[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Rules and Regulations]
[Pages 42979-42988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21117]
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DEPARTMENT OF AGRICULTURE
7 CFR Part 402
RIN 0563-AB09
Catastrophic Risk Protection Endorsement
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes part
402 chapter IV of title 7 of the Code of Federal Regulations (CFR). The
intended effect of this rule is to provide for a catastrophic risk
protection plan of insurance. This coverage is the lowest level
required to be purchased by a producer to be eligible for certain other
agricultural farm program benefits. The producer may execute a waiver
of any eligibility for emergency crop loss assistance in connection
with the crop rather than obtain insurance coverage to be eligible for
certain other agricultural farm program benefits. This action is needed
to comply with statutory mandates of the Federal Crop Insurance Act
(Act), as amended by the Federal Crop Insurance Reform Act of 1994
(Reform Act) and the Federal Agriculture Improvement and Reform Act of
1996 (1996 Act).
EFFECTIVE DATE: August 20, 1996.
FOR FURTHER INFORMATION CONTACT: Louise Narber, Program Analyst,
Research and Development Division, Product Development Branch, Federal
Crop Insurance Corporation, United States Department of Agriculture,
9435
[[Page 42980]]
Holmes Road, Kansas City, MO 64131, telephone (816) 926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order No. 12866 and Departmental Regulation 1512-1
This action has been reviewed under United States Department of
Agriculture (USDA) procedures established by Executive Order No. 12866.
This action constitutes a review as to the need, currency, clarity, and
effectiveness of these regulations under those procedures. The sunset
review date established for these regulations is December 1, 2001.
This rule has been determined to be economically significant for
the purposes of Executive Order No. 12866 and, therefore, has been
reviewed by the Office of Management and Budget (OMB).
Cost Benefit Analysis
A Cost Benefit Analysis has been completed and is available to
interested persons at the address listed above. In summary, the
analysis finds that crop insurance reform, generally is expected to
result in net positive benefits to producers, taxpayers, and society.
The effects on individual producers compared to payments under ad hoc
disaster programs depends primarily on the farm program payment yield
compared to the farm's actual yield and market prices. In general,
however, the reform is expected to result in less volatility of
producers' incomes and less risk of no income due to adverse weather
events. Rural communities and producers will benefit from the certainty
of payments in times of catastrophic yield losses. The Government and
taxpayers will benefit from a single disaster protection program and
consequent reduced Federal outlays. Although producers who had not
previously participated in the Federal crop insurance program will have
an added burden to make application and report yields and acreage, the
benefits in terms of greater risk protection outweigh the costs.
Paperwork Reduction Act of 1995
In accordance with the Paperwork Reduction Act of 1995, the
information collection requirements contained in these regulations have
been previously approved by OMB and assigned OMB control number 0563-
0003 through September 30, 1998. The 1996 Act alleviates producers from
the requirement to obtain at least catastrophic coverage on crops of
economic significance to be eligible for certain other USDA program
benefits if the producer waives any eligibility for emergency crop loss
assistance in connection with the crop. Due to this provision, FCIC
anticipates that fewer producers will obtain insurance coverage. This
will reduce the paperwork burden. We estimate that approximately 30
percent of the insureds with CAT coverage will cancel their crop
insurance coverage. As a result the paperwork burden approved under OMB
Number 0563-0003 will be reduced by 44,176 hours. Copies of the
information collection may be obtained from Bonnie Hart, USDA, FSA,
Advisory and Corporate Operations Staff, Regulatory Review Group, P.O.
Box 2415, Ag Box 0572, Washington, D.C. 20013-2415, 8:15 a.m.-4:45
p.m., Monday through Friday, except holidays, telephone (202) 690-2857.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. This rule contains no Federal
mandates (under the regulatory provisions of Title II of the UMRA) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
UMRA.
Executive Order No. 12612
It has been determined under section 6(a) of Executive Order No.
12612, Federalism, that this rule does not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment. The
provisions contained in this rule will not have a substantial direct
effect on States or their political subdivisions, or on the
distribution of power and responsibilities among the various levels of
Government.
Regulatory Flexibility Act
This regulation will not have a significant impact on a substantial
number of small entities. However, it does provide additional
flexibility and cost savings for small entities in the following three
areas. First, producers are no longer required to obtain at least CAT
coverage for economically significant crops. Instead, they may sign a
waiver foregoing emergency crop loss assistance. Insureds likely to
decline coverage are those who believe that the costs associated with
obtaining insurance exceed the benefits. The producers most likely to
fall into this category are those who have insurance policies with low
liabilities. For these producers, the $50 fee for CAT would be most
likely to outweigh expected indemnities. Second, an allowance has been
made to allow all producers with a share in a tobacco crop under one
marketing card to insure the crop under one insurance policy. To
qualify under this provision, none of the shareholders may have an
interest in another tobacco crop in the county. It is estimated that
35,100 policyholders may utilize this allowance, thereby saving the $50
processing fee for each. Third, with specified restrictions, persons
who hold an undivided interest in a crop may be eligible to purchase
one insurance policy covering all shares to satisfy linkage
requirements. The restrictions associated with this allowance include:
all landowners must agree in writing to the arrangement; none of the
landowners may hold any other interest in the given crop in the county
for which they are required to buy at least CAT coverage; and the total
liability under the CAT endorsement for all landowners must be $2,500
or less. Because no data are available providing an indication of
insureds with an undivided interest, it is not possible to estimate the
savings associated with not paying the $50 processing fee in these
situations. However, some small entities will benefit from this
allowance.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order No. 12372
This program is not subject to the provisions of Executive Order
No. 12372, which require intergovernmental consultation with state and
local officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115, June 24, 1983.
Executive Order No. 12778
The Office of the General Counsel has determined that these
regulations meet the applicable standards provided in sections 2(a) and
2(b)(2) of Executive Order No. 12778. The provisions of this rule will
preempt state and local laws to the extent such state and local laws
are inconsistent herewith. The administrative appeal provisions
published at 7 CFR parts 11 and 780 must be exhausted before any action
for judicial review may be brought.
Environmental Evaluation
This action is not expected to have a significant impact on the
quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
[[Page 42981]]
National Performance Review
This regulatory action is being taken as part of the National
Performance Review Initiative to eliminate unnecessary or duplicative
regulations and improve those that remain in force.
Background
The amendments to the Act, made by the Reform Act, were effective
on October 13, 1994. This regulation provides the policy and procedures
to carry out the catastrophic risk protection insurance requirements of
those amendments.
