[Federal Register Volume 63, Number 232 (Thursday, December 3, 1998)]
[Rules and Regulations]
[Pages 66706-66715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32156]
[[Page 66706]]
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DEPARTMENT OF AGRICULTURE
Federal Crop Insurance Corporation
7 CFR Part 457
RIN 0563-AB69
Common Crop Insurance Regulations; Basic Provisions
AGENCY: Federal Crop Insurance Corporation, USDA.
ACTION: Final rule.
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SUMMARY: The Federal Crop Insurance Corporation (FCIC) amends the
Common Crop Insurance Policy; Basic Provisions for the purpose of:
Clarifying certain provisions; adding definitions and provisions to
allow enterprise and whole farm units; allowing the use of a written
agreement to insure acreage that has not been planted and harvested in
one of the three previous crop years; removing the requirement that a
minimum amount of prevented planting acreage be contiguous before a
prevented planting payment can be made; and removing the requirement
that the Palmer Drought Severity Index be used to determine eligibility
for a prevented planting payment in certain circumstances. The intended
effect of this action is to create a policy that best meets the needs
of the insured.
EFFECTIVE DATE: November 30, 1998.
FOR FURTHER INFORMATION CONTACT: Janice Nuckolls, Insurance Management
Specialist, Research and Development, Product Development Division,
Federal Crop Insurance Corporation, United States Department of
Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone (816)
926-7730.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
The Office of Management and Budget (OMB) has determined this rule
to be significant and, therefore, it has been reviewed by 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 of all the changes in the final rule, eliminating
the contiguous acreage requirement to determine eligible prevented
planting acreage will have the most impact. The impact is greatest in
certain regions of the Northern Plains, but the effect on overall crop
insurance payments is expected to be small. Additional indemnities
resulting from this change are estimated to average $500,000 per year.
Premium rate adjustments have been made to cover the additional
indemnities. Additional costs to the Government will be about $250,000
for premium subsidies, $110,000 in administrative subsidies, and
$38,000 in underwriting losses. Other provisions of the rule serve to
clarify provisions or make changes that may cause slight changes in
expected indemnities and premiums. Removal of the use of the Palmer
Drought Severity Index is not expected to significantly impact
indemnities over those that were expected to be covered. Previous
premium rates reflected this risk. Other than removal of the contiguous
land requirement indicated above, little impact is foreseen.
Paperwork Reduction Act of 1995
Under the provisions of the Paperwork Reduction Act of 1995 (44
U.S.C. chapter 35), the collections of information for this rule have
been previously approved by the Office of Management and Budget (OMB)
under control number 0563-0053 through October 31, 2000. The amendments
set forth in this rule do not revise the content or alter the frequency
of reporting for any of the forms or information collections cleared
under the above referenced docket.
Unfunded Mandates Reform Act of 1995
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA),
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 UMRA) for State, local, and tribal
governments or the private sector. Therefore, this rule is not subject
to the requirements of sections 202 and 205 of UMRA.
Executive Order 12612
It has been determined under section 6(a) of Executive Order 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 economic impact on a
substantial number of small entities. New provisions included in this
rule will not impact small entities to a greater extent than large
entities. The amount of work required of the insurance companies
delivering and servicing these policies will not increase from the
amount of work currently required. Therefore, this action is determined
to be exempt from the provisions of the Regulatory Flexibility Act (5
U.S.C. 605) and no Regulatory Flexibility Analysis was prepared.
Federal Assistance Program
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.450.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372 which requires 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 12988
This rule has been reviewed in accordance with Executive Order
12988 on civil justice reform. The provisions of this rule will not
have a retroactive effect. 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 part 11 must be exhausted before any action against FCIC for
judicial review may be brought.
Environmental Evaluation
This action is not expected to have a significant economic impact
on the quality of the human environment, health, and safety. Therefore,
neither an Environmental Assessment nor an Environmental Impact
Statement is needed.
