On April 3, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-20-008 and a press release regarding self-certifications for replant inspections and waivers of the witness requirement for assignments of indemnities. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-008. https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2020-News/USDA-Adds-Additional-Flexibilities-for-Crop-Insurance–to-Support-Americas-Farmers-and-Ranchers. RMA states it is relaxing the requirements in response to the stay-at-home orders in many states that may prevent loss adjusters from completing the on-the-farm inspections and obtaining necessary signatures. The 2020 Loss Adjustment Manual allows self-certification replant inspections for certain crops with 50 gross acres (before considering share) per unit or less. Producers growing the authorized crops could self-certify to their replanting without an on-the-farm inspection.
With respect to the assignment of indemnities, RMA states that producers may assign their indemnity to a creditor or person with whom the producer owes a debt or other pecuniary obligation using the Assignment of Indemnity Form, which must be signed by the producer, a witness and the creditor before it can be approved by the approved insurance provider (AIP) and become effective. RMA states that industry representatives are having difficulty obtaining witnesses and have requested relief.
In response to these issues, RMA is allowing self-certification for up to 100 gross acres per unit instead of 50 acres. In addition, RMA states it is authorizing AIPs to allow producers who have elected basic or enterprise units to apply the 100 acre limitation, and perform self-certifications, for each underlying databases that could qualify was separate optional units under the basic unit or separate optional or basic units under the enterprise unit. RMA states that all other replanting requirements remain unchanged.
RMA also states that AIPs have the authority to waive the witness signature requirement for the approval of assignments through July 15, 2020, as applicable for crop years 2019 through 2021. RMA states that the signature of the creditor and producer must be a pen and ink signature in the hand of the person whose signature is required or an acceptable electronic signature. RMA states that AIPs must obtain and maintain documentation for proof of the debt or pecuniary obligation before the assignment is accepted.
ANALYSIS – The crop insurance program, as designed, required substantial interactions between producers, agents and loss adjusters. Given the stay-at-home restrictions and uncertainty when they will be lifted, it makes sense that these interactions may need to be curtailed. MGR-20-008 relaxes some of the previously required personal interactions. It increases the maximum acres that can be self-certified for replant payment purposes, eliminating the requirement for on-farm inspections. While this will reduce the interactions between loss adjusters and producers, it is not clear it will eliminate them, although the amount of acreage that can be self-certified may be increased significantly. For example, assume the producer has a 1000 acre enterprise unit that is made up from four optional units of 250 acres each. Under the existing procedures, the producer could only self-certify if the replanted acreage was 50 acres or less for the whole enterprise unit. Under MGR-20-008, the producer would be able to self-certify the replanted acreage if the producer replanted 100 acres or less in each of the four optional units. Instead of 50 acres, the producer could potentially self-certify 400 acres. This increase may be sufficient to eliminate most on-farm inspections.
The witness requirement for assignments of indemnity were intended to protect the interests of producers by ensuring that the assignment was valid and entered into freely between the producer and the creditor. This is an issue because section 509 of the Federal Crop Insurance Act precludes anyone from using any legal process to obtain the producer’s indemnity before it is paid to the producer. The only exception allowed by RMA is when the producer freely elects to assign the indemnity to a creditor. Requirements for assignments of indemnity are found in section 29 of the Common Crop Insurance Policy Basic Provisions (Basic Provisions). Assignments are limited to valid creditors and persons with whom the producer has a pecuniary obligation. Section 29(a) states that the producer may be required to provide proof of the debt or pecuniary obligation. MGR-20-008 now makes it mandatory for the AIP to obtain and maintain documentation for proof of the debt or pecuniary gain. RMA suggests this change is due to the waiver of the witness signature. The witness signature can certainly provide proof that the assignment was entered into willingly but it is not clear the witness can attest that a valid debt or pecuniary obligation was owed. However, if the producer is required to provide proof of the debt or pecuniary obligation prior to the AIP’s acceptance of the assignment of indemnity, this could provide evidence of a free intent to assign the indemnity and of the valid debt.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.