening phrases of (A) [``If
revenue protection is not available''] & (B) [``In such instances,'']
are not necessary and should be deleted.
Response: The proposed provision has been revised and moved to
section 3(c).
Comment: A commenter stated it can be very confusing for the
producer if they sign up for revenue protection, which gets changed
this year to yield protection, but next year would possibly be changed
back to revenue protection. The commenter asked when it reverts back to
revenue protection. The commenter asked whether it would be before they
may possibly determine the market conditions are significantly
different than the price used to establish rates again. Another
commenter stated the last sentence in section 3(k)(3) should be revised
to state ``* * * unless you change the type of protection * * *'' so it
does not imply canceling the crop insurance policy.
Response: If the producer elects revenue protection and revenue
protection is not provided for the current crop year, the producer's
coverage will automatically be changed to yield protection for the
current crop year and revert back to revenue protection for the next
crop year as long as the projected price can be determined in
accordance with the CEPP. Currently, changes in plans of insurance,
such as switching from CRC to RA, require cancellation and rewriting of
the policy. Now, producers can change plans of insurance by simply
changing coverage. FCIC has clarified this provision accordingly and
moved it to redesignated section 3(c).
Section 4 Contract Changes
Comment: A commenter asked if it is necessary to add ``* * * or the
Commodity Exchange Price Provisions'' to the list of changes in section
4(b) that can be reviewed on the web site. They asked if it would be
considered part of the ``policy provisions.''
Response: It is important to inform the public that any changes to
the CEPP can be viewed on RMA's Web site not later than the contract
change date contained in the Crop Provisions. The CEPP, if applicable,
is a part of the policy and is listed with the other applicable
documents in the definition of ``policy.'' The change has been retained
in the final rule.
[[Page 15806]]
Comment: A commenter stated section 4(c) still states the
policyholder will receive ``a copy of the changes to the Basic
Provisions and Crop Provisions, and a copy of the Special Provisions *
* *'' without any mention of the new CEPP. Reference to the CEPP should
be added here or the other references should be made more generic as in
(b).
Response: The producer should be provided a copy of changes to the
CEPP not later than 30 days prior to the cancellation date for the
insured crop. The provisions have been amended accordingly.
Section 6 Report of Acreage
Comment: A few commenters believe the proposal should allow a
producer who discovers an error in an acreage report to correct the
acreage report without penalty provided that: (1) The producer offers
evidence through FSA documentation, GPS mapping, or other verifiable
means; and (2) the initial report was an inadvertent error rather than
an attempt to misreport acres, as determined by the insurance provider.
A few additional commenters believe FSA should also provide
documentation of historical compliance by the producer demonstrating
the lack of any pattern of misreporting in addition to the two items
listed above.
Response: Many acreage-reporting errors may be inadvertent
mistakes. However, it is difficult to determine when a mistake is or is
not inadvertent. Further, whether the error was inadvertent or not, it
could have the effect of changing liability, premiums, and indemnities.
Therefore, accurate reporting is critical on each acreage report. This
is different than reporting SSNs and EINs because misreporting there
does not affect the coverage and the SSN and EIN are only reported on
the application. There are numerous producers who have not filled out
an application in years and they may not know their SSN or EIN was
misreported. However, the current provisions do allow revisions without
penalty in certain instances, including those in which information is
clearly transposed or when the insurance provider or someone from USDA
caused the error. No change has been made.
Comment: A commenter stated FCIC should allow producers to report
all acreage information to their crop insurance agent or to FSA on a
field-by-field basis. This information could then be downloaded to the
other agency. Many of the problems in getting accurate information stem
from forcing producers to report their acreage twice, in two different
formats, and with two different deadlines for FSA and FCIC. The
commenter stated they are always comparing information that has been
reported to them to what has been reported to FSA. However, the real
problem is by the time they find a difference, it is too late to make
any changes. FCIC also forces producers to report acreage with 100
percent accuracy, which is not possible. The commenter stated almost
all cases he has seen of misreported acreage are inadvertent errors,
and there needs to be allowance for those. There is no incentive for a
producer to misreport acreage. If producers over-report, they pay
additional premium. If they under-report, their liability cannot be
increased at loss time, so they get a decreased loss payment. If
producers do not want to insure some of their crop(s), they do not have
to buy insurance at anything but the CAT level, which is basically
free. The commenter stated FSA is just completing the digitizing of
their maps in their area and that is a good first step in standardizing
the reporting process for producers.
Response: For crop insurance, producers must report acreage of a
crop on a unit basis since the guarantee and indemnity is computed for
each unit. FSA requires reporting by Farm Serial Number (FSN). The crop
acreage within an insurance unit and within a FSN is not necessarily
the same number of acres. If producers have many small fields and they
report each field by line on the acreage report, the chance of
transposed numbers or omitting a field greatly increases. However, as
stated above, misreporting acreage, regardless of the reason, can
affect liability, premiums, and indemnities. Therefore, every effort
must be made to ensure accurate reporting. FCIC is currently working
with FSA to find common identifiers for acreage that would allow
producers to file one acreage report that can be used by both FSA and
crop insurance. No change has been made.
Comment: A commenter stated section 6(a)(3)(ii)(C) identifies when
the acreage report is due for planted, late planted and prevented
planting acreage. In the past couple of years, the commenter has had
situations in Arkansas and Mississippi where acreage was planted more
than five days after the end of the late planting period. The commenter
stated according to section 6(a)(3)(ii), (C) is applicable as the
acreage reporting deadline because (A) and (B) had already passed. The
commenter stated the producer could not have submitted a timely acreage
report because the producer did not finish planting until after the
indicated acreage reporting deadline. The commenter stated this was an
acceptable practice in those areas because of how the dates were
established. The commenter recommended this item be extended from 5
days after the end of the late planting period to 15 days after the end
of the late planting period to account for these situations.
Response: The end of the late planting period is the last date the
crop can be planted and be insurable unless the acreage was prevented
from being planted. If the producer plants acreage after the late
planting period, the producer is still required to submit the acreage
report within the 5 days after the end of the late planting period. In
such case, the producer should list all acreage of the crop. Acreage
planted before the end of the late planting period should be listed as
insurable and the planting dates provided. Acreage planted after the
end of the late planting period should be listed as uninsured unless
the insured crop was prevented from being planted, and the producer
wants to insure it as planted acreage. No change has been made.
Comment: A few comments were received regarding section 6(c)(5). A
few commenters recommended the provisions be amended to require a
producer to report on a daily basis, any acreage planted during the
late planting period. One of the commenters stated this information is
necessary to apply the coverage reductions for late planted acreage
described in section 16. A commenter stated this provision should
address what happens if the acreage is not reported by day. The
commenter asked if it will be assumed that all of the acreage was
planted the date planting is complete for the unit. A few commenters
stated there has been some confusion in the past as to the appropriate
date to enter on an acreage report when the planting of a unit takes
more than one day. To bring clarity to this issue, FCIC proposes to
revise section 6(c)(5) to state the date to be entered on the acreage
report must include the final date acreage was planted on the unit. The
common sense approach to acreage reporting proposed in section 6(c)(5)
should be retained in the final rule.
Response: FCIC has revised the provisions to combine sections
6(c)(1) and (5) because both are dealing with the amount of acreage
planted before the final planting date and planted during the late
planting period. Redesignated section 6(c)(1)(ii) requires the producer
to report the amount of acres planted each day during the late planting
period and this requirement is retained in the final rule. Such
information is necessary
[[Page 15807]]
to determine the proper guarantee or dollar amount of insurance under
section 16. The commenters are correct that the consequences of not
reporting the acres planted each day during the late planting period
should be included in the provisions. FCIC has revised the provisions
to indicate failure to report each date acres were planted in the late
planting period will result in the presumption that all acreage planted
in the late planting period was planted on the last day planting took
place in the late planting period and the guarantee will be adjusted
accordingly. Although revised for clarity, FCIC has retained the
provision that only requires the reporting of the last date the acreage
in the unit was planted for acreage planted on or before the final
planting date. This is for ease of administration because it provides a
total of the timely planted insured acreage.
Comment: A few comments were received regarding section 6(d)(1). A
commenter stated FCIC should amend this section to incorporate the
interpretation provided by FAD-58 even though FCIC did not propose
changes. Another commenter stated the 2006 LAM specifies the insurance
provider cannot lower acres unless they have determined there is not a
loss on the acreage. This results in the insurance provider going out
and inspecting the acreage. The commenter asked if this language would
be removed in the combo policy. The commenter stated that it seems
unnecessary for the insurance provider to have to go out and inspect a
crop where they are reducing liability. No one would want to reduce
liability if they think there could be a loss.
Response: Section 6(d)(1) states the producer can revise acreage
with consent from the insurance provider only when: (1) No cause of
loss has occurred; (2) the approved insurance provider's appraisal has
determined the crop will produce at least 90 percent of the yield used
to determine the guarantee; (3) the information on the acreage report
is clearly transposed; (4) the insurance provider or someone from USDA
committed an error regarding the information on the acreage report; or
(5) if expressly allowed by the policy. FAD-58 simply reiterates these
requirements. Therefore, there is no need to incorporate these FAD-58
provisions into the policy. FAD-58 also deals with the procedures
applicable once one of the criteria in section 6(d)(1) has been met and
specifies what must be done in order to make the acreage adjustment.
These procedures do not modify the requirements in section 6(d)(1) or
add any new criteria that would permit a revision to the acreage. They
just specify the manner in which such revision is made and this is no
different than the manner in which loss adjustment is done. These
requirements are more appropriately included in the procedures. FCIC is
not allowing producers to substitute one certification of acreage for
another without proof that the second certification is correct by an
acreage measurement. It is unlikely producers would want to reduce
liability or acres if they thought there could be a loss but if they
did not think a loss was probable they might want to reduce acres to
reduce premium. Therefore, an inspection must be made to ensure that
the reduction in acreage is legitimate. No change has been made.
Comment: A commenter stated FCIC seeks to revise section 6(d)(2) to
clarify once prevented planting acres are reported on the acreage
report, the producer cannot change the crop or the type reported as
being prevented from planting even though the acreage reporting date
may not have passed. However, the producer can amend the acreage report
to add additional acreage for the insured crop that was prevented from
being planted. The common sense approach to acreage reporting proposed
in section 6(d)(2) should be retained in the final rule.
Response: The commenter is correct that regardless of whether the
acreage reporting date has passed, section 6(d)(2)(iii) precludes the
information regarding crop or type from being revised. FCIC has
retained the provision in the final rule.
Comment: Many comments were received regarding section 6(d)(3). A
commenter stated producers should not be penalized if they request a
certified acreage measurement service but the certified acreage
measurement service fails to complete the acreage measurement. The
commenter stated in this case, as a matter of equity, the producer
should pay the premium owed and the appropriate indemnity should be
paid. A commenter recommended the provisions regarding acreage
measurement requests be removed from the Basic Provisions and be put in
the Special Provisions in states for which this language was intended.
If the language is not removed from the Basic Provisions, the commenter
would prefer to keep the current language which states ``Failure to
provide the measurement to us will result in the application of section
6(g) if the estimated acreage is not correct and estimated acreage
under this section will no longer be accepted for any subsequent
acreage report.'' The commenter stated producers could request a
measurement service and intentionally under report their acres for a
lower premium under the proposed language. The commenter stated if
producers do not think they will have a claim, they do not provide the
measurement and they pay a lower premium. If the producers think they
will have a claim, they provide the measurement service information.
The commenter stated under the proposed language, this action is
permissible and was not permissible under the current language. A
commenter stated the language ``you may request an acreage measurement
* * *'' could be interpreted by insureds to mean they may make this
request to the insurance provider. The commenter stated insurance
providers are not in a position to perform these services for free, yet
insurance providers are not allowed to charge for these services. The
commenter stated FSA charges for their measurement services and,
therefore, insurance providers should not be expected to provide these
services for free. The commenter suggested the language be modified to
clarify insurance providers are not expected to provide free acreage
measurement services. A commenter stated they understand FCIC cannot
apply the sanctions set forth in section 6(g). However, the commenter
found FCIC's solution to be inadequate. The commenter stated if an
insured requests an acreage measurement, but fails to submit a
measurement within 60 days of submitting a notice of loss, the reported
acreage should be treated as certified acreage. The commenter also
stated that in addition, the insured should be barred from submitting a
request for an acreage determination in subsequent crop years. A
commenter stated the provisions in section 6(d)(3)(ii)(B) and (iii)(A)
seem to conflict. The commenter stated if this language is not revised
as indicated above, the following changes need to be made to the
current language: (a) Section 6(d)(3)(ii)(B) states the insurance
provider will revise the premium and indemnity due once an acreage
measurement is provided if the initial indemnity paid and premium
charged was based on the insurance provider's measurement; (b) Section
6(d)(3)(iii)(A) cannot occur in any situation. The commenter stated the
insurance provider can only revise the indemnity and premium if the
insured provides an acreage measurement after the initial indemnity has
been paid and the initial premium has been charged based on the
insurance provider's measurement. If it is not provided, no revision
could take place; and (c)
[[Page 15808]]
section 6(d)(3)(iii)(A) would not apply. The commenter recommended
section 6(d)(3)(iii)(A) be removed and add the requirement to section
6(d)(3)(ii)(B) that the deadline for providing the acreage measurement
is the termination date and failure to provide the acreage measurement
by the termination date will result in the insurance provider no longer
accepting an estimated acreage report from the producer for any
subsequent acreage report. A commenter stated the provision in section
6(d)(3)(iii)(A) seems unnecessary if the insurance provider has
determined acreage for claim purposes. The commenter stated the penalty
described in section 6(d)(3)(iii)(B) should be sufficient. A commenter
stated FCIC should reconsider whether the termination date is the
appropriate deadline for subsection section 6(d)(3)(iii). In the
commenter's opinion, 60 days after the acreage reporting date provides
an insured ample opportunity to obtain and submit an acreage
measurement. The commenter also recommended FCIC direct the insurance
providers on how to address this issue, rather than giving insurance
providers a variety of alternatives. The commenter stated one choice
will lead to consistent action by insurance providers and treatment of
policyholders. A few commenters stated the proposed language provides
insurance providers with a choice [measure the acreage, or settle the
claim based on reported acreage and then revise as needed if, or when,
the insured's measurement information is received] that could put one
insurance provider at odds with another from the producer's viewpoint.
The commenters stated such a choice seems unnecessary. They stated
producers who commit to providing the measurement service should be
held responsible for doing so. The commenters added their biggest
concern with the existing language is there is no ultimate deadline for
the insured to provide the measurement information. They believe
stipulation of a reasonable deadline is necessary. The commenters
suggested the deadline be 15 calendar days prior to the premium billing
date and that the provisions be revised as follows: ``(3) You may
request an acreage measurement prior to the acreage reporting date and
submit documentation of such request and an acreage report with
estimated acreage by the acreage reporting date. You must provide the
measurement to us and we will revise your acreage report if there is a
discrepancy. (i) If an acreage measurement is not received by the time
we receive a notice of loss, we will defer any prevented planting
payment, replant payment, or indemnity until the acreage measurement is
received for the unit. (ii) If you fail to provide the measurement to
us by no later than 15 calendar days prior to the premium billing date
in the Special Provisions, no prevented planting payment, replant
payment, or indemnity will be due for the unit and premium will still
be owed. We will no longer accept estimated acreage from you for any
subsequent acreage report.''
Response: Given the advances in technology, there should no longer
be the lag times between the request for a measurement and the receipt
of such measurement. However, when estimated acreages are provided,
there needs to be a measurement to ensure that the proper premium and
any indemnity is paid. Further, it is the producer who elects who will
conduct the acreage measurement and the producer should be held
responsible for the selection. Therefore, producers are held
accountable for ensuring that acreage measurements are timely provided
to the insurance provider. The provisions allowing acreage measurement
should not be removed from the Basic Provisions because all producers,
regardless of their location should have the same opportunity to
request an acreage measurement. This is not a situation where such
measurement will only be available in selected areas. In addition, FCIC
never intended requests for acreage measurements be made to the
insurance providers. FCIC has revised the provision to indicate
producers may request the service from FSA or a business that provides
such service. If a producer fails to provide the measurement, the
reported acres should not be considered as the certified acres. All the
participants in the program have a responsibility to ensure that the
information used to determine premium and indemnity is correct.
However, as proposed, a burden is placed on the system when the policy
allows claims to be paid based on the estimated information and then
any overpayments to be repaid. To ease this burden, FCIC has elected to
adopt the recommendation requesting that the claim be deferred until
the acreage measurement is provided or the insurance provider elects to
conduct its own acreage measurement. Therefore, the two choices are
maintained because there may be situations where the insurance provider
may already be required to determine the acreage under existing
procedures and may elect to use the determined acreage here. The
commenters are correct that FCIC cannot require the insurance providers
to perform a measurement service when it is not required by the
procedures but they certainly should be provided the option to do so.
If the producer does not provide the measurement to the insurance
provider, the claim is never paid unless the insurance provider elects
to perform the measurement. In this case the estimated acreage will not
be accepted from the producer for subsequent crop years. Since the
claim will not be settled until the correct acreage is known, the
under-reporting provisions in section 6(g) will not apply for incorrect
reporting of acreage for any acreage for which a measurement was
requested. These revisions should eliminate any conflict between the
provisions. FCIC has also revised the provisions to separate out the
requirements for the payment of premium to avoid confusion with respect
to whether premium must still be paid while the claim is deferred. FCIC
has clarified that the premium must still be paid but that if the
acreage measurement is not provided at least 15 days before the premium
billing date, premium will be based on estimated acreage and revised if
the acreage is later corrected by the measurement. Failure to provide
the measurement by the termination date will result in the inability to
use acreage estimates for all subsequent crop years.
Comment: A few comments were received regarding section 6(g). A
commenter stated the removal of the liability adjustment factor (LAF)
penalty is a very good change. A commenter supports the proposed
revision that omits punitive penalties for errors in over and under
reporting acreage and believes the remedy provided under the proposed
revisions is adequate to deter any abuse. The commenter urged FCIC to
retain it in the final rule. A few commenters suggested revising (1)(i)
to read ``A lower liability than the actual liability determined, the
liability reported will not be increased and the premium will be
adjusted to the amount we determine to be correct (in the event the
insurable acreage is under-reported for any unit, all production or
value from insurable acreage in that unit will be considered production
or value to count in determining the indemnity); or''. The commenters
stated this revision should eliminate the current problems associated
with application of a LAF. The commenters believe this will allow for
greater flexibility on the procedure side in the proper calculation and
processing of claim payments and premium.
Response: FCIC did not propose removing the LAF provisions
currently
[[Page 15809]]
contained in section 6(g)(1). However, it did propose removing the
additional misreported information factor provisions currently
contained in section 6(g)(2) and has not retained the misreported
information factor provisions in this final rule. FCIC agrees the
retained LAF provisions are adequate to deter abuse. The recommended
change would require charging more premium than would be necessary to
cover the risk for the coverage provided. Since no changes to section
6(g)(1) were proposed, and the public was not provided an opportunity
to comment on the recommended change, the recommendation cannot be
incorporated in the final rule. No change has been made.
Comment: A commenter stated the provisions contained in section
6(g) are contradictory because one area of section 6 reads that ``the
waiver of the misreporting provisions only applies to the acreage for
which a measurement was requested'' and then further states it is
impossible to separate out the production guarantee and production to
count for acreage because these are reported on a unit basis making it
difficult to access a penalty for not reporting the measured acreage
timely. The commenter recommended if the measurements are not provided
to the insurance provider and a claim is filed, the existing
misreported information factor procedures should apply. The commenter
added if a claim is not filed, the premium should be surcharged.
Response: Redesignated section 6(d)(5) does provide for a waiver of
misreporting penalties when an acreage measurement has been requested
and results in a revision to the acreage report. If a producer requests
a measurement for only a part of a unit and then misreports another
part of the unit, the liability adjustment factor will be calculated by
comparing the liability based on the correct measured acres plus the
incorrect unmeasured acres and the liability for the correct amount of
acreage in the unit. As stated above, the misreported information
factor provisions have been removed from the provisions. Therefore, the
misreported information factor provisions cannot be applied. Even if
they were still in the policy, they could not be applied because if the
acreage measurement is not provided, it is impossible to determine
whether the acreage was incorrect or by how much. The only way to
obtain the information is through measurement of the acreage by an
insurance provider and since such measurement is at the election of the
insurance provider, producers cannot be penalized when such an election
is made. There is no basis to apply a surcharge to the premium when a
producer fails to provide the measurement. Now that claims will not be
paid until the measurement is provided, there is an incentive for
producers to provide the measurements. If the producer does not provide
the measurement, they will no longer be allowed to submit estimated
acreage for any subsequent acreage report. The provisions in section
6(d)(3) have been revised accordingly.
Comment: Many comments were received regarding the provisions
proposed in section 6(g)(2). Many of the commenters stated they agreed
with removal of the misreported information factor penalty in section
6(g) for the following reasons: (1) The misreported information factor
penalty duplicated penalties already in place for misreporting; (2)
Prior rules carried a sufficient penalty for under or over reported
acres; (3) The misreported information factor penalty was very
difficult to administer and justify to the policyholder; (4) The
penalty was too harsh on producers when in most instances the producer
forgot to report the acreage in a certain field; (5) Prudent claims
adjusting should quell any incentive to over-report acreage by not
paying claims on the over-reported liability; (6) Producers have no
other incentive to under-report or over-report acreage since they only
penalize themselves by doing so; and (7) The penalties for misreporting
were draconian, especially since a producer has little to gain from
either under or over-reporting his or her acreage. Another commenter
supported the proposed revision indicating if the share is misreported,
the production guarantee and amount of insurance will not be revised
but either the correct share or the reported share will be used to
determine the indemnity depending on which is lower. The commenter
stated this proposed change is a positive one and urged FCIC to retain
it in the final rule. A few commenters stated they commented against
the severity of the penalties when they were proposed and believed they
were too harsh for producers making innocent reporting errors. The
commenters commended FCIC for proposing to revoke this provision and
urged them to retain this proposal in the final rule.
Response: Provided that insurance providers are diligent in
verifying acreage, the remaining penalties for under or over-reported
acres in section 6 of the Basic Provisions are adequate. FCIC will
retain the revisions proposed in section 6(g)(2).
Section 7 Annual Premium and Administrative Fees
Comment: A commenter suggested perhaps the price information
(whether the projected price in the CEPP or the price election in the
actuarial documents) should continue to be referenced in section 7(d)
instead of being deleted.
Response: The first sentence in section 7(d) is redundant with
section 7(c)(1) because section 7(c)(1) expressly uses the price
election or projected price in the calculation of premium. Therefore, a
separate section is not needed stating that the price election or
projected price will be used to calculate premium. No change has been
made.
Comment: A commenter questioned if FCIC is going to retain the
``grandfathering'' of the old limited resource farmer definition in
section 7(e)(4)(ii) in the new policy. The commenter thought this was
going to be dropped. The commenter stated there is no mention of it in
the definition in section 1.
Response: USDA has gone to a standard definition of ``limited
resource farmer'' and to avoid any potential conflicts, FCIC has
revised this definition to specify the term has the same meaning as the
USDA definition found at http://www.lrftool.sc.egov.usda.gov/LRP-D.htm.
With respect to the provisions in section 7(e)(4)(ii), since FCIC has
not proposed to remove this provision, and the public was not provided
an opportunity to comment, no change has been made.
Section 8 Insured Crop
Comment: A commenter stated FCIC should consider whether the
reference to ``* * * price election, if applicable * * *'' in section
8(b)(2) should be revised to accommodate projected and harvest prices
since sections 8(b)(2)(ii)(A) & (B) refer to projected and harvest
prices in the CEPP. In addition, it is unclear why ``* * * included in
the actuarial documents * * *'' is being changed to ``* * * included on
the actuarial documents * * *'' here but not consistently throughout.
Previously the standard seems to have been to use ``included in'' and
``contained in'' but ``shown on''.
Response: All prices should be referenced in section 8(b)(2) to
avoid any confusion with respect to the applicable prices. However,
FCIC has not retained proposed sections 8(b)(2)(i) and (ii) because the
information contained therein was redundant with the information
contained in section 18 regarding written agreements for
[[Page 15810]]
revenue protection. Section 8(b)(2) now simply states that insurance is
not available unless allowed by written agreement in accordance with
section 18. FCIC has also reviewed all references to the actuarial
documents and revised them as necessary to be consistent.
Section 9 Insurable Acreage
Comment: A few comments were received regarding proposed section
9(a)(2). A commenter recommended adding the phrase ``or wheat'' after
the phrase ``sorghum silage.'' Another commenter stated the reference
to ``* * * except corn or sorghum silage * * *'' is unclear as to
whether it is considered a ``* * * cover, hay, or forage crop * * *''
Based on how it is addressed in proposed section 9(a)(3), it appears
that corn/sorghum silage is not considered to be a cover, hay or forage
crop for insurability purposes. The commenter stated they question
whether it is necessary to include the exception here, and in proposed
(a)(3), if that is the case. If it is determined to be necessary here,
it needs to be rewritten for clarity. The commenter stated this can be
accomplished by placing a comma between ``silage'' and ``unless'' prior
to (i) and (ii).
Response: FCIC has restructured section 9(a) to more clearly
delineate when acreage is insurable and when it is not insurable.
Previously the provisions had double negatives, and multiple uses of
the terms ``except'' and ``unless'' that made them confusing. The newly
revised, streamlined provisions should eliminate these problems. Wheat
can be produced for hay and, therefore, this exception has been added.
However, it is considered a hay, not a forage and a parenthetical has
been added after the reference to ``hay.'' In the context of
redesignated sections 9(a)(2)(i) and (ii), corn silage and sorghum
silage are not considered to be cover or hay crops, but are considered
to be forage crops. However, the provisions specify acreage planted to
either of these crops in one of the last three years will be insurable.
Since there may be additional acceptable silage types, FCIC has
modified the provisions to refer to ``insurable silage'' to accommodate
any expansion. In addition, the provisions in redesignated section
9(a)(1)(i)(C) have been revised to allow acreage to be insurable when a
perennial crop was on the acreage for two of the three previous crop
years.
Comment: A few commenters stated insurance providers should be
required to provide notice to a producer if the producer may be
eligible for an indemnity on a second crop. This notice should be
provided in time to allow the producer to gather information required
to request the indemnity, including harvesting, production, and
marketing records.
Response: The producer is only eligible for an indemnity on a
second crop if they have elected to insure the second crop. If such an
election is made, as with any other crop, it is the producer's
responsibility to provide notice to the insurance provider if there has
been damage to the insured crop. It is not the responsibility of the
insurance provider to notify the producer that they may be eligible for
a payment. No change has been made.
Comment: A commenter stated that existing section 9(c) should be
reconsidered in view of current underwriting procedures that do not
allow any production history from irrigated acreage reported and
insured as non-irrigated acreage to be used for acreage that is truly
non-irrigated (since it would raise the approved yield above what could
be reasonably expected for a non-irrigated farming practice).
Response: FCIC has considered the provision and revised section
9(c) to clarify that if a producer elects to insure irrigated acreage
under a non-irrigated practice, the irrigated yield will only be used
to establish the approved yield if the producer continues to use a good
irrigation practice. If the producer does not use a good irrigation
practice, the producer will receive a yield determined in accordance
with section 3(h)(3).
Section 10 Share Insured
Comment: A few commenters stated they continue to oppose current
provisions allowing a tenant to insure the landlord's share and vice
versa. The commenters recommended requiring separate applications and
policies. The commenters recommended removing the current provisions
and the proposed provisions that would extend the ability to insure
under one policy to parents and children, spouses, or members of the
same household. The commenters recommend removing the provisions
because: (1) ``Person'' is defined in the policy and each ``person''
should only be allowed to insure their own share; (2) As acknowledged
in the preamble to the rule, there is already significant confusion
regarding when spouses may obtain separate policies; (3) The provisions
were implemented to minimize paperwork by having only one policy, but
they have resulted in so much confusion it has required additional
procedures; (4) The provisions provide a way to sidestep the general
rules that a person must insure all his/her interest in the crop/county
and at the same level, price, etc. For example, a landlord has two
different acreages with two tenants. One tenant farms the good piece of
ground and chooses CAT coverage and the other tenant farms the poor
piece of ground and chooses 85 percent coverage; (5) There have been
significant problems with the implementation of spousal SBI reporting
requirements; (6) Additional problems are foreseen if children and
other household members are added to the list of ``other'' shares
covered under an individual entity's policy; (7) The language in this
section does not set forth clear rules for when separate policies may
be obtained; and (8) If a landlord does not wish to deal with crop
insurance, the landlord can assign a power of attorney to his tenant so
the tenant can obtain a policy on the landlord's share.
Response: Since removal of the provision was not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule.
FCIC has not retained the proposed change in the final rule to allow a
person to insure the share of their spouse, child, parent, or other
member of the household. FCIC had failed to include the reporting of
the SBI's for all of these persons under proposed section
10(a)(3)(iii). Further, FCIC agrees this proposed change adds
unnecessary complexity and confusion.
Comment: A few commenters stated they viewed the addition in
section 10(a) as being positive because it allows members of the same
household to insure each others share in the same manner as landlords
and tenants. However, they stated it is not clear if the person
completing the application for insurance has to have a share in the
crop that will be insured. One of the commenters stated the provision
allows someone to insure an interest in a crop even though they do not
have an insurable interest in it.
Response: As stated above, FCIC has not retained the provisions
proposed in section 10 in the final rule that would have allowed a
person to insure the share of their spouse, child, parent, or other
member of the household. FCIC has retained the current provision that
allows a landlord or tenant to insure the other person's share.
However, before a person can insure the other person's share, they must
both have a share in the insured crop. FCIC has revised section 10(a)
to make this clearer.
Comment: A commenter stated the proposed language in section 10(a)
seems to contradict itself because if insurance ``* * * will only
attach to that
[[Page 15811]]
person's share * * *'', it cannot then be extended to the other people
listed in (1) and (2). The commenter recommended clarifying the
provisions by combining the two sentences as follows: ``* * * share in
the insured crop, and will attach only to that person's share unless
the application clearly states:'' (1) The insurance is requested for an
entity other than an individual (for example * * *); (2) You will
insure your landlord's or tenant's share; or (3) The share insured
includes the share of your spouse * * *''
Response: There was a potential contradiction and FCIC has revised
the provisions to make it clear that insurance will attach only to the
applicant's share except when the application specifies the insured is
an entity and in landlord tenant situations. Additionally, as stated
above, FCIC has not retained the provisions proposed in section 10 in
the final rule that would have allowed a person to insure the share of
their spouse, child, parent, or other member of the household.
Comment: A commenter stated both sections 10(a)(1) and (2) provide
that ``insurance will not extend to any other person having a share in
the crop: unless the application clearly states * * *'' Because the
insurance policy is continuous from year to year, the insured may not
complete an application each year. Accordingly, the commenter
recommended that if, in a crop year after the completion of the
application, an additional person obtains a share in the crop,
insurance may be extended to that person upon completion of a company-
approved form, such as a policy change form.
Response: As stated above, FCIC has not retained the proposed
provisions authorizing a person to insure the share of their spouse,
child, parent, or other member of the household. Therefore, this will
no longer be a problem. With respect to landlords or tenants, there is
no requirement that persons insure the share of other persons in an
entity with a share of the crop or the landlord insure the tenant's
share or vice versa. This is a choice that is made by the insured.
Policy change forms are to change coverage, i.e., coverage level
percentages, price elections, types, etc. To extend coverage to another
person there must be a new application to ensure the eligibility of the
additional person. No changes have been made in response to this
comment.
Comment: A commenter stated section 10(a)(2)(iii) appeared to be
superfluous and, therefore, confusing. Section 10(b)(1)(i) provides
that an insured's share will include ``any acreage or interest reported
by or for your spouse * * *'' Similarly, the definition of
``substantial beneficial interest'' creates the presumption that a
spouse has an interest in the insured. The commenter asked why is it
necessary to state in section 10(a)(2)(iii) that an application
includes the spouse's share. As this is a contentious issue, the
commenter suggested FCIC combine the guidelines relating to spouses and
spousal interests in one subsection rather than dividing them among
several subsections. This will alleviate confusion and obviate the need
to refer to multiple provisions.
Response: Proposed section 10(a)(2)(iii) is unnecessary and FCIC
has removed the provision. The sections dealing with spouses and
spousal interests cannot be combined. Section 2 and the definition of
``substantial beneficial interest'' involve the interest of the spouse
in the insured for the purposes of determining which tax identification
numbers have to be reported. Section 10 involves the interest of the
spouse in the insured crop. This is to determine under what
circumstance spouses can have separate policies. No changes have been
made in response to this comment.
Comment: A few commenters stated the added language in sections
10(a)(2)(iii), (a)(3), and (b) [regarding insuring the share of the
spouse, children, parents and/or other household members on an
``individual'' policy] does not seem to mesh and leads to the following
questions and suggested changes: (1) Section 10(a)(2) requires that the
application must clearly state the share of other family/household
members is included, suggesting that those shares are not included if
there is no such indication on the application. However, section
10(b)(1) states ``We will consider to be included * * * any acreage or
interest reported by or for * * *'' [emphasis added] those other
family/household members. This language would allow such acreage/
interest to be added at acreage reporting time instead of requiring
that it be specified by the sales closing date. If this is supposed to
be an option elected on the application, then section 10(b) should
continue to say ``We may consider * * *'' Changing it to ``We will
consider * * *'' suggests it is mandatory instead of a choice; (2) The
language in section 10(a)(2)(iii)(A)-(D) indicates that the
individual's policy can (if stated on the application) include the
share of: (A) The spouse, (B) a child, (C) a parent, or (D) other
household members. This could be taken to mean that if the spouse's
share is included, none of the others can be (or one child's share can
be included but not more than one). Presumably the intent would be
better served with ``and/or''; and (3) The language in section
10(a)(2)(iii)(A)-(D) does not seem to match the added language in
section 10(b)(1), with a distinction between spouses [in (i)] and
children or other household members [in (ii)]; parents are not
mentioned separately. If section 10(b)(1)(i) is intended to correspond
to current procedures that require policies for married individuals to
include the spouse's share unless they are legally separate or unless
they can prove they have separate farming operations, this does not fit
with the phrases suggesting there is a choice of whether or not to
include the spouse's share. In addition, section 10(b)(1)(ii) states
that a child or other household member is included ``* * * unless the
child or other member of the household can demonstrate such person has
a separate share in the crop.'' The wording in paragraph (a)(2) would
seem to suggest that ``separate share'' could be insured as long as it
was clearly stated on the application.
Response: As stated above, FCIC has not retained the provisions
proposed in section 10 in the final rule that would have allowed a
person to insure the share of their spouse, child, parent, or other
member of the household. FCIC has retained the provisions in section
10(b) that states if it is determined the spouse, child, parent or
other household member does not have a separate farming operation or
share in the crop, as applicable, there can be no separate policy and
the share reported by the spouse, child, parent or other household
member will be considered to be included in the insured's share. As
stated above, there is a difference between having an interest in the
insured and having a share of the crop. Section 10 only deals with the
latter. Under section 2 and the definition of ``substantial beneficial
interest,'' spouses are presumed to have an interest in the insured and
there is no exception as long as they remain married and not legally
separated. However, spouses and children are presumed not to have a
separate share of the crop. Therefore, they cannot have separate
policies unless they can demonstrate they have a separate farming
operation or share of the crop, as applicable. If they meet this
burden, they must have separate policies.
Comment: A few commenters stated they have serious concerns
regarding the addition of the introductory phrase in section 10(a)(3)
``If a producer insures any of the shares under section 10(a)(2), * *
*'' When section 10(a)(2) applies, section 10(a)(3) requires ``* * *
evidence of the other party's approval
[[Page 15812]]
(lease, power of attorney, etc.) * * *'' and [in (3)(i)] ``* * * the
percentage shares of each person * * *'' not only when the landlord's/
tenant's share is being insured, as in the current Basic Provisions,
but also for spouses, children, parents and other household members.
The commenters strongly recommended that these requirements continue to
apply only to the tenant/landlord situations ``* * * under section
10(a)(2)(i) & (ii) * * *'' Otherwise, this expansion of these
requirements would lead to the following serious problems: (1) Family
members who do not have separate shares in the farming operation would
not be likely to have any official documentation that they approved
having their share included in the ``individual'' policy; (2) If,
according to one interpretation of the new language in sections
10(b)(1) and (1)(ii), the interest of a child or other household member
will be considered to be included ``* * * unless the child or other
member of the household can demonstrate such person has a separate
share in the crop * * *'', it would seem to be difficult (if not
impossible) to designate the percentage of share for those children and
household members. These shares are not separate and distinct as is the
case with landlords and tenants; (3) If, according to the added phrase
in section 2(b)(2)(i), the spouse is considered to have 50 percent
interest in the insured entity, that leaves only 50 percent to be
divided among the named insured, children, parents and other household
members; and (4) Although the proposed language would require children
and household members to report their percentage shares (if they
actually can be determined), there is no clear indication whether their
names and identification numbers would have to be listed on the SBI
form, as required in section 10(a)(3)(ii) and (iii) for tenant/landlord
policies. Refer to the definition of SBI: ``* * * Any child * * * will
not be considered to have a substantial beneficial interest in the
applicant or insured unless the child has a separate legal interest in
such person * * *'' If that is the intention, there is likely to be
strong resistance to that added requirement. When the spousal SBI
reporting requirements were added to procedure several years ago, it
created an administrative burden on insurance providers to obtain the
SBI information for spouses of policyholders and led to serious
objections from some policyholders who did not want to provide that
information for spouses who were not actively involved in the farming
operation and were not a signing party to the policy contract. At that
time, questions were raised whether the spousal SBI reporting
requirements would be expanded to include the children and other
household members (based on the policy language that ``We may consider
* * *'' their interest to be included), and FCIC provided assurances
that would not happen.
Response: As stated above, FCIC has elected not to retain the
provisions in section 10(a)(2) related to spouses, parents, children,
and other members of the household. Therefore, the requirement for
providing leases, power-of-attorneys, etc., only applies to landlord-
tenant situations or entity situations. Further, as stated above, there
is a difference between having an interest in the insured and having a
share of the crop. Section 10 only deals with the latter. Under section
2 and the definition of ``substantial beneficial interest,'' spouses
are presumed to have an interest in the insured and there is no
exception as long as they remain married and not legally separated.
However, spouses and children are presumed not to have a separate share
of the crop. Therefore, they cannot have separate policies unless they
can demonstrate they have a separate farming operation or share of the
crop, as applicable. If they meet this burden, they must have separate
policies. There is no presumption of children having an SBI in the
insured so they do not have to be reported as an SBI unless they have
some other legal interest in the insured.
Comment: A commenter stated section 10(a)(3)(ii) requires that a
landlord or tenant that insures the other's share must report that
person's SSN. The same obligation should be imposed on a parent who
insures a child's share and vice versa. It is the commenter's
understanding that section 2 already imposes the obligation on an
insured to report his or her spouse's SSN.
Response: Since, as stated above, FCIC has not retained the
proposed provisions that would have allowed the producer to insure the
share of his or her spouse, child, parent, or other member of the
household, it is no longer necessary to require the identification
number for such persons.
Comment: A commenter stated section 10(b) requires ``separate
equipment'' to prove the spouses have separate farming operations. The
2007 Crop Insurance Handbook language requires separate accounting of
inputs (e.g., labor and equipment), but not ``separate equipment.'' The
CIH language seems to be more appropriate.
Response: FCIC has removed the requirement for separate equipment
because many farming operations share equipment even though they are
separate and distinct. This should be no different for spouses or
children. However, they must still have all the other attributes of
separate farming operations.
Comment: A few commenters asked if the change in section 10(b)(1)
from ``may consider'' to ``will consider'' means the share of any
spouse, children and/or other household members must be included or
whether the phrase ``* * * reported by or for * * *'' means those
shares do not have to be included if they do not want to report them.
Response: The provisions in section 10(b) mean any share reported
by or for the spouse, child or other member of the household will be
considered to be included in the insured person's share. As stated
above, FCIC has clarified that only children that reside in the
insured's household are considered to be included in the insured's
share. This means the insured can still report 100 percent share of the
crop and the spouse and children in the household are presumed to be
included in that 100 percent. However, if the spouse or children in the
household can show they have a separate farming operation or share, as
applicable, they must separately insure their farming operation or
share, as applicable, under a different policy. For example, a father
and son who live in the same household both produce corn in the county.
If the son can prove that he has a share of the crop (i.e., the son
receives a share of the crop in exchange for his labor), the son must
have a separate policy to insure the corn produced on his farming
operation. If the son was living outside the insured's household, the
son could not obtain insurance unless he could show he has a separate
share and again he would be required to insure his share under a
separate policy.
Comment: A few commenters recommended clarifying provisions in
section 10(b)(1)(i) regarding spouses with separate farming operations,
by adding parentheses as follows: ``* * * separate land (excluding
transfers of acreage from one spouse to another), * * *''
Response: FCIC has revised the provisions accordingly.
Comment: A commenter recommended removal of provisions in section
10(b)(1)(i) regarding proof of separate farming operations. The
combined interest can/should be insured under one individual/spousal
policy. This option causes confusion with interpretation of separate
farming
[[Page 15813]]
operations by producers which leads to coverage penalties described in
section 10(b)(2)(i).
Response: There are legitimate situations where the two spouses
have totally separate farming operations. If they can meet their burden
of proof that the operations are separate, then two separate policies
are needed. If there is only one farming operation, then it is
appropriate that the interests of the spouses be combined in order to
protect program integrity. Further, the proposed rule clarified which
policy should be voided and the provisions have been retained.
Therefore, there should no longer be confusion. No change has been made
in regard to this comment.
Comment: A commenter asked whether a couple that is legally
separated (not divorced), each with a farm, can qualify for two
separate policies. The spouse would not have any SBI, so the commenter
assumes they could each have a policy even if one is paying child
support.
Response: If the spouses are legally separated, they would no
longer have a SBI in each other. This simply means that the spouse's
identification number would not have to be reported. This is a separate
issue from whether the spouses have separate insurable interests in the
insured crop. If the spouses can prove the two farming operations are
separate, then they are entitled to separate policies regardless of
whether child support or alimony is being paid.
Comment: A commenter stated forcing a husband and wife to have one
policy creates some problems. FSA is still allowing a husband and wife
to be two ``persons'' as far as payment eligibility is concerned, if
certain criteria are met. One of these criteria are the
``separateness'' of their operations. Forcing them into one crop policy
could jeopardize that ``separateness.'' The commenter stated they have
people who consider not insuring their crop because of this issue.
Response: The provisions allow separate policies for spouses who
meet the requirements for separate farming operations. FCIC understands
FSA may have different program requirements for spouses to be
considered ``separate.'' However, since the two programs have different
purposes, the requirements may need to be different. The fact that FCIC
may not consider the spouses to have separate shares should have no
impact on the eligibility of a spouse for FSA programs. Each program is
administered under its own requirements. Further, FCIC does not believe
that its requirement spouses be insured under one policy if the they
cannot meet the criteria for separate farming operations for the
purposes of crop insurance adversely affects the spouses' ability to
meet the FSA requirements for a separate farming operation. No change
has been made.
Comment: A few commenters stated the concerns and recommendations
listed below regarding the new section 10(b)(2) which states [in part]:
``If it is determined that the spouse, child or other member of the
household has a separate policy but does not have a separate farming
operation or share of the crop * * *'' that other policy will be void
and there will be no premium due or indemnity paid. If each spouse
takes out a separate policy and it is later determined they do not have
separate farming operations, the proposed wording could result in the
voidance of both policies (each one has a policy saying the ``spouse's
policy will be void''). Presumably the intent is that one policy would
remain in effect. A commenter suggested where the producer's spouse,
child, or other member of the household holds a policy that is voided,
the acreage insured under the voided policy should be insured under the
producer's policy. The commenter stated this change would be helpful,
particularly in community property states, where inequities can
otherwise result. The commenter urged FCIC to include this change in
the final rule. An additional commenter stated no penalties should be
imposed for spouses or other household members obtaining separate
policies that are later determined to not qualify to have separate
policies, until definitive rules are established. Per section
10(b)(2)(i), ``The spouse's policy will be void and will be determined
in accordance with section 22(a) * * *'' There is some question as to
whether the reference is appropriate. Section 22(a) addresses ``Other
Like Insurance,'' which is understood to mean duplicate coverage on the
same acreage/share, while it is likely that separate spousal policies
that do not qualify to be separate would not be insuring the same
acreage or share (each would show 50% share, for example). If this
situation is supposed to be covered by 22(a), it would seem to conflict
with the statement in 10(b)(2)(i) that the ``spouse's policy will be
void * * *'' since section 22(a)(1) & (2) provide guidelines for
determining which of the duplicate policies remain in effect. It is not
clear whether the intention is to specify which spouse's policy would
remain in effect or whether it would be allowed for the parties
involved to decide. At the least, it might help to change the reference
to ``22(a)(1) & (2).'' The proposed language does not match the
explanation given in the ``Background'' section of the proposed rule,
which indicates the acreage and share must be combined. The proposed
policy language only says the other policy will be void; it makes no
mention of adding the acreage/share from the voided policy to the
remaining policy. If an insurance provider determines the two spouses
do not meet the requirements for insuring their farming operations
under separate policies, the total coverage for both operations should
be combined under a single policy and the other policy voided. Since
both operations had full coverage in effect, there should be no loss of
coverage but the coverage should be consolidated under a single policy
at the time this determination is made. The penalties as currently
outlined in the draft provisions are unduly harsh and should be
reconsidered. When the determination is made that the two policies need
to be combined, the language needs to address which policy's coverage
takes precedence and should serve as the policy in effect for the
remainder of the crop year (i.e., level of coverage, price percentage,
options, etc.). The provisions state ``No premium will be due and no
indemnity will be paid for a policy that is voided * * *'' Presumably,
this is because the premium and indemnity would apply to the other
policy remaining in place. Otherwise, there should be some
consideration of allowing the insurance provider to retain a percentage
of the premium to cover the administrative costs incurred, as in other
cases where the policy is voided. Proposed section 10(b)(2)(ii) should
be changed as follows: ``The policy for the child or other member of
the household will be void;'' or alternatively, change ``child'' to
``child's policy''. Also, in section 10(b)(2)(iii), change ``* * * for
a policy that is voided in accordance with sections 10(b)(2)(i) and
(ii)'' to ``* * * for the voided policy.'' It is not necessary to refer
to the two immediately preceding subsections given the context and the
lead-in from section 10(b)(2).
Response: If spouses do not have separate farming operations, it
was always intended that one policy be void and one policy should
remain in effect and the acreage and shares from the voided policy
should be combined under the remaining effective policy. The provisions
have been clarified accordingly. The commenter is correct that section
22(a) is referring to the case in which there are duplicate policies on
[[Page 15814]]
the same share and acreage, while section 10(b) refers to different
policies on separate acreage or shares. The provisions have been
revised to refer only to sections 22(a)(1) and (2). These sections will
specify which policy will remain in effect. Sections 22(a)(1) and (2)
will determine the coverage levels, price elections, etc., that apply.
There is no penalty contained in section 10(b). Full coverage is
provided under a single policy.
Comment: A commenter stated section 10(b)(2)(ii) provides that a
spouse's policy will be void in accordance with section 22(a) if the
spouse has a separate policy but does not have a separate farming
operation or share in the crop, and asked if the spouse whose policy is
voided is considered to have a SBI in the surviving policy. The
commenter questioned if the spouse was not reported as having a SBI in
the surviving policy, which is possible if the spouses considered their
farming operations to be separate, whether the surviving policy is
subject to the penalties in section 2(b). The commenter recommended
FCIC clarify the ramification to the policy that is not voided.
Response: A SBI is not the same as a share. As stated above, SBI
involves the spouse's interest in the insured. A share involves the
spouse's interest in the crop. Therefore, regardless of whether there
are separate policies or a single policy, the spouse's social security
number must be included on the application. If the spouse's social
security number is not reported on any application, the consequences in
section 2 apply, not any consequence stated in section 10.
Section 11 Insurance Period
Comment: A commenter stated section 11(b)(2) specifies harvest of
the unit is one of the events that triggers when coverage ends. The
commenter asked if the intent of the policy is to cover grain in
storage until all of the ``unit'' is harvested. The commenter stated
current language could be interpreted to cover grain in storage. The
commenter provided an example where a producer had a 200 acre unit and
harvested 180 acres and stored the production in a bin. Lightning
strikes the bin and all of the grain is destroyed. The commenter asked
since the producer still had 20 acres left to harvest, and therefore
had not completed harvest of the unit, whether the burned up grain
should be counted as production since an insured cause of loss happened
during the insurance period. The commenter stated if FCIC does not want
this situation to be covered since the acreage was harvested, FCIC
would need to clarify section 11 in more detail. The commenter
suggested language such as harvest of the ``crop'' instead of unit
could be used.
Response: FCIC has not proposed any changes to section 11. However,
the commenter has raised a statutory issue that needs to be addressed.
Section 508(a)(2) of the Act prohibits insurance extending beyond the
period during which the insured commodity is in the field, except in
the case of tobacco and potatoes. Therefore, the policy does not cover
the insured crop after it has left the field. FCIC has added a new
section 11(c) that specifies that coverage ends on any acreage within a
unit where an event resulting in the end of the insurance period occurs
on the acreage. Therefore, in the commenter's example, insurance would
end on any acreage in the unit that had been harvested even though
coverage remained in effect on the unharvested acreage. This will
preclude coverage for any grain in storage because it will have come
from acreage where the insurance period had already ended. However,
this situation also applies to other events that can cause the
insurance period to end. Therefore, FCIC has revised section 11(b) to
clarify that coverage ends on each unit or part of a unit at the
earliest of one of the events specified in sections 11(b)(1) through
(6), even though the insurance period may not have ended for other
acreage within the unit. FCIC has also clarified that the calendar date
for the end of the insurance period may be contained in the Special
Provisions because there have been occasions when the end of the
insurance period stated in the Crop Provisions may no longer be
reflective of the period of risk due to changing technologies, etc.
Section 12 Causes of Loss
Comment: A commenter suggested revising section 12(a) to add a
reference to landlords as follows: ``Negligence, mismanagement, or
wrongdoing by you, any member of your family or household, your tenants
and/or landlords, or employees.''
Response: Negligence, mismanagement, or wrongdoing by any person is
not intended to be covered by the policy. Section 508(a) of the Act
only authorizes coverage for natural disasters. Further, there may be
confusion regarding the distinction between proposed sections 12(a) and
(g). Therefore, FCIC has revised section 12(a) to make it inclusive of
any act by any person, that affects the yield, quality or price of the
insured crop and proposed section 12(g) has not been retained in the
final rule.
Comment: A few comments were received regarding the introductory
text in section 12. A commenter stated the prefatory phrase in the
opening paragraph is unwieldy and confusing. The commenter requested
FCIC amend this provision as follows: ``The insurance provided is only
those unavoidable * * * When revenue protection is elected, protection
also is provided against decline in the harvest price below the
projected price.'' Another commenter stated the proposed language
specifically identifies causes of loss that are not covered. Previous
language (the current policy) has a much broader provision relative to
causes of loss not covered (``* * * all other causes * * *''). The
commenter asked whether this change was intended, and if so, what the
rationale was for it. Further, the prior/current language indicates
that coverage is against only unavoidable loss directly caused by
specific causes. The proposed language removes the ``directly caused
by'' language. The commenter asked what was the reason for this change.
Response: The proposed introductory text was not clear as it was
intended and FCIC has revised the first sentence to improve readability
and clarity. The provision providing coverage when the harvest price is
less than the projected price is contained in the Crop Provisions and
is subject to the same restrictions as any other cause of loss.
Therefore, to avoid a potential conflict, FCIC has not added the
provision to section 12. FCIC has also included the provisions omitted
in the proposed rule stating that all other causes of loss, including
those listed were not covered. The phrase ``directly caused by'' was
removed because some losses are covered even though they are not
directly caused by an insurable cause of loss but the insurable cause
of loss was the proximate cause of the loss. For example, disease is
not covered under the policy but adverse weather is covered. There
could be a situation where the presence of excess moisture caused a
disease in the insured crop. Excess moisture was not the direct cause
of the loss but it was the proximate cause and, therefore, the loss is
covered.
Comment: A commenter disagreed with the provisions added to section
12(d). The commenter felt FCIC is asking the insurance providers to
make judgment calls, which will create more fraud, waste and abuse in
ways that are already used in the prevented planting system.
[[Page 15815]]
Response: FCIC presumes that the judgment call referred to is the
determination of whether the producer was unable to prepare the land
for irrigation using the producer's established irrigation method. This
is not similar to prevented planting because in prevented planting the
judgment is whether the soil is too dry to permit germination or
progress toward crop maturity if the crop was planted. However, the
judgment here is only whether the acreage was too dry to permit the
producer to prepare the soil without extensive damage. Further, under
proposed section 14(e)(4)(iii) (Your Duties), the burden is on the
insured to prove the loss was caused by an insured cause of loss. The
burden is not on the insurance provider to prove that such a cause of
loss did not occur. This clear enunciation of the burden should
mitigate any potential fraud, waste, and abuse. No change has been
made.
Comment: Many comments were received regarding the proposed
addition of section 12(g). A few commenters were concerned about
provisions that specify any act by a third person adversely affecting
the yield or price, such as terrorism, chemical drift, theft, etc., is
a cause for loss for revenue protection coverage. A commenter stated
the addition may make common sense regarding yield, but asked how it
can apply to price. The commenter asked, for example, if a car bomb
goes off in the Middle East and markets react, if this would be deemed
a ``terrorist act'' and would FCIC disallow coverage because ``prices
changed due to a third party or terrorist.'' The markets do not operate
in a vacuum. Theoretically, every single event happening in the world
each day affects price. The commenter asked how FCIC can make decisions
about what is and is not a ``terrorist act'' or the result of a ``third
person.'' Market efficiency ultimately rules and sorts everything out.
The commenter asked how FCIC can ever say prices are not reacting to a
``third person.'' Prices do what they do. Everyone in the system is
aware of the risk, especially producers. The commenter stated they
understand the need to suspend the system should catastrophic events
occur (i.e., government itself is unable to function). This can be
better said than the open-ended language proposed. The commenter stated
they would suggest language that simply says if markets are closed for
an extended period due to acts of God or other reasons other than
routine market policy or function, or if the government itself is
essentially inoperable for a prolonged period due to acts of God or
other acts beyond the government's control, then the Secretary of
Agriculture has the right to suspend the policy/program. A commenter
stated the proposed addition is impossible to administer and would
create deep uncertainty in the reliability of revenue protection. A
commenter opposed any provision that would consider actions by a
terrorist that cause a price change for revenue policies to be due to
an uninsurable cause. The commenter strongly recommended yield or
revenue losses from terrorist activities be added as a named peril to
all crop insurance policies. Furthermore, the commenter recommended
FCIC develop a multiple-year terrorism policy that provides producers
with such protection when a multiple year cleanup period is required.
Such a policy could be based on the average of prior year's income tax
returns. A commenter asked how market price fluctuations caused by an
uninsured cause of loss will be determined. The commenter asked what
the effect on the wheat market is if the World Trade Center gets
bombed. Suppose commodity prices would have risen sharply five years
ago, would there have been a push to reduce crop insurance coverage
because of the attack? It seems there are always about a million
reasons why the commodity markets move, and to try to determine that
one of them is responsible for the movement seems impossible. The
commenter believes the market price should be used, no matter what it
is, as it is truly what producers can receive for their product, and
truly represents their risk. Crop insurance needs to be a product that
producers and their lenders can rely on through whatever is happening.
A commenter stated they agree with the proposed changes, however, they
believe the text could be improved by restating it as follows: ``Any
act by a third person, whether the result of negligence or intentional
misconduct, that adversely affects the yield or price, such as
terrorism, chemical drift, fire, theft, and similar third-party
actions.'' The commenter stated their fundamental proposed change in
the definition is the addition of the clarifying clause after ``third
person'' in the first line. It is important to be explicit that third-
party acts of negligence and intentional misconduct are not covered.
That should present no problem because negligence itself is defined
appropriately in section 1 of the Basic Provisions. Further, its
applicability is implicit in new subsection (g) (e.g., recognition that
``chemical drift'' is not an insured cause of loss). It is important to
recognize negligence as a form of third-party action that could
adversely affect yield or price, and it is critical to do so explicitly
to avoid any risk of ambiguity. While acts such as terrorism are
important to exclude, due to their inherent evil, negligent acts can
have the same impact on yield or price and, therefore, should also be
specifically excluded. Finally, the commenter recommended ``fire'' be
added because it is one of the most common causes of loss resulting
from third-party conduct. Another commenter suggested adding ``fire''
to the list in section 12(g), because fire and chemical drift are the
two most common causes of loss caused by a third party. An additional
commenter stated they are concerned that FCIC reserves the right to
deny or withdraw coverage due to unfavorable market moves suspected of
resulting from ``third person acts.'' The commenter stated the proposed
addition of a new section 12(g) states that ``[a]ny act by a third
person that adversely affects the yield or price, such as terrorism,
chemical drift, theft, etc.'' is a cause for loss of coverage. The
commenter stated they oppose the denial of coverage solely on the basis
of sudden unfavorable market moves, regardless of the source. A few
commenters stated they oppose the denial or withdrawal of coverage when
based on suspicion or speculation. The commenters stated any effort to
determine price impacts directly attributable to third person acts
(i.e., terrorism) would be speculative at best. The interjection of
such a subjective and unpredictable factor would lead to deep
uncertainty relative to the reliability of revenue protection.
Therefore, they urge these provisions be omitted in the final rule. A
commenter stated the provisions are not clear with respect to who is
authorized to make the official determination that an event has
occurred because of the acts of a third person.
Response: The commenter is correct that it is difficult to
determine if a price change or at least how much of a price change was
due to third party action. However, FCIC must still be compliant with
the provisions of the Act that do not allow man made acts to be
covered. This limitation applies to price changes as well as other
causes of loss. To ensure that the revenue protection is meaningful,
FCIC is presuming that usual market price changes are an insured cause
of loss. To interpret the Act in any other manner would effectively
negate revenue coverage. Therefore, usual causes of price swings, such
as over or under production
[[Page 15816]]
domestically or abroad, are considered normal market price changes.
This is not the case with terrorism or the accidental release of a
pest, unapproved genetically modified seed, etc. These are incidents
that are not usual in the market and may involve a situation where a
single person or limited number of people may have the ability to
affect the price for all. However, even after an act of terrorism,
etc., there may still be other reasons for the price change. Therefore,
FCIC has revised the cause of loss section in the Crop Provisions to
clarify that the price change is covered unless FCIC can prove the
price change was the direct result of an uninsured cause of loss in
section 12(a) and can quantify the effect the uninsured cause had on
the price. If FCIC cannot meet these burdens, the price change is
covered under the policy. Under usual market conditions, this will be a
very difficult burden to meet but if there are those instances where it
can be met, the Act precludes payment. As stated above, FCIC has
revised the provisions to add the requirements of proposed section
12(g) to section 12(a). This should eliminate any confusion whether the
acts of persons that cause the loss are covered. Terrorism cannot be
added as an insured cause of loss and FCIC cannot develop a multiple
year terrorism policy. Section 508(a)(1) of the Act requires that to
qualify for coverage under a plan of insurance, the losses of the
insured commodity must be due to drought, flood, or other ``natural''
disaster (as determined by the Secretary). Therefore, the Act does not
authorize coverage for terrorism.
