On March 16, 2020, the Risk Management Agency (RMA) issued Final Agency Determination: FAD 292, interpreting section 20(a) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions). https://www.rma.usda.gov/en/Policy-and-Procedure/Final-Agency-Determinations/Basic-Provisions-20a-FAD-292. The first requestor interpreted sections 20(a) and (b)(1) and (2) of the Basic Provisions to mean that all rights and obligations under the policy are reserved exclusively to the insured named on the application, including the right to initiate arbitration and seek and collect any indemnities owed. The first requestor cites to the definition of “you” and “insured” in the Basic Provisions as the named insured shown on the application. The first requestor acknowledges that section 855 of the 2017 General Standards Handbook allows an insured to grant a third party the authority to sign crop insurance documents on the insured’s behalf through a properly executed power of attorney (attorney-in-fact). The requestor states that the power of attorney does not grant the third party any rights or interests under the policy, including the right to an indemnity or the right to file a demand or prosecute the insured’s claims in arbitration. The first requestor states section 509 of the Federal Crop Insurance Act (FCIA) precludes a power of attorney from initiating or prosecuting any legal process, including arbitration, on its own behalf in an attempt to collect indemnities that may otherwise be owed to the insured. The first requestor states that rights and interests in the policy can only be transferred or assigned to a third party in compliance with sections 28 and 29 of the Basic Provisions.
The second requestor interprets section 20 to mean that section 20 allows a person to initiate arbitration through a properly executed power of attorney as long as it is initiated within one year of the date the claim was denied or the determination being challenged was rendered. The second requestor states that there is nothing in the policy that precludes the attorney-in-fact from initiating the arbitration in their own name rather than the name of the policyholder. The second requestor states that there is nothing in section 20 that requires arbitration to be commenced in the name of the insured, and not simply on their behalf. The second request states that the term “you” is not used in section 20 to denote only the insured. The second requestor states that nothing in section 20 precludes the attorney-in-fact from initiating arbitration claims using the power of attorney issued by the policyholder.
RMA’s interpretation is that section 2 of the Basic Provisions states that a power of attorney may grant authority to a person to sign any document on the named insured’s behalf. RMA concludes that arbitration proceeding can be initiated through a document signed by the attorney-in-fact but the arbitration must be for the named insured, not the attorney-in-fact.
ANALYSIS – There is a lot to unpack in this request and while RMA provides an interpretation, it fails to provide the rational basis for it. Section 509 expressly states that any claim for indemnity shall not be liable to attachment, levy, garnishment, or any other legal process before payment to the insured. Therefore, section 509 precludes any third party from from initiating arbitration in their own name and collecting any indemnity before it is paid to the insured. The only exceptions are if the insured transfers coverage and the right to the indemnity or assigns the indemnity to a third party in accordance with sections 28 and 29 of the Basic Provisions. However, those rights must be expressly conferred by the insured using the approved insurance provider’s forms for this purpose. A power of attorney does not qualify. Further, by definition, a power of attorney is a document that authorizes a person to act on another persons behalf. It does not authorize the attorney-in-fact to act on their own behalf for matters covered by the power of attorney. Since no person can collect or otherwise obtain an insured’s indemnity unless expressly authorized by the insured, and powers of attorney only allow someone to act on a person’s behalf, section 509 of the FCIA precludes an attorney-in-fact with only a power of attorney from initiating arbitration in their own name. To interpret the provisions in any other manner would render sections 28 and 29 of the Basic Provisions moot.
The next question is whether the power of attorney can allow the attorney-in-fact to initiate arbitration on behalf of the insured. RMA’s procedures requires than any power of attorney name the person authorized, the period of authorization, and the powers granted. Therefore, any determination of whether an attorney-in-fact can initiate arbitration on behalf of the insured will be fact specific and depend on the specific power of attorney and the powers conferred.
Generally speaking, the provisions in the Basic Provisions regarding a power of attorney all reference the authority to sign documents and legally bind the insured. However, that does not limit a power of attorney from conferring other powers but most states require that powers of attorneys be strictly construed so powers granted must be express not implied. If the insured only provides the authority to sign documents on the insureds behalf, then that is the limit of the attorney-in-fact’s authority. Because powers of attorney are strictly construed, even if the powers conferred in the power of attorney allow the attorney-in-fact to sign all documents on the insured’s behalf, unless the power of attorney expressly confers the power to litigate or arbitrate on the insured’s behalf, the attorney-in-fact can only initiate arbitration, they cannot actually arbitrate the dispute.
Ultimately, it is the power of attorney and the powers that have been granted that will determine the authority of the attorney-in-fact to act on behalf of the insured but the attorney-in-fact can only act on behalf of the insured. The power of attorney does not allow the attorney-in-fact to act in their own interest.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.