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Final Agency Determination: FAD-68

FAD-68

Subject: On October 6, 2006, the Risk Management Agency received a request for a Final Agency Determination for the 2006 crop year, regarding the interpretation of section 28 of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8, as it applies to the applicable crop and crop year. This request is pursuant to 7 C.F.R. part 400, subpart X.

Background

The Basic Provisions (7 C.F.R. 457.8) states:

Section 1. Definitions

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Actuarial documents - The material for the crop year which is available for public inspection in your agent's office and published on RMA's website at http://www.rma.usda.gov/ or a successor website, and which shows available coverage levels, information needed to determine amounts of insurance, premium rates, premium adjustment percentages, practices, particular type or varieties of the insurable crop, insurable acreage, and other related information regarding crop insurance in the county.

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Crop Year - The period within which the insured crop is normally grown, regardless of whether or not it is actually grown, and designated by the calendar year in which the insured crop is normally harvested, unless otherwise specified in the Crop Provisions.

Section 28. Transfer of Coverage and Right to Indemnity

If you transfer any part of your share during the crop year, you may transfer your coverage rights, if the transferee is eligible for crop insurance. We will not be liable for any more than the liability determined in accordance with your policy that existed before the transfer occurred. The transfer of coverage rights must be on our form and will not be effective until approved by us in writing. Both you and the transferee are jointly and severally liable for the payment of the premium and administrative fees. The transferee has all rights and responsibilities under this policy consistent with the transferee’s interest.
Interpretation Submitted

The requestor indicates the key word contained in section 28 of the Basic Provisions is crop year as it applies to the specific cabbage crop year for which the interpretation is sought. Specifically, in the requestor’s opinion there are the two distinct planting periods for cabbage in a calendar year in which the insured crop is normally grown in Colquitt County, Georgia. Therefore, there are two distinct crop years for cabbage in a calendar year in Colquitt County, Georgia. For each planting period or crop year: the type of cabbage and the number of acres of each type of cabbage vary; the liability coverage, and the premium charged therefore, are calculated based upon the type of cabbage planted and the number of acres of each type of cabbage planted; and a Summary of Coverage is then issued reflecting the type of cabbage, the acreage for each type, the liability coverage and the premiums charged therefore. Thus, there is a spring cabbage crop year for which liability coverage is provided for the specific type, and number of acres for each type, of cabbage planted during the spring cabbage crop year; likewise, for a fall cabbage crop year.

The requestor also noted that if a producer would transfer any part of the producer's share during the spring cabbage crop Year, no coverage would be provided in excess of the liability coverage listed in the policy in effect for the spring cabbage crop year. The same would hold true for transfers made during the fall cabbage crop year. Any transfers made subsequent to the harvesting of a cabbage crop year and prior to the planting of the following cabbage crop year, do not occur during either cabbage crop year, and as a result, are not subject to limitation under Section 28 of the Terms and Conditions Basic Provisions.

In the requestor's opinion as section 28 reads and applies to cabbage planted in Colquitt County, Georgia; it refers to a Transfer of Right to Indemnity which occurs during a cabbage crop year only not before the cabbage crop year or after the cabbage crop year. For the limitation referenced in section 28 to apply, the transfer would have to occur after cabbage is planted and before the same crop of cabbage is harvested.

Final Agency Determination

The Federal Crop Insurance Corporation does not agree with the requestor's interpretation of crop year in that fall planted cabbage and spring planted cabbage are two distinct crop years.

Crop year is defined in the Basic Provisions as the period in which the insured crop is normally produced and is designated by the year in which it is harvested. This means that there is only one crop year for each insured crop. Therefore, the issue is whether each planting of cabbage is considered a separate insured crop that can have separate crop years.

Section 6 of the Cabbage Pilot Crop Provisions provides “the insured crop will be all the cabbage types in the county that are listed in the Special Provisions, for which a premium rate is provided by the actuarial documents, in which you have a share , and that are . . . (c) Planted within the planting periods designated in the Special Provisions." Therefore, there is only one cabbage crop, which includes cabbage planted during both the spring and fall planting period. This means there is only one crop year that encompasses both the spring and fall planting periods.

This is supported by the other policy provisions. Section 2 of the Cabbage Crop Provisions states that optional units may be established for each type and planting period if all other conditions in section 34 of the Basic Provisions are met. Under section 34 of the Basic Provisions, optional units are smaller units made from the basic unit. The Basic Provisions define the basic unit as all insurable acreage of the insured crop in the county. Therefore, optional units are still comprised of all acreage of the same insured crop.

Further, section 3(b) of the Cabbage Crop Provisions states that the producer can only select one coverage level for the insured crop unless the Crop Provisions allow separate insurance for an individual type or variety. In such case the producer is charged separate administrative fees. The Cabbage Crop Provisions does not allow separate insurance for each planting of cabbage and only one administrative fee is charged that covers both plantings of cabbage.

The Summary of Coverage may contain separate premiums, guarantees and indemnities for each planting only because insurance is provided on an optional unit basis by type and planting period. Each optional unit is still comprised of all the acreage of the same insured cabbage crop. The fact that there are separate insurance periods for each planting of cabbage does not mean each planting can be considered a separate crop. The insurance period is the time frame during which the crop is at risk and losses occurring during that time frame are covered. If the crop is planted and harvested more than once, each would require a separate insurance period because there will be time after cabbage has been harvested and before the next planting is planted where no coverage is provided. This does not affect the unit structure or the fact that all acreage of cabbage in the county, as long as it is planted within the two planting periods, is the insured crop.

FCIC does not agree with the requester's interpretation as to how crop year applies to the provisions contained in section 28 of the Basic Provisions. Since both the fall planted and spring planted cabbage are part of the same insured crop, they both fall within the same crop year. This means that any transfer of an insured share or right to an indemnity that occurs after insurance attaches to the first planting of cabbage and before the completion of harvest or the end of the insurance period, whichever is applicable, for the last planting of cabbage would fall within the same crop year and be subject to the limitations contained in section 28 of the Basic Provisions.

In accordance with 7 C.F.R. 400.765(c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2004 and succeeding crop years.

Date of Issue: December 20, 2006