On August 13, 2020, the Risk Management Agency (RMA) issued Frequently Asked Questions (FAQs)related to the August 10 Derecho in the Midwest, which were updated on August 19, 2020. https://www.rma.usda.gov/News-Room/Frequently-Asked-Questions/August-10-2020-Derecho. In those FAQs, producers were advised:
- To promptly notify their crop insurance agent to file a notice of loss if they suspect damage or a loss in production due to wind or any other cause of loss. When a producer files a notice of loss, it allows approved insurance providers (AIP) the opportunity to inspect and accurately appraise the production in order to timely settle any potential claims.
- To provide the notice of loss to the AIP within 72 hours of the initial time of discovery of damage or loss of production and confirmed in writing within 15 days. Under certain conditions, an AIP may accept a delayed notice of loss, when filing a timely notice of loss is not feasible.
- That adverse weather conditions are an insurable cause of loss. Adverse weather includes events such as hail, frost, freeze, wind, drought, and excess moisture. Multi-Peril Crop Insurance covers damage to the crop in the field, not damage to farm infrastructure such as grain bins, irrigation equipment, livestock barns, etc.
- That AIPs will make a determination of loss on a case-by-case basis. If the AIP determines that field conditions will prevent producers from ever being able to mechanically harvest the crop, that production will not be counted and will be considered a full loss. If the producer chooses to harvest, an indemnity may be paid on the amount that falls below the insurance guarantee.
- The producer may agree to settle the claim based on appraised production rather than taking to harvest. However, if production is later harvested, the producer must accept the higher of harvested production or appraised production for claims purposes. This may require a revised claim and repayment of any overpaid indemnity.
- Producers may have purchased non-Federal supplemental wind coverage, which is widely available, that may additionally support losses. The producer may be entitled to an indemnity under non-Federal supplemental wind coverage as well as their MPCI policy.
- The policy does not require harvest for claims purposes. However, if acreage is not harvested, claims will be settled based on appraised production. If the AIP cannot conduct an accurate appraisal, AIPs have the option to authorize the use of representative sample areas, which are areas of a field that the AIP authorizes the producer to leave when the producer wants immediate release of the field to go to another use, but an accurate appraisal cannot be made at the present time. Appraisals from the representative sample area of the unharvested crop acreage are used to settle the claim and are conducted at a later date to determine the per-acre appraisal for the entire unharvested acreage.
- If the producer agrees to settle based on appraised production, but they still attempt to harvest for silage, the producer must accept the higher of the appraised or harvested production for claims purposes.
- If the producer agrees to settle based on appraised production and the AIP releases for another use, and then the producer attempts to harvest for silage, there are no impacts and the producer is not required to take the higher of appraised or harvested production. However, if the producer attempts to harvest as grain, the higher of the appraised or actual harvested production will be used for claims purposes.
- The producer can hay or graze a second crop without impacting their crop insurance payment if each of the following are true: 1)the ground has been appraised by the AIP; 2) the ground has been released for another use by the AIP; 3) it is not practical to replant the insured crop; and 4) the second crop will not be insured.
- AIPs will make case-by-case determinations to production based on in-field inspections. If the AIP cannot conduct an accurate appraisal, AIPs have the option to authorize the use of representative sample areas.
- The AIP makes this determination if the crop can be mechanically harvested on a case-by-case basis. If a determination cannot be made at the time of inspection, the AIP (adjuster) may authorize the use of representative sample areas.
- If the crop is normally mechanically harvested, and the AIP determines that as a result of the insured cause of loss, the acreage will never be able to be mechanically harvested, the production to count on the acreage will be considered zero and there are no destruction requirements. The AIP will settle the claim based on a zero appraisal.
- There are no destruction requirements when claims are settled based on appraisals and released by the AIP. Destruction requirements are only applicable to production considered to have zero market value. (Note: Producers with operations consisting of no-till production and that are currently enrolled in NRCS programs should consult with their local office to help determine the best method to remove excess vegetation.)
- If the insured is unable to mechanically harvest, or agrees to settle based on appraised production, and the insured chooses to utilize the damaged production by means of baling, chopping, etc., (any use other than harvest as defined in the applicable Crop Provisions) there would be no impact to the indemnity. However, if any portion of the production is harvested at any time, either mechanically or by hand, the claim will be revised to reflect the greater of the appraised or harvested production. Any overpaid indemnity must be repaid.
- For production that qualifies for quality adjustment, zero market value typically applies to mature production that has been harvested, or mature appraised production that will not be harvested. Zero market value occurs when no buyers in the local area are willing to purchase the production and fair consideration to deliver production to a market outside the local marketing area (distant market) is equal to or greater than the production’s value at the distant market. Zero market value procedure requires destruction of the production.
- In order to qualify for quality adjustment and zero market value, the grain must be mature (under 40% moisture). Further, corn insured as silage is not eligible for quality adjustment, therefore zero market value does not apply.
- Unless the AIP determines production to be zero market value, the production is not required to be destroyed. (Note: Producers with operations consisting of no-till production and that are currently enrolled in NRCS programs should consult with their local office to help determine the best method to remove excess vegetation.)
RMA issued updated FAQs on September 11, 2020. https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/August-10-2020-Derecho.
ANALYSIS – Unlike many Midwest storms, the derecho left large swaths of acreage damaged or destroyed. One of the major issues is downed corn, where the corn itself was undamaged but the acreage is unable to be mechanically harvested. These FAQs answers these and other questions that have arisen in the aftermath of the storm. The FAQs were updated on September 11 , 2020 but RMA did not identify what changes were made.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.