On April 20, 2020, the Risk Management Agency (RMA) issued an Updated Final Agency Determination: FAD-294 relating to section 10(c) of the 2017 Coarse Grains Crop Provisions. https://www.rma.usda.gov/Policy-and-Procedure/Final-Agency-Determinations/Coarse-Grains-Crop-Provisions-FAD-294. The requestor interpreted section 10(c) of the Coarse Grains Crop Provisions to mean that the producer must decide the method of harvest at the time of harvest, not at the time of the sales closing date for the purchase of crop insurance or the acreage reporting date. the requestor states that at the time of insuring crops for coverage in the spring and filing acreage reporting forms, the producer simply chooses the level of protection for the crop, notwithstanding that the producer may intend to harvest the crop in a particular manner.
The requestor states that if the producer decides to harvest the crop in a manner other than what it was insured as, then, pursuant to section (10)(c), the producer must notify the insurance agency before harvest begins to avoid any penalties. As long as the producer makes the insurance agency aware of any plan to harvest a crop in a manner other than what it was insured as, then the producer will not incur any penalties, and it is up to the insurance agency to settle a claim with respect to the alternative method of harvest.
The requestor states that in the case of corn, a producer who plants corn may elect to insure it with revenue or yield protection, irrespective of any intended method of harvest. Should the producer elect to insure the corn as grain with revenue protection and, at the time of harvest, decide to chop it as silage, then, pursuant to section (10)(c) of the Coarse Grains Crop Provisions, he must notify the insurance agency to avoid any penalties (and vice versa should the producer insure the corn as silage and decide to harvest it as grain).
RMA interpreted section 10(c) of the Coarse Grains Crop Provisions to mean the insured must select the plan of insurance and level of protection by the sales closing date. RMA states that by the acreage reporting date, the producer must report the type/practice, including intended use, that was planted in accordance with the policy and requirements for the county. RMA states that for corn only, if the actuarial documents for the county provide a premium rate for both grain and silage, all insurable acreage will be insured as the type or types reported by the producer on or before the acreage reporting date. RMA states that after the acreage reporting date, if the producer decides to harvest the crop in a manner other than what it was insured as, the producer must notify the approved insurance provider (AIP) before harvest begins to allow the AIP to inspect and appraise the crop, and obtain written consent from the AIP to put the insured crop to another use.
ANALYSIS – As an initial matter, the website states that this is an updated FAD-294 but there is nothing in FAD-294 that states what what parts of the interpretation were updated or why. FAD-294 is drafted as new FAD. Further, there is nothing that states that this FAD supersedes the previous version. To the extent that this FAD is binding on all participants, it would be helpful to clarify what changes were made to the prior FAD-294 and which interpretation takes precedence.
With respect to the interpretation, it appears that RMA is disagreeing with the requestor. Where the requestor states that producer decides the method of harvest at the time of harvest, RMA states that the intended use must be reported by the acreage reporting date. This means that one must presume that “method of harvest” are “intended use” are synonymous. RMA states that if, after the acreage reporting date, the producer elects to harvest the crop in a manner other that what the crop was insured as the producer must notify the AIP before harvest begins to allow the AIP to appraise the crop, and obtain consent to put the crop to another use. This is correct. However, RMA could have referenced sections 5(d) and 5(e) of the Coarse Grains Crop Provisions, which state that grain sorghum is only insurable if planted for harvest as grain and soybeans are only insurable if planted for harvest as beans, to support its interpretation. If the manner of harvest determines insurability, the producer cannot wait until harvest to decide on the method of harvest.
RMA could have also referenced section 5(c) of the Coarse Grains Crop Provisions, which states that for corn if both grain and silage are insurable, the producer must report the type to be insured on or before the acreage reporting date, to support its interpretation. RMA could have referenced section 11(c)(1)(i)(E) of the Coarse Grain Crop Provisions, which specifically references what happens if the producer reports planting the crop for grain and harvests it for silage. The provisions of the policy do not support the requestors interpretation that the producer must determine the manner of harvest is reported at the time of harvest.
What is not addressed in this FAD is the requestor’s interpretation that it can harvest the crop in a manner other than what was reported, without penalty, as long as the producer notifies the AIP before harvest. Presumably the “penalty” the requestor is referring to is the assignment of the guarantee for production to count when the producer fails to give notice before harvest if the producer reported planting the crop as grain but harvest it as silage, or vice versa. The policy is clear that as long as the producer notifies the AIP prior to harvest, the producer will not receive the guarantee as production to count.
However, the requestor also asserts that, after notice is provided, the AIP must “settle a claim with respect to the alternative method of harvest.” It is not clear what this means but section 11(c)(1)(iv) of the Coarse Grains Crop Provisions states that the production to count is the potential production on insured acreage the producer puts to another use. If the crop was insured as grain and later is harvested as silage, this is acreage put to another use. Therefore, if the reported use was harvest as grain and the producer later harvests it as silage, the AIP will appraise the acreage as harvest for grain.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.