The Risk Management Agency (RMA) issued Final Agency Determination FAD-287, which interpreted section 21 of the Common Crop Insurance Policy Basic Provisions (Basic Provisions). The interpretation sought was regarding those provisions that allowed for the correction. Section 21(b)(3) discusses the knowing misreporting of information and requiring the replacement of yields determined to be incorrect and repayment of any overpaid amounts. The requestor opined that section 21(b)(3) only addresses one scenario, knowing misreporting, and does not address to claims corrections for other non-compliance with policy terms. The requestor cites to FAD-106 where RMA addressed a similar question regarding sections 21(f)(1) and (g) where the requestor there stated that the assessment of assigned yields was the only instance where the AIP could go back to a previous year and claim overpayments. RMA rejected that position, stating that sections 21(f)(1) and (g) provide only one insurance were the AIP could go back and claim overpaid indemnities. In FAD-287, RMA agreed with the requestors interpretation that section 21(b)(3) provides one instance where claims corrections or overpayments are discussed. Non-compliance with any other provision could entitle the AIP to collect overpaid amounts.
On October 16, 2019, RMA updated FAD-287 to include a second requestor’s interpretation and RMA’s judgment of that interpretation. The second requestor stated that there is nothing in the Basic Provisions that would allow an AIP to revisit and adjust claims which have been proven by records that the AIP found satisfactory and the claim paid. absent a knowing misreporting of information or a violation of the record retention requirements. The second requestor states that no policy provision allows the AIP to readjust a previously settled claim if the insured properly provides records to the AIP, the AIP reviews the records and pays the claim, and the insured properly retains the records. The second requestor states that FAD-106 makes it clear that only non-compliance by an insured can result in an AIP being able to recover alleged overpayments. The second requestor states that AIPs can only readjust previously paid claims when the insured has not been compliant with policy provisions and cannot unilaterally change its mind and overturn past loss adjustments based solely on instances such as a different adjuster or administration’s opinion of the records. The second requestor states that differing opinions regarding records does not justify readjustment of an already paid claim. The second requestor states that it in incumbent on the AIP to thoroughly review the insured’s record when the claim is made and come to a final decision.
RMA disagreed with the second requestor that only non-compliance by an insured can result in AIPs being able to reclaim alleged overpayments. RMA states that the AIPs have a duty to correct claims. RMA refers to FAD-281, which states that the Federal crop insurance program uses taxpayer dollars and FCIC and AIPs have a duty to ensure those dollars in accordance with policy and procedure. RMA states that if the AIP discovers that a claim was not adjusted in accordance with the loss adjustment procedures the AIP is required to correct the claim. RMA cites to Old Republic Insurance Company v. FCIC, 947 F.2d 269 (7th Circuit 1991). RMA agrees with the first requestor that if an error is recognized at any point it must be corrected.
ANALYSIS – The Federal crop insurance program is funded in large part through taxpayer dollars. While premiums generally cover indemnities, RMA funds on average about 50 percent of the premiums. Given this, RMA has an obligation to ensure that these taxpayer dollars are properly spent, which is why the policy specifies that where information is incorrect and it affects the amount of the claim paid, the producer is required to repay any overpaid amounts. This would apply to any misreported or incorrect information. The policy just provides some specific examples.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.