On May 28, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-20-016 and a National Press release regarding the deferral of interest. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-016; https://www.rma.usda.gov/en/News-Room/Press/Press-Releases/2020-News/USDA-Allows-Extensions-on-Insurance-Deadlines-Deferral-of-Interest-to-Help-Producers-Amid-Pandemic. RMA states that the Common Crop Insurance Policy Basic Provisions provides that interest will start to accrue the first day of the month, following issuance of the notice of premium due by the approved insurance provider (AIP), provided that a minimum of 30 days has passed from the premium billing date. RMA states that it recognizes the challenges facing the crop insurance industry and producers and wants to provide flexibility that supports the health and safety of all parties.
RMA has authorized the AIPs to provide additional time for policyholders to make payment of premium and administrative fees. RMA states that interest accrual on premium payments and administrative fees will be waived to the earliest of an additional 60 days of the scheduled payment due date or the termination date on policies with premium billing dates between May 1, 2020, and July 31, 2020. RMA states that AIPs will begin to accrue interest after this additional period for unpaid premium and administrative fees. RMA also states that to assist the AIPs it will defer collection of any unpaid producer premium and administrative fees, and waive all associated interest from AIPs accordingly beginning with the June monthly accounting reports. RMA states that AIPs are also authorized to provide additional time for policyholders to make payment for written payment agreements due between May 1, 2020, and July 31, 2020. RMA states that payments may be extended up to 60 days of the scheduled payment due date and considered a timely payment. Such extension of time will not be considered a modification of the Written Payment Agreement, and the AIP may waive any additional interest for the payment during this 60-day period.
ANALYSIS – The pandemic has certain affected the country in numerous ways and agriculture has not been spared its effects. However, the policy provisions specifically state they are not subject to waiver and they have the force of law. In the past, RMA has used the impossibility defense due to stay-at-home orders or concern about the potential spread of the corona virus and RMA implies that defense here stating that it is deferring the payment of interest and administrative fees to provide “flexibility that supports the health and safety of all parties.” This rationale makes sense for the waivers of policy provisions that required contact between an agent and producer or other such persons but making payments does not seem to fit in this category since they are, for the most part, contactless. The more defensible rationale would be the financial hardship facing producers in this pandemic. RMA should be more careful in explaining the rational basis for its actions to ensure they fit the circumstances.
With respect to the actions taken in MGR-20-016, it is not completely clear whether RMA is giving an additional 30 or 60 days before interest starts to accrue. The AIP provides a notice of premium due. Interest starts to accrue on the first day of the month as long as there is 30 days since the premium billing date. Now RMA is waiving interest to the earliest of an additional 60 days of the scheduled payment due date. It is not clear if the scheduled payment due date is the same as the premium billing date or if it is 30 days after the premium billing date just before interest starts to accrue. It makes a difference because if they are considered the same, only an additional 30 days of interest is waived. If the scheduled payment due date is the date before interest would normally start to accrue (at least 30 days after billing), then interest for an additional 60 days has been waived. This may need clarification.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.