On September 22, 2020, the Risk Management Agency (RMA) published Final Agency Determination FAD-299 regarding the one year limitation period in which to initiation arbitration proceedings after the date the claim is denied or the approved insurance provider renders a determination in which the insured disagrees. https://www.rma.usda.gov/Policy-and-Procedure/Final-Agency-Determinations/Basic-Provisions-20b-FAD-299.
The first requestor interprets section 20(b)(1) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions) to mean that the one year period to file for arbitration is tolled if a loss adjusters makes misrepresentations regarding the loss adjustment on the claim. The requestor interprets section 20(b)(1) to permit equitable tolling only as to the improper and incorrect adjustment, not the entirety of the claim. The requestor states that under these circumstances: improper and incorrect claims adjustment based on a claims adjuster’s failure to adjust a claim in accordance with approved loss adjustment procedures, a policyholder’s reliance on the adjuster’s false representation that the claim had been adjusted properly and correctly, discovery by the policyholder of the improper and incorrect claim adjustment more than one year after payment of the incorrect indemnity, and the insurer’s refusal to correct the erroneously adjusted claim, compliance with the one-year limitations period is impossible unless the period is equitably tolled until the policyholder’s discovery. The requestor claims to distinguish the Merrill case on the basis that the issue is the loss adjustment procedures, which the producer is not presumed to know.
The requestor states that if section 20(b)(1) were to be interpreted otherwise, the policyholder, by no fault of his own, would be barred from his sole remedy. The requestor states that if the arbitration period may never be tolled, then an AIP would be strongly disincentivized from ever reviewing past claims, even if it had actual knowledge that a policyholder has been defrauded, and even if such reviews were conducted, and an underpayment was identified, AIPs would have every incentive not to notify the policyholder of that underpayment until over one year had passed since the incorrect payment. The policyholder would be completely at the mercy of the insurer.
The requestor notes that FAD-281, issued September 20, 2018, explicitly recognized that: “If the AIP discovers a claim was not adjusted according to loss adjustment procedures established or approved by FCIC the AIP is required to correct the claim.” The requestor believes the interpretation requested would provide a remedy in the event that the AIP discovers that a claim was not adjusted according to loss adjustment procedures established or approved by FCIC, but neither corrects the claim nor informs the policyholder of the AIP’s error within one year of the AIP’s discovery.
The requestor states it is aware of FAD-280, and notes that while the issue posed here is similar to the issue posed there, FAD-280 did not address whether the one-year limitations period would be equitably tolled. The requestor states, that certainly FCIC allows equitable relief to those policyholders under crop insurance policies. See, e.g., FAD-259, published on RMA’s website on, August 17, 2016, (“FCIC has historically recognized impossibility as a defense to performance under the policy”); Manager’s Bulletin No. MGR-03-012, published on RMA’s website on September 29, 2003, (finding equitable remedy necessary where policy provisions proved “unworkable”); Manager’s Bulletin No. MGR-09-004, published on RMA’s website on June 12, 2009, (establishing a “fair and equitable [market] price” where no market price could be established using solely the policy’s pricing formula); Manager’s Bulletin No. MGR-05-021, published on RMA’s website on, November 15, 2005, (allowing post-deadline revisions to acreage report for leased land where without revisions the result would have been “inequitable because the determination of whether the producer can lease the land is outside the control of the producer”).
The second requestor contends that all information needed to verify the accuracy of the claim is available to a policyholder, such as the yield, the guarantee, and the number of acres, such that the policyholder can verify the amount of indemnity owed by the AIP, either independently or by consulting the policyholder’s agent, at the time the payment is made and the policyholder must act to protect its interests and to verify the amount of the claim at the time the payment or determination is made. Further, the one-year limitation period is meaningless if the policyholder can defeat its application by alleging misrepresentation or other equitable claims to formulate a basis to toll the limitations period.