On Friday, January 6, 1995, FCIC published an interim rule in the
Federal Register at 60 FR 2000-2005 to add a new catastrophic risk
protection (CAT) level of insurance through the Catastrophic Risk
Protection Endorsement which amends new and existing crop insurance
policies, endorsements, and crop provisions when elected by the
insured. Following publication of that interim rule, the public was
afforded 60 days to submit written comments, data, and opinions. On
Monday, August 7, 1995, by publication at 60 FR 40055, FCIC reopened
and extended the comment period to August 18, 1995. A total of 40
comments were received from the crop insurance industry, FSA, producer
groups, and producers. The category, comments received, and FCIC
responses are as follows:
General Comments
Comment: One comment received from the crop insurance industry
suggested that the phrase ``at the option of the Secretary'' should be
added after, ``Catastrophic risk protection coverage may be offered
through approved insurance providers and'' in Section 402.1, to be
consistent with the Act. This change is needed to enable the FSA to
cease delivering CAT coverage in counties in which such coverage
becomes unnecessary.
Response: The Federal Agriculture Improvement and Reform Act of
1996 provides for CAT coverage to be offered by approved insurance
providers if there are a sufficient number available within an area. If
approved insurance providers are not sufficiently available, local
offices of the USDA will provide CAT coverage. FCIC agrees that the
Secretary must now make an affirmative determination that CAT can be
delivered through local FSA offices. The provision has been changed
accordingly.
Comments Regarding Definitions
Comment: One comment received from a producer group suggested that
the definitions should include a reference to the standards that will
be used in determining whether a producer's crop loss was due to
drought, flood, or other natural disaster as determined by the
Secretary. The comment recommended referencing other FCIC regulations
that are applicable in making this determination and similarly
referencing coverage exclusions.
Response: The insured is responsible for demonstrating that any
loss of production or value has been directly caused by one or more of
the insured causes during the insurance period. Catastrophic risk
protection is only available through an endorsement which becomes part
of the crop insurance policy. Each crop policy contains a section
regarding the causes of loss for which insurance is provided. Coverage
exclusions, such as failure to follow good farming practices, are also
specified in these policies. Therefore, a change to the definitional
section of this rule is not necessary.
Comment: Another comment received from a producer group indicated
that sustainable and alternative agricultural practices are frequently
and erroneously labeled as not being ``good farming practices'' simply
because they may be different from the traditional approach in the
area.
Response: The definition of ``good farming practices'' contained in
various crop policies does not exclude the use of sustainable or
alternative practices. However, farming practices must control weeds,
provide sufficient nutrients, protect against disease and insects,
etc., to be considered good farming practices. The definition will not
be changed.
Comment: Another comment received from the crop insurance industry
suggested clarifying the definition of ``catastrophic risk protection''
by deleting the word ``minimal'' and replacing it with either the word
``minimum'' or ``lowest.''
Response: FCIC agrees with the comment and has amended the
definition of ``catastrophic risk protection'' by replacing the word
``minimal'' with the word ``minimum.''
Comment: The crop insurance industry suggested clarifying the
definition of ``crop of economic significance'' to explain the
consequences if a crop planted in 1994, is planted in 1995 although
originally there was no intent to plant the crop in 1995; and to
clarify who is responsible for determining which crops are of economic
significance.
Response: FCIC agrees with the comment and has added provisions in
section 12 to clarify requirements regarding crops of economic
significance. Producers who do not intend to plant a crop do not have
to obtain crop insurance or execute a waiver of any eligibility for
emergency crop loss assistance in connection with the crop to remain
eligible for certain USDA program benefits, even if they produced the
crop the previous year. However, if the producer decides to plant the
crop after the sales closing date, the producer cannot obtain insurance
on the crop and must execute a waiver of any eligibility for emergency
crop loss assistance in connection with the crop to be eligible for
certain other USDA program benefits. If a waiver is not executed, the
producer must return those benefits already received. Provisions were
also added indicating that it is the producer's responsibility to
determine crops of economic significance in the county and that the
producer may have to provide records to permit the insurance provider
to verify whether a crop is a crop of economic significance. FCIC has
issued a worksheet that may be used by producers to assist them in
determining crops of economic significance. USDA will be ultimately
responsible for determining eligibility and paying any amount due a
person for any applicable USDA program.
Comment: A producer group suggested that the definition of ``crop
of economic significance'' is contrary to the Act and invites legal
action to test it. They stated that the Act looks to a percentage of
all crops grown by the producer and the definition in this regulation
provides for a county by county test to be done.
Response: FCIC agrees that Sec. 508(b)(7) and (8) of the Act does
not specifically indicate that crops of economic significance are
determined on a county basis. However, an administrative interpretation
was made to operate on a county basis because of the language in
Sec. 508(b)(7)(A) of the Federal Crop Insurance Act. In addition,
operating on a county basis is consistent with the long standing
practice of insuring acreage on a county basis. Although the provisions
of the Act may have changed, the insurance rationale has not. No
changes will be made to conform to this suggestion.
Comment: The Farm Service Agency requested that the term ``limited
resource farmer'' be changed to ``limited income farmer.'' Farm Credit
Programs, which are part of FSA, have used the term ``limited resource
farmer'' for many years and it has a very different definition than the
definition of
[[Page 42982]]
``limited resource farmer'' used for crop insurance purposes.
Response: Section 508(b)(5) of the Act expressly authorizes FCIC to
waive the administrative fee for ``limited resource farmers.'' Since
``resources'' include more than the producer's ``income'' such as farm
size, the definition will not be changed.
Comment: The crop insurance industry and a producer group
questioned what the phrase ``a need to maximize farm income'' meant in
the definition of ``limited resource farmer'' and recommended an
explanation be added to the endorsement or the phrase deleted.
Response: FCIC has reconsidered this provision and amended the
definition of ``limited resource farmer'' by deleting the phrase ``a
need to maximize farm income.''
Comment: A producer group recommended defining or omitting the
phrase ``small or family farm'' in the definition of ``limited resource
farmer.'' They also questioned how a person is categorized as a limited
resource farmer and whether or not such person is required to obtain at
least catastrophic risk protection (CAT) coverage, if available. The
comment also asked if the limited resource status could be used as a
defense if a producer is denied benefits for failure to meet linkage
requirements.
