In the 2018 Farm Bill, Congress revised a number of provisions of statutory provisions relating to hemp (see sections 7129, 7501, 7605, 10113, 10114, and 12619). Congress also amended the Federal Crop Insurance Act relating to hemp (see 11101, 11106, 11113, 11119, and 11121) . Section 12619 of the 2018 Farm Bill made cannabis that qualifies as hemp no longer a controlled substance.
The Risk Management Agency (RMA) issued Manager’s Bulletin: MGR-19-002 that discussed the insurability of hemp under the Whole-Farm Revenue Protection (WFRP) plan of insurance for the 2019 crop year. MGR-19-002, quotes the provisions in the existing WFRP that state the farm operation is ineligible of it includes any revenue from a controlled substance (section 3), excludes revenue from a controlled substance from the allowable revenue (section 10), and voids the policy if the farm operation includes revenue from a controlled substance (section 17). Section 36 of the WFRP policy expressly states that controlled substances are not insurable under WFRP and that the farming operation is not eligible for insurance if it includes any revenue from a controlled substance even if the substance is legal in the state where it is produced.
In its action section, RMA determined that since hemp is no longer a controlled substance, revenue from its production will no longer make the farming operation ineligible for WFRP as of the date of passage of the 2018 Farm Bill (December 20, 2018). However, RMA also determined that, as of the contract change date for the WFRP for the 2019 crop year, August 31, 2018, cannabis was a controlled substance and because any cannabis was an uninsurable commodity so hemp cannot be insured under the WFRP policy for 2019. Since RMA considered hemp an uninsurable commodity, expected and historical revenue from hemp is excluded from allowable revenue and revenue to count under section 10(b)(9) of the WFRP policy.
ANALYSIS – There are several concerns with MGR-19-002. First, the 2018 Farm Bill did not exclude hemp from a controlled substance until December 2018. This means that, as of the August 31, 2018 contract change date, farming operations producing hemp would be ineligible for WFRP in their entirety. However, even though the 2018 Farm Bill was passed after the contract change date, RMA has elected to allow the farming operation to be eligible for insurance. Two issues come to mind. Policies cannot be changed after the contract change date because that is the date its terms and conditions are legally set. Further, the contract change date is the last date a policy may be revised for the purposes of the Standard Reinsurance Agreement. Therefore, this action leave RMA vulnerable to a legal challenge. In addition, MGR-19-002 does not reference any actual change made to those provision in the WFRP policy or Special Provisions to state that hemp is no longer a controlled substance. There is certainly a question regarding whether changes to a policy made by a bulletin, which is not part of the policy, are effective.
Second, even through RMA changed the WFRP policy to allow hemp growers to be eligible for WFRP, RMA did not make hemp insurable under the WFRP policy. Instead, RMA stated that since cannabis was a controlled substance as of the contract change date of August 31, 2019 hemp remains uninsurable under 2019 WFRP policy. The problem is that the contract change date applies equally to all provisions of the policy. As of the contract change date, hemp was still a controlled substance so it seems the eligibility and insurability provisions should have been treated the same but they were not. It would be interesting to know RMA’s rational basis for this disparate treatment.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.