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    Crop Insurance News and Analysis – September 3, 2020 – Emergency Loss Procedures for Crops Flooded Above the Edible Portion

    September 24, 2020 By //  by Kim Arrigo

    On September 3, 2020, the Risk Management Agency (RMA) issued Managers Bulletin MGR-20-028, providing emergency loss procedures for crops flooded above the edible portion as a result of Hurricane Hanna. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/MGR-20-028. RMA states that excessive precipitation associated with Hurricane Hanna has caused flooding in Texas. RMA states that a significant amount of unharvested cropland acres is flooded above the edible portion of the crop, resulting in production which is considered adulterated under the Federal Food, Drug, and Cosmetic Act and may be injurious to human or animal health. RMA states that it, in conjunction with approved insurance providers (AIPs), recognizes the need for authorizing emergency procedures, which will streamline certain loss determinations and the destruction of adulterated production, accelerating loss adjustment and issuance of indemnity payments to crop insurance policyholders in impacted areas.

    RMA states that it is authorizing the use of these emergency procedures for all crops in Texas counties impacted by Hurricane Hanna. RMA also states that the application of these emergency procedures is limited to those situations where the catastrophic nature of the losses due to flooding will result in unnecessary delays in processing claims if these emergency procedures are not authorized. RMA states it is authorizing the following emergency procedures for AIPs to utilize, on a case-by-case basis, to assist impacted policyholders and increase the efficiency of the claims process. RMA states that for all claims utilizing these emergency procedures, AIPs must:

    (1) Submit all information with a simplified claim flag of “F” through the Policy Acceptance and Storage System for applicable record types in Appendix III of the Standard Reinsurance Agreement; and

    (2) Document in each claim folder that these emergency procedures were applied. Record in the Narrative of the Production Worksheet: “Emergency procedures applied per MGR-20-028.”

    (3) Follow procedures found in subparagraphs 1108 and 1102H(3) of the 2020 Loss Adjustment Manual (LAM) on Flooded Crops and Zero Market Value Production.

    (4) During the on-the-farm inspection, AIPs may finalize claims based on policyholder’s signed certification that the production will be destroyed. This certification may be included in the Narrative of the Production Worksheet or on a separate certification form. The policyholder must sign and date the certification statement stating:

    “I acknowledge my crop has been exposed to flood waters and is considered adulterated in accordance with FDA guidelines and:

    (i) All such production will be destroyed in accordance with any applicable method prescribed by State or Federal regulations, as soon as possible but no later than October 31, 2020, unless an extension has been granted by my AIP.

    (ii) I understand that if any portion of my Zero Market Value production is salvaged (sold, ginned, etc.), I will notify my AIP immediately, and that this will result in a corrected claim and will require repayment of any overpaid indemnity.

    (iii) I understand that I am responsible for maintaining photographic evidence, with the date and location identified, to verify destruction of the production. I understand that I am required to maintain this evidence for three years from the date of destruction.”

    MGR-20-028 also included a note that states “NOTE: This procedure may be applied to flooded cotton modules in the field. However, the unsubmerged portions of cotton modules that have been exposed to flood or standing water may be salvageable. Therefore, AIPs should use caution in releasing any such cotton that may have portions of production ginned. Any cotton ginned from such modules will be considered production to count and any remaining cotton, either adulterated or unsalvageable, will not be considered production to count.”

    ANALYSIS – 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. The AIPs are to apply the procedures on a case-by-case basis. These different statements may create an ambiguity and allow differences in loss adjustment by AIPs. Consistency in the usage of terms and statements eliminates the potential for ambiguity.

    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.

    Filed Under: Blog

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