Response: FCIC agrees that the terms ``small'' and ``family farm''
are not necessary in the definition and has amended the definition
accordingly. All producers, including limited resource farmers, are
required to obtain at least CAT coverage, if available, to be eligible
for certain other USDA program benefits, unless the producer executes a
waiver of any eligibility for emergency crop loss assistance in
connection with the crop. The limited resource farmer status only
authorizes FCIC to waive payment of the administrative fees and may not
be used as a defense for failure to obtain CAT coverage. Producers may
request limited resource farmer status at the time the application for
insurance is made.
Comment: A producer stated that a spouse's salary from a job in
town should not be included in total income when considering all
sources of revenue for a limited resource farmer.
Response: The purpose of this provision is to excuse producers from
paying the administrative fee when it would impose a financial
hardship. Since part of the farm's income is usually used to defray the
personal expenses of the producer, outside income such as a spouse's
salary will affect the determination. All of the income within the
family entity, from all sources of revenue, including the spouses' will
be considered as the annual gross income.
Comment: A producer group suggested that the word ``producer'' be
defined and used rather than the word ``person'' because it would be
less confusing since ``person'' is specifically defined with regard to
payment limitation rules. If this change is not made, the comment
suggested adding provisions to indicate that the definition in these
provisions does not reference the term ``person'' for payment
limitation purposes.
Response: A definition of ``person'' contained in any other statute
or regulation is not applicable to the Federal crop insurance program
unless expressly provided. Therefore, the definition of a person with
respect to payment limitation purposes is not relevant. The term
``person'' is defined for this program and has been used in the crop
insurance program for longer than payment limitation has existed. The
term ``person'' cannot be replaced with ``producer'' because not all
``persons'' are producers within the context of the program and to
alternate between the two terms would be confusing. No change to the
provisions will be made.
Comments Regarding Insurance Units
Comment: A producer observed that coverage was available only by
basic units, and stated that unit division on share basis was very
misleading.
Response: Unit division on a share basis is explained in section 3
(Unit Division) of the Catastrophic Risk Protection Endorsement. This
document is provided to all insureds who elect the endorsement.
Provisions contained therein are complete with examples and should not
be misleading to insureds. No change will be made.
Comments Regarding Linkage Requirements
Comment: Twenty-three (23) comments were received from producers
who disagreed with the mandatory requirement to purchase crop insurance
to remain eligible for certain other USDA program benefits. One
additional comment received from a FSA employee discussed producers'
aversion to the mandatory requirement to purchase crop insurance to be
eligible for certain other USDA benefits.
Response: (1) The mandatory requirement that producers obtain crop
insurance has been amended in the 1996 Act. (2) Now, section 508(b)(7)
of the Act requires the producer to obtain at least a CAT plan of
insurance or comparable coverage unless the producer executes a waiver
of any eligibility for emergency crop loss assistance in connection
with the crop, to remain eligible for certain other USDA program
benefits. The intent of the Act is to encourage the fullest possible
participation in the Federal Crop Insurance program since ad hoc
disaster legislation is repealed. Crop insurance provides greater
assurance that producers are protected from the impacts of widespread
disaster causing a crop loss. The CAT endorsement will be amended to
conform to the statutory change.
Comment: Nine comments received from producers stated that it is
unfair to have to obtain insurance on other crops such as corn, wheat
and soybeans in order to remain eligible for the tobacco price support
program.
Response: The statutory requirement to obtain insurance for all
crops of economic significance, unless the producer executes a waiver
of any eligibility for emergency crop loss assistance in connection
with the crop, is applicable to all Agriculture Marketing Transition
Act benefits, the conservation reserve program, and certain farm credit
programs. Producers who do not participate in these programs are not
required to obtain insurance on any of their crops. However, with the
elimination of ad hoc disaster assistance, a producers only available
protection is through crop insurance.
Comments Regarding Administrative Fees
Comment: Twenty-two (22) comments received from producers and 1
comment received from FSA state that: (1) Charging the same
administrative fee for both small producers and large producers was
unfair; (2) the larger producer will receive greater payments than the
small producer due to the differences in the acreages; (3) the number
of people involved in an operation does not increase the risk; (4) the
size of the operation affects the liability covered; (5) in determining
the administrative fees, factors should be used to compensate the
differences in the size of the acreage, not the number of crops; (6)
the amount of coverage or size of the operation should be a
consideration in determining the administrative fee; and (7) fees
should be pro-rated based on the size of the operation, a given amount
per acre, or something fair for the small farmer in respect to the
benefit they could attain from it.
Response: Section 508(b)(5) of the Act mandates the amount of
administrative
[[Page 42983]]
fee. The Act expressly states that the fee will be paid on a per crop
and per county basis. FCIC does not have the authority to change this
requirement. Further, this fee is not related to the amount of
liability or the risk associated with the size of the operation. The
fee is intended to defray the costs associated with calculating the
actual production history and processing applications, acreage reports,
etc., which do not normally vary greatly between small and large
farming operations. Producers who do not wish to obtain insurance and
pay the administrative fee for any or all of their crops may execute a
waiver of any eligibility for emergency crop loss assistance for the
crop. Therefore, no change will be made.
Comment: Seven comments received from producers claimed the
administrative fee is not fair because separate fees are required for
(1) each crop; (2) each county; and (3) crops in two or more counties
when farms are consolidated in one FSA Farm Serial Number and
administered in one FSA office.
Response: Section 508(b)(5) of the Act mandates that the fee be
paid on a per crop and per county basis. FCIC does not have the
authority to change this requirement. Producers who do not wish to
obtain insurance and pay the administrative fee for any or all of their
crops may execute a waiver of any eligibility for emergency crop loss
assistance for the crop. Therefore, no change will be made.
Comment: One comment from a producer claimed that as a result of
the narrow definition of ``limited resource farmer'' and ``crop of
economic significance,'' small farmers with several crops are required
to pay $200 plus idle acreage to be eligible for certain other USDA
program benefits. In return, they receive little more in program
benefits than the administrative fees incurred. The producer stated
that he would like to pay the administrative fee for each farm rather
than one fee per crop or have the fee based on acreage or something
fair for the small farmer.
Response: FCIC is statutorily mandated to charge an administrative
fee on a per crop basis. However, if the amount of liability under the
policy is equal to or less than the administrative fee, the crop is not
considered a ``crop of economic significance'' and the producer is not
required to obtain insurance for the crop. Further, under the 1996 Act,
producers of program crops are no longer required to idle acres.
Producers who do not wish to obtain insurance and pay the
administrative fee for any or all of their crops may execute a waiver
of any eligibility for emergency crop loss assistance in connection
with the crop. Therefore, no change will be made.
Comment: Seven (7) comments received from producers stated that it
is unreasonable for each person sharing in a crop to pay separate
administrative fees.
