The Risk Management Agency (RMA) issued Managers Bulletin: MGR-19-027 regarding the allowance of bypass procedures for sugar beets. RMA states that due to excess moisture, delayed harvest situations and freezing temperatures in parts of the Upper-Midwest and Pacific Northwest, some processors are suspending harvest and delivery of unharvested sugar beets for the 2019 crop year. RMA states that the sugar beets that have not been harvested will likely remain unharvestable due to an insurable cause of loss that occurred during the insurance period, such as extremely wet or frozen fields. Further, RMA states that the 2019 Loss Adjustment Manual (LAM) includes procedures for bypassed acreage “which could be applicable to sugar beets. However, the procedure explicitly states that the crop must have the definition of “Bypassed Acreage” within the Crop Provisions in order to be applicable.” RMA states that the current Sugar Beet Crop Provisions do not include a definition of “bypassed acreage.”
RMA goes on to state that it is authorizing the use of the bypassed acreage procedures found in paragraph 903 of the LAM for sugar beets in all regions for the 2019 crop year. RMA states that approved insurance providers may use the procedures on a case-by-case basis “to assist impacted policyholders and to increase the efficiency of AIP services and determinations when settling these claims.
ANALYSIS – Of greatest concern is the obvious contradiction in MGR-19-027. It states very clearly that the bypass procedures in the LAM are only applicable if the definition of “bypassed acreage” is included in the Crop Provisions. This requirement is found in paragraph 903A of the LAM. RMA then states that the Sugar Beet Crop Provisions do not contain a definition of “bypassed acreage.”
Even though RMA acknowledges that the policy and procedures do not allow for bypass for sugar beets, RMA has elected to allow the procedures to apply anyway. The preamble to the Common Crop Insurance Policy Basic Provisions, codified at 7 C.F.R. 457.8, very clearly states that no one has the authority to waive or vary the terms of the policy except as allowed by the policy and this includes RMA. RMA’s decision to disregard these provisions sets a precedent that will have a long lasting effect on the program. Program integrity is adversely affected. The precedent of waiving or varying provisions will make it more difficult to enforce violations of policy provisions and procedures against producers, agents, loss adjusters, and approved insurance providers in the future. Uncertainty is added to the program when terms and conditions of insurance are changed after the contract change date. These changes may affect premium and liability after they have been established by contract. These changes also affect actuarial soundness because their effect may not be included in the premium. The language in the preamble that precludes waiver or variance of the policy provisions have the force of law and were put in place to expressly prevent the actions authorized by RMA in MGR-19-027.
Even if the LAM allowed the bypass procedures to be applicable to sugar beets, MGR-19-027 is a little confusing. RMA states that there has been excess moisture and freezing temperatures. Publicly available information states that these wet conditions prevented harvest and left so much moisture in the fields that when the freeze occurred, the sugar beets were frozen in the field before they could be harvested. These are insurable causes of loss and whatever damage occurs from these causes are covered by the policy regardless of whether the processor decides to stop accepting production.
However, the issue addressed by MGR-19-027 is bypassed acreage. The applicable Crop Provisions define “bypassed acreage” as “land on which production is ready for harvest but the processor elects not to accept such production so it is not harvested.” Then presumably MGR-19-027 is supposed to apply to acreage where the crop has not been damaged by the excess moisture or freeze and the crop can be harvested but it is not due to the decision by the processor to not accept the production. However, this is not clear from the bulletin. Further, in other Crop Provisions that cover bypassed acreage, there are additional provisions that apply to bypassed acreage and it is not clear whether those provisions similarly apply to sugar beets for 2019. Only section 903 of the LAM is referenced. Assuming this bulletin was authorized by law, it may need further clarification to distinguished acreage of sugar beets that may be damaged by excess moisture and freeze whether harvested or not from undamaged sugar beets on acreage that is only unharvested due to a decision by the processor.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.