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Final Agency Determination: FAD-207

Subject: Request dated December 10, 2013, to the Risk Management Agency (RMA) requesting a Final Agency Determination for the 2012 crop year regarding the interpretation of section 4 of the Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. § 457.8. This request is pursuant to 7 C.F.R. § 400, subpart X.

Background:

The preamble to the Basic Provisions states, in relevant part:

This insurance policy is reinsured by the Federal Crop Insurance Corporation (FCIC) under the provisions of the Federal Crop Insurance Act (Act) (7 U.S.C. 1501 et seq.). All provisions of the policy and rights and responsibilities of the parties are specifically subject to the Act. The provisions of the policy may not be waived or varied in any way by us, our insurance agent or any other contractor or employee of ours or any employee of USDA unless the policy specifically authorizes a waiver or modification by written agreement. We will use the procedures (handbooks, manuals, memoranda and bulletins), as issued by FCIC and published on RMA’s Web site at http://www.rma.usda.gov/ or a successor Web site, in the administration of this policy, including the adjustment of any loss or claim submitted hereunder. In the event that we cannot pay your loss because we are insolvent or are otherwise unable to perform our duties under our reinsurance agreement with FCIC, your claim will be settled in accordance with the provisions of this policy and FCIC will be responsible for any amounts owed. No state guarantee fund will be liable for your loss.
Throughout this policy, “you” and “your” refer to the named insured shown on the accepted application and “we,” “us,” and “our” refer to the insurance company providing insurance. Unless the context indicates otherwise, use of the plural form of a word includes the singular and use of the singular form of the word includes the plural.
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Section 1 of the Basic Provisions states, in relevant part:

1. Definitions.
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Contract - (See “policy”).
Contract change date - The calendar date by which changes to the policy, if any, will be made available in accordance with section 4 of these Basic Provisions.
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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.
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Section 4 of the Basic Provisions states:

4. Contract Changes.

(a) We may change the terms of your coverage under this policy from year to year.

(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.

Additionally, the requestor states 7 U.S.C. §7996(a)(2)(b) does not authorize the Secretary of USDA to grant equitable relief to producers participating in programs governed by the Federal Crop Insurance Act.

Interpretation Submitted

The requestor interprets these policy and statutory provisions to mean that the only changes to policy provisions that may be made after the applicable contract change date are changes to “clear errors” (such as obvious typographical errors) described in section 4(b) of the Basic Provisions. Substantive changes to policy provisions are not authorized. Moreover, an “inadvertent error” is not a “clear error” and is therefore not correctable after the applicable contract change date. A clear error is an error that everyone can agree on, such as mere transposition of a number. A clear error is not an intentional change to the policy provisions, which is later characterized as inadvertent. There is no legal authority for the Risk Management Agency (RMA) to change an inadvertent error after the contract change date.

In Manager’s Bulletin: MGR-13-004, RMA recognized the limits on its authority to change policy provisions, including Special Provisions, after the contract change date as RMA stated: “RMA does not have the authority to waive or alter this provision of the policy…”

The requestor also interprets these policy and statutory provisions to mean that the terms “we,” “us,” and “our” refer to the insurance company providing insurance. Thus, only an approved insurance provider can change a clear error in the policy pursuant to section 4(b). RMA cannot make changes to the policy. See 7 U.S.C. §7996(a)(2)(b).

Final Agency Determination

FCIC disagrees in part with the requestor’s interpretation of the meaning of the phrase “clear errors.” The examples provide an indication of the types of errors that are correctable and some may characterize these as more than typographical errors. These examples may be characterized as inadvertent errors. However, FCIC agrees that these types of errors are usually open and obvious.

FCIC also agrees the terms “we,” “us,” and “our” refer to the insurance company providing insurance. FCIC does not agree that only the insurance provider can correct clear errors. RMA, as the regulator of the Federal crop insurance program, establishes the terms and conditions of insurance and is the only entity with the authority to correct the clear errors. Because the policy is a contract between the insurance provider and the producer, it is the insurance provider that communicates those corrections to the producer but that does not give the insurance provider the authority to unilaterally make any corrections.

Correcting clear errors is not the same as equitable relief under 7 U.S.C. §7996(a)(2)(b). FCIC agrees that equitable relief is not available to the Federal crop insurance program.

In accordance with 7 C.F.R. § 400.765(c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the crop years the policy provisions are in effect. Any appeal of this decision must be in accordance with 7 C.F.R. § 400.768(g).

Date of Issue: February 26, 2014