Section 13 Replanting Payment
Comment: A few comments were received regarding replant payments. A
commenter stated producers who incur 100 percent of the replant cost
should receive 100 percent of the replant payment although the crop is
insured by more than one person on a share basis. The commenter
appreciated FCIC's openness to working to implement a fair and
equitable provision in this regard notwithstanding any administrative
challenges. The commenter proposed a workable solution to the current
problem is to have tenants who buy insurance on a share basis receive
100 percent of the replant payment when the tenant provides verifiable
evidence that he/she paid 100 percent of replant costs. Conversely,
landlords would not receive a replant payment if they cannot provide
evidence they bore any share of replant costs. A commenter recommended
keeping the current language and adding ``or Special Provisions'' to
the end of the paragraph.
Response: As stated in the background section of the proposed rule,
FCIC proposed to remove the provisions that allow the person who incurs
the total cost of replanting to receive a replant payment based on the
total shares insured when more than one person insures the crop on a
share basis. To make the provision work, FCIC required the two
producers with a share in the crop to be insured with the same
insurance provider before the producer incurring all the costs could
receive the replant payment. This was necessary to allow the insurance
provider to track the payments to ensure not more than 100 percent of
the replant payment is paid out (e.g., the tenant received a 100
percent replant payment from one insurance provider and the landlord
received a 50 percent replant payment from another insurance provider).
FCIC also required that both producers insure with the same insurance
provider to ensure that the insurance provider making the 100 percent
replant payment received 100 percent of the premium associated with
replant payments (e.g., if two producers with 50 percent shares insure
with two insurance providers, each insurance provider would receive
only 50 percent of the premium associated with the replant payments).
Subsequently, FCIC received complaints that this resulted in disparate
treatment based on which insurance provider the producer insured with
because producers insured with different insurance providers could not
receive 100 percent of the replant payment even if they incurred 100
percent of the costs. The recommended changes, while achieving equity
by allowing the person who paid the replant costs to recoup the
payment, would make the program vulnerable to mistakes and abuse if the
producers are insured with different insurance providers. FCIC has not
found a way to provide 100 percent of the replant payment to one
producer that does not result in this disparate treatment or open the
program to potential vulnerabilities. However, FCIC is open to new
ideas. No change has been made.
Comment: A few comments were provided to section 13(c). A commenter
stated that the proposed language could be misleading to policyholders
who think their actual cost of replanting will be paid. The commenter
questioned why FCIC needs to bring up the actual cost of replanting in
the Basic Provisions if it is not intended to be used in any Crop
Provisions. A commenter recommended FCIC substitute the term
``limited'' for ``specified.'' It is doubtful the Crop Provisions or
Special Provisions would permit replant payments in excess of an
insured's actual cost. A commenter stated they consider the provisions
positive regarding if the Replant Cost Study finds actual replanting
costs paid are consistently higher than the amounts specified in the
Crop Provisions, then the insurance provider does not have to verify
replanting costs prior to paying replant claims. A commenter supported
the proposed revision, which would allow replant payments to be more
responsive to actual costs and the commenter urged FCIC to retain it in
the final rule.
Response: FCIC does not agree that the word ``limited'' should be
used. For certain crops, it has been determined the replant payment
will be the amount specified in the Crop Provisions, regardless of the
actual costs. However, for other crops, the actual costs will be used.
Therefore, FCIC agrees that as proposed, the language can be confusing.
FCIC has revised section 13(c) to specify the replant payment will be
the lesser of the producer's actual cost for replanting or the amount
specified in the Crop Provisions unless otherwise specified in the
Special Provisions. The replant study that FCIC has contracted out is
not complete and there may need to be some adjustment to the amount
contained in the Crop Provisions. Revising section 13(c) to specify
that the amount will be contained in the Crop Provisions unless
otherwise specified in the Special Provisions will allow for an
expedited adjustment. FCIC is attempting to reduce the burden on the
producer and insurance provider to provide records for crops for which
it has been determined that the actual costs always exceed the amount
payable under the Crop Provisions by having the Crop Provisions no
longer consider the actual costs.
Section 14 Duties in the Event of Damage, Loss, Abandonment,
Destruction, or Alternative Use of Crop or Acreage
Comment: A commenter stated they do not understand FCIC's proposal
in section 14. They understand what FCIC is trying to address but do
not understand FCIC's proposed solution. The commenter stated this
needs further clarification.
Response: FCIC proposed several changes to the provisions contained
in section 14. Since the commenter did not specify which proposed
change their comment applied to, FCIC cannot specifically respond to
this comment. No change has been made in response to this comment.
[[Page 15817]]
Comment: A commenter stated it appears the burden of proof is
greatly increasing for producers through several of the proposed
provisions. While they completely endorse efforts to crack down on
fraud and abuse, they also caution against overly strenuous and
burdensome rules that may prove difficult for producers to remember and
meet in a timely fashion. The commenter stated producers are extremely
busy, and to expect them to remember numerous crop insurance rules,
dates, time deadlines, and other regulations, or risk loss of coverage
seems rather harsh. The commenter fears many producers may not be made
aware of the numerous reporting deadlines being proposed such as
reporting added land within 10 days, notice of damage within 72 hours,
final planting dates, the date and amount of acreage planted per day
during the late planting period, notice of expected revenue loss within
45 days after the harvest price is released, and for revenue coverage,
the deadline to submit a claim for indemnity within 60 days after the
latest date the harvest price is released. The commenter stated it will
be imperative for producers to work with knowledgeable agents who can
help them remember all of the reporting requirements and deadlines.
However, for agents to be successful they must work with a large number
of producers, which makes it difficult for them to have firsthand
knowledge of all of the variables that must be reported.
Response: There have always been numerous dates that producers and
agents must be aware of because they affect insurance coverage.
However, these dates are necessary to properly administer the crop
insurance policy. Without deadlines related to the submission of
notices of loss and claims, it would be extremely difficult to
correctly determine the cause and amount of loss. Further, while
deadlines from the existing revenue products have been incorporated
into this rule, they have been clarified to make them more workable and
consistent with current deadlines in the Basic Provisions. However, as
stated more fully below, some of the proposed provisions may have been
impractical and have been revised in this final rule.
Comment: Many comments were received regarding the provision
proposed in section 14(b) that requires notice of loss to be given the
earlier of 72 hours of discovery of damage or within 72 hours after the
end of the insurance period, regardless of whether the producer has
harvested the crop. A few commenters stated that a 72-hour time period
to report the discovery of damage or a potential loss is insufficient.
They stated there are instances in which damage or loss may occur, but,
because of the type of damage or loss, it may take more than 72 hours
for the damage or loss to be apparent to the insured. Similarly, there
may be instances where the insured is physically unable to report the
damage or loss within 72 hours of discovery. For example, it would have
been impossible for some of the producers in Louisiana to have reported
losses during the recent hurricane disaster, since there was no
electricity or phone service available for quite some time following
the disaster. The commenters stated that by shortening the time period,
it is likely a number of producers will be caught unaware of whether
they sustained a loss by the notice of loss deadline. The commenters
urged FCIC to retain the current 15 day loss notification deadline. A
few commenters stated the tighter time-frame is too short. They
recommended the current provision be retained. Another commenter stated
the proposed change places an undue burden on the producer. The
commenter stated the fact that whether a claim is reported within 72
hours or 15 days after the end of the insurance period does not hamper
the ability to properly evaluate the damage. The commenter stated they
see nothing wrong with leaving the 15 day requirement as it is today. A
commenter stated the proposed change will cause a large number of
unnecessary losses to be submitted just to ensure the policyholder has
complied with the terms of the policy. The commenter stated this could
result in less than reasonable or realistic loss ratios being submitted
to FCIC and additional expense incurred by insurance providers with
setting up losses and inspecting released claims. A commenter stated
the 72-hour period will cause a significant increase in the number of
delayed claim notices. The commenter stated although the selection of a
deadline for submitting a notice of damage or potential loss is
arbitrary, the 72-hour time period is too short to be reasonable or
justified. A few commenters stated the proposed change will increase
the workload on insurance providers and producers by making producers
report all potential loss events. The commenters stated it appears FCIC
is requiring notice of every potential loss event, including those that
may not by themselves trigger an indemnity. The commenters stated
producers should only be required to provide notice when they believe
with reasonable certainty that a loss for which an indemnity will
likely be paid has been sustained. The commenters stated implementation
of this proposed change will create a considerable and unnecessary
additional workload on the system. The commenters stated currently,
producers may provide notice within 15 days after the insurance period
ends and the common practice is for producers to provide a single
notice of loss, especially when a series of events eventually trigger
an indemnity. They recommend FCIC strike the proposed change and retain
the current notice time-frame. The commenters stated the current rules
are understood by both producers and insurance providers and will still
allow for the orderly submission of required notices of loss. A
commenter recommended there be an exception like that provided for
producers who are unable to submit requests for written agreements by
the sales closing date. A commenter stated reducing the number of days
after the insurance period from 15 days to 72 hours (three days) is
unnecessary and unfair to a producer, particularly for a producer with
revenue coverage. The commenter stated it takes numerous calculations
to determine if there is a loss and this proposed change will cause
more producers to turn in unnecessary claims. A few commenters stated
the notice provisions set forth in section 14 apply in the event of
``damage or a potential loss of production or revenue.'' The commenters
pointed out the Basic Provisions define ``damage'' but ``potential
loss,'' whether to production or revenue, is not defined. The
commenters asked how a producer is to judge when there is a potential
loss. They noted that in disputes involving notice or lack thereof,
producers often allege they did not anticipate or did not know that
loss would occur. The commenters asked how an insurance provider is to
assess whether a producer knew or should have known of a potential loss
when assessing whether a producer provided timely notice. The commenter
recommended FCIC define the term ``potential loss'' or otherwise
provide objective criteria for determining whether there was a
``potential loss of production or revenue.'' A commenter stated the
proposed change will require a producer to give notice within 72 hours
after the end of the insurance period regardless of whether the
producer knows if there has been damage to the crop. The commenter
added that the proposed 72-hour requirement could cause a large number
of unnecessary notices to be submitted just to ensure the producer has
complied with policy provisions, which
[[Page 15818]]
could result in increased expenses incurred by insurance providers in
inspecting and investigating these ``precautionary'' claims. A
commenter believed the proposed change provides insufficient time in
which to provide notice of loss, thereby creating considerable and
unnecessary additional workload, and actually exacerbates the problem
FCIC seeks to remedy. The commenter stated FCIC notes the change is
``needed because there may be circumstances where the producer is
unable to harvest the crop before the end of the insurance period or
even 15 days after. In such case, the producer may have no knowledge
whether a loss has occurred. Therefore, it would have been impossible
for the producer to timely give notice.'' The commenter added that FCIC
then goes on to state, ``Now producers will have to give notice not
later than 72 hours after the end of the insurance period regardless of
whether the producer knows there is damage.'' The commenter stated by
shortening the notice of loss deadline from 15 days after the insurance
period ends to the earlier of within 72 hours of discovery of damage or
72 hours after the end of the insurance period, it is highly probable,
if not absolutely certain, that the number of producers caught unaware
of whether they sustained a loss by the notice of loss deadline will
only increase and become an even greater problem for producers than it
already is. The commenter stated the only solution will be for
producers to report losses whenever in doubt, regardless of whether
they know for certain that a loss has actually been sustained, thus
imposing considerable new and unnecessary workload on the system. The
commenter added this problem is further exacerbated by the requirement
that the reporting of any loss, regardless of whether it is likely to
trigger an indemnity or not, appears to be required within 72 hours of
discovery. The commenter stated currently, producers may provide notice
within 15 days after the insurance period ends and the common practice
is for producers of a crop to provide notice of loss all at once. The
commenter believes the current timeline maximizes the chance the
producer will know by the notice of loss deadline whether or not a loss
was sustained, provides for the orderly submission of notices of loss,
and minimizes unnecessary additional workload. The commenter urged FCIC
to maintain the current notice of loss deadline and requirements. A
commenter opposed the proposed change because they do not believe it is
practical. The commenter stated the 72-hour deadline would be virtually
impossible for: (a) Producers who sell production because often they do
not know whether their production is less than the insurance guarantee
until they receive the settlement sheet from the elevator or processor
and this commonly is not received within 72 hours; (b) producers to
make insured loss determinations by insurance unit in the midst of
harvesting, when their primary goal is to keep the harvest progressing
as rapidly as possible to minimize further crop losses; (c) landlords
who rely on their tenants to grow their crops because usually they do
not have the results of the harvest within 72 hours; (d) producers who
store their grain on the farm to make determinations of the amount of
production on a unit basis within 72 hours of harvesting; and (e)
producers who obtain the services of a third party to determine the
amount of their production.
Response: FCIC proposed to revise the notice provisions contained
in section 14(b) to require producers to give notice of damage within
72 hours of their initial discovery of damage or a potential loss of
production, or to provide notice within 72 hours after the end of the
insurance period. The commenters are correct that the proposed
requirement to provide notice within 72 hours after the end of the
insurance period may not provide adequate time for producers to
determine if there is a loss. Therefore, FCIC has revised the
provisions to require notice within 72 hours of the producer's initial
discovery of damage (but not later than 15 days after the end of the
insurance period, even if the insured has not yet harvested the crop).
However, the later the notice is provided after the insured cause of
loss, the more difficult it will be for the producer to prove that the
damage was caused by such cause of loss. FCIC has also retained the
proposed provisions that require producers, who do not initially
discover damage by the 15th day after the end of the insurance period,
to provide notice no later than 15 days after the end of the insurance
period even if the crop is not harvested. This will eliminate any
confusion regarding whether a delay in harvest will allow a delay in
the notice. Producers are now required to report any damage even if
harvest is not complete. This will allow insurance providers to timely
adjust the loss and verify that the insured cause of loss occurred
during the insurance period. Provisions contained in proposed section
14(b)(4)(i) allow the insurance provider to pay the claim when the
notice is late, provided the insurance provider determines they still
have the ability to accurately verify the amount and cause of the loss.
Therefore, an exception, similar to the exception that is allowed for
written agreements when extenuating circumstances prevent a producer
from timely applying for the written agreement, is not necessary.
Additionally, in cases of widespread losses, where an insured cause of
loss such as a hurricane or flood prevented timely notice, insurance
providers should be aware of the cause of loss and be able to make the
claim determinations. These revisions should eliminate most of the
problems raised by commenters regarding precautionary notices of loss
and the burden they would impose on insurance providers. Further, the
policy has always required that notice of loss be given within 72 hours
of the discovery of damage. This requirement has not changed. However,
as revised, if a producer does not know there is a loss until they
harvest the crop, they can still give notice of damage after harvest
provided notice is given within 15 days after the end of the insurance
period. In all cases, the producer must be able to show the loss
occurred due to an insured peril. The commenters are correct that
insurance providers cannot determine whether a producer may believe he
or she has a potential loss. Therefore, FCIC has removed the term
``potential'' from the provisions. Producers must give notice of the
discovery of damage or loss of production or loss of revenue, as
applicable.
Comment: A commenter recommended proposed sections 14(b)(1)(i) and
14(b)(1)(ii) (except section 14(b)(1)(ii)(B)) be combined since it is
the same wording. The commenter also recommended the language in
section 14(b)(1) be revised to: (1) Remove the phrase ``For crops for
which revenue protection is not available and crops for which revenue
protection is available but not selected'' so the provision will apply
to all crops; and (2) Add at the end ``For crops which revenue
protection is elected and notices are not required under section
14(b)(1)(ii)(A), not later than 45 days after the latest date the
harvest price is released for any crop in the unit where there is a
potential revenue loss.''
Response: FCIC has revised the provisions to eliminate redundancies
and improve readability.
Comment: A commenter stated section 14(b)(1)(ii) has too many
subsections and is confusing. More specifically, the term ``within'' in
[[Page 15819]]
subsections (A)(1) and (2) should be deleted. In addition, subsection
(B), which is an exception to subsection (A), should be designated as
subsection (1)(iii). The commenter recommended reorganizing this
provision as follows: ``(ii) For crops for which revenue protection is
elected, the earlier of: (A) 72 hours of your initial discovery of
damage or a potential loss of production; or (B) 72 hours after the end
of the insurance period * * * (iii) If notices are not required under
section 14(b)(1)(ii), not later than 45 days after the latest date the
harvest price is released * * *''.
Response: As stated above, FCIC has revised the provisions by
removing the redundancies and combining the provisions where
appropriate.
Comment: A commenter recommended FCIC clarify that proposed section
14(b)(2)(ii) pertains to revenue only losses and does not include
losses that contain both production and revenue loss.
Response: FCIC is unsure of what provision the commenter is
referencing. Proposed provisions contained in section 14(b)(2)(ii)
pertain to notices of loss for prevented planting, which apply to
prevented planting losses under all policies with prevented planting
coverage, not just policies with revenue protection. No change has been
made.
Comment: A commenter stated proposed section 14(b)(4) (redesignated
section 14(b)(5)) provides penalties for a producer's failure to comply
with certain notice requirements and, in doing so, differentiates
between (i) the failure to report production losses or prevented
planting acreage and (ii) revenue losses. With respect to the latter,
subsection (b)(4) (redesignated subsection (b)(5)) expressly provides
that the producer ``will still be required to pay all premiums owed.''
However, there is no such statement with respect to the former. The
commenter recommended that (i) and (ii) be consistent in their
treatment of premium.
Response: The provision contained in proposed section 14(b)(4)(ii)
requires the producer to give timely notice of a revenue loss. FCIC has
removed the provision in the final rule and elected to treat failure to
give notice of a revenue loss in the same manner as failure to give
notice for a production loss. FCIC has revised the provisions contained
in proposed section 14(b)(4) (redesignated section 14(b)(5)) to
differentiate between notice of losses for claims purposes and notice
of loss for prevented planting purposes. With respect to prevented
planting, no premium will be owed or prevented planting payment made if
the insurance provider cannot verify the crop was prevented from being
planted because coverage is considered not to have attached to the
acreage. With respect to an indemnity, no indemnity will be paid if the
insurance provider cannot accurately adjust the loss, but the producer
would still be required to pay the premium, because coverage would have
attached and would have been provided during the insurance period until
the loss occurred. FCIC has also revised the provision to refer to the
ability of the insurance provider to accurately adjust the loss. As
proposed, there could be a potential conflict with section 14(e), which
places the burden on the producer to establish the loss, that the loss
occurred during the insurance period, and that it was due to an
insurable cause of loss.
Comment: A commenter stated proposed section 14(b)(4)(i) would be
strengthened by adding ``solely'' between the words ``considered'' and
``due.'' This change should foreclose any proration or allocation of
fault argument made by a policyholder.
Response: FCIC agrees with the commenter and has revised the
provisions in redesignated section 14(b)(5) accordingly.
Comment: A commenter recommended additional language be added to
section 14(c)(1) that expands the policy requirement for leaving
representative samples. They stated the current language only addresses
cases where a notice of loss was provided within 15 days of harvest or
after harvest had begun. The commenter recommended the following
revision: (c)(1) If representative samples are required by the Crop
Provisions, leave representative samples intact of the unharvested
crop, (1) if you report damage less than 15 days before the time you
begin harvest, (2) during harvest of the damaged unit or (3) as
required by us throughout the growing season.
Response: When losses occur early in the season, it is appropriate
for the insurance provider to require that representative samples be
left intact. FCIC has revised the provisions to require the insured to
also leave representative samples when required by the insurance
provider.
Comment: A commenter stated section 14(c)(1) should be revised to
provide: ``* * * less than 15 days before the time you ``will'' begin
harvest * * *''
Response: FCIC agrees with the commenter and has revised the
provision accordingly. FCIC has also revised section 14(c)(2) to
specify harvest on the remainder of the unit for clarification.
Comment: A commenter stated section 14(d)(3) should read ``in
accordance with the Settlement of Claim provisions of the applicable
Crop Provisions'' to tie it directly to the nomenclature used in the
Crop Provisions.
Response: FCIC agrees with the commenter and has revised the
provision accordingly.
Comment: A commenter recommended section 14(e)(1) be clarified so
it is clear this information and the deadlines referenced in section
14(e)(3) also apply to information for replant payments.
Response: The commenter is correct that the deadlines were also
intended to apply to replant payments and prevented planting payments.
FCIC has revised the provisions in sections 14(e)(1), 14(e)(3)(i) and
(ii) by removing the phrase ``for indemnity'' so the provisions will
include all claims, not just those for indemnities.
Comment: A commenter stated section 14(e)(1) would be enhanced by
adding at the end of the proposed text this additional language: ``and
if we have time to make a loss determination under applicable FCIC
procedures.'' The commenter stated this addition simply reinforces the
concept that late claims should not be adjusted if the insurance
provider lacks sufficient time to follow approved procedures.
Response: Insurance providers have a responsibility to ensure that
they have the personnel available to adjust losses in a timely manner.
When there are widespread losses where it may be difficult to timely
complete all the claims, FCIC has generally taken measures to relax the
loss adjustment procedures as long as such action does not adversely
affect program integrity. Therefore, the procedures should not be an
impediment to the completion of claims. Extensions should be granted if
the information needed to determine the amount of the loss is not
available by the deadline to submit the claim (for example, the
production records or quality test results are not yet available).
Subsequent to the proposed rule, FCIC published a final rule on
September 3, 2009, to implement the provisions in the 2008 Farm Bill
that allow claims to be delayed in cases when producers have farm-
stored grain production, FCIC has reformatted section 14(e)(1) to
include these provisions.
Comment: A commenter suggested adding language in section 14(e)(2)
to create a clear distinction between a ``notice of loss'' and a
``claim for indemnity.'' The commenter
[[Page 15820]]
recommended the following language: ``(e)(2) Failure to timely submit a
claim and provide the required information necessary to determine the
amount of indemnity, as stated in subpart 4 below, will result in no
indemnity, prevented planting * * *'' The commenter also stated this
additional language would also need to be included in section
14(e)(3)(i) & (ii).
Response: FCIC has revised the provisions in section 14(e)(2) to
specify failure to timely submit a claim or provide the required
information ``necessary to determine the amount of the claim'' will
result in no indemnity, prevented planting payment or replant payment.
There is no need to add this language to sections 14(e)(3)(i) and (ii)
because these sections simply provide the date by which the information
referenced in section 14(e)(2) must be submitted. Further, section
14(e)(4) contains requirements beyond the information needed to be
submitted with the claim. Therefore, it would not be appropriate to
include such references in section 14(e)(2).
Comment: A commenter stated section 14(e)(3)(i) applies to ``crops
covered by yield protection and for which revenue is not available,''
and section 14(e)(3)(ii) to ``crops covered by revenue protection.''
The commenter stated FCIC has omitted crops covered by yield protection
and for which revenue coverage is available (i.e., the insured selects
yield protection though revenue protection is available). The commenter
stated it is likely FCIC intended this third category to be addressed
by subsection (i); however, FCIC's wording is imprecise and confusing.
The commenter recommended FCIC amend subsection (i) to state: ``crops
covered by yield protection'' because whether or not revenue coverage
is available but not selected or simply not available is immaterial
once yield protection attaches to the crop.
Response: As stated in previous comments, FCIC has divided section
3 of the Basic Provisions into yield protection, revenue protection and
all other plans of insurance (e.g., APH and dollar amount of insurance
coverage). For the purpose of section 14(e)(3), the only distinction
needed is between revenue protection and all other plans of insurance
and FCIC has revised the provisions accordingly.
Comment: A commenter recommended sections 14(e)(3)(i) and (ii) need
to be clarified so if revenue coverage is selected, and the loss is due
to price drop only, the policyholder has 45 days, not 60, after the
price announcement to file a loss. However, if a loss is due to both a
production and revenue loss, the claim needs to be filed within 72
hours after the end of the insurance period.
Response: The commenter has confused the filing of the notice of
loss with the filing of the claim. Section 14(b) contains the deadlines
for filing a notice of loss. Section 14(e) contains the deadlines for
filing a claim. If FCIC were to adopt the commenter's suggestion of a
45 day deadline, the deadline to submit the claim and the notice of
loss would be the same day. As proposed, the producer will have an
additional 15 days after the last date the notice of loss was filed to
submit a claim. No change has been made.
Comment: A commenter stated the second prong of the notice
provisions in section 14(e)(3)(ii) is confusing and amenable to
different interpretations. For example, the reference to ``the latest
day'' may cause confusion with respect to determining when the
insurance period ends under section 11(b).
Response: The commenter is correct that the proposed language could
cause confusion. FCIC has removed the reference to latest date and
instead revised the provisions to refer to the date the insurance
period ends for all acreage in the unit. When there is acreage in the
unit where the insurance period ended on different dates, it is the
last date the insurance period ends on the unit. For example, if a unit
has corn acreage that was put to another use on July 15 and corn
acreage where harvest was completed on September 30, the claim must be
submitted not later than 60 days after September 30. This should make
it clear that the 60 days starts running on the actual date the
insurance period ended in the unit, not just the calendar date stated
in the Crop Provisions. For revenue protection, FCIC has revised the
provisions to make it clear that the 60 days starts to run on the later
of the last date the harvest price is released for the crops in the
unit or the date the insurance period ends for all acreage in the unit.
Comment: A commenter recommended changing the wording in section
14(e)(3)(ii) as follows: With regard to declaring the amount of the
producer's loss by the later of 60 days after the latest date the
harvest price is released for any crop or 60 days after the end of the
insurance period for any unit of the crop in the county.
Response: Claims must be submitted by unit. Therefore, it is
appropriate to establish the deadlines for the filing of the claim by
unit. Further, the suggested change does not address the situation for
units where there may be acreage with different ends of the insurance
periods. As stated above, FCIC has revised the provision to clarify the
60 days starts to run on the date the insurance period ends for the
unit. No change has been made in response to this comment.
Comment: A commenter recommended adding the following phrase before
the parenthetical in section 14(e)(4)(i)(B)(1): ``and that second crop
acreage must have produced above the per acre guarantee in order for
the insured to receive the rest of the indemnity on the first crop
acreage.''
Response: It is not appropriate to add the recommended language.
There could be cases where there was a production loss but ultimately
not a payable indemnity on the unit or cases where the second crop
acreage did not contribute to any indemnity due for the unit (e.g., a
producer with revenue protection suffered a small production loss on
the second crop acreage; however, after the revenue price was announced
it was determined there was no payable indemnity for the unit or the
second crop acreage did not contribute to any payable indemnity on the
unit). Further, section 14(e)(4) involves the records that must be
maintained to be eligible for an indemnity. Section 15 specifies how
payments will be made on first and second crop acreage. Therefore, it
could potentially be confusing to add the language in section 14.
Additionally, provisions previously contained in this section were
omitted in the proposed rule. These provisions allowed production to be
prorated when separate records were not maintained for acreage subject
to an indemnity reduction. Removal of these provisions was not
addressed in the background section of the preamble of the proposed
rule. Therefore, the public was not notified of the change and did not
have an adequate opportunity to comment. These provisions have been
added in section 14(e)(4)(i)(B)(1) of this final rule. In addition to
the public not having an opportunity to comment, FCIC has determined
that removing this provision would have a detrimental effect on
producers and the crop insurance program. Retaining the provisions is
appropriate and does not put the program in any risk of adverse
selection or moral hazard.
Comment: A commenter recommended making the same deadline date for
submitting claims in section 14(e)(3), regardless of whether the
producer elected revenue or yield protection. The commenter recommended
requiring the producer to submit a claim for indemnity not later than
60 days after the calendar date
[[Page 15821]]
contained in the Crop Provisions for the end of insurance period.
Response: For producers who elect revenue protection, the revenue
portion of a loss cannot be determined until after the harvest price is
announced. As stated above, FCIC has revised the provisions to make it
clear that the actual date the insurance period ends for all acreage in
the unit starts the 60 day deadline. It is possible that the end of the
insurance period may be more than 60 days before the harvest price is
announced. For example, the crop fails and the acreage is put to
another use on July 1. The harvest price will be announced more than 60
days later. Therefore, producers must be given 60 days after the date
the harvest price is announced to submit their claim. No change has
been made.
Comment: A commenter stated proposed section 14(e)(4)(iii)(C)
contains the language ``* * * directly caused by * * *'' one or more of
the insured causes of loss. As they noted above in section 12, the
``directly caused by'' language no longer appears in the proposed
language.
Response: Since FCIC removed the requirement in section 12 that the
loss be ``directly'' caused by an insured cause of loss, FCIC has also
removed the reference to ``directly'' in section 14(e)(4)(iii)(C).
Comment: A commenter stated sections 14(e)(4) and (5) would read
better, and be clearer, if the references to the insured's ``burden''
were revised. They suggest changing (e)(4) from ``* * * the burden is
on you * * *'' to ``it is your responsibility'' or ``you must'' [since
this is under ``Your Duties''], and changing (e)(5) from ``meet any
burden on you'' to ``meet any obligation'' established in the relevant
provision. The commenter stated these changes would eliminate any
argument over the meaning of ``burden.'' They believe the suggested
language is linguistically superior. The commenter added they agree
with the changes proposed in section 14 and, in support of changes
proposed to be made, they note that they conform to existing case law
involving the Federal Crop Insurance program. For instance, the new
language in subsection (e)(5) is directly supported by controlling law.
See, e.g., FCIC v. Merrill, 332 U.S. 380, 385 (1947), and Scaife v.
FCIC, 167 F.2d 152, 154 (8th Cir. 1948).
Response: FCIC agrees the proposed provisions should be revised.
FCIC has revised the provisions to specify producers must comply with
the requirements contained in section 14(e)(4). FCIC has also revised
section 14(e)(5) to specify failure of the producer to meet any of his
or her duties specified in section 14(e)(4) will result in denial of
the claim and premium is still owed except for prevented planting
claims. This change is to be consistent with other changes made that no
longer requires producers to pay premium when prevented planting
coverage is denied.
Section 15 Production Included in Determining an Indemnity and Payment
Reductions
Comment: A commenter suggested changing the language in section
15(b) to provide that either harvested or appraised production, as
determined by the insurance provider, will be used to determine the
production to be counted. This will strengthen the insurance providers'
ability to use appraisals in cases where harvested production records
that are reported are inconsistent with pre-harvest appraisals.
Response: There are issues with respect to possible differences
between appraised and harvested production. However, allowing the
insurance provider to elect which to use could result in disparate
treatment. Rather than the recommended change, FCIC has inserted the
word ``verifiable'' before the word ``records.'' This requires the
records to be verifiable through independent sources. If the records
cannot be verified, they should not be accepted. However, if the
records are verifiable records, they are presumed to be more accurate
than the appraisal. Further, if there is a significant difference, the
producer will have to show that the loss of production was due to an
insurable cause of loss.
Comment: A commenter stated the references in unrevised section
15(b)(3)(i) & (ii) to ``* * * the end of the insurance period * * *''
conflict with the procedures in the Loss Adjustment Manual, which refer
to ``* * * the calendar date for the end of the insurance period * *
*'' Either the policy or the procedures need to be revised.
Response: The policy provisions are correct and the procedures have
been revised to be consistent with the policy. Once the insurance
period ends, regardless of the event that ends the insurance period,
appraised production should be used to adjust the loss unless the
producer can prove there was no subsequent damage to the crop.
Section 17 Prevented Planting
Comment: Several comments were received in support of the changes
proposed in section 17 that clarify and reduce abuse of the prevented
planting provisions, and provide additional flexibility for producers.
A commenter stated they finally could commend FCIC for proposing
changes that improve the prevented planting provisions through
clarification of terms and conditions as well as some additional
flexibility for producers. A few commenters supported the changes that
provide clarification and reduce abuse of the prevented planting
provisions. A commenter stated they view the incorporation of several
modifications and clarifications, which came directly from the
prevented planting workgroup, as positive. Another commenter stated
while prevented planting is consistently one of the most vexing issues
faced in the Federal crop insurance program by both insurance providers
and producers alike, they believe the proposed revisions clarify a
number of prevented planting issues. A commenter stated they support
measures in the proposed rule to reduce abuse of the prevented planting
provisions.
Response: FCIC appreciates the support for its efforts to clarify
provisions, reduce program vulnerability, and also provide additional
flexibility for producers.
Comment: A commenter thought the prevented planting and late
planting programs were working fine.
Response: While FCIC agrees many of the current prevented planting
provisions are sufficient, it also recognizes certain provisions needed
revision based on questions and issues that have arisen, as well as
comments FCIC received recommending revisions to the prevented planting
provisions. FCIC believes the proposed changes improve readability of
the provisions, provide clarification and additional flexibility for
producers, and also help prevent abuse of the prevented planting
provisions.
Comment: A commenter stated the revised provisions in section 17
are burdensome and confusing. The commenter feels because such detail
has been incorporated into this section, and subsections (d)-(f) in
particular, the procedures cannot be understood. The commenter doubts
any producer could be expected to understand the concepts set forth in
section 17 and the conditions precedent to the receipt of a prevented
planting payment.
Response: There have been issues in the past with prevented
planting raised by producers and insurance providers. To adequately
address these issues, additional detail is necessary. These details
should allow greater understanding and more consistent application of
the provisions. Without further details regarding the perceived
problems with the provisions cited,
[[Page 15822]]
FCIC is unable to make any revisions in response to this comment.
Comment: A commenter stated the revision proposed in section
17(a)(1) to specify a prevented planting payment may be made only in
connection with insurable acreage seems to be simply a codification of
common sense. There have been questions raised in the past, primarily
in legal actions, with respect to whether the provisions concerning
insurable acreage applied to prevented planting. The commenter stated
the proposed revision should be retained in the final rule.
Response: FCIC has retained the proposed revision in the final
rule.
Comment: Several commenters opposed the changes proposed in section
17(b)(4) that specify prevented planting coverage cannot be increased
if any cause of loss has occurred prior to the time the producer
requests the increased prevented planting coverage level. A commenter
stated that currently, prevented planting coverage cannot be increased
if there has been a cause of loss that could or will prevent planting.
FCIC states the change is needed because it may be impossible to make
such determinations at the time the producer is seeking to increase
coverage because the insurance provider cannot predict whether the
cause of loss really would prevent planting when other intervening
events could change the outcome. While the commenter greatly
appreciates FCIC working to resolve this legitimate concern, they fear
the change does not alleviate the problem because it still may not be
known by the insurance provider that a cause of loss has occurred at
the time the producer seeks to increase prevented planting coverage. In
fact, it may not be known until such time that the producer seeks a
prevented planting payment after having already increased coverage
under the new rule, at which time the increased coverage has to be
denied after the fact. The commenter believes a more straightforward
and workable solution is to disallow increased prevented planting
coverage when it is known a peril will prevent planting. The commenter
urged FCIC to include this modification in the final rule. Another
commenter believed the proposed provision is overly broad because the
insured could not increase prevented planting coverage if any cause of
loss, however slight (such as an isolated incidence of hail), occurs
during the prevented planting insurance period. The commenter suggested
one solution to this difficulty is to eliminate the increased levels of
prevented planting coverage. The commenter stated that likewise, the
provisions contained in the Crop Provisions that allow policyholders
with additional coverage to increase the prevented planting coverage
above the prevented planting default level should be eliminated. The
commenter stated producers already have the ability to increase or
decrease coverage through their base policy level of protection (e.g.,
CAT or level of additional coverage). A commenter asked FCIC to
consider removing the additional levels of prevented planting coverage
because it would eliminate the concern of producers increasing levels
when losses have occurred and remove the burden for insurance providers
to administer the requests for increased levels. A commenter
recommended eliminating section 17(b) entirely because the commenter
believes the base coverage level for prevented planting provides
adequate levels of prevented planting coverage. The commenter stated
these additional levels of prevented planting coverage are not needed
and are difficult to administer. A commenter stated it will still be
impossible for the insurance provider to know whether the cause of loss
has occurred during the prevented planting insurance period. The
commenter proposed the buy-up levels be eliminated or increase
prevented planting coverage by 5 percent for each crop.
Response: There is an issue with determining whether a cause of
loss that occurs before the coverage is increased will cause the
acreage to be prevented from being planted. At the time the coverage is
increased, it may be impossible to know whether the acreage will
actually be prevented from being planted several months later since
other intervening events could change the outcome. While FCIC agrees an
isolated hail storm may result in an insurable cause of loss to a
planted crop, it is not likely an isolated hail storm would be an event
that prevents producers from planting. Therefore, FCIC has revised the
proposed provisions to clarify an increase in the prevented planting
coverage level will not be allowed if a cause of loss that ``could''
prevent planting has occurred prior to the time the producer requests
the increased prevented planting coverage level, regardless of whether
it is known if the cause of loss ``will'' actually prevent planting.
This will only require examination of the type of cause of loss and if
it is a type that could prevent planting, then, producers cannot
increase their coverage. It would be too difficult to administer if
insurance providers are required to look at the timing of occurrences
or whether the cause of loss caused or contributed to the prevented
planting. FCIC cannot incorporate the commenters' recommendations that
the additional levels of prevented planting coverage be removed in the
final rule since the recommended change was not proposed, the
recommended change is substantive in nature, and the public was not
provided an opportunity to comment on the recommended change.
Comment: A commenter supported the provisions proposed in section
17(d) that allow prevented planting coverage for some producers who do
not plant due to drought conditions, even though other producers in the
area do plant. The commenter hopes the paper work for those who choose
to take prevented planting in that situation will decrease from what
was required this year. The commenter added because of the paper work
requirement, some producers said they should have just gone ahead and
planted even though doing so was destined to result in crop failure (in
this case, planting would result in higher costs to the government than
prevented planting).
Response: The proposed provisions specify producers who do not
plant in drought conditions when other producers plant in anticipation
of receiving adequate precipitation, may be eligible for prevented
planting coverage. However, the fact that other producers may be
planting does not change the standards applicable to be eligible for
prevented planting. The current requirement is that producers must
provide documentation supporting that on the final planting date (or
within the late planting period if the insured elects to try to plant
within the late planting period) for non-irrigated acreage, there was
insufficient soil moisture for germination of seed or progress toward
crop maturity due to a prolonged period of dry weather, or for
irrigated acreage, there was not a reasonable expectation of having
adequate water to carry out an irrigated practice. Further, even if
producers elect to plant the crop in drought conditions it does not
mean that they will receive an indemnity. The issue is whether such
planting meets the requirements of section 8(b)(1). No change has been
made.
Comment: A commenter recommended, with respect to non-irrigated
practices, that FCIC amend section 17(d) to require that, prior to the
final planting date, an insured obtain the opinion of an ``agricultural
expert'' recommending that, because of drought, the insured cannot or
should not plant. The commenter stated under the current policy and
procedures, an insurance provider is forced to gather information
[[Page 15823]]
regarding moisture, seed germination and similar data well after the
final planting date. This often is difficult and hinders the insurance
provider's ability to adjust the prevented planting loss. Likewise, an
insured's decision not to plant because of drought should be based on
soil conditions during the planting or late planting period. However,
insureds frequently justify their decision not to plant based on the
failure of crops planted, as opposed to the specific insured's
individual situation. The commenter stated FCIC must revise the policy
to address the problems associated with prevented planting claims due
to drought.
Response: As stated above, provisions contained in section 17(d)
require documentation of the drought conditions that prevented
planting. FCIC has revised the provision to make it clear that it is
the producer who is required to provide the applicable documentation
consistent with the requirements of section 14(e)(2), which specifies
it is the producers responsibility to establish that an insured cause
of loss occurred during the insurance period. If the producer cannot
meet this responsibility, no prevented planting payment should be made.
Comment: A commenter stated the addition of ``* * * failure or
breakdown of irrigation equipment or facilities * * *'' in proposed
section 17(d) could allow the insured to delay repairs when such an
event occurred well in advance of the final planting date. The
commenter stated this may be addressed in section 12(d)(1), which
requires ``* * * all reasonable efforts to restore the equipment or
facilities to proper working order within a reasonable amount of time *
* *'' The commenter stated there is a general reference to 12(d) in
section 17(d)(1)(ii). However, the commenter does not believe this is
entirely clear in section 17(d).
Response: The same causes of loss apply to both prevented planting
and planted acreage. Therefore, to be eligible for a prevented planting
payment due to failure of the irrigation equipment or facilities, the
producer must make all reasonable efforts to restore the equipment or
facilities within a reasonable amount of time in accordance with
section 12(d). To make this clearer, FCIC has revised the provisions to
separate failure of the irrigation equipment or facilities from the
other causes and make section 12(d) expressly applicable to failure of
the irrigation equipment or facilities. FCIC has also clarified the
provisions in section 17(d). This should avoid any confusion.
Comment: A commenter stated they do not feel failure or breakdown
of irrigation equipment or facilities should be added as a reason for
qualifying for a prevented planting payment in section 17(d)(1).
Response: Failure or breakdown of the irrigation equipment or
facilities is only a covered cause of loss if such failure or breakdown
was caused by an insured cause of loss (for example, a tornado
destroyed a producer's irrigation equipment). Further, FCIC is
requiring that all reasonable efforts be made to restore the equipment
or facilities. Therefore, program integrity should not be adversely
affected by providing coverage for the results of a natural disaster.
No change has been made as a result of this comment.
Comment: A commenter stated the requirement in the last sentence of
proposed section 17(d)(2) [``* * * if it is possible for you to plant
on or prior to the final planting date * * *''] needs to apply to
producers who are prevented from planting during the late planting
period as well.
Response: Producers are not required to plant during the late
planting period. Therefore, producers cannot be denied a prevented
planting payment for failure to plant during the late planting period.
No change has been made.
Comment: A commenter stated their interpretation of prevented
planting is that if a producer elects not to plant due to excessive
moisture and others in the area plant, the producer will not be
eligible for a prevented planting payment. The commenter stated some
areas have very diverse soil types within the same field, there are
upland acres and bottomland acres on the same farm serial number, some
fields and areas do not drain as well as others, rainfall across an
area or county can vary significantly, and conditions may vary so much
across a county, it could be valid for a producer to not plant in one
end of a county while another producer in the other end of the county
plants. The commenter gave an example of a producer planting corn for
silage very late since the producer needed the fodder for the cattle
and another producer choosing not to plant corn for grain during the
same time-frame since the producer missed the optimum window needed to
produce corn for grain. The commenter suggested the same approach be
taken for excessive precipitation as FCIC is proposing for drought.
Producers should not be penalized because they elect not to take the
risk. The commenter questioned what the definitions of area and similar
conditions are.
Response: The definition of ``prevented planting'' requires the
comparison of acreage with similar characteristics. Therefore, if two
producers have similar acreage and one is able to plant and the other
does not, there must be a determination of whether the requirements in
section 8(b)(1) have been met for the acreage that was planted. If it
is determined that the conditions under which the crop is planted are
not generally recognized in the area, then the crop is not insurable
and the producer that did not plant the crop would be eligible for a
prevented planting payment. Further, it is possible that there may be
situations where the planted crop is insurable under section 8(b)(1)
and the producer that elects not to plant the crop is still eligible
for prevented planting. For example, in some cases there may be a
prolonged drought and some producers are prevented from planting, yet
agricultural experts may recognize it is appropriate to plant in dry
conditions because if conditions were to change and normal rainfall is
received, it will still allow the producer to make a crop. Under such
an uncertain situation, the policy would not require the producer to
plant and the producer may be eligible for a prevented planting
payment. The producer must plant the insured crop, whenever it is
possible to plant the crop, even if it is later than the date the
optimum yield could be expected as long as it is before the final
planting date. Drought and excessive precipitation cannot be treated
the same because in a drought situation the seed will not germinate
until adequate moisture is received and it is not uncommon for weeks to
go by with no precipitation. In an excessive moisture situation there
is a better chance of producing the insured crop. Section 1 defines
``area'' as ``Land surrounding the insured acreage with geographic
characteristics, topography, soil types and climatic conditions similar
to the insured acreage.'' This definition should also be sufficient to
explain ``similar characteristics'' of the acreage referred to in the
definition of ``prevented planting.'' No change has been made.
Comment: A commenter stated the phrases ``insured acres reported''
and ``acreage for which payment is made based on another crop'' in
section 17(e)(1)(i)(A) conflict with one another.
Response: The commenter is correct. In addition, as indicated more
fully below, FCIC has revised section 17(h) so that if a crop that was
prevented from being planted no longer has eligible prevented planting
acreage but the producer has eligible prevented planting acreage for
another higher dollar crop,
[[Page 15824]]
the remaining eligible acreage can be used for prevented planting but
the payment will be based on the crop that was prevented from being
planted. Therefore, there is no longer a need for the phrase ``acreage
for which payment is made based on another crop.''
Comment: Several comments were received regarding the provisions
proposed in section 17(e)(1)(i)(C) that allow irrigated acres to be
increased for prevented planting purposes if irrigation equipment is
added to the farm or if irrigated acreage is added to a farming
operation. A few commenters believe this provision should enhance the
current prevented planting provisions. A commenter stated they agree
with the proposed change. They believe it follows a common sense
approach and it should be retained. Another commenter stated the
language in section 17(e)(1)(i)(C) which states, ``* * * or if you
acquired additional land for the current crop year * * *'' should be
changed to `` * * * or if you acquire * * *'' to match the tense used
in the first phrase ``If you add * * *'' [and in (i)(B)].
Response: FCIC has retained the change in the final rule.
Additionally, FCIC has changed the word ``acquired'' to ``acquire'' in
section 17(e)(1)(i)(C) as suggested.
Comment: A few commenters agreed with the change proposed in
section 17(e)(1)(ii)(A)(2), which allows a producer who is farming for
the first time in a county and who purchases land after the sales
closing date to notify the insurance provider within ten days of the
purchase to be eligible for prevented planting. The commenters stated
this should enhance the current prevented planting provisions. Another
commenter supported the proposed allowance of submissions of intended
acreage reports on new ground after the sales closing date and urged
FCIC to retain this provision in the final rule.
Response: FCIC has retained the proposed provisions in the final
rule.
Comment: A commenter questioned if the references to ``intended
acreage report'' in section 17(e)(1)(ii)(A)(1)-(2) & (B)-(D) should be
revised to ``intended prevented planting acreage report'' to limit this
to that situation or whether FCIC should add a definition of ``intended
acreage report'' to clarify when and why it would be used.
Response: FCIC has added a definition of ``intended acreage
report'' to avoid any possible confusion between the intended acreage
report, which is intended to report acreage by crop the producer
intends to plant solely for the purpose of determining prevented
planting acreage eligibility, and the acreage report, which is the
report of actual planted and prevented planted acreage by crop in
accordance with section 6.
Comment: A commenter suggested that in section 17(f)(3), the word
``is'' at the beginning of the third phrase [``* * * or is required * *
* ''] should not be added, since it is not included in the first two
phrases.
Response: The proposed change will not be retained in the final
rule.
Comment: A commenter did not support the change proposed in section
17(f)(4) because they believe it will allow adverse selection by
permitting the first producer to claim prevented planting on a fall
crop and the second producer to claim prevented planting on a spring
crop, when neither have to produce records regarding prevented planting
payments. The commenter stated this circumvents the double cropping
requirements. The commenter suggested that the following example from
FCIC's Claims Advisory be included anywhere there is reference to
double cropping history. After posting FAD-045 regarding double
cropping history, questions remain as to what records of acreage and
production the Federal crop insurance policy requires to prove a double
cropping history. Either: (1) The producer must provide records of
acreage and production that show that the producer successfully double
cropped both crops; or (2) the producer must provide acreage and
production records that show the specific acreage was successfully
double cropped with both crops. In either case, records must be only
from the acreage that was double cropped and cannot be combined with
records from acreage that was not double cropped. For example, if a
producer has never double cropped in the county but is renting acreage
on which another producer double cropped wheat and soybeans on seven
out of twenty fields in two of the last four years, to prove a history
of double cropping wheat and soybeans the records of acreage and
production for wheat and for soybeans must be provided from the seven
fields and these are the only fields that qualify for double cropping.
If a producer has their own records of double cropping, they must still
provide separate records from the seven fields that were double
cropped; however, the producer can use the number of acres eligible for
the double cropping anywhere in their farming operation.
Response: The provisions in section 17(f)(4) do not allow producers
to circumvent the double cropping requirements. Provisions proposed in
section 17(f)(4)(i), (ii), and (iii) set forth the double cropping
requirements that must be met before prevented planting payments can be
made for both a fall crop and a spring crop on the same acreage in the
same crop year. A question was previously raised regarding what acreage
the double cropping exemption would apply to when the producer submits
his or her own double cropping history records, versus when the
producer is farming newly obtained ground and submits the double
cropping history records of a previous producer for the newly added
ground. FCIC addressed this issue in both Final Agency Determination
(FAD) 045 and in an FCIC Claims Advisory. These clarifications
regarding records and the applicability of the double cropping history
should also be reflected in section 17(f)(4) and FCIC has revised the
double cropping history provisions contained in sections 15(i) and
17(f)(4).
Comment: A commenter stated that section 17(f)(4)(ii) is very
confusing and hard to follow. The commenter stated the parenthetical
phrase [``* * * (the crop that was prevented from being planted
following another crop that was planted if qualifying under section
17(f)(5)(i)(A))''] is included twice and most, or all, of it does not
seem to be necessary since ``second crop'' is defined in section 1. The
commenter noted the parenthetical phrases end with a reference to ``* *
* if qualifying under section 17(f)(5)(i)(A)'' and section
17(f)(5)(i)(A) refers back to section 17(f)(4)(ii) to determine if the
insured meets ``* * * the double cropping requirements in section
17(f)(4).'' Therefore, the commenter believes the reference in section
17(f)(4) appears to be unnecessary since it ultimately rebounds back
onto itself. The commenter added eliminating the parenthetical phrases
would at least make the sentence a little easier to read and
understand: ``You provide records acceptable to us of acreage and
production that show you have double cropped acreage in at least two of
the last four crop years in which the second crop that was prevented
from being planted was planted, or show the applicable acreage was
double cropped in at least two of the last four crop years in which the
second crop that was prevented from being planted was grown on it;
and.'' The commenter stated the provision still includes some
repetition that could be minimized, and believes some rewording could
eliminate the potential confusion of the phrase ``* * * second crop
that was prevented from being planted was planted * * *''
[[Page 15825]]
Response: FCIC has revised section 17(f)(4)(ii) for clarity. As
revised, the provisions make it clear that if a prevented planting
payment has already been paid on the acreage, the producer is not
eligible for a prevented planting payment on the insured crop unless,
with respect to the insured crop: (1) The producer can provide
acceptable records showing that the producer has a double cropping
history with the insured crop that was prevented from planting for at
least two of the previous four crop years; or (2) the acreage has a
double cropping history with the insured crop that was prevented from
planting for at least two of the previous four crop years. FCIC has
also added provisions specifying that the insured's double cropping
history can apply to any acreage in the county but the history for
another producer is only applicable to the acreage that was double
cropped. This is consistent with FAD-045 and clarifies the acreage to
which the records must apply. FCIC has made a conforming change in
section 15(i) in order to ensure that the provisions are consistent.
Comment: A commenter stated the provisions proposed in section
17(f)(6) specify cover crops or volunteer crops that are in place
longer than twelve months prior to the final planting date for the
insured crop will be considered pasture or forage and will result in no
prevented planting payment. The commenter believes this revision to the
prevented planting provisions should help remedy the situation where a
producer claims to be prevented from planting on the same piece of
ground a number of consecutive years and it is clear he or she has no
real intention of planting.
Response: FCIC has retained the proposed revision in the final
rule.
Comment: A commenter suggested the provisions proposed in
sections17(f)(6), (i) & (ii) be revised by moving ``Cover or volunteer
plants that are seeded, transplanted, or that volunteer'' to the end of
(6), with a colon at the end, instead of repeating it in both (i) &
(ii), which would then begin: ``(i) More than 12 months * * *'' and
``(ii) Less than 12 months * * *'', making the difference easier to
identify. The commenter added as rewritten, the phrase that cover/
volunteer plants will or will not ``* * * be considered pasture or
other forage crop * * *'' does not work. Therefore, the commenter
suggested revising either to ``* * * pasture or forage crop * * *'' or
``* * * pasture or another forage crop * * *''
Response: FCIC has revised the provisions in section 17(f)(6)
accordingly.
Comment: A commenter recommended revising section 17(f)(9)(i) by
deleting the phrase ``* * * to plant and produce a crop with the
expectation of at least producing the yield used to determine your
production guarantee or amount of insurance'' since this is a duplicate
of the same phrase in (9). The commenter added that since this would
leave only ``Inputs include, but are not limited to, sufficient
equipment and manpower necessary'', this could perhaps be consolidated
into (9), something like ``* * * proof that you had the inputs (i.e.,
sufficient equipment and manpower) available * * *''
Response: FCIC has revised the provisions in section 17(f)(9)
accordingly.
Comment: A commenter stated the added language in sections
17(f)(9)(ii)(A) & (B) referring to ``* * * a substantial change in the
availability of inputs * * *'' in (A) and ``* * * insufficient inputs *
* *'' in (B) could lead to questions of what is considered substantial
or insufficient.
Response: The commenter is correct that the word ``substantial''
can be removed thereby eliminating questions regarding its meaning.
Section 17(f)(9)(ii) has been revised to clarify the provision is
referring to changes in inputs that could impact the ability to plant
the insured crop. However, the word ``insufficient'' cannot be removed
because the intent of the provision is to deny prevented planting
coverage when the producer cannot show that he or she had the ability
to actually plant the crop but for the insured cause of loss. It is
possible that a producer can have a quantity of an input, such as 1,000
pounds of seed, but it would take considerably more inputs to plant all
the acreage using good farming practices. If there are not adequate
resources to produce the crop, the acreage cannot be considered to have
been prevented from planting. FCIC has clarified that when determining
the sufficiency of inputs, the insurance provider must consider all the
crop acreage to avoid paying prevented planting claims when the
producer uses all available inputs on planted acreage and then claims
prevented planting on the remaining crop acreage.
Comment: Several comments were received regarding the provisions
proposed in section 17(h) regarding prevented planting payments that
are made based on another crop. A commenter stated while there may be
no perfect solutions to the problems encountered when a crop's eligible
prevented planting database acres are exhausted, the commenter believes
the proposal in section 17(h) is a vast improvement over the current
provisions. Another commenter stated allowing eligible acres for
another crop to be used to determine overall acreage on which prevented
planting payments will be made relative to the actual crop prevented
from being planted is a positive change that reflects the actual loss
on the farm. The commenter observed that important safeguards are put
in place in order to prevent any abuse and urged FCIC to retain the
proposed change in the final rule. A few other commenters also
supported the provisions proposed in section 17(h).
Response: FCIC has retained provisions that prevent a prevented
planting payment based on a value higher than the crop prevented from
being planted.
Comment: A commenter stated they do not fully understand the need
for the calculation in section 17(h)(1)(i)(A)(1), which simply gets one
back to the amount of the crop for which the prevented planting was
reported.
Response: The factor used in proposed section 17(h)(1)(i)(A)(1)
added an unnecessary complication. FCIC has removed the factor and
revised the provision to specify that when the insured crop that is
prevented from being planted has insufficient eligible prevented
planting acreage and the crop with remaining eligible prevented
planting acreage has a value that is higher than the insured crop, the
value of the insured crop will be used to determine the prevented
planting payment and the producer would report all the prevented
planting acreage as the insured crop for the purpose of determining
future prevented planting eligible acreage.
Comment: A commenter stated the price terminology is the only
difference in the calculations in section 17(i)(1)(ii)(A) & (B) when
revenue protection is, or is not, available. Therefore, the commenter
proposes consolidating this into, ``(ii) The amount determined by
multiplying the production guarantee (per acre) for timely planted
acreage of the insured crop (or type, if applicable) by your price
election or projected price (whichever is applicable);''
Response: FCIC has revised the provisions accordingly.
Section 18 Written Agreements
Comment: A commenter stated they agree continuous written
agreements should continue to be in effect.
Response: FCIC has retained the provisions in the final rule that
allow continuous written agreements.
[[Page 15826]]
Comment: A commenter encouraged FCIC to leave any revisions to
Written Agreements in the Written Agreement Handbook instead of within
the policy.
Response: The policy, since it is published as a regulation,
carries the force of law, which is applicable to all program
participants. The Written Agreement Handbook is FCIC issued procedure,
which does not provide provisions of insurance. It simply provides
instructions and guidance to address provisions in the policy.
Accordingly, changes or revisions to the policy cannot be accomplished
by modifying the Written Agreement Handbook alone. No changes have been
made in response to this comment.
Comment: A commenter stated it is unclear whether the parenthetical
phrase ``* * * (except for a written agreement in effect for more than
one year) * * *'' in section 18(c) applies only to ``the guarantee,''
as currently written, or also to the ``premium rate'' or whether it is
not needed since the following phrase could cover multi-year written
agreements ``* * * or information needed to determine the guarantee and
premium rate * * *''. This potential ambiguity should be resolved in
the final rule. Presumably the phrase ``* * * projected and harvest
prices in accordance with the Commodity Exchange Price Provisions * *
*'' is intended to require that the written agreement will identify
which board/exchange and other CEPP information will apply to the
requested crop/county, but perhaps this could be revised for brevity
and clarity so it does not suggest that the written agreement will
specify a harvest price that would not have been released at that time.
They suggested the following approach: ``(c) If approved by FCIC, the
written agreement will include all variable terms of the contract,
including, but not limited to, crop practice, type or variety;
guarantee and premium rate (or information needed to determine them);
and the amount of insurance or the applicable price information (price
election or the information needed to determine the projected and
harvest prices), as follows: ``(1) If a price election is applicable,
it will not exceed the price election contained in the actuarial
documents for the county (or the county used to establish the other
terms of the written agreement). ``(2) If revenue protection is
available (or made available by the written agreement), the written
agreement will include the information needed to determine the
projected price and/or harvest price (if revenue protection is not
selected, the harvest price is not applicable). ``(3) If the applicable
price election or projected price cannot be provided, or is not
appropriate for the crop, the written agreement will not be approved.''
(Combined current and proposed language to cover both kinds of prices.)
Another commenter questioned if the same type of written agreement will
be available for both yield protection and revenue protection in
section 18(c)(3).
Response: The placement of the parenthetical statement could lead
to a misinterpretation of the intent of the language and the provisions
were revised and reformatted to provide greater clarity. The same type
of written agreement will be available for both yield protection and
revenue protection under section 18(c)(3). The provisions of section
18(c) are intended to specify the terms that must be contained in the
written agreement. These include the prices or the mechanisms to
calculate them. However, section 18(c)(3) makes it clear that the
written agreement will only offer revenue coverage for the crop if it
is already provided in the county or State. Section 18(c)(4) clarifies
if revenue coverage is not provided in the State, the written agreement
will only offer yield protection. These prices will be based on
existing CEPP.
Comment: A commenter stated they believe section 18(d) reads better
if the lead-in is divided into two sentences: ``Each written agreement
will only be valid for the number of crop years specified in the
written agreement. A multi-year written agreement:''. To follow
properly from the lead-in in (d), part of (3) should be changed to
read: ``* * * then insurance coverage will be in accordance * * *'' to
``* * * will have insurance coverage in accordance * * *'' Also, FCIC
should change in (4) the spelling of ``cancelled'' to ``canceled'' to
be consistent with how it is spelled elsewhere, such as in (d)(3), or
change the others to match this, since either spelling may be
acceptable, depending on the source.
Response: As stated above, FCIC has revised the provisions to make
the spelling of ``canceled'' consistent throughout the policy. FCIC has
not proposed any changes to section 18(d). Therefore, the other
recommended changes are not adopted.