Response: (1) Section 508(b)(7) states that each ``person'' must
obtain crop insurance on any crop of economic significance in which the
person has an interest. (2) The Act further states that each producer
must pay an administrative fee. However, persons who execute a waiver
of their eligibility for emergency crop loss assistance are still
eligible for the specified USDA benefits. FCIC has amended section 7 to
specify that, for tobacco producers, only one administrative fee will
be charged when one policy is issued for multiple shareholders,
provided: (1) A tobacco marketing card has been issued by FSA for a
specific producer and Farm Serial Number; (2) all of the shareholders
agree in writing; (3) this producer and other persons have a share in
the crop; and (4) neither this producer nor the other persons hold any
interest in another tobacco crop for which they are required to obtain
at least CAT coverage. Linkage requirements will be satisfied for each
shareholder of the crop. Section 7 has also been amended to allow a
landowner to obtain catastrophic risk protection and establish linkage
for all other landowners who hold an undivided interest in the
insurable acreage provided: (1) The landowners do not have multiple
farming interests; (2) all the landowners agree in writing to such
arrangement and have their social security number or employer
identification number listed on the application without regard to the
actual amount of their interest in the insured acreage; (3) the total
liability for all landowners is $2,500 or less; and (4) the landowner
insuring the crop will make application for insurance, provide name and
identification number for each person, pay the one administrative fee
for all the producers within the county, fulfill all agreements under
the contract, and receive and distribute the indemnity payments. This
is a new provision that will alleviate each producer in an undivided
interest from being required to pay a separate administrative fee when
all of the producers share in the crop and have no other insurable
interest in that crop and the total liability is $2,500 or less.
Comment: The crop insurance industry suggested that the
administrative fees for CAT coverage should be addressed separately
from those for limited coverage (see section 6).
Response: The provisions of the Act mandate aggregation of the fees
for CAT and limited coverage in order to ensure that the producer does
not pay any administrative fee in excess of the amount required on a
per county per producer basis. Further, the use of the administrative
fee to offset the costs of delivery of the program is the same for both
CAT and limited coverage. This aggregation of fees is more clearly
communicated by the proposed language than it would be if the
provisions were separated therefore, no revisions will be made.
Comment: The crop insurance industry suggested clarifying the
language in section 5 (now 6) which explains that an insured may not
receive a refund of an administrative fee if the producer has insured
enough crops to generate fees in excess of the caps included in the
regulations.
Response: This provision has been clarified. Administrative fees
will not be refunded if, after the purchase of the additional coverage,
the producer still has 4 or more crops insured in the county, or 4 or
more crops insured in each of three or more counties, at the CAT or
limited coverage level.
Comment: The crop insurance industry stated that the endorsement
fails to include provisions requiring an insured to refund any benefits
received prior to the policy being terminated for nonpayment of fees.
Response: FCIC agrees with the comment and has amended section 6(f)
of the endorsement accordingly.
Comments Regarding Insureds' Duties and Rights
Comment: A producer group suggested that there is insufficient
guidance as to appeal rights or the procedure that will be followed in
the event of a loss.
Response: Each crop policy contains provisions for procedure to be
followed in the event of a crop loss. These policies are published in
chapter IV of Title 7 of the CFR. The applicable appeal procedures are
published at 7 CFR parts 11 and 780. In addition, each reinsured
company has established mediation, arbitration, or similar procedures
to address insureds concerns. Therefore, no change will be made.
Claim for Indemnity
Comment: The crop insurance industry recommended that the CAT
endorsement contain a provision indicating that when the insured with
[[Page 42984]]
CAT coverage files a claim for indemnity under the policy, that filing
indicates the insured has made the election to receive a CAT indemnity
rather than a benefit under any other USDA program that compensates for
the same crop loss. It stated that the regulations need to specify how
the producer is to make this election, when he or she must make it, and
who is responsible for enforcing it.
Response: (1) The Act expressly provides the producer with the
choice of which program under which to receive benefits. (2) Since
information about other program benefits may not be available until
long after the crop loss has occurred, producers cannot be presumed to
have made a choice because they have not delayed receipt of benefits to
which they are entitled. (3) Producers cannot make informed choices
with respect to which program benefits to choose until they know what
benefits will be available. Therefore, section 9(b) of the endorsement
has been amended to permit producers to receive a CAT indemnity and, if
other program benefits are later made available, to reimburse the
entire amount of the CAT indemnity to be eligible for a benefit under
the other program. USDA will be responsible for determining if a crop
insurance payment has been made prior to making payment under any other
applicable USDA program.
Comment: Another comment from FSA stated that previous legislation
required emergency loan applicants to have obtained crop insurance the
previous year. The reform legislation forbids the applicant from
collecting the CAT indemnity, or noninsured crop disaster assistance
program (NAP) payment for the same loss that qualifies for the
emergency loan. This requires the producers to pay for coverage on
which they are never allowed to collect because if they collect the CAT
or NAP payment, they will immediately become ineligible for an
emergency loan. The commentor suggested a more reasonable approach
would be to limit the total benefits from all sources for a loss to the
total amount of loss, rather than limiting the benefit to a single
source. Otherwise the producer will often collect the payment and then
apply for a regular farm operating or farm ownership loan, rather than
an emergency loan. Denying the producer the opportunity to collect the
CAT or NAP payment will put a further strain on the Farm Credit
Programs already limited loan funds.
Response: The provision in previous legislation that required
emergency loan applicants to have obtained crop insurance the previous
year was removed in the Reform Act. The statute is clear that, for CAT
coverage policies, if another program provides compensation for the
same crop loss, the producer must elect only one program under which to
receive benefits. Therefore, the producer cannot receive benefits from
all sources up to the total amount of the loss. Further, since the Act
expressly provides the producer with the choice of which program to
receive benefits, FCIC cannot administratively abrogate that right.
However, any producer who receives a CAT indemnity payment is not
automatically prohibited from receiving assistance for the same loss
under other USDA programs. Such producers will be given the opportunity
to reimburse the entire amount of the indemnity and receive assistance
under the other USDA program. No change will be made.
Comments Regarding Eligibility
Comment: One comment was received from within FCIC recommending
that language be included that would deny benefits from other USDA
programs if the producer fails to carry out the producer's
responsibilities in accordance with policy provisions. It was suggested
that language be added to indicate that such failure would be
considered a scheme or device to circumvent the insurance requirement.
