The Risk Management Agency (RMA) issued two Managers Bulletins, MGR-19-009 looking at the impact of North Carolina State disaster payments on Whole Farm Revenue Protection (WFRP) indemnities for 2018, and MGR-19-010, which deals with veteran farmer or rancher benefits.
With respect to MGR-19-009, WFRP requires that certain payments that compensate for damage to insured commodities other than from WFRP be included as revenue. WFRP states that any government program payments will be added to revenue-to-count when determining a claim. RMA states that disaster payments are given as an example. RMA also states that only Federal disaster payments impact revenue to count, citing section 44 of the WFRP Handbook, which states:
44 Allowable Revenue and Allowable Revenue Worksheet
(7) All of the following must be excluded from the allowable revenue in each year of the whole-farm history period, expected revenue for the insurance period, and revenue-to-count for claims:
(h) Revenue from government agricultural programs, including NAP, Federal crop disaster payments, and replant payments;
In MGR-10-009, RMA stated it was issuing a clarification that for the 2018 insurance ear only, only Federal disaster payments will be considered revenue-to-count for farming operations in North Carolina. State disaster payments are excluded. RMA also stated that no disaster payments from any source will be allowable revenue when completing the whole farm history report for future years and will not be considered when establishing the approved revenue of the farm operation.
ANALYSIS – The bulletin does provide a benefit for North Carolina producers for 2018 but there are some inconsistencies. RMA has used the WFRP Handbook to narrow the provisions in section 25(e) of the WFRP policy, which refers to any program payments from other programs such as disaster payments, to only refer to Federal disaster payments. Assuming that such an interpretation has a rational basis, it is unclear why it would only apply to the 2018 insurance year. The interpretation should apply to all years in which the provisions are in effect. This makes this bulletin confusing.
With respect to MGR-19-010, RMA states that the 2018 Farm Bill added a definition of a “veteran farmer or rancher” and to provide them the same benefits as beginning farmers and ranchers. These benefits include the waiver of catastrophic risk protection and additional coverage administrative fees, provide an additional premium subsidy of 10 percentage points, use of another person’s production history for acreage transferred to the veteran farmer or rancher who had previously been involved in the decision making or physical activities on the farm, and increasing the yield from 60 to 80 percent of the applicable transitional yield for the yield substitution provisions. Veterans are to apply by June 1, 2019 or the acreage reporting date, whichever is later to determine eligibility. RMA made the veteran farmer and rancher benefits available for the 2019 crop year for any crop whose sales closing date was December 20, 2018 or later. The benefits will be available for all policies for 2010. RMA issued procedures published at https://www.rma.usda.gov/-/media/RMAweb/Bulletins/MGR-19-010-Attachment.ashx?la=en.
ANALYSIS – There is no question that this bulletin provides benefits to veterans that were previously not available. The benefits provided are contained in the Common Crop Insurance Policy Basic Provisions with respect to beginning farmers and ranchers and are now being extended to veteran farmers. The problem is that many of the crop policies for which these benefits are being made available for the 2019 crop year had contract change dates of November 30. Historically, changes to the policy have not been allowed after the contract change date because it violates the terms of the policy, violates the principles of insurance, and violates the Standard Reinsurance Agreement, which states that eligible crop insurance contracts reinsured are those in effect as of the contract change date.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.