On April 23, 2020, the Risk Management Agency (RMA) issued Informational Memorandum: AO-20-001 regarding the Wildfire Hurricane Indemnity Program and Wildfire Hurricane Indemnity Program+ Linkage Requirements. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/OA-20-001. RMA stated that it received questions about the Wildfire Hurricane Indemnity Program and Wildfire Hurricane Indemnity Program+ administered by the Farm Service Agency (FSA). RMA states it was asked if the Occurrence Loss Option (OLO) available under the Nursery Value Select pilot program can be used to meet the linkage requirements for the Wildfire Hurricane Indemnity Program and Wildfire Hurricane Indemnity Program+. RMA states that if producers purchase the OLO with the 50 percent buy-up coverage or higher, the producer will meet the the Wildfire Hurricane Indemnity Program and Wildfire Hurricane Indemnity Program+ linkage requirement of 60/100 or equivalent coverage provided the producers adhere to all other requirements for these programs.
ANALYSIS – There are several issued with this Informational Memorandum. The first is why there is a reference to the coverage level under the OLO, which is an option under the Nursery Value Select policy, and not the coverage level under the Nursery Value Select policy. The OLO is not a stand alone policy and it does not operate without the Nursery Value Select policy. Further, under the terms of the Nursery Value Select policy, the coverage level is selected under section 3(b). https://www.rma.usda.gov/-/media/RMAweb/Policies/Nursery-Value-Select/Nursery-Value-Select-Crop-Provisions-21-1010.ashx. There is no provision in section 15 that allows for selection of coverage level for the OLO, much less one that is different than the coverage level for the Nursery Value Select policy.
The OLO operates to allow the deductible to operate at the plant level and not the unit level so maybe there is concern that producers who select the OLO do not actually have an effective 60 percent coverage level but nothing is referenced in the Memorandum. RMA may have an explanation of why the OLO can determine linkage instead of the coverage level under the Nursery Value Select policy, but it was not included in the Memorandum.
The other issue is RMA’s statement that an OLO with a 50 percent buy-up coverage or higher will meet the linkage requirement. FSA’s final rule published on September 13, 2019 states “Participants must obtain crop insurance or NAP, as may be applicable, at the 60 percent coverage level or higher.” https://www.federalregister.gov/documents/2019/09/13/2019-19932/agricultural-disaster-indemnity-programs. Therefore, it is unclear why a 50 percent buy-up coverage would meet the 60 percent or higher coverage required by regulation. Further, FSA’s regulation does not refer to equivalent coverage to 60 percent. Again, RMA may have an explanation, but it was not included in the Memorandum.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.