On February 20, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-20-003. related to prevented planting on added land. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-003. RMA states it has received questions when prevented planting decisions should be made on added land. RMA quotes section 20(f)(12) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions)., which states that prevented planting coverage is not available for any acreage if a cause of loss has occurred that may prevent planting at the time:
(i) You lease the acreage (except acreage you leased the previous crop year and continue to lease in the current crop year);
(ii) You buy the acreage;
(iii) The acreage is released from a USDA program which prohibits harvest of a crop;
(iv) You request a written agreement to insure the acreage; or
(v) You acquire the acreage through means other than lease or purchase (such as inherited or gifted acreage).
In its action section, RMA states that approved insurance providers (AIP) may consider conditions at the time the producer takes possession of the added land, which means the AIP must determine if a cause of loss that may prevent planting exists at the time the insured takes possession of the land.
The example RMA provides is where a landlord and tenant sign a lease on January 1. At the time the lease is executed, there is still an unharvested crop from a previous tenant in the field and a cause of loss that could prevent planting. On March 1 of the same year the previous tenant harvests the crop and the new tenant takes possession of the acreage. Based on the conditions when the new tenant takes possession, the AIP determines there was not a cause of loss present that could prevent planting and the AIP provides prevented planting coverage on the added acreage.
ANALYSIS – The outcome makes sense but unfortunately, this is not what the policy permits. There are specific dates contained in section 17(f)(12) of the Basic Provisions – the date the land is leased, the date the land is bought, the date the acreage is released from a USDA program, the date of a written agreement request, the date the producer otherwise acquires the acreage. None of these provisions refer to the date of possession of the acreage by the producer or allow the stated dates to be revised based on the date of possession.
Prevented planting on added land is not a new issue. There have been similar issues with prevented planting and added land over the years. This has given RMA numerous opportunities to revise the Basic Provisions to allow certain determinations to be made at the time of possession of the land. Instead, RMA has elected to revise the provisions to modify their terms by bulletin after the contract change date, which is expressly prohibited by the preamble to the Basic Provisions published as regulation that has the force of law.
Further, it is unclear whether RMA has considered the flip side of this. The producer signs the lease for the added land on March 15 but the previous tenant still has to remove equipment, such as irrigation equipment, from the added land so the producer does not take possession of the land until April 1. There is a major storm on March 28 that may cause prevented planting. Under section 17(f)(12), since there was no cause of loss at the time the lease was signed, the producer is eligible for prevented planting. However, at the time the producer possessed the land a cause of loss that could prevent planting had occurred so under MGR-20-003, the producer would not be eligible for prevented planting. This type of ambiguity can adversely affect program integrity and result in disparate treatment between producers.
The contract change date exists for a very important reason, to add certainty to the program for producers, agents, AIPs, reinsurers, and RMA and its oversight bodies. Modification or revision of the policy terms after the contract change dates removes the uncertainty and chips away at the integrity of the program.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.