The second requestor further contends the FCIC has already determined in FAD-211 that:
The policy is codified in the Code of Federal Regulations and has the force of law. Therefore, no one has the authority to waive or modify the provisions except as authorized in the regulations themselves. In accordance with section 506(l) of the Federal Crop Insurance Act (Act) (7 U.S.C. §1506(l)) state and local laws are preempted to the extent that they are in conflict with the Act, regulations or contracts of FCIC. A vast majority of the policy provisions, including the preamble to the policy, are codified in regulation so they preempt state and local laws.
The second requestor contends that FAD-280 considered this specific fact pattern in relation to other equitable principals and RMA stated therein there is no basis for modification of the terms of the policy by equitable principals.
The second requestor states that the first requester seeks a final agency determination which essentially overturns FAD-211 and FAD-280 to allow equitable estoppel to prevent the application of the one-year limitation provision until such time as the policyholder becomes aware of the claim. The second requestor states that such a change would overturn years of precedent in the industry and would essentially open up claims to be brought indefinitely as long as the policyholder was able to state he or she did not realize they were entitled to indemnity under the insurance policy. Both FAD-211 and FAD-280 reject the application of equitable principals to extend the limitations. The second requestor states that RMA should not add exceptions to the rule created by a federal regulation. The second requestor states this result is fair to all parties since the policyholder already has access to all the information required to allow him or her to calculate the indemnity owed under the policy at the time the initial determination is made. The second requestor states that if the policyholder were to make a basic effort to calculate the loss he or she claims to have sustained, then he or she would know whether or not the indemnity paid was correct at the time it was paid. No action or inaction on the part of the AIP or its adjuster changes the simple fact that the policyholder could make the same calculation at the same time the AIP did. The policyholder has access to all marketing and disposition records, as well as production records, and can verify the calculations of the AIP at any time the policyholder chooses to do so.
The second requester also agrees with FCIC conclusion in FAD-281 that if the AIP determines a claim was not adjusted in accordance with procedures established or approved by the FCIC, the AIP is required to correct the claim; however, that would create a new determination from which the policyholder could pursue arbitration if it disagreed. The second requestor states that FAD 281 does not address the situation where an AIP does not determine that the adjustment process was not followed. The simple question before the RMA at this time is whether or not arbitration may be commenced more than one year after the determination the policyholder seeks to challenge.
RMA states that it agrees with the second requestor that the one-year limitation provision in section 20(a)(1) prevents a policyholder from bringing a claim based upon the policy more than one year after the claim payment or the determination which is being challenged. This is supported by FAD-280, published on RMA’s website on September 18, 2018, which states that the one-year limitation provision prevents a policyholder from bringing an arbitration action or seeking judicial review under the terms of the policy more than one year after the claim payment or the determination which is being challenged.
RMA states that if arbitration proceedings include or are initiated based on extra-contractual claims and equitable estoppel principals are brought forth, this does not alter or add exceptions to the one-year period. FAD-258, published on RMA’s website on November 19, 2019, states section 20(b)(1) makes it clear that even if mediation is elected, the initiation of arbitration proceedings must occur within one year of the date the approved insurance provider denies the claim or renders the determination with which the policyholder disagrees. FCIC also agrees that failure to initiate arbitration within the period prescribed by section 20(b)(1) precludes the policyholder from seeking judicial review.
ANALYSIS – RMA is correct in its interpretation that the one year limitation period to file for arbitration prevents a producer from bringing a claim more than one year after the claim is paid or the determination made. The one year limitation period is to provide finality to the claims process and the burden is on the producer to determine whether he or she agrees with the claim determination. The first requestor is correct that FAD-281 recognizes that if the approved insurance provider (AIP) discovers the claim is not paid in accordance with the loss adjustment procedures, the AIP is required to correct the claim. However, the first requestor interprets this to mean that the producer’s only remedy if the one year limitation period has passed is to allow equitable tolling. This is not correct. In fact, the second requestor is correct that if the producer believes the claim was improperly adjusted, it can request the AIP to correct the claim. Whatever the AIPs decides becomes a new determination from which the one year limitation period begins again. Therefore, the producer is not left without a remedy.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.