The comment indicates that some people are interpreting current
provisions to mean that once a producer applies for crop insurance on a
crop of economic significance, by signing an application for insurance,
that he or she has met the requirement for eligibility for certain
other USDA program benefits, even though he or she has not met the
requirements for crop insurance coverage to be in effect.
Response: FCIC agrees that failure to comply with all policy
provisions may result in ineligibility for certain other program
benefits specified in section 12(e). A new section 12(f) has been added
that states this requirement.
Comment: A producer group stated that section 9(b), which provides
that a person can receive either CAT benefits or other USDA benefits
for the same loss, but not both, should be clarified to state that a
producer will not have to forego other USDA payments that are not
specifically related to the crop loss, e.g., regular deficiency
payments.
Response: Deficiency payments do not compensate a producer for a
crop loss, they provided compensation for changes in the market price.
Therefore, deficiency payments could be made regardless of whether or
not the producer collected an indemnity. No changes have been made in
the provisions in response to this comment.
Comment: FSA suggested that the requirement for a producer to have
at least CAT coverage only applies to ``new'' Farm Credit loans not
``new and amended'' loans. The Act specifically listed the applicable
benefits in three loan-making authorities and the authority to service
(reschedule, reamortize, subordinate, write-down or otherwise amend)
loans is given in other sections of the Consolidated Farm and Rural
Development Act. There is a discrepancy over the effective date of the
CAT requirement. The requirement was effective upon enactment, however,
applicants could not be required to purchase CAT coverage before it was
available. The commentor continued to say that the effective
implementation date for their loan programs is January 23, 1995.
Response: Section 508(b)(7)(A) of the Act was effective on October
13, 1994, and mandated that the producer obtain at least CAT coverage
on crops of economic significance to be eligible for certain farm
credit benefits. Therefore, producers who obtained farm credit
programs, loans, or amended existing loans after October 13, 1994, are
statutorily required to comply with this provision. Amendments to
existing loans were included because such amendments can have a
significant effect on the terms and duration of such loans. Further,
Congress realized that some producers obtained loans in 1995, prior to
enactment of the Act. To permit producers to comply with the
requirements of section 508(b)(7)(A), sales closing dates for CAT
coverage were extended to April 13, 1995.
Comment: One comment received from FSA disagreed with provisions
that require the producer to obtain CAT coverage for the crop year in
which a farm credit loan is sought. The producer is not always able to
anticipate credit needs by the CAT sales closing date so it would be
more workable to allow the producer to obtain coverage for the
following year if the sales closing date had passed and it was not
possible to obtain coverage for the current year.
Response: The requirement for CAT coverage in the crop year for
which a benefit is sought is a statutory requirement, although now
producers may execute a waiver of any eligibility for emergency crop
loss assistance in connection with the crop and remain eligible for
certain USDA program benefits. Therefore, no changes have been made. It
is the responsibility of the producer and the lender to anticipate
credit needs in the worst case scenario
[[Page 42985]]
so crop insurance can be obtained prior to the applicable sales closing
dates.
In addition to the changes described above, FCIC has made the
following changes to the CAT endorsement:
1. Sec. 402.1--Amend this section by adding, ``if provided by the
Corporation,'' after ``The Federal Crop Insurance Act, as amended by
the Federal Crop Insurance Reform Act of 1994, requires the Federal
Crop Insurance Corporation to implement a catastrophic risk protection
plan of insurance that provides a basic level of insurance coverage to
protect producers in the event of a catastrophic crop loss due to loss
of yield, or prevented planting'' to clarify that not all policies
offer prevented planting coverage.
2. Section 1--Clarify the definition of ``approved yield'' to cover
crops not included under 7 CFR part 400, sub- part G.
3. Section 1--Delete the phrase ``in which you have an insurable
share'' from the definition of ``crop of economic significance''. The
Act states that a determination of a ``crop of economic significance''
be based on the producer's share of all crops grown in the county, not
just the insurable crops.
4. Section 1--Add a definition for ``expected market price,''
``linkage requirement,'' and ``zero acreage report'' for clarification
purposes.
5. Section 1--Delete the definition of ``price election'' because
the definition of ``expected market price'' replaced it.
6. Section 1--Delete the definition of ``CFSA'' and add the
definition of ``FSA'' to reflect the change in the agency's name.
7. Section 4--Add a new section 4(e) to clarify that a producer
must have suffered at least a 50 percent loss in yield to be eligible
for an indemnity under this endorsement.
8. A new section 5(a) has been added specifying that acreage
reports be signed and filed before the acreage reporting date. To
minimize the burden imposed by the requirement, this provision also
allows that an operator may sign the acreage report for all other
persons with an insurable interest in the policy. All producers are
bound by all statements on the signed acreage report. Since the acreage
report is an integral part of the insurance contract and the document
upon which the premium is based it must be properly executed.
9. A new section 5(b) has been added to consolidate and clarify
information on share, share leases, cash leases, and insurance coverage
in multiple owner situations. Consequently, the definition of share and
section 3(c) of the interim rule has been deleted.
10. Section 6(c) (now 7(a)) has been amended to allow a producer to
obtain catastrophic risk protection coverage on high risk land from an
insurance provider other than the insurance provider where the limited
or additional coverage was obtained, if the provider of the limited or
additional coverage does not sell or service CAT policies. This change
was necessary because some companies who provide limited and additional
coverage do not provide CAT coverage.
11. Section 11(a) (now 12(e)) has been amended by replacing the
specifically named price support and production adjustment programs
under which producers receive benefits to benefits under the
Agricultural Market Transition Act.
List of Subjects in 7 CFR Part 402
Claims, Crop insurance, Reporting and recordkeeping requirements.
Final Rule
Accordingly, for the reasons set out in the preamble, the interim
rule, ``Catastrophic Risk Protection Endorsement,'' published at 60 FR
2000-2005, is adopted as a final rule, effective for the 1997 and
succeeding crop year for all crops with a 1997 crop year contract
change date following the effective date of this rule and for the 1998
and succeeding crop years for all crops with a 1997 crop year contract
change date prior to the effective date of this rule, with changes as
follows:
7 CFR Part 402 is revised to read as follows:
PART 402--CATASTROPHIC RISK PROTECTION ENDORSEMENT; REGULATIONS FOR
THE 1997 AND SUBSEQUENT CROP YEARS
Sec.
402.1 General statement.
402.2 Applicability.
402.3 OMB control numbers.
402.4 Catastrophic risk protection endorsement.
Authority: 7 U.S.C. 1506(l) and 1506(p).
Sec. 402.1 General statement.