Background
On Wednesday, September 30, 1998, FCIC published a notice of
proposed rulemaking in the Federal Register at 63 FR 52194-52198 to
amend the Common Crop Insurance Policy; Basic Provisions (Basic
Provisions) (7 CFR part 457) effective for the 1999 and succeeding crop
years for all crops with contract change dates after the effective date
of the final rule, and for the 2000 or 2001 and succeeding crop years
for all crops with contract change dates prior to the effective date of
the final rule.
The public was afforded 15 days following filing of the proposed
rule at the Federal Register to submit written comments and opinions. A
total of 59 comments were received from an insurance service
organization, reinsured companies, crop insurance agents, and a
national commodity
[[Page 66707]]
group. The comments received and FCIC's responses are as follows:
Comment: An insurance service organization stated that sufficient
time was not allowed to deal with the proposed rule. It stated that a
fifteen day comment period is simply inadequate to deal with the
magnitude of concerns and is an inadequate amount of time to
sufficiently consider the implications and to solicit and compile
comments from member companies.
Response: To meet the needs of producers and for ease in
administering the policy, it was important the provisions be revised
and effective for 1999 spring crops. This requires the rule to be made
effective prior to the contract change dates for the specific crops. In
order to accomplish this, the comment period could not be longer than
15 days. Most of the changes in the proposed rule arose from requests
from producers and insurance companies. All individual members and
other interested parties had an opportunity to comment.
Comment: A reinsured company and an insurance service organization
made the following comments regarding enterprise and whole farm units:
(1) Definitions should be consistent among policies such as Crop
Revenue Coverage (CRC), Revenue Assurance (RA), the Basic Provisions,
(2) The phrase ``and at least 50 insurable acres'' should be deleted
from the definitions of enterprise unit and whole farm unit. The
commenter stated that as long as at least two basic units were
involved, the number of acres should be irrelevant. (3) Clarify whether
the enterprise unit discount is based on the number of acres or the
number of sections in the enterprise unit. (4) A producer who farms in
four different sections, owning the land in one section but cash-
renting the land in the other three sections would qualify for one
basic unit and not for enterprise units under the proposed definition.
However, if the other three sections were share-rented, the producer
would qualify for at least two separate basic units and, therefore, for
an enterprise unit. This does not seem equitable. (5) Whether the
sentence referring to at least two basic units and at least 50
insurable acres mean cropland (plantable) acreage that may be counted
for more than one crop or is it crop specific, meaning a small
operation may qualify for an enterprise unit on a crop one year but not
the next because of crop rotation or other factors, and whether it
includes acreage that was prevented from being planted. (6) The
provision that requires producers to report acreage and production at
the basic unit level defeats the purpose of unit consolidation offered
by enterprise and whole farm units and should be eliminated. (7) Allow
an insured to report acreage and production on an optional unit basis
if the producer chooses (currently allowed under CRC). This would allow
flexibility in succeeding years to insure optional units. (8) Failure
to report information at the enterprise or whole farm unit level, if
those levels are chosen, should not result in premiums and indemnities
being based on basic units. It would be more logical to treat basic
units that were not reported as such as enterprise and whole farm units
rather than as basic units. This reversion to basic units is logical
when the insured wanted further division into optional units but did
not certify accordingly. The commenter questioned why enterprise and
whole farm units would revert to basic units when the required
information, on a basic unit basis is not provided. This could result
in more units and a higher possibility of a loss, although at a higher
premium. Section 34(a)(5) may not be necessary if enterprise or whole
farm units do not revert to basic units if acceptable production
reports are not provided.
The insurance service organization stated that adding to the
definition of ``enterprise unit,'' the requirement of separate legal
descriptions and at least two optional units, may cause need for some
clarification. The insurance service organization also asked whether
the following can qualify for enterprise units: (A) Multiple legal
descriptions as well as multiple basic units when two or more basic
units (by share arrangement in the same section) are not divided into
optional units; (B) Multiple optional units as a substitute for
multiple basic units when one basic unit is divided into two or more
optional units by legal description; and (C) When a basic unit is
divided into two optional units, such as irrigated and non-irrigated
practices within one section, rather than by legal description.