Comment: A few commenters stated the provisions in section 18(e)
permit an insured to submit a request for a written agreement after the
sales closing date if the insured physically was unable to submit said
request. However, section 2, which governs the submission of
applications, does not contain a similar safe harbor. A commenter
stated, for example, a tornado struck Springfield, IL just two days
before the March 15, 2006, sales closing date disrupting power and
telephones. For what reason is the physical inability to submit a
request a legitimate excuse for a written agreement but not for an
application? A commenter stated the late filed application procedure is
completely deleted from the 2006 CIH apparently because there was no
authorization in the policy. A commenter recognized FCIC did not
propose changes to section 18(e)(1), though changes are proposed for
other provisions of section 18. However, the commenter did not
understand the seemingly arbitrary distinction, described above, and
recommended FCIC remedy this inconsistency. A commenter stated written
agreement requests may be made after the sales closing date with
sufficient justification such as hospitalization.
Response: As stated above, to be eligible for insurance,
applications must be submitted by the sales closing date, which are
statutorily set for spring planted crops and cannot be revised. This
precludes accepting late filed applications for such crops. Further,
the sales closing dates are established to provide the maximum amount
of time for applications to be submitted without adversely affecting
program integrity. FCIC can ensure there is no adverse selection and
maintain program integrity through its right of rejection of written
agreements. No change has been made in response to this comment.
Comment: A few commenters stated they are not sure what is meant by
the new language in proposed section 18(e)(2)(i)(A) ``except acreage
that qualifies under section 9(a)(1),''. The commenters asked whether
this means that it is uninsurable, or that it must be requested by the
sales closing date. A commenter stated that section 9(a)(1) addresses
acreage that is not considered ``insurable acreage,'' with exceptions
listed in 9(a)(1)(i)-(iii). The exception in section 9(a)(1)(ii) is if
``The Crop Provisions or a written agreement specifically allow
insurance for such acreage'' that was not planted and harvested at
least one of the last three years; part of this also is mentioned in
section 18(e)(2)(i)(B). Since the possibility of a written agreement is
allowed in section 9(a)(1)(ii), it does not seem that it should be
precluded in section 18(e)(2)(i)(A). If section 18(e)(2)(i)(A) is
intended to exclude some other part of section 9(a)(1), the reference
needs to be more specific. If the exclusion is intended to apply to the
timeframe of ``On or before the acreage reporting date'' in section
18(e)(2)(i), or something else, that also needs to be clarified. FCIC
also should clarify that the reference to ``the expiration date'' is
[[Page 15827]]
the expiration date for the insured to accept the written agreement (as
opposed to the expiration date for an annual written agreement). The
commenter also recommended removal of the language ``on the day the
first field is appraised'' as this is unreasonable to expect the
insured to sign the written agreement the same day the crop was
appraised. Another commenter stated as written, existing section
18(e)(2) does not follow from the lead-in in (e), which states ``A
request for a written agreement may be submitted: ``(2) For the first
year the written agreement will be in effect only:'' If the information
in (e)(2) is supposed to apply to those written agreement requests made
``After the sales closing date but on or before the acreage reporting
date * * *'' in (1), it should be combined with (1). If it is supposed
to apply to all first-year written agreements, it needs to be a
separate subsection.
Response: The exception in proposed section 18(e)(2)(i)(A) was
unclear and FCIC has removed it. The provisions have also been
restructured to improve readability. The provisions requiring a written
agreement to be signed by the insured by the earlier of the first date
the crop was appraised to determine whether the potential production
meets the requirement or the expiration date should not be removed.
These appraisals are generally later in the production period and
producers will have already received an offer for a written agreement
contingent upon the result of the appraisal. Producers can always sign
the offer before the appraisal and it will only come into effect if the
appraised amount is sufficient. However, if producers are able to wait
until after the appraisals are completed to sign, there is a potential
vulnerability because producers may have more information regarding
whether they will likely have a loss. The written agreement needs to be
signed during the appraisal process and since the producer already
knows the terms of the agreement, and insurance providers can set up
appointments to ensure the producer is present to sign, it should not
be a problem to obtain the signature at appraisal. The first date of
appraisal is used because multiple appraisals may be required and this
eliminated the question of what appraisal date is used. FCIC agrees the
expiration date should be clarified and has revised the provisions in
redesignated section 18(e)(2)(i)(A)(2) to specify it is the expiration
date for the producer to accept the offer.
Comment: A commenter stated the added phrase ``* * * or to insure a
practice, type or variety where the actuarial documents in another
county do not permit coverage * * *'' is unclear in section
18(e)(2)(ii). The explanation in the ``Background'' of the proposed
rule says this is to add a ``* * * reference to the time a written
agreement request must be submitted to insure a practice, type or
variety where there are no actuarial documents for the practice, type
or variety'' but it is unclear whether this is referring to actuarial
documents not existing in the county where coverage is desired, or not
existing in any county in the entire country. If it is really intended
to allow a written agreement request to insure non-irrigated rice (as
an example of a practice that is not rated anywhere), perhaps it should
be worded: ``* * * or to insure a practice, type or variety for which
there are no actuarial documents in any county.'' In addition, it would
be interesting to know how often FCIC approves a written agreement for
a completely unrated practice, type or variety, and on what basis.
Response: The proposed addition was never intended to change the
current requirement that allows written agreements even though there
are no actuarial documents in any county in the country that covers the
requested practice, type or variety as long as the producer has
adequate production history upon which the guarantee and premium rates
can be established. This is consistent with section 508(a)(4)(B) of the
Act. Therefore, FCIC has removed language that refers to situations in
which there are no actuarial documents in any county.
Comment: A commenter stated section 18(e)(3) reads: ``(e) A request
for a written agreement may be submitted: ``(3) On or before the sales
closing date, for all requests for renewal of written agreements,
except as provided in section 18(e)(1);''. The commenter stated that
FCIC needs to consider whether this should be set up as a separate
subsection from (e), which also would separate this from the reference
in (e)(4), which does not appear to involve straightforward renewal
requests but does fit with the ``may'' in (e). It addresses the
deadline for renewal requests, and the wording of (e)(3) suggests they
``must'' be submitted by the sales closing date (with the only
exception being physical inability to do so), rather than ``may.''
Response: FCIC has revised section 18(e) by moving the provisions
for renewal of written agreements by the sales closing date to section
18(a). This now places all the provisions regarding the sales closing
date deadline in one subsection. The provisions in section 18(e) only
reference written agreements that can be requested at a time other than
the sales closing date.
Comment: A commenter stated in sections 18(f)(1)(i)-(vi), (2)(i)-
(vi) & (3) the readability and substantive text of subsection (f) would
be improved by revising the outline numbering. Currently, (1) reads
``For all written agreement requests:'' but (1)(i) does not apply to
``* * * policies that do not require APH * * *'' and (v) applies only
to perennial crop policies. Therefore, we suggest: (a) eliminating the
phrase in (1); (b) changing (1)(i)-(v) to (1)-(5); (c) deleting (2)(i),
which would be covered by the second part of currently numbered (1)(i);
(d) changing (2)(ii)-(v) to (6)(i)-(iv); and (e) combining (1)(vi),
(2)(vi) & (3) into (7), or (7) & (8) if the requirements for ``all
other information that supports * * *'' should be kept distinct from
``Such other information as specified in the Special Provisions * *
*''.
Response: There are separate types of written agreements in section
18(f)(1) and (2), with different requirements so it is not practical to
combine these. Further, while there are a few exceptions in section
18(f)(1), these exceptions are clearly stated. To combine and redraft
the provisions as suggested by the commenter would not provide any
additional clarification. No changes have been made in response to this
comment.
Comment: A commenter stated unless every field in the country is
identified with an FSA Farm Serial Number, perhaps the reference in
section 18(f)(1)(iv) should include a qualifier similar to the one for
legal descriptions. The commenter also referred to their comments on
the proposed definition of ``common land unit,'' as to whether these
references should be added to the Basic Provisions until the details of
the joint FCIC-FSA project are settled.
Response: The provision only requires the FSN, if available. In
addition, as previously stated, FCIC agrees there are issues that
should be resolved before the definition of ``common land unit'' is
included in the policy provisions. Therefore, the proposed definition
and the reference in section 18 will not be retained in the final rule.
However, the term has been included in section 6(c) so it can be used
in the future without requiring policy revisions.
Comment: A comment was received regarding section 18(i). A
commenter stated the language ``A written agreement will be denied
unless'' should be rewritten and reorganized to read: ``(i) A written
agreement will be approved if: ``(1) FCIC approves the written
agreement request; ``(2) The crop meets the minimum appraisal amount
[[Page 15828]]
specified in section 18(e)(2)(i)(A), if applicable; and ``(3) The
original written agreement is signed by you and postmarked not later
than the expiration date.'' The commenter stated they also believe this
provision should include some reference to agreement or approval by the
insurance provider, who is one of the parties to the policy contract.
Response: FCIC has revised the provision to require acceptance of
the written agreement by the insurance provider before it is effective.
FCIC has not adopted the recommendation that the provision specify when
the written agreement will be approved because there may be other
conditions for approval that are not stated in the list. Section 18(i)
is intended to identify those requirements, which if not met, will
result in denial.
Section 20 Mediation, Arbitration, Appeal, Reconsideration, and
Administrative and Judicial Review
Comment: A commenter recommended FCIC amend section 20 to provide
that any legal action resulting from FCIC's termination of revenue
protection as per proposed section 3(k) shall be brought in accordance
with 7 CFR part 400 subpart J or appeal in accordance with 7 CFR part
11.
Response: As stated above, the proposed provisions in section 3(k)
have been revised and redesignated as section 3(c)(5). These provisions
involve determinations made by FCIC or USDA regarding market forces and
whether revenue protection should be available. Since those decisions
are clearly made by FCIC, they fall within section 20(e). Therefore,
there is no need to add other provisions to section 20.
Comment: A commenter stated the proposed changes are of three types
in section 20: (1) Conforming changes; (2) linguistic improvements; and
(3) changes driven by existing procedures regarding good farming
practice determinations. The commenter stated as a general matter,
changes of this sort are understandable. They stated that because
section 20 was radically revised when the existing Basic Provisions
were published in August 2004, there has been relatively little
experience with the actual operation of the new arbitration and
litigation provisions because policyholder disputes under the current
provisions contained in section 20 have only recently been entering the
litigative process. They believe this suggests an argument in favor of
leaving the current text of section 20 basically intact, except for the
limited changes made in the proposed rule and suggested herein. The
commenter also stated the current provisions and the proposed
provisions in section 20 are replete with cross-references, exceptions,
and limitations. As such, the commenter does not believe the provisions
are readily understood. The commenter is concerned with the complexity
of the provisions contained in section 20, combined with a producer's
potential argument that its terms are not easily comprehended, presents
a State court trial judge with an opportunity to disregard their
applicability and to rule that they deprive a producer of the right to
a jury trial. While the commenter firmly believes that any such holding
would be unwarranted, they remain concerned that this risk is present.
Thus, the commenter encourages FCIC to restructure section 20 to make
it flow more logically (as has been done with section 14) and to
simplify the text.
Response: FCIC agrees with the commenter that the current and
proposed provisions in section 20 should basically remain intact.
However, FCIC is concerned that a major restructuring between proposed
and final rule could lead to an inadvertent error or omission that
would normally be caught in the public comment period. Further, the
current structure, while it may be improved, reads as FCIC intended
when the provisions were drafted. FCIC may revisit these provisions
next time it revises the Basic Provisions. No change has been made.
Comment: A few commenters stated the text of section 20(a)(2)
requires a written reasoned decision by an arbitrator. The commenters
recognized this approach may be appropriate in significant cases,
especially when judicial review is likely, but believe it adds
unnecessarily to the cost of resolving smaller disputes. The commenter
stated there can be occasions when it is not prudent, for reasons of
precedent, to have a written reasoned decision. The commenter proposed,
instead, the parties to the arbitration should determine by mutual
agreement whether a written reasoned decision by the arbitrator is
required. If the parties disagree on this issue, a written reasoned
decision should be mandatory only if the insurance provider requests
one.
Response: The provisions contained in section 20 allow arbitration
as a method to resolve most disputes between producers and their
insurance provider. However, other provisions in section 20(a) also
require that if the dispute in any way involves a policy or procedure
interpretation, regarding whether a specific policy provision or
procedure is applicable to the situation, how it is applicable, or the
meaning of any policy provision or procedure, an interpretation must be
obtained from FCIC. The provisions also specify such interpretation
will be binding in any arbitration. Failure to obtain any required
interpretation from FCIC will result in the nullification of any
arbitration award. If the arbitrator is not required to provide a
written statement describing the factual findings and the
determinations, there would be no way to determine if the arbitrator
ruled on a policy provision or procedure without the required FCIC
interpretation, or whether the arbitrator failed to apply the FCIC
interpretation, which in either case would result in nullification of
the arbitration award. In addition, it is possible that the arbitration
award may have been the result of insurance provider, loss adjuster or
agent error. Under such circumstances, the policy would not be eligible
for reinsurance. Therefore, a written arbitration decision is necessary
to the operation of the program. No change has been made.
Comment: A few comments were received regarding mediation. A
commenter stated they understand the importance of mediation as an
alternative dispute resolution mechanism. However, they believe
mediation has limited utility with respect to disputes under crop
insurance policies because the preamble to the Basic Provisions and the
explicit terms of section 14(d) (``Our Duties'') compel utilization of
FCIC's established or approved loss adjustment procedures. The
commenter stated the type of compromise inherent in mediation may not
permit an insurance provider to reach a settlement that both resolves
the dispute with the policyholder and simultaneously is sufficient to
avoid criticism by the Compliance Division. The commenter stated if the
final rule does not revise subsection (a), FCIC's published discussion
of this comment (and any similar comments offered by insurance
providers) should affirmatively state FCIC supports resolution of
disputes by mediation, encourages utilization of mediation, and will
respect the parties' decision to settle a dispute with the aid of a
neutral third-party mediator. The commenter stated a clear statement
that settlement discussions will not be second-guessed by hindsight
should provide comfort to the parties. Another commenter stated since
the preamble of the policy provides procedures issued or approved by
FCIC will be used in administering the policy and adjusting losses,
they question whether there is any room to resolve differences via
mediation, as
[[Page 15829]]
mediation usually involves some type of compromise to achieve
resolution. Therefore, they believe the mediation reference should be
removed from the policy.
Response: FCIC supports resolution of disputes through the use of
mediation, because mediation may be a faster, less expensive
alternative than arbitration and litigation. However, while the
commenter is correct that the insurance provider cannot waive or in any
way modify any policy provision or procedure issued by FCIC, many of
the disputes involve factual matters within the discretion of the
insurance provider (for example, what the insured did or did not do,
when something was done, the amount of appraised production, etc.).
Such types of disputes may be agreed upon through mediation based on
evidence available that supports the factual determination. It will be
up to the parties to determine whether the dispute can be resolved
through mediation. No change has been made.
Comment: A few commenters recommended language be added in section
20(f) as follows: ``Any suit must be brought against us in the United
States District Court for the district in which the insured acreage is
located.'' The commenters believe this is necessary to ensure uniform
application of Federal law. A commenter requested FCIC to note the text
of 7 U.S.C. 1508(j)(1), which they read to support the recommended
revision.
Response: Use of the word ``us'' in the recommended language in the
reinsured version would refer to the insurance provider but
508(j)(2)(A) of the Act states if a claim for indemnity is denied by
the Corporation or an insurance provider, an action on the claim may be
brought against ``the Corporation or Secretary'' only in the United
States district court for the district in which the insured farm is
located. This statutory provision does not require a producer to file
suit against the ``insurance provider'' in the United States district
court. Even the revisions to section 508(j) of the Act as a result of
the 2008 Farm Bill, which clarifies that producers can only sue FCIC
when FCIC makes determinations under the policy or instructs the
insurance provider to take certain actions under the policy, do not
require producers to file suit against insurance providers in the
United States District Court. Therefore, FCIC cannot preclude producers
from filing claims against the insurance provider in State court.
However, FCIC agrees section 20(e) of the reinsured version should be
revised to be consistent with section 508(j)(2)(A) of the Act and
specify any suit must be filed against FCIC in the United States
district court for the district in which the insured farm is located.
Comment: A few commenters disagreed with the change proposed in
section 20(j). They stated the current provision mirrors section V.F.
of Appendix IV of the SRA and it should be retained. The commenters
stated FCIC may accompany an insurance provider when it works a claim
and provide instruction on how to pay the claim during the loss
adjustment process. They believe if the insurance provider follows
FCIC's instruction on how to pay the claim during the loss adjustment
process, the insurance provider should not be held responsible for any
litigation that may result. They pointed out in such a situation, no
modifications, revisions, or corrections were made by FCIC, yet FCIC
was directly involved in determining how the final payment would be
made. The commenters stated if FCIC was directly involved in
determining how the final payment would be made, FCIC should be
responsible for any litigation that may occur as a result of its
instructions and the insurance provider should not be held responsible
for any litigation that may result.
Response: If FCIC participates in the actual adjustment of the
claim, any suit filed by the producer should be against FCIC.
Therefore, the proposed change will not be retained in the final rule.
Section 21 Access to Insured Crop and Records, and Record Retention
Comment: A commenter stated they appreciated the relaxed
misreporting standards for production, especially within the 3-year
record retention period. Such a rule change will permit true continuity
of actual production from year to year in recordkeeping.
Response: FCIC is not sure which provision in section 21 the
commenter is referring to. Therefore, FCIC cannot respond to the
comment.
Comment: Several comments were received regarding section 21(b)(3).
A commenter stated the preamble of the rule specified FCIC intends the
language to apply in cases where the record retention period has
expired. The language should specifically state this intent if that is
indeed the intent. A few commenters stated the proposed language has
FCIC determining if yields are knowingly misreported and the insurance
provider may replace any yield in the APH it determines is incorrect.
If FCIC and an insurance provider dispute that yields were incorrect,
the insurance provider would have the option of only changing yields
they feel are incorrect and not the yields FCIC feels are incorrect.
The commenters stated if FCIC is determining if yields are knowingly
misreported, they should determine which yields are incorrect. The
commenters recommended removing the three references to ``we''
(insurance provider) and replacing with ``FCIC.'' The revised wording
could be ``If FCIC determines you or anyone assisting you knowingly
misreported any information related to any yield you have certified,
FCIC will require us to replace all yields in your APH FCIC determines
to be incorrect with the lesser of an assigned yield or the yield FCIC
determines is correct.'' Even with the proposed language, a commenter
expressed concern about how the producer could be held accountable for
years beyond the record retention period for acreage and production
evidence. The commenter questioned if this would not be difficult to
argue in a court of law. A commenter recommended the provision
specifically state the penalties provided are not exclusive of any
other penalties that may be provided for by the Basic Provisions. A
commenter stated the language contradicts requirements to retain
records as stated in section 21(b)(2). The commenter stated it is not
clear how yields can be determined to be incorrect if records are not
available and are not required to be available. A few commenters
suggested changing the end of the sentence to state: ``yields in your
APH determined to be incorrect * * * or the yield determined to be
correct.'' A commenter stated as proposed, this subsection has a
potential inconsistency; it opens with a reference to determinations
made by FCIC, but closes with references to yield(s) ``we [i.e., the
insurance provider] determine'' to be either correct or incorrect. The
commenter stated their change simply makes the close of this subsection
consistent with the fact that FCIC is making the determinations that
would result in yield adjustments.
Response: FCIC has revised the language so that either the
insurance provider or FCIC, who has evidence that the producer or
anyone assisting the producer knowingly misreported any information
related to any certified yield, will replace the incorrect yields. The
ability to correct or replace the yields should not be restricted as to
who will take the action. Section 21(b)(3) is not dependent on the
record retention period. At any time FCIC or the insurance provider
obtains evidence that yields have been knowingly misreported, the
yields will be replaced. FCIC cannot operate the program in an
actuarially sound manner and maintain
[[Page 15830]]
program integrity if it were to allow the use of yields that it knows
are incorrect. Such yields do not only affect a single year, they
affect the guarantee, premium, and any indemnity, prevented planting or
replant payment for each year the incorrect yield would remain in the
database. However, no action can be taken by FCIC or the insurance
provider unless it has evidence that shows the yields are incorrect.
This evidence can be from third parties (e.g., transportation records,
records from a buyer of the insured crop, or other records obtained by
the insurance provider, FCIC, or any person acting for the insurance
provider or USDA authorized to investigate or review any matter
relating to crop insurance). This provision does not hold the producer
accountable for not having production records. It holds the producer
accountable because other records obtained show that the information
was misreported. Because this provision involves only the consequences
for knowingly misreported yield information, and there are other
provisions that also involve misreported information in general, the
provision should specifically state the sanctions provided are not
exclusive of any other sanctions that may be provided by the policy
provisions or other applicable laws. FCIC has revised the provision
accordingly. FCIC has also revised the provision to specify ``the yield
determined to be correct.''
Section 22 Other Insurance
Comment: A commenter recommended section 22(c) be removed because
there is no way an insurance provider can accurately appraise a crop
before a fire because they do not know when lightning will strike. The
commenter believes it is sufficient to have the language in section (b)
to deal with fire when there is other insurance against fire.
Response: Section 22(c) provides the explanation of how the value
referred to in section 22(b) is determined. Therefore, section 22(c)
cannot be removed. However, as stated more fully below, since section
35 contains a methodology for determining the value of the crop, FCIC
has revised section 22(c) to cross reference section 35. This
eliminates the perceived need for any pre-loss appraisal.
Section 26 Interest Limitations
Comment: A commenter recommended language be added in section 26 to
address what date would be used to calculate interest in cases where
the insured did not sign the claim form. The commenter recommended the
following language be inserted as the second sentence of this
provision: ``Until you provide all of the information and documents
requested or required under paragraph 14, interest will not accrue and
the sixty (60) day time period is tolled.''
Response: Section 26 states that interest will not be computed
until after the 60th day after the claim form is signed by the
producer. Therefore, if the claim form is not signed by the producer,
the computation of interest does not begin. Further, since no changes
to this section were proposed, and the public was not provided an
opportunity to comment on the recommended change, the recommendation
cannot be incorporated in the final rule. No change has been made.
Section 28 Transfer of Coverage and Right to Indemnity
Comment: A few comments were received regarding section 28. A
commenter stated the proposed change allows a transfer of (right to)
coverage if the policyholder's share in the insured crop is transferred
to a third party any time after the sales closing date and after which
the new entity is unable to apply for his or her own policy. This is an
extension to include the time between the sales closing date and when
insurance attaches, and should resolve some of the successor-in-
interest problems that arise because of that current time period. The
need for the Transfer of Right to an Indemnity form previously was to
address the situation where insurance had already attached (not just
been applied for) so the original entity was responsible for paying the
premium but could not collect an indemnity because he or she no longer
had an insurable share, while the new entity could not apply for
coverage after the sales closing date or report the share since it was
not his/hers at the time coverage attached. This proposed change will
require a significant rethinking of the reason and purpose for this
procedure since it ``backs up'' the transfer to deal with the problem
as one of not being able to apply for coverage rather than one of how
to deal with existing coverage that has changed hands. This is not
necessarily a bad idea; however, it needs to be thought through very
carefully to avoid creating unintended consequences and new problems to
replace the old. For example, this proposed change could have an effect
on acreage reporting and prevented planting provisions. If the transfer
takes place before the crop is planted (insurance attaches) and both
the original entity and the new entity have policies for the crop in
the county, this would allow the new entity to choose whether to: (a)
do a Transfer of Coverage to use the original entity's coverage level,
price, APH, etc., for that crop year; or (b) report the ``added land''
on his or her own policy. Under the current procedure, this is not
usually an option because the original entity would have filed an
acreage report already. A commenter stated ``right to coverage'' is
used five times in section 28 and is unclear of the full meaning and
needs to be defined. A commenter agrees with the provisions, which
allow for transfer of coverage after the sales closing date but prior
to insurance attaching. A commenter stated that, per the proposed
language, a transfer of coverage may be done after the sales closing
date if an insured sells or leases all or part of their farming
operation and the transfer of coverage may apply prior to acres being
planted. The commenter questioned what happens if acres have been
planted and coverage attached. The commenter was also concerned the
reference to ``enter into a relationship with another person to provide
a share of the insured crop'' could be misinterpreted as a new entity
being formed. For example, a new partnership is being formed. The
commenter questioned if this would be an entity change after the sales
closing date and not be applicable for that year.
Response: The commenter is correct that the proposed provisions
could involve the acreage reporting and prevented planting provisions.
In addition, in considering the comments, FCIC realized there are
numerous administrative and coverage issues that must be addressed
prior to allowing transfers when coverage has not yet attached or for
prevented planting coverage. Further, as drafted, there may be
unintended consequences. Therefore, FCIC has not retained the proposed
provisions in the final rule.
Section 29 Assignment of Indemnity
Comment: A few commenters questioned the proposed changes to
section 29, which allowed assignments only to be made to legitimate
creditors of the insured person. A commenter suggested the need for a
clear definition of ``legitimate creditor.'' The commenter did not
think insurance providers are capable of making that decision and
recommended either clearly defining the term or not referencing it at
all. Another commenter stated they are concerned about how the rules
for assignment of indemnity may be changed. They believe there are
situations other than a normal creditor/grower relationship where this
[[Page 15831]]
provision is legitimate and they urged FCIC to be careful how this
provision is revised.
Response: As previously stated, FCIC has removed the phrase ``any
legitimate'' in the definition of ``assignment of indemnity.'' FCIC has
also revised section 29 to specify the producer may assign his or her
right to an indemnity for the crop year only to creditors or other
persons to whom the producer has a financial debt or other pecuniary
obligation.
Comment: A few comments were received regarding sections 29(a) and
(b). The commenters indicated section 29(a), which states: ``You may
assign your right to an indemnity for the crop year only to one or more
of your creditors'' was confusing when read in conjunction with
subsection (b), which states the insurance provider will accept only
``one assignment form for each crop.'' Some of the commenters stated
although it is evident an insured may submit only one assignment form
per crop, it is difficult to determine whether that form may include
multiple creditors. A commenter stated the inclusion of the term
``only'' was confusing. An additional commenter stated current
situations dictate they have the capability of having multiple
lienholders on one crop. If FCIC's intent, as explained in the
discussion preceding the Basic Provisions, is to prevent assignments to
relatives or persons to whom there is no debt, section 29 should so
state. The commenter recommended FCIC amend section 29(a) to state:
``You may assign your right to an indemnity for the crop year only to
creditors or other persons to whom you have a legitimate financial
debt.''
Response: FCIC has determined more than one assignment form may be
accepted. In this case, the multiple assignees will be treated the same
as if multiple assignees are listed on one form. The provisions have
been clarified that only one check will be issued in the name of the
insured and all assignees. This is being done under the current
provisions so this is not a change. It is up to the insured and
assignees to divide the indemnity among them. The provisions have also
been clarified to indicate more than one creditor may be listed on a
single form. As stated above, FCIC has also revised the provisions to
indicate an assignment may be made to any creditor or other person to
whom the producer has a financial debt or other pecuniary obligation.
Comment: A commenter stated the provisions in section 29 no longer
state the assignment ``will not be effective until approved in writing
by us'' but now just states it ``* * * must be provided to us.'' The
commenter recommended retaining the previous language but suggested if
the previous language is not retained, there needs to be some method to
verify an assignment was sent and received by the insurance provider
(i.e., certified mail).
Response: The language was removed because it was considered
redundant with the definition of ``assignment of indemnity.'' However,
as proposed, this definition fails to state the approval must be in
writing. Since this is necessary in order to confirm acceptance, FCIC
has revised the definition of ``assignment of indemnity'' to include
the phrase ``approved in writing.''
Comment: A commenter stated they propose changing ``* * * a
lienholder with a lien * * *'' to ``* * * a lienholder * * *'' in
section 29(c) because ``with a lien'' does not add anything that is not
covered by ``lienholder.''
Response: FCIC has revised the provision accordingly.
Comment: A few comments were received regarding section 29(f). The
commenters stated the provision provides if the producer does not file
a claim for indemnity within the 60-day period specified in section
14(e) the assignee may submit the claim not later than 45 days after
the period for filing a claim has expired. The commenters questioned if
this was the intent, and if so, why the assignee should be granted the
additional 45 days, which would give an assignee more rights under the
policy than the insured. A commenter questioned why the period for an
assignee to file a claim has been extended from 15 days after the 60-
day period after the end of the insurance period to 45 days [``after
the period for filing a claim'']. The commenter stated allowing 45 days
seems excessive and suggested 30 days should be sufficient.
Response: It is not a case of giving the assignee more rights than
the insured. The insured is in control during the claims process and
can ensure that documents are timely filed. However, with respect to an
assignee, the assignee may not even know there has been a loss.
Further, even if the loss is known, the assignee may not know the
insured has failed to file a claim until after the period to file the
claim has expired. Forty-five days may be too long because so much time
will have passed since the end of the insurance period and it may make
loss adjustment difficult. However, this must be balanced with a
reasonable time for the assignee to obtain the necessary information to
complete the claim. Therefore, FCIC has changed the number of days to
30 in section 29(e).
Section 30 Subrogation (Recovery of Loss From a Third Party)
Comment: A few commenters stated they oppose deletion of the
subrogation provisions in section 30. A commenter stated it is
important to convey in writing to policyholders their specific
obligations to preserve the subrogation rights of insurance providers.
Although State common law often recognizes some form of subrogation as
an equitable right of an insurance provider, FCIC should not expect
insurance providers to rely on potential deficiencies or
inconsistencies in State law. Instead, there should be an unequivocal
subrogation right established as a matter of Federal law in the Basic
Provisions. The commenter stated FCIC's approach, as expressed in the
July 14 explanatory text, is unrealistic. Although the proposed
revisions exclude third-party negligence as an insured cause of loss,
proposing to delete insurance providers' subrogation rights assumes
arbitrators and courts will agree with a denial of a claim on that
basis. If that is not the result of the dispute resolution process
outlined in section 20, deleting section 30 may be viewed as a bar to
recovery of losses on a subrogation claim. FCIC should recognize that
possibility and not diminish insurance providers' rights to
subrogation. The commenter stated the text of section 30 should be
restored in its existing form. Another commenter stated the rule
proposes to remove the subrogation article from the policy. While the
commenter agreed with FCIC's depiction of the scope of coverage, they
suggested the language not be deleted to maximize insurance providers'
ability to recover potential overpayments when third party liability is
established after payment. There could be situations where they have
paid a claim, discovered the claim was not due to natural causes and
cannot get the money back from the insured, then they should have the
right to subrogate from the offending party. For example, fire is
believed to be caused by lightning and the claim is paid accordingly,
but later found to actually be caused by the railroad. The commenter
stated after they pay the claim and their insured declares bankruptcy,
they should still have the right to try to recover money from the
railroad.
Response: There may be situations where the producer may have
received an indemnity payment for what was thought to be an insurable
cause of loss. However, it is later discovered that the cause was man-
made and the producer
[[Page 15832]]
has a right to recover from a third party. The commenters want to have
a right to recover against the third party. Subrogation generally
involves the situation where a loss is payable under a policy but
another party was also responsible to pay all or a portion of the loss.
Under that situation, the insurance policy did cover the loss but
someone else may have been more properly responsible to pay for the
loss. This will never be the situation under the crop insurance policy
because if the producer has a right to recover against a third party,
that means the producer was never eligible to receive the indemnity
under the policy. Therefore, subrogation is not an appropriate remedy.
If a loss was caused by the actions of a third party, the insurance
provider must collect the overpayment from the producer because the
issue is coverage, not subrogation.
Section 31 Applicability of State and Local Statutes
Comment: A few commenters stated FCIC has not suggested any change
with respect to section 31. The commenters recommended this section be
revised to read as follows: ``If the provisions of this policy conflict
with or cover the same subjects or matters as the statutes of the State
or locality in which this policy is issued, the policy provisions will
prevail. State and local laws and regulations either in conflict with
Federal statutes, this policy, and the applicable regulations, or
covering the same subjects or matters as Federal statutes, this policy,
and the applicable Federal regulations, do not apply to this policy,
and they are preempted.'' The commenters stated this suggested revision
would strengthen the concept that Federal law, as expressed in a
policyholder's MPCI policy, determines all of the parties' contractual
rights and obligations.
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made. However, FCIC's preemptive authority is limited
to that contained in section 506(l) of the Act, which states that
FCIC's regulations, contracts, and agreements preempt State law to the
extent that State law is inconsistent.
Section 34 Units
Comment: A few comments were received regarding proposed section
34(a)(2)(i). A commenter stated the proposed rule would reduce the
producer's ability to choose the enterprise unit definition that best
suits their farm. They had this ability with the selection of IP, RA or
CRC plans of insurance. Another commenter recommended condensing
proposed sections 34(a)(2)(i)(A) & (B) into one paragraph instead of
two to read ``Acreage must be planted and located in two or more
separate sections, section equivalents, FSA farm serial numbers or
units established by a written unit agreement.''
Response: The commenter is correct that the enterprise unit
qualifications under the current IP, RA, and CRC plans of insurance are
different. However, since these are being combined into a single
policy, it is no longer practical to have different meanings to the
same term. It would only add confusion and ambiguity to the policy.
Further, FCIC has chosen the least restrictive of the qualifications
between RA and CRC. The enterprise unit under IP coverage was all of
the acreage of the crop in the county. FCIC has revised proposed
section 34(a)(2)(i) (redesignated section 34(a)(4)(i)) to condense the
provisions in proposed paragraphs (A) and (B) into one paragraph.
Comment: A few comments were received regarding premium discounts
for enterprise units. A few commenters stated the proposal for
measuring the premium discount on enterprise units is not clear and
should be clarified so producers and agents know the basis. The rule
states under the current provisions, the enterprise unit discount for
CRC is based on acres and for RA it is based on sections. This
information is found in the Special Provisions, which are not part of
the proposed regulations. The proposed rule reads ``FCIC is also
proposing that an enterprise unit may be available for certain crops,
as designated in the actuarial documents. The revised policy provides a
premium discount if the producer elects a basic or enterprise unit.'' A
few commenters strongly supported the provisions to provide premium
discounts to producers who aggregate their acreage into the larger
basic and enterprise units. A commenter supports using acres to
determine the discount for enterprise units. Acres relate directly to
total liability, so this is the better measurement to earn a discount.
An insured may show several sections on the policy, but end up with
minimal total acres. Therefore, the current RA method can provide a
disproportionate discount for the actual risk exposure. A commenter
stated it appears further adjustments in the current premium discounts
are still required to fully reflect the corresponding reduction in risk
exposure. Assuming the new provisions do not result in eliminating this
disparity, the new provisions are unlikely to increase the number of
producers selecting larger units for their policy coverage.
Response: FCIC has elected to use acres as the basis for the
enterprise unit discount because, as the commenter correctly states, it
is more directly related to the liability. As more experience is
gained, FCIC may use a different method to determine enterprise unit
discounts in the future. As with all rating information, including all
applicable discounts, the enterprise unit discount will be contained in
the actuarial documents or the cost estimator. FCIC has a mandate to
set premium based on expected losses and a reasonable reserve. This
mandate also applies to all discounts. Therefore, FCIC will continue to
review the risk exposure for basic, whole-farm and enterprise units to
determine the appropriate discount for each.
Comment: A commenter stated the method for processing multiple
lines of acreage for the enterprise unit has been different in the past
between RA and CRC. It is not clear which method is being adopted in
this new combined policy and it warrants some additional discussion
prior to implementation.
Response: FCIC assumes that the commenter is asking how the
guarantee, premium, liability, and claim payments are determined by the
insurance provider when the acreage report has multiple lines of
information within the single enterprise unit. How this information is
determined has been different between plans of insurance. However, such
determinations are addressed in FCIC approved procedures and have not
been made a part of the policy. It is the intent of FCIC to treat the
multiple lines of acreage the same as is currently done under the APH
plan of insurance (e.g., irrigated and nonirrigated acreage within the
same unit). The procedures will reflect this intent.
Comment: A commenter recommended clarifying that units by irrigated
and non-irrigated acreage cannot be used to qualify for enterprise
units or enterprise unit discounts.
Response: As stated above, proposed section 34(a)(2) (redesignated
section 34(a)(4)) has been amended and the qualifications for an
enterprise unit now require: (1) Coverage for all of the insurable
acreage of the same insured crop in the county; and (2) acreage of the
insured crop planted in at least two or more sections, section
equivalents, FSA farm serial numbers, or units established by a written
agreement. Therefore, the practice used is
[[Page 15833]]
immaterial. Further, on June 15, 2009, FCIC published an interim rule
involving the new premium subsidy available for enterprise and whole
farm units. FCIC published the final rule on November 23, 2009. The
provisions of that final rule have been incorporated into this final
rule. No change has been made in response to this comment.
Comment: A few comments were received regarding the proposed
provision in section 34(a)(2)(ii) to allow separate enterprise units
for fall and spring types of a crop. A few commenters stated it is as
if winter and spring wheat, for example, were separate crops. This
seems contrary to the enterprise unit requirement in proposed section
34(a)(2)(i) that ``To qualify, an enterprise unit must contain all of
the insurable acreage of the same insured crop * * *.'' It would allow
the policyholder to receive the benefit of the enterprise unit discount
while still having two units for the crop/county instead of one. This
subsection states `` * * * you may have an enterprise unit for spring
wheat and a separate enterprise unit for winter wheat'' but does not
indicate whether the policyholder would be allowed to have an
enterprise unit on one type and basic or optional units on the other
type (which would be logical if these types were truly considered
separate ``crops'' yet this further degrades the enterprise unit
concept if allowed for the same crop just because there are winter and
spring types. A commenter stated the explanation given in the
background section of the proposed rule is that having both winter and
spring types in one enterprise unit ``* * * would delay the payment of
any claim until any losses could also be determined for the spring
types. This would make it difficult to establish the revenue protection
guarantees or premium until such information is available for the
spring variety.'' Presumably, the same problem would exist for winter
and spring wheat types in one basic unit, which is still the default
unit structure under section 2 of the Small Grains Crop Provisions.
Policyholders may select optional units by winter and spring type. A
few commenters stated FCIC also needs to clarify whether a policyholder
with two sections of wheat would qualify for two enterprise units by
type if one section was planted to winter wheat and the other section
to spring wheat. This meets the requirement in proposed section
34(a)(2)(i) of at least two sections for the ``insured crop,'' but
probably not the intended requirement since it would result in two
enterprise units, each made up of a single section (optional unit). A
few commenters stated FCIC needs to consider how this would work with
the Fall-Seeded Endorsement. They do not think this would resolve the
problem that exists with having to wait to settle the winter wheat
claim until the spring acreage can be included.
Response: Currently RA allows for winter wheat to be in an
enterprise unit and spring wheat to be in an enterprise unit, but does
not allow both winter and spring wheat to be in the same enterprise
unit. The provisions for other plans of insurance provided for only one
enterprise unit in this case. FCIC has elected to include both winter
and spring wheat types in the same enterprise unit or whole-farm unit.
Although no current policy provides for including both winter and
spring wheat in a whole-farm unit, doing so makes the provisions
consistent between unit structures and will result in less confusion in
the marketplace. In addition, including all crop types in a single unit
is consistent with the whole-farm unit concept, which includes all
crops produced that are eligible for a whole-farm unit. Providing
separate units results in several administrative problems. For example,
if a producer failed to qualify for an enterprise unit for one type,
the basic unit structure is assigned for that type. However, since a
basic unit consists of both winter or fall and spring types, it made it
impossible to retain the enterprise unit structure for the remaining
type. The provisions are more consistent when both basic units and
enterprise units contain both winter or fall and spring types. Further,
the election for an enterprise unit must be made by the fall sales
closing date. The provisions in this final rule have been revised
accordingly. As stated above, FCIC has also clarified that to qualify
for an enterprise unit, there must be at least two sections, section
equivalents, FSA farm serial numbers, or units established by written
agreement. Further, as incorporated from the final rule published on
November 23, 2009, at least two of the sections, section equivalents,
FSA farm serial numbers, or units established by written agreement must
each have planted acreage that constitutes at least the lesser of 20
acres or 20 percent of the insured crop acreage in the enterprise unit.
This will prevent producers from planting a few acres in a separate
section simply to qualify for the new premium subsidy. If there is
planted acreage in more than two sections, section equivalents, FSA
farm serial numbers or units established by written agreement, these
can be aggregated to form at least two parcels to meet this
requirement. For example, if a producer has 80 planted acres in section
one, 10 planted acres in section two, and 10 planted acres in section
three, the producer may aggregate sections two and three to meet this
requirement.
Comment: A commenter stated that although the term ``us'' is
defined to mean the insurance provider, the commenter recommended that,
for improved clarity, FCIC amend proposed section 34(a)(3)(i)(A) to
provide: ``must be insured under revenue protection and with the same
insurance provider.''
Response: FCIC has revised the provision in redesignated section
34(a)(5) for clarity. However, since the insurance provider is referred
to as ``us'' throughout the policy, it would not be appropriate to
change the reference here and not in all other places where the term is
referenced.
Comment: A few comments were received regarding whole-farm units. A
few commenters stated proposed section 34(a)(3)(i)(B) requires that ``A
whole-farm unit must contain all of the insurable acreage planted to at
least two crops eligible for revenue protection'' but then proposed
section 34(a)(3)(iii) states ``Winter or fall types of an insured crop
* * * cannot be included in a whole-farm unit.'' As stated above, it is
not clear if the excluded winter type must be insured as a separate
enterprise unit or if the policyholder may choose basic or optional
units for the winter type. Presumably the winter type must be insured
under revenue protection (if available) according to the wording in
proposed section 34(a)(3)(i)(A), although it is not entirely clear on
this since the winter type is in some respects being treated as a
separate ``crop.'' [ed.] They suggested combining (iii) with (i) so the
winter type exception is included with the general requirement in
(i)(B), or add a reference in (i)(B) to that exception. A few
commenters stated they believe eliminating winter wheat from the whole-
farm unit in proposed section 34(a)(3)(iii) is unjustified. A long wait
for indemnity settlement should not impact the FCIC adversely, and the
producer can make the decision whether the premium discount is worth
the wait. The commenters stated they would also like to have included
in the final rule, provisions for a 90 percent coverage level for those
who elect the whole-farm unit. A few commenters stated reducing the
ability to enroll winter wheat and barley in whole-farm units could
dramatically affect a producer's option for indemnifying their crop.
They urged FCIC to carefully consider how this change would impact
production decisions and make changes
[[Page 15834]]
to the regulation to ensure that producers have the most options
available to them. Another commenter opposed the exclusion of winter
wheat producers from the whole-farm unit premium discount. The
commenter stated producers have wheat in their crop mix to spread their
yield risk. Additionally, producers currently wait several months for
GRIP/GRP indemnity payments, which would be longer than the wait that
would be needed until fall harvest. A commenter stated prohibiting
winter wheat and winter barley from a whole-farm unit is completely
counterproductive to the purpose of whole-farm units reduced risk
through crop and land area diversification. Rather than viewing the
different growing seasons of fall and spring planted crops as a
hindrance, they should be embraced as a perfect example for a whole-
farm unit diversification. Granted, FCIC may not be able to establish
the guarantee or premium until the information regarding spring planted
crops is available, however, fairly accurate estimates should be
possible. If producers are willing to wait for the actual guarantee and
premium calculations, so should FCIC. Producers applying for only
spring planted crops also do not know their exact policy premium and
guarantee until they report their actual planted acreage. The commenter
recommended FCIC make whole-farm units as attractive as possible for
producers. Producers who recognize whole-farm units as a broad,
comprehensive risk management tool should be rewarded to the fullest
extent possible within actuarial soundness. The commenter believed
significantly higher participation in whole-farm units could result in
substantial savings from reduced ``spot-losses'' of optional and basic
units. Those savings should be reallocated to reduced premiums and
higher coverage level options as incentives for whole-farm unit
participation. The commenter urged FCIC to make fall seeded crops
available for inclusion in whole-farm units. The commenter also urged
FCIC to provide the highest financial and coverage level incentives
possible to producers for whole-farm unit selection.
Response: As stated above, FCIC has elected to include both winter
or fall and spring types in the same enterprise or whole-farm unit. For
plans of insurance based on a producer's individual yield, the Act
limits coverage to 85 percent. Therefore, FCIC does not have the
discretion to raise coverage levels above that amount.
Comment: A few comments were received regarding proposed section
34(c)(1)(i). A commenter recommended FCIC delete the phrase ``in
accordance with FCIC approved procedures'' in proposed section
34(c)(1)(i)(B). This terminology is not used in conjunction with any
other method of optional unit division, and the commenter does not
agree with its inclusion in proposed section 34(c)(1)(i)(B) only. A
commenter opposed the changes to proposed section 34(c)(1), optional
unit definition, for non-sectioned land and to replace it with an
ambiguous general statement that provides for deferring the definition
to FCIC procedures at a later date. From a practical sense, this
removes the requirement to offer units by FSA Farm Serial number and
sectional equivalent to such areas of the country. The commenter
objected to giving up a known definition in the policy for an unknown
one. There is also a fairness issue of specifying a definition for
areas with square mile surveys and an unknown for other producers.
Publishing a definition in procedures shortchanges affected producers
because there is not a due process for procedural changes as there is
for policy changes and producers must operate according to policy terms
as they do not receive FCIC administrative procedures. The commenter
also stated they were deeply concerned ``sectional equivalents'' were
omitted from the proposed optional unit definition. With the very
dramatic variation of climate and topography within a county that
exists within Pennsylvania and the Northeastern states, this tool is
necessary to make crop insurance a responsive risk management tool.
Furthermore, ``sectional equivalents'' are necessary to provide eastern
producers equity with the units by section in most of the rest of the
U.S. If the objective is to provide such a benefit without the
laborious written agreement process, the commenter recommended optional
units by FSA tract numbers. This would also better facilitate workable
common land units between FSA and FCIC which is a very important and
necessary step to permit producers to file one common acreage report
for the programs of both agencies. A few commenters stated the new
language in proposed section 34(c)(1)(i)(B) about ``Parcels of land
that are grouped together that only have metes and bounds identifiers *
* *'' needs further clarification or explanation. The commenter stated
it is unclear whether this is supposed to be the equivalent of the
current ``FCIC-approved procedures'' for either the Unit Division
Option (allowing policyholders in four states to aggregate contiguous
parcels of land that are less than 640 acres in size to create their
own optional units), or Written Unit Agreements, or both, or something
different altogether. The commenter stated they would be able to
provide better comments if they had a better idea of what ``FCIC-
approved procedures'' are involved and/or will be revised or added. The
distinction between the ``parcels of land'' in (A) & (B) is unclear.
Based on the wording used, the differences are between parcels ``* * *
legally identified by other methods of measure * * *'' and those ``* *
* grouped together that only have metes and bounds identifiers, in
accordance with FCIC-approved procedures.'' This could suggest ``metes
and bounds identifiers'' are not considered ``legally identified'' or
that only ``metes and bounds'' require special procedures, but it could
be difficult to know which category applies to certain ``other'' types
of land identification. ``Metes and bounds'' is a lengthy description
identifying the boundaries of a field (as opposed to the brief section-
township-range or FSN identifiers) and, as far as the commenter knows,
is no longer being created. It would be helpful to know which regions
still use metes and bounds instead of other methods of land
identification.
Response: The reference to FCIC procedures is needed for most
optional unit situations except for optional units established by
sections with readily discernable boundaries because the procedures
provide instructions and guidance to address the complex and unique
circumstances that occur when determining how to group other parcels of
land to establish optional units. It is not possible to include all
possible situations in the policy provisions. However, the commenter is
correct and the reference to procedures should not have only been
included in the provisions related to metes and bounds. Therefore, FCIC
has added references to the procedures when referring to land legally
identified by means other than sections. The provisions in section
34(c) provide the requirements regarding how optional units may be
established. Under the current and proposed provisions, optional units
may be offered by FSA Farm Serial Number and sectional equivalents
(e.g., Spanish grants) in the absence of sections. The proposed changes
to subsection 34(c) do not eliminate the use of either Spanish grants
or FSA Farm Serial Numbers as viable options, where available, in the
absence of sections. However, FCIC agrees the language, as proposed,
could lead to a misinterpretation of the intent of the revision.
Accordingly, section
[[Page 15835]]
34(c) has been reformatted and clarified to clearly provide that
section equivalents, such as Spanish grants, may be used to establish
optional units, in the absence of sections, and that FSA farm serial
numbers may be used when neither sections or section equivalents are
available or their boundaries are not discernible. Metes and bounds are
legal identifiers, and are still in use today in some parts of the
country. However, FCIC has not retained provisions that specifically
reference metes and bounds, instead the provisions reference parcels of
land legally identified by other methods of measure.
Comment: A few comments were received regarding proposed section
34(c)(1)(ii)(B). The commenters stated, as worded, this means if
``section equivalents under proposed section 34(c)(1)(i)'' ARE
``available,'' optional units by FSN are not allowed even if the
policyholder did not choose to establish section equivalents. The
commenters questioned whether that is the intent. If it is, the next
question is whether the policyholder would be restricted to basic
units, or whether he/she could still have optional units by FSN because
the three situations listed are linked with the word ``or,'' so as long
as any one of these is the case, optional units can be established by
FSN: ``(A) The area has not been surveyed using sections; ``(B) Section
equivalents under section 34(c)(1)(i) are not available; or ``(C) In
areas where boundaries are not readily discernible.''
Response: If sections are available, they must be used to establish
optional units. It is only if sections are not available that section
equivalents must be used to establish optional units. It is only if
sections and section equivalents are not available that farm serial
numbers may be used to establish optional units. The only exception to
this priority is if the boundaries of the sections or section
equivalents, as applicable, are not readily discernible or the
availability of units by section or section equivalents, as applicable,
is limited by the Crop Provisions or Special Provisions. The provisions
have been revised to make this clearer.
Comment: A few comments were received regarding section 34(f). A
commenter recommended FCIC add a third sentence to section 34(f) that
states: ``Prevented planting acreage will not apply to the calculation
of any unit discount.'' Another commenter questioned how to treat the
scenario when two optional units have one unit being planted and the
other one prevented planting in section 34(b). Would the planted unit
receive a basic unit discount based on the proposed language? The
commenter stated the current procedure would not allow a basic unit
discount on the planted or prevented planting unit. The commenter would
not want the basic unit discount to apply in this situation.
Response: Although the proposed rule provided that unit discounts
would not apply to prevented planting acreage, FCIC has determined
there is no clear rational basis for there to be a difference in the
unit discount provided for prevented planting acreage and planted
acreage. Further, this conflicted with other provisions in the Basic
Provisions that state planted and prevented planted acreage receive the
same premium rate. Therefore, the proposed provision and any reference
to section 34(f) are not retained in the final rule. However, as stated
above, the eligibility for whole-farm and enterprise units is based on
planted acreage, and prevented planted acreage will not be considered
when establishing the unit structure.
Comment: A commenter stated the proposed rule does not offer an
increased incentive for producers to elect basic or enterprise unit
structures. Optional unit structures contribute too much confusion for
both the agent and producer. Optional units are not only a source for
potential errors/oversight by the producer and agent but can also be a
source of fraud by the producer with the commingling of grain. The
final rule of the Common Crop Insurance Regulations, Basic Provisions;
and Various Crop Provisions would be a great opportunity to introduce
larger surcharges for the election of optional units or larger rate
decreases for the election of basic or enterprise units.
Response: FCIC must set rates based on the expected losses. To the
extent that optional units have higher losses, such losses are
considered in the premium rates. FCIC does not have the authority to
increase premium rates or add a surcharge that was not related to the
expected losses. However, subsequent to the publication of the proposed
rule, the 2008 Farm Bill provided additional premium subsidy amounts as
an incentive for producers to elect enterprise or whole-farm units. No
change has been made in response to this comment.
Section 35 Multiple Benefits
Comment: A few comments were received regarding section 35(b). A
commenter stated the revised section appears to eliminate collecting
crop insurance and some, if not all, ad hoc disaster aid benefits. If
producers are prevented or greatly limited from receiving ad hoc
disaster payments, they will reduce their purchase of crop insurance.
This would seem to be an undesired effect. If a producer pays a premium
for a crop insurance benefit, the producer should receive the same ad
hoc disaster payment as the producer who chose not to carry crop
insurance and the producer should not have the crop insurance indemnity
reduced. Congress decides whether to provide the extra benefits. If
there is a limitation on benefits, it should be included in the ad hoc
disaster aid and not the crop insurance indemnity. The commenter does
not think there should be more limiting language in the new policy that
will keep producers from collecting crop insurance indemnity payments.
If this provision does not apply to GRIP/GRP, it should not be applied
to the proposed rule. A commenter stated they are aware in some years
Congress approves ad hoc disaster assistance that can provide benefits
to producers that exceed the amount of actual loss. Of course this is
not good policy, but even worse policy is to create an enormous
disincentive for the crop insurance program by reducing a producer's
crop insurance indemnity because of a disaster payment. The commenter
stated this section provides the basis for determining ``actual loss''
which is the new benchmark for measuring benefits. However, subsection
(c) still discusses the payment of benefits as a function of ``any crop
insurance indemnity.'' The commenter recommended subsections (b) and
(c) be reconciled to eliminate this apparent inconsistency. A commenter
proposed the following language to ensure that crop values are
adequately expressed:
(b) The total amount received from all such sources may not
exceed the amount of your actual loss. The amount of the actual loss
is the difference between the total value of the insured crop before
the loss and the total value of the insured crop after the loss.
(1) The total value of the crop before the loss is your expected
yield that has been adjusted for technology trends, adjusted for
recent local adverse weather events, and adjusted for your adoption
of recent new technology times the highest price election, projected
price, or harvest price for the crop;
(2) The total value of the crop after the loss is your
production to count times the lesser of the projected price, or
harvest price, or APH price election for the crop;
(3) If you have an amount of insurance, the total value before
the loss is the highest amount of insurance available for the crop
that has also been adjusted for increased value for contracted
prices or higher prices for quality, adjusted for technology trends,
adjusted for recent local adverse weather events, and adjusted for
your adoption of recent new technology; and
(4) If you have an amount of insurance, the total value after
the loss is the production to count times the price contained in the
Crop
[[Page 15836]]
Provisions for valuing production to count. A commenter stated the
language in the first sentence does not define ``all sources'' that
relate to the revenue produced by the crop insured. Specifically,
does the crop insurance policy language of ``all sources'' in 35(b)
support the language in 35(a)? It would appear that language along
the lines of ``The total amount received from all such sources,
excluding payments from other USDA programs, may not exceed the
amount of your losses'' would be appropriate and would help clarify
``all sources.''
Response: Section 508(n) of the Act expressly states for additional
coverage that the amount received under crop insurance and the amounts
received under any other USDA program that provides a benefit for the
same loss cannot exceed the amount of the actual loss. FCIC is bound by
this provision and, therefore, it must be reflected in the policy.
Section 35(b) is only intended to provide a means to calculate the
amount of the actual loss specified in section 508(n) of the Act. Only
Congress has the authority to provide an exception. Since Congress has
provided an exception in the past, FCIC has revised the provision to
specify any amount received for the same loss from any USDA agency in
addition to the crop insurance payment will not exceed the difference
between the crop insurance payment and the actual amount of the loss,
unless otherwise provided by law. The suggested revision involving
technology trends, local weather events, etc., cannot be incorporated
because there are no current procedures or methodologies for such
adjustments. This rule does not apply to Group Risk Protection (GRP) or
Group Risk Income Protection (GRIP). A different proposed rule will
propose changes to those policies. FCIC has revised the provisions to
clarify the meaning of ``all sources.'' FCIC has also made other minor
clarifications that do not change the meaning of the provisions.
Comment: A commenter recommended removing section 35(d). The
commenter feels the Basic Provisions deal with policy and coverage
issues and is a contract between an insurance provider and a producer.
Although this proposed statement is informative to the producer for
other USDA programs, the commenter stated there is no need for this
paragraph in the Basic Provisions since it has no bearing or
ramifications on the contract between the insurance provider and the
producer. If a person did not purchase crop insurance, he/she would not
have these Basic Provisions to look up and realize they may be
adversely impacted by not purchasing crop insurance. Another commenter
considers the use of the term ``obtain'' in ``[f]ailure to obtain crop
insurance may impact your ability to obtain benefits under other USDA
programs'' to be overbroad, misleading and, therefore, inaccurate. The
commenter stated there are various situations in which an insured may
not obtain an indemnity that does not impact the producer's eligibility
or qualifying for other USDA benefits. Instead, it is the failure to
comply with the terms and conditions of the Basic Provisions or to
qualify for coverage that likely will impact a producer's ability to
receive benefits under other USDA programs. The commenter recommended
FCIC amend section 35(d) accordingly.
Response: The commenter is correct that the language in section
35(d) has no bearing or ramification on the contract between the
insurance provider and the producer. Therefore, the proposed provision
is not retained in the final rule.
Section 36 Substitution of Yields
Comment: A commenter recommended that to be consistent with the
Crop Insurance Handbook, the term ``T-yield'' should be changed to ``T-
Yield'' in sections 36(a) and (c).
Response: The reference needs to be consistent within the policy.
Therefore, FCIC has removed the phrase ``(T-yield)'' from section 36(a)
and has removed the phrases ``T-yield'' from section 36(c) and replaced
them with the term ``transitional yield'' in all three places.
Crop Provisions--General Comments Applicable to All
Comment: A commenter stated the ``order of priority'' statement is
not addressed in the proposed rule, but they recommend it be deleted
from the Crop Provisions since the order of priority of the policy
documents is covered in the Basic Provisions. This deletion is proposed
in two subsequently issued proposed rules, for potatoes and for fresh
market sweet corn. However, if it is not deleted, it needs to be
updated to match the one in the Basic Provisions, which adds the CEPP.
Otherwise, given that the order of priority is that the Crop Provisions
take priority over the Basic Provisions, the ``old'' order would
continue to apply to the Crop Provisions included in this proposed
rule.
Response: FCIC has revised the Crop Provisions included in this
final rule to remove the ``order of priority'' statement to avoid any
conflict with the priority statement in the Basic Provisions.
Insurance Guarantees, Coverage Levels, and Prices for Determining
Indemnities
Comment: A few comments were received referencing the section
titled Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities in all of the Crop Provisions proposed to be
amended in the proposed rule. A commenter stated if sections 2(a) and
(b) (of the Cotton Crop Provisions) are kept and not moved to section 3
of the Basic Provisions as recommended in other comments, the phrase
``In addition to the requirements of section 3 of the Basic
Provisions'' currently at the beginning of (b) should be moved to be
the introductory statement of this section since it applies to (a) as
well as (b). A commenter stated at least two provisions that are
essentially the same are included in this section. One or both of these
are prefaced by ``In addition to the requirements of section 3 of the
Basic Provisions * * *'' The commenter recommends FCIC consider whether
one or both of these statements should be included in section 3(d) of
the Basic Provisions instead of having to be repeated in each of the
Crop Provisions with revenue protection available. The first of these
is: ``You must elect to insure your [crop name] with either revenue
protection or yield protection by the sales closing date.'' Additional
language is included in section 3(b) of the Small Grains Crop
Provisions because only two of the small grain crops have this choice.