The Federal Crop Insurance Act, as amended by the Federal Crop
Insurance Reform Act of 1994, requires the Federal Crop Insurance
Corporation to implement a catastrophic risk protection plan of
insurance that provides a basic level of insurance coverage to protect
producers in the event of a catastrophic crop loss due to loss of yield
or prevented planting, if provided by the Corporation, provided the
crop loss or prevented planting is due to an insured cause of loss
specified in the crop insurance policy. This Catastrophic Risk
Protection Endorsement is a continuous endorsement that is effective in
conjunction with a crop insurance policy for the insured crop.
Catastrophic risk protection coverage will be offered through approved
insurance providers if there are a sufficient number available to
service the area. If there are an insufficient number available, as
determined by the Secretary, local offices of the Farm Service Agency
will provide catastrophic risk protection coverage.
Sec. 402.2 Applicability
This Catastrophic Risk Protection Endorsement is applicable to each
crop for which catastrophic risk protection coverage is available and
for which the producer elects such coverage.
Sec. 402.3 OMB control numbers.
The information collection activity associated with this rule has
been approved by the Office of Management and Budget (OMB) pursuant to
the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) under OMB
control number 0563-0003.
Sec. 402.4 Catastrophic Risk Protection Endorsement Provisions.
The Catastrophic Risk Protection Endorsement Provisions for the
1997 and succeeding crop years are as follows:
Department of Agriculture
Federal Crop Insurance Corporation
Catastrophic Risk Protection Endorsement
(This is a continuous endorsement)
If a conflict exists between this Endorsement and any of the
policies specified in section 2 or the Special Provisions for the
insured crop, this endorsement will control.
Terms and Conditions
1. Definitions
Additional coverage--Plans of crop insurance providing a level
of coverage equal to or greater than sixty-five percent (65%) of
your approved yield indemnified at one hundred percent (100%) of the
expected market price, or comparable coverage as established by
FCIC.
Administrative fee--The $50 fee the producer must pay on a per
crop and county basis with a maximum of $200 per producer per county
and $600 per producer for catastrophic and limited coverage on an
annual basis.
Approved insurance provider--A private insurance company,
including its agents, that has been approved and reinsured by FCIC
to provide insurance coverage to producers participating in the
Federal Crop Insurance program.
Approved yield--The amount of production per acre computed in
accordance with FCIC's Actual Production History Program (7 CFR part
400, subpart G) or for
[[Page 42986]]
crops not included under 7 CFR part 400, subpart G, the yield used
to determine the guarantee in accordance with the crop provisions or
the Special Provisions.
Catastrophic risk protection--The minimum level of coverage
offered by FCIC which meets the requirements for a person to qualify
for certain other USDA program benefits (see sections 4 and 12).
County--The political subdivision of a state listed in the
actuarial table and designated on your accepted application,
including land in an adjoining county, provided such land is part of
a field that extends into the adjoining county and the county
boundary is not readily discernable. For peanuts and tobacco, the
county will also include any land identified by a FSA farm serial
number for the county but physically located in another county.
Crop of economic significance--A crop that has either
contributed in the previous crop year, or is expected to contribute
in the current crop year, ten percent (10%) or more of the total
expected value of your share of all crops grown in the county.
However, a crop will not be considered a crop of economic
significance if the expected liability under the Catastrophic Risk
Protection Endorsement is equal to or less than the administrative
fee required for the crop.
Expected market price--(price election) The price per unit of
production (or other basis as determined by FCIC) anticipated during
the period the insured crop normally is marketed by producers. This
price will be set by FCIC before the sales closing date for the
crop. The expected market price may be less than the actual price
paid by buyers if such price typically includes remuneration for
significant amounts of post-production expenses such as
conditioning, culling, sorting, packing, etc.
FCIC--The Federal Crop Insurance Corporation, a wholly owned
Government Corporation within USDA.
FSA--The Farm Service Agency, an agency of the United States
Department of Agriculture or any successor agency.
Insurance is available--When crop information is contained in
the county actuarial documents for a particular crop.
Limited coverage--Plans of insurance offering coverage that is
equal to or greater than fifty percent (50%) of your approved yield
indemnified at one hundred percent (100%) of the expected market
price, or a comparable coverage, but less than sixty-five percent
(65%) of your approved yield indemnified at one hundred percent
(100%) of the expected market price, or a comparable coverage.
Limited resource farmer--A producer or operator of a farm, with
an annual gross income of $20,000 or less derived from all sources
of revenue, including income from spouse's or other members of the
household, for each of the prior two years. Notwithstanding the
previous sentence, a producer on a farm or farms of less than 25
acres aggregated for all crops, where a majority of the producer's
gross income is derived from such farm or farms, but the producer's
gross income from farming operations does not exceed $20,000, will
be considered a limited resource farmer.
Linkage requirement--The legal requirement that a producer must
obtain at least catastrophic risk protection coverage for any crop
of economic significance as a condition of receiving benefits for
such crop from certain other USDA programs in accordance with
section 12(e), unless the producer executes a waiver of any
eligibility for emergency crop loss assistance in connection with
the crop.
Secretary--The Secretary of the United States Department of
Agriculture.
USDA--The United States Department of Agriculture.
Zero acreage report--An acreage report filed by you that
certifies you do not have a share in the crop for that crop year.
2. Eligibility, Life of Policy, Cancellation, and Termination
(a) You must have one of the following policies in force to
elect this Endorsement:
(1) The General Crop Insurance Policy (7 CFR 401.8) and crop
endorsement;
(2) The Common Crop Insurance Policy (7 CFR 457.8) and crop
provisions;
(3) The Group Risk Plan Policy, if available for catastrophic
risk protection; or
(4) A specific named crop insurance policy.
(b) You must have made application for catastrophic risk
protection on or before the sales closing date for the crop in the
county.
(c) You must be a ``person'' as defined in the crop policy to be
eligible for catastrophic risk protection coverage.
(d) In addition to the provisions specified in the applicable
crop policy, this Endorsement will terminate for the crop year for
which:
(1) You fail to pay the applicable administrative fee, as
specified in section 6;
(2) You elect to purchase limited or additional coverage for the
insured crop; or
(3) The applicable crop policy, to which this endorsement
attaches, automatically terminates (i.e., the policy must be renewed
each year).
3. Unit Division
(a) This section is in lieu of the unit provisions specified in
the applicable crop policy.
(b) For catastrophic risk protection coverage, a unit will be
all insurable acreage of the insured crop in the county on the date
coverage begins for the crop year:
(1) In which you have one hundred percent (100%) crop share; or
(2) Which is owned by one person and operated by another person
on a share basis.
