On August 21, 2020, the Risk Management Agency (RMA) issued an Informational Memorandum: AO-20-003 regarding the use of representative sample areas. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/OA-20-003. RMA states that it has received numerous reports that approved insurance providers (AIPs) are instructing insureds that RMA requires damaged production be harvested to be eligible for a crop insurance indemnity. RMA states that neither the Common Crop Insurance Policy Basic Provisions (Basic Provisions) nor individual Crop Provisions requires harvest. RMA states that the 2020 Loss Adjustment Manual provides procedures for situations in which the insured may or may not harvest, including procedures for representative sample area appraisals, procedures for situations in which the crop will never be able to be mechanically harvested, and procedures for release of acreage.
RMA states that insureds have the option to settle claims based on appraised or harvested production. RMA states that when insureds request their acreage be released for another use, AIPs may require that representative sample areas be left for reasons listed in paragraph 924 of the Loss Adjustment Manual. RMA states that if representative sample areas are authorized, insureds are required to maintain the representative sample areas as they would if the acreage would be taken to harvest. further, RMA states that if insureds comply with these requirements and the representative sample areas are maintained until the time of normal harvest, any additional production damage to the representative sample areas due to a named peril in the policy will be considered an insured Cause of Loss, including revenue losses. RMA states that if the crop is determined to be unable to be mechanically harvested, the AIP should refer to subparagraph 921D in the Loss Adjustment Manual.
ANALYSIS – RMA is correct that the Basic Provisions and the Crop Provisions do not require harvest of the crop as a prerequisite to the payment of an indemnity. Section 14(c) and (d) of the Basic Provisions and the claims section in the Crop Provisions contain provisions for appraisals to be the basis for an indemnity whether or not the crop is harvested. Some policies require consent and representative samples if the crop or acreage is destroyed, put to another use, or abandoned. The Loss Adjustment Manual contains the procedures to be followed when appraisals are used in the adjustment of a claim and the care and maintenance of representative samples.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.