It would seem logical to have this be section 3(d)(1) in the Basic
Provisions, preceding the currently proposed 3(d)(1) that refers to the
policyholder being able to change the selection of revenue or yield
protection. An alternate location would be section 3(b) of the proposed
Basic Provisions, which states that, among other things, the insured
``* * * must select the same coverage, * * * the same protection
(amount of insurance, yield coverage * * *, or yield protection or
revenue protection, if available) * * *'' but does not specify the
sales closing date as the deadline by which these elections must be
made. If this statement is not moved to the Basic Provisions, the
commenter suggested a more specific reference in the Crop Provisions to
section 3(d) and/or 3(b) of the Basic Provisions. The second statement
is: ``You must select the same percentage for both the projected price
and the harvest price * * *''. All but Cotton also include an example
to illustrate the price percentage ``* * * for each type must have the
same percentage relationship to the maximum price offered * * *''. For
Coarse Grains, the example is specific to grain and
[[Page 15837]]
silage corn. For Small Grains, there is equivalent language in section
3(a) regarding the percentage of the price election for those crops for
which revenue protection is not available. The commenter requested FCIC
to consider moving some or all of this to section 3(d) of the proposed
Basic Provisions, either preceding or in combination with 3(d)(3),
which states if the policyholder does not select a price percentage in
any subsequent year, the insurance provider will assign a percentage
that has the same relationship to what was previously selected. The
equivalent ``price election percentage'' language in section 3(a) of
the Small Grains Crop Provisions could be moved to section 3(c) of the
proposed Basic Provisions as well. A commenter stated the proposed
language appears to require a producer to select two price percentages
(one for the projected price and one for harvest price). The commenter
recommended revising the sentence to ``You must select a price
percentage which will apply to both the projected price and the harvest
price; and'' which could avoid the appearance of having to report price
percentages twice. A commenter stated the language which states, ``You
must select the same percentage for both the projected price and the
harvest price'' could be deleted because this is addressed in the Basic
Provisions.
Response: The provisions regarding the selection of the same price
percentage for the applicable prices are repetitive. Therefore, FCIC
has removed this provision from all of the Crop Provisions contained in
this rule and moved them to section 3 of the Basic Provisions. The
provisions regarding the availability of revenue protection and yield
protection have been retained in the final rule since the availability
of revenue protection and yield protection is crop specific. Since the
provision regarding the availability of revenue protection or yield
protection is being retained in the Crop Provisions, the requirement
that such election be made by the sales closing date should also be
retained in each of the Crop Provisions. Further, since the provisions
that specify the prices for each type must have the same percentage
relationship are also repetitive, FCIC has removed the provisions from
the Crop Provisions and moved them to the Basic Provisions in section
3(b). In addition, as stated above, redesignated section 3(c) of the
Basic Provisions specifies only 100 percent of the projected and
harvest prices will be available if revenue protection is elected.
Causes of Loss
Comment: A few comments were received referencing the section
titled ``Causes of Loss'' in all of the Crop Provisions proposed to be
amended in the proposed rule. A commenter recommended the reference to
fire be revised to state ``Fire, due to natural causes.'' This would
clarify when fire is an insured cause of loss and would be consistent
with the Federal Crop Insurance Act and the Crop Insurance Handbook.
The commenter stated FCIC has proposed to change the tobacco provisions
to reference ``Fire, if caused by lightning'' to help clarify this in
the tobacco policy. It needs to be clarified in the other Crop
Provisions as well. A commenter recommended the reference to fire be
revised to state ``Fire which is caused by a naturally occurring
event.'' The commenter stated this wording is buried in the Basic
Provisions, and believes that reaffirming the phrase in the Crop
Provisions will avoid any confusion for the insured on what part of
fire is or is not covered. A commenter also recommended rewording
``Adverse weather conditions'' to read ``Adverse weather events or
conditions.''
Response: The Basic Provisions contain the requirements that are
applicable to all policies and it includes the requirement that all
causes of loss be naturally occurring. To repeat this requirement for a
single cause of loss in the Crop Provisions will only create confusion
regarding whether the other listed causes must be naturally occurring.
There is no reason to be repetitive. The Basic Provisions are just as
important as the Crop Provisions and are binding on all program
participants. In addition, FCIC has clarified provisions contained in
section 12(a) of the Basic Provisions by specifying fire, caused by
anything other than a naturally occurring event, is not covered.
Changing ``adverse weather conditions'' to read ``adverse weather
events or conditions'' does not improve or clarify the provisions.
There are many ways to describe weather.
Replanting Payments
Comment: A few comments were received referencing the section
titled ``Replanting Payments'' in all of the Crop Provisions, except
cotton, proposed to be amended in the proposed rule. A commenter stated
they suggest revising the replanting sections of the Crop Provisions by
deleting (a)(1) and (2) and revising sections (a) and (b) as follows:
(a) A replanting payment is allowed if the insured crop is damaged by
an insurable cause of loss to the extent * * *'' and (b) In lieu of
section 13(c) of the Basic Provisions, the maximum amount of the
replanting payment per acre will be * * *''. A commenter stated
according to the preamble language, FCIC currently has a contract out
to review the amount that is paid for a replanting payment for the
various crops. There has been a concern that some of these amounts have
not been changed for a number of years and may not reflect the
increased costs of replanting. The commenter assumed this study will
determine the correct amounts to be paid and appropriate Crop
Provisions will be revised accordingly.
Response: Paragraphs (a)(1) and (2) in the replanting payments
section of the Crop Provisions must remain intact as long as section 13
of the Basic Provisions limits the amount of a replanting payment to
the actual cost of replanting. As stated in the proposed rule, FCIC is
currently in the process of contracting a replant study to determine
the appropriate costs of replanting. Replanting payments will be
adjusted based on the results of the study. Even though recommendations
have been given to increase the amount of the replanting payments, FCIC
cannot increase the amounts until the replanting study is completed and
determines that the current amounts are incorrect.
Duties in the Event of Damage or Loss
Comment: A commenter stated the proposed revision in the section
titled ``Duties in the Event of Damage or Loss'' in all of the Crop
Provisions proposed to be amended in the proposed rule that specifies
representative samples are required in accordance with section 14 of
the Basic Provisions is good since it simply refers to section 14 of
the Basic Provisions without repeating the specifics.
Response: FCIC has retained the provisions in the final rule.
Settlement of Claim
Comment: A commenter stated that, in the settlement of claims
sections of the Crop Provisions, the example shows how a claim is
calculated for yield protection and revenue protection. In setting up
the example, both the projected price and harvest price are used and
then they are applied to the type of policy being calculated. The
commenter stated it is confusing to have the harvest price before the
example of calculating a production policy claim and believes the
harvest price should only be at the beginning of the revenue policy
claim calculation.
Response: In the claims examples in the Crop Provisions, FCIC
usually sets
[[Page 15838]]
up the factual scenario and then calculates the possible indemnity
payment. These proposed provisions are structured the same. What is
important is the manner in which the indemnity is calculated for
revenue protection and yield protection and these calculations are not
confusing, nor would the calculations be any different if the reference
to harvest price was moved. The example for yield protection clearly
demonstrates the harvest price is not used for yield protection. No
change has been made.
Comment: A commenter stated FCIC has added as defined terms
``revenue protection guarantee'' and ``yield protection guarantee.''
However, with respect to the methodology for settling claims, FCIC
retains the ``production guarantee'' terminology. More specifically, in
subsection (b)(1)(i) for canola, coarse grains, cotton, rice, and small
grains, which relates to yield losses, the policy refers to the
``production guarantee.'' By contrast, in subsection (b)(1)(ii) for the
crops listed above, which pertains to revenue losses, FCIC employs the
new ``revenue protection guarantee'' language. The commenter stated
this inconsistency is pointless and confusing. Accordingly, the
commenter recommended FCIC amend subsection (b)(1) in the Crop
Provisions for the crops listed above as follows: (1) Multiplying the
number of insured acres of each insured crop or type, as applicable by
your respective: (i) Yield protection guarantee (per acre) and your
applicable * * * (ii) Revenue protection guarantee (per acre) if you
elected revenue protection.
Response: FCIC has revised the Crop Provisions so that the claims
provisions refer to the yield protection guarantee (per acre) or
revenue protection guarantee (per acre) as applicable.
Comment: A few comments were received regarding the section titled
``Settlement of Claim'' in all of the Crop Provisions proposed to be
amended in the proposed rule. A commenter stated a provision states the
insurance provider will combine all optional units for which acceptable
records of production were not provided. The commenter stated the Crop
Insurance Handbook prohibits them from combining databases so the
wording is misleading and should be clarified. The databases remain
intact and the unit numbering changes from optional to basic. This
section also needs to be revised to include how total production to
count will be determined for revenue protection similar to the current
language in the CRC Crop Provisions. A commenter stated the following
comment applies to Small Grains 11(c)(1)(i), Cotton 10(c)(1)(i), Coarse
Grains 11(c)(1)(i), and Rice 12(c)(1)(i), which were not amended in the
proposed rule. For the crops proposed in the rule that have revenue
protection available and revenue protection has been elected, and in
the situation where the harvest price is less than the projected price,
the provision fails to accurately determine the correct production to
count for acreage that is abandoned; put to another use without
consent; damaged solely by uninsured causes; or for which the insured
failed to provide records of production that are acceptable to the
insurance provider. The Crop Provisions as proposed state such acreage
will be appraised at ``not less than the production guarantee.'' For
example, see Coarse Grains section 11(c)(1)(i) (not included in the
Proposed Rule), and compare it to section 11(b), which does spell out
the steps for revenue protection as well as for yield protection. The
production guarantee (per acre) is a unit of measure determined by
multiplying approved yield times the coverage level (no price/revenue
consideration). The revenue protection guarantee (per acre) is
determined using the greater of the projected price or the harvest
price. However, the value of the production to count is determined
using the harvest price. As an example, a corn policy with 1.0 acre
insured, a production guarantee of 50.0 bu/acre, projected price of
$2.00, and harvest price of $1.50 and the acreage is destroyed without
consent. Total revenue guarantee = $100 (1.0 x 50.0 x $2.00). Total
revenue to count = $75 (1.0 x 50.0 x $1.50). Even though the insured
put the acreage to another use without consent, an indemnity is still
due. Another commenter stated the following comment applies to Small
Grains 11(d)(3), Coarse Grains 11(d)(2), Rice 12(d)(3), and Canola/
Rapeseed 12(d)(3) which is not in the proposed rule. The commenter
strongly recommends this subsection be revised to incorporate the
current policy language in the Quality Adjustment Amendatory
Endorsement. That amendatory language needs to become part of the
revised Crop Provisions instead of continuing to require insurance
providers and policyholders to read this outdated subsection and then
read the revised language in the mandatory endorsement. Incorporating
the amendatory language would eliminate the need to provide one more
piece of paper to those insuring small grains, coarse grains and/or
canola/rapeseed. The commenter stated the endorsement would continue to
be required for policyholders insuring sunflowers, safflowers, dry
beans and dry peas until those Crop Provisions are updated. Ideally, if
these other Crop Provisions cannot be revised through the regulatory
process for the same crop year as the ones in the proposed rule, the
Quality Adjustment Amendatory Endorsement could be revised to delete
the crops that no longer need it, but if that cannot be accomplished,
insurance providers probably would prefer to explain to their
policyholders which crops no longer needed it than to have to continue
to include the endorsement with those policies.
Response: If a producer has optional units but does not keep
acceptable records of production, the optional units will be combined
into a basic unit for the purposes of determining the loss amount. The
APH databases are established based on crop, type, practice, etc., in
accordance with 7 CFR part 400, subpart G and FCIC issued procedures.
The combining of units for the purpose of the claims does not change
how the databases are established or maintained. The Crop Provisions
have been amended to clarify how the total production will be
determined for both yield protection and revenue protection in section
(c) of the Settlement of Claim section. The language in the Quality
Adjustment Provisions--Amendatory Endorsement is already codified in
the Code of Federal Regulations in each of the Crop Provisions so it is
not necessary in the proposed and final rules. When the Basic
Provisions and Crop Provisions are typeset for public use, the
applicable information will be included in the new typeset policies.
Comment: A commenter recommended additional items be addressed
while policies are open for changes and improvements: The inception
point at which quality adjustment begins and the amount of discount
allowed are out of sync with market requirements in Pennsylvania and
the Northeast. This makes crop insurance less appealing to producers
because it provides very little quality protection for this risk
exposure. It is their belief protection against poor quality, due to an
insurable cause, should trigger at the point where the market place
begins to discount the price. Crop insurance is the only tool available
for producers to manage this risk exposure. Part of this problem may be
because Northeastern markets quality specifications are geared to needs
for human consumption because increasing amounts of production is for
this use, while grains in other parts of the country are grown for
animal feed and ethanol where quality requirements may
[[Page 15839]]
not be as high. The commenter provided the following discount inception
points for wheat, corn and soybeans according to current crop insurance
policy provisions versus the market place: (1) Wheat, policy test
weight-<50 lbs., market place-<58 lbs.; (2) corn, policy test weight-
<49 lbs., market place-<52 lbs.; and 3) soybeans, policy test weight-
<49 lbs., market place-<54 lbs. Previous experience with mature flooded
corn, quality was so bad that FSA would not make loan deficiency
payments, the Pennsylvania Health Department recommended destruction
due to contamination and FCIC counted production at near full value.
Another part of the problem with the current FCIC quality adjustment is
the process used. Currently, FCIC requires quality determination by
U.S. grain graders, which is a costly and time delaying process. The
crop insurance program would be much more useful and producer friendly
if quality adjustments were based on a price comparison between good
and actual production from the marketplace. Example: If the commodity
is only worth 50 percent of a good quality product, the production to
count would be 50 percent of the gross production.
Response: Since no changes to these provisions were proposed, and
the public was not provided an opportunity to comment on the
recommended changes, the recommendations cannot be incorporated in the
final rule. No change has been made.
Prevented Planting
Comment: A few comments were received regarding the section titled
``Prevented Planting'' in all of the Crop Provisions proposed to be
amended in the proposed rule. A commenter recommended FCIC review or
contract out for review the percent of the production guarantee
provided for prevented planting purposes for all of the Crop Provisions
that provide such coverage. The commenter was concerned the amount of
prevented planting coverage being provided is too high. Another
commenter stated there continues to be concerns about the amount of
prevented planting payments that are made on an annual basis. The
prevented planting language in the proposed rule does contain some
language that will be beneficial (i.e., by limiting the amount of
prevented planting that is paid when shifting acres to another crop).
The commenter stated it does not address what they consider to be the
biggest incentive for producers to report acreage as prevented planting
rather than attempt to plant a crop, which is the excessive amount of
prevented planting coverage that is provided when the crop is prevented
from being planted. The commenter's first recommendation for prevented
planting would be to remove the provisions that allow the producer to
increase the prevented planting coverage by 5 percent and 10 percent,
respectively. The commenter's second recommendation is to reevaluate or
contract out a study to examine the percentage of prevented planting
coverage provided in the Crop Provisions. For example, the Coarse
Grains Crop Provisions provide prevented planting coverage that is 60
percent of the production guarantee for timely planted acreage. It is
the commenter's understanding that when prevented planting was
originally added to these provisions that the ERS data supported a
coverage amount of 50 percent of the production guarantee for timely
planted acreage but when the policy was published as a final rule, the
FCIC decided to offer actual coverage that was 10 percent higher. The
commenter felt that if the prevented planting coverage amounts were
more in line with the supporting data, producers would have a reduced
incentive to file for prevented planting coverage.
Response: Since no changes to the percent of the producer's
production guarantee for prevented planting coverage were proposed in
any of the Crop Provisions, and the public was not provided an
opportunity to comment on the recommended changes, the recommendations
cannot be incorporated in the final rule. No change has been made.
Small Grains Crop Provisions--General
Comment: A commenter stated a short rate for spring crops would be
appropriate. The commenter stated there should be a graze off date for
spring crops included in the final rule. If the producer ultimately
decides to graze off a crop and thereby limit any indemnity, the
producer should receive a reduction in premium rate. The commenter
urged FCIC to include this change in the final rule.
Response: Since the suggested change was not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Comment: A commenter stated triticale is a small grain crop growing
like barley, buckwheat, flax, oats, rye, and wheat. Sometimes insurance
companies will insure triticale as wheat. More and more acreage of
triticale is being planted for grain. Official United States Standards
for triticale are available and all the procedures for triticale could
be just like wheat or other small grains. The commenter suggested
adding triticale to the list of crops insured under the Small Grains
Crop Provisions.
Response: Triticale is not currently insurable under the terms of
the Small Grains Crop Provisions. Triticale cannot be considered or
insured as wheat or any other small grain crop. Further, if producers
report triticale as wheat on any of the crop insurance documents, they
are making a false statement and could be subject to administrative,
civil, or criminal sanctions. FCIC has contracted for research to
determine the feasibility of a crop insurance program for triticale.
Based on the outcome of the research and evaluation, it will be
determined if an insurance program can be offered. No change can be
made until the research and evaluation are completed.
Small Grains Crop Provisions--Section 1--Definitions
Comment: A commenter recommended definitions for ``continuous
cropping'' and ``summer fallow'' be added either in these Crop
Provisions or in the applicable Special Provisions where such practices
are denoted.
Response: The terms ``summerfallow'' and ``continuous cropping''
are not used in the Small Grains Crop Provisions. If the terms are used
in the actuarial documents, the definitions should also be included
therein. No change has been made.
Comment: A commenter stated the definition of ``prevented
planting'' which is not in the proposed rule and is ``In lieu of the
definition contained in the Basic Provisions * * *'' but it has not
been revised while the Basic Provisions definition has, deleting the
reference in the first sentence to ``* * * with proper equipment * *
*'', combining the next two sentences, and adding ``Failure to plant
because of uninsured causes, such as lack of proper equipment or labor
to plant acreage, is not considered prevented planting.'' Unless it is
intended for the Small Grains Crop Provisions to retain the previous
wording in addition to adding the references to the ``latest'' final
planting date and ``applicable'' late planting period needed for
counties with both winter and spring types of the insured crop, this
needs to be revised accordingly. Please consider if the added
information for dual counties could be in addition to the Basic
Provisions definition instead of having to replace it totally.
[[Page 15840]]
Response: The commenter is correct that the definition of
``prevented planting'' should be consistent between the Basic
Provisions and the Small Grains Crop Provisions with the exception of
the reference to the ``latest final planting date.'' FCIC also agrees
the definition in the Small Grains Crop Provisions does not have to
replace the entire definition in the Basic Provisions. However, rather
than include the differences required for small grains in the Basic
Provisions as the commenter suggests, the definition in the Small
Grains Crop Provisions has been revised so that it refers to the
definition in the Basic Provisions, but replaces the phrase ``final
planting date'' with ``the latest final planting date.'' This avoids
including provisions specific to small grains in the Basic Provisions.
Comment: A commenter stated the definition of ``sales closing
date,'' which was not in the proposed rule, is another unchanged
definition that is ``In lieu of the definition contained in the Basic
Provisions * * *'' but provides essentially the same information in the
first sentence. Please consider deleting the first sentence and
prefacing the second sentence with ``In addition to the definition in
the Basic Provisions * * *''.
Response: FCIC agrees the definition contains repetitive
provisions. In addition, information regarding counties with both fall
and spring sales closing dates is contained in section 3(b). Therefore,
the definition of ``sales closing date'' is not needed and has been
removed in this final rule.
Small Grains Crop Provisions--Section 2--Unit Division
Comment: A few commenters stated separate classes of wheat should
be allowed separate unit designations and coverage levels. Hard red
winter wheat and hard red spring wheat, for instance, typically have
separate sales closing dates but should also be afforded separate
coverage levels and policy elections.
Response: Separate units are currently allowed for initially
planted winter wheat and initially planted spring wheat. Therefore,
hard red winter and hard red spring wheat already qualify for separate
units in counties that have both winter and spring wheat final planting
dates. In addition, the durum class and club wheat subclass can qualify
for separate units in counties where the Special Provisions specify
these wheat types. However, since separate units and separate coverage
levels for all the various wheat classes were not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Small Grains Crop Provisions--Section 3--Insurance Guarantees, Coverage
Levels, and Prices for Determining Indemnities
Comment: A commenter stated producers in dual counties should have
the ability to take separate plans, levels, or endorsements on their
winter and spring wheat. The commenter stated at the very minimum, if a
producer does not seed winter wheat he/she should be able to change the
plan on his/her spring wheat without having to cancel his/her wheat
policy in the fall.
Response: Since separate insurance plans, coverage levels or
endorsements for winter and spring wheat were not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. If
a producer does not plant any winter wheat in a county with both fall
and spring sales closing dates, they should be able to elect either
yield or revenue coverage in the spring. Provisions proposed in section
3(b)(3) (now redesignated section 3(b)(2)) that allow the producer to
change their elected coverage until the spring sales closing date were
already included and have been retained in the final rule.
Comment: A commenter stated a concern regarding increased planting
of winter wheat acres in Northern and Northeastern South Dakota. This
concern relates to FCIC's designation of ``winter wheat'' or ``spring
wheat'' counties. Winter wheat cannot be insured in spring counties
until it has proven to have survived the winter. The commenter
requested a change in the Small Grains Crop Provisions to insure winter
wheat and spring wheat as two separate crops instead of two types of
the same crop. This change would allow producers additional flexibility
in their planting decisions. Additionally, with the release of new
winter hardy varieties and agronomic practices such as no-till, there
has been a combined effect of increasing winter wheat survivability in
South Dakota.
Response: Since the recommended change was not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Small Grains Crop Provisions--Section 5--Cancellation and Termination
Dates
Comment: A commenter recommends Yankton, Turner, Lincoln, Union and
Clay counties in South Dakota be designated as winter wheat-growing
counties. The commenter stated this is due to the large increase in
winter wheat acres with a need for full coverage insurance.
Response: FCIC has amended the provisions accordingly.
Small Grains Crop Provisions--Section 6--Insured Crop
Comment: A commenter stated the phrase ``We may agree, in writing,
to insure a crop prohibited under * * *'' in section 6(a)(4), which was
not in proposed rule, indicates this is handled between the insurance
provider and the applicant/insured rather than as a written agreement.
If this is not true, please revise the wording.
Response: The current section 6(a)(4) does refer to a ``written
agreement'' as does section 6(a)(2). To reduce confusion and improve
consistency between terms used in various policy documents and FCIC
issued procedures, section 6(a) has been restructured and the phrase
``agree in writing'' has been replaced with the phrase ``written
agreement.''
Comment: A commenter stated FCIC is proposing to insure buckwheat
in section 6(a)(5). As the insurance provided for buckwheat differs
from that applicable to wheat, the commenter assumes FCIC will create a
separate crop code for buckwheat. In addition, the commenter asked that
FCIC clarify section 6(a)(5)(iii), as it is unclear what is meant by
``purchase price.'' The commenter asked whether FCIC will publish a
price election relative to buckwheat.
Response: Buckwheat is a separate crop and a separate crop code
will be established for it. The phrase ``purchase price'' in proposed
section 6(a)(5)(iii) (redesignated section 6(b)(3) in this final rule)
refers to the amount the buyer will pay the producer for production
under contract. FCIC has revised the provision to specify ``the price
to be paid for the contracted production'' for clarity. The price
election used to establish the amount of insurance protection will be
based on the contract price.
Comment: A commenter stated FCIC should consider changing the
reference to ``* * * additional coverage is available for wheat or
barley damaged * * *'' in section 6(c), which was not in the proposed
rule, since this does not use ``additional coverage'' in the way it is
defined in the Basic Provisions (a
[[Page 15841]]
level higher than CAT) and so could be confusing.
Response: The commenter is correct that using a defined term in
another manner may be confusing and has removed the word ``additional''
in redesignated section 6(d).
Small Grains Crop Provisions--Section 7--Insurance Period
Comment: A commenter stated the opening statement in section 7
reads: ``In lieu of the requirements under section 11 of the Basic
Provisions * * *'' Unless it is intended for 7(a) to supersede the
phrase ``Except for prevented planting'' and the explanation of what is
meant by the date of acceptance of the application in the Basic
Provisions, we would suggest deleting this opening and revising to
state: ``In accordance with section 11 of the Basic Provisions, and
subject to any provisions provided by the Wheat or Barley Winter
Coverage Endorsement (if elected by you): ``(a) Insurance attaches * *
*:'' ``(b) The calendar date for the end of the insurance period is the
following applicable date * * *'' Further, the rest of 7(b) duplicates
Basic Provisions section 11(b)(1)-(3) & (5) except for referring to
``Insurance ends'' instead of ``Coverage ends.''
Response: FCIC has amended the provisions accordingly.
Comment: A commenter recommended clarifying if acres and share need
to be reported by sales closing date in section 7(a)(2)(v). Currently,
questions arise regarding the acreage reporting deadline when an
insured is requesting winter acres to be added to a spring only county.
The insurance provider performs an inspection to see if the stand
qualifies for insurance, but does not need to determine acres. The
commenter questioned if acres can be revised by the spring acreage
reporting date or if they need to be reported by the sales closing
date. The insured could experience a loss after the inspection in the
spring and then request an increase in the number of acres to be
insured. There is no deadline specified when acres must be reported.
The commenter recommended adding ``unless you request such coverage and
amount of acres and share to be insured on or before the spring sales
closing date.''
Response: While there is no policy requirement to report the number
of insured acres or share by the sales closing date (because the number
of insured acres and share are determined when insurance attaches) the
number of acres of fall planted wheat or barley should be included on
the request for coverage. The provisions in section 7(a)(2)(v) have
been revised accordingly. Only those acres accepted by the insurance
provider should be included on the acreage report as insurable acres.
If other than the accepted acres are subsequently reported on the
acreage report, any applicable provisions regarding under or over-
reporting acreage would then apply.
Small Grains Crop Provisions--Section 9--Replanting Payments
Comment: A commenter stated section 9(a)(1), which is not in the
proposed rule, currently states ``In lieu of provisions in section 13
of the Basic Provisions that limit the amount of a replant payment to
the actual cost of replanting, the amount of any replanting payment
will be determined in accordance with these Crop Provisions.'' The
commenter recommended deleting section 9(a)(1) and adding the following
reference to section 13(c) of the Basic Provisions to section 9(c):
``In lieu of section 13(c) of the Basic Provisions, the maximum amount
of the replanting payment per acre will be * * *.'' The remaining
sections in 9(a) would then be renumbered and section 9(a)(2) could be
revised leaving only the reference to complying with the winter
coverage endorsement.
Response: Since the recommended changes were not proposed, and the
public was not provided an opportunity to comment, the recommendation
cannot be incorporated in the final rule. No change has been made.
Comment: A commenter recommended FCIC add a new section 9(f) to
clarify replant provisions apply specifically to spring wheat. Since
replant provisions are not applicable to winter wheat, the commenter
believes clarification of this provision would be useful.
Response: Section 9(b) excludes replant payments for all winter
types if there is only a fall final planting date. Therefore, this
exclusion applies to more than just winter wheat. Further, there is a
replant payment for fall types if there is both a spring and fall final
planting date in the county. No change has been made.
Small Grains Crop Provisions--Section 11--Settlement of Claim
Comment: A commenter stated some livestock operations cannot use
the same feed barley as other operations because of their nature.
Barley that has a poor test weight and some other problems will not
work in a confined operation, whereas this same feed would work in a
feed lot. Therefore, it has less value.
Response: It is not clear if the commenter is suggesting different
quality provisions dependant upon intended use of the grain. If so, it
would be very difficult to develop and administer such provisions.
Different quality protection levels would have to be developed based on
intended use of grain and reported intentions may change during the
crop year. No changes have been made.
Small Grain Crop Provisions--Section 12--Late Planting
Comment: A commenter stated there is a concern the final planting
dates for winter crops in some areas are already late, and then when
the late planting period is included, it becomes extremely late for the
crop to get established prior to the winter months. The commenter
recommended RMA's Regional Offices review final planting dates in the
Special Provisions to make sure they are not too late.
Response: RMA's Regional Offices review final planting dates on a
periodic basis and make changes as necessary. If the commenter or any
interested party is concerned about the dates for specific crops or
counties, they should advise the RMA Regional Office. Any interested
person may find contact information for the applicable regional office
on RMA's Web site at http://www.rma.usda.gov/aboutrma/fields/rsos.html.
No change has been made.
Cotton Crop Provisions--Section 1--Definitions
Comment: A commenter stated the definition of ``Production
guarantee'' which was not in the proposed rule is essentially a
reworking of the ``production guarantee (per acre)'' definition in the
Basic Provisions, specifying pounds as the unit of measure and adding
``* * * any applicable yield conversion factor for non-irrigated skip-
row planting patterns * * *'' to the calculation. The commenter
suggested changing the defined term to ``Production guarantee (per
acre)'' and beginning the definition with ``In lieu of the definition
in section 1 of the Basic Provisions, * * *''
Response: FCIC has revised the definition accordingly.
Cotton Crop Provisions--Section 5--Insured Crop
Comment: Several comments were received regarding proposed changes
to sections 5(b)(4) and (5). A commenter suggested FCIC clarify what
``acreage following a small grain crop'' means in section 5(b)(4). The
commenter asked whether it refers to a small grain which is planted,
planted but not harvested, or
[[Page 15842]]
refers to only if the crop is harvested. The commenter recommended
replacing ``following'' with either ``planted to a small grain crop''
or reference to ``harvest.'' A commenter stated the proposed revision
(replacing (4) & (5)) is more restrictive since cotton would not be
insured ``following a small grain crop'' whether or not the small grain
crop had reached the heading stage. This probably is a good change
because of soil moisture concerns and because it would be easier to
administer not having to determine what percentage of the field had
reached the heading stage. A few commenters stated they believe this
provision would be burdensome on producers, insurance providers and
FCIC and should be revised. A few commenters suggest FCIC allow cotton
to be insured following a small grain crop if the acreage is irrigated
or if planting a small grain or other approved crop as a cover crop is
recognized as a good farming practice on non-irrigated acreage and
documented in the county's Special Provisions. A commenter stated
determining insurability of non-irrigated cotton by the county Special
Provisions, rather than individual written agreement, would be less
cumbersome to administer, more equitable to producers, and would allow
decisions to be made by extension and other experts based on sound
agronomic considerations. A commenter stated unless FCIC intends to
address this in the Special Provisions for the Southeastern states,
there will be a lot of cotton that is no longer insurable. There is a
lot of acreage where a small grain crop is planted as a cover crop
(never reaches the headed stage) and then cotton is subsequently
planted. The commenter felt the previous language whereby the small
grain crop must have reached the heading stage is a better indicator of
whether or not the subsequent cotton crop should be insured. A
commenter stated requiring a written agreement for the coverage of dry-
land cotton preceded by a cover crop is an unnecessary attempt to
reduce fraud and abuse that will discourage the use of established
conservation practices. The commenter stated FCIC's proposed revisions
of section 5(b)(4) eliminates a producer's ability to insure non-
irrigated cotton following a cover crop or small grain crop planted in
the same calendar year, except through the initiation of a written
agreement. This provision will introduce inefficiencies and increase
cost, forcing some producers to choose between planting a cover crop
and purchasing insurance. This deterrent would serve only to increase
adverse selection and introduce regional bias since irrigation is not
practical in certain production areas. Given the importance of cover
crops to the environment, the role of cover crops in established
conservation programs and the bias introduced by requiring written
agreements, annual written agreements should not be required when dry-
land cotton is preceded by a cover crop. A few commenters recommended
instead of revising the language, FCIC should create a set of
requirements or restrictions on the management of cover crops designed
to guard against moral hazard that would be specified within cotton's
Special Provisions. For example, if the small grain or other approved
crop is permitted in the county Special Provisions, the small grain or
other approved crop on non-irrigated acreage must be fully terminated
(burned down) a certain number of days (e.g., 45 days) prior to the
final planting date for cotton in order for non-irrigated cotton to be
insured on the acreage in the same calendar year. However, any
requirements or restrictions placed on cover crop management should:
(a) Be consistent with guidelines and requirements established by
existing conservation programs; (b) be sensitive to agronomic
differences between cover crops; and (c) consider regional variations
in cultural practices and weather patterns.
Response: FCIC agrees the proposed provisions may be overly
restrictive and has removed them. However, soil moisture levels are
still a concern in certain regions. Therefore, the Special Provisions
in those regions will contain a statement to limit coverage appropriate
for the area. This is consistent with the method in which other Crop
Provisions address this same issue.
Cotton Crop Provisions--Section 8--Causes of Loss
Comment: A few commenters stated failure of the irrigation water
supply provision in section 8(h) needs to more clearly delineate
between failures which are not covered versus failures which are
covered. Specifically, the commenters were concerned moving from
current language (``Failure of the irrigation water supply, if
applicable, due to an unavoidable cause of loss occurring within the
insurance period.'') to proposed language (``Failure of the irrigation
water supply due to a cause of loss specified in sections 8(a) through
(g) that also occurs during the insurance period.'') could preclude
coverage of legitimate losses resulting from unavoidable weather-
related events. For example, the commenter asked whether the new
language would cover losses of a producer whose insurance attached when
the producer's well produced 500 gallons of water per minute but
afterward only produced 300 gallons per minute due to prolonged periods
of hot, dry weather. Similarly, the commenter asked whether the new
language would cover losses of a producer whose insurance attached when
water supplies from a local water reservoir were expected to be ample
but afterward the governing body for the reservoir determines that
normal water level deliveries are not possible, again due to weather
conditions. In a third example, the commenter asked whether the new
language would cover losses due to the breakage of the well casing or
lining caused by shifting ground below the surface, which is an
unavoidable weather-related event that can only be remedied by drilling
a new well. The commenters believed it is vital all losses caused by
weather-related events, including those that adversely impact the
availability of irrigation water supplies, remain covered under the
Federal crop insurance program.
Response: As indicated in the proposed rule, the provisions
previously stated failure of the irrigation water supply was an insured
cause of loss if the failure was due to an unavoidable cause of loss.
FCIC has always considered the provision to limit the cause of the
failure of the irrigation supply to be due to one of the insured
perils. However, since the unavoidable causes of loss were not clearly
referenced in section 8(h), they could have been interpreted to extend
beyond the named perils. Now the provision is consistent with other
Crop Provisions and ensures only named perils are covered under the
policy. The specific situations raised by the commenter may be covered
by the new language provided the failure of the irrigation water supply
was due to a cause of loss specified in section 8 of the Cotton Crop
Provisions (e.g., adverse weather conditions, fire, earthquake, etc.)
that occurred during the insurance period. However, if there are
management decisions involving the allocation of water or other man-
made causes also involved, such decisions or causes may not be
insurable. Each individual situation must be examined and it is
impossible to set a single standard. Further, causes of loss not listed
in the applicable Crop Provisions, even if allowed by the Act, have not
been included in the premium rates. Rates have been established based
on the listed perils, which is consistent with
[[Page 15843]]
other Crop Provisions. No change has been made.
Cotton Crop Provisions--Section 10--Settlement of Claim
Comment: A commenter asked FCIC to consider changing unamended
section 10(c) by replacing ``The total production (pounds) to count * *
*'' with ``The total production to count (in pounds) * * *'' so
``(pounds)'' is not inserted in the middle of the common term
``production to count.''
Response: FCIC has revised the provisions accordingly.
Comment: A few commenters stated the percentage threshold for
quality adjustment has been changed from 75 percent to 85 percent. A
commenter suggests it may be good for the producer but it does not give
any relief to the loss adjustment procedure. Cotton quality adjustment
is long and laborious. Before it was ``improved'' to its present state,
it was considerably simpler for loss adjustment. A large policy now
could take days to do quality adjustment. The commenter suggests FCIC
simplify the procedure once again. Claims staff could help, perhaps,
with input on how to effect the simplification. This will result in
increased time and workload to complete cotton losses as well as
resulting in additional payments being made for quality losses. The
commenter was opposed to this increase and recommended this threshold
remain at 75 percent.
Response: FCIC has consulted with the National Cotton Council and
they provided data that demonstrated that quality adjustment at the 85
percent level was more appropriate. FCIC is willing to work with the
affected parties to determine whether there can be simplification of
the loss adjustment process while still maintaining program integrity.
No change has been made.
Cotton Crop Provisions--Section 11--Prevented Planting
Comment: A commenter stated clarification is needed to address
prevented planting determinations for both the guarantee and acreage in
section 11(a). To be most equitable for all producers, they recommended
basing both determinations on a solid-plant basis. They suggested
adding a reference to ``eligible acreage'' and changing ``based on your
approved yield'' to ``determined on a solid-planted basis'' so it reads
as follows: ``(a) In addition to the provisions contained in section 17
of the Basic Provisions, your prevented planting production guarantee
and eligible acreage will be determined on a solid-plant basis without
adjustment for skip-row planting patterns.''
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Sunflower Seed Crop Provisions--General
Comment: Many negative comments were received because the proposed
rule did not provide revenue protection for sunflowers. The commenters
urged FCIC to provide revenue protection for sunflowers in the final
rule. They stated that elimination of revenue coverage would unduly
diminish the risk management options currently available to sunflower
producers and cause serious damage to the entire sunflower industry.
Sunflower seed is much in demand because the oil is one of the
healthiest. Major companies like Frito Lay have switched to sunflower
oil because it is healthier and tastes good. Sunflower producers need
to have the same or similar programs as producers of other crops.
Planting sunflowers is an option for producers from Texas to North
Dakota and is one of the best options in dryer climates. It is more
drought tolerant than most crops and fits in limited irrigation areas.
Commenters stated that sunflowers are an extremely important crop in
North Dakota. In 2005, North Dakota ranked first in the nation's
sunflower production, producing 44 percent of the national total. North
Dakota also has several sunflower handling/processing facilities. A
commenter stated that sunflowers will produce the most oil per acre of
any crop including soybeans and canola. Each of these crops will
produce about the same pounds of grain but sunflowers have 45 to 50
percent oil, soybeans have 18 to 20 percent oil, and canola has 38 to
40 percent oil. With bio-diesel becoming prevalent, it is very
important to support sunflowers as they produce the most oil per acre.
Commenters also stated that use of revenue products have grown
significantly since the crop insurance reform legislation passed in
2000 and the commenters are concerned preventing these products from
being used by sunflower producers will unfairly restrict these
producers' risk management options. They understand a proposal has been
submitted to the agency to address the agency's concerns on how to
determine an appropriate base price for the product absent a futures
contract(s) in the commodity. They hope FCIC will seriously consider
this proposal or others that would preserve revenue coverage for
sunflowers. The commenters stated, because of the very intense and
competitive atmosphere for acreage among crops, U.S. sunflower
producers need access to the risk management tools that are available
to other major crop producers. Crop insurance programs influence what
crops get planted. The amendments offered in the new policy would give
producers a choice of revenue protection (against loss of revenue
caused by low prices, low yields or a combination of both) or yield
protection (for production losses only) within the same Basic
Provisions and applicable Crop Provisions. Excluding revenue protection
for sunflower producers would not allow them to consider and determine
the best risk management tool for their operations. A commenter stated
that market forces are constantly changing. This is due to farm program
adjustments, trans fat labeling requirements, and food crops produced
for energy. Health is driving increased demand for sunflower products.
Sunflower oil is enjoying strong demand from domestic users due to its
healthy and stable profile. An example is the recent announcement from
the major U.S. snack food manufacturer, Frito Lay, of their decision to
replace cottonseed oil with sunflower oil in two of their major potato
chip brands. A release from Frito Lay clearly states this change to
sunflower oil eliminates 60 million pounds of saturated fat from the
U.S. diet annually. The Food and Drug Administration's requirement that
trans fats be listed on all food product labels and the industry
decision to produce NuSun[supreg] (mid-oleic sunflower oil) changed the
historical price relationship between sunflower and soybean oils.
Sunflower oil is one of the few naturally stable oils that can be used
in food manufacturing without the need for hydrogenation. Because of
this development, it is estimated U.S. sunflower acres will need to
expand from the present 2 million to 4.5 million by 2010. However, the
growth in acres to meet this demand could be restricted if producers
are unable to insure sunflowers with revenue protection. The commenters
stated the competition for existing acres is intense. Members of the
National Sunflower Association (NSA) have identified their inability to
buy appropriate crop insurance as the number one serious impediment to
taking advantage of these new market opportunities. The commenters
stated, the intent of Congress in providing major expansion of the crop
insurance program in 2000 was clear: ``make crop insurance more widely
available.'' The
[[Page 15844]]
intent was not for the program to be administered in a manner that
keeps producers from diversifying their operations and limiting the
risk associated from growing only a few selected crops. Congress has
also crafted farm policy to encourage planting flexibility so producers
can respond to market forces. This holds especially true where market
forces encourage production of crops like sunflowers. Having revenue
protection for sunflowers will give producers additional flexibility
and greater security. The commenters stated the Federal Register notice
states, ``Very few crop policies of sunflowers earned premium in 2003.
Removal of this crop from eligibility is appropriate because the
mechanism for price discovery does not adequately reflect either market
value or changes in the market valuation during the period between
planting and harvest.'' The commenters stated they have agreed with
that statement for the last three years. They have met and corresponded
with RMA and related USDA agencies in an effort to change the pricing
mechanism for the RA crop insurance policy. In a letter to former RMA
Administrator Ross Davidson in September 2005, the commenter suggested
two potential methods of price discovery that would allow the RA policy
to more adequately reflect the market value for sunflower seed. The
commenters stated they did not receive a response to their proposal.
The commenters stated they also agree with the statement in the Federal
Register that the RA sunflower policy has seldom been used in the last
several years. The problem with the present RA policy is that the
formula used to obtain a sunflower `strike' price is outdated. The old
formula of taking the Chicago Soybean Oil Futures contract and dividing
that number by two and subtracting one simply no longer represents a
sunflower seed value. This formula worked reasonably well until the
2000 crop year. Prior to that time the majority of oil-type sunflower
acres were of the linoleic fatty acid type. The vast majority of this
sunflower oil was exported to countries in North Africa, the Middle
East and Mexico. Values for the oil were at par or slightly greater
than soybean oil values. However, this changed beginning in 2000 when
the U.S. sunflower industry began the switch to NuSun. In the 2005 crop
year, it is estimated 90 percent of the sunflower oil-type acres were
either NuSun or high oleic, the latter sells at a premium to NuSun oil.
The bottom line is the old FCIC formula visa via the Chicago Soybean
Oil futures market no longer works. Producers were cautioned not to use
the RA policy in the last several years because it did not reflect
sunflower seed values. The Multi-Peril price elections better reflected
sunflower values. The commenters recommended sunflowers not be
eliminated from the Combo policies, however, it will be necessary to
change the value. The commenter provided a chart which shows the
existing formula and two additional formula modifications. One
modification is to take the Chicago Soybean Oil Futures contract (per
the RA formula) and simply divide that average number by two. The other
choice is to divide by two and add one. The commenters stated the
second alternative has the best relationship to the annual average of
new crop NuSun prices offered at the Enderlin, North Dakota crushing
plant. It is important to point out the NuSun price does not reflect an
average 6 percent oil premium. Neither does it reflect high oleic which
generally is priced at $1.50 cwt premium to NuSun. Nor does it reflect
hulling types which are priced at $1.50 premium to NuSun. Nor does it
reflect confection sunflower which is priced from $3 to 4 cwt over
NuSun. The commenters stated there is also the factor of bio-diesel in
the U.S. vegetable oil market that is changing all of the old pricing
rules. The Chicago Soybean Oil futures contract often tracks the
petroleum market due to bio-diesel. The commenters stated the point
they want to emphasize is market dynamics change and the U.S. vegetable
oil market is in a very dynamic time. Sunflowers are part of this
dynamic process and producers should not be penalized in the loss of
revenue protection due to an out-dated formula. The commenters stated
on behalf of sunflower producers throughout the U.S., they strongly
encourage FCIC to include revenue protection for sunflowers. They are
willing to give any assistance FCIC may need to make this a reality for
sunflower producers. If revenue protection is not provided for
sunflowers, the loser will be the American farmer and the domestic
industries that depend on sunflower production. Commenters stated that
agriculture is currently experiencing dynamic changes. Renewable
energy, shifts in nutritional and dietary demands, and other
alternative uses are impacting the demand for and market prices of
several crops including sunflowers. Seed and confectionary sunflower
products are shipped worldwide. The commenter stated fifty percent of
his company's business is sunflower exports to Europe. To exclude
revenue protection for sunflowers will be to the detriment of U.S.
farmers, the health of our citizens, and domestic industries.
Response: As stated more fully above, FCIC has reevaluated its
decision and determined that there is an appropriate pricing method
that would allow revenue protection for sunflowers. Therefore, the
Sunflower Seed Crop Provisions have been amended to add revenue
protection and to make other clarifications and simplifications similar
to other Crop Provisions in the final rule.
Coarse Grains Crop Provisions--General
Comment: A few commenters stated producers of grain type corn, of
which a portion of the acreage is harvested for silage, need to be
allowed the option to continue to insure such acreage on a grain basis
with CRC type protection that includes the harvest price option. A
commenter stated this is necessary so grain and silage producers can
have the same replacement price protection as grain only producers who
choose to hedge in order to buy-out their hedge contract in the event
of yield loss. The commenter acknowledged insuring grain type corn
acreage cut for silage in a manner that provides producers with the
needed risk management protection is challenging. The commenter stated
in the Northeast, producing corn silage with very high nutrient value
is critical for profitable livestock and dairy production. With all of
the emphasis on maximizing the relative feed value (RFV) of the silage,
if producers have reduced grain content in the corn silage, they
purchase additional feedstuffs to balance the ration. The commenter
stated producers need the replacement feed provision currently provided
by the CRC program and thus need the market price option under the new
policy. The commenter added in the Northeast, grain yields frequently
have more yield variability than tonnage yields and insuring on a
tonnage basis does not work well because the grain content of the
silage could be off considerably but the impact on tonnage yield is
still within the insurance deductible. Therefore, there is no indemnity
to help to pay for the cost of feed supplements to make up for the
reduction of grain content and RFV. Another commenter recommended the
availability of revenue protection for corn silage should be retained,
because the commenter believes revenue protection should be available
to these producers. The commenter stated if market and/or agronomic
decisions suggest producers should produce these crops, the Federal
crop insurance program should not
[[Page 15845]]
create a disincentive. The commenter urged FCIC to provide revenue
protection for corn silage in the final rule.
Response: Under the current revenue policies, only corn grown for
harvest as grain is insurable. In this proposed rule, producers can
insure both corn grown for grain and corn grown for silage under the
revenue protection policy but the corn grown for silage will not
receive protection against a change in price. The harvest price is the
same as the projected price, which is established by FCIC. This is
because corn silage is not traded under any commodity exchange and the
correlation has not been established between corn silage prices and
corn for grain or other crop prices that are established on a commodity
exchange. Therefore, FCIC must establish the projected price for corn
grown for silage. Since the projected price is not based on a commodity
exchange, there is no basis to calculate a harvest price that is
different than the projected price. No change has been made.
Comment: A commenter stated when Northeastern producers plant grain
type corn, of which some will be harvested as grain and some as silage,
they do not determine which acreage will be harvested for silage until
harvest time. For this reason, past efforts by FCIC to require
producers to designate acreage for grain and acreage for silage have
always failed to work at the farm level.
Response: FCIC agrees the number of acres and the location of the
acres ultimately harvested for silage and grain will depend on many
factors that may change after the acreage has been reported. However,
crop insurance guarantees and premiums are established based on the
number of acres of each insured type reported on the acreage report.
Therefore, producers who plant corn for both silage and grain must
report the number of acres planted for each purpose. Provided the
acreage is all located in the same unit, it does not matter which
particular acreage in the unit was harvested for grain and harvested
for silage. No change has been made.
Comment: A commenter supported the inclusion of corn silage to
revenue coverage.
Response: FCIC has retained the provision in the final rule.
However, the harvest price for corn grown for harvest as silage will be
set equal to the projected price for corn silage since corn silage is
not traded under any commodity exchange and no correlation has been
established between corn silage prices and corn for grain or other crop
prices that are established on a commodity exchange.
Coarse Grains Crop Provisions--Section 1--Definitions
Comment: A commenter stated the definition of ``planted acreage''
in section 1 provides, in part: ``(corn must be planted in rows far
enough apart to permit mechanical cultivation if the specific farming
practice you use requires mechanical cultivation to control weeds) * *
*''. The commenter stated that, assumedly, the producer has the
discretion to determine if a particular practice requires mechanical
cultivation. The commenter asked if there is a minimum row width that
de facto is too narrow to permit mechanical cultivation, and if so, the
policy should so state. Another commenter stated they have some
concerns with the added phrase which states, ``(corn must be planted in
rows far enough apart to permit mechanical cultivation if the specific
farming practice you use requires mechanical cultivation to control
weeds) * * *''. The commenter stated the addition of the phrase depends
on the sufficiency of the research completed to date for determining
yield variations based on practice differences. The commenter believes
if FCIC's research shows no material differences based on practices
used, this change may be appropriate. However, if yields differ based
on these practices, the proposed change could allow coverage on narrow-
row corn even if it was not planted to the hybrid variety needed for
that farming practice.
Response: FCIC has determined that the current requirement that
corn must be planted in rows far enough apart to permit mechanical
cultivation is no longer necessary and has removed it in the final
rule. Given the characteristics of the new varieties and available
chemicals, mechanical cultivation may not be used in many areas.
Further, FCIC cannot establish the necessary row spacing because it
depends on many factors. If the practice used to plant the crop is not
generally recognized for the area, under section 8(b)(1) of the Basic
Provisions, the crop will not be insured.
Coarse Grains Crop Provisions--Section 7--Insurance Period
Comment: A few comments were received regarding the change proposed
in section 7(b) to move the calendar date for the end of the insurance
period for corn insured as silage in several states from September 30
to October 20. A few commenters suggested Virginia should be included
in the list of states with the October 20 calendar date for the end of
insurance period for corn grown as silage. One of the commenters stated
NASS data should support that Virginia has very similar climatic
conditions as the states listed. Another commenter suggested Virginia
be added to the list of states (including Maryland, Pennsylvania, and
West Virginia) to which the calendar date for the end of insurance
period for silage is October 30. The commenter stated the silage
planting and harvest dates and growing season in Virginia's western
counties are similar to those in West Virginia. The commenter noted
there have been several occasions where the September 30 end of
insurance period passes before all silage has been harvested. A
commenter recommended the calendar date for the end of the insurance
period for corn insured as silage be established as September 30 rather
than September 20 to assure that protection continues through harvest
completion in years when crop maturity is late and can result in crop
destruction from hurricanes. A commenter stated the proposed change in
section 7(b)(1) extends the calendar date for the end of the insurance
period from September 30 to October 20 for corn insured as silage in
all Texas counties. The commenter also noted section 7(a)(1) was not
changed in the proposed rule. Therefore, the calendar date for corn
insured as grain in south Texas remains September 30 (and December 10
in other Texas counties). The commenter noted FCIC's explanation for
this change is that the extra time is needed to complete silage
harvest, but they question why the grain date in south Texas remains so
early by comparison.
Response: FCIC has revised the calendar date for the end of
insurance period for corn silage in Virginia to October 20.
Additionally, FCIC has determined such change is also appropriate for
North Carolina and has revised the provision accordingly. FCIC assumes
that the commenter was referring to the October 20 date stated in the
proposed rule for the referenced states (including Maryland,
Pennsylvania, and West Virginia), not October 30 as a commenter
suggested, and has revised the provision accordingly. A commenter
recommended that the end of the insurance period be moved from
September 20 to September 30 but the proposed rule uses September 30
and it is retained in the final rule. It is not appropriate to move the
end of the insurance period for all states to October 20. FCIC proposed
the changes for the listed states because of the particular agronomic
conditions in those states. Not all states have the same agronomic
[[Page 15846]]
conditions. If the commenter has information about a particular State,
it can provide such information to FCIC for consideration at a future
date. The commenter is correct that, as proposed, there was an
inconsistency in the end of the insurance period for corn for grain and
silage in Texas. However, since silage is harvested before grain, the
end of the insurance period dates should have a similar relationship.
Therefore, the calendar date for the end of the insurance period for
corn insured as silage in Texas should remain as September 30.
Additionally, FCIC has determined the calendar date for the end of the
insurance period for corn insured as silage in New Mexico and Oklahoma
should also remain as September 30 because the corn silage is normally
harvested in those states by September 30. FCIC has revised the
provision accordingly.
Coarse Grains Crop Provisions--Section 8--Causes of Loss
Comment: A commenter stated the shift from current language
granting coverage for losses caused by a failure of irrigation water
supplies resulting from unavoidable weather related events could
inadvertently preclude coverage of legitimate losses. The commenter
stated it is vital that all losses caused by weather related events,
including those that adversely impact the availability of irrigation
water supplies, remain covered under the Federal crop insurance
program. They recommended the Agency substitute the more inclusive
wording of the current provision in place of the proposed language.
Response: Failure of the irrigation water supply that occurs during
the insurance period is a covered cause of loss if such failure is due
to a cause of loss specified in the Crop Provisions. FCIC has always
considered the provision to limit the cause of the failure of the
irrigation supply to be due to one of the insured perils. However, the
provision previously referred to an unavoidable cause of loss, which
could have been interpreted to extend coverage beyond the named perils
and beyond those of natural disasters and that would be a violation of
the Act. Further, other causes of loss, even if allowed by the Act,
have not been included in the premium rates. Rates have been
established based on the listed perils, which is consistent with other
Crop Provisions. No change has been made.
Coarse Grains Crop Provisions--Section 9--Replanting Payments
Comment: Several commenters suggested revising the proposed
provisions in section 9(b) to increase the number of bushels used to
compute the replant payment amount. A commenter stated the number of
bushels used to compute the replant payment for corn should be
increased from 8 to 12 bushels and the number of bushels used for
soybeans should be increased from 3 to 5 bushels. A commenter stated
the current coarse grains replanting maximums are: corn grain 8 bushel,
corn silage 1 ton, grain sorghum 7 bushel, and soybeans 3 bushel. The
commenter stated there was a previous proposal to increase the maximum
coarse grain replanting payments as follows: corn grain 10 bushel, corn
silage 1.25 ton, grain sorghum 8 bushel, and soybeans 4 bushel. Replant
increases were justified due to increased input costs, etc. The
commenter asked why no consideration was given to this recommendation
when there was overwhelming support for these increases. A commenter
stated the existing level of replant cost reimbursement is considerably
outdated. The commenter stated with the ever rising cost of inputs for
nitrogen based fertilizer, chemicals, etc., and the fuel cost to
replant, the number of bushels used to compute the replant payment
should be increased for corn from 8 to 10 bushels and for soybeans from
3 to 4 bushels. Another commenter believes the current replant payment
schedule is outdated. The commenter stated with the introduction of
Round-Up Ready seed, replant costs have increased and replant payments
should more closely reflect these costs. The commenter noted in some
areas, the cost to plant an acre of Round-Up Ready corn is about $40
per acre. Therefore, using the current APH price election, a replant
payment per acre will only amount to $16 or 40 percent of the cost of
seed alone. The commenter stated the cost to plant an acre of Round-Up
Ready soybeans is about $42 per acre. However, a replant payment per
acre will only amount to $15.45 or 36 percent of the cost of seed
alone.
Response: FCIC is aware average costs associated with replanting
have increased significantly in recent years. FCIC has contracted for a
replant study. Based on the outcome of the study, FCIC will make
appropriate revisions to compensate producers for a portion of the
replanting costs based on the most current average replanting costs
available. No change has been made.
Comment: A commenter stated they understand a study is underway
that could change the number of bushels used in the replanting payment
calculations for these crops. Since such changes would have to be put
in the Special Provisions until the next revision of the Coarse Grains
Crop Provisions, it might be worth considering whether to delete the
specific numbers in (1)-(4) and revise (b) to read ``* * * the number
of bushels (tons for corn insured as silage) for the applicable crop as
specified in the Special Provisions * * *''.
Response: FCIC has revised section 13 of the Basic Provisions to
allow the amounts contained in the Crop Provisions to be revised in the
Special Provisions. Therefore, there is no need to remove the amounts
from the Crop Provisions because such amounts will apply until the
study is complete. However, FCIC has added a provision to ensure that
the amounts could be adjusted in the Special Provisions. The same
change has been made in the other Crop Provisions contained in this
rule.
Coarse Grains Crop Provisions--Section 10--Duties in the Event of
Damage or Loss
Comment: A few comments were received regarding the provisions
proposed in section 10(c). A commenter stated the proposed language
begins with, ``In lieu of any policy provision providing otherwise * *
*'', having to do with when acreage will be harvested in a different
manner than originally reported, raises the question of how this fits
into the order of priority, and whether this is supposed to supersede
any provision in the Special Provisions. A commenter recommended the
provisions contained in section 10(c) be revised to allow corn, which
is ultimately cut for silage, to be insured as grain as long as it is
appraised before harvest and thus be allowed revenue coverage with up
and down price protection. The commenter stated the major value
component of corn silage is how much grain content is in the silage and
the value of the grain and if the price of corn is low, the value of
the silage is proportionately lower and if corn prices are high, the
value of the silage is proportionally higher. The commenter added
drought damaged corn with no grain in it makes silage a lot less
valuable than silage full of grain. If the producer has to supplement
their silage for their dairy or other livestock with grain, they must
go out in the market and buy grain, thus they need price protection on
corn cut for silage, just like they need it for corn harvested for
grain. The commenter stated in the
[[Page 15847]]
Midwest (like Illinois) corn cut for silage has been insurable as grain
for years. It has been appraised before harvest but eligible for corn
revenue coverage. The commenter stated most farmers do not know how
many acres they will cut for silage until they are in the midst of
silage cutting, so it makes the most sense to insure it as grain and
pay claims based on corn grain appraisals. The commenter believes
allowing corn cut for silage to be insured as grain as long as proper
notice is given to the company so it can be appraised before harvest
should also remove the harsh requirements or loss of coverage referred
to in section 2(c). A commenter stated section 10(c) requires the
producer to provide notice to the insurance provider before harvest if
the producer intends to harvest acreage in a manner different than as
reported and imposes penalties if the producer fails to provide such
notice. The commenter pointed out the critical element of this
provision is intent. The commenter asked how an insurance provider
should determine the intent of the producer. The commenter stated if
the manner in which the producer insures the crop is sufficient
manifestation of intent, then the policy should state this clearly. The
commenter stated because of the various legal connotations associated
with the concept of intent, they question whether ``intends'' is the
appropriate term. To this end, the commenter suggested amending section
10(c) as follows: ``In lieu of any policy provision providing
otherwise, if you harvest any acreage in a manner other than as you
reported * * * you must notify us before harvest begins * * *'' The
commenter stated the removal of the term ``intend'' enables the
insurance provider to focus on the producer's actions rather than on
the producer's mindset. In addition, the commenter recommended an
exception to the penalty set forth in the final sentence of section
10(c) stating that if a producer fails to provide timely notice, but
leaves representative samples that enable the insurance provider to
accurately perform appraisals or adjust a loss, the insured should not
be penalized for said failure. The commenter further stated if the
insurance provider and the integrity of the loss adjustment process are
not prejudiced, imposing such a significant penalty is Draconian. A
commenter stated that in the Federal Register, FCIC stated ``it is too
difficult to convert silage production to grain * * * after the crop
has been harvested.'' On this point the commenter agreed; however the
commenter believes Section 10 D (3), Appraisals for Acreage that will
be Harvested, of the Crop Insurance Handbook effectively addresses this
situation in a manner that does not impose undue hardship on the
producer or undue loss adjustment expense on the insurance provider.
The commenter pointed out this procedure provides for an appraisal when
over 50 percent of the unit is harvested in a manner other than
reported. The commenter hoped the intention of the proposed rule is to
keep the 50 percent rule, and not force adjusters to visit every grain
producer who chops some silage, or every silage producer who fills the
bunker and shells the small remaining acreage. Another commenter stated
section 10 of the Coarse Grains Crop Provisions states if the producer
intends to harvest any acreage in a manner other than as reported, the
acreage must be appraised in accordance with section 11(c)(1)(i)(E).
The commenter asked if this eliminates procedure in the Crop Insurance
Handbook that allows harvest of less than 50 percent of a unit without
an appraisal. The commenter stated the most common example of this is
when a producer insures corn in a grain only county and harvests a
portion, usually less than 50 percent of the unit, as silage. The
commenter added many farmers in livestock areas do this. The commenter
stated if the insurance provider must appraise all crops when harvested
in a different manner than insured, the insurance provider's loss
adjusting expenses will increase.