(Example: If, in addition to the land you own, you rent land from
five landlords, three on a crop share basis and two on a cash basis,
you would be entitled to four units; one for each crop share lease
and one that combines the two cash leases and the land you own.)
(c) Further division of the units described in paragraph (b)
above is not allowed under this Endorsement.
4. Insurance Guarantees, Coverage Levels, and Prices for Determining
Indemnities
(a) Notwithstanding any provision contained in any other policy
document, for the 1995 through 1998 crop years, catastrophic
coverage will offer protection equal to fifty percent (50%) of your
approved yield indemnified at sixty percent (60%) of the expected
market price, or a comparable coverage as established by FCIC.
(b) Notwithstanding any provision contained in any other policy
document, for the 1999 and subsequent crop years, catastrophic
coverage will offer protection equal to fifty percent (50%) of your
approved yield indemnified at fifty-five percent (55%) of the
expected market price, or a comparable coverage as established by
FCIC.
(c) If the crop policy denominates coverage in dollars per acre
or other measure, or any other alternative method of coverage, such
coverage will be converted to the amount of coverage that would be
payable at fifty percent (50%) of your approved yield indemnified at
sixty percent (60%) of the expected market price for the 1995
through 1998 crop years and fifty percent (50%) of your approved
yield indemnified at fifty-five percent (55%) of the expected market
price for the 1999 and subsequent crop years.
(d) You may elect catastrophic coverage for any crop insured or
reinsured by FCIC on either an individual yield and loss basis or an
area yield and loss basis, if both options are offered as set out in
the Actuarial Table or the Special Provisions.
(e) To be eligible for an indemnity under this endorsement you
must have suffered at least a 50 percent loss in yield.
5. Report of Acreage
(a) The report of crop acreage that you file in accordance with
the crop policy must be signed on or before the acreage reporting
date. For catastrophic risk protection, unless the other person with
an insurable interest in the crop objects in writing prior to the
acreage reporting date and provides a signed acreage report on their
own behalf, the operator may sign the acreage report for all other
persons with an insurable interest in the crop without a power of
attorney. All persons with an insurable interest in the crop, and
for whom the operator purports to sign and represent, are bound by
the information contained in that acreage report.
(b) For the purpose of determining the amount of indemnity only,
your share will not exceed your insurable interest at the earlier of
the time of loss or the beginning of harvest. Unless the accepted
application clearly indicates that insurance is requested for a
partnership or joint venture, insurance will only cover the crop
share of the person completing the application. The share will not
extend to any other person having an interest in the crop except as
may otherwise be specifically allowed in this endorsement. Any
acreage or interest reported by or for your spouse, child or any
member of your household may be considered your share. A lease
containing provisions for both a minimum payment (such as a
specified amount of cash, bushels, pounds, etc.) and a crop share
will be considered a crop share lease. A lease containing provisions
for either a minimum payment (such as a specified amount of cash,
bushels, pounds, etc.,) or a crop share will be considered a cash
lease. Land rented for cash, a fixed commodity payment, or any
consideration other than a share in the insured crop on such land
will be considered as owned by the lessee.
[[Page 42987]]
6. Annual Premium and Administrative Fees
(a) Notwithstanding any provision contained in any other policy
document, you will not be responsible to pay a premium, nor will the
policy be terminated because the premium has not been paid. FCIC
will pay a premium subsidy equal to the premium established for the
coverage provided under this endorsement.
(b) In return for catastrophic risk protection, you must pay an
administrative fee as follows:
(1) To the insurance provider at the time of application (the
fee will not be refunded if you file a zero acreage report the
initial crop year for which the application is accepted);
(2) Annually, on or before the acreage reporting date for the
applicable crop for any subsequent crop years that catastrophic risk
protection is in effect (The fee will not be required if you file a
bonafide zero acreage report on or before the acreage reporting
date, however, filing a false zero acreage report could subject you
to criminal and administrative sanction); and
(3) Equal to $50 per crop per county, subject to a maximum of
two hundred dollars ($200) per county and six hundred dollars ($600)
for all counties in which you insure crops. In calculating the
maximum amount of administrative fees, the fees paid for both
catastrophic risk protection and limited coverage will be combined.
(c) The administrative fee provisions of paragraph (b) of this
section do not apply if you meet the definition of a limited
resource farmer (see section 1). If you qualify as a limited
resource farmer and desire to be exempted from paying the
administrative fee you must sign the waiver at the time of
application (on or before the sales closing date.)
(d) When a crop policy has provisions to allow you the option to
separately insure individual crop types or varieties, you must pay a
separate administrative fee in accordance with paragraph (b) of this
section for each type or variety you elect to separately insure.
(e) The administrative fee will be refunded if, after applying
for catastrophic risk protection and paying the administrative fee,
you elect to purchase additional coverage for such crop in the same
county on or before the sales closing date. Administrative fees will
not be refunded, however if, after the purchase of the additional
coverage, you still have 4 or more crops insured in the county, or 4
or more crops insured in each of three or more counties, at the CAT
or limited coverage level.
(f) If the administrative fee is not paid when due, the crop
insurance contract will terminate effective at the beginning of the
crop year for which the administrative fee was not paid. You may be
ineligible for certain other USDA program benefits as set out in
section 12, and all such benefits already received for the crop year
must be refunded. If you fail to pay the administrative fee when
due, the execution of a waiver of any eligibility for emergency crop
loss assistance in connection with the crop will not be effective
for any crop year in which payment was not made.
7. Insured Crop
The crop insured is specified in the applicable crop policy,
however:
(a) Notwithstanding any other policy provision requiring the
same insurance coverage on all insurable acreage of the crop in the
county, if you purchase limited or additional coverage for a crop,
you may separately insure acreage under catastrophic coverage that
has been designated as ``high risk'' land by FCIC, provided that you
execute a High Risk Land Exclusion Option and obtain a catastrophic
risk protection policy with the same approved insurance provider, if
available, on or before the applicable sales closing date. If
catastrophic coverage is not available from the same insurance
provider, you may obtain the catastrophic risk protection policy for
the high risk land from another approved insurance provider or FSA,
if available. You will be required to pay a separate administrative
fee for both the limited or additional coverage policy and the
catastrophic coverage policy unless the maximum administrative fee
would be exceeded.
