On August 15, 2019, the Risk Management Agency (RMA) issued Managers Bulletin MGR-19-023. In that Bulletin, RMA offered emergency flood relief in the form of deferred interest on premiums on the basis that producers have not yet received indemnity payments for the severe flooding and excess moisture. For the 2019 crop year only, RMA deferred premium until the earliest termination date or November 30, 2019. RMA stated that for any premium that is not paid by the earliest of the applicable termination date or November 30, interest will accrue consistent with the terms of the policy. RMA also states that to assist the AIPs and provide relief from the requirements of the Standard Reinsurance Agreement that all uncollected premium be paid to the Federal Crop Insurance Corporation (FCIC), RMA will also defer collection of any unpaid producer premium from the AIPs, without interest, by two months.
ANALYSIS – In the accompanying press release, RMA stated that this action is not unprecedented and that producers typically have some crop harvested and cash flow to make their billing date, but with so many late planted crops, this year will be an anomaly.
RMA is correct that deferral of premium is not unprecedented because RMA did it in 2018 in MGR-18-013. However MGR-18-013 was done in October 1, 2019, after Hurricane Florence damaged crops. That bulletin was in direct response to a recent hurricane and there was concerns about the impossibility of making payments because of infrastructure concerns. So the 2019 situation is not the same since the severe flooding and excess moisture occurred to delay or prevent planting much earlier in the crop year and RMA has not alluded to any impossibility that would prevent producers from paying premium except for financial issues.
While I sympathize with producers and understand the extreme pressures they are under this year, every year in some area of the country there will be producers that have planted their crops late or are unable to timely harvest their crops because of adverse weather. These producers may also not have harvested some of their crops and have the cash flow to pay premiums. In these instances, producers are still required to timely pay premiums.
This is another instance where RMA is revising the policy after the contract change date and it has not provided an impossibility defense it has used previously. This precedent makes future enforcement of policy terms difficult at best and placed the AIP in the unenviable position of having to defend the policy in similar situations where RMA has not granted relief. I am not sure what the right answer is but waiving policy terms leads to a significant slippery slope that could adversely affect the integrity of the program.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.