Response: The commenter is correct that there may be a conflict
between the priority contained in the Basic Provisions and the ``in
lieu of'' language in section 10(c). To eliminate this conflict, FCIC
has removed the ``in lieu of'' provision. Under the current revenue
plans of insurance for corn, only corn planted for harvest as grain is
insurable. Under the proposed rule, any acreage planted for harvest
either as grain or silage is insurable under revenue protection.
However, a variety of corn that is adapted for silage use only is only
insurable as silage. Further, although insured under revenue
protection, as stated above, the harvest price for corn insured as
silage will be set equal to the projected price for corn silage since
corn silage is not traded under any commodity exchange. The commenter
is correct that the use of the word ``intent'' is not appropriate.
Therefore, FCIC has revised the provisions, similar to the suggested
language, to require the producer to provide notice if the producer
will harvest in another manner. At some point a decision must be made
and the provisions obligate the producer to notify the insurance
provider before actual harvest begins. Provisions contained in section
14(d)(1)(ii) of the Basic Provisions require the producer to obtain
consent before the producer puts the insured crop to an alternative
use. Harvesting a crop insured as grain for silage would be considered
an alternative use. Therefore, notice is already required. There is
nothing to preclude the insurance provider from authorizing the
producer to leave representative strips and basing the appraisal on
such strips. However, to be consistent with the other notice
requirements in the Basic Provisions, the producer must still provide
notice that the producer is harvesting the crop in a manner other than
it was reported for coverage. Further, section 14(d)(3) of the Basic
Provisions states that the sanction for failure to report putting the
insured crop to an alternative use is the assignment of an amount of
production or value in accordance with the claims provisions in the
Crop Provisions. Therefore, FCIC cannot remove the sanction in section
10(c) of the Coarse Grains Crop Provisions without setting up a
conflict in the policy provisions. The procedures contained in the Crop
Insurance Handbook that specify how corn production will be determined
for acreage harvested in a manner other than as reported when such
acreage is less than 50 percent of the unit will remain in effect.
However, these procedures only apply when there is no loss and there
must be a determination of production for APH purposes. The Crop
Insurance Handbook provisions regarding the 50 percent are not
applicable when determining production to count for claim purposes. If
a producer will harvest any acreage in a manner other than as reported,
the insurance provider must make the appraisals required in
redesignated section 14(d)(2) of the Basic Provisions to determine the
production to count for such acreage for claim purposes.
Coarse Grains Crop Provisions--Section 11--Settlement of Claim
Comment: A commenter requested FCIC consider changing section 11(c)
``The total production in bushels (tons for corn insured as silage) to
count * * *'' to ``The total production to count (in bushels for grain
or tons for corn insured as silage) * * *'' similar to the wording in
deleted subsection (d).
Response: FCIC has revised the introductory text in section 11(c)
to read as follows: ``The total production to count (in bushels for
corn insured as grain or in tons for corn insured as silage) from all
insurable acreage in the unit will include:''.
[[Page 15848]]
Comment: A commenter stated section 11(e) as revised would allow
quality adjustment only for ``corn insured as silage'', which was
changed from ``corn insured or harvested as silage.'' The commenter
asked that FCIC refer to their comment to 11(c) above.
Response: Under the changes proposed in section 11, the silage
quality adjustment provisions will be contained in redesignated section
11(e). This adjustment, which reduces the silage production to count
when the insurance provider's appraisal of grain content is less than
4.5 bushels of grain per ton of silage, is only applicable to corn
insured as silage. If corn is insured as grain but harvested as silage,
the grain quality adjustment standards will apply. Therefore, FCIC
removed the language ``or harvest'' from the provisions regarding
quality adjustment in redesignated section 11(d) to avoid any
conflicts.
Comment: A commenter stated quality protection for poor quality
silage also needs to be updated because currently, no quality
adjustment occurs until the grain content falls below 4.5 bushels per
ton. The commenter stated this current standard needs updated since
comparing NASS 10-year State average yield data for grain versus silage
in Pennsylvania results in a ratio of 7 bushels of grain per ton of
silage. The commenter believes the ratio is probably higher in intense
livestock operations. Therefore, the commenter recommended that the
inception point of quality adjustment for silage should be changed from
4.5 to about 6.5 bushels per ton.
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Comment: A commenter recommended a new section 11(f)(3) be added to
address some of the aflatoxin issues that recently occurred in Texas.
The commenter recommended the following language: ``Any acreage insured
as grain or silage that ends up being harvested as silage will not be
eligible for quality adjustment for any mycotoxin.'' The commenter
stated this recommended change is supported by the agronomic research
indicating these mycotoxins (i.e., aflatoxin) are not present at the
stage of growth such acreage is normally chopped for silage. The
commenter stated this recommended addition would prohibit the producer
being paid a loss for mycotoxins that might develop in representative
samples of the insured crop left by the producer for the insurance
provider's appraisal, even though the value of the harvested silage
crop was not impacted with a reduced value from the mycotoxins.
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Malting Barley Price and Quality Endorsement--General
Comment: A commenter appreciated the efforts of FSA to educate
malting barley producers of the proposed rule changes for malting
barley crop insurance. The commenter thought the proposed changes were
significant and was pleased to be properly notified. The commenter also
appreciated the extended public comment period that enabled additional
comments to be submitted.
Response: Education assistance is helpful and FCIC appreciates any
efforts made by FSA. FCIC agreed to extend the comment period because
of the complexity of the proposed changes and the need for additional
time to review them. This additional time allowed commenters to more
thoroughly analyze the proposed changes and to provide more meaningful
comments.
Comment: A commenter stated the malting barley coverage was not
ample because if a producer has a loss there is still a large gap
between what the producer is responsible for and what the insurance
provider will pay.
Response: The commenter does not identify any specific gap in
insurance coverage. Therefore, FCIC is not sure how to respond. If the
commenter is referring to the difference between the bushel production
guarantee and the average historical yield (the deductible), this
amount is mandated by the Act. The Act provides for deductible levels
as low as 15 percent (85 percent coverage level) and this coverage
level is available in most areas where malting barley coverage is
provided.
Comment: A commenter stated the Malt Barley Option is an
improvement in the Pacific Northwest for producers to be able to sign a
malt barley contract with buyers other than a brewery or maltster.
Great Western Malting is the major purchaser of malt barley in
Washington State and Great Western Malting uses the private grain
companies and co-operative grain companies as a contracting agent with
the producers. In essence, with the old rule, malt growers were not
eligible to participate in the contract price and option because no
brewery or maltster contracted production in the barley growing area of
Washington State.
Response: The proposed rule allows the malting barley additional
value price to be based on the sale price specified in a production
contract with a buyer other than a brewery or maltster and this
provision is retained in this final rule.
Comment: Several commenters stated U.S. barley crop acreage has
declined by 75 percent in the last 20 years (1987 to 2006). The
commenters stated this dramatic decline can be attributed to several
factors, but central among them is a lack of cost effective risk
management tools. Some of the other factors include increased pressure
from imported barley, and increasing production and transportation
costs. The commenters stated malting barley has become a specialty crop
in the U.S. and, now more than ever, producers need access to
affordable and workable crop insurance to maintain a viable production
base in the U.S.
Response: It is important to provide cost effective risk management
tools for barley producers and FCIC will continue to work with producer
organizations and other interested parties to provide an affordable and
effective barley crop insurance program.
Comment: Several commenters expressed concern barley producers in
multi-year drought or hail situations have suffered yield losses that
affect their actual production history and preclude their ability to
obtain meaningful and adequate crop coverage. A commenter stated he has
farmed for 35 years and has been in a hail belt for seven years on some
of his farm and is in an eight-year drought. A few commenters urged
FCIC to include a mechanism in the provisions to address this serious
APH erosion problem. A commenter stated under the proposed changes to
the Malting Barley Price and Quality Endorsement, it appears a producer
could be severely punished or even dropped from the program because of
a lack of malt production. A commenter stated most times, the reason
for barley to not make malt is related entirely to weather conditions.
The weather conditions could be hail, drought, rain at harvest, or many
other things. Weather related disasters are a part of the business. It
becomes a major problem if bad weather conditions occur a few years in
a row and it raises premium rates, or worse, causes producers to have
their coverage dropped. In the proposed rule, it mentions a producer
must provide sales records for at least four crop years to be eligible
for coverage. The commenter
[[Page 15849]]
asked if this also means FCIC will only use 4 crop years to determine
production criteria. A few producers recommended using at least 10
years or every year of a producer's production history to determine the
history. This would eliminate a few bad years in a row affecting a
producer's production history. Another good example of this would be a
few hail years. A commenter also asked if a producer chose a 70 percent
level of coverage, would a 70 percent fulfillment rate for that year be
enough to prevent a penalty from occurring that particular year. A
commenter stated adjusting the premium rates should take into account
more than mother nature, and rates could increase but if the rates rise
each year, it will make it much more expensive to carry the insurance.
A commenter stated FCIC should not reduce APH yields due to a reduction
in price caused by a loss in crop quality. Numerous examples exist in
which a producer produced an average or above average yield (in bushels
per acre), but the quality of the crop was less than optimal, thus
resulting in a lower price to the grower. Losses due to quality need to
be reflected in the price to prevent reduced approved yields.
Response: There are problems associated with multiple years of poor
weather and resulting reductions in APH yields. However, the manner in
which APH yields are calculated are set in section 508(g) of the Act
and generally require the use of a simple average of actual yields with
some exceptions that apply because of loss years. To mitigate the
adverse impact of multiple years of disasters, Congress implemented
provisions that allow producers to replace low yields in the feed
barley APH databases with yields equal to 60 percent of the applicable
transitional yield. These provisions have helped stabilize feed barley
APH yields and the underlying insurance coverage for malting barley
insured under Option B of the Malting Barley Price and Quality
Endorsement. With respect to the issue of the reduction in APH due to
poor quality, FCIC cannot make any changes at this time because none
were proposed and the public was not provided an opportunity to
comment. While FCIC is concerned with reduced APH yields, it is also
concerned with program integrity and actuarial soundness. The proposed
provisions requiring producers to provide malting barley yield history
for Option B require producers to prove they have a history of
successfully producing barley of sufficient quality for malting
purposes were intended to address such issues. However, based on
comments received and further review, FCIC has replaced the proposed
provisions with alternative provisions that are less complex to
administer, yet still address program integrity and actuarial soundness
issues. The new provisions permit coverage under Option B only if the
producer can prove he or she produced and sold an amount of malting
barley equal to 75 percent or more of the amount of contracted bushels
in one of the three crop years malting barley was planted immediately
preceding the previous crop year. For example, if the producer wishes
to insure 2011 crop year malting barley and had a malting barley
contract to produce 10,000 bushels in 2009, the producer must have
produced and sold at least 7,500 bushels of 2009 crop year malting
barley production. Producers may qualify for coverage based on any one
of the three crop years in which they planted an approved malting
barley variety prior to the previous crop year. If the producer does
not meet this requirement, he or she may still insure malting barley
under Option A. However, the producer must elect Option A prior to the
applicable sales closing date and meet all other requirements for
insurance under Option A. Failure to do so will result in no coverage
under Option A or Option B. FCIC agrees continued rate increases will
impact the affordability of malting barley insurance and believes these
changes in Option B may help reduce the need for future rate increases.
Comment: A commenter encouraged FCIC to develop specific
underwriting guides for malting barley, as well as feed barley, wheat,
and other cereal crops. Underwriting guides assist in developing
appropriate administrative mechanisms that are reflective of rating
issues while simultaneously ensuring program compliance.
Response: The Crop Insurance Handbook contains specific
underwriting requirements for malting barley, feed barley, wheat and
other crops. Further, the commenter has not identified any specific
area where these underwriting guidelines are deficient. Therefore, it
is not necessary to provide separate handbooks for malting barley,
wheat, or other crops.
Malting Barley Price and Quality Endorsement--Section 1--Definitions
Comment: A commenter stated adding a specific definition of
``additional value price'' is appropriate in order to provide greater
clarity to producers, buyers, and agents. The commenter stated examples
need to be included that describe the methodology by which the
additional value price is derived.
Response: FCIC proposed to add a definition of ``additional value
price'' and will retain the definition in the final rule. Additionally,
both Option A and Option B provide step-by-step instructions that
should be used to calculate the additional value price per bushel.
Therefore, an example should not be needed in the definition. No
changes have been made.
Comment: A commenter stated moving the definitions to the beginning
of the endorsement is good and recommended adding the definition of
``malt'' since ``malt extract'' is already defined and both terms are
used in the endorsement.
Response: FCIC has revised the endorsement accordingly.
Comment: A commenter encouraged FCIC to explore (in cooperation
with the Federal Grain Inspection Service (FGIS)) the validity of
parameter tests (e.g., protein, germination, etc.) utilized by barley
buyers. If barley buyers are utilizing tests based upon defendable
scientific parameters, then these tests should be adopted by FCIC for
use in insurance product enhancement, thus preventing producers from
inadvertent loss due to differences in testing procedures between FGIS
and barley buyers. The commenter provided an example in which a buyer
rejects malting barley based upon an objective test (e.g., protein) and
the producer files a claim for insurance. The insurance adjuster has
the barley tested at an FGIS approved facility and it is acceptable
according to the FGIS test, but is still unacceptable to the buyer. In
this case, the producer sustained a loss for which no indemnity is
paid. The commenter further stated testing procedures must be
consistent between FGIS and buyers.
Response: FCIC is willing to explore any issues regarding validity
of testing procedures with FGIS. However, FCIC cannot insure the
decisions of the buyer of whether to purchase the barley. Further,
there may be situations where the barley is acceptable to one buyer but
not acceptable to another. Therefore, an objective test must be used.
The current policy recognizes current tests utilized by barley buyers
provided the tests meet the definition of ``objective test'' contained
in the endorsement and requires tests be conducted in accordance with
procedures approved by the American Society of Brewing Chemists, FGIS
or the Food and Drug Administration, depending on which test is being
performed. Problems may occur when both the malting barley buyer and
the insurance provider have ``objective tests'' performed on the same
production and the test results are different. In this case, the policy
must
[[Page 15850]]
provide a priority to determine which test result will be used to
settle a claim. The proposed provisions specify the tests used in case
of conflict will be those performed at an official grain inspection
location established under the U.S. Grain Standards Act except for
germination tests, or performed at a laboratory selected by the
insurance provider for germination tests. It is FCIC's understanding
that grain buyers will generally accept official FGIS tests to
determine if grain will be accepted even if their own tests show
different results. Therefore, instances in which grain is rejected even
though found acceptable through FGIS testing should be minimal. The
objective test provisions have been retained in the final rule.
Comment: A commenter questioned why ``protein content'' was removed
from the definition of ``objective test'' since it is still being used
in the policy. Another commenter stated that using the same protein
test as the maltsters is a positive change.
Response: ``Protein content'' was not removed from the definition.
While it is not specifically listed, it is included under the
procedures approved by FGIS. As stated above, testing for protein
content that is performed by buyers of malting barley may be acceptable
provided their tests are performed in accordance with FGIS approved
procedures.
Malting Barley Price and Quality Endorsement--Section 4
Comment: A commenter stated if the Malting Barley Endorsement is
available in any counties with both fall and spring sales closing dates
for barley, the references in sections 4 and 4(c) to ``sales closing
date'' as the deadline to elect, cancel or change the Malting Barley
Option (A or B) might need to be revised.
Response: The commenter is correct that the proposed provisions did
not address situations in which more than one sales closing date may be
applicable. FCIC has restructured section 4 and added a new paragraph
(d) that specifies that the endorsement can be elected until the spring
sales closing date in counties with spring and fall sales closing dates
only when the producer has no fall planted acreage of approved malting
barley varieties.
Malting Barley Price and Quality Endorsement--Section 6
Comment: Several commenters stated one of the significant
constraints for many of their barley producers is the inability to
ensure malting barley under optional units that reflect diverse
geography, growing conditions and management practices (irrigated
versus non-irrigated). The commenters stated a large number of their
producers opt to take feed barley coverage only so they can insure
their risks under an appropriate unit structure. However, that has
resulted in a couple of undesirable results, namely a smaller pool of
participants under the malt barley endorsement and a lack of effective
coverage for the higher valued malting barley crop. They believe
malting barley should be insurable under optional units, like other
crops. Another commenter stated it has been a problem having a variety
of feed barley (only for feed), which has been ``production to count''
against those varieties which he grows for malt. The commenter stated
there should be two separate units--one for feed varieties and one for
malt varieties as they are very different (like apples and oranges).
Response: Since no changes to provisions regarding unit structure
were proposed, and the public was not provided an opportunity to
comment on the recommended change, the recommendation cannot be
incorporated in the final rule. No change has been made. However,
production of a feed barley variety should not be insured under the
malting barley endorsement nor should any feed barley production be
production to count against the malting barley production guarantee.
Malting Barley Price and Quality Endorsement--Section 7
Comment: A commenter recommended the second sentence in section 7
be amended to provide: ``In the event you choose a percentage of the
additional value price that is less than 100 percent * * *''
Response: FCIC has revised section 7 accordingly. The provision has
also been clarified to indicate the producer cannot select more than
100 percent of the additional value price.
Comment: A commenter recommended adding a reference to the
possibility of more than one additional value price from multiple
malting barley contracts. Presumably, if there are multiple additional
value prices, the same percentage would apply to all, and the premium
calculation would be done separately for each, as in section 13(b)-(c)
and in the example of reporting different shares in section 6.
Response: If more than one additional value price is applicable,
the same percentage would apply to all additional value prices. The
provisions in section 7 have been revised accordingly.
Malting Barley Price and Quality Endorsement--Section 8
Comment: A few commenters referenced the following new provisions
in section 8 ``* * * The premium rate you pay will be adjusted by a
factor contained in the actuarial table based on your history of
fulfilling the production specified in malting barley contracts in
prior years, as applicable.'' According to the explanation in the
Proposed Rule, ``* * * This is similar to other insured crops where the
premium rate increases as the yield decreases and vice versa * * *''.
The commenters stated additional clarification is needed because: (1)
Similar language to this is not seen in the other Crop Provisions in
this proposed rule; (2) rate adjustments already exist and it is not
clear what change is proposed; (3) it is not clear if the provision
applies only to Option B or if it applies to both options since there
is no limiting language; (4) the information to be found in the
actuarial table is not available for review; and (5) the explanation
refers to yield increases/decreases but makes no mention of quality.
Response: The proposed provision was unique to the Malting Barley
Price and Quality Endorsement because it referred to an ``option
factor'' that is applied to the applicable premium rate. However, as
stated above, the proposed provisions which would have required
producers insuring under Option B to provide records of past malting
barley production have been changed. Therefore, the ``option factor''
will no longer be adjusted based on such records and the provisions
that referenced the factor have been removed in this final rule.
Comment: A commenter stated the new provision in section 8 that
refers to premium rate adjustment should be further reviewed as it
appears it will be difficult to administer.
Response: As stated above, FCIC has replaced the provisions
regarding fulfillment rates with alternative provisions that will
address FCIC's concerns with program integrity and actuarial soundness.
Therefore, the premium rate adjustment based on fulfillment rates is no
longer applicable.
Malting Barley Price and Quality Endorsement--Section 10
Comment: A few commenters stated section 10 is dealing with losses
not settled by May 31 of the following year. One commenter is not sure
what the problem is with the existing process. They have some maltsters
that do not take delivery by that time frame, so producers are not
certain if their barley
[[Page 15851]]
is malt quality, or not. Under the current system, the loss can be left
open until final disposition of the barley. Under the proposed change
it appears the producer must verify the barley won't be sold (even for
feed?) or the loss will just be closed and the barley will be assumed
to be malt quality. This will not work for those maltsters who take
late delivery of barley. Another commenter recommended clarifying
references to ``* * * not be sold * * *'' in sections 10(b)(2)(i) and
(iii).
Response: The commenter is correct that the provisions do not
adequately address when buyers take late delivery. Therefore, FCIC
agrees claims could be deferred if the producer agrees to defer
settlement until the production is sold and the provisions have been
revised accordingly. However, there may be cases in which the
production to count is below the production guarantee and the producer
may want to settle the claim even though the quality and sale price
have not been determined by the buyer. In this case, the producer may
agree to settle the claim at any time prior to disposition of the
grain, but no quality adjustment can be allowed because there is no
selling price upon which to base quality adjustment.
Comment: A commenter stated in section 10(a)(1)-(3) as written
``It'' in (a)(2) & (3) refers to ``your claim'' in (a), but perhaps is
meant to refer to ``All insured production'' at the beginning of
(a)(1). If so, move ``all insured production'' to the end of (a) and
delete the opening word(s) in (a)(1)-(3).
Response: The word ``it'' is intended to refer to the production.
The provisions have been revised as recommended.
Comment: A commenter stated section 10(b) refers to when ``any
production fails'' to meet the criteria in (a)(2) but does not mention
(a)(3). The wording of (a)(1)-(3) indicates that (a)(2) ``and'' (3)
must be considered together and separately from (a)(1), which is
separated from the others by the word ``or''.
Response: Section 10(b) refers to the quality criteria in section
14(a)(2), not the criteria in 10(a)(2) and (3). Therefore, no change is
necessary.
Malting Barley Price and Quality Endorsement--Section 11
Comment: Several commenters stated a producer who has enrolled in
the Malt Barley Quality Endorsement and has a valid malting contract
should be indemnified for prevented planting at the malt barley
additional value rather than feed barley value.
Response: Since the recommended change was not proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Malting Barley Price and Quality Endorsement--Section 14(a)(2)
Comment: A few commenters stated the beverage and food products
produced from malting barley are numerous and quality factors can vary
from year to year, depending on market needs. The rulemaking process
does not allow for timely responses to the needs of the end-user and
malting barley producer. This is a particular concern with the
established malting barley quality factors. The commenters strongly
urged malting barley quality factors be determined annually under the
Special Provisions, and not specified under this rule. Another
commenter stated quality factors should be subjected to re-rating on an
annual basis.
Response: The quality standards of the industry may require
revision from time to time to reflect changes in standards. However,
rather than repeating all of the quality standards in the Special
Provisions for all applicable counties, the provisions in section
14(a)(2) have been revised to allow the Special Provisions to contain
different or additional standards, as may be applicable. Those
standards can only be changed if done prior on or before the contract
change date.
Comment: A few commenters supported the proposed change to replace
``sprout damage'' with ``injured by sprout.'' Some of the commenters
stated that ``injured by sprout'' is the official USDA/FGIS term used
for the test. One commenter stated the proposed rule contains a
different term--``sprout injury'' and if these terms are considered
equivalent by FCIC, they have no problem with the current wording, but
if they are not equivalent then the proper term would be ``injured by
sprout.'' Another commenter stated section 14(a)(2) for both Option A
and B changed ``Sprout damaged'' to ``Injured by sprout'' in the
quality standards chart. However, additional clarification was not
provided as to the difference between ``Sprout damaged'' and ``Injured
by sprout.'' The malting barley companies and breweries are using the
``Pearling'' method and the State grain labs literally use a razor
blade to cut the kernel to determine sprout. This was supposed to be
addressed by FCIC, or at least according to the State Grain Lab
personnel in Montana, it was supposed to be clarified. The State Grain
Lab is using pearling but not for malt barley.
Response: ``Injured by sprout'' is the proper term and the
provision has been revised accordingly. FCIC has also revised the names
of other quality factors listed in section 14(a)(2) so they match the
terms in the chart at the end of the same section. This will make the
terms consistent throughout the section. The only test acceptable for
determining ``injured by sprout'' is that done in accordance with FGIS
standards and these standards require the grain to be pearled. Tests
not performed in accordance with FGIS standards are not considered
``objective tests'' as defined in the endorsement and cannot be used.
The State grain labs in Montana will still perform standard tests on
malting barley, which may include cutting kernels to determine damage.
However, they will also perform tests for ``injured by sprout,'' which
includes pearling, when a request is made for such test.
Comment: Several commenters supported the proposed change that
lowers the protein requirement to match the maltsters standards as well
as redefining sprout damage. One of the commenters stated these are
very positive moves within the malt barley endorsement, and that it has
been a financial hardship in the past having a product which could not
be delivered as malt barley and yet the producer could not collect
insurance for it. Another commenter asked why the quality standard for
six-row barley is not lowered from 14.0 percent to 13.5 percent as
well, thus providing consistency between the two types.
Response: The changes in protein and sprout quality standards
improve insurance coverage for malting barley and have been retained in
the final rule. Malting barley buyers generally have different protein
standards for six and two rowed malting barley. Fourteen percent is
generally acceptable for six rowed barley while 13.5 percent is
generally acceptable for two rowed barley. No change has been made.
Comment: Many commenters oppose the change for the mycotoxin
maximum under Option B (MPCI) from contract specifications to 2 parts
per million (ppm). A few commenters said such a change is unacceptable
without the existence of a mycotoxin (DON) rider covering the producer
from losses occurring in the gap between contract specifications and 2
ppm. A commenter stated FCIC should also narrow the gap with mycotoxins
and vomitoxins to match the malt industry standard. A commenter said
adding a level for mycotoxin creates another window of discrepancy, as
most malt contracts have NO tolerance for toxins. A producer could have
barley a maltster
[[Page 15852]]
will not accept, and yet get no insurance indemnity. A commenter stated
mycotoxins should follow the contract specifications of the malt buyer,
not the mycotoxin limit of 2.0 ppm proposed in the endorsement.
Response: FCIC understands some contracts contain a standard
stricter than the proposed 2.0 ppm. However, FCIC has found production
contracts vary depending on individual buyer requirements. For example,
some production contracts deduct 5 cents per bushel for 1.1 to 2.0 ppm,
some have no discount for 2.0 ppm, some require non-detectable levels
(less than 0.5 ppm), and some accept higher levels but pay the market
price for such production. Current RA and IP plans of insurance provide
insurance against levels greater than 2.0 ppm. The 2.0 ppm standard
represents a quality level generally acceptable in the marketplace and
provides adequate insurance protection against mycotoxins in most
situations. To accommodate those situations where the production
contract requires levels lower than 2.0 ppm, FCIC has revised the
provisions to allow additional coverage if the Special Provisions allow
the additional coverage. Although the provisions have been revised,
such coverage will not be provided until a premium rate is developed
for such coverage and provided in the cost estimator or actuarial
documents.
Comment: A commenter stated there is a considerable percentage
difference between the standards for ``injured by mold'' and ``mold
damage'' (5.0 percent for injured by mold vs. 0.4 percent for mold
damage). The current nomenclature is confusing and appears to be
redundant when viewed by growers. Efforts should be made to combine
these constituents into a single category (similar to injured by
sprout). The same comment was made regarding ``injured by frost'' and
``frost damage.''
Response: ``Injured by mold'' and ``mold damaged'' are not the same
and denote different levels of harm. The lower the level of harm, the
higher the tolerance generally is for such harm. Further, each term is
individually defined by FGIS. FCIC is willing to discuss removing one
or the other with any interested parties. However, since both the
injury and damage categories are currently covered for mold and frost,
there was no proposal to eliminate one or the other, and the public was
not provided an opportunity to comment on the recommended changes, the
recommendations cannot be incorporated in the final rule.
Malting Barley Price and Quality Endorsement--Section 14(b)
Comment: Several comments were received regarding the quality
adjustment provisions in section 14(b), including those provisions that
make an allowance for reconditioning costs. One commenter stated
counting production sold for any use at a price greater than the
projected price is reasonable and assists in more closely achieving
actuarial soundness while simultaneously minimizing fraud, waste, and
abuse. Other commenters supported changes in calculating conditioning
incentives in the proposed rule. The commenters stated such incentives
can provide growers with additional income, reduce insurance
indemnities, and provide the end-user with additional product. They
further stated many producers are capable of on-farm conditioning and
strongly encouraged that producers be allowed to condition their own
production at established regional rates.
Response: FCIC has retained the proposed provisions. However, FCIC
is not aware of any established regional rates for conditioning. Costs
for conditioning may vary based on the level of damage, energy and
labor costs, etc. Therefore, the cost of reconditioning will be based
on the actual cost of reconditioning. No changes have been made.
Comment: A commenter stated the provisions dealing with barley sold
for less than the contracted price need to be revised. The provisions
seem to anticipate the price received will always be higher than the
feed barley projected price, which may not be the case. It seems if the
price is lower than the feed barley projected price, the formula would
yield a negative production to count number, which is not what is
wanted. The commenter stated he understands the concept, and the
problem. A farmer has a $3 malt contract, and delivers barley to the
maltster that is of marginal quality. The maltster offers to give him
$2.50, and take the barley as ``feed'' barley. If the feed barley
projected price is $2, under the current system, the farmer receives
the entire amount of the malt barley endorsement equaling $1. Under the
proposed change he would only receive the $.50 difference between his
sale price and his contract price. Under the current system, the farmer
would get $2.50 for his barley plus $1 for his insurance payment. The
$3.50 total is more than his contract price was, so he is money ahead
by selling for a lower price. The proposed change would eliminate that
possibility, but it creates some new issues. The farmer has no
incentive to seek the best price for his barley, because his insurance
payment is going to make him whole. Instead of conditioning barley, to
deliver some that is of malt quality, he could just sell it all for
feed. He could also seek to deliver the barley as close to home as
possible, even at a lower price, because again, the insurance will make
him whole. The commenter stated he knows it is possible under the
current system to have some strange pricing/delivery/conditioning
issues, but he is not certain the proposed changes would do anything to
make the situation better. In his experience, almost all the malt
barley growers try very hard to deliver on their contracts, and to do
whatever they have to do to condition/size their barley to make that
happen, and the current insurance program does not seem to deter them
from that goal.
Response: The damaged barley may be sold for an amount lower than
the projected price and the calculation would result in a negative
number. In this instance the quality adjustment factor would be zero
and no production should be counted (provided failure to meet
applicable quality standards and the reduction in value is due to an
insured cause of loss). The provision in proposed section 14(b)(4) has
been revised accordingly. FCIC also agrees the previous provisions
could have resulted in some instances in which a producer could receive
more per bushel for production than they could have if there were no
loss. However, these instances should have been very limited because
the price received for feed barley would generally be close to the
price election for feed barley. Further, it is unlikely producers will
want to sell production for a price lower than the market price of the
damaged production. Insurance providers are monitoring the market to
ensure that producers are not creating losses by accepting less than
the market price for their barley. If the producer sells for less than
a reasonable market price, the insurance provider should not allow
adjustment associated with the price reduction below the market price.
In addition, producers have an incentive to produce and sell good
quality malting barley to reduce negative impacts on their malting
barley APH yield if insured under Option A, or eligibility for malting
barley insurance under Option B.
Malting Barley Price and Quality Endorsement--Option A
Comment: Several commenters supported the proposed change in Option
A to use the sales price
[[Page 15853]]
established in the contract or price agreement minus the projected
price for feed barley or the price designated in actuarial documents.
Response: The proposed changes have been retained in this final
rule.
Comment: A commenter stated a producer is not only required to have
a malting barley price agreement, the producer must also provide the
insurance provider with a copy of the agreement before the acreage
reporting date. The commenter suggested FCIC modify section 4(a)(1)(vi)
of Option A to state, ``Provided by the acreage reporting date, a
malting barley price agreement for the sale of 5,720 bushels at $2.72
per bushel.''
Response: FCIC has revised the provision to include the reference
to providing the malting barley price agreement by the acreage
reporting date.
Malting Barley Price and Quality Endorsement--Option B
Comment: Many commenters had concerns regarding the addition of
provisions in section 1(a) of Option B that require producers to prove
their ``malting barley contract fulfillment rates.'' The provisions
will be used to impact eligibility and the premium rate. Without
knowing more of the specifics of this proposal, it is impossible to
deem it worthy, or not. If the proposal is to have a 10 percent premium
increase for a very low fulfillment rate, that is very manageable. If
the proposal is to eliminate eligibility for anyone who has less than a
90 percent fulfillment rate, that is totally unacceptable. This entire
section creates a lot more work for producers and their agents.
Compiling information about barley delivered, and comparing it to
contracts that were in place takes a huge amount of time, for
producers, agents, and company adjusters and auditors. The 4-year
window is too short, if having 2 bad years out of 4 could make someone
ineligible for coverage. Producers should be able to consider all the
years in their databases if that kind of eligibility penalty is
proposed. For most producers, this would be the entire 10 years.
Fulfillment rates for 10 years would better depict the success of a
malt barley crop, as it would reflect years of natural disaster as well
as years of good conditions. Rather than require 4 years of consecutive
records, an alternative should be considered (e.g., the producer must
provide production records and malting barley contracts for 4 of the
previous 6 years). If a producer has been successfully producing malt
barley for 20 years then has 4 years of hail or drought, the producer's
eligibility or rate should not be challenged. The producer has no
control over these external forces. Going back to retrieve that
information requires keeping records longer than the required retention
period. This whole section is very troubling because of all the
possible implications and complications it could impose. The current
policy already contains many of these features. A producer's coverage
is based on their proven history, and if their history is below
``normal'' they pay a higher premium rate, and have lower coverage
levels. A simple, manageable, understandable program is needed to gain
the producer's trust and to keep them insured. Contracts for malting
barley purchases reflect the demand for this specialty crop with the
current acreage trends and contracting is conducted with a realistic
expectation of producers fulfilling the contracts. It is not sensible
for a contracting entity to risk over purchasing, nor to contract with
producers having little prospect of success. The recent loss ratio
experiences of the malting barley endorsement are the result of
multiple years of adverse weather and environmental conditions that
have resulted in a loss of yield, malting quality or a combination of
both, and are not the result of fraud, poor crop management or
inappropriate contracting practices. The contract fulfillment provision
should not be implemented because it will amount to an elimination of
effective insurance coverage for the majority of malting barley
production under contract with the U.S. malting and brewing industry.
Contract fulfillment rates, if implemented, should only be used to
calculate premiums and not be used to determine program eligibility.
Response: There have been issues with respect to whether producers
seeking insurance have the experience to produce malting barley or are
producing it on land suitable for the production of malting barley.
Malting barley receives an additional price and producers must
demonstrate that they can produce malting barley to be eligible to
receive the higher price. Nothing in the malting barley price and
quality endorsement affects the producer's ability to insure their
barley under the Small Grains Crop Provisions. However, the commenters
are correct that the use of the fulfillment rates as proposed may be
too restrictive. Therefore, as stated above, as a condition of
eligibility, FCIC has changed the provisions to require that producers
have produced and sold at least 75 percent of their contracted amount
in at least one of the three most recent crop years they produced
malting barley before the previous crop year.
Comment: A commenter stated the new language in section 1(a) of
Option B can be interpreted to mean the producer must have planted
malting barley in each year for the four years preceding the current
crop year (i.e., the producer must have planted barley in 2004, 2005,
2006, and 2007 in order to obtain coverage). This seems rigid, and if
the producer missed one of those years, they would not be eligible to
obtain coverage.
Response: As stated above, the proposed provisions have not been
retained in the final rule.
Comment: A commenter stated in Option B, FCIC introduces the
concept of an ``average malting barley contract fulfillment rate''
however, FCIC has not defined this term, and FCIC's description of its
purpose is unclear. The commenter recommended FCIC define ``average
malting barley contract fulfillment rate'' and clarify the related
provisions.
Response: As stated above, the proposed provisions have not been
retained in the final rule.
Comment: A commenter recommended clarifying the provisions by
redesignating the second sentence of proposed section 1(a)(2) in Option
B as section 1(a)(3).
Response: As stated above, the proposed provisions have not been
retained in the final rule.
Comment: Several commenters had the following recommendations
regarding the contract fulfillment rate amounts: (1) A fulfillment rate
over 100 percent should be able to be counted; (2) A contract
fulfillment rate of 75 percent should be used in years when the covered
crop is produced in a county that has been declared a Federal crop
disaster county, if the producer so elects; and (3) Losses not covered
under the endorsement (i.e., losses not related to quality per se such
as prevented planting, hail damage, etc.) should not be used to
calculate the fulfillment rates or should be treated as missing years
with the same 75 percent default fulfillment rate.
Response: As stated above, the proposed provisions have not been
retained in the final rule.
Comment: A commenter stated using contract fulfillment rates to
determine eligibility is an underwriting issue as well as a rating
issue. Using fulfillment rates in determining premiums is reasonable,
but the fulfillment rates (and the reasons why contracts are not
fulfilled) should also be documented. Producers who are successfully
fulfilling contracts should be rewarded
[[Page 15854]]
through lower premiums. What FCIC ultimately needs is an underwriting
guide for malt barley insurance.
Response: As stated above, the proposed provisions have not been
retained in the final rule.
Comment: Many comments were received regarding the additional value
price. Many commenters stated the proposed rule caps the ``additional
value price'' under option B at $1.25 instead of the current $2.00. The
commenters strongly oppose this change, as it does not offer malting
barley growers needed protection and runs counter to current price
trends in U.S. malting barley markets. A few commenters stated
according to NASS, the price differential producers receive for malting
and feed barley has risen steadily over the past ten years (1995-2004)
and should this continue at the same pace it would reach $1.53 by the
time the rule is implemented (2009). Contract premiums of more than
$1.25 for malting barley over feed barley prices are being offered in
every region of the country. Some commenters stated for example, NASS
figures indicate that producers in Montana received an average premium
for malting barley of $1.22 over the last ten years and exceeded the
proposed cap in four of those years. Some commenters stated it should
be noted that the NASS reported prices paid to producers are a
combination of contracted and open market purchases and may
significantly under represent contract prices. Some commenters stated
it could be argued that the current ``additional value price'' cap of
$2.00 offers insufficient coverage for malting barley producers and
therefore, lowering the cap at all is unacceptable. A commenter stated
FCIC needs to utilize historical barley price data and related
derivation methods to document how the $1.25 cap was determined. The
commenter stated transparency is necessary in the calculation process.
If historical price data and forecasted trends indicate that the value
of $1.25 per bushel is not reflective of price relationships, then the
$1.25 per bushel value (cap) would be deemed inappropriate and thus
must be replaced with the appropriate derived value. A commenter stated
they now have wheat prices near $5, and barley producers are
considering growing wheat for the first time. Maltsters may have to
come to the table with higher contract prices to guarantee their
supply, but if that higher price is capped by an artificial insurance
limit, that could discourage producers from raising barley. The
difference between the value of feed barley and the value of malt
barley could vary greatly, as they are really two entirely different
products.
Response: The maximum additional value price under Option B should
remain at $2.00 per bushel and FCIC has revised the provisions
accordingly.
Rice Crop Provisions--Section 1--Definitions
Comment: A commenter asked if the definition of ``planted'' which
was not in the proposed rule should be ``planted acreage'' and begin
``In lieu of the definition in the Basic Provisions * * *'' Otherwise,
rice has separate definitions of ``planted'' and ``planted acreage.''
Response: FCIC has removed the definition of ``planted'' and
replaced it with a definition of ``planted acreage'' and specified it
is in addition to the definition contained in section 1 of the Basic
Provisions. This should eliminate any potential conflicts.
Rice Crop Provisions--Section 12--Settlement of Claim
Comment: A commenter stated in regards to section 12(d)(1), which
is not in the proposed rule, the moisture adjustment percentage is
changed in the Special Provisions for California. Consider adding a
reference here to the possibility of such regional variations in the
Special Provisions.
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Canola and Rapeseed Crop Provisions--Section 1--Definitions
Comment: A commenter stated FCIC should consider if the definition
of ``Planted acreage'' which is not in the proposed rule should be ``In
lieu of the definition in the Basic Provisions * * *'' instead of ``In
addition to * * *'' It is unclear what is left in the BP definition
that would still apply in addition to this definition.
Response: Since no changes to this section were proposed, and the
public was not provided an opportunity to comment on the recommended
change, the recommendation cannot be incorporated in the final rule. No
change has been made.
Canola and Rapeseed Crop Provisions--Section 6--Insured Crop
Comment: A commenter stated the provisions proposed in section 6(b)
concerning counties with both fall and spring final planting dates is
essentially the same as section 7(a)(2)(iii) of Small Grains Crop
Provisions. In the Canola and Rapeseed Crop Provisions, this issue is
proposed to be addressed in section 6, entitled ``Insured Crop.''
However, in the Small Grains Crop Provisions, the language appears in
section 7, entitled ``Insurance Period.'' The commenter recommends that
proposed section 6(b) of the Canola and Rapeseed Crop Provisions be
incorporated into section 7 (Insurable Acreage). Another commenter
suggested rearranging section 6(b) for better clarity. The commenter
stated FCIC should compare this to Small Grains section 7(a)(2)(iii)(A)
& (B), and note that is under ``Insurance Period'' rather than under
``Insured Crop.''
Response: FCIC agrees section 6(b) of the Canola and Rapeseed Crop
Provisions may not be an appropriate location. FCIC has placed these
provisions in the ``Insurable Acreage'' section of the Crop Provisions
to be consistent with references to the requirement to replant in the
``Insurable Acreage'' section of the Basic Provisions. FCIC agrees the
provisions should be clarified and has revised them accordingly.
Canola and Rapeseed Crop Provisions--Section 8--Insurance Period
Comment: A commenter recommended the unamended provision in section
8 be revised to read ``* * * the calendar date for the end of the
insurance period is * * *'', as it is in the other Crop Provisions.
Response: FCIC has revised the provisions accordingly.
Canola and Rapeseed Crop Provisions--Section 10--Replanting Payment
Comment: A commenter stated section 10(a)(4) indicates the
replanted crop must be planted at a sufficient rate to achieve at least
the yield used to determine the production guarantee. This becomes
problematic when the crop is replanted after the final planting date.
If the crop is initially planted after the final planting date, it is
insurable with reduced coverage to recognize the reduced crop potential
from planting the crop so late. Therefore, assuming it is still
practical to replant after the final planting date, and if the producer
does so, the replanted crop would not meet the requirements of this
section of the policy since the crop potential for the replanted crop
would be expected to be less than the yield used to determine the
production guarantee. This language needs to be modified as has been
done in previous versions of the Basic Provisions definition of
``Replanting'' (2001 version of the Basic Provisions
[[Page 15855]]
was revised for 2004 to make this change).
Response: The commenter is correct that the language should be
clarified. The provisions proposed in section 10(a)(4) have been
revised to indicate seeding must be at a rate considered appropriate by
agricultural experts for the crop, type and practice. A conforming
change has been made in the Small Grains Crop Provisions.
In addition to the changes described above, FCIC has made editorial
changes, corrected references to specific policy sections, and made
revisions necessary to conform to changes in provisions previously made
due to the Food, Conservation, and Energy Act of 2008 as follows:
Basic Provisions
1. Added a definition of ``verifiable records'' in section 1. Since
this term is used in the Basic Provisions, the definition is added to
refer the reader to the definition contained in 7 CFR part 400, subpart
G.
2. Revised the provisions in redesignated section 2(b)(9) to
clarify if information regarding persons with a substantial beneficial
interest changes after the sales closing date for the previous crop
year, the new information must be provided by the sales closing date
for the current crop year. In addition, an allowance has been added for
cases where the information changed less than 30 days before the sales
closing date for the current crop year. In this case, the new
information does not have to be provided until the sales closing date
for the next crop year.
3. Revised redesignated section 2(b)(10)(i) to remove reference to
the Personal Responsibility and Work Opportunity Reconciliation Act of
1996 (PRWORA). This reference was removed because there are reasons
other than PRWORA that may result in denial of a request for assignment
of a number.
4. Revised section 2(f)(2)(i)(D) to clarify the crop year a policy
will be terminated for failure to make a payment under any written
payment agreement. Under the current provisions questions were asked
regarding the meaning of ``crop year prior to the crop year in which
you failed to make the scheduled payment.'' FCIC is clarifying the
applicable crop year and providing an example.
5. Revised section 3 to specify a producer may change the plan of
insurance (e.g., yield protection or revenue protection) not later than
the sales closing date because the Basic Provisions now cover more than
just the APH plan and there is no need to require producers to cancel
and reapply. Changing plans of insurance is no different than changing
coverage levels, etc., since the same policy documents apply.
6. Revised redesignated section 3(f) to clarify producers must
report all production of the crop, including production from both
insured and uninsured acreage. There were questions regarding whether
uninsured acreage had to be reported and FCIC is clarifying that all
production for the crop means from all acreage, whether insured or not.
7. Removed current sections 7(e)(5) and (6), which are reserved,
and redesignated section 7(e)(7) as section 7(e)(5).
8. Revised section 9(a) to allow the Special Provisions to provide
coverage for acreage otherwise excluded under the provisions. Coverage
was already allowed in the Crop Provisions or written agreement so this
change is not substantive. Also added a provision to allow insurance on
acreage that has not been planted or harvested in one of the three
previous crop years because it was in a hay or forage crop rotation.
There was a potential for a conflict because the proposed rule stated
that acreage is not insurable if the only crop planted and harvested
was a cover crop, hay or forage crop. However, the existing provisions
also state that the acreage is insurable if the acreage was not planted
and harvested because of a crop rotation. Since hay and forage crops
can be used in crop rotations, the provision had to be clarified that
if these crops are used in a crop rotation, the acreage is insurable.
9. Clarified provisions in proposed sections 17(e)(1)(i) and (ii)
regarding the determination of eligible acres for prevented planting.
Questions have been raised regarding the ability to submit an intended
acreage report when a producer has not planted a crop for which
prevented planting insurance was available or has not received a
prevented planting insurance guarantee. The proposed rule stated the
intended acreage report could be used if the producer did not plant a
crop in any of the four most recent crop years. There are some who
interpreted this to mean that if the producer did not plant a crop for
which prevented planting insurance was available or has not received a
prevented planting insurance guarantee in any one of the four most
recent crop years, the producer could file an intended acreage report
and this is not correct. The provision was intended to only allow an
intended acreage report if the producer never planted a crop or had a
prevented planting guarantee in the previous four crop years. The
requirement has been clarified accordingly. FCIC also added the
parenthetical that was contained in proposed section 17(e)(1)(i) to
(ii) so that the provisions are consistent.
10. Revised section 18(i)(2) to specify the signed written
agreement must be postmarked or delivered to the insurance provider not
later than the expiration date for the producer to accept the offer.
The proposed provision did not recognize that the document could also
be hand delivered.
11. Revised section 20(a)(1)(iii) [For Reinsured Policies] to
clarify an interpretation by FCIC of a policy provision is considered a
determination that is a matter of general applicability, and to remove
provisions regarding appealability and a Director's review from the
National Appeals Division. Including the Director's Review in section
20(a)(1)(iii) mistakenly created the impression that an interpretation
of a policy provision could be appealed to the National Appeals
Division. However, the National Appeals Division is precluded by
statute (7 U.S.C. 6992(d)) and 7 CFR part 11 from hearing appeals
regarding matters of general applicability. The only appeal right is to
have the Director of the National Appeals Division determine whether
the decision was adverse to the producer and appealable, or a matter of
general applicability and not appealable.
12. Added new sections 20(b)(3) [For FCIC Policies] and 20(k) [For
Reinsured Policies] to clarify that if a determination made by FCIC is
a matter of general applicability is not subject to administrative
review under 7 CFR part 400, subpart J or appeal under 7 CFR part 11.
If the producer wants to seek judicial review of any FCIC determination
that is a matter of general applicability, the producer must request a
determination of non-appealability from the Director of the National
Appeals Division in accordance with 7 CFR 11.6 before seeking judicial
review. This clearly distinguishes between matters that are appealable
to the National Appeals Division and specified in section 20(e) from
those that are not appealable.
13. Revised section 24(a) [For reinsured policies] to clarify that
after the termination date, FCIC will collect any unpaid administrative
fees and any interest owed thereon for any catastrophic risk protection
policy. Previous provisions were not clear that FCIC would collect
these amounts for only catastrophic risk protection policies. Insurance
providers will collect these unpaid amounts for additional coverage
policies.
[[Page 15856]]
14. Revised section 34(a) to specify a producer can elect an
enterprise unit for any crop for which revenue protection is available,
or for crops for which revenue protection is not available only if
allowed by the Special Provisions. The revised provisions also specify
a whole-farm unit can be elected only for crops for which revenue
protection is elected and is provided unless limited by the Special
Provisions, or for crops for which revenue protection is not available
and for yield protection only if allowed by the Special Provisions.
These revisions were made because, after publication of the proposed
rule, FCIC determined that whole-farm and enterprise units would
automatically be available for all crops for which revenue protection
is available and it was not necessary to repeat this information on
every Special Provisions. Additionally, the provisions have been
revised to allow changes in unit structure until the spring sales
closing date in counties with both fall and spring sales closing dates,
if the producer does not have any insured fall planted acreage of the
insured crop. This change is made to be consistent with provisions in
the Canola and Rapeseed and Small Grains Crop Provisions that allow a
producer to change their coverage level, percentage of price, etc.,
when there is no fall-planted acreage of the insured crop. FCIC has
also revised redesignated sections 34(a)(4)(vii) and 34(a)(5)(v) to
specify what unit structure would be in effect if the producer failed
to qualify for an enterprise or whole-farm unit. These revisions were
made to be consistent with other provisions in the policy that allow
until the acreage reporting date to elect basic or optional units.
Small Grains Crop Provisions
15. Revised section 5 to allow cancellation and termination dates
to be shown in the Special Provisions. There have been cases in which
cropping patterns have changed in counties (e.g., winter wheat is now
grown where only spring wheat was grown in the past) and it is
reasonable to change program dates accordingly. Allowing these dates to
be modified in the Special Provisions will allow program dates to be
changed when necessary without the delays associated with the
regulatory process.
16. Revised section 7(b) to remove provisions that specify the
different events that end the insurance period. This language was
duplicative of the provisions contained in section 11 of the Basic
Provisions.
Cotton Crop Provisions
17. Amended section 4 by revising the January 15 cancellation and
termination date for Val Verde, Edwards, Kerr, Kendall, Bexar, Wilson,
Karnes, Goliad, Victoria, and Jackson Counties, Texas, and all Texas
counties lying south thereof to January 31. The Consolidated
Appropriations Act (H.R. 3194) for 2000 mandated the earliest sales
closing date for any spring planted crop would be January 31.
Cancellation and termination dates generally correspond to the sales
closing dates in order to avoid the potential for coverage attaching
before the policy is terminated or canceled. Therefore, the termination
and cancellation dates needed to be revised. Previously, FCIC
implemented the revision to the applicable crops in the Special
Provisions. This change will eliminate any potential conflict between
the regulations and the Special Provisions.
Coarse Grains Crop Provisions
18. Revise section 10(b) to remove provisions regarding the
submission of a claim when there is more than one calendar date for the
end of the insurance period for the unit (e.g., when there is grain and
silage in the same unit). These provisions are duplicative of the new
provisions contained in section 14 of the Basic Provisions.
Malting Barley Price and Quality Endorsement
19. Revised the definition of ``malt extract.'' The revisions
clarify that malt extract may, in some cases, be condensed or
evaporated to a syrup or powder. The proposed definition indicated the
extract was always condensed to a powder and this is not always the
case.
Rice Crop Provisions
20. Amended section 5 by revising the January 15 cancellation and
termination date for Jackson, Victoria, Goliad, Bee, Live Oak,
McMullen, La Salle, and Dimmit Counties, Texas; and all Texas Counties
south thereof to January 31. The Consolidated Appropriations Act (H.R.
3194) for 2000 mandated the earliest sales closing date for any spring
planted crop would be January 31. Cancellation and termination dates
generally correspond to the sales closing dates in order to avoid the
potential for coverage attaching before the policy is terminated or
canceled. Therefore, the termination and cancellation dates needed to
be revised. Previously, FCIC implemented the revision to the applicable
crops in the Special Provisions. This change will eliminate any
potential conflict between the regulations and the Special Provisions.
Canola and Rapeseed Crop Provisions
21. Changed the cancellation and termination dates for Alabama from
August 31 to September 30. This change makes these dates in Alabama
consistent with the dates used in Georgia. This change is made because
the agronomic conditions in these two states are similar and the
program dates should be the same.
Other Crop Provisions
22. After it had published the proposed rule, FCIC discovered there
will be other crop policies that are affected because references have
been changed in this final rule and no longer match those referenced in
certain Crop Provisions. As a result, FCIC has revised the Texas Citrus
Tree Crop Insurance Provisions, Pear Crop Insurance Provisions,
Sugarcane Crop Insurance Provisions, Macadamia Tree Crop Insurance
Provisions, Macadamia Nut Crop Insurance Provisions, Onion Crop
Insurance Provisions, Dry Pea Crop Insurance Provisions, Plum Crop
Insurance Provisions, and Cabbage Crop Insurance Provisions to correct
specific references to the revised Common Crop Insurance Regulations,
Basic Provisions.
List of Subjects in 7 CFR Part 457
Crop insurance, Reporting and recordkeeping requirements.
Final Rule
0
Accordingly, as set forth in the preamble, the Federal Crop Insurance
Corporation amends 7 CFR part 457, as follows:
PART 457--COMMON CROP INSURANCE REGULATIONS
0
1. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(1), 1506(o).
0
2. Amend Sec. 457.8 as follows:
0
A. Throughout Sec. 457.8, where they appear:
0
i. Remove the word ``cancelled'' and add the word ``canceled'' in its
place,
0
ii. Remove the phrase ``high risk'' and add the phrase ``high-risk'' in
its place,
0
iii. Remove the phrase ``the organic agricultural industry'' and add
the phrase ``organic agricultural experts'' in its place,
0
iv. Remove the phrase ``whole farm'' and add the phrase ``whole-farm''
in its place, and
0
v. Remove the phrase ``the RMA Web site'' and add the phrase ``RMA's
Web site'' in its place;
0
B. Revise paragraph (b) and add new paragraphs (c) through (f),
immediately
[[Page 15857]]
before the Common Crop Insurance Policy, to read as follows:
Sec. 457.8 The application and policy.
* * * * *
(b) FCIC or the reinsured company may reject or discontinue the
acceptance of applications in any county or of any individual
application upon FCIC's determination that the insurance risk is
excessive.
(c) If the producer had a Crop Revenue Coverage, Revenue Assurance,
Income Protection, or Indexed Income Protection crop insurance policy
in effect for the 2010 crop year and has not canceled or changed such
coverage in accordance with such policy, revenue protection will
continue in effect under the Common Crop Insurance Policy Basic
Provisions and no new application is required. Revenue protection will
be at the same coverage level, 100 percent of price, with any
applicable options, endorsements, and enterprise or whole-farm unit
structures that were in effect the previous year still in effect, as
long as all qualifications are met and such coverage remains available.
(1) If the producer had revenue coverage under the Revenue
Assurance crop insurance policy for the 2010 crop year and:
(i) The producer had the fall harvest price option, for the 2011
crop year the producer will have revenue protection under the Common
Crop Insurance Policy Basic Provisions based on the greater of the
projected price or the harvest price; or
(ii) The producer did not have the fall harvest price option, for
the 2011 crop year the producer will have revenue protection under the
Common Crop Insurance Policy Basic Provisions and the harvest price
exclusion.
(2) If the producer had revenue coverage under the Income
Protection or Indexed Income Protection crop insurance policy for the
2010 crop year, for the 2011 crop year the producer will have revenue
protection under the Common Crop Insurance Policy Basic Provisions and
the harvest price exclusion.
(3) If the producer has revenue protection under paragraph (c) of
this section, the producer may exclude coverage for hail and fire if
the requirements are met.
(d) If the producer had coverage under an Actual Production History
crop insurance policy for a crop under the Common Crop Insurance Policy
Basic Provisions for the 2010 crop year, and that crop now has revenue
protection available, the producer will have yield protection for the
crop under the Common Crop Insurance Policy Basic Provisions in effect
for the 2011 crop year at the same coverage level, and percentage of
price, any applicable options or endorsements, and enterprise unit
structures that were in effect the previous year continue in effect, as
long as all qualifications are met and such coverage remains available.
(e) If the producer had coverage under Actual Production History or
another crop insurance policy for a crop under the Common Crop
Insurance Policy Basic Provisions for the 2010 crop year and that crop
does not have revenue protection available for the 2011 crop year, the
producer will continue with the same crop insurance policy (e.g.,
Actual Production History or amount of insurance) until canceled or
terminated.
(f) With respect to any crop insurance policy specified in
paragraphs (c) through (e) of this section:
(1) The producer may change their coverage (coverage level, percent
of price, etc.) in accordance with section 3 of the Common Crop
Insurance Policy Basic Provisions or the producer may cancel such
coverage in accordance with section 2 of the Common Crop Insurance
Policy Basic Provisions. If the producer changes their crop insurance
policy (e.g., Actual Production History, yield protection, revenue
protection, amount of insurance, etc.) for any crop year, the producer
must elect the coverage level, percentage of price, any applicable
options, endorsements, and unit structure (enterprise or whole-farm)
that will be in effect under the new crop insurance policy.
(2) If a producer has a properly executed Power of Attorney on file
with the insurance provider, such Power of Attorney will remain in
effect under the Common Crop Insurance Policy Basic Provisions until it
is terminated.
(3) If the producer has a current written agreement in effect for
the crop for multiple crop years, such written agreement will remain in
effect if the terms of the written agreement are still applicable, the
conditions under which the written agreement was provided have not
changed, and the crop insurance policy remains with the same insurance
provider.
* * * * *
Sec. 457.8 [Amended]
0
3. Further amend Sec. 457.8 by revising the``Agreement to Insure''
sections after the second paragraph of both the ``FCIC Policies'' and
``Reinsured Policies'' sections that precede ``Terms and Conditions
Basic Provisions'' as follows:
FCIC Policies
* * * * *
AGREEMENT TO INSURE: In return for the payment of the premium, and
subject to all of the provisions of this policy, we agree with you to
provide the insurance as stated in this policy. If there is a conflict
between the Act, the regulations published at 7 CFR chapter IV, and the
procedures issued by us, the order of priority is: (1) The Act; (2) the
regulations; and (3) the procedures issued by us, with (1) controlling
(2), etc. If there is a conflict between the policy provisions
published at 7 CFR part 457 and the administrative regulations
published at 7 CFR part 400, the policy provisions published at 7 CFR
part 457 control. If a conflict exists among the policy provisions, the
order of priority is: (1) The Catastrophic Risk Protection Endorsement,
as applicable; (2) the Special Provisions; (3) the Commodity Exchange
Price Provisions, as applicable; (4) the Crop Provisions; and (5) these
Basic Provisions, with (1) controlling (2), etc.
Reinsured Policies
* * * * *
AGREEMENT TO INSURE: In return for the payment of the premium, and
subject to all of the provisions of this policy, we agree with you to
provide the insurance as stated in this policy. If there is a conflict
between the Act, the regulations published at 7 CFR chapter IV, and the
procedures as issued by FCIC, the order of priority is: (1) The Act;
(2) the regulations; and (3) the procedures as issued by FCIC, with (1)
controlling (2), etc. If there is a conflict between the policy
provisions published at 7 CFR part 457 and the administrative
regulations published at 7 CFR part 400, the policy provisions
published at 7 CFR part 457 control. If a conflict exists among the
policy provisions, the order of priority is: (1) The Catastrophic Risk
Protection Endorsement, as applicable; (2) the Special Provisions; (3)
the Commodity Exchange Price Provisions, as applicable; (4) the Crop
Provisions; and (5) these Basic Provisions, with (1) controlling (2),
etc.
Sec. 457.8 [Amended]
0
4. Further amend Sec. 457.8 in section 1 as follows:
0
A. Add definitions of ``Commodity Exchange Price Provisions (CEPP),''
``Cooperative Extension System,'' ``harvest price,'' ``harvest price
exclusion,'' ``insurable interest,'' ``intended acreage report,''
``organic agricultural experts,'' ``projected price,'' ``revenue
protection,'' ``revenue protection guarantee (per acre),'' ``RMA's Web
site,'' ``verifiable records,'' ``yield
[[Page 15858]]
protection,'' and ``yield protection guarantee (per acre).''
