June 28, 2019 was an full day for the Risk Management Agency (RMA). In addition to numerous handbooks that were updated and released, RMA published a rule that revised the Common Crop Insurance Policy Basic Provisions (Basic Provisions), Area Risk Protection Insurance (ARPI) policy, and Catastrophic Risk Protection (CAT) Endorsement. Many of the changes were mandated by the 2018 Farm Bill. In the Basic Provisions, RMA added provisions that officially implements the cup on the actual production history (APH), which limits the amount the APH can be reduced to 10 percent of the prior year’s APH. RMA revised the native sod provisions to have them apply to all crops not just annual crops and the reductions apply for 4 cumulative crop years when the crop is insured with a limit to the first 10 years after initial tilling. Provisions were added regarding veteran farmers and ranchers that waives all administrative fees, provides an additional premium subsidy of 10 points higher than otherwise offered, and allows the use of another persons production history when the acreage is transferred to the veteran and the veteran previously was involved in the production of the crop or livestock. In ARPI, RMA added a definition and a reference for veteran farmer or rancher and revised the definition of tilled. RMA also revised provisions regarding premium offsets and native sod. In the CAT Endorsement, RMA revised the administrative fee from $300 to $655 for each crop in the county.
RMA also made changes to the Basic Provisions and ARPI unrelated to the 2018 Farm Bill, which includes provisions to clarify that offsets must be first applied to the policy and crop associated with the claim before they are applied to other policies, having assigned yields for misreporting only apply to those units affected by the incorrect certification, allowing correction for inadvertent errors without penalty on the production report, allows approved insurance providers to provide changes made to the policy to be sent to producers electronically instead of a hard copy unless the producer does not have the ability to receive the information or the producer elects to receive a hard copy, and moving the provisions regarding the exclusion of yields to section 36 and renaming the section.
Administratively, RMA also revised the Supplemental Coverage Option (SCO), RMA revised those provisions that allowed only a single election of whether to purchase SCO or elect Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC). Now producers must annually report acreage elected for ARC on their acreage reports. If producers fail to accurately report their ARC acreage, they will be ineligible for SCO on the acreage but still be required to pay 60 percent of the premium due for the effected acreage.
RMA also revised the Texas Citrus Tree policy to add lemon trees in selected counties, provide an option to select a percent of the price election for all citrus trees by type, and allow enterprise units to insure all acreage of the same tree crop.
ANALYSIS – The contract change date for most fall planted crops was June 30, 2019, so policy changes had to be made by that date to be effective for the 2020 crop year – provided that RMA adheres to this legal mandate. With respect to the Basic Provisions, there appears to be a conflict in the applicability provisions. The Summary and Background sections states the changes will be “applicable for the 2020 crop year for crops with a contract change date on or after June 30, 2019. For all crops the changes to the policy made by in this rule are applicable for the 2021 and succeeding crop years.” The Final Rule section states “For the reasons discussed above, FCIC amends 7 CFR parts 402, 407, and 457, effective for the 2020 crop year for crops with a contract change date on or after June 30, 2019, and for the 2021 and succeeding crop years for all other crops.” RMA may want to issue a correction to remove any ambiguity.
The SCO change was mandated by law but the decision to require payment of 60 percent of the premium when ARC acreage is not properly reported seems punitive. In sections 2 and 27 of the Basic Provisions where indemnity is denied but premium is still owed the amount is 20 percent of the premium. Twenty percent corresponds to the administrative and operating expenses incurred by the approved insurance provider in administering the policy. To the extent that amounts are charged in excess of the costs incurred could be considered punitive, which requires specific legislative authority that to my knowledge does not exist except as what is contained in section 515(h) of the Federal Crop Insurance Act (FCIA), which only allows civil fines.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.