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California Drought

Mar 3, 2014

Q: Will the diversion of water from insured perennial crops to save other perennial crops be considered an eligible cause of loss and indemnified?
A: Par. 84 N (2) of the LAM states “Producers may allocate life-sustaining amounts of water to their perennial crops (except forage crops) to avoid long-term losses to their operations regardless of whether or not a perennial crop is insured …”. As in all loss situations the Approved Insurance Provider (AIP) must determine, on a case by case basis, the circumstances of the insured operation, available water, and reasonable management decisions for the particular operation. If an insured diverts water as described, and such diversion is deemed a good irrigation practice and the amount of water is not in excess of the amount of water needed to sustain the life of the crop, losses on the insured perennial crops should be indemnified due to an insurable cause of loss drought. In addition, all other applicable provisions and policies apply.

Q: In the past RMA has provided a baseline memorandum for South of Delta and North of Delta farmland in California. Will this continue for 2014?
A: The Davis Regional Office intends on providing any relevant information it gathers regarding water availability, similar to the ones posted in recent years, by the end of April.

Q: Added Land will increase eligibility for Prevented Planting acres; AIP’s would like clarification on the timing of when a lease or purchase of added land would be considered acceptable for added land to currently insured acreage.
A: Section 17(e)(1)(i)(B) of the Basic Provisions provides the policy terms that are responsive to this question.

Q: Par 24B(2)(d) of the PP LASH states in part:
(d) Decreased water allocation resulting from the diversion of water for environmental or other reasons is not an insurable cause of loss unless the diversion is made necessary due to an insured cause of loss. California Exchange Contractors may or may not get the water that they were supposed to get due to re-allocation of water for human health and safety. Will the diversion of water for human health and safety due to drought/failure of the irrigation water supply be considered an insurable cause of loss?

A: The policy provisions relative to this question have not changed from past years where AIPs faced similar circumstances. As in the past, only diversions of water attributable to an insured cause of loss, such as drought that occur during the insurance period are covered under the terms of the policy. If AIPs are able to determine the diversions had to be made due to drought conditions they may be covered under the policy; however, diversions not resulting from the drought but for other reasons such as environmental, endangered species, etc. (Delta smelt) would not be covered.

Q: Based on the LAM Paragraph 84 N (2): Can a grower decide to divert all water from older trees to younger trees or must the grower provide life sustaining water to all acres? (i.e.: Almond orchard of 28 years with declining production and reaching the end of the life span; all water is diverted to an uninsurable block of 5 year old trees to assure their survival.)
A: Please refer to the LAM Paragraph 84. (M)(7) and (N) for relevant instructions regarding this question. The LAM allows the diversion of water for life-sustaining purposes. In addition, growers are required to follow good farming practices. In the absence of crop insurance, if a grower would divert all his/her water to sustain the younger trees, then it would be considered an acceptable practice. The amount of life-sustaining water would be based on soil conditions, water quality, and the age of the trees as recommended by agricultural experts.

Q: Questions have been raised for the 2014 crop year on perennials crops regarding the drought and the provision that states you may not increase your coverage level if a cause of loss has occurred that could reduce your yield. Requests for level increases must be made before the Sales Closing Date and the last perennial crop closing date in California is January 31. Neither growers, agents, AIPs or RMA could know if yields would be reduced or if there would be an actual failure of the water supply as of January 31. Historically on average 48% of the entire water year's precipitation occurs after January 31. In some years over 100%of the average annual precipitation has occurred after January 31. Also it should be noted that the majority of perennial crop acreage in California is irrigated from the growers' own personal well water and not from a surface irrigation water district. On January 31 it is impossible to know what the underground water table level will be later in the year let alone if there will crop yield losses. Annual Crop Growers are allowed to change the coverage level; even with the knowledge they are going to be claiming Prevented Planting. The only restriction is they cannot add options or endorsements. It seems inequitable to restrict perennial growers.
Does RMA for 2014 in California intend to interpret that this crop provision in Section 3 for perennial crops to apply to possible future adverse weather results, or only as originally intended to avoid abuse when disease, damage, or cultural practices occurred the previous year?

A: RMA does not particularly understand the question being asked. The language cited in the applicable policies will apply; therefore, in 2014, as the policy states “You may not increase your elected or assigned coverage level .... if a cause of loss that would or could reduce the yield of the insured crop has occurred prior to the time that you request the increase.”

Q: For the 2014 crop year if the language is applied literally is January 31 a reasonable cut off for increased coverage level changes?
A: The language is applicable at any time an increase in coverage is requested for the current crop year, if a cause of loss that would or could reduce the yield of the insured crop has occurred prior to the time that you request the increase.

Contact Information

For more information, contact the Davis Regional Office.