0
B. Revise the definitions of ``actuarial documents,'' ``agricultural
experts,'' ``assignment of indemnity,'' ``average yield,''
``catastrophic risk protection,'' ``claim for indemnity,''
``conventional farming practice,'' ``delinquent debt,'' ``enterprise
unit,'' ``liability,'' ``limited resource farmer,'' ``policy,''
``prevented planting,'' ``price election,'' ``production report,''
``section,'' ``share,'' ``substantial beneficial interest,'' ``void,''
and ``whole-farm unit.''
0
C. Remove the definition of ``organic agricultural industry.''
0
D. Redesignate the definitions of ``Code of Federal Regulations
(CFR),'' ``consent,'' ``second crop,'' and ``section'' in alphabetical
order.
The revised and added text reads as follows:
1. Definitions.
* * * * *
Actuarial documents. The information for the crop year which is
available for public inspection in your agent's office and published on
RMA's Web site and which shows available crop insurance policies,
coverage levels, information needed to determine amounts of insurance,
prices, premium rates, premium adjustment percentages, practices,
particular types or varieties of the insurable crop, insurable acreage,
and other related information regarding crop insurance in the county.
* * * * *
Agricultural experts. Persons who are employed by the Cooperative
Extension System or the agricultural departments of universities, or
other persons approved by FCIC, whose research or occupation is related
to the specific crop or practice for which such expertise is sought.
* * * * *
Assignment of indemnity. A transfer of policy rights, made on our
form, and effective when approved by us in writing, whereby you assign
your right to an indemnity payment for the crop year only to creditors
or other persons to whom you have a financial debt or other pecuniary
obligation.
Average yield. The yield calculated by totaling the yearly actual
yields, assigned yields in accordance with sections 3(f)(1) (failure to
provide production report), 3(h)(1) (excessive yields), and 3(i)
(second crop planted without double cropping history on prevented
planting acreage), and adjusted or unadjusted transitional yields, and
dividing the total by the number of yields contained in the database.
* * * * *
Catastrophic risk protection. The minimum level of coverage offered
by FCIC. Catastrophic risk protection is not available with revenue
protection.
* * * * *
Claim for indemnity. A claim made on our 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.
* * * * *
Commodity Exchange Price Provisions (CEPP). A part of the policy
that is used for all crops for which revenue protection is available,
regardless of whether you elect revenue protection or yield protection
for such crops. This document includes the information necessary to
derive the projected price and the harvest price for the insured crop,
as applicable.
* * * * *
Conventional farming practice. A system or process that is
necessary to produce an agricultural commodity, excluding organic
farming practices.
Cooperative Extension System. A nationwide network consisting of a
State office located at each State's land-grant university, and local
or regional offices. These offices are staffed by one or more
agricultural experts, who work in cooperation with the Cooperative
State Research, Education and Extension Service, and who provide
information to agricultural producers and others.
* * * * *
Delinquent debt. Has the same meaning as the term defined in 7 CFR
part 400, subpart U.
* * * * *
Enterprise unit. All insurable acreage of the same insured crop in
the county in which you have a share on the date coverage begins for
the crop year, provided the requirements of section 34 are met.
* * * * *
Harvest price. A price determined in accordance with the Commodity
Exchange Price Provisions and used to value production to count for
revenue protection.
Harvest price exclusion. Revenue protection with the use of the
harvest price excluded when determining your revenue protection
guarantee. This election is continuous unless canceled by the
cancellation date.
* * * * *
Insurable interest. Your percentage of the insured crop that is at
financial risk.
* * * * *
Intended acreage report. A report of the acreage you intend to
plant, by crop, for the current crop year and used solely for the
purpose of establishing eligible prevented planting acreage, as
required in section 17.
* * * * *
Liability. Your total amount of insurance, value of your production
guarantee, or revenue protection guarantee for the unit determined in
accordance with the Settlement of Claim provisions of the applicable
Crop Provisions.
Limited resource farmer. Has the same meaning as the term defined
by USDA at http://www.lrftool.sc.egov.usda.gov/LRP-D.htm.
* * * * *
Organic agricultural experts. Persons who are employed by the
following organizations: Appropriate Technology Transfer for Rural
Areas, Sustainable Agriculture Research and Education or the
Cooperative Extension System, the agricultural departments of
universities, or other persons approved by FCIC, whose research or
occupation is related to the specific organic crop or practice for
which such expertise is sought.
* * * * *
Policy. The agreement between you and us to insure an agricultural
commodity and consisting of the accepted application, these Basic
Provisions, the Crop Provisions, the Special Provisions, the Commodity
Exchange Price Provisions, if applicable, other applicable endorsements
or options, the actuarial documents for the insured agricultural
commodity, the Catastrophic Risk Protection Endorsement, if applicable,
and the applicable regulations published in 7 CFR chapter IV. Insurance
for each agricultural commodity in each county will constitute a
separate policy.
* * * * *
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 the acreage, or use of a
particular production method, is not considered prevented planting.
Price election. The amounts contained in the Special Provisions, or
in an addendum thereto, that is the value per pound, bushel, ton,
carton, or other applicable unit of measure for the purposes of
determining premium and indemnity under the policy. A price
[[Page 15859]]
election is not applicable for crops for which revenue protection is
available.
* * * * *
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.
* * * * *
Projected price. The price for each crop determined in accordance
with the Commodity Exchange Price Provisions. The applicable projected
price is used for each crop for which revenue protection is available,
regardless of whether you elect to obtain revenue protection or yield
protection for such crop.
* * * * *
Revenue protection. A plan of insurance that provides protection
against loss of revenue due to a production loss, price decline or
increase, or a combination of both. If the harvest price exclusion is
elected, the insurance coverage provides protection only against loss
of revenue due to a production loss, price decline, or a combination of
both.
Revenue protection guarantee (per acre). For revenue protection
only, the amount determined by multiplying the production guarantee
(per acre) by the greater of your projected price or your harvest
price. If the harvest price exclusion is elected, the production
guarantee (per acre) is only multiplied by your projected price.
RMA's Web site. A Web site hosted by RMA and located at http://www.rma.usda.gov/or a successor Web site.
* * * * *
Section. For the purposes of unit structure, a unit of measure
under a rectangular survey system describing a tract of land usually
one mile square and usually containing approximately 640 acres.
Share. Your insurable interest in the insured crop as an owner,
operator, or tenant at the time insurance attaches. However, only for
the purpose of determining the amount of indemnity, your share will not
exceed your share at the earlier of the time of loss or the beginning
of harvest.
* * * * *
Substantial beneficial interest. An interest held by any person of
at least 10 percent in you (e.g., there are two partnerships that each
have a 50 percent interest in you and each partnership is made up of
two individuals, each with a 50 percent share in the partnership. In
this case, each individual would be considered to have a 25 percent
interest in you, and both the partnerships and the individuals would
have a substantial beneficial interest in you. The spouses of the
individuals would not be considered to have a substantial beneficial
interest unless the spouse was one of the individuals that made up the
partnership. However, if each partnership is made up of six individuals
with equal interests, then each would only have an 8.33 percent
interest in you and although the partnership would still have a
substantial beneficial interest in you, the individuals would not for
the purposes of reporting in section 2). The spouse of any individual
applicant or individual insured will be presumed to have a substantial
beneficial interest in the applicant or insured unless the spouses can
prove they are legally separated or otherwise legally separate under
the applicable State dissolution of marriage laws. Any child of an
individual applicant or individual insured will not be considered to
have a substantial beneficial interest in the applicant or insured
unless the child has a separate legal interest in such person.
* * * * *
Verifiable records. Has the same meaning as the term defined in 7
CFR part 400, subpart G.
Void. When the policy is considered not to have existed for a crop
year.
Whole-farm unit. All insurable acreage of all the insured crops
planted in the county in which you have a share on the date coverage
begins for each crop for the crop year and for which the whole-farm
unit structure is available in accordance with section 34.
* * * * *
Yield protection. A plan of insurance that only provides protection
against a production loss and is available only for crops for which
revenue protection is available.
Yield protection guarantee (per acre). When yield protection is
selected for a crop that has revenue protection available, the amount
determined by multiplying the production guarantee by your projected
price.
Sec. 457.8 [Amended]
0
5. Further amend Sec. 457.8 in section 2 as follows:
0
a. Amend paragraph (a) by adding at the end of the paragraph the
following sentence ``In accordance with section 4, FCIC may change the
coverage provided from year to year.'';
0
b. Revise paragraph (b);
0
c. Amend paragraph (e)(2) by removing ``14(c)'' and adding ``14(e)'' in
its place;
0
d. Amend paragraph (f)(1)(i)(C) by adding the word ``written'' before
the phrase ``payment agreement'';
0
e. Amend paragraph (f)(1)(ii) by removing the phrase ``2(f)(2)(i)(D) or
(E)'' and adding the phrase ``2(f)(2)(i)(A), (B), (D), or (E)'' in its
place;
0
f. Revise paragraphs (f)(2)(i)(A), (B), (C), and (D);
0
g. Amend paragraph (f)(2)(ii) by removing the phrase ``2(f)(2)(i)(D)
and (E)'' and adding the phrase ``2(f)(2)(i)(A), (B), (D), or (E)'' in
its place;
0
h. Revise paragraph (f)(3)(ii);
0
i. Amend paragraph (f)(3)(iii) by removing the semicolon at the end of
the text and adding a period in its place;
0
j. Amend paragraph (f)(4) by removing the semicolon at the end of the
text and adding a period in its place;
0
k. Revise paragraph (f)(5);
0
l. Revise paragraph (g); and
0
m. Amend paragraph (k) by adding the word ``other'' between the words
``any'' and ``applicable''.
The revised text reads as follows:
2. Life of Policy, Cancellation, and Termination.
* * * * *
(b) With respect to your application for insurance:
(1) You must include your social security number (SSN) if you are
an individual (if you are an individual applicant operating as a
business, you may provide an employer identification number (EIN) but
you must also provide your SSN); or
(2) You must include your EIN if you are a person other than an
individual;
(3) In addition to the requirements of section 2(b)(1) or (2), you
must include the following for all persons who have a substantial
beneficial interest in you:
(i) The SSN for individuals; or
(ii) The EIN for persons other than individuals and the SSNs for
all individuals that comprise the person with the EIN if such
individuals also have a substantial beneficial interest in you;
(4) You must include:
(i) Your election of revenue protection, yield protection, or other
available plan of insurance; coverage level; percentage of price
election or percentage of projected price, as applicable; crop, type,
variety, or class; and any other material information
[[Page 15860]]
required on the application to insure the crop; and
(ii) All the information required in section 2(b)(4)(i) or your
application will not be accepted and no coverage will be provided;
(5) Your application will not be accepted and no insurance will be
provided for the year of application if the application does not
contain your SSN or EIN. If your application contains an incorrect SSN
or EIN for you, your application will be considered not to have been
accepted, no insurance will be provided for the year of application and
for any subsequent crop years, as applicable, and such policies will be
void if:
(i) Such number is not corrected by you; or
(ii) You correct the SSN or EIN but:
(A) You cannot prove that any error was inadvertent (Simply stating
the error was inadvertent is not sufficient to prove the error was
inadvertent); or
(B) It is determined that the incorrect number would have allowed
you to obtain disproportionate benefits under the crop insurance
program, you are determined to be ineligible for insurance or you could
avoid an obligation or requirement under any State or Federal law;
(6) With respect to persons with a substantial beneficial interest
in you:
(i) The insurance coverage for all crops included on your
application will be reduced proportionately by the percentage interest
in you of persons with a substantial beneficial interest in you
(presumed to be 50 percent for spouses of individuals) if the SSNs or
EINs of such persons are included on your application, the SSNs or EINs
are correct, and the persons with a substantial beneficial interest in
you are ineligible for insurance;
(ii) Your policies for all crops included on your application, and
for all applicable crop years, will be void if the SSN or EIN of any
person with a substantial beneficial interest in you is incorrect or is
not included on your application and:
(A) Such number is not corrected or provided by you, as applicable;
(B) You cannot prove that any error or omission was inadvertent
(Simply stating the error or omission was inadvertent is not sufficient
to prove the error or omission was inadvertent); or
(C) Even after the correct SSN or EIN is provided by you, it is
determined that the incorrect or omitted SSN or EIN would have allowed
you to obtain disproportionate benefits under the crop insurance
program, the person with a substantial beneficial interest in you is
determined to be ineligible for insurance, or you or the person with a
substantial beneficial interest in you could avoid an obligation or
requirement under any State or Federal law; or
(iii) Except as provided in sections 2(b)(6)(ii)(B) and (C), your
policies will not be voided if you subsequently provide the correct SSN
or EIN for persons with a substantial beneficial interest in you and
the persons are eligible for insurance;
(7) When any of your policies are void under sections 2(b)(5) or
(6):
(i) You must repay any indemnity, prevented planting payment or
replant payment that may have been paid for all applicable crops and
crop years;
(ii) Even though the policies are void, you will still be required
to pay an amount equal to 20 percent of the premium that you would
otherwise be required to pay; and
(iii) If you previously paid premium or administrative fees, any
amount in excess of the amount required in section 2(b)(7)(ii) will be
returned to you;
(8) Notwithstanding any of the provisions in this section, if you
certify to an incorrect SSN or EIN, or receive an indemnity, prevented
planting payment or replant payment and the SSN or EIN was not correct,
you may be subject to civil, criminal or administrative sanctions;
(9) If any of the information regarding persons with a substantial
beneficial interest in you changes after the sales closing date for the
previous crop year, you must revise your application by the sales
closing date for the current crop year to reflect the correct
information. However, if such information changed less than 30 days
before the sales closing date for the current crop year, you must
revise your application by the sales closing date for the next crop
year. If you fail to provide the required revisions, the provisions in
section 2(b)(6) will apply; and
(10) If you are, or a person with a substantial beneficial interest
in you is, not eligible to obtain a SSN or EIN, whichever is required,
you must request an assigned number for the purposes of this policy
from us:
(i) A number will be provided only if you can demonstrate you are,
or a person with a substantial beneficial interest in you is, eligible
to receive Federal benefits;
(ii) If a number cannot be provided for you in accordance with
section 2(b)(10)(i), your application will not be accepted; or
(iii) If a number cannot be provided for any person with a
substantial beneficial interest in you in accordance with section
2(b)(10)(i), the amount of coverage for all crops on the application
will be reduced proportionately by the percentage interest of such
person in you.
* * * * *
(f) * * *
(2) * * *
(i) * * *
(A) For a policy with unpaid administrative fees or premiums, the
termination date immediately subsequent to the billing date for the
crop year (For policies for which the sales closing date is prior to
the termination date, such policies will terminate for the current crop
year even if insurance attached prior to the termination date. Such
termination will be considered effective as of the sales closing date
and no insurance will be considered to have attached for the crop year
and no indemnity, prevented planting or replant payment will be owed);
(B) For a policy with other amounts due, the termination date
immediately following the date you have a delinquent debt (For policies
for which the sales closing date is prior to the termination date, such
policies will terminate for the current crop year even if insurance
attached prior to the termination date. Such termination will be
considered effective as of the sales closing date and no insurance will
be considered to have attached for the crop year and no indemnity,
prevented planting or replant payment will be owed);
(C) For all other policies that are issued by us under the
authority of the Act, the termination date that coincides with the
termination date for the policy with the delinquent debt or, if there
is no coincidental termination date, the termination date immediately
following the date you become ineligible;
(D) For execution of a written payment agreement and failure to
make any scheduled payment, the termination date for the crop year
prior to the crop year in which you failed to make the scheduled
payment (for this purpose only, the crop year will start the day after
the termination date and end on the next termination date, e.g., if the
termination date is November 30 and you fail to make a payment on
November 15, 2011, your policy will terminate on November 30, 2010, for
the 2011 crop year); or
* * * * *
(3) * * *
(ii) Execute a written payment agreement and make payments in
accordance with the agreement (We will not enter into a written payment
agreement with you if you have
[[Page 15861]]
previously failed to make a scheduled payment under the terms of any
other payment agreement with us or any other insurance provider); or
* * * * *
(5) For example, for the 2011 crop year, if crop A, with a
termination date of October 31, 2010, and crop B, with a termination
date of March 15, 2011, are insured and you do not pay the premium for
crop A by the termination date, you are ineligible for crop insurance
as of October 31, 2010, and crop A's policy is terminated as of that
date. Crop B's policy does not terminate until March 15, 2011, and an
indemnity for the 2010 crop year may still be owed. If you enter into a
written payment agreement on September 25, 2011, the earliest date by
which you can obtain crop insurance for crop A is to apply for crop
insurance by the October 31, 2011, sales closing date and for crop B is
to apply for crop insurance by the March 15, 2012, sales closing date.
If you fail to make a payment that was scheduled to be made on April 1,
2012, your policy will terminate as of October 31, 2011, for crop A,
and March 15, 2012, for crop B, and no indemnity, prevented planting
payment or replant payment will be due for that crop year for either
crop. You will not be eligible to apply for crop insurance for any crop
until after the amounts owed are paid in full or you file a petition to
discharge the debt in bankruptcy.
* * * * *
(g) In cases where there has been a death, disappearance,
judicially declared incompetence, or dissolution of any insured person:
(1) If any married individual insured dies, disappears, or is
judicially declared incompetent, the named insured on the policy will
automatically convert to the name of the spouse if:
(i) The spouse was included on the policy as having a substantial
beneficial interest in the named insured; and
(ii) The spouse has a share of the crop.
(2) The provisions in section 2(g)(3) will be applicable if:
(i) Any partner, member, shareholder, etc., of an insured entity
dies, disappears, or is judicially declared incompetent, and such event
automatically dissolves the entity; or
(ii) An individual, whose estate is left to a beneficiary other
than a spouse or left to the spouse and the criteria in section 2(g)(1)
are not met, dies, disappears, or is judicially declared incompetent.
(3) If section 2(g)(2) applies and the death, disappearance, or
judicially declared incompetence occurred:
(i) More than 30 days before the cancellation date, the policy is
automatically canceled as of the cancellation date and a new
application must be submitted; or
(ii) Thirty days or less before the cancellation date, or after the
cancellation date, the policy will continue in effect through the crop
year immediately following the cancellation date and be automatically
canceled as of the cancellation date immediately following the end of
the insurance period for the crop year, unless canceled by the
cancellation date prior to the start of the insurance period:
(A) A new application for insurance must be submitted prior to the
sales closing date for coverage for the subsequent crop year; and
(B) Any indemnity, replant payment or prevented planting payment
will be paid to the person or persons determined to be beneficially
entitled to the payment and such person or persons must comply with all
policy provisions and pay the premium.
(4) If any insured entity is dissolved for reasons other than
death, disappearance, or judicially declared incompetence:
(i) Before the cancellation date, the policy is automatically
canceled as of the cancellation date and a new application must be
submitted; or
(ii) On or after the cancellation date, the policy will continue in
effect through the crop year immediately following the cancellation
date and be automatically canceled as of the cancellation date
immediately following the end of the insurance period for the crop
year, unless canceled by the cancellation date prior to the start of
the insurance period:
(A) A new application for insurance must be submitted prior to the
sales closing date for coverage for the subsequent crop year; and
(B) Any indemnity, replant payment or prevented planting payment
will be paid to the person or persons determined to be beneficially
entitled to the payment and such person or persons must comply with all
policy provisions and pay the premium.
(5) If section 2(g)(2) or (4) applies, a remaining member of the
insured person or the beneficiary is required to report to us the
death, disappearance, judicial incompetence, or other event that causes
dissolution not later than the next cancellation date, except if
section 2(g)(3)(ii) applies, notice must be provided by the
cancellation date for the next crop year. If notice is not provided
timely, the provisions of section 2(g)(2) or (4) will apply retroactive
to the date such notice should have been provided and any payments made
after the date the policy should have been canceled must be returned.
* * * * *
Sec. 457.8 [Amended]
0
6. Further amend Sec. 457.8 in section 3 as follows:
0
a. Revise paragraphs (b), (c), (d);
0
b. Redesignate paragraphs (e) through (j) as paragraphs (f) through
(k), respectively, and add a new paragraph (e);
0
c. Amend redesignated paragraph (f) by revising the introductory text;
0
d. Revise redesignated paragraph (g);
0
e. Amend the introductory text of redesignated paragraph (h) by
removing the phrase ``3(f)'' and adding the phrase ``3(g)'' in its
place;
0
f. Amend redesignated paragraph (h)(1) by removing the phrase
``3(e)(1)'' and adding the phrase ``3(f)(1)'' in its place and by
removing the phrase ``, and you may be subject to provisions of section
27'';
0
g. Amend redesignated paragraph (h)(2)(i) by removing the word ``and''
after the semicolon at the end;
0
h. Amend redesignated paragraph (h)(2)(ii) by removing the word
``insured'' and adding the word ``insurable'' in its place and removing
the word ``or'' at the end and adding the word ``and'' in its place;
0
i. Add a new paragraph (h)(2)(iii);
0
j. Amend redesignated paragraph (i)(2) by removing the phrase
``3(h)(1)'' and adding the phrase ``3(i)(1)'' in its place;
0
k. Amend redesignated paragraph (i)(3) by removing the phrase
``3(h)(2)'' and adding the phrase ``3(i)(2)'' in its place; and
0
l. Amend redesignated paragraph (j) by adding at the end of the
paragraph the following sentence, ``If you elected a whole-farm unit,
you may exclude hail and fire coverage only if allowed by the Special
Provisions.''
The revised and added text reads as follows:
3. Insurance Guarantees, Coverage Levels, and Prices.
* * * * *
(b) With respect to the insurance choices:
(1) For all acreage of the insured crop in the county, unless one
of the conditions in section 3(b)(2) exists, you must select the same:
(i) Plan of insurance (e.g., yield protection, revenue protection,
actual production history, amount of insurance, etc.);
(ii) Level of coverage (all catastrophic risk protection or the
same level of additional coverage); and
(iii) Percentage of the available price election, or projected
price for yield
[[Page 15862]]
protection. For revenue protection, the percentage of price is
specified in section 3(c)(2). If different prices are provided by type
or variety, insurance will be based on the price provided for each type
or variety and the same price percentage will apply to all types or
varieties.
(2) You do not have to select the same plan of insurance, level of
coverage or percentage of available price election or projected price
if:
(i) The applicable Crop Provisions allow you the option to
separately insure individual crop types or varieties. In this case,
each individual type or variety insured by you will be subject to
separate administrative fees. For example, if two grape varieties in
California are insured under the Catastrophic Risk Protection
Endorsement and two varieties are insured under an additional coverage
policy, a separate administrative fee will be charged for each of the
four varieties; or
(ii) You have additional coverage for the crop in the county and
the acreage has been designated as ``high-risk'' by FCIC. In such case,
you will be able to exclude coverage for the high-risk land under the
additional coverage policy and insure such acreage under a separate
Catastrophic Risk Protection Endorsement, provided the Catastrophic
Risk Protection Endorsement is obtained from the same insurance
provider from which the additional coverage was obtained. If you have
revenue protection and exclude high-risk land, the catastrophic risk
protection coverage will be yield protection only for the excluded
high-risk land.
(c) With respect to revenue protection, if available for the crop:
(1) You may change to another plan of insurance and change your
coverage level or elect the harvest price exclusion by giving written
notice to us not later than the sales closing date for the insured
crop;
(2) Your projected price and harvest price will be 100 percent of
the projected price and harvest price issued by FCIC;
(3) If the harvest price exclusion is:
(i) Not elected, your projected price is used to initially
determine the revenue protection guarantee (per acre), and if the
harvest price is greater than the projected price, the revenue
protection guarantee (per acre) will be recomputed using your harvest
price; or
(ii) Elected, your projected price is used to compute your revenue
protection guarantee (per acre);
(4) Your projected price is used to calculate your premium, any
replant payment, and any prevented planting payment; and
(5) If the projected price or harvest price cannot be calculated
for the current crop year under the provisions contained in the
Commodity Exchange Price Provisions:
(i) For the projected price:
(A) Revenue protection will not be provided and you will
automatically be covered under the yield protection plan of insurance
for the current crop year unless you cancel your coverage by the
cancellation date or change your plan of insurance by the sales closing
date;
(B) Notice will be provided on RMA's Web site by the date specified
in the applicable projected price definition contained in the Commodity
Exchange Price Provisions;
(C) The projected price will be determined by FCIC and will be
released by the date specified in the applicable projected price
definition contained in the Commodity Exchange Price Provisions; and
(D) Your coverage will automatically revert to revenue protection
for the next crop year that revenue protection is available unless you
cancel your coverage by the cancellation date or change your coverage
by the sales closing date; or
(ii) For the harvest price:
(A) Revenue protection will continue to be available; and
(B) The harvest price will be determined and announced by FCIC.
(d) With respect to yield protection, if available for the crop:
(1) You may change to another plan of insurance and change your
percentage of price and your coverage level by giving written notice to
us not later than the sales closing date for the insured crop;
(2) The percentage of the projected price selected by you
multiplied by the projected price issued by FCIC is your projected
price that is used to compute the value of your production guarantee
(per acre) and the value of the production to count; and
(3) Since the projected price may change each year, if you do not
select a new percentage of the projected price on or before the sales
closing date, we will assign a percentage which bears the same
relationship to the percentage that was in effect for the preceding
year (e.g., if you selected 100 percent of the projected price for the
previous crop year and you do not select a new percentage for the
current crop year, we will assign 100 percent for the current crop
year).
(e) With respect to all plans of insurance other than revenue
protection and yield protection (e.g., APH, dollar amount plans of
insurance, etc.):
(1) In addition to the price election or amount of insurance
available on the contract change date, we may provide an additional
price election or amount of insurance no later than 15 days prior to
the sales closing date.
(i) You must select the additional price election or amount of
insurance on or before the sales closing date for the insured crop.
(ii) These additional price elections or amounts of insurance will
not be less than those available on the contract change date.
(iii) If you elect the additional price election or amount of
insurance, any claim settlement and amount of premium will be based on
your additional price election or amount of insurance.
(2) You may change to another plan of insurance or change your
coverage level, amount of insurance or percentage of the price
election, as applicable, for the following crop year by giving written
notice to us not later than the sales closing date for the insured
crop.
(3) Your amount of insurance will be the amount of insurance issued
by FCIC multiplied by the coverage level percentage you elected. Your
price election will be the price election issued by FCIC multiplied by
the percentage of price you elected.
(4) Since the amount of insurance or price election may change each
year, if you do not select a new amount of insurance or percentage of
the price election on or before the sales closing date, we will assign
an amount of insurance or percentage of the price election which bears
the same relationship to the amount of insurance or percentage of the
price election that was in effect for the preceding year (e.g., if you
selected 100 percent of the price election for the previous crop year
and you do not select a new percentage of the price election for the
current crop year, we will assign 100 percent of the price election for
the current crop year).
(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:
* * * * *
(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
[[Page 15863]]
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.
(h) * * *
(2) * * *
(iii) We determine there is no valid agronomic basis to support the
approved yield; or
* * * * *
Sec. 457.8 [Amended]
0
7. Further amend Sec. 457.8 in section 4 by revising paragraphs (b)
and (c) to read as follows:
4. Contract Changes.
* * * * *
(b) Any changes in policy provisions, amounts of insurance, premium
rates, program dates, price elections or the Commodity Exchange Price
Provisions, if applicable, can be viewed on RMA's Web site not later
than the contract change date contained in the Crop Provisions (except
as allowed herein or as specified in section 3). We may only revise
this information after the contract change date to correct clear errors
(e.g., the price for oats was announced at $25.00 per bushel instead of
$2.50 per bushel or the final planting date should be May 10 but the
final planting date in the Special Provisions states August 10).
(c) After the contract change date, all changes specified in
section 4(b) will also be available upon request from your crop
insurance agent. You will be provided, in writing, a copy of the
changes to the Basic Provisions, Crop Provisions, Commodity Exchange
Price Provisions, if applicable, and Special Provisions not later than
30 days prior to the cancellation date for the insured crop. If
available from us, you may elect to receive these documents and changes
electronically. Acceptance of the changes will be conclusively presumed
in the absence of notice from you to change or cancel your insurance
coverage.
* * * * *
Sec. 457.8 [Amended]
0
8. Further amend Sec. 457.8 in section 6 as follows:
0
a. Revise paragraph (c);
0
b. Revise paragraph (d)(2);
0
c. Remove paragraph (d)(3) and redesignate paragraphs (d)(4), (5) and
(6) as paragraphs (d)(3), (4) and (5), respectively;
0
d. Revise redesignated paragraph (d)(3);
0
e. Amend redesignated paragraph (d)(5) by removing the phrase ``section
6(d)(1), (2), (4), or (5)'' and adding the phrase ``section 6(d)(1),
(2), or (3)'' in its place;
0
f. Revise the introductory text of paragraph (g)(1); and
0
g. Revise paragraph (g)(2).
The revised text reads as follows:
6. Report of Acreage.
* * * * *
(c) Your acreage report must include the following information, if
applicable:
(1) The amount of acreage of the crop in the county (insurable and
not insurable) in which you have a share and the date the insured crop
was planted on the unit as follows:
(i) The last date any timely planted acreage was planted and the
number of acres planted by such date; and
(ii) The date of planting and the number of acres planted per day
for acreage planted during the late planting period (If you fail to
report the number of acres planted on a daily basis, all acreage
planted in the late planting period will be presumed to have been
planted on the last day planting took place in the late planting period
for the purposes of section 16);
(2) Your share at the time coverage begins;
(3) The practice;
(4) The type; and
(5) The land identifier for the crop acreage (e.g., legal
description, FSA farm serial number or common land unit number if
provided to you by FSA, etc.) as required on our form.
(d) * * *
(2) For prevented planting acreage:
(i) On or before the acreage reporting date, you can change any
information on any initially submitted acreage report, except as
provided in section 6(d)(2)(iii) (e.g., you can correct the reported
share, add acreage of the insured crop that was prevented from being
planted, etc.);
(ii) After the acreage reporting date, you cannot revise any
information on the acreage report (e.g., if you have failed to report
prevented planting acreage on or before the acreage reporting date, you
cannot revise it after the acreage reporting date to include prevented
planting acreage) but we will revise information that is clearly
transposed or if you provide adequate evidence that we or someone from
USDA have committed an error regarding the information on your acreage
report; and
(iii) You cannot revise your initially submitted acreage report at
any time to change the insured crop, or type, that was reported as
prevented from being planted;
(3) You may request an acreage measurement from FSA or a business
that provides such measurement service prior to the acreage reporting
date, submit documentation of such request and an acreage report with
estimated acreage by the acreage reporting date, and if the acreage
measurement shows the estimated acreage was incorrect, we will revise
your acreage report to reflect the correct acreage:
(i) If an acreage measurement is only requested for a portion of
the acreage within a unit, you must separately designate the acreage
for which an acreage measurement has been requested;
(ii) If an acreage measurement is not provided to us by the time we
receive a notice of loss, we may:
(A) Defer finalization of the claim until the measurement is
completed, and:
(1) Make all necessary loss determinations, except the acreage
measurement; and
(2) Finalize the claim in accordance with applicable policy
provisions after you provide the acreage measurement to us (If you fail
to provide the measurement, your claim will not be paid); or
(B) Elect to measure the acreage, and:
(1) Finalize your claim in accordance with applicable policy
provisions; and
(2) Estimated acreage under this section will not be accepted from
you for any subsequent acreage report; and
(iii) Premium will still be due in accordance with sections 2(e)
and 7. If
[[Page 15864]]
the acreage is not measured as specified in section 6(d)(3)(ii) and the
acreage measurement is not provided to us at least 15 days prior to the
premium billing date, your premium will be based on the estimated
acreage and will be revised, if necessary, when the acreage measurement
is provided. If the acreage measurement is not provided by the
termination date, you will be precluded from providing any estimated
acreage for all subsequent crop years.
* * * * *
(g) * * *
(1) Except as provided in section 6(g)(2), if you submit
information on any report that is different than what is determined to
be correct and such information results in:
* * * * *
(2) If your share is misreported and the share is:
(i) Under-reported, any claim will be determined using the share
you reported; or
(ii) Over-reported, any claim will be determined using the share we
determine to be correct.
* * * * *
Sec. 457.8 [Amended]
0
9. Further amend Sec. 457.8 in section 7 as follows:
0
a. Amend paragraph (c)(1) by removing the phrase ``the price election''
and adding the phrase ``your price election or your projected price, as
applicable,'' in its place;
0
b. Amend paragraph (c)(2) by removing the phrase ``the amount of
insurance'' and adding the phrase ``your amount of insurance'' in its
place;
0
c. Amend paragraph (d) by removing the first sentence;
0
d. Amend paragraph (e) by removing reserved paragraphs (e)(5) and
(e)(6); and
0
e. Amend paragraph (e) by redesignating paragraph (e)(7) as (e)(5).
Sec. 457.8 [Amended]
0
10. Further amend Sec. 457.8 in section 8 by revising paragraph (b)(2)
to read as follows:
8. Insured Crop.
* * * * *
(b) * * *
(2) For which the information necessary for insurance (price
election, amount of insurance, projected price and harvest price, as
applicable, premium rate, etc.) is not included in the actuarial
documents, unless such information is provided by a written agreement
in accordance with section 18;
* * * * *
Sec. 457.8 [Amended]
0
11. Further amend Sec. 457.8 in section 9 by revising paragraphs (a)
and (c) to read as follows:
9. Insurable Acreage.
(a) All acreage planted to the insured crop in the county in which
you have a share:
(1) Except as provided in section 9(a)(2), is insurable if the
acreage has been planted and harvested or insured (including insured
acreage that was prevented from being planted) in any one of the three
previous crop years. Acreage that has not been planted and harvested
(grazing is not considered harvested for the purposes of section
9(a)(1)) or insured in at least one of the three previous crop years
may still be insurable if:
(i) Such acreage was not planted:
(A) In at least two of the three previous crop years to comply with
any other USDA program;
(B) Due to the crop rotation, the acreage would not have been
planted in the previous three years (e.g., a crop rotation of corn,
soybeans, and alfalfa; and the alfalfa remained for four years before
the acreage was planted to corn again); or
(C) Because a perennial tree, vine, or bush crop was on the acreage
in at least two of the previous three crop years;
(ii) Such acreage constitutes five percent or less of the insured
planted acreage in the unit;
(iii) Such acreage was not planted or harvested because it was
pasture or rangeland, the crop to be insured is also pasture or
rangeland, and the Crop Provisions, Special Provisions, or a written
agreement specifically allow insurance for such acreage; or
(iv) The Crop Provisions, Special Provisions, or a written
agreement specifically allow insurance for such acreage; or
(2) Is not insurable if:
(i) The only crop that has been planted and harvested on the
acreage in the three previous crop years is a cover, hay (except wheat
harvested for hay) or forage crop (except insurable silage). However,
such acreage may be insurable only if:
(A) The crop to be insured is a hay or forage crop and the Crop
Provisions, Special Provisions, or a written agreement specifically
allow insurance for such acreage; or
(B) The hay or forage crop was part of a crop rotation;
(ii) The acreage has been strip-mined. However, such acreage may be
insurable only if:
(A) An agricultural commodity, other than a cover, hay (except
wheat harvested for hay), or forage crop (except insurable silage) has
been harvested from the acreage for at least five crop years after the
strip-mined land was reclaimed; or
(B) A written agreement specifically allows insurance for such
acreage;
(iii) The actuarial documents do not provide the information
necessary to determine the premium rate, unless insurance is allowed by
a written agreement;
(iv) The insured crop is damaged and it is practical to replant the
insured crop, but the insured crop is not replanted;
(v) The acreage is interplanted, unless insurance is allowed by the
Crop Provisions;
(vi) The acreage is otherwise restricted by the Crop Provisions or
Special Provisions;
(vii) The acreage is planted in any manner other than as specified
in the policy provisions for the crop unless a written agreement
specifically allows insurance for such planting;
(viii) The acreage is of a second crop, if you elect not to insure
such acreage when an indemnity for a first insured crop may be subject
to reduction in accordance with the provisions of section 15 and you
intend to collect an indemnity payment that is equal to 100 percent of
the insurable loss for the first insured crop acreage. This election
must be made on a first insured crop unit basis (e.g., if the first
insured crop unit contains 40 planted acres that may be subject to an
indemnity reduction, then no second crop can be insured on any of the
40 acres). In this case:
(A) If the first insured crop is insured under this policy, you
must provide written notice to us of your election not to insure
acreage of a second crop at the time the first insured crop acreage is
released by us (if no acreage in the first insured crop unit is
released, this election must be made by the earlier of the acreage
reporting date for the second crop or when you sign the claim for
indemnity for the first insured crop) or, if the first insured crop is
insured under the Group Risk Protection Plan of Insurance or successor
provisions (7 CFR part 407), this election must be made before the
second crop insured under this policy is planted, and if you fail to
provide such notice, the second crop acreage will be insured in
accordance with the applicable policy provisions and you must repay any
overpaid indemnity for the first insured crop;
(B) In the event a second crop is planted and insured with a
different insurance provider, or planted and insured by a different
person, you must
[[Page 15865]]
provide written notice to each insurance provider that a second crop
was planted on acreage on which you had a first insured crop; and
(C) You must report the crop acreage that will not be insured on
the applicable acreage report; or
(ix) The acreage is of a crop planted following a second crop or
following an insured crop that is prevented from being planted after a
first insured crop, unless it is a practice that is generally
recognized by agricultural experts or organic agricultural experts for
the area to plant three or more crops for harvest on the same acreage
in the same crop year, and additional coverage insurance provided under
the authority of the Act is offered for the third or subsequent crop in
the same crop year. Insurance will only be provided for a third or
subsequent crop as follows:
(A) You must provide records acceptable to us that show:
(1) You have produced and harvested the insured crop following two
other crops harvested on the same acreage in the same crop year in at
least two of the last four years in which you produced the insured
crop; or
(2) The applicable acreage has had three or more crops produced and
harvested on it in the same crop year in at least two of the last four
years in which the insured crop was grown on the acreage; and
(B) The amount of insurable acreage will not exceed 100 percent of
the greatest number of acres for which you provide the records required
in section 9(a)(2)(ix)(A).
* * * * *
(c) Notwithstanding the provisions in section 8(b)(2), if acreage
is irrigated and a premium rate is not provided for an irrigated
practice, you may either report and insure the irrigated acreage as
``non-irrigated,'' or report the irrigated acreage as not insured (If
you elect to insure such acreage under a non-irrigated practice, your
irrigated yield will only be used to determine your approved yield if
you continue to use a good irrigation practice. If you do not use a
good irrigation practice, you will receive a yield determined in
accordance with section 3(h)(3)).
* * * * *
Sec. 457.8 [Amended]
0
12. Further amend Sec. 457.8 in section 10 by revising paragraphs (a)
and (b) to read as follows:
10. Share Insured.
(a) Insurance will attach:
(1) Only if the person completing the application has a share in
the insured crop; and
(2) Only to that person's share, except that insurance may attach
to another person's share of the insured crop if the other person has a
share of the crop and:
(i) The application clearly states the insurance is requested for a
person other than an individual (e.g., a partnership or a joint
venture); or
(ii) The application clearly states you as a landlord will insure
your tenant's share, or you as a tenant will insure your landlord's
share. If you as a landlord will insure your tenant's share, or you as
a tenant will insure your landlord's share, you must provide evidence
of the other party's approval (lease, power of attorney, etc.) and such
evidence will be retained by us:
(A) You also must clearly set forth the percentage shares of each
person on the acreage report; and
(B) For each landlord or tenant, you must report the landlord's or
tenant's social security number, employer identification number, or
other identification number we assigned for the purposes of this
policy, as applicable.
(b) With respect to your share:
(1) We will consider to be included in your share under your
policy, any acreage or interest reported by or for:
(i) Your spouse, unless such spouse can prove he/she has a separate
farming operation, which includes, but is not limited to, separate land
(transfers of acreage from one spouse to another is not considered
separate land), separate capital, separate inputs, separate accounting,
and separate maintenance of proceeds; or
(ii) Your child who resides in your household or any other member
of your household, unless such child or other member of the household
can demonstrate such person has a separate share in the crop (Children
who do not reside in your household are not included in your share);
and
(2) If it is determined that the spouse, child or other member of
the household has a separate policy but does not have a separate
farming operation or share of the crop, as applicable:
(i) The policy for one spouse or child or other member of the
household will be void and the policy remaining in effect will be
determined in accordance with section 22(a)(1) and (2);
(ii) The acreage or share reported under the policy that is voided
will be included under the remaining policy; and
(iii) No premium will be due and no indemnity will be paid for the
voided policy.
* * * * *
Sec. 457.8 [Amended]
0
13. Further amend Sec. 457.8 in section 11 as follows:
0
a. Revise paragraph (b); and
0
b. Add a new paragraph (c).
The revised and added text reads as follows:
11. Insurance Period.
* * * * *
(b) Coverage ends on each unit or part of a unit at the earliest
of:
(1) Total destruction of the insured crop;
(2) Harvest of the insured crop;
(3) Final adjustment of a loss on a unit;
(4) The calendar date contained in the Crop Provisions or Special
Provisions for the end of the insurance period;
(5) Abandonment of the insured crop; or
(6) As otherwise specified in the Crop Provisions.
(c) Except as provided in the Crop Provisions or applicable
endorsement, in addition to the requirements of section 11(b), coverage
ends on any acreage within a unit once any event specified in section
11(b) occurs on that acreage. Coverage only remains in effect on
acreage that has not been affected by an event specified in section
11(b).
Sec. 457.8 [Amended]
0
14. Further amend Sec. 457.8 in section 12 as follows:
0
a. Revise the introductory paragraph; and
0
b. Revise paragraphs (a) and (d).
The revised text reads as follows:
12. Causes of Loss.
Insurance is provided only to protect against unavoidable,
naturally occurring events. A list of the covered naturally occurring
events is contained in the applicable Crop Provisions. All other causes
of loss, including but not limited to the following, are not covered:
(a) Any act by any person that affects the yield, quality or price
of the insured crop (e.g., chemical drift, fire, terrorism, etc.);
* * * * *
(d) Failure or breakdown of the irrigation equipment or facilities,
or the inability to prepare the land for irrigation using your
established irrigation method (e.g., furrow irrigation), unless the
failure, breakdown or inability is due to a cause of loss specified in
the Crop Provisions.
(1) You must make all reasonable efforts to restore the equipment
or facilities to proper working order within a reasonable amount of
time unless we determine it is not practical to do so.
[[Page 15866]]
(2) Cost will not be considered when determining whether it is
practical to restore the equipment or facilities;
* * * * *
Sec. 457.8 [Amended]
0
15. Further amend Sec. 457.8 in section 13 by revising paragraphs (a)
and (c) to read as follows:
13. Replanting Payment.
(a) If allowed by the Crop Provisions, a replanting payment may be
made on an insured crop replanted after we have given consent and the
acreage replanted is at least the lesser of 20 acres or 20 percent of
the insured planted acreage for the unit (as determined on the final
planting date or within the late planting period if a late planting
period is applicable). If the crops to be replanted are in a whole-farm
unit, the 20 acres or 20 percent requirement is to be applied
separately to each crop to be replanted in the whole-farm unit.
* * * * *
(c) The replanting payment per acre will be:
(1) The lesser of your actual cost for replanting or the amount
specified in the Crop Provisions or Special Provisions; or
(2) If the Crop Provisions or Special Provisions specify that your
actual cost will not be used to determine your replant payment, the
amount determined in accordance with the Crop Provisions or Special
Provisions.
* * * * *
Sec. 457.8 [Amended]
0
16. Further amend Sec. 457.8 in section 14 as follows:
0
a. Revise the text under ``Your Duties'';
0
b. Amend the paragraphs under ``Our Duties'' by redesignating
paragraphs (a) through (d) as paragraphs (f) through (i); and
0
c. Add a new paragraph (j) to the text under ``Our Duties''.
The revised and added text reads as follows:
14. Duties in the Event of Damage, Loss, Abandonment, Destruction,
or Alternative Use of Crop or Acreage.
Your Duties:
(a) In the case of damage or loss of production or revenue to any
insured crop, you must protect the crop from further damage by
providing sufficient care.
(b) Notice provisions:
(1) For a planted crop, when there is damage or loss of production,
you must give us notice, by unit, within 72 hours of your initial
discovery of damage or loss of production (but not later than 15 days
after the end of the insurance period, even if you have not harvested
the crop).
(2) For crops for which revenue protection is elected, if there is
no damage or loss of production, you must give us notice not later than
45 days after the latest date the harvest price is released for any
crop in the unit where there is a revenue loss.
(3) In the event you are prevented from planting an insured crop
that has prevented planting coverage, you must notify us within 72
hours after:
(i) The final planting date, if you do not intend to plant the
insured crop during the late planting period or if a late planting
period is not applicable; or
(ii) You determine you will not be able to plant the insured crop
within any applicable late planting period.
(4) All notices required in this section that must be received by
us within 72 hours may be made by telephone or in person to your crop
insurance agent but must be confirmed in writing within 15 days.
(5) If you fail to comply with these notice requirements, any loss
or prevented planting claim will be considered solely due to an
uninsured cause of loss for the acreage for which such failure
occurred, unless we determine that we have the ability to accurately
adjust the loss. If we determine that we do not have the ability to
accurately adjust the loss:
(i) For any prevented planting claim, no prevented planting
coverage will be provided and no premium will be owed or prevented
planting payment will be paid; or
(ii) For any claim for indemnity, no indemnity will be paid but you
will still be required to pay all premiums owed.
(c) Representative samples:
(1) If representative samples are required by the Crop Provisions,
you must leave representative samples of the unharvested crop intact:
(i) If you report damage less than 15 days before the time you will
begin harvest or during harvest of the damaged unit; or
(ii) At any time when required by us.
(2) The samples must be left intact until we inspect them or until
15 days after completion of harvest on the remainder of the unit,
whichever is earlier.
(3) Unless otherwise specified in the Crop Provisions or Special
Provisions, the samples of the crop in each field in the unit must be
10 feet wide and extend the entire length of the rows, if the crop is
planted in rows, or if the crop is not planted in rows, the longest
dimension of the field.
(4) The period to retain representative samples may be extended if
it is necessary to accurately determine the loss. You will be notified
in writing of any such extension.
(d) Consent:
(1) You must obtain consent from us before, and notify us after
you:
(i) Destroy any of the insured crop that is not harvested;
(ii) Put the insured crop to an alternative use;
(iii) Put the acreage to another use; or
(iv) Abandon any portion of the insured crop.
(2) We will not give consent for any of the actions in section
14(d)(1)(i) through (iv) if it is practical to replant the crop or
until we have made an appraisal of the potential production of the
crop.
(3) Failure to obtain our consent will result in the assignment of
an amount of production or value to count in accordance with the
Settlement of Claim provisions of the applicable Crop Provisions.
(e) Claims:
(1) Except as otherwise provided in your policy, you must submit a
claim declaring the amount of your loss by the dates shown in section
14(e)(3), unless you:
(i) Request an extension in writing by such date and we agree to
such request (Extensions will only be granted if the amount of the loss
can not be determined within such time period because the information
needed to determine the amount of the loss is not available); or
(ii) Have harvested farm-stored grain production and elect, in
writing, to delay measurement of your farm-stored production and
settlement of any potential associated claim for indemnity (Extensions
will be granted for this purpose up to 180 days after the end of the
insurance period).
(A) For policies that require APH, if such extension continues
beyond the date you are required to submit your production report, you
will be assigned the previous year's approved yield as a temporary
yield in accordance with applicable procedures.
(B) Any extension does not extend any date specified in the policy
by which premiums, administrative fees, or other debts owed must be
paid.
(C) Damage that occurs after the end of the insurance period (for
example, while the harvested crop production is in storage) is not
covered; and
(2) Failure to timely submit a claim or provide the required
information necessary to determine the amount of the claim will result
in no indemnity, prevented planting payment or replant payment:
(i) Even though no indemnity or replant payment is due, you will
still be
[[Page 15867]]
required to pay the premium due under the policy for the unit; or
(ii) Failure to timely submit a prevented planting claim will
result in no prevented planting coverage and no premium will be due.
(3) You must submit a claim not later than:
(i) For policies other than revenue protection, 60 days after the
date the insurance period ends for all acreage in the unit (When there
is acreage in the unit where the insurance period ended on different
dates, it is the last date the insurance period ends on the unit. For
example, if a unit has corn acreage that was put to another use on July
15 and corn acreage where harvest was completed on September 30, the
claim must be submitted not later than 60 days after September 30); or
(ii) For revenue protection, the later of:
(A) 60 days after the last date the harvest price is released for
any crop in the unit; or
(B) The date determined in accordance with section 14(e)(3)(i).
(4) To receive any indemnity (or receive the rest of an indemnity
in the case of acreage that is planted to a second crop), prevented
planting payment or replant payment, you must, if applicable:
(i) Provide:
(A) A complete harvesting, production, and marketing record of each
insured crop by unit including separate records showing the same
information for production from any acreage not insured.
(B) Records as indicated below if you insure any acreage that may
be subject to an indemnity reduction as specified in section 15(e)(2):
(1) Separate records of production from such acreage for all
insured crops planted on the acreage (e.g., if you have an insurable
loss on 10 acres of wheat and subsequently plant cotton on the same 10
acres, you must provide records of the wheat and cotton production on
the 10 acres separate from any other wheat and cotton production that
may be planted in the same unit). If you fail to provide separate
records for such acreage, we will allocate the production of each crop
to the acreage in proportion to our liability for the acreage; or
(2) If there is no loss on the unit that includes acreage of the
second crop, no separate records need to be submitted for the second
crop and you can receive the rest of the indemnity for the first
insured crop.
(C) Any other information we may require to settle the claim.
(ii) Cooperate with us in the investigation or settlement of the
claim, and, as often as we reasonably require:
(A) Show us the damaged crop;
(B) Allow us to remove samples of the insured crop; and
(C) Provide us with records and documents we request and permit us
to make copies.
(iii) Establish:
(A) The total production or value received for the insured crop on
the unit;
(B) That any loss occurred during the insurance period;
(C) That the loss was caused by one or more of the insured causes
specified in the Crop Provisions; and
(D) That you have complied with all provisions of this policy.
(iv) Upon our request, or that of any USDA employee authorized to
conduct investigations of the crop insurance program, submit to an
examination under oath.
(5) Failure to comply with any requirement contained in section
14(e)(4) will result in denial of the claim and any premium will still
be owed, unless the claim denied is for prevented planting.
Our Duties:
* * * * *
(j) For revenue protection, we may make preliminary indemnity
payments for crop production losses prior to the release of the harvest
price if you have not elected the harvest price exclusion.
(1) First, we may pay an initial indemnity based upon your
projected price, in accordance with the applicable Crop Provisions
provided that your production to count and share have been established;
and
(2) Second, after the harvest price is released, and if it is not
equal to the projected price, we will recalculate the indemnity payment
and pay any additional indemnity that may be due.
* * * * *
Sec. 457.8 [Amended]
0
17. Further amend Sec. 457.8 in section 15 as follows:
0
a. Revise paragraph (b)(1);
0
b. Revise paragraph (c); and
0
c. Add new paragraphs (i)(1) and (2).
The added and revised text reads as follows:
15. Production Included in Determining an Indemnity and Payment
Reductions.
* * * * *
(b) * * *
(1) You must provide us with the amount of harvested production (If
you fail to provide verifiable records of harvested production, no
indemnity will be paid and you will be required to return any
previously paid indemnity for the unit that was based on an appraised
amount of production); and
* * * * *
(c) If you elect to exclude hail and fire as insured causes of loss
and the insured crop is damaged by hail or fire, appraisals will be
made as described in our form used to exclude hail and fire.
* * * * *
(i) * * *
(1) If the records you provided are from acreage you double cropped
in at least two of the last four crop years, you may apply your history
of double cropping to any acreage of the insured crop in the county
(e.g., if you have double cropped 100 acres of wheat and soybeans in
the county and you acquire an additional 100 acres in the county, you
can apply that history of double cropped acreage to any of the 200
acres in the county as long as it does not exceed 100 acres); or
(2) If the records you provided are from acreage that another
producer double cropped in at least two of the last four crop years,
you may only use the history of double cropping for the same physical
acres from which double cropping records were provided (e.g., if a
neighbor has double cropped 100 acres of wheat and soybeans in the
county and you acquire your neighbor's 100 double cropped acres and an
additional 100 acres in the county, you can only apply your neighbor's
history of double cropped acreage to the same 100 acres that your
neighbor double cropped).
* * * * *
Sec. 457.8 [Amended]
0
18. Further amend Sec. 457.8 in section 17 as follows:
0
a. Revise the introductory text of paragraph (a)(1);
0
b. Revise paragraphs (a)(2) and (3);
0
c. Revise paragraph (b)(4);
0
d. Revise paragraphs (c), (d), and (e);
0
e. Revise paragraphs (f) and (h); and
0
f. Revise paragraph (i)(1).
The revised text reads as follows:
17. Prevented Planting
(a) * * *
(1) You are prevented from planting the insured crop on insurable
acreage by an insured cause of loss that occurs:
* * * * *
(2) You include on your acreage report any insurable acreage of the
insured crop that was prevented from being planted; and
(3) You did not plant the insured crop during or after the late
planting period. Acreage planted to the insured crop during or after
the late planting period
[[Page 15868]]
is covered under the late planting provisions.
(b) * * *
(4) You cannot increase your elected or assigned prevented planting
coverage level for any crop year if a cause of loss that could prevent
planting (even though it is not known whether such cause will actually
prevent planting) has occurred during the prevented planting insurance
period specified in section 17(a)(1)(i) or (ii) and prior to your
request to change your prevented planting coverage level.
(c) The premium amount for acreage that is prevented from being
planted will be the same as that for timely planted acreage except as
specified in section 15(f). If the amount of premium you are required
to pay (gross premium less the subsidy) for acreage that is prevented
from being planted exceeds the liability on such acreage, coverage for
those acres will not be provided (no premium will be due and no
indemnity will be paid for such acreage).
(d) Prevented planting coverage will be provided against:
(1) Drought, failure of the irrigation water supply, failure or
breakdown of irrigation equipment or facilities, or the inability to
prepare the land for irrigation using your established irrigation
method, due to an insured cause of loss only if, on the final planting
date (or within the late planting period if you elect to try to plant
the crop), you provide documentation acceptable to us to establish:
(i) For non-irrigated acreage, the area that is prevented from
being planted has insufficient soil moisture for germination of seed or
progress toward crop maturity due to a prolonged period of dry weather.
The documentation for prolonged period of dry weather must be
verifiable using information collected by sources whose business it is
to record and study the weather, including, but not limited to, local
weather reporting stations of the National Weather Service; or
(ii) For irrigated acreage:
(A) Due to an insured cause of loss, there is not a reasonable
expectation of having adequate water to carry out an irrigated practice
or you are unable to prepare the land for irrigation using your
established irrigation method:
(1) If you knew or had reason to know on the final planting date or
during the late planting period that your water will be reduced, no
reasonable expectation exists; and
(2) Available water resources will be verified using information
from State Departments of Water Resources, U.S. Bureau of Reclamation,
Natural Resources Conservation Service or other sources whose business
includes collection of water data or regulation of water resources; or
(B) The irrigation equipment or facilities have failed or broken
down if such failure or breakdown is due to an insured cause of loss
specified in section 12(d).
(2) Causes other than drought, failure of the irrigation water
supply, failure or breakdown of the irrigation equipment or facilities,
or your inability to prepare the land for irrigation using your
established irrigation method, provided the cause of loss is specified
in the Crop Provisions. However, if it is possible for you to plant on
or prior to the final planting date when other producers in the area
are planting and you fail to plant, no prevented planting payment will
be made.
(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)).
(B) If you acquire additional land for the current crop year, the
number of eligible acres determined in section 17(e)(1)(i)(A) for a
crop may be increased by multiplying it by the ratio of the total
cropland acres that you are farming this year (if greater) to the total
cropland acres that you farmed in the previous year, provided that:
(1) You submit proof to us that you acquired additional acreage for
the current crop year by any of the methods specified in section
17(f)(12);
(2) The additional acreage was acquired in time to plant it for the
current crop year using good farming practices; and
(3) No cause of loss has occurred at the time you acquire the
acreage that may prevent planting (except acreage you lease the
previous year and continue to lease in the current crop year).
(C) If you add adequate irrigation facilities to your existing non-
irrigated acreage or if you acquire additional land for the current
crop year that has adequate irrigation facilities, the number of
eligible acres determined in section 17(e)(1)(i)(A) for irrigated
acreage of a crop may be increased by multiplying it by the ratio of
the total irrigated acres that you are farming this year (if greater)
to the total irrigated acres that you farmed in the previous year,
provided the conditions in sections 17(e)(1)(i)(B)(1), (2) and (3) are
met. If there were no irrigated acres in the previous year, the
eligible irrigated acres for a crop will be limited to the lesser of
the number of eligible non-irrigated acres of the crop or the number of
acres on which adequate irrigation facilities were added.
(ii) If you have not 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 not received a prevented planting insurance guarantee in all 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:
(1) The number of acres specified on your intended acreage report,
which must be submitted to us by the sales closing date for all crops
you insure for the crop year and that is accepted by us; or
(2) The number of acres specified on your intended acreage report,
which must be submitted to us within 10 days of the time you acquire
the acreage and that is accepted by us, if, on the sales closing date,
you do not have any acreage in a county and you subsequently acquire
acreage through a method described in section 17(f)(12) in time to
plant it using good farming practices.
(B) The total number of acres listed on the intended acreage report
may not exceed the number of acres of cropland in your farming
operation at the time you submit the intended acreage report.
[[Page 15869]]
(C) If you acquire additional acreage after we accept your intended
acreage report, the number of acres determined in section
17(e)(1)(ii)(A) may be increased in accordance with section
17(e)(1)(i)(B) and (C).
(D) Prevented planting coverage will not be provided for any
acreage included on the intended acreage report or any increased amount
of acreage determined in accordance with section 17(e)(1)(ii)(C) if a
cause of loss that may prevent planting occurred before the acreage was
acquired, as determined by us.
(iii) For any crop that must be contracted with a processor to be
insured:
(A) The number of eligible acres will be:
(1) The number of acres of the crop specified in the processor
contract, if the contract specifies a number of acres contracted for
the crop year;
(2) The result of dividing the quantity of production stated in the
processor contract by your approved yield, if the processor contract
specifies a quantity of production that will be accepted (for the
purposes of establishing the number of prevented planting acres, any
reductions applied to the transitional yield for failure to certify
acreage and production for four prior years will not be used); or
(3) Notwithstanding sections 17(e)(1)(iii)(A)(1) and (2), if a
minimum number of acres or amount of production is specified in the
processor contract, this amount will be used to determine the eligible
acres.
(B) If a processor cancels or does not provide contracts, or
reduces the contracted acreage or production from what would have
otherwise been allowed, solely because the acreage was prevented from
being planted due to an insured cause of loss, we will determine the
number of eligible acres based on the number of acres or amount of
production you had contracted in the county in the previous crop year.
If the applicable Crop Provisions require that the price election be
based on a contract price, and a contract is not in force for the
current year, the price election will be based on the contract price in
place for the previous crop year. If you did not have a processor
contract in place for the previous crop year, you will not have any
eligible prevented planting acreage for the applicable processor crop.
The total eligible prevented planting acres in all counties cannot
exceed the total number of acres or amount of production contracted in
all counties in the previous crop year.
(2) Any eligible acreage determined in accordance with section
17(e)(1) will be reduced by subtracting the number of acres of the crop
(insured and uninsured) that are timely and late planted, including
acreage specified in section 16(b).