(b) A tobacco producer may insure one hundred percent (100%) of
the tobacco crop that is identified by a tobacco marketing card
issued by FSA for a specific producer and Farm Serial Number under
one CAT policy, provided the producer and other persons each have a
share in the crop, all the shareholders agree in writing to such
arrangement, and none of the persons hold any other interest in
another tobacco crop for which they are required to obtain at least
catastrophic coverage. If the tobacco crop is insured under one
policy:
(1) The linkage requirements will be satisfied for each
shareholder of the crop; and
(2) The producer insuring the crop will:
(i) Make application for insurance and provide the name and
social security number, or employer identification number, of each
person with a share in the tobacco crop;
(ii) File the acreage report showing a one-hundred percent
(100%) share in the crop (all insurable acreage covered by such
marketing card will be considered as one unit);
(iii) Be responsible to pay the one administrative fee for all
the producers within the county;
(iv) Fulfill all requirements under the crop insurance contract;
and
(v) Receive any indemnity payment under his or her social
security number or employer identification number and distribute the
indemnity payments to the other persons sharing in the crop.
(c) A landowner will be allowed to obtain catastrophic coverage
to satisfy linkage requirements for all other landowners who hold an
undivided interest in the insurable acreage, provided:
(1) All the landowners must agree in writing to such arrangement
and have their social security number or employer identification
number listed on the application, without regard to the actual
amount of their interest in the insured acreage;
(2) All landowners must have an undivided interest in the
insurable acreage;
(3) None of the landowners may hold any share in other acreage
for which they are required to obtain at least catastrophic
coverage;
(4) The total cumulative liability under the Catastrophic Risk
Protection Endorsement for all landowners must be $2,500 or less;
(5) The landowner insuring the crop will:
(i) Make application for insurance and provide the name and
social security number or employer identification number of each
person with an undivided interest in the insurable acreage;
(ii) Be responsible to pay the one administrative fee for all
the producers within the county;
(iii) Fulfill all requirements under the insurance contract; and
(iv) Receive any indemnity payment under the landowner's social
security number, or when applicable, employer identification number,
and distribute the indemnity payments to the other persons sharing
in the crop.
8. Replanting Payment
Notwithstanding any provision contained in any other crop
insurance document, no replant payment will be paid whether or not
replanting of the crop is required under the policy.
9. Claim for Indemnity
(a) If two or more insured crop types, varieties, or classes are
insured within the same unit, and multiple price elections are
applicable, the dollar amount of insurance and the dollar amount of
production to be counted will be determined separately for each
type, variety, class, etc., that have separate price elections and
then totaled to determine the total liability or dollar amount of
production to be counted for the unit.
(b) If you are eligible to receive an indemnity under this
endorsement and benefits compensating you for the same loss under
any other USDA program, you must elect the program from which you
wish to receive benefits. Only one payment or program benefit is
allowed. However, if other USDA program benefits are not available
until after you filed a claim for indemnity, you may refund the
total amount of the indemnity and receive the other program benefit.
Farm ownership and operating loans, may be obtained from the USDA in
addition to crop insurance indemnities.
10. Concealment or Fraud
Notwithstanding any provision contained in any other crop
insurance document, your CAT policy may be voided by us on all crops
without waiving any of our rights, including the right to collect
any amounts due:
(a) If at any time you conceal or misrepresent any material fact
or commit fraud relating to this or any other contract issued under
the authority of the Federal Crop Insurance Act with any insurance
provider; and
(b) The voidance will be effective as of the beginning of the
crop year during which such act or omission occurred. After the
policy has been voided, you must make a new application to obtain
catastrophic risk protection coverage for any subsequent crop year.
If your policy is voided under this
[[Page 42988]]
section, any waiver of eligibility for emergency crop loss
assistance in connection with the crop will not be effective for the
crop for the year in which the voidance occurred.
11. Exclusion of Coverage
(a) Options or endorsements that extend the coverage available
under any crop policy offered by FCIC will not be available under
this endorsement, except the Late Planting Agreement Option. Written
agreements are not available for any crop insured under this
endorsement.
(b) Notwithstanding any provision contained in any other crop
policy, hail and fire coverage and high-risk land may not be
excluded under catastrophic risk protection.
12. Eligibility for Other USDA Program Benefits
(a) Even if it was a crop of economic significance for the
previous crop year, if you do not intend to plant the crop in the
current crop year, you do not have to obtain crop insurance or
execute a waiver of your eligibility for any emergency crop loss
assistance in connection with the crop to remain eligible for the
USDA program benefits specified in subsection (e). However, if,
after the sales closing date, you plant that crop, you will be
unable to obtain insurance for that crop and you must execute a
waiver of your eligibility for emergency crop loss assistance in
connection with the crop to remain eligible for the USDA program
benefits specified in section 12(e). Failure to execute such a
waiver will require you to refund any benefits already received
under a program specified in section 12(e).
(b) You are initially responsible to determine the crops of
economic significance in the county. The insurance provider may
assist you in making these initial determinations. However, these
determinations will not be binding on the insurance provider. To
determine the percentage value of each crop:
(1) Multiply the acres planted to the crop, times your share,
times the approved yield, and times the price;
(2) Add the values of all crops grown by the producer in the
county; and
(3) Divide the value of the specific crop by the result of
section 12(b)(2).
(c) You may use the type of price such as the current local
market price, futures price, established price, highest amount of
insurance, etc., for the price when calculating the value of each
crop, provided that you use the same type of price for all crops in
the county.
(d) You may be required to justify the calculation and provide
adequate records to enable the insurance provider to verify whether
a crop is of economic significance.
(e) You must obtain at least catastrophic coverage for each crop
of economic significance in the county in which you have an
insurable share, if insurance is available in the county for the
crop, unless you execute a waiver of any eligibility for emergency
crop loss assistance in connection with the crop to be eligible for:
(1) Benefits under the Agricultural Market Transition Act;
(2) Loans or any other USDA provided farm credit, including:
guaranteed and direct farm ownership loans, operating loans, and
emergency loans under the Consolidated Farm and Rural Development
Act provided after October 13, 1994; and
(3) Benefits under the Conservation Reserve Program derived from
any new or amended application or contracts executed after October
13, 1994.
(f) Failure to comply with all provisions of the policy
constitutes a breach of contract and may result in ineligibility for
certain other farm program benefits for that crop year and any
benefit already received must be refunded. If you breach the
insurance contract, the execution of a waiver of any eligibility for
emergency crop loss assistance will not be effective for the crop
year in which the breach occurs.
Signed in Washington, D.C., on August 13, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-21117 Filed 8-19-96; 8:45 am]
BILLING CODE 3410-FA-P
