On October 31, 2019, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-19-026, which extended sugar beet insurance coverage to clamps. RMA states that the Common Crop Insurance Policy Basic Provisions (Basic Provisions) provide that insurance coverage ends on the earliest of: 1) total destruction of the crop; 2) harvest of the crop: 3) final adjustment of the crop; 4) abandonment of the crop; or 5) the calendar date for the end of the insurance period. RMA states that the Sugar Beet Crop Provisions defines “harvest” as the topping and lifting of the sugar beets in the field. RMA states that due to difficult harvest conditions, sugar beet processors will accept harvested sugar beets stored in clamps and that RMA has been asked to extend coverage to sugar beets stored in clamps.
RMA states that if the processor agreed to accept sugar beets stored in clamps coverage could continue for up to seven days after the clamp was started but no later than the end of the insurance period listed in the county. RMA states that any sugar beets placed in clamps that is not delivered directly to the sugar beet processor by the earlier of seven days after the clamp was started of the calendar date for the end of the insurance period will be considered undamaged and the production guarantee will be assessed for such acreage. If less than the entire field of sugar beets will be placed in a clamp, the acreage of sugar beets lifted and placed in the clamp must be specifically identified.
ANALYSIS – As stated before, this has been an unusual year for agriculture and producers are suffering. There is little dispute that assistance is needed but the manner in which it is provided matters. MGR-19-026 underscores this issue. There are several items of concern in this bulletin. The simplest is what is a clamp. RMA never defines the term. Apparently “a clamp is formed by excavating a shallow rectangular depression in a field to make a base for the clamp. Root crops are then stacked onto the base up to a height of about 2 m (6 ft 7 in). When the clamp is full, the earth scraped from the field to make the base is then used to cover the root crops to a depth of several inches.”
After understanding what a clamp is, the most significant issue becomes where it is located. Under section 508(a)(2) of the Federal Crop Insurance Act insurance ends once the insured crop has been removed from the field. Therefore, the placement of the clamps matters. If the sugar beets are removed from the field in which they were grown and harvested, by statute, insurance ends and coverage cannot be extended while the crop is in the clamps. However, there is nothing in MGR-19-026 that states that the clamps must be located in the field in which the sugar beets were harvested. Extending coverage for sugar beets stored in clamps located on other fields would be a violation of statute. This issue should be clarified.
In addition, the policy itself states that insurance ends once the sugar beets are topped and lifted. The Basic Provisions states that policy provisions cannot be waived or varied in any way by anyone, including RMA. MGR-19-026 extends coverage beyond what is allowed by the policy, which is a variance or waiver of the policy provisions. Further, the Basic Provisions are published in the Code of Federal Regulations and have the force of law. Therefore, RMA’s authority to vary of waive the provisions of the Basic Provisions and Sugar Beet Crop Provisions is unclear.
Further, waivers or modifications of policy provisions after the contract change date have consequences, not the least of which are the eroding of the enforceability of the policy provisions and program integrity. In many cases, these modifications are not accounted for in the premium and additional losses may be incurred.
This is not the first time this year where RMA has waived or varied policy provisions. Approved insurance providers, producers, and reinsurers may no longer be certain of their exposure or liability when terms and conditions of insurance can change after the contract change date. Precedents may be being set that cannot be undone.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.