(f) Regardless of the number of eligible acres determined in
section 17(e), prevented planting coverage will not be provided for any
acreage:
(1) That does not constitute at least 20 acres or 20 percent of the
insurable crop acreage in the unit, whichever is less (If the crop is
in a whole-farm unit, the 20 acre or 20 percent requirement will be
applied separately to each crop in the whole-farm unit). Any prevented
planting acreage within a field that contains planted acreage will be
considered to be acreage of the same crop, type, and practice that is
planted in the field unless:
(i) The acreage that was prevented from being planted constitutes
at least 20 acres or 20 percent of the total insurable acreage in the
field and you produced both crops, crop types, or followed both
practices in the same field in the same crop year within any one of the
four most recent crop years;
(ii) You were prevented from planting a first insured crop and you
planted a second crop in the field (There can only be one first insured
crop in a field unless the requirements in section 17(f)(1)(i) or (iii)
are met); or
(iii) The insured crop planted in the field would not have been
planted on the remaining prevented planting acreage (e.g., where
rotation requirements would not be met or you already planted the total
number of acres specified in the processor contact);
(2) For which the actuarial documents do not provide the
information needed to determine the premium rate, unless a written
agreement designates such premium rate;
(3) Used for conservation purposes, intended to be left unplanted
under any program administered by the USDA or other government agency,
or required to be left unharvested under the terms of the lease or any
other agreement (The number of acres eligible for prevented planting
will be limited to the number of acres specified in the lease for which
you are required to pay either cash or share rent);
(4) On which the insured crop is prevented from being planted, if
you or any other person receives a prevented planting payment for any
crop for the same acreage in the same crop year, excluding share
arrangements, unless:
(i) It is a practice that is generally recognized by agricultural
experts or organic agricultural experts in the area to plant the
insured crop for harvest following harvest of the first insured crop,
and additional coverage insurance offered under the authority of the
Act is available in the county for both crops in the same crop year;
(ii) For the insured crop that is prevented from being planted, you
provide records acceptable to us of acreage and production that show,
in at least two of the last four crop years:
(A) You have double cropped acreage on which the insured crop that
is prevented from being planted in the current crop year was grown (You
may apply your history of double cropping to any acreage of the insured
crop in the county (e.g., if you have double cropped 100 acres of wheat
and soybeans in the county and you acquire an additional 100 acres in
the county, you can apply that history of double cropped acreage to any
of the 200 acres in the county as long as it does not exceed 100
acres)); or
(B) The acreage you are prevented from planting in the current crop
year was double cropped with the insured crop that is prevented from
being planted (You may only use the history of double cropping for the
same physical acres from which double cropping records were provided
(e.g., if a neighbor has double cropped 100 acres of wheat and soybeans
in the county and you acquire your neighbor's 100 double cropped acres
and an additional 100 acres in the county, you can only apply your
neighbor's history of double cropped acreage to the same 100 acres that
your neighbor double cropped)); and
(iii) The amount of acreage you are double cropping in the current
crop year does not exceed the number of acres for which you provided
the records required in section 17(f)(4)(ii);
(5) On which the insured crop is prevented from being planted, if:
(i) Any crop is planted within or prior to the late planting period
or on or prior to the final planting date if no late planting period is
applicable, unless:
(A) You meet the double cropping requirements in section 17(f)(4);
(B) The crop planted was a cover crop; or
(C) No benefit, including any benefit under any USDA program, was
derived from the crop; or
(ii) Any volunteer or cover crop is hayed, grazed or otherwise
harvested within or prior to the late planting period or on or prior to
the final planting date if no late planting period is applicable;
(6) For which planting history or conservation plans indicate the
acreage would have remained fallow for crop rotation purposes or on
which any pasture or forage crop is in place on the
[[Page 15870]]
acreage during the time planting of the insured crop generally occurs
in the area. Cover plants that are seeded, transplanted, or that
volunteer:
(i) More than 12 months prior to the final planting date for the
insured crop that was prevented from being planted will be considered
pasture or a forage crop that is in place (e.g., the cover crop is
planted 15 months prior to the final planting date and remains in place
during the time the insured crop would normally be planted); or
(ii) Less than 12 months prior to the final planting date for the
insured crop that was prevented from being planted will not be
considered pasture or a forage crop that is in place;
(7) That exceeds the number of acres eligible for a prevented
planting payment;
(8) That exceeds the number of eligible acres physically available
for planting;
(9) For which you cannot provide proof that you had the inputs
(including, but not limited to, sufficient equipment and manpower)
available to plant and produce a crop with the expectation of producing
at least the yield used to determine your production guarantee or
amount of insurance. Evidence that you previously had planted the crop
on the unit will be considered adequate proof unless:
(i) There has been a change in the availability of inputs since the
crop was last planted that could affect your ability to plant and
produce the insured crop;
(ii) We determine you have insufficient inputs to plant the total
number of insured crop acres (e.g., you will not receive a prevented
planting payment if you have sufficient inputs to plant only 80 acres
but you have already planted 80 acres and are claiming prevented
planting on an additional 100 acres); or
(iii) Your planting practices or rotational requirements show the
acreage would have remained fallow or been planted to another crop;
(10) Based on an irrigated practice production guarantee or amount
of insurance unless adequate irrigation facilities were in place to
carry out an irrigated practice on the acreage prior to the insured
cause of loss that prevented you from planting. Acreage with an
irrigated practice production guarantee will be limited to the number
of acres allowed for that practice under sections 17(e) and (f);
(11) Based on a crop type that you did not plant, or did not
receive a prevented planting insurance guarantee for, in at least one
of the four most recent crop years:
(i) Types for which separate projected prices or price elections,
as applicable, amounts of insurance, or production guarantees are
available must be included in your APH database in at least one of the
four most recent crop years (Crops for which the insurance guarantee is
not based on APH must be reported on your acreage report in at least
one of the four most recent crop years) except as allowed in section
17(e)(1)(ii) or (iii); and
(ii) We will limit prevented planting payments based on a specific
crop type to the number of acres allowed for that crop type as
specified in sections 17(e) and (f); or
(12) If a cause of loss has occurred that may prevent planting at
the time:
(i) You lease the acreage (except acreage you leased the previous
crop year and continue to lease in the current crop year);
(ii) You buy the acreage;
(iii) The acreage is released from a USDA program which prohibits
harvest of a crop;
(iv) You request a written agreement to insure the acreage; or
(v) You acquire the acreage through means other than lease or
purchase (such as inherited or gifted acreage).
* * * * *
(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.
(2) The prevented planting payment and premium will be based on:
(i) The crop that was prevented from being planted if the insured
crop with remaining eligible acreage would have resulted in a higher
prevented planting payment than would have been paid for the crop that
was prevented from being planted; or
(ii) The crop from which eligible acres are being used if the
insured crop with remaining eligible acreage will result in a lower
prevented planting payment than would have been paid for the crop that
was prevented from being planted.
(3) For example, assume you were prevented from planting 200 acres
of corn and you have 100 acres eligible for a corn prevented planting
guarantee that would result in a payment of $40 per acre. You also had
50 acres of potato eligibility that would result in a $100 per acre
payment and 90 acres of grain sorghum eligibility that would result in
a $30 per acre payment. Your prevented planting coverage will be based
on 100 acres of corn ($40 per acre), 90 acres of grain sorghum ($30 per
acre), and an additional 10 acres of corn (using potato eligible acres
and paid as corn at $40 per acre). Your prevented planting payment
would be $7,100 ($4,000 + $2,700 + $400).
(4) Prevented planting coverage will be allowed as specified in
section 17(h) only if the crop that was prevented from being planted
meets all the policy provisions, except for having an adequate base of
eligible prevented planting acreage. Payment may be made based on crops
other than those that were prevented from being planted even though
other policy provisions, including but not limited to, processor
contract and rotation requirements, have not been met for the crop
whose eligible acres are being used.
(5) An additional administrative fee will not be due as a result of
using eligible prevented planting acreage as specified in section
17(h).
(i) * * *
(1) Multiplying the prevented planting coverage level percentage
you elected, or that is contained in the Crop Provisions if you did not
elect a prevented planting coverage level percentage, by:
(i) Your amount of insurance per acre; or
(ii) The amount determined by multiplying the production guarantee
(per acre) for timely planted acreage of the insured crop (or type, if
applicable) by your price election or your projected price, whichever
is applicable;
* * * * *
Sec. 457.8 [Amended]
0
19. Further amend Sec. 457.8 in section 18 as follows:
0
a. Revise paragraphs (a), (c) and (e);
0
b. Amend paragraph (f)(1)(ii) by adding the phrase ``in which the crop
was planted'' between the phrases ``crop year'' and ``during the base
period'';
0
c. Revise paragraph (f)(1)(iv);
[[Page 15871]]
0
d. Revise paragraphs (f)(2)(i)(A) and (f)(2)(ii)(A);
0
e. Revise paragraph (g);
0
f. Amend paragraph (h)(5) by removing the word ``determines'' and
adding the word ``determine'' in its place;
0
g. Revise paragraph (i);
0
h. Amend paragraph (j) by removing the word ``Multiyear'' and adding
the word ``Multi-year'' in its place;
0
i. Amend paragraph (m) by removing ``(e)'' and adding ``(a)'' in its
place and removing the word ``and'' after the semicolon;
0
j. Amend paragraph (n) by removing the period at the end of the text
and adding the phrase ``; and'' in its place; and
0
k. Add a new paragraph (o).
The revised and added text reads as follows:
18. Written Agreements.
* * * * *
(a) You must apply in writing for each written agreement (including
renewal of a written agreement) no later than the sales closing date,
except as provided in section 18(e);
* * * * *
(c) If approved by FCIC, the written agreement will include all
variable terms of the contract, including, but not limited to, the
crop; practice, type or variety; guarantee; premium rate; and projected
price, harvest price, price election or amount of insurance, as
applicable, or the information needed to determine such variable terms.
If the written agreement is for a county:
(1) That has a price election or amount of insurance stated in the
Special Provisions, or an addendum thereto, for the crop, practice,
type or variety, the written agreement will contain the price election
or amount of insurance stated in the Special Provisions, or an addendum
thereto, for the crop, practice, type or variety;
(2) That does not have price elections or amounts of insurance
stated in the Special Provisions, or an addendum thereto, for the crop,
practice, type or variety, the written agreement will contain a price
election or amount of insurance that does not exceed the price election
or amount of insurance contained in the Special Provisions, or an
addendum thereto, for the county that is used to establish the other
terms of the written agreement, unless otherwise authorized by the Crop
Provisions;
(3) For which revenue protection is not available for the crop, but
revenue protection is available in the State for the crop, the written
agreement will contain the information used to establish the projected
price and harvest price, as applicable, for that State; or
(4) In a State for which revenue protection is not available for
the crop, but revenue protection is available for the crop in another
State, the written agreement is available for yield protection only,
and will contain the information needed to determine the projected
price for the crop from another State as determined by FCIC;
* * * * *
(e) A request for a written agreement may be submitted:
(1) After the sales closing date, but on or before the acreage
reporting date, if you demonstrate your physical inability to submit
the request on or before the sales closing date (e.g., you have been
hospitalized or a blizzard has made it impossible to submit the written
agreement request in person or by mail);
(2) For the first year the written agreement is requested:
(i) On or before the acreage reporting date to:
(A) Insure unrated land, or an unrated practice, type or variety of
a crop; although, if required by FCIC, such written agreements may be
approved only after appraisal of the acreage by us and:
(1) The crop's potential is equal to or exceeds 90 percent of the
yield used to determine your production guarantee or amount of
insurance; and
(2) You sign the written agreement no later than the date the first
field is appraised or by the expiration date for you to accept the
offer, whichever comes first; or
(B) Establish optional units in accordance with FCIC procedures
that otherwise would not be allowed, change the premium rate or
transitional yield for designated high-risk land, or insure acreage
that is greater than five percent of the planted acreage in the unit
where the acreage has not been planted and harvested or insured in any
of the three previous crop years;
(ii) On or before the cancellation date to insure a crop in a
county that does not have actuarial documents for the crop (If the Crop
Provisions do not provide a cancellation date for the county, the
cancellation date for other insurable crops in the same State that have
similar final planting and harvesting dates will be applicable); or
(iii) On or before the date specified in the Crop Provisions or
Special Provisions; or
(3) For adding land or a crop to either an existing written
agreement or a request for a written agreement, provided the request is
submitted by the applicable deadline specified in section 18;
(f) * * *
(1) * * *
(iv) The legal description of the land (in areas where legal
descriptions are available) and the FSA farm serial number including
tract and field numbers, if available. The submission must also include
an FSA aerial photograph, or field boundaries derived by a Geographic
Information System or Global Positioning System, or other legible maps
delineating field boundaries where you intend to plant the crop for
which insurance is requested;
* * * * *
(2) * * *
(i) * * *
(A) A completed APH form signed by you (only for crop policies that
require APH) based on verifiable production records for at least the
three most recent crop years in which the crop was planted; and
* * * * *
(ii) * * *
(A) A completed APH form signed by you (only for crop policies that
require APH) based on verifiable production records for at least the
three most recent crop years for a similar crop from acreage:
* * * * *
(g) A request for a written agreement will not be accepted if:
(1) The request is submitted to us after the applicable deadline
contained in sections 18(a) or (e);
(2) All the information required in section 18(f) is not submitted
to us with the request for a written agreement (The request for a
written agreement may be accepted if any missing information is
available from other acceptable sources);
(3) The request is to add land to an existing written agreement or
to add land to a request for a written agreement and the request to add
the land is not submitted by the applicable deadline specified in
sections 18(a) or (e); or
(4) The request is not authorized by the policy;
* * * * *
(i) A written agreement will be denied unless:
(1) FCIC approves the written agreement;
(2) The original written agreement is signed by you and delivered
to us, or postmarked, not later than the expiration date for you to
accept the offer;
(3) We accept the written agreement offer; and
(4) The crop meets the minimum appraisal amount specified in
section 18(e)(2)(i)(A)(1), if applicable;
* * * * *
[[Page 15872]]
(o) If you disagree with any determination made by FCIC under
section 18, you may obtain administrative review in accordance with 7
CFR part 400, subpart J or appeal in accordance with 7 CFR part 11,
unless you have failed to comply with the provisions contained in
section 18(g) or section 18(i)(2) or (4).
* * * * *
Sec. 457.8 [Amended]
0
20. Further amend Sec. 457.8 in section 20 (for FCIC policies) as
follows:
0
a. Revise paragraph (b);
0
b. Revise paragraph (c); and
0
c. Redesignate paragraphs (d) and (e) as paragraphs (e) and (f),
respectively, and add a new paragraph (d).
The revised and added text reads as follows:
[For FCIC Policies]
20. Appeal, Reconsideration, Administrative and Judicial Review.
* * * * *
(b) If you disagree with our determinations:
(1) Except for determinations specified in section 18(g), section
18(i)(2) or section 20(b)(2) or (3), you may obtain an administrative
review in accordance with 7 CFR part 400, subpart J (administrative
review) or appeal in accordance with 7 CFR part 11 (appeal);
(2) Regarding whether you have used good farming practices
(excluding determinations of the amount of assigned production for
uninsured causes for your failure to use good farming practices), you
may request reconsideration in accordance with the reconsideration
process established for this purpose and published at 7 CFR part 400,
subpart J (reconsideration). To appeal or request administrative review
of determinations of the amount of assigned production, you must use
the appeal or administration review process; or
(3) Any determination made by us that is a matter of general
applicability is not subject to administrative review under 7 CFR part
400, subpart J or appeal under 7 CFR part 11. If you want to seek
judicial review of any determination that is a matter of general
applicability, you must request a determination of non-appealability
from the Director of the National Appeals Division in accordance with 7
CFR part 11.6 prior to seeking judicial review.
(c) If you fail to exhaust your right to appeal, you will not be
able to resolve the dispute through judicial review.
(d) You are not required to exhaust your right to reconsideration
prior to seeking judicial review. If you do not request reconsideration
and you elect to file suit, such suit must be brought in accordance
with section 20(e)(2) and must be filed not later than one year after
the date the determination regarding whether you used good farming
practices was made.
* * * * *
Sec. 457.8 [Amended]
0
21. Further amend Sec. 457.8 in section 20 (For reinsured policies) as
follows:
0
a. Revise paragraph (a)(1)(iii);
0
b. Revise paragraph (d) and the introductory text of paragraph (e); and
0
c. Add a new paragraph (k).
The revised and added text reads as follows:
[For Reinsured Policies]
20. Mediation, Arbitration, Appeal, Reconsideration, and
Administrative and Judicial Review.
(a) * * *
(1) * * *
(iii) An interpretation by FCIC of a policy provision is considered
a determination that is a matter of general applicability.
* * * * *
(d) With respect to good farming practices:
(1) We will make decisions regarding what constitutes a good
farming practice and determinations of assigned production for
uninsured causes for your failure to use good farming practices.
(i) If you disagree with our decision of what constitutes a good
farming practice, you must request a determination from FCIC of what
constitutes a good farming practice before filing any suit against
FCIC.
(ii) If you disagree with our determination of the amount of
assigned production, you must use the arbitration or mediation process
contained in this section.
(iii) You may not sue us for our decisions regarding whether good
farming practices were used by you.
(2) FCIC will make determinations regarding what constitutes a good
farming practice. If you do not agree with any determination made by
FCIC:
(i) You may request reconsideration by FCIC of this determination
in accordance with the reconsideration process established for this
purpose and published at 7 CFR part 400, subpart J; or
(ii) You may file suit against FCIC.
(A) You are not required to request reconsideration from FCIC
before filing suit.
(B) Any suit must be brought against FCIC in the United States
district court for the district in which the insured acreage is
located.
(C) Suit must be filed against FCIC not later than one year after
the date:
(1) Of the determination; or
(2) Reconsideration is completed, if reconsideration was requested
under section 20(d)(2)(i).
(e) Except as provided in sections 18(n) or (o), or 20(d) or (k),
if you disagree with any other determination made by FCIC or any claim
where FCIC is directly involved in the claims process or directs us in
the resolution of the claim, you may obtain an administrative review in
accordance with 7 CFR part 400, subpart J (administrative review) or
appeal in accordance with 7 CFR part 11 (appeal).
* * * * *
(k) Any determination made by FCIC that is a matter of general
applicability is not subject to administrative review under 7 CFR part
400, subpart J or appeal under 7 CFR part 11. If you want to seek
judicial review of any FCIC determination that is a matter of general
applicability, you must request a determination of non-appealability
from the Director of the National Appeals Division in accordance with 7
CFR 11.6 before seeking judicial review.
Sec. 457.8 [Amended]
0
22. Further amend Sec. 457.8 in section 21 as follows:
0
a. Revise paragraph (b); and
0
b. Amend paragraph (f)(1) by removing the phrase ``3(e)(1)'' and adding
the phrase ``3(f)(1)'' in its place.
The revised text reads as follows:
21. Access to Insured Crop and Records, and Record Retention.
* * * * *
(b) You must retain, and provide upon our request, or the request
of any employee of USDA authorized to investigate or review any matter
relating to crop insurance:
(1) Complete records of the planting, replanting, inputs,
production, harvesting, and disposition of the insured crop on each
unit for three years after the end of the crop year (This requirement
also applies to all such records for acreage that is not insured);
(2) All records used to establish the amount of production you
certified on your production reports used to compute your approved
yield for three years after the calendar date for the end of the
insurance period for the crop year for which you initially certified
such records, unless such records have already been provided to us
(e.g., if you are a new insured and you certify 2007 through 2010 crop
year production records in 2011 to determine your approved yield for
the 2011 crop year, you must retain all records from the
[[Page 15873]]
2007 through 2010 crop years through the 2014 crop year. If you
subsequently certify records of the 2011 crop year in 2012 to determine
your approved yield for the 2012 crop year, you must retain the 2011
crop year records through the 2015 crop year and so forth for each
subsequent year of production records certified); and
(3) While you are not required to maintain records beyond the
record retention period specified in section 21(b)(2), at any time, if
we or FCIC have evidence that you, or anyone assisting you, knowingly
misreported any information related to any yield you have certified, we
or FCIC will replace all yields in your APH database determined to be
incorrect with the lesser of an assigned yield determined in accordance
with section 3 or the yield determined to be correct:
(i) If an overpayment has been made to you, you will be required to
repay the overpaid amount; and
(ii) Replacement of yields in accordance with section 21(b)(3) does
not exempt you from other sanctions applicable under the terms of the
policy or any applicable law.
* * * * *
Sec. 457.8 [Amended]
0
23. Further amend Sec. 457.8 in section 22 by revising paragraph (c)
to read as follows:
22. Other Insurance.
* * * * *
(c) For the purpose of section 22(b), the amount of loss from fire
will be the difference between the total value of the insured crop
before the fire and the total value of the insured crop after the fire.
This amount will be determined in accordance with the provisions in
section 35.
Sec. 457.8 [Amended]
0
24. Further amend Sec. 457.8 in section 23 by revising the last
sentence to read as follows:
23. Conformity to Food Security Act.
* * * We will recover any and all monies paid to you or received by you
during your period of ineligibility, and your premium will be refunded,
less an amount for expenses and handling equal to 20 percent of the
premium paid or to be paid by you.
* * * * *
Sec. 457.8 [Amended]
0
25. Further amend Sec. 457.8 in section 24 (For reinsured policies) by
revising the last sentence of paragraph (a) to read as follows:
[For reinsured policies]
24. Amounts Due Us.
(a) * * * After the termination date, FCIC will collect any unpaid
administrative fees and any interest owed thereon for any catastrophic
risk protection policy and we will collect any unpaid administrative
fees and any interest owed thereon for additional coverage policies.
* * * * *
Sec. 457.8 [Amended]
0
26. Further amend Sec. 457.8 in section 27 by revising paragraph (b)
to read as follows:
27. Concealment, Misrepresentation or Fraud.
* * * * *
(b) Even though the policy is void, you will still be required to
pay 20 percent of the premium that you would otherwise be required to
pay to offset costs incurred by us in the service of this policy. If
previously paid, the balance of the premium will be returned.
* * * * *
Sec. 457.8 [Amended]
0
27. Further amend Sec. 457.8 by revising section 29 to read as
follows:
29. Assignment of Indemnity.
(a) You may assign your right to an indemnity for the crop year
only to creditors or other persons to whom you have a financial debt or
other pecuniary obligation. You may be required to provide proof of the
debt or other pecuniary obligation before we will accept the assignment
of indemnity.
(b) All assignments must be on our form and must be provided to us.
Each assignment form may contain more than one creditor or other person
to whom you have a financial debt or other pecuniary obligation.
(c) Unless you have provided us with a properly executed assignment
of indemnity, we will not make any payment to a lienholder or other
person to whom you have a financial debt or other pecuniary obligation
even if you may have a lien or other assignment recorded elsewhere.
Under no circumstances will we be liable:
(1) To any lienholder or other person to whom you have a financial
debt or other pecuniary obligation where you have failed to include
such lienholder or person on a properly executed assignment of
indemnity provided to us; or
(2) To pay to all lienholders or other persons to whom you have a
financial debt or other pecuniary obligation any amount greater than
the total amount of indemnity owed under the policy.
(d) If we have received the properly executed assignment of
indemnity form:
(1) Only one payment will be issued jointly in the names of all
assignees and you; and
(2) Any assignee will have the right to submit all loss notices and
forms as required by the policy.
(e) If you have suffered a loss from an insurable cause and fail to
file a claim for indemnity within the period specified in section
14(e), the assignee may submit the claim for indemnity not later than
30 days after the period for filing a claim has expired. We will honor
the terms of the assignment only if we can accurately determine the
amount of the claim. However, no action will lie against us for failure
to do so.
Sec. 457.8 [Amended]
0
28. Further amend Sec. 457.8 by removing and reserving section 30.
Sec. 457.8 [Amended]
0
29. Further amend Sec. 457.8 in section 34 as follows:
0
a. Revise the heading;
0
b. Revise paragraph (a);
0
c. Amend paragraph (b)(3) by adding the word ``and'' after the
semicolon at the end;
0
d. Amend paragraph (b)(4) by removing the phrase ``; and'' and adding a
period in its place; and
0
e. Revise paragraph (c)(1).
The revised and added text reads as follows:
34. Units.
(a) You may elect an enterprise unit or whole-farm unit in
accordance with the following:
(1) For crops for which revenue protection is available, you may
elect:
(i) An enterprise unit if you elected revenue protection or yield
protection; or
(ii) A whole-farm unit if you elected:
(A) Revenue protection and revenue protection is provided unless
limited by the Special Provisions; or
(B) Yield protection only if whole-farm units are allowed by the
Special Provisions;
(2) For crops for which revenue protection is not available,
enterprise units or whole-farm units are available only if allowed by
the Special Provisions;
(3) You must make such election on or before the earliest sales
closing date for the insured crops in the unit and report such unit
structure on your acreage report:
(i) For counties in which the actuarial documents specify a fall or
winter sales closing date and a spring sales closing date, you may
change your unit election on or before the spring sales closing date
(earliest spring sales closing date for
[[Page 15874]]
crops in the unit if electing a whole-farm unit) if you do not have any
insured fall planted acreage of the insured crop;
(ii) Your unit selection will remain in effect from year to year
unless you notify us in writing by the earliest sales closing date for
the crop year for which you wish to change this election; and
(iii) These units may not be further divided except as specified
herein;
(4) For an enterprise unit:
(i) To qualify, an enterprise unit must contain all of the
insurable acreage of the same insured crop in:
(A) Two or more sections, if sections are the basis for optional
units where the insured acreage is located;
(B) Two or more section equivalents determined in accordance with
FCIC issued procedures, if section equivalents are the basis for
optional units where the insured acreage is located or are applicable
to the insured acreage;
(C) Two or more FSA farm serial numbers, if FSA farm serial numbers
are the basis for optional units where the insured acreage is located;
(D) Any combination of two or more sections, section equivalents,
or FSA farm serial numbers, if more than one of these are the basis for
optional units where the acreage is located or are applicable to the
insured acreage (e.g., if a portion of your acreage is located where
sections are the basis for optional units and another portion of your
acreage is located where FSA farm serial numbers are the basis for
optional units, you may qualify for an enterprise unit based on a
combination of these two parcels);
(E) One section, section equivalent, or FSA farm serial number that
contains at least 660 planted acres of the insured crop. You may
qualify under this paragraph based only on the type of parcel that is
utilized to establish optional units where your insured acreage is
located (e.g., if having two or more sections is the basis for optional
units where the insured acreage is located, you may qualify for an
enterprise unit if you have at least 660 planted acres of the insured
crop in one section); or
(F) Two or more units established by written agreement; and
(ii) At least two of the sections, section equivalents, FSA farm
serial numbers, or units established by written agreement in section
34(a)(4)(i)(A), (B), (C), (D), or (F) must each have planted acreage
that constitutes at least the lesser of 20 acres or 20 percent of the
insured crop acreage in the enterprise unit. If there is planted
acreage in more than two sections, section equivalents, FSA farm serial
numbers or units established by written agreement in section
34(a)(4)(i)(A), (B), (C), (D), or (F), these can be aggregated to form
at least two parcels to meet this requirement. For example, if sections
are the basis for optional units where the insured acreage is located
and you have 80 planted acres in section one, 10 planted acres in
section two, and 10 planted acres in section three, you may aggregate
sections two and three to meet this requirement.
(iii) The crop must be insured under revenue protection or yield
protection, unless otherwise specified in the Special Provisions;
(iv) If you want to change your unit structure from enterprise
units to basic or optional units in any subsequent crop year, you must
maintain separate records of acreage and production:
(A) For each basic unit, to be eligible to use records to establish
the production guarantee for the basic unit; or
(B) For optional units, to qualify for optional units and to be
eligible to use such records to establish the production guarantee for
the optional units;
(v) If you do not comply with the production reporting provisions
in section 3(f) for the enterprise unit, your yield for the enterprise
unit will be determined in accordance with section 3(f)(1);
(vi) You must separately designate on the acreage report each
section or other basis in section 34(a)(4)(i) you used to qualify for
an enterprise unit; and
(vii) If we discover you do not qualify for an enterprise unit and
such discovery is made:
(A) On or before the acreage reporting date, your unit division
will be based on the basic or optional units, whichever you report on
your acreage report and qualify for; or
(B) At any time after the acreage reporting date, we will assign
the basic unit structure; and
(5) For a whole-farm unit:
(i) To qualify:
(A) All crops in the whole-farm unit must be insured:
(1) Under revenue protection (if you elected the harvest price
exclusion for any crop, you must elect it for all crops in the whole-
farm unit), unless the Special Provisions allow whole-farm units for
another plan of insurance and you insure all crops in the whole-farm
unit under such plan (e.g., if you plant corn and soybeans for which
you have elected revenue protection and you plant canola for which you
have elected yield protection, the corn, soybeans and canola would be
assigned the unit structure in accordance with section 34(a)(5)(v));
(2) With us (e.g., if you insure your corn and canola with us and
your soybeans with a different insurance provider, the corn, soybeans
and canola would be assigned the unit structure in accordance with
section 34(a)(5)(v)); and
(3) At the same coverage level (e.g., if you elect to insure your
corn and canola at the 65 percent coverage level and your soybeans at
the 75 percent coverage level, the corn, soybeans and canola would be
assigned the unit structure in accordance with section 34(a)(5)(v));
(B) A whole-farm unit must contain all of the insurable acreage of
at least two crops; and
(C) At least two of the insured crops must each have planted
acreage that constitutes 10 percent or more of the total planted
acreage liability of all insured crops in the whole-farm unit (For
crops for which revenue protection is available, liability will be
based on the applicable projected price only for the purpose of section
34(a)(5)(i)(C));
(ii) You will be required to pay separate administrative fees for
each crop included in the whole-farm unit;
(iii) You must separately designate on the acreage report each
basic unit for each crop in the whole-farm unit;
(iv) If you want to change your unit structure from a whole-farm
unit to basic or optional units in any subsequent crop year, you must
maintain separate records of acreage and production:
(A) For each basic unit, to be eligible to use such records to
establish the production guarantee for the basic units; or
(B) For optional units, to qualify for optional units and to be
eligible to use such records to establish the production guarantee for
the optional units; and
(v) If we discover you do not qualify for a whole-farm unit for at
least one insured crop because, even though you elected revenue
protection for all your crops:
(A) You do not meet all of the other requirements in section
34(a)(5)(i), and such discovery is made:
(1) On or before the acreage reporting date, your unit division for
all crops for which you elected a whole-farm unit will be based on
basic or optional units, whichever you report on your acreage report
and qualify for; or
(2) At any time after the acreage reporting date, we will assign
the basic unit structure for all crops for which you elected a whole-
farm unit; or
(B) It was not possible to establish a projected price for at least
one of your crops, your unit division will be based on the unit
structure you report on your
[[Page 15875]]
acreage report and qualify for only for the crop for which a projected
price could not be established, unless the remaining crops in the unit
would no longer qualify for a whole-farm unit, in such case your unit
division for the remaining crops will be based on the unit structure
you report on your acreage report and qualify for.
* * * * *
(c) * * *
(1) Optional units may be established if each optional unit is
located in a separate section where the boundaries are readily
discernible:
(i) In the absence of sections, we may consider parcels of land
legally identified by other methods of measure, such as Spanish grants,
provided the boundaries are readily discernible, if such parcels can be
considered as the equivalent of sections for unit purposes in
accordance with FCIC issued procedures; or
(ii) In the absence of sections as described in section 34(c)(1) or
other methods of measure used to establish section equivalents as
described in section 34(c)(1)(i), optional units may be established if
each optional unit is located in a separate FSA farm serial number in
accordance with FCIC issued procedure;
* * * * *
Sec. 457.8 [Amended]
0
30. Further amend Sec. 457.8 by revising section 35 to read as
follows:
35. Multiple Benefits.
(a) If you are eligible to receive an indemnity and are also
eligible to receive benefits for the same loss under any other USDA
program, you may receive benefits under both programs, unless
specifically limited by the crop insurance contract or by law.
(b) Any amount received for the same loss from any USDA program, in
addition to the crop insurance payment, will not exceed the difference
between the crop insurance payment and the actual amount of the loss,
unless otherwise provided by law. The amount of the actual loss is the
difference between the total value of the insured crop before the loss
and the total value of the insured crop after the loss.
(1) For crops for which revenue protection is not available:
(i) If you have an approved yield, the total value of the crop
before the loss is your approved yield times the highest price election
for the crop; and
(ii) If you have an approved yield, the total value of the crop
after the loss is your production to count times the highest price
election for the crop; or
(iii) If you have an amount of insurance, the total value of the
crop before the loss is the highest amount of insurance available for
the crop; and
(iv) If you have an amount of insurance, the total value of the
crop after the loss is your production to count times the price
contained in the Crop Provisions for valuing production to count.
(2) For crops for which revenue protection is available and:
(i) You elect yield protection:
(A) The total value of the crop before the loss is your approved
yield times the applicable projected price (at the 100 percent price
level) for the crop; and
(B) The total value of the crop after the loss is your production
to count times the applicable projected price (at the 100 percent price
level) for the crop; or
(ii) You elect revenue protection:
(A) The total value of the crop before the loss is your approved
yield times the higher of the applicable projected price or harvest
price for the crop (If you have elected the harvest price exclusion,
the applicable projected price for the crop will be used); and
(B) The total value of the crop after the loss is your production
to count times the harvest price for the crop.
(c) FSA or another USDA agency, as applicable, will determine and
pay the additional amount due you for any applicable USDA program,
after first considering the amount of any crop insurance indemnity.
Sec. 457.8 [Amended]
0
31. Further amend Sec. 457.8 in section 36 as follows:
0
a. Amend paragraph (a) by removing the phrase ``(T-yield)''; and
0
b. Amend paragraph (c) by removing the phrase ``T-yield'' and adding
the phrase ``transitional yield'' in its place in all three instances
that it appears.
0
32. Amend Sec. 457.101 by revising the introductory text to read as
follows:
Sec. 457.101 Small grains crop insurance
The small grains crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
Sec. 457.101 [Amended]
0
33. Further amend Sec. 457.101 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
Sec. 457.101 [Amended]
0
34. Further amend Sec. 457.101 in section 1 as follows:
0
a. Remove the definition of ``sales closing date''; and
0
b. Revise the definition of ``prevented planting'' to read as follows:
1. Definitions.
* * * * *
Prevented planting. As defined in the Basic Provisions, except that
the references to ``final planting date'' contained in the definition
in the Basic Provisions are replaced with the ``latest final planting
date.''
* * * * *
Sec. 457.101 [Amended]
0
35. Further amend Sec. 457.101 by revising section 3 to read as
follows:
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions:
(a) Revenue protection is not available for your oats, rye, flax,
or buckwheat. Therefore, if you elect to insure such crops by the sales
closing date, they will only be protected against a loss in yield;
(b) Revenue protection is available for wheat and barley.
Therefore, if you elect to insure your wheat or barley:
(1) You must elect to insure your wheat or barley with either
revenue protection or yield protection by the sales closing date; and
(2) In counties with both fall and spring sales closing dates for
the insured crop:
(i) If you do not have any insured fall planted acreage of the
insured crop, you may change your coverage level, or your percentage of
projected price (if you have yield protection), or elect revenue
protection or yield protection, until the spring sales closing date; or
(ii) If you have any insured fall planted acreage of the insured
crop, you may not change your coverage level, or your percentage of
projected price (if you have yield protection), or elect revenue
protection or yield protection, after the fall sales closing date.
* * * * *
Sec. 457.101 [Amended]
0
36. Further amend Sec. 457.101 in section 5 by revising the
introductory text and all the information under the heading ``WHEAT''
in the table to read as follows:
5. Cancellation and Termination Dates.
The cancellation and termination dates are as follows, unless
otherwise specified in the Special Provisions:
[[Page 15876]]
----------------------------------------------------------------------------------------------------------------
Crop, State and county Cancellation date Termination date
----------------------------------------------------------------------------------------------------------------
Wheat:
All Colorado counties except September 30....................... September 30.
Alamosa, Archuleta, Conejos,
Costilla, Custer, Delta, Dolores,
Eagle, Garfield, Grand, La Plata,
Mesa, Moffat, Montezuma, Montrose,
Ouray, Pitkin, Rio Blanco, Rio
Grande, Routt, Saguache, and San
Miguel; all Iowa counties except
Plymouth, Cherokee, Buena Vista,
Pocahontas, Humboldt, Wright,
Franklin, Butler, Black Hawk,
Buchanan, Delaware, Dubuque and
all Iowa counties north thereof;
all Nebraska counties except Box
Butte, Dawes, and Sheridan; all
Wisconsin counties except Buffalo,
Trempealeau, Jackson, Wood,
Portage, Waupaca, Outagamie,
Brown, Kewaunee and all Wisconsin
counties north thereof; all other
States except Alaska, Arizona,
California, Connecticut, Idaho,
Maine, Massachusetts, Minnesota,
Montana, Nevada, New Hampshire,
New York, North Dakota, Oregon,
Rhode Island, South Dakota, Utah,
Vermont, Washington, and Wyoming.
Del Norte, Humboldt, Lassen, Modoc, September 30....................... November 30.
Plumas, Shasta, Siskiyou and
Trinity Counties, California;
Archuleta, Custer, Delta, Dolores,
Eagle, Garfield, Grand, La Plata,
Mesa, Moffat, Montezuma, Montrose,
Ouray, Pitkin, Rio Blanco, Routt,
and San Miguel Counties, Colorado;
Connecticut; Idaho; Plymouth,
Cherokee, Buena Vista, Pocahontas,
Humboldt, Wright, Franklin,
Butler, Black Hawk, Buchanan,
Delaware, and Dubuque Counties,
Iowa, and all Iowa counties north
thereof; Massachusetts; all
Montana counties except Daniels,
Roosevelt, Sheridan, and Valley;
Box Butte, Dawes, and Sheridan
Counties, Nebraska; New York;
Oregon; Rhode Island; all South
Dakota counties except Corson,
Walworth, Edmunds, Faulk, Spink,
Beadle, Kingsbury, Miner, McCook,
Minnehaha and all South Dakota
counties north and east thereof;
Washington; Buffalo, Trempealeau,
Jackson, Wood, Portage, Waupaca,
Outagamie, Brown and Kewaunee
Counties, Wisconsin, and all
Wisconsin counties north thereof;
and all Wyoming counties except
Big Horn, Fremont, Hot Springs,
Park, and Washakie.
Arizona; all California counties October 31......................... November 30.
except Del Norte, Humboldt,
Lassen, Modoc, Plumas, Shasta,
Siskiyou and Trinity; Nevada; and
Utah.
Alaska; Alamosa, Conejos, Costilla, March 15........................... March 15.
Rio Grande, and Saguache Counties,
Colorado; Maine; Minnesota;
Daniels, Roosevelt, Sheridan, and
Valley Counties, Montana; New
Hampshire; North Dakota; Corson,
Walworth, Edmunds, Faulk, Spink,
Beadle, Kingsbury, Miner, McCook,
and Minnehaha Counties, South
Dakota, and all South Dakota
counties north and east thereof;
Vermont; and Big Horn, Fremont,
Hot Springs, Park, and Washakie
Counties, Wyoming.
----------------------------------------------------------------------------------------------------------------
* * * * *
Sec. 457.101 [Amended]
0
37. Further amend Sec. 457.101 in section 6 as follows:
0
a. Revise paragraphs (a)(2) and (3);
0
b. Remove paragraph (a)(4);
0
c. Redesignate paragraphs (b) through (d) as (c) through (e) and add a
new paragraph (b); and
0
d. Amend redesignated paragraph (d) by removing the word
``additional''.
The revised and added text reads as follows:
6. Insured Crop.
(a) * * *
(2) That is planted for harvest as grain (a grain mixture in which
barley or oats is the predominate grain may also be insured if allowed
by the Barley or Oat Special Provisions, or if a written agreement
allows insurance for such mixture. The production from such mixture
will be considered as the predominate grain on a weight basis); and
(3) That is not, unless insurance is allowed by a written
agreement:
(i) Interplanted with another crop except as allowed in section
6(a)(2);
(ii) Planted into an established grass or legume; or
(iii) Planted as a nurse crop, unless planted as a nurse crop for
new forage seeding, but only if seeded at a normal rate and intended
for harvest as grain.
(b) Buckwheat will be insured only if it is produced under a
contract with a business enterprise equipped with facilities
appropriate to handle and store buckwheat production. The contract must
be executed by you and the business enterprise, in effect for the crop
year, and a copy provided to us no later than the acreage reporting
date. To be considered a contract, the executed document must contain:
(1) A requirement that you plant, grow and deliver buckwheat to the
business enterprise;
(2) The amount of production that will be accepted or a statement
that all production from a specified number of acres will be accepted;
(3) The price to be paid for the contracted production or a method
to determine such price; and
(4) Other such terms that establish the obligations of each party
to the contract.
* * * * *
Sec. 457.101 [Amended]
0
38. Further amend Sec. 457.101 in section 7 as follows:
0
a. Revise the introductory text;
0
b. Revise paragraphs (a)(2)(iii) and (v); and
0
c. Revise paragraph (b).
The revised text reads as follows:
7. Insurance Period.
In accordance with section 11 of the Basic Provisions, and subject
to any provisions provided by the Wheat or Barley Winter Coverage
Endorsement (if elected by you):
(a) * * *
(2) * * *
(iii) Whenever the Special Provisions designate both fall and
spring final planting dates:
(A) Any winter barley or winter wheat that is damaged before the
spring final planting date, to the extent that growers in the area
would normally not further care for the crop, must be replanted to a
winter type of the insured crop to maintain insurance based on the
winter type unless we agree that replanting is not practical. If it is
not practical to replant to the winter type of wheat or barley but is
practical to replant to a spring type, you must replant to a spring
type to keep your insurance based on the winter type in force.
(B) Any winter barley or winter wheat acreage that is replanted to
a spring type of the same crop when it was practical to replant the
winter type will be insured as the spring type and the production
guarantee, premium, projected price, and harvest price applicable to
the spring type will be used. In this case, the acreage will be
considered to be initially planted to the spring type.
(C) Notwithstanding sections 7(a)(2)(iii)(A) and (B), if you have
elected coverage under a barley or
[[Page 15877]]
wheat winter coverage endorsement (if available in the county),
insurance will be in accordance with the endorsement.
* * * * *
(v) Whenever the Special Provisions designate only a spring final
planting date, any acreage of fall planted barley or fall planted wheat
is not insured unless you request such coverage on or before the spring
sales closing date, and we determine, in writing, that the acreage has
an adequate stand in the spring to produce the yield used to determine
your production guarantee. However, if we fail to inspect the acreage
by the spring final planting date, insurance will attach as specified
in section 7(a)(2)(v)(C).
(A) Your request for coverage must include the location and number
of acres of fall planted barley or wheat.
(B) The fall planted barley or fall planted wheat will be insured
as a spring type for the purpose of the production guarantee, premium,
projected price, and harvest price, if applicable.
(C) Insurance will attach to such acreage on the date we determine
an adequate stand exists or on the spring final planting date if we do
not determine adequacy of the stand by the spring final planting date.
(D) Any acreage of such fall planted barley or fall planted wheat
that is damaged after it is accepted for insurance but before the
spring final planting date, to the extent that growers in the area
would normally not further care for the crop, must be replanted to a
spring type of the insured crop unless we agree it is not practical to
replant.
(E) If fall planted acreage is not to be insured it must be
recorded on the acreage report as uninsured fall planted acreage.
(b) The calendar date for the end of the insurance period is the
following applicable date:
(1) September 25 in Alaska;
(2) July 31 in Alabama, Arizona, Arkansas, Connecticut, Delaware,
Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New
Jersey, North Carolina, South Carolina and Tennessee; or
(3) October 31 in all other states.
0
39. Further amend Sec. 457.101 in section 8 as follows:
0
a. Amend the introductory text by removing the phrase ``(Causes of
Loss)'';
0
b. Amend paragraph (g) by removing the word ``or'' at the end;
0
c. Revise paragraph (h); and
0
d. Add a new paragraph (i).
The revised and added text reads as follows:
8. Causes of Loss.
* * * * *
(h) Failure of the irrigation water supply due to a cause of loss
specified in sections 8(a) through (g) that also occurs during the
insurance period; or
(i) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
Sec. 457.101 [Amended]
0
40. Further amend Sec. 457.101 in section 9 as follows:
0
a. Revise paragraph (a)(6);
0
b. Revise paragraph (c); and
0
c. Revise paragraph (e).
The revised text reads as follows:
9. Replanting Payments.
(a) * * *
(6) The replanted crop must be seeded at a rate sufficient to
achieve a total (undamaged and new seeding) plant population that is
considered appropriate by agricultural experts for the insured crop,
type and practice.
* * * * *
(c) Unless otherwise specified in the Special Provisions, the
amount of the replanting payment per acre will be:
(1) The lesser of 20 percent of the production guarantee or the
number of bushels for the applicable crop specified below:
(i) Two bushels for flax or buckwheat;
(ii) Four bushels for wheat; or
(iii) Five bushels for barley or oats;
(2) Multiplied by:
(i) Your price election for oats, flax or buckwheat; or
(ii) Your projected price for wheat or barley; and
(3) Multiplied by your share.
* * * * *
(e) Replanting payments will be calculated using your price
election or your projected price, as applicable, and your production
guarantee for the crop type that is replanted and insured. For example,
if damaged spring wheat is replanted to durum wheat, your projected
price applicable to durum wheat will be used to calculate any
replanting payment that may be due. A revised acreage report will be
required to reflect the replanted type. Notwithstanding the previous
two sentences, the following will have a replanting payment based on
your production guarantee and your price election or your projected
price, as applicable, for the crop type initially planted:
(1) Any damaged winter crop type that is replanted to a spring crop
type, but that retains insurance based on the winter crop type; and
(2) Any acreage replanted at a reduced seeding rate into a
partially damaged stand of the insured crop.
Sec. 457.101 [Amended]
0
41. Further amend Sec. 457.101 by revising section 10 to read as
follows:
10. Duties in the Event of Damage or Loss
Representative samples are required in accordance with section 14
of the Basic Provisions.
Sec. 457.101 [Amended]
0
42. Further amend Sec. 457.101 in section 11 as follows:
0
a. Revise paragraph (b);
0
b. Amend the introductory text of paragraph (c) by removing the phrase
``(bushels)'' and adding the phrase ``(in bushels)'' after the word
``count'';
0
c. Revise the introductory text of paragraph (c)(1)(i); and
0
d. Add a new paragraph (c)(2).
The revised and added text reads as follows:
11. Settlement of Claim.
* * * * *
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres of each insured crop or
type, as applicable by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection for barley or wheat;
(ii) Production guarantee (per acre) and your price election for
oats, rye, flax, or buckwheat; or
(iii) Revenue protection guarantee (per acre) if you elected
revenue protection for barley or wheat;
(2) Totaling the results of section 11(b)(1)(i), (ii), or (iii),
whichever is applicable;
(3) Multiplying the production to count of each insured crop or
type, as applicable, by your respective:
(i) Projected price for wheat or barley if you elected yield
protection;
(ii) Price election for oats, rye, flax, or buckwheat; or
(iii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 11(b)(3)(i), (ii), or (iii),
whichever is applicable;
(5) Subtracting the result of section 11(b)(4) from the result of
section 11(b)(2); and
(6) Multiplying the result of section 11(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of wheat in the unit with a
production guarantee (per acre) of 45 bushels, your projected price is
$3.40,
[[Page 15878]]
your harvest price is $3.45, and your production to count is 2,000
bushels.
If you elected yield protection:
(1) 50 acres x (45 bushel production guarantee x $3.40 projected
price) = $7,650.00 value of the production guarantee
(3) 2,000 bushel production to count x $3.40 projected price =
$6,800.00 value of the production to count
(5) $7,650.00-$6,800.00 = $850.00
(6) $850.00 x 1.000 share = $850.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (45 bushel production guarantee x $3.45 harvest
price) = $7,762.50 revenue protection guarantee
(3) 2,000 bushel production to count x $3.45 harvest price =
$6,900.00 value of the production to count
(5) $7,762.50-$6,900.00 = $862.50
(6) $862.50 x 1.000 share = $863.00 indemnity.
(c) * * *
(1) * * *
(i) For oats, rye, flax, or buckwheat, and barley or wheat under
yield protection, not less than the production guarantee (per acre),
and for barley or wheat under revenue protection, not less than the
amount of production that when multiplied by the harvest price equals
the revenue protection guarantee (per acre) for acreage:
* * * * *
(2) All harvested production from the insurable acreage.
* * * * *
Sec. 457.101 [Amended]
0
43. Further amend Sec. 457.101 in section 13 by revising paragraph (b)
to read as follows:
13. Prevented Planting.
* * * * *
(b) Your prevented planting coverage will be 60 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
0
44. Amend Sec. 457.104 by revising the introductory text to read as
follows:
Sec. 457.104 Cotton crop insurance provisions.
The cotton crop insurance provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
Sec. 457.104 [Amended]
0
45. Further amend Sec. 457.104 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
Sec. 457.104 [Amended]
0
46. Further amend Sec. 457.104 in section 1 by removing the definition
of ``production guarantee'' and adding the definition of ``production
guarantee (per acre)'' to read as follows:
1. Definitions.
* * * * *
Production guarantee (per acre). In lieu of the definition
contained in the Basic Provisions, the number of pounds determined by
multiplying the approved yield per acre by any applicable yield
conversion factor for non-irrigated skip-row planting patterns, and
multiplying the result by the coverage level percentage you elect.
* * * * *
Sec. 457.104 [Amended]
0
47. Further amend Sec. 457.104 by revising section 2 to read as
follows:
2. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions, you must elect to insure your cotton with either revenue
protection or yield protection by the sales closing date.
Sec. 457.104 [Amended]
0
48. Further amend Sec. 457.104 by revising section 3 to read as
follows:
3. Contract Changes.
In accordance with section 4 of the Basic Provisions, the contract
change date is November 30 preceding the cancellation date.
Sec. 457.104 [Amended]
0
49. Further amend Sec. 457.104 in section 4 as follows:
0
a. Amend the introductory text by removing the phrases ``(Life of
Policy, Cancellation and Termination)''and ``(Sec. 457.8)''; and
0
b. Amend the table by removing the phrase ``January 15'' and adding the
phrase ``January 31'' in its place and removing the word ``Reagon'' and
adding the word ``Reagan'' in its place.
Sec. 457.104 [Amended]
0
50. Further amend Sec. 457.104 by revising section 5 to read as
follows:
5. Insured Crop.
In accordance with section 8 of the Basic Provisions, the crop
insured will be all the cotton lint, in the county for which premium
rates are provided by the actuarial documents:
(a) In which you have a share; and
(b) That is not (unless allowed by the Special Provisions or by
written agreement):
(1) Colored cotton lint;
(2) Planted into an established grass or legume; or
(3) Interplanted with another spring planted crop.
Sec. 457.104 [Amended]
0
51. Further amend Sec. 457.104 in section 6 by removing the phrases
``(Insurable Acreage)'' and ``(Sec. 457.8)'' in the introductory text;
Sec. 457.104 [Amended]
0
52. Further amend Sec. 457.104 in section 7 by removing the phrases
``(Insurance Period)'' and ``(Sec. 457.8)'' in the introductory text
of paragraph (b);
Sec. 457.104 [Amended]
0
53. Further amend Sec. 457.104 in section 8 as follows:
0
a. Remove the phrases ``(Causes of Loss)'' and ``(Sec. 457.8)'' in the
introductory text;
0
b. Remove the word ``or'' at the end of paragraph (g);
0
c. Revise paragraph (h); and
0
d. Add a new paragraph (i).
The revised and added text reads as follows:
8. Causes of Loss.
* * * * *
(h) Failure of the irrigation water supply due to a cause of loss
specified in sections 8(a) through (g) that also occurs during the
insurance period; or
(i) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
Sec. 457.104 [Amended]
0
54. Further amend Sec. 457.104 by revising section 9 to read as
follows:
9. Duties in the Event of Damage or Loss.
(a) In addition to your duties under section 14 of the Basic
Provisions, in the event of damage or loss, the cotton stalks must
remain intact for our inspection. The stalks must not be destroyed, and
required samples must not be harvested, until the earlier of our
inspection or 15 days after harvest of the balance of the unit is
completed and written notice of probable loss given to us.
(b) Representative samples are required in accordance with section
14 of the Basic Provisions.
Sec. 457.104 [Amended]
0
55. Further amend Sec. 457.104 in section 10 as follows:
0
a. Revise paragraphs (a) and (b);
0
b. Amend the introductory text in paragraph (c) by removing the phrase
``(pounds)'' and adding the phrase ``(in pounds)'' after the phrase
``to count'';
[[Page 15879]]
0
c. Revise the introductory text of paragraph (c)(1)(i);
0
d. Amend paragraph (c)(1)(iv)(A) by removing the word ``of'' after the
phrase ``harvested production'' and adding the word ``or'' in its
place; and
0
e. Revise paragraph (d).
The revised text reads as follows:
10. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event you
are unable to provide records of production that are acceptable to us
for any:
(1) Optional unit, we will combine all optional units for which
acceptable records of production were not provided; or
(2) Basic unit, we will allocate any commingled production to such
units in proportion to our liability on the harvested acreage for each
unit.
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection; or
(ii) Revenue protection guarantee (per acre) if you elected revenue
protection;
(2) Totaling the results of section 10(b)(1)(i) or 10(b)(1)(ii),
whichever is applicable;
(3) Multiplying the production to count by your:
(i) Projected price if you elected yield protection; or
(ii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 10(b)(3)(i) or 10(b)(3)(ii),
whichever is applicable;
(5) Subtracting the result of section 10(b)(4) from the result of
section 10(b)(2); and
(6) Multiplying the result of section 10(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of cotton in the unit with a
production guarantee (per acre) of 525 pounds, your projected price is
$.65, your harvest price is $.70, and your production to count is
25,000 pounds.
If you elected yield protection:
(1) 50 acres x (525 pound production guarantee x $.65 projected
price) = $17,062.50 value of the production guarantee
(3) 25,000 pound production to count x $.65 projected price =
$16,250.00 value of production to count
(5) $17,062.50-$16,250.00 = $812.50
(6) $812.50 x 1.000 share = $813.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (525 pound production guarantee x $.70 harvest
price) = $18,375.00 revenue protection guarantee
(3) 25,000 pound production to count x $.70 harvest price =
$17,500.00 value of the production to count
(5) $18,375.00-$17,500.00 = $875.00
(6) $875.00 x 1.000 share = $875.00 indemnity.
(c) * * *
(1) * * *
(i) For yield protection, not less than the production guarantee
and for revenue protection, not less than the amount of production that
when multiplied by the harvest price equals the revenue protection
guarantee (per acre) for acreage:
* * * * *
(d) Mature white cotton may be adjusted for quality when production
has been damaged by insured causes. Such production to count will be
reduced if the price quotation for cotton of like quality (price
quotation ``A'') for the applicable growth area is less than 85 percent
of price quotation ``B.''
(1) Price quotation ``B'' is defined as the price quotation for the
applicable growth area for cotton of the color and leaf grade, staple
length, and micronaire reading designated in the Special Provisions for
this purpose.
(2) Price quotations ``A'' and ``B'' will be the price quotations
for the Upland Cotton Warehouse Loan Rate published by FSA on the date
the last bale from the unit is classed. If the date the last bale
classed is not available, the price quotations will be determined on
the date the last bale from the unit is delivered to the warehouse, as
shown on the producer's account summary obtained from the gin.
(3) If eligible for adjustment, the amount of production to count
will be determined by multiplying the number of pounds of such
production by the factor derived from dividing price quotation ``A'' by
85 percent of price quotation ``B.''
* * * * *
Sec. 457.104 [Amended]
0
56. Further amend Sec. 457.104 by revising section 11(b) to read as
follows:
11. Prevented Planting.
* * * * *
(b) Your prevented planting coverage will be 50 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
0
57. Amend Sec. 457.106 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict;
0
C. Amend section 2(b) by removing the phrase ``34(a) (1), (3), and
(4)'' and adding the phrase ``34(b)(1), (3), and (4)'' in its place;
and
0
D. Amend section 6 by removing the phrase ``section 5 (Annual
Premium)'' and adding the phrase ``section 7'' in its place.
The revised text reads as follows:
Sec. 457.106 Texas citrus tree crop insurance provisions.
The Texas Citrus Tree Crop Insurance Provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
0
58. Revise the introductory text of Sec. 457.108 to read as follows:
Sec. 457.108 Sunflower seed crop insurance provisions.
The sunflower seed crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
Sec. 457.108 [Amended]
0
59. Further amend Sec. 457.108 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
* * * * *
Sec. 457.108 [Amended]
0
60. Further amend Sec. 457.108 by revising section 2 to read as
follows:
2. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions, you must elect to insure your sunflowers with either
revenue protection or yield protection by the sales closing date.
Sec. 457.108 [Amended]
0
61. Further amend Sec. 457.108 by revising section 3 to read as
follows:
3. Contract Changes.
In accordance with section 4 of the Basic Provisions, the contract
change date is November 30 preceding the cancellation date.
Sec. 457.108 [Amended]
0
62. Further amend Sec. 457.108 in section 4 by removing the term
``(Sec. 457.8)'';
Sec. 457.108 [Amended]
0
63. Further amend Sec. 457.108 in section 5 by removing the phrases
``(Insured Crop)'' and ``(Sec. 457.8)'';
Sec. 457.108 [Amended]
64. Further amend Sec. 457.108 in section 6 by removing the
phrases ``(Insurable Acreage)'' and ``(Sec. 457.8)'';
[[Page 15880]]
Sec. 457.108 [Amended]
0
65. Further amend Sec. 457.108 in section 7 by removing the phrases
``(Insurance Period)'' and ``(Sec. 457.8)'';
Sec. 457.108 [Amended]
0
66. Further amend Sec. 457.108 in section 8 as follows:
0
a. Amend the introductory text by removing the phrases ``(Causes of
Loss)'' and ``(Sec. 457.8)'';
0
b. Amend paragraph (g) by removing the word ``or'' at the end;
0
c. Revise paragraph (h); and
0
d. Add a new paragraph (i).
The revised and added text reads as follows:
8. Causes of Loss.
* * * * *
(h) Failure of the irrigation water supply due to a cause of loss
specified in sections 8(a) through (g) that also occurs during the
insurance period; or
(i) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
Sec. 457.108 [Amended]
0
67. Further amend Sec. 457.108 by revising section 9 to read as
follows:
9. Replanting Payments.
(a) A replanting payment is allowed as follows:
(1) In lieu of provisions in section 13 of the Basic Provisions
that limit the amount of a replant payment to the actual cost of
replanting, the amount of any replanting payment will be determined in
accordance with these Crop Provisions;
(2) Except as specified in section 9(a)(1), you must comply with
all requirements regarding replanting payments contained in section 13
of the Basic Provisions; and
(3) The insured crop must be damaged by an insurable cause of loss
to the extent that the remaining stand will not produce at least 90
percent of the production guarantee for the acreage.
(b) Unless otherwise specified in the Special Provisions, the
amount of the replanting payment per acre will be the lesser of 20
percent of the production guarantee or 175 pounds, multiplied by your
projected price, multiplied by your share.
(c) When the crop is replanted using a practice that is uninsurable
for an original planting, the liability for the unit will be reduced by
the amount of the replanting payment. The premium amount will not be
reduced.
(d) If the acreage is replanted to an insured crop type that is
different than the insured crop type originally planted on the acreage:
(1) The production guarantee, premium, and projected price and
harvest price, as applicable, will be adjusted based on the replanted
type;
(2) Replanting payments will be calculated using your projected
price and production guarantee for the crop type that is replanted and
insured; and
(3) A revised acreage report will be required to reflect the
replanted type, as applicable.
