On July 21, 2020, the Risk Management Agency (RMA) published Final Agency Determination: FAD-296 interpreting section 11(d) of the Pear Crop Provisions. https://www.rma.usda.gov/en/Policy-and-Procedure/Final-Agency-Determinations/Pear-Crop-Provisions-11d-FAD-296. Two requests for interpretation were provided:
RMA states that the first requestor interpreted section 11(d) of the Pear Crop Provisions to mean that any damaged pears that were not graded or appraised prior to the placement in storage will not be considered damaged and will be considered production to count when adjusting the loss. RMA states that the first requestor contends that section 11(d) of the Pear Crop Provisions applies to section 13 of the Pear Crop Provisions, which is the Fresh Pear Quality Adjustment Endorsement, and since the Pear Crop Provisions considers the pears that were not graded as “not damaged,” no indemnity would be due under the Fresh Pear Quality Adjustment Endorsement.
RMA states that the second requestor contends that the interpretation of the provisions provided by the first requestor applies to a situation where the producer knows or has good reason to know that a pear crop was damaged prior to placement in storage. RMA states that the second requestor interprets that the policy provisions are silent and are not applicable when a producer has no knowledge of latent crop defect before placement in storage. The second requestor states the policy does not deny coverage for nor address an unknown latent pear defect.
RMA states it agrees with the first requestor’s interpretation of section 11(d) of the Pear Crop Provisions. RMA states that, in accordance with section 11(b)(2) of the Basic Provisions, insurance ends at the harvest of the insured crop so the Pear Crop Provisions do not provide coverage for production once the insured crop is placed in storage. RMA states that if pear production is not graded or appraised prior to the earlier of the time pears are placed in storage or the date the pears are delivered to a packer, processor, or other handler, it is not possible to determine whether the damage occurred during the insurance period or after the end of the insurance period.
RMA also states that, in accordance with section 14(b) of the Basic Provisions, when there is damage or loss of production, the producer must give the approved insurance provider notice, by unit, within 72 hours of initial discovery of damage or loss of production (but not later than 15 days after the end of the insurance period, even if the producer has not harvested the crop). RMA states that, in accordance with section 11(d) of the Pear Crop Provisions, any production that is not graded or appraised prior to the placement in storage will be considered production to count when adjusting the loss. RMA states that section 11(d) of the Pear Crop Provisions is applicable to pears insured under the Fresh Pear Quality Adjustment Endorsement.
ANALYSIS – RMA’s interpretation is correct any production that is not graded or appraised prior to the placement in storage will be considered production to count when adjusting the loss. There is no ambiguity with respect to section 11(d). It clearly states that any pear production that is not graded or appraised prior to the earlier of the date the pears are placed in storage or delivered to the packer, processor, or handler will not be considered damaged.
To accept the second requestors interpretation would effectively render section 11(d) moot because it would provide producers with the incentive not to get their production appraised or graded before storage or delivery because they could always claim ignorance of the damage. Contrary to the interpretation of the second requestor, the policy is not silent. Section 11(d) creates an obligation on the producer to get production appraised or appraised before storage or delivery to discover any damage. Producers who fail to comply with this obligation must accept the consequences of their actions, which is all unappraised or ungraded production counts as production to count.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.