On March 6, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-20-004, regarding emergency loss procedures for unharvested crops that were flooded above the edible portion. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-004. RMA states that excessive precipitation in 2019 caused flooding in many counties in Minnesota, Missouri, North Dakota, and South Dakota. RMA states that a significant number of unharvested cropland acres were flooded above the edible portion resulting in production that is “adulterated” under the Federal Food, Drug, and Cosmetic Act and may be injurious to human or animal health. In response, RMA has issued emergency procedures that will streamline certain loss determinations and the destruction of adulterated production.
Approved insurance providers (AIPs) can use the emergency procedures on a case by case basis and must flag the claims using the procedures, document in the claim folder that the emergency procedures were applied, follow the procedures found in subparagraphs 1108 and 1102H(3) of the Loss Adjustment Manual, and during the on-farm inspection finalize the claim based on the producer’s signed certification that the production will be destroyed. RMA provides the certification statement the producer must sign.
ANALYSIS – It appears that loss adjusters are required by subparagraph 1108 to visit the farm to verify that the production has been flooded above the edible portion. Once that determination has been made the claim can be paid based on the adulterated production and the producer certifies the production will be destroyed, any production receiving a zero value that has been sold will result in the adjustment of the claim, and the producer must maintain photographic evidence of the date and location of the destruction for verification purposes. As a practical matter this makes sense and, as long as loss adjusters verify that the flood in fact rose above the edible portion, the procedures provide for a zero value.
RMA states that application of the “emergency procedures is limited to those situations where the catastrophic nature of the losses due to flooding or excess precipitation is such that not authorizing these emergency procedures could result in claim settlement delays.” It is not quite clear what this is intended to mean. As drafted, it appears that the application of these procedures is to any acreage that flooded above the edible portion but now its application appears to be limited to situations where not applying the procedures would delay claims being paid. These different statements may create an ambiguity since the latter statement never mentions the adulterated nature of the crop. Consistency in the usage of terms and statements eliminates the potential for ambiguity.
For example, RMA also states the insured must sign a certification but the statement actually reads as an acknowledgment. The crop insurance program has been based on certifications for most of the last 30 years. The term “acknowledgment” has rarely if ever been used in the crop insurance program in connection statements such as these. The definition of each term is slightly different. It is unclear whether the use of both “certification” and “acknowledge” in this Bulletin means RMA intended them to have different meanings or RMA intends them to be used interchangeably. If its is the latter, then RMA should use one or the other term to avoid the appearance of an ambiguity.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.