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    Crop Insurance News and Analysis – July 31, 2020 – Informational Memorandum: COM-20-003

    August 16, 2020 By //  by Kim Arrigo

    On July 31, 2020, the Risk Management Agency (RMA) issued Informational Memorandum: COM-20-003, involving first crop and second crop issues under the Common Crop Insurance Policy Basic Provisions (Basic Provisions) and the Rainfall and Vegetation Index (RI/VI) Plan Common Policy. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/COM-20-003.

    RMA states that Compliance has identified instances of first crop and second crop potential abuse where agents have misapplied differences in double cropping requirements under the Basic Provisions and RI/VI policy in their sales and marketing practices. RMA states that it found several instances where agents placed policies for the same producer with two different approved insurance providers (AIPs) to avoid detection. RMA states it found producers insured cotton acreage under Basic Provisions and subsequently insured an annual forage crop on the same acreage in the same crop year under RI/VI. RMA states that AIPs may have erroneously paid full indemnities for both the cotton and annual forage crop losses when double cropping these crops together may not be a generally recognized practice in the area by agricultural experts.

    RMA states that section 9(2)(viii)(B) of the Basic Provisions and section 6(i)(4) of the RI/VI policy require producers to provide written notice to each AIP that a second crop has been planted on acreage on which the producer had a first insured crop with a different AIP.

    RMA states that section 15(h)(7) of the Basic Provisions states that with respect to double cropped acreage for which one of the crops you have double cropped is insured under a plan of insurance not covered under the Basic Provisions, each insured crop must follow its own Basic Provisions, Crop Provisions, and Special Provisions to determine if the double cropping requirements have been met. RMA states that if the double cropping requirements in the applicable Basic Provisions, Crop Provisions, or Special Provisions have not been met for each insured crop, section 15(e) of these Basic Provisions applies. For example, RMA states that if the AIP determines that Annual Forage Crop Provisions double cropping requirements are not met, then section 15(e) would apply.

    RMA states that section 15(e) of the Basic Provisions “states, in relevant part, that you may elect to plant and insure a second crop on the same acreage for harvest in the same crop year (you will pay the full premium and, if there is an insurable loss to the second crop, receive the full amount of indemnity that may be due for the second crop…and 1) Collect an indemnity payment that is 35% of the insurable loss for the first insured crop; 2) be responsible for premium that is 35% of the premium that you would otherwise owe for the first insured crop; and 3) if the second insured crop does not suffer an insurable loss: collect an indemnity payment for the other 65% if insurable loss that was not previously paid…and be responsible for the remainder of the premium for the first insured crop that you did not pay.”

    In the Action section, RMA states that AIPs should remind their policyholders that in the event a second crop is planted and insured with a different AIP, or planted and insured by a different person, the policyholder must provide written notice to each AIP that a second crop was planted on acreage on which the policyholder had a first insured crop. AIPs should also remind policyholders that it is the policyholder’s responsibility to provide evidence of the production methods utilized to produce or manage the insured crop and allow it to make normal progress toward maturity, and are those production methods generally recognized by agricultural experts or organic agricultural experts, as applicable, for the area including double cropping practices in accordance with RI/VI.

    RMA states that AIPs should also remind policyholders and agents that the Annual Forage Crop Provisions modify RI/VI by excluding only the record keeping requirement for double cropping. In order for the insured annual forage crop to meet the double cropping requirement, the remaining conditions must be met, including but not limited to: 1) it is a practice that is generally recognized by agricultural experts or organic agricultural experts for the area to plant two or more crops for harvest in the same crop year; and 2) the second crop is customarily planted after the first crop for harvest on the same acreage in the same crop year in the area. RMA’s example is that regionally it is a generally recognized double cropping practice to plant wheat followed by soybeans.

    RMA states that it has not identified an instance of double cropping involving two spring seeded crops such as cotton followed by corn for silage. RMA states that if the AIP determines that Annual Forage Crop Provisions double cropping requirements are not met, then section 15(e) of the Basic Provisions, would apply and a full indemnity on both the first crop and second crop is not authorized.

    ANALYSIS – The first paragraph of COM-20-003 states out that Compliance has identified agents placing separate spring planted crops with separate AIPs to avoid detection that a second crop has been planted on the same acreage that a first crop has been planted on. This certainly appears to be an example of fraud, waste or abuse by the agent and producer but this is never discussed in COM-20-003. Further, it is never discussed that such conduct could allow for the imposition of civil, criminal or administrative sanctions. This is a serious allegation yet RMA focuses on the violation of policy provisions and not the potential for fraud, waste or abuse.

    RMA only states that AIPs should remind producers of their obligation to report with each AIP if it has planted a first and second crop insured with different AIPs. RMA also states that AIPs should remind producers that it is the producers responsibility to provide evidence that it meets the good farming practice and double cropping requirements. RMA only states that AIPs should remind producers that under RI/VI all the double cropping provisions are applicable except the record keeping requirement. Nowhere does it suggest that AIPs may want to investigate to determine whether agents have been placing policies with different AIPs to avoid detection of planting first and second crops.

    Further, COM-20-003 is ambiguous. In the first sentence of the last paragraph in the Action section RMA states “RMA has not identified an instance of double cropping involving two spring seeded crops such as cotton followed by corn for silage.”  This could mean RMA has consulted agricultural experts and determined that producers cannot double crop cotton and corn for silage so AIPs should be applying the indemnity reduction to the first insured crop. It could also simply mean that RMA has checked its database and has not found that cotton and corn for grain silage has ever been double cropped and AIPs should consult agricultural experts regarding whether it is a generally recognized practice to plant two or more crops for harvest in the same crop year. It is not clear what RMA intended.

    All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.

    Filed Under: Blog

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