On April 23, 2020, the Risk Management Agency (RMA) issued Managers Bulletin: MGR-20-011 regarding the Hurricane Insurance Protection-Wind Index Endorsement (Endorsement). https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-011. RMA states that the Hurricane Insurance Protection-Wind Index Endorsement prevents producers from increasing acreage in anticipation of a hurricane when the loss is triggered before the acreage reporting date plus 14 days. In this case, the acreage is limited to the amount listed on the intended acreage report submitted by the underlying policy’s sales closing date or the actual acreage reported on the acreage report.
RMA states that concerns have been raised that, for this initial year the Endorsement is offered, a hurricane can occur before the acreage report plus 14 days but crops like corn and soybeans may not have any eligible acreage because the sales closing date for the underlying policy occurred before the Endorsement was made available. For crops with an sales closing date prior to April 30, 2020, the Endorsement requires the intended acreage report be filed by the sales closing date for the underlying policy. RMA states that for some crops, whose sales closing dates may be been as far back as January 31, 2020, it is impossible to meet the criteria since the Endorsement was not available until late February.
RMA states that for policies with a sales closing date on or before April 30, 2020:
- Approved insurance providers may accept an intended acreage report, for Endorsement purposes only, from the producer by the Endorsement sales closing date instead of the sales closing date of the underlying crop policy.
- If a county is triggered for an indemnity due to a qualifying event prior to the underlying crop policy’s ARD plus 14 days, the number of eligible acres will be limited to the lesser of:
- the acres contained in the intended acreage report; or
- the acres planted and reported on the current crop year’s acreage report.
- In the event a policyholder does not submit an intended acreage report this initial year of the Endorsement’s implementation, the number of eligible acres will be limited to the lesser of:
- the number of acres planted and reported on the current crop year’s acreage report; or
- the highest number of planted acres in any one of the immediate past four crop years.
- The allowances provided in MGR 20-009 regarding policyholders’ signatures also apply to Endorsement intended acreage reports.
ANALYSIS – It is unclear why the Endorsement did not take into consideration that there could be crop policies where the sales closing date had passed prior to the Endorsement being offered for sale and it would not be possible to file an intended acreage report by the sales closing date. The Endorsement had terms expressly intended for the initial year. However, once the error was discovered, RMA had the choice to make these producers with crops where the underlying policy sales closing date had passed be ineligible or allow them to obtain coverage. Impossibility has always been a defense to enforcement of policy provisions. In most cases it is usually a physical impossibility, such as storms that shut down infrastructure that prevents timely reporting. In this case it was a drafting error in the Endorsement. Accepting a drafting error as an impossibility certainly opens the door beyond what had previously been allowed.
Further, the purpose of this Bulletin is to give producers additional time to file intended acreage reports the initial year of implementation so it is unclear why this Bulletin has a contingency if the producer does not file an intended acreage report. The Endorsement itself states that, for the initial year, the eligible acreage is the lesser of the acreage reported on the intended acreage report or the actual acreage planted and reported on the acreage report for the current year. Instead, RMA states the eligible acreage is the actual acreage planted and reported on the acreage report for the current year or the highest number of planted acres in any one of the immediate past four years. In the Endorsement, this provision applies to subsequent years. RMA fails to explain why it is making this provision applicable to the initial year when it has already extended the deadline for filing these intended acreage reports.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.