On January 29, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-020-002 regarding the extension of time to obtain samples for the purposes of quality adjustment on unharvested acreage. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-002. RMA states that the Special Provisions and the Loss Adjustment Manual (LAM) require approved insurance providers (AIPs) to collect samples for the purpose of quality adjustment not later than 60 days after the calendar date for the end of the insurance period. RMA states that this requirement applies to all eligible crops with quality adjustment procedures in the Special Provisions. RMA states that due to prolonged and extreme winter conditions, obtaining samples by the current 60-day deadline may be impossible or may present a risk to the health or safety of personnel.
As a result, RMA states that it is extending the deadline to collect samples for 2019 only. RMA states when the AIP has granted additional time to harvest due to extreme winter conditons, including ice and snow, the required deadline to obtain samples for quality adjustment is not later than 120 days after the calendar date for the end of the insurance period and applies to open claims where the crop is currently not harvested. RMA states that the “AIPs must obtain timely crop samples for the insured to be eligible for quality adjustment determinations in accordance with the Special Provisions.”
ANALYSIS – Impossibility has always been allowed by RMA as a defense to a failure to comply with a term of the policy and that appears to be the defense asserted by RMA. The problem is that there is nothing in the Bulletin that requires proof of impossibility by the producer. RMA presumes impossibility for all states and all counties where quality adjustment is allowed by the policy. Not all states or even counties are experiencing the extreme winter weather, nor has it been as prolonged in all states or counties, but the Bulletin still allows an additional 60 days to obtain samples regardless of whether the producer is actually prevented from obtaining samples due to the extreme weather.
In the past when there may be an impossibility defense, RMA has given the AIPs the discretion to consider the defense when the producer has proof of impossibility. For example, communications are down because of a hurricane, etc. Here, RMA is allowing the impossibility defense without evidence of impossibility and that is problematic. To solve this, RMA simply needed to give the AIPs the discretion to extend deadlines in those cases where the producer can demonstrate an impossibility to obtain samples within the 60 day deadline. It may not change the outcome but it protects the program from possible abuse.
In addition, the more time that passes after the insurance period, the more difficult it is to establish that damage was caused by an insurable cause of loss that occurred within the insurance period. Other intervening causes of loss may cause damage in that additional 60 days allowed by the Bulletin that would not otherwise be covered because it is outside the insurance period. This places a difficult burden on the AIP to distinguish between insurable and uninsurable losses unless the presumption is that all damage to the crop stems from the original insured cause of loss that prevented harvesting and that it occurred within the insurance period. However, this is a dangerous presumption that could adversely affect program integrity.
Further, in those cases where the crop may have been damaged during the insurance period, the Bulletin incentivizes the producer to wait that additional 60 days in the hopes of additional damage and a higher payout because there are no consequences if the producer failed to obtain the samples when weather permits earlier in the 120 day period.
Lastly, it is unclear what is meant by the last sentence in the Action section. As written, it appears to negate the rest of the Bulletin by stating that samples must be timely obtained in accordance with the Special Provisions, which only provides 60 days after the end of the insurance period to obtain samples. It is possible that RMA meant “timely” to mean the 120 days and “in accordance with the Special Provisions” to mean all other requirements except the deadline but that is not how it reads. This probably needs clarification.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.