Final Agency Determination: FAD-018
Subject: Interpretation of a portion of section 457.7 of the Common Crop Insurance Policy Basic
Provisions (Basic Provisions), published in the Code of Federal Regulations (C.F.R.) at 7 C.F.R.
On May 9, 2003, the Risk Management Agency was asked for a Final Agency Determination for the 2000
crop year, regarding the interpretation of a portion of section 457.7 of the Basic Provisions.
This request is pursuant to 7 C.F.R., part 400, subpart X. Section 457.7 states in relevant part:
No indemnity shall be paid unless the insured complies with all terms and conditions of the contract.
Section 457.7 is interpreted to mean that "before an insurance company must make a payment to an
insured agricultural producer under a crop insurance contract reinsured by the Federal Crop
Insurance Corporation ("FCIC"), the insured must comply fully and completely with all terms and
conditions of the contract, and that no indemnity is due the insured if he or she fails to comply
or only partially complies with such terms and conditions."
Final Agency Determination
The Federal Crop Insurance Corporation (FCIC) agrees that section 457.7 requires an insured to
comply with all policy provisions before an indemnity is paid. In addition, section 14(a) of the
Common Crop Insurance Policy (Basic Provisions) (7 C.F.R. 457.8) requires compliance with all
policy provisions before an indemnity is paid. Failure to comply with the policy requirements
constitutes a breach of the insurance contract and could jeopardize receipt of any indemnity if
such breach is determined to be substantive. For example, if the breach results in the inability
to accurately determine the amount of loss or whether a loss occurred, then no indemnity could be
However, when failure to comply with a provision is determined to not affect the amount or
existence of a loss in any way, or when the policy provides a remedy for the failure to comply
with a policy term, then an indemnity may still be paid. For example, section 3(c) of the Basic
Provisions requires the insured to report production for an insured crop by a certain time, but
this section also states a yield will be assigned if the insured fails to comply with the
requirement. In this case, although the insured did not fully comply with a policy provision, an
indemnity could still be paid.
In accordance with 7 C.F.R. 400.765(c), this Final Agency Determination is binding on all
participants in the Federal crop insurance program for crop year 2000.
Date of Issue: August 5, 2003