Sec. 457.108 [Amended]
0
68. Further amend Sec. 457.108 by revising section 10 to read as
follows:
10. Duties in the Event of Damage or Loss.
Representative samples are required in accordance with section 14
of the Basic Provisions.
Sec. 457.108 [Amended]
0
69. Further amend Sec. 457.108 in section 11 as follows:
0
a. Revise paragraphs (a) and (b);
0
b. Amend the introductory text of paragraph (c) by removing the phrase
``(pounds)'' and adding the phrase ``(in pounds)'' after the phrase
``to count'';
0
c. Revise the introductory text of paragraph (c)(1)(i); and
0
d. Revise paragraph (d)(4).
The revised text reads as follows:
11. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event you
are unable to provide records of production that are acceptable to us
for any:
(1) Optional unit, we will combine all optional units for which
acceptable records of production were not provided; or
(2) Basic unit, we will allocate any commingled production to such
units in proportion to our liability on the harvested acreage for each
unit.
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection; or
(ii) Revenue protection guarantee (per acre) if you elected revenue
protection;
(2) Totaling the results of section 11(b)(1)(i) or 11(b)(1)(ii),
whichever is applicable;
(3) Multiplying the production to count by your:
(i) Projected price if you elected yield protection; or
(ii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 11(b)(3)(i) or 11(b)(3)(ii),
whichever is applicable;
(5) Subtracting the result of section 11(b)(4) from the result of
section 11(b)(2); and
(6) Multiplying the result of section 11(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of sunflowers in the unit
with a production guarantee (per acre) of 1,250 pounds, your projected
price is $.11, your harvest price is $.12, and your production to count
is 54,000 pounds.
If you elected yield protection:
(1) 50 acres x (1,250 pound production guarantee x $.11 projected
price) = $6,875.00 value of the production guarantee
(3) 54,000 pound production to count x $.11 projected price =
$5,940.00 value of production to count
(5) $6,875.00 - $5,940.00 = $935.00
(6) $935.00 x 1.000 share = $935.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (1,250 pound production guarantee x $.12 harvest
price) = $7,500.00 revenue protection guarantee
(3) 54,000 pound production to count x $.12 harvest price =
$6,480.00 value of the production to count
(5) $7,500.00 - $6,480.00 = $1,020.00
(6) $1,020.00 x 1.000 share = $1,020.00 indemnity.
(c) * * *
(1) * * *
(i) For yield protection, not less than the production guarantee,
and for revenue protection, not less than the amount of production that
when multiplied by the harvest price equals the revenue protection
guarantee (per acre) for acreage:
* * * * *
(d) * * *
(4) Sunflower seed production that is eligible for quality
adjustment, as specified in sections 11(d)(2) and (3), will be reduced
in accordance with quality adjustment factor provisions contained in
the Special Provisions.
* * * * *
Sec. 457.108 [Amended]
0
70. Further amend Sec. 457.108 by revising section 12 to read as
follows:
12. Prevented Planting.
Your prevented planting coverage will be 60 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
0
71. Amend Sec. 457.111 as follows:
0
A. Revise the introductory text to read as set forth below;
[[Page 15881]]
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict; and
0
C. Amend section 2(c) by removing the phrase ``34(a) (1)'' and adding
the phrase ``34(b)(1)'' in its place.
The revised text reads as follows:
Sec. 457.111 Pear crop insurance provisions.
The Pear Crop Insurance Provisions for the 2011 and succeeding crop
years are as follows:
* * * * *
0
72. Revise the introductory text of Sec. 457.113 to read as follows:
Sec. 457.113 Coarse grains crop insurance provisions.
The coarse grains crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
Sec. 457.113 [Amended]
0
73. Further amend Sec. 457.113 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
Sec. 457.113 [Amended]
0
74. Further amend Sec. 457.113 in section 1 by revising the
definitions of ``planted acreage'' and ``production guarantee (per
acre)'' to read as follows:
1. Definitions.
* * * * *
Planted acreage. In addition to the definition contained in the
Basic Provisions, coarse grains must initially be planted in rows,
unless otherwise provided by the Special Provisions, actuarial
documents, or by written agreement.
Production guarantee (per acre). In lieu of the definition
contained in the Basic Provisions, the number of bushels (tons for corn
insured as silage) determined by multiplying the approved yield per
acre by the coverage level percentage you elect.
* * * * *
Sec. 457.113 [Amended]
0
75. Further amend Sec. 457.113 by revising section 2 to read as
follows:
2. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions, you must elect to insure your corn, grain sorghum, or
soybeans with either revenue protection or yield protection by the
sales closing date.
Sec. 457.113 [Amended]
0
76. Further amend Sec. 457.113 by revising section 3 to read as
follows:
3. Contract Changes.
In accordance with section 4 of the Basic Provisions, the contract
change date is November 30 preceding the cancellation date.
Sec. 457.113 [Amended]
0
77. Further amend Sec. 457.113 in section 4 as follows:
0
a. Amend the introductory text by removing the term ``(Sec. 457.8)'';
0
b. Amend paragraph (a) by removing the date of ``January 15'' and
adding ``January 31'' in its place; and
0
c. Amend paragraph (b) by removing the date of ``February 15'' and
adding ``January 31'' in its place.
Sec. 457.113 [Amended]
0
78. Further amend Sec. 457.113 in section 5 as follows:
0
a. Amend the introductory text of paragraph (a) by removing the phrases
``(Insured Crop)'' and ``(Sec. 457.8)'';
0
b. Amend paragraph (a)(3)(i) by removing the word ``paragraph'' and
adding the word ``section'' in its place;
0
c. Amend the introductory text of paragraph (b) and paragraph (b)(1) by
removing the word ``subsection'' and adding the word ``section'' in its
place in both places;
0
d. Revise the introductory text of paragraph (b)(2);
0
e. Amend paragraph (b)(2)(i) by removing the phrase ``high-oil, high-
protein,'' and adding the phrase ``high-oil or high-protein (except as
authorized in section 5(b)(2)),'' in its place; and
0
f. Amend the introductory text of paragraph (d) and paragraph (e) by
removing the word ``subsection'' and adding the word ``section'' in its
place in both places.
The revised text reads as follows:
5. Insured Crop.
* * * * *
(b) * * *
(2) Yellow dent or white corn, including mixed yellow and white,
waxy or high-lysine corn, high-oil corn blends containing mixtures of
at least 90 percent high yielding yellow dent female plants with high-
oil male pollinator plants, or commercial varieties of high-protein
hybrids, and excluding:
* * * * *
Sec. 457.113 [Amended]
0
79. Further amend Sec. 457.113 in section 7 as follows:
0
a. Amend the introductory text by removing the word ``under'' and
adding the word ``of'' in its place and removing the phrases
``(Insurance Period)'' and ``(Sec. 457.8)''; and
0
b. Revise paragraph (b) to read as follows:
7. Insurance Period.
* * * * *
------------------------------------------------------------------------
------------------------------------------------------------------------
(b) For corn insured as silage:
(1) Connecticut, Delaware, Idaho, October 20.
Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York,
North Carolina, Oregon,
Pennsylvania, Rhode Island, Vermont,
Virginia, Washington, and West
Virginia.
(2) All other states................. September 30.
------------------------------------------------------------------------
* * * * *
Sec. 457.113 [Amended]
0
80. Further amend Sec. 457.113 in section 8 as follows:
0
a. Amend the introductory text by removing the phrases ``(Causes of
Loss)'' and ``(Sec. 457.8)'';
0
b. Amend paragraph (g) by removing the word ``or'' at the end of the
paragraph;
0
c. Revise paragraph (h); and
0
d. Add a new paragraph (i).
The revised and added text reads as follows:
8. Causes of Loss.
* * * * *
(h) Failure of the irrigation water supply due to a cause of loss
specified in sections 8(a) through (g) that also occurs during the
insurance period; or
(i) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
Sec. 457.113 [Amended]
0
81. Further amend Sec. 457.113 by revising section 9 to read as
follows:
9. Replanting Payments.
(a) A replanting payment is allowed as follows:
(1) In lieu of provisions in section 13 of the Basic Provisions
that limit the amount of a replant payment to the actual cost of
replanting, the amount of any replanting payment will be determined in
accordance with these Crop Provisions;
(2) Except as specified in section 9(a)(1), you must comply with
all requirements regarding replanting payments contained in section 13
of the Basic Provisions; and
(3) The insured crop must be damaged by an insurable cause of loss
to the extent that the remaining stand will not produce at least 90
percent of the production guarantee for the acreage.
[[Page 15882]]
(b) Unless otherwise specified in the Special Provisions, the
amount of the replanting payment per acre will be the lesser of 20
percent of the production guarantee or the number of bushels (tons for
corn insured as silage) for the applicable crop specified below,
multiplied by your projected price, multiplied by your share:
(1) 8 bushels for corn grain;
(2) 1 ton for corn silage;
(3) 7 bushels for grain sorghum; and
(4) 3 bushels for soybeans.
(c) When the crop is replanted using a practice that is uninsurable
for an original planting, the liability on the unit will be reduced by
the amount of the replanting payment. The premium amount will not be
reduced.
(d) If the acreage is replanted to an insured crop type that is
different than the insured crop type originally planted on the acreage:
(1) The production guarantee, premium, and projected price and
harvest price, as applicable, will be adjusted based on the replanted
type;
(2) Replanting payments will be calculated using your projected
price and production guarantee for the crop type that is replanted and
insured; and
(3) A revised acreage report will be required to reflect the
replanted type, as applicable.
Sec. 457.113 [Amended]
0
82. Further amend Sec. 457.113 by revising section 10 to read as
follows:
10. Duties in the Event of Damage or Loss.
(a) Representative samples are required in accordance with section
14 of the Basic Provisions.
(b) For any corn unit that has separate dates for the end of the
insurance period (grain and silage), in lieu of the requirement
contained in section 14 of the Basic Provisions to provide notice
within 72 hours of your initial discovery of damage (but not later than
15 days after the end of the insurance period), you must provide notice
within 72 hours of your initial discovery of damage (but not later than
15 days after the latest end of the insurance period applicable to the
unit).
(c) If you will harvest any acreage in a manner other than as you
reported it for coverage (e.g., you reported planting it to harvest as
grain but will harvest the acreage for silage, or you reported planting
it to harvest as silage but will harvest the acreage for grain), you
must notify us before harvest begins. Failure to timely provide notice
will result in production to count determined in accordance with
section 11(c)(1)(i)(E).
Sec. 457.113 [Amended]
0
83. Further amend Sec. 457.113 in section 11 as follows:
0
a. Revise paragraphs (a) and (b);
0
b. Amend the introductory text in paragraph (c) by removing the phrase
``in bushels (tons for corn silage) (see subsection 11(d))'' and adding
the phrase ``(in bushels for corn insured as grain or in tons for corn
insured as silage)'' after the phrase ``to count'';
0
c. Revise the introductory text of paragraph (c)(1)(i);
0
d. Amend paragraph (c)(1)(i)(C) by removing the word ``or'' at the end
of the paragraph;
0
e. Amend paragraph (c)(1)(i)(D) by adding the word ``or'' at the end of
the paragraph;
0
f. Add a new paragraph (c)(1)(i)(E);
0
g. Amend paragraph (c)(1)(iii) by removing the phrase ``subsection
11(e)'' and adding the phrase ``section 11(d)'' in its place;
0
h. Amend paragraph (c)(1)(iv) by removing the first sentence and adding
the phrase ``Potential production on insured acreage you will put to
another use or abandon, if you and we agree on the appraised amount of
production.'' in its place and removing the word ``if'' in the second
sentence and adding the word ``when'' in its place;
0
i. Remove paragraph (d) and redesignate paragraphs (e) through (g) as
paragraphs (d) through (f), respectively;
0
j. Amend the introductory text of redesignated paragraph (d) by
removing the phrase ``or harvested'' in both places and removing the
phrase ``subsection 11(f)'' and adding the phrase ``section 11(e)'' in
its place;
0
k. Amend redesignated paragraph (d)(4) by removing the phrase
``paragraphs 11(e)'' and adding the phrase ``sections 11(d)'' in its
place;
0
l. Amend the introductory text of redesignated paragraph (e) by
removing the phrase ``or harvested''; and
0
m. Revise redesignated paragraph (e)(2).
The revised and added text reads as follows:
11. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event you
are unable to provide records of production that are acceptable to us
for any:
(1) Optional unit, we will combine all optional units for which
acceptable records of production were not provided; or
(2) Basic unit, we will allocate any commingled production to such
units in proportion to our liability on the harvested acreage for each
unit.
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres of each insured crop or
type, as applicable, by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection; or
(ii) Revenue protection guarantee (per acre) if you elected revenue
protection;
(2) Totaling the results of section 11(b)(1)(i) or 11(b)(1)(ii),
whichever is applicable;
(3) Multiplying the production to count of each insured crop or
type, as applicable, by your respective:
(i) Projected price if you elected yield protection; or
(ii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 11(b)(3)(i) or 11(b)(3)(ii),
whichever is applicable;
(5) Subtracting the result of section 11(b)(4) from the result of
section 11(b)(2); and
(6) Multiplying the result of section 11(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of corn in the unit with a
production guarantee (per acre) of 115 bushels, your projected price is
$2.25, your harvest price is $2.20, and your production to count is
5,000 bushels.
If you elected yield protection:
(1) 50 acres x (115 bushel production guarantee x $2.25 projected
price) = $12,937.50 value of the production guarantee
(3) 5,000 bushel production to count x $2.25 projected price =
$11,250.00 value of the production to count
(5) $12,937.50 - $11,250.00 = $1,687.50
(6) $1,687.50 x 1.000 share = $1,688.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (115 bushel production guarantee x $2.25 projected
price) = $12,937.50 revenue protection guarantee
(3) 5,000 bushel production to count x $2.20 harvest price =
$11,000.00 value of the production to count
(5) $12,937.50 - $11,000.00 = $1,937.50
(6) $1,937.50 x 1.000 share = $1,938.00 indemnity.
(c) * * *
(1) * * *
(i) For yield protection, not less than the production guarantee,
or for revenue protection, not less than the amount of production that
when multiplied by the harvest price equals the revenue protection
guarantee (per acre) for acreage:
* * * * *
(E) For which you fail to give us notice before harvest begins if
you report planting the corn to harvest as
[[Page 15883]]
grain but harvest it as silage or you report planting the corn to
harvest as silage but harvest it as grain.
* * * * *
(e) * * *
(2) If the normal silage harvesting period has ended, or for any
acreage harvested as silage or appraised as silage after the calendar
date for the end of the insurance period as specified in section 7(b),
we may increase the silage production to count to a 65 percent moisture
equivalent to reflect the normal moisture content of silage harvested
during the normal silage harvesting period.
* * * * *
Sec. 457.113 [Amended]
0
84. Further amend Sec. 457.113 by revising section 12 to read as
follows:
12. Prevented Planting.
Your prevented planting coverage will be 60 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
0
85. Amend Sec. 457.116 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict;
0
C. Amend section 2(b) by removing the phrase ``3.(c)'' and adding the
phrase ``3(f)'' in its place; and
0
D. Amend section 6 by removing the phrase ``9(a)(3)'' and adding the
phrase ``9(a)(2)(iv)'' in its place.
The revised text reads as follows:
Sec. 457.116 Sugarcane crop insurance provisions.
The Sugarcane Crop Insurance Provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
0
86. Revise Sec. 457.118 to read as follows:
Sec. 457.118 Malting barley price and quality endorsement.
The malting barley price and quality endorsement provisions for the
2011 and succeeding crop years are as follows:
FCIC policies: United States Department of Agriculture, Federal
Crop Insurance Corporation.
Reinsured policies: (Appropriate title for insurance provider).
Both FCIC and reinsured policies:
Small Grains Crop Insurance Malting Barley Price and Quality
Endorsement
(This is a continuous endorsement. Refer to section 2 of the Basic
Provisions.)
In return for your payment of premium for the coverage contained
herein, this endorsement will be attached to and made part of the Basic
Provisions and Small Grains Crop Provisions, subject to the terms and
conditions described herein.
1. Definitions.
Additional value price. The value per bushel determined in
accordance with section 3 of Option A or section 3 of Option B, as
applicable.
Approved malting variety. A variety of barley specified in the
Special Provisions.
Brewery. A facility where malt beverages are commercially produced
for human consumption.
Contracted production. A quantity of barley the producer agrees to
grow and deliver, and the buyer agrees to accept, under the terms of
the malting barley contract.
Crop year. In addition to the definition in the Basic Provisions
and only for APH purposes under the terms of this endorsement, the
period within which the crop is actually grown and designated by the
calendar year in which the insured crop is normally harvested.
Licensed grain grader. A person authorized by the U.S. Department
of Agriculture to inspect and grade barley in accordance with the U.S.
Standards for malt barley.
Malt. A substance produced by germinating barley under controlled
conditions and then drying it.
Malt extract. A substance made by adding warm water to ground malt
and separating the liquid from the solid. In some cases, the liquid
extract may be condensed or evaporated to a syrup or powder.
Malting barley contract. An agreement in writing:
(a) Between the producer and a brewery or a business enterprise
that produces or sells malt or malt extract to a brewery, or a business
enterprise owned by such brewery or business;
(b) That specifies the amount of contracted production, the
purchase price or a method to determine such price; and
(c) That establishes the obligations of each party to the
agreement.
Malting barley price agreement. An agreement that meets all
conditions required for a malting barley contract except that it is
executed with a business enterprise that is not described in the
definition of a malting barley contract, but that normally contracts to
purchase malting barley production and has facilities appropriate to
handle and store malting barley production.
Objective test. A determination made by a qualified person using
standardized equipment that is widely used in the malting industry that
follows a procedure approved by the:
(a) American Society of Brewing Chemists when determining percent
germination;
(b) Federal Grain Inspection Service when determining quality
factors other than percent germination; or
(c) Food and Drug Administration (FDA) when determining
concentrations of mycotoxins or other substances or conditions
identified by the FDA as being injurious to human or animal health.
Subjective test. A determination:
(a) Made by a person using olfactory, visual, touch or feel,
masticatory, or other senses unless performed by a licensed grain
grader;
(b) That uses non-standardized equipment; or
(c) That does not follow a procedure approved by the American
Society of Brewing Chemists, the Federal Grain Inspection Service, or
the Food and Drug Administration.
2. This endorsement provides coverage for malting barley production
and quality losses at a price per bushel greater than that offered
under the Small Grains Crop Provisions.
3. You must have the Basic Provisions and the Small Grains Crop
Provisions in force to elect to insure malting barley under this
endorsement.
4. You must elect either Option A or Option B on or before the
sales closing date:
(a) No coverage will be provided under:
(1) Either Option A or Option B of this endorsement if you fail to
elect either Option A or Option B, or if you elect Option B but fail to
have a malting barley contract in effect by the acreage reporting date;
or
(2) Option B of this endorsement if you have not met the production
requirements specified in section 1(a) of Option B (in such case, you
will only have coverage under the Small Grains Crop Provisions unless
you elect coverage under Option A on or before the sales closing date);
(b) If you elect coverage under Option A, and subsequently enter
into a malting barley contract, your coverage will continue under the
terms of Option A;
(c) Your election (Option A or Option B) will continue from year to
year unless you cancel or change your election on or before the sales
closing date, or your coverage is otherwise
[[Page 15884]]
canceled or terminated under the terms of your policy; and
(d) In counties with both fall and spring sales closing dates, you
may elect this endorsement until the spring sales closing date only if
you do not have any fall planted acreage of approved malting barley
varieties.
5. All acreage in the county planted to approved malting varieties
that is insurable under the Small Grains Crop Provisions for feed
barley and your elected Option will be insured under this endorsement,
except any acreage on which you produce seed under the terms of the
seed contract.
6. In lieu of the definitions and provisions regarding units and
unit division in the Basic Provisions and the Small Grains Crop
Provisions, all malting barley acreage in the county insured under this
endorsement will be considered as one basic unit regardless of whether
such acreage is owned, rented for cash, or rented for a share of the
crop. Your shares in the malting barley acreage insured under this
endorsement must be designated separately on the acreage report. For
example, if you have 100 percent share in 50 acres and 75 percent share
in 10 acres you must list the 50 acres separately from the 10 acres on
your acreage report and include the percent share for each.
7. You must select a percentage of the additional value price on or
before the sales closing date (you can select only one percentage even
if more than one additional value price is applicable, and this
percentage must be 100 percent or less). In the event you choose a
percentage less than 100 percent of the additional value price, we will
multiply that percentage by the additional value price specified in
Option A or Option B, as applicable, to determine the additional value
price applicable to this endorsement.
8. The additional premium amount for this coverage will be
determined by multiplying your malting barley production guarantee (per
acre) by your additional value price, by the premium rate, by the
acreage planted to approved malting barley varieties, by your share at
the time coverage begins. The premium rate you pay will be adjusted by
a malting barley factor contained in the actuarial documents, as
applicable.
9. In addition to the reporting requirements contained in section 6
of the Basic Provisions, you must provide all the information required
by the Option you elect.
10. In accordance with section 14 of the Basic Provisions:
(a) We will settle your claim within 30 days if all production:
(1) Meets the quality criteria specified in section 14(a)(2) of
this endorsement; or
(2) Grades U.S. No. 4 or worse in accordance with the grades and
grade requirements for the subclasses six-rowed and two-rowed barley,
or for the class barley in accordance with the Official United States
Standards for Grain; and
(3) Is not accepted by a buyer for malting purposes; or
(b) Whenever any production fails one or more of the quality
criteria specified in section 14(a)(2) of this endorsement and grades
U.S. No. 3 or better, we will not agree upon the amount of loss until
the earlier of:
(1) The date you sell, feed, donate, or otherwise utilize such
production for any purpose; or
(2) May 31 of the calendar year immediately following the calendar
year in which the insured malting barley is normally harvested. If you
still retain any insured production on or after this date, we will:
(i) Defer completion of your claim if you agree to such deferment;
or
(ii) If you do not agree to defer your claim, we will complete your
claim; however, no adjustment for quality deficiencies will be made and
all remaining unsold insured production will be considered to have met
the quality standards specified in this endorsement.
11. This endorsement for malting barley does not provide prevented
planting coverage. Such coverage is only provided in accordance with
the provisions of the Small Grains Crop Provisions for feed barley.
12. Production from all acreage insured under this endorsement and
any production of feed barley varieties must not be commingled prior to
our making all determinations under section 14. Failure to keep
production separate as required herein will result in denial of your
claim for indemnity.
13. In the event of loss or damage covered by this endorsement, we
will settle your claim by:
(a) Multiplying the insured acreage by your malting barley
production guarantee (per acre) determined in accordance with section 2
of Option A or Option B, as applicable;
(b) Multiplying the result in section 13(a) by your respective
additional value price per bushel;
(c) Multiplying the number of bushels of production to count
determined in accordance with section 14 by your additional value price
per bushel (If more than one additional value price is applicable, the
highest additional value price will be used until the number of bushels
covered at the higher additional value price is reached and the
remainder of the production will be multiplied by the lower additional
value price. For example, if variety A is grown under a malting barley
price agreement and 1000 bushels of variety A are insured using an
additional value price of $0.68 per bushel but only 500 bushels of
variety A are produced, the 500 bushels would be valued at $0.68 per
bushel and all other production of other varieties will be valued at
the lower additional value price unless such production is acceptable
under the terms of the malting barley price agreement, in which case
500 bushels of the other varieties would also be valued at $0.68 per
bushel);
(d) Subtracting the result of section 13(c) from the result in
section 13(b); and
(e) Multiplying the result of section 13(d) by your share.
14. The amount of production to be counted against your malting
barley production guarantee will be determined as follows:
(a) Production to count will include all:
(1) Appraised production determined in accordance with sections
11(c)(1)(i), (ii) and (iv) of the Small Grains Crop Provisions;
(2) Harvested production and unharvested production that meets, or
would meet if properly handled, either the acceptable percentage or
parts per million standard contained in any applicable malting barley
contract or malting barley price agreement for protein, plump kernels,
thin kernels, germination, blight damaged, injured by mold, mold
damaged, injured by sprout, injured by frost, frost damaged, and
mycotoxins or other substances or conditions identified by the Food and
Drug Administration or other public health organizations of the United
States as being injurious to human health, or the following quality
standards (additional or different quality standards may be specified
or made available in the Special Provisions), whichever is less
stringent:
----------------------------------------------------------------------------------------------------------------
Six-rowed Malting
Barley Two-rowed Malting Barley
----------------------------------------------------------------------------------------------------------------
Protein (dry basis)................ 14.0% maximum........ 13.5% maximum.
[[Page 15885]]
Plump kernels...................... 65.0% minimum........ 75.0% minimum.
Thin kernels....................... 10.0% maximum........ 10.0% maximum.
Germination........................ 95.0% minimum........ 95.0% minimum.
Blight damaged..................... 4.0% maximum......... 4.0% maximum.
Injured by mold.................... 5.0% maximum......... 5.0% maximum.
Mold damaged....................... 0.4% maximum......... 0.4% maximum.
Injured by sprout.................. 1.0% maximum......... 1.0% maximum.
Injured by frost................... 5.0% maximum......... 5.0% maximum.
Frost damaged...................... 0.4% maximum......... 0.4% maximum.
Mycotoxins......................... 2.0 ppm maximum...... 2.0 ppm maximum.
----------------------------------------------------------------------------------------------------------------
(3) Harvested production that does not meet the quality standards
contained in section 14(a)(2), but is accepted by a buyer. If the price
received is less than the total of the additional value price and the
feed barley projected price announced by FCIC, the production to count
may be reduced or the values used to settle the claim may be adjusted
in accordance with sections 14(b), (c), and (d).
(b) For the quantity of production that qualifies under section
14(a)(3), the amount of production to count will be determined by:
(1) Subtracting the projected price for feed barley from the sale
price per bushel of the damaged production (If the sale price is less
than the market value of the damaged production, the sale price will be
the market value);
(2) Subtracting the weighted average cost per bushel for
conditioning the production, if any, (not to exceed the discount you
would have received had you sold the barley without conditioning, for
example, if the price per bushel of the production without conditioning
is $2.80 and the price for such production after conditioning is $2.90,
the discount is $0.10 and the cost of conditioning can not exceed $0.10
per bushel) from the result of section 14(b)(1);
(3) Dividing the result of section 14(b)(1) or (2), as applicable,
by 100 percent of the additional value price (The weighted average
additional value price will be used in the event more than one
additional value price is applicable, for example, if 1000 bushels of
variety A are insured with an additional value price of $0.68 and 500
bushels are insured with an additional value price of $0.40, the
weighted average additional value price would be $0.59); and
(4) Multiplying the result of section 14(b)(3) (if less than zero,
no production will be counted; or, if more than 1.000, no adjustment
will be made) by the number of bushels of damaged production.
(c) No reduction in the amount of production to count will be
allowed for:
(1) Moisture content;
(2) Damage due to uninsured causes;
(3) Costs or reduced value associated with drying, handling,
processing, or quality factors other than those contained in section
14(a)(2); or
(4) Any other costs associated with normal handling and marketing
of malting barley.
(d) All grade and quality determinations must be based on the
results of objective tests. No indemnity will be paid for any loss
established by subjective tests. We may obtain one or more samples of
the insured crop and have tests performed at an official grain
inspection location established under the U.S. Grain Standards Act or
laboratory of our choice to verify the results of any test. In the
event of a conflict in the test results, our results will determine the
amount of production to count.
OPTION A (FOR MALTING BARLEY PRODUCTION, REGARDLESS OF WHETHER GROWN
UNDER A MALTING BARLEY CONTRACT OR PRICE AGREEMENT)
1. To be eligible for coverage under this option:
(a) You must provide us with acceptable records of your sales of
malting barley and the number of acres planted to malting varieties for
at least the four crop years in your APH database prior to the crop
year immediately preceding the current crop year (for example, to
determine your production guarantee for the 2011 crop year, records
must be provided for the 2006 through the 2009 crop years, if malting
barley varieties were planted in each of those crop years);
(1) Failure to provide acceptable records or reports as required
herein will make you ineligible for coverage under this endorsement;
and
(2) You must provide these records to us no later than the
production reporting date specified in the Basic Provisions; and
(b) If you produce malting barley under a malting barley contract
or malting barley price agreement, you must provide us with a copy of
your current crop year contract or agreement on or before the acreage
reporting date if you want the additional value price based on such
contract or price agreement. All terms and conditions of the contract
or agreement, including the contract price or future contract price,
must be specified in the contract or agreement and be effective on or
before the acreage reporting date.
2. Your malting barley production guarantee (per acre) will be the
lesser of:
(a) The production guarantee (per acre) for feed barley for acreage
planted to approved malting varieties calculated in accordance with the
Basic Provisions; or
(b) A yield per acre calculated by:
(1) Dividing the number of bushels of malting barley sold each year
by the number of acres planted to approved malting barley varieties in
each respective year;
(2) Adding the results of section 2(b)(1);
(3) Dividing the result of section 2(b)(2) by the number of years
approved malting barley varieties were planted; and
(4) Multiplying the result of section 2(b)(3) by your coverage
level.
3. The additional value price per bushel will be determined as
follows:
(a) For production grown under a malting barley contract or a
malting barley price agreement, the additional value price per bushel
will be the following amount, as applicable:
(1) The sale price per bushel established in the malting barley
contract or malting barley price agreement (not including discounts or
incentives that may apply) minus the projected price for barley;
(2) The amount per bushel for malting barley (not including
discounts or incentives that may apply) above a feed barley price that
is determined at a later date, provided the method of determining the
price is specified in the malting barley contract or malting barley
price agreement; or
(3) If your malting barley contract or malting barley price
agreement has a
[[Page 15886]]
variable price option, you must select a price or a method of
determining a price that will be treated as the sale price and your
additional value price per bushel will be calculated under section
3(a)(1) or (2), as applicable.
(b) The additional value price per bushel designated in the
actuarial documents will be used if:
(1) Production is not grown under a malting barley contract or
malting barley price agreement; or
(2) The malting barley contract or malting barley price agreement
is not provided to us by the acreage reporting date.
(c) Under no circumstances will the additional value price exceed
$1.25 per bushel.
(d) The number of bushels eligible for coverage using an additional
value price determined in section 3(a) will be the lesser of:
(1) The amount determined by multiplying the number of acres
planted to an approved malting barley variety by your malting barley
production guarantee (per acre) determined in accordance with section
2; or
(2) The amount determined by multiplying the number of bushels
specified in the malting barley contract or malting barley price
agreement by your coverage level.
(e) Under no circumstances will the number of bushels determined in
section 3(d) that will receive an additional value price determined in
accordance with section 3(a) exceed the amount determined by
multiplying 125 percent of the greatest number of acres that you
certified for malting barley APH purposes in any crop year contained in
your malting barley APH database by your malting barley production
guarantee (per acre) determined in accordance with section 2. Any
bushels in excess of this amount will be insured using the additional
value price designated in the actuarial documents.
4. Loss Example.
In accordance with section 13, your loss will be calculated as
follows:
(a) Assume the following:
(1) A producer has:
(i) 400 acres of barley insured under the Small Grains Crop
Provisions, of which 200 acres are planted to feed barley and 200 acres
are planted to an approved malting barley variety;
(ii) 100 percent share;
(iii) A feed barley approved yield of 55 bushels per acre;
(iv) A malting barley approved yield, based on malting barley sales
records and the number of acres planted to approved malting barley
varieties, of 52 bushels per acre;
(v) Selected the 75 percent coverage level; and
(vi) Provided a malting barley price agreement by the acreage
reporting date for the sale of 5,720 bushels at $2.72 per bushel;
(2) The projected price for feed barley is $1.92 per bushel;
(3) The additional value price per bushel from the actuarial
documents is $0.40;
(4) In accordance with section 3(a)(1), the additional value price
per bushel for production grown under a malting barley price agreement
is $0.80 ($2.72 malting barley price agreement price minus $1.92
projected price); and
(5) The total production from the 200 acres of malting barley is
7,250 bushels, all of which fails to meet the quality standards
specified in section 14(a) and in the malting barley price agreement:
(i) 4,750 bushels are sold for $2.31 per bushel; and
(ii) After conditioning at a cost of $0.05 per bushel, an
additional 2,500 bushels are sold for $2.20 per bushel;
(b) The amount of insurance protection is determined as follows:
(1) 4,290 bushels eligible for coverage using the additional value
price from the malting barley price agreement [the lesser of 4,290
bushels (5,720 bushels grown under a malting barley price agreement x
.75 coverage level) or 7,800 bushels (200 acres planted to approved
malting barley varieties x 39.0 bushel per acre (52 bushels per acre
malting barley approved yield x .75 coverage level) malting barley
production guarantee)] x $0.80 additional value price = $3,432.00
amount of insurance protection for the bushels grown under the malting
barley price agreement;
(2) 3,510 bushels eligible for coverage using the additional value
price from the actuarial documents (7,800 bushel total malting barley
production guarantee - 4,290 bushels covered using the additional value
price from the malting barley price agreement) x $0.40 additional value
price = $1,404.00 amount of insurance protection for the bushels not
grown under a malting barley price agreement; and
(3) $3,432.00 + $1,404.00 = $4,836.00 total amount of insurance
protection for the unit;
(c) In accordance with section 14, the total amount of production
to count is determined as follows:
(1) Damaged production that is not reconditioned:
(i) $2.31 price per bushel - $1.92 projected price for feed barley
= $0.39;
(ii) $0.39 / $0.62 weighted average additional value price
($4,836.00 total insurance protection / 7,800 bushel production
guarantee = $0.62 weighted average additional value price) = 0.63; and
(iii) 0.63 x 4,750 bushels of damaged production sold at $2.31 =
2,993 bushels of production to count;
(2) Damaged production that is reconditioned:
(i) $2.20 price per bushel - $1.92 projected price for feed barley
= $0.28;
(ii) $0.28 - $0.05 reconditioning cost = $0.23;
(iii) $0.23 / $0.62 weighted average additional value price = 0.37;
and
(iv) 0.37 x 2,500 bushels of damaged production sold at $2.20 = 925
bushels of production to count; and
(3) Total production to count is 3,918 bushels (2,993 + 925);
(d) The value of production to count is $3,134.00 (3,918 bushels x
$0.80 additional value price (all production to count is valued at the
higher additional value price since the amount of production to count
did not exceed the number of bushels covered at the higher additional
value price)); and
(e) The indemnity amount is $1,702.00 ($4,836.00 total amount of
insurance protection for the unit - $3,134.00 value of production to
count).
OPTION B (FOR PRODUCTION GROWN UNDER MALTING BARLEY CONTRACTS ONLY)
1. To be eligible for coverage under this option:
(a) On or before the sales closing date, for at least one of the
three crop years you planted malting barley immediately preceding the
previous crop year:
(1) You must have had a malting barley contract and produced and
sold at least 75 percent of the contracted amount for the crop year
such contract was applicable, or such other amount specified in the
Special Provisions (e.g., if you wish to insure 2011 crop year malting
barley and you had a malting barley contract to produce 10,000 bushels
in 2009, you must have produced and sold at least 7,500 bushels of 2009
crop year malting barley production); and
(2) You must provide us a copy of your prior malting barley
contract and acceptable records of sales of malting barley required to
establish compliance with section 1(a)(1) of Option B;
(b) The maximum amount of production that may be insured under
Option B will be limited to the lesser of the amount of malting barley
contained in the current crop year's malting barley contract or 200
percent of the amount contracted for the crop year used to demonstrate
compliance with section 1(a)(1) of Option B; and
[[Page 15887]]
(c) On or before the acreage reporting date, you must provide us
with a copy of your malting barley contract for the current crop year:
(1) All terms and conditions of the contract, including the
contract price or method to determine the price, must be specified in
the contract and be effective on or before the acreage reporting date;
(2) If you fail to timely provide the contract, or any terms are
omitted, we may elect to determine the relevant information necessary
for insurance under Option B, or deny liability; and
(3) Only contracted production or acreage is covered by Option B.
2. Your malting barley production guarantee (per acre) will be the
lesser of:
(a) The production guarantee (per acre) for feed barley for acreage
planted to approved malting barley varieties calculated in accordance
with the Basic Provisions; or
(b) A yield per acre calculated by:
(1) Dividing the number of bushels of contracted production by the
number of acres planted to approved malting varieties in the current
crop year; and
(2) Multiplying the result of section 2(b)(1) by the coverage level
percentage you elected under the Small Grains Crop Provisions.
3. The additional value price per bushel will be the following
amount, as applicable:
(a) The sale price per bushel established in the malting barley
contract (without regard to discounts or incentives that may apply)
minus the projected price for feed barley;
(b) The amount per bushel for malting barley (not including
discounts or incentives that may apply) above a feed barley price that
is determined at a later date, provided the method of determining the
price is specified in the malting barley contract; or
(c) If your malting barley contract has a variable premium price
option, you must select a price or a method of determining a price that
will be treated as the sale price and your additional value price per
bushel will be calculated under section 3(a) or (b), as applicable; and
(d) Under no circumstances will the additional value price per
bushel exceed $2.00 per bushel.
4. Loss Example.
In accordance with section 13, your loss will be calculated as
follows:
(a) Assume the following:
(1) A producer has:
(i) 400 acres of barley insured under the Small Grains Crop
Provisions, of which 200 acres are planted to feed barley and 200 acres
are planted to an approved malting barley variety;
(ii) 100 percent share;
(iii) A feed barley approved yield of 55 bushels per acre;
(iv) A malting barley approved yield, based on contracted
production and the number of acres planted to approved malting barley
varieties of 52 bushels per acre;
(v) Selected the 75 percent coverage level; and
(vi) A malting barley contract for the sale of 10,000 bushels of
malting barley at $2.60 per bushel;
(2) The projected price for feed barley is $1.92 per bushel;
(3) In accordance with section 3, the additional value price per
bushel for production grown under the malting barley contract is $0.68
($2.60 malting barley contract price minus $1.92 projected price); and
(4) The total production from the 200 acres of malting barley is
7,250 bushels, all of which fails to meet the quality standards
specified in section 14(a) and in the malting barley contract:
(i) 4,750 bushels are sold for $2.31 per bushel; and
(ii) After conditioning at a cost of $0.05 per bushel, an
additional 2,500 bushels are sold for $2.20 per bushel;
(b) In accordance with section 2, the amount of insurance
protection is determined as follows:
(1) The lesser of 41.3 bushels per acre production guarantee (55
bushels x 75 percent coverage level) for feed barley or 37.5 bushels
per acre (10,000 bushels contracted / 200 acres = 50.0 bushels per acre
and 50.0 x 75 percent coverage level = 37.5);
(2) 37.5 bushels per acre x 200 acres = 7,500 bushels total malting
barley production guarantee; and
(3) 7,500 bushels x $0.68 additional value price = $5,100.00 total
amount of insurance for the unit;
(c) In accordance with section 14, the total amount of production
to count is determined as follows:
(1) Damaged production that is not reconditioned:
(i) $2.31 price per bushel - $1.92 projected price for feed barley
= $0.39;
(ii) $0.39 / $0.68 additional value price = 0.57; and
(iii) 0.57 x 4,750 bushels of damaged production sold at $2.31 =
2,708 bushels of production to count;
(2) Damaged production that is reconditioned:
(i) $2.20 price per bushel-$1.92 projected price for feed barley =
$0.28;
(ii) $0.28-$0.05 reconditioning cost = $0.23;
(iii) $0.23 / $0.68 additional value price = 0.34; and
(iv) 0.34 x 2,500 bushels of damaged production sold at $2.20 = 850
bushels of production to count; and
(3) Total production to count is 3,558 bushels (2,708 + 850);
(d) The value of production to count is $2,419.00 (3,558 bushels x
$0.68 additional value price); and
(e) The indemnity amount is $2,681.00 ($5,100.00 total amount of
insurance protection for the unit - $2,419.00 value of production to
count).
0
87. Amend Sec. 457.130 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict; and
0
C. Amend section 2(a) by removing the phrase ``34(a) (1), (3), and
(4)'' and adding the phrase ``34(b)(1), (3), and (4)'' in its place.
The revised text reads as follows:
Sec. 457.130 Macadamia tree crop insurance provisions.
The macadamia tree crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
0
88. Amend Sec. 457.131 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict; and
0
C. Amend section 2(a) by removing the phrase ``34(a)(1)'' and adding
the phrase ``34(b)(1)'' in its place.
The revised text reads as follows:
Sec. 457.131 Macadamia nut crop insurance provisions.
The macadamia nut crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
0
89. Amend Sec. 457.135 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict; and
0
C. Amend section 9(a) by removing the phrase ``14(c)'' and adding the
phrase ``16 of the Basic Provisions'' in its place.
The revised text reads as follows:
Sec. 457.135 Onion crop insurance provisions.
The onion crop insurance provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
0
90. Amend Sec. 457.140 as follows:
0
A. Revise the introductory text of Sec. 457.140 to read as set forth
below; and
[[Page 15888]]
0
B. Amend section 3(a) by removing the phrase ``3(b)(1)'' and adding the
phrase ``3(b)'' in its place.
The revised text reads as follows:
Sec. 457.140 Dry pea crop insurance provisions.
The dry pea crop insurance provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
0
91. Revise the introductory text of Sec. 457.141 to read as follows:
Sec. 457.141 Rice crop insurance provisions.
The rice crop insurance provisions for the 2011 and succeeding crop
years are as follows:
* * * * *
Sec. 457.141 [Amended]
0
92. Further amend Sec. 457.141 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
Sec. 457.141 [Amended]
0
93. Further amend Sec. 457.141 in section 1 by removing the definition
of ``planted'' and adding the definition of ``planted acreage'' to read
as follows:
1. Definitions.
* * * * *
Planted acreage. In addition to the definition in section 1 of the
Basic Provisions, land on which there is uniform placement of an
adequate amount of rice seed into a prepared seedbed by one of the
following methods (Acreage seeded in any other manner will not be
insurable unless otherwise provided by the Special Provisions or by
written agreement):
(a) Drill seeding--Using a grain drill to incorporate the seed to a
proper soil depth;
(b) Broadcast seeding--Distributing seed evenly onto the surface of
an un-flooded seedbed followed by either timely mechanical
incorporation of the seed to a proper soil depth in the seedbed or
flushing the seedbed with water; or
(c) Broadcast seeding into a controlled flood--Distributing the
rice seed onto a prepared seedbed that has been intentionally covered
to a proper depth by water. The water must be free of movement and be
completely contained on the acreage by properly constructed levees and
gates.
* * * * *
Sec. 457.141 [Amended]
0
94. Further amend Sec. 457.141 by revising section 3 to read as
follows:
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions, you must elect to insure your rice with either revenue
protection or yield protection by the sales closing date.
Sec. 457.141 [Amended]
0
95. Further amend Sec. 457.141 in section 4 by removing the phrases
``(Contract Changes)'' and ``(Sec. 457.8)'';
Sec. 457.141 [Amended]
0
96. Further amend Sec. 457.141 in section 5 as follows:
0
a. Amend the introductory text by removing the phrases ``(Life of
Policy, Cancellation and Termination)'' and ``(Sec. 457.8)''; and
0
b. Amend the table by removing the date of ``January 15'' and adding
``January 31'' in its place.
Sec. 457.141 [Amended]
0
97. Further amend Sec. 457.141 in the introductory text of section 6
by removing the phrases ``(Insured Crop)'' and ``(Sec. 457.8)'' and
adding the phrase ``or by written agreement'' at the end of the text;
Sec. 457.141 [Amended]
0
98. Further amend Sec. 457.141 in the introductory text of section 7
by removing the phrases ``(Insurable Acreage)'' and ``(Sec. 457.8)'';
Sec. 457.141 [Amended]
0
99. Further amend Sec. 457.141 in section 8 by removing the phrases
``(Insurance Period)'' and ``(Sec. 457.8)'';
Sec. 457.141 [Amended]
0
100. Further amend Sec. 457.141 in section 9 as follows:
0
a. Amend the introductory text of paragraph (a) by removing the phrases
``(Causes of Loss)'' and ``(Sec. 457.8)'';
0
b. Amend paragraph (a)(7) by removing the word ``or'' at the end;
0
c. Amend paragraph (a)(8) by removing the period at the end and adding
``; or'' in its place; and
0
d. Add a new paragraph (a)(9) to read as follows:
9. Causes of Loss.
(a) * * *
(9) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
* * * * *
Sec. 457.141 [Amended]
0
101. Further amend Sec. 457.141 by revising section 10 to read as
follows:
10. Replanting Payment.
(a) A replanting payment is allowed as follows:
(1) In lieu of provisions in section 13 of the Basic Provisions
that limit the amount of a replant payment to the actual cost of
replanting, the amount of any replanting payment will be determined in
accordance with these Crop Provisions;
(2) Except as specified in section 10(a)(1), you must comply with
all requirements regarding replanting payments contained in section 13
of the Basic Provisions;
(3) The insured crop must be damaged by an insurable cause of loss
to the extent that the remaining stand will not produce at least 90
percent of the production guarantee for the acreage; and
(4) The replanted crop must be seeded at a rate that is normal for
initially planted rice (if new seed is planted at a reduced seeding
rate into a partially damaged stand of rice, the acreage will not be
eligible for a replanting payment).
(b) Unless otherwise specified in the Special Provisions, the
amount of the replanting payment per acre will be the lesser of 20
percent of the production guarantee or 400 pounds, multiplied by your
projected price, multiplied by your share.
(c) When the crop is replanted using a practice that is uninsurable
for an original planting, the liability on the unit will be reduced by
the amount of the replanting payment. The premium amount will not be
reduced.
Sec. 457.141 [Amended]
0
102. Further amend Sec. 457.141 by revising section 11 to read as
follows:
11. Duties in the Event of Damage or Loss.
Representative samples are required in accordance with section 14
of the Basic Provisions.
Sec. 457.141 [Amended]
0
103. Further amend Sec. 457.141 in section 12 as follows:
0
a. Revise paragraphs (a) and (b); and
0
b. Revise the introductory text of paragraph (c)(1)(i).
The revised text reads as follows:
12. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event you
are unable to provide records of production that are acceptable to us
for any:
(1) Optional unit, we will combine all optional units for which
acceptable records of production were not provided; or
(2) Basic unit, we will allocate any commingled production to such
units in proportion to our liability on the harvested acreage for each
unit.
[[Page 15889]]
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection; or
(ii) Revenue protection guarantee (per acre) if you elected revenue
protection;
(2) Totaling the results of section 12(b)(1)(i) or 12(b)(1)(ii),
whichever is applicable;
(3) Multiplying the production to count by your:
(i) Projected price if you elected yield protection; or
(ii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 12(b)(3)(i) or 12(b)(3)(ii),
whichever is applicable;
(5) Subtracting the result of section 12(b)(4) from the result of
section 12(b)(2); and
(6) Multiplying the result of section 12(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of rice in the unit with a
production guarantee (per acre) of 3,750 pounds, your projected price
is $.0750, your harvest price is $.0700, and your production to count
is 150,000 pounds.
If you elected yield protection:
(1) 50 acres x (3,750 pound production guarantee x $.0750 projected
price) = $14,062.50 value of the production guarantee
(3) 150,000 pound production to count x $.0750 projected price =
$11,250.00 value of the production to count
(5) $14,062.50 - $11,250.00 = $2,812.50
(6) $2,812.50 x 1.000 share = $2,813.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (3,750 pound production guarantee x $.0750 projected
price) = $14,062.50 revenue protection guarantee
(3) 150,000 pound production to count x $.0700 harvest price =
$10,500.00 value of the production to count
(5) $14,062.50 - $10,500.00 = $3,562.50
(6) $3,562.50 x 1.000 share = $3,563.00 indemnity.
(c) * * *
(1) * * *
(i) For yield protection, not less than the production guarantee
and for revenue protection, not less than the amount of production that
when multiplied by the harvest price equals the revenue protection
guarantee (per acre) for acreage:
* * * * *
Sec. 457.141 [Amended]
0
104. Further amend Sec. 457.141 by revising section 13 to read as
follows:
13. Prevented Planting.
Your prevented planting coverage will be 45 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
0
105. Amend Sec. 457.157 as follows:
0
A. Revise the introductory text of Sec. 457.157 to read as set forth
below;
0
B. Remove the paragraph immediately preceding section 1 which refers to
the order of priority in the event of conflict; and
0
C. Amend section 2(b) by removing the phrase ``34(a)(1)'' and adding
the phrase ``34(b)(1)'' in its place.
The revised text reads as follows:
Sec. 457.157 Plum crop insurance provisions.
The Plum Crop Insurance Provisions for the 2011 and succeeding crop
years are as follows:
* * * * *
0
106. Revise the introductory text of Sec. 457.161 to read as follows:
Sec. 457.161 Canola and rapeseed crop insurance provisions.
The canola and rapeseed crop insurance provisions for the 2011 and
succeeding crop years are as follows:
* * * * *
Sec. 457.161 [Amended]
0
107. Further amend Sec. 457.161 by removing the paragraph immediately
preceding section 1 which refers to the order of priority in the event
of conflict.
Sec. 457.161 [Amended]
0
108. Further amend Sec. 457.161 by revising section 3 to read as
follows:
3. Insurance Guarantees, Coverage Levels, and Prices for
Determining Indemnities.
In addition to the requirements of section 3 of the Basic
Provisions:
(a) You must elect to insure your canola and rapeseed with either
revenue protection or yield protection by the sales closing date; and
(b) In counties with both fall and spring sales closing dates for
the insured crop:
(1) If you do not have any insured fall planted acreage of the
insured crop, you may change your coverage level, or your percentage of
projected price (if you have yield protection), or elect revenue
protection or yield protection, until the spring sales closing date; or
(2) If you have any insured fall planted acreage of the insured
crop, you may not change your coverage level, or your percentage of
projected price (if you have yield protection), or elect revenue
protection or yield protection, after the fall sales closing date.
* * * * *
Sec. 457.161 [Amended]
0
109. Further amend Sec. 457.161 in section 5 by adding the phrase
``Alabama and'' before the word ``Georgia''.
Sec. 457.161 [Amended]
0
110. Further amend Sec. 457.161 by revising section 7 to read as
follows:
7. Insurable Acreage.
In addition to the provisions of section 9 of the Basic Provisions:
(a) We will not insure any acreage that does not meet the rotation
requirements contained in the Special Provisions;
(b) Whenever the Special Provisions designate only a fall final
planting date, any acreage of canola or rapeseed damaged before such
final planting date, to the extent that growers in the area would
normally not further care for the crop, must be replanted to a fall
type of the insured crop unless we agree that replanting is not
practical;
(c) Whenever the Special Provisions designate both fall and spring
final planting dates:
(1) Any fall canola or rapeseed that is damaged before the spring
final planting date, to the extent that growers in the area would
normally not further care for the crop, must be replanted to a fall
type of the insured crop to maintain insurance based on the fall type
unless we agree that replanting is not practical. If it is not
practical to replant to the fall type of canola or rapeseed but is
practical to replant to a spring type, you must replant to a spring
type to keep your insurance based on the fall type in force; and
(2) Any fall canola or rapeseed acreage that is replanted to a
spring type of the same crop when it was practical to replant the fall
type will be insured as the spring type and the production guarantee,
premium, projected price, and harvest price applicable to the spring
type will be used. In this case, the acreage will be considered to be
initially planted to the spring type; and
(d) Whenever the Special Provisions designate a spring final
planting date, any acreage of spring canola or rapeseed damaged before
such final planting date, to the extent that growers in the area would
normally not further care for the crop, must be replanted to a spring
type of the insured crop unless we agree that replanting is not
practical; or
(e) Whenever the Special Provisions designate only a spring final
planting
[[Page 15890]]
date, any acreage of fall planted canola or rapeseed is not insured
unless you request such coverage on or before the spring sales closing
date, and we determine in writing that the acreage has an adequate
stand in the spring to produce the yield used to determine your
production guarantee. However, if we fail to inspect the acreage by the
spring final planting date, insurance will attach as specified in
section 7(e)(3):
(1) Your request for coverage must include the location and number
of acres of fall planted canola or rapeseed;
(2) The fall planted canola or rapeseed will be insured as a spring
type for the purpose of the production guarantee, premium, projected
price, and harvest price, if applicable;
(3) Insurance will attach to such acreage on the date we determine
an adequate stand exists or on the spring final planting date if we do
not determine adequacy of the stand by the spring final planting date;
(4) Any acreage of such fall planted canola or rapeseed that is
damaged after it is accepted for insurance but before the spring final
planting date, to the extent that growers in the area would normally
not further care for the crop, must be replanted to a spring type of
the insured crop unless we agree it is not practical to replant; and
(5) If fall planted acreage is not to be insured it must be
recorded on the acreage report as uninsured fall planted acreage.
Sec. 457.161 [Amended]
0
111. Further amend Sec. 457.161 by revising section 8 to read as
follows:
8. Insurance Period.
In accordance with the provisions of section 11 of the Basic
Provisions, the calendar date for the end of the insurance period is
October 31 of the calendar year in which the crop is normally
harvested.
Sec. 457.161 [Amended]
0
112. Further amend Sec. 457.161 in section 9 as follows:
0
a. Amend paragraph (g) by removing the word ``or'' at the end;
0
b. Revise paragraph (h); and
0
c. Add a new paragraph (i).
The revised and added text reads as follows:
9. Causes of Loss.
* * * * *
(h) Failure of the irrigation water supply due to a cause of loss
specified in sections 9(a) through (g) that also occurs during the
insurance period; or
(i) For revenue protection, a change in the harvest price from the
projected price, unless FCIC can prove the price change was the direct
result of an uninsured cause of loss specified in section 12(a) of the
Basic Provisions.
Sec. 457.161 [Amended]
0
113. Further amend Sec. 457.161 by revising section 10 to read as
follows:
10. Replanting Payment.
(a) A replanting payment is allowed as follows:
(1) In lieu of provisions in section 13 of the Basic Provisions
that limit the amount of a replant payment to the actual cost of
replanting, the amount of any replanting payment will be determined in
accordance with these Crop Provisions;
(2) Except as specified in section 10(a)(1), you must comply with
all requirements regarding replanting payments contained in section 13
of the Basic Provisions;
(3) The insured crop must be damaged by an insurable cause of loss
to the extent that the remaining stand will not produce at least 90
percent of the production guarantee for the acreage; and
(4) The replanted crop must be seeded at a rate sufficient to
achieve a total (undamaged and new seeding) plant population that is
considered appropriate by agricultural experts for the insured crop,
type and practice.
(b) Unless otherwise specified in the Special Provisions, the
amount of the replanting payment per acre will be the lesser of 20
percent of the production guarantee or 175 pounds, multiplied by your
projected price, multiplied by your share.
(c) When the crop is replanted using a practice that is uninsurable
for an original planting, the liability on the unit will be reduced by
the amount of the replanting payment. The premium amount will not be
reduced.
(d) If the acreage is replanted to an insured crop type that is
different than the insured crop type originally planted on the acreage:
(1) The production guarantee, premium, and projected price and
harvest price, as applicable, will be adjusted based on the replanted
type;
(2) Replanting payments will be calculated using your projected
price and production guarantee for the crop type that is replanted and
insured; and
(3) A revised acreage report will be required to reflect the
replanted type, as applicable.
Sec. 457.161 [Amended]
0
114. Further amend Sec. 457.161 by revising section 11 to read as
follows:
11. Duties in the Event of Damage or Loss.
Representative samples are required in accordance with section 14
of the Basic Provisions.
Sec. 457.161 [Amended]
0
115. Further amend Sec. 457.161 in section 12 as follows:
0
a. Revise paragraphs (a) and (b);
0
b. Revise the introductory text of paragraph (c)(1)(i);
0
c. Revise paragraph (d)(4);
0
d. Remove paragraph (d)(5); and
0
e. Revise paragraph (e), including removing the example.
The revised text reads as follows:
12. Settlement of Claim.
(a) We will determine your loss on a unit basis. In the event you
are unable to provide records of production that are acceptable to us
for any:
(1) Optional unit, we will combine all optional units for which
acceptable records of production were not provided; or
(2) Basic unit, we will allocate any commingled production to such
units in proportion to our liability on the harvested acreage for each
unit.
(b) In the event of loss or damage covered by this policy, we will
settle your claim by:
(1) Multiplying the number of insured acres of each type, as
applicable, by your respective:
(i) Yield protection guarantee (per acre) if you elected yield
protection; or
(ii) Revenue protection guarantee (per acre) if you elected revenue
protection;
(2) Totaling the results of section 12(b)(1)(i) or 12(b)(1)(ii),
whichever is applicable;
(3) Multiplying the production to count of each type, as
applicable, by your respective:
(i) Projected price if you elected yield protection; or
(ii) Harvest price if you elected revenue protection;
(4) Totaling the results of section 12(b)(3)(i) or 12(b)(3)(ii),
whichever is applicable;
(5) Subtracting the result of section 12(b)(4) from the result of
section 12(b)(2); and
(6) Multiplying the result of section 12(b)(5) by your share.
For example:
You have 100 percent share in 50 acres of canola in the unit with a
production guarantee (per acre) of 650 pounds, your projected price is
$.1220, your harvest price is $.1110, and your production to count is
31,000 pounds.
If you elected yield protection:
(1) 50 acres x (650 pound production guarantee x $.1220 projected
price) = $3,965.00 value of the production guarantee
[[Page 15891]]
(3) 31,000 pound production to count x $.1220 projected price =
$3,782.00 value of the production to count
(5) $3,965.00-$3,782.00 = $183.00
(6) $183.00 x 1.000 share = $183.00 indemnity; or
If you elected revenue protection:
(1) 50 acres x (650 pound production guarantee x $.1220 projected
price) = $3,965.00 revenue protection guarantee
(3) 31,000 pound production to count x $.1110 harvest price =
$3,441.00 value of the production to count
(5) $3,965.00-$3,441.00 = $524.00
(6) $524.00 x 1.000 share = $524.00 indemnity.
(c) * * *
(1) * * *
(i) For yield protection, not less than the production guarantee
and for revenue protection, not less than the amount of production that
when multiplied by the harvest price equals the revenue protection
guarantee (per acre) for acreage:
* * * * *
(d) * * *
(4) Canola production that is eligible for quality adjustment, as
specified in sections 12(d)(2) and (3), will be reduced in accordance
with the quality adjustment factors contained in the Special
Provisions.
(e) Any production harvested from plants growing in the insured
crop may be counted as production of the insured crop on an unadjusted
weight basis.
* * * * *
Sec. 457.161 [Amended]
0
116. Further amend Sec. 457.161 by revising section 14 to read as
follows:
14. Prevented Planting.
Your prevented planting coverage will be 60 percent of your
production guarantee for timely planted acreage. If you have additional
coverage and pay an additional premium, you may increase your prevented
planting coverage to a level specified in the actuarial documents.
* * * * *
0
117. Amend Sec. 457.171 as follows:
0
A. Revise the introductory text to read as set forth below;
0
B. Amend section 12(b) by removing the phrase ``14(a)(2)(Your Duties)''
and adding the phrase ``14(b)(1)'' in its place; and
0
C. Amend section 12(e) by removing the phrase ``14(a)(3)(Your Duties)''
and adding the phrase ``14(c)'' in its place.
The revised text reads as follows:
Sec. 457.171 Cabbage crop insurance provisions.
The Cabbage Crop Insurance Provisions for the 2011 and succeeding
crop years are as follows:
* * * * *
Signed in Washington, DC, on March 17, 2010.
William J. Murphy,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 2010-6432 Filed 3-29-10; 8:45 am]
BILLING CODE 3410-08-P