The reinsured company stated that section 34(a)(1) provides that an
election of enterprise or whole farm units must be made before the
earliest sales closing date for the insured crops. The company stated
this language would be appropriate for whole farm units (multiple crops
for a whole farm unit); however, language should also be added to
specify the sales closing date for the crop for enterprise units
(single crop). The insurance service organization stated if the
enterprise unit definition is changed to match the CRC wheat
definition, section 34(a) would need to be revised accordingly.
Response: With respect to the first set of comments: (1)
Consistency among crop insurance policies is desirable. However, FCIC
is required to offer its programs at an actuarially sound rate. Private
insurance products need only be offered at an actuarially appropriate
rate. Therefore, consistency may not always be achieved. (2) FCIC has
deleted the 50 acre requirement from both the enterprise and whole farm
units. (3) For enterprise units, the discount will be based on the
number of sections, not the number of acres. (4) FCIC has revised the
definition of ``enterprise unit'' to allow acreage to qualify for an
enterprise unit if the acreage would qualify for either two or more
basic units of the same crop located in separate sections, section
equivalents, or farm serial numbers or two or more optional units of
the same crop located in separate sections, section equivalents, or
farm serial numbers. Therefore, both scenarios discussed in the comment
would qualify for an enterprise unit. (5) As stated above, the
definition of ``enterprise unit'' has been revised to require two or
more basic or optional units of the same crop. (6) and (7) Producers
will still be required to report acreage on a basic or optional unit to
ensure eligibility for an enterprise unit, although when determining
premiums or indemnities, all the acreage within the enterprise unit
will be used. FCIC has eliminated the requirement that producers report
production on a basic or optional unit basis. Production must be
reported for the enterprise unit. However, a provision has also been
added to specify that any required production records must be
maintained separately by basic or optional units if the producer wishes
to change the unit structure in subsequent crop years. (8) FCIC has
eliminated the provisions that specified that if the producer fails to
report information at the enterprise or whole farm level, premiums and
indemnities will be based on the basic units. Instead, if the producer
fails to provide any required production reports for the enterprise
unit, the producer will be assigned a yield in accordance with section
3(c)(1) of the Basic Provisions. It is only if the acreage never
qualified for enterprise units will the acreage be divided in basic
units.
With respect to the second set of comments: (A) When there are
basic units in multiple sections, the acreage will qualify for an
enterprise unit. (B) When there are multiple optional units in multiple
sections, the acreage will qualify for enterprise units. (C) When there
are multiple optional units in the
[[Page 66708]]
same section, the acreage will not qualify as an enterprise unit.
Comment: A reinsured company suggested the wording in section 2(e)
should clarify that administrative fees that are not paid also make a
person ineligible to participate in crop insurance programs.
An insurance service organization asked if sections 2(e)(1)-(10)
would remain after revising section 2(e) introductory text. The
insurance service organization also stated that the phrase ``you may be
determined to be ineligible'' suggests that a company may choose to not
make that determination even though payment is past due. They
recommended saying ``You will be determined to be ineligible.''
Response: FCIC has added a provision in section 2(e) to include
administrative fees as ``any amount due'' for clarity. This provision
was not intended to permit insurance companies to allow insureds to
remain eligible even though they may be indebted. FCIC has revised the
provision to change the word ``may'' to ``will.'' Sections 2(e)(1)-(10)
were inadvertently deleted in the proposed rule and will remain in the
policy.
Comment: A reinsured company stated that the provision in section
9(a)(1)(iii) that allows a written agreement to provide insurance
coverage for acreage that has not been planted and harvested within one
of the 3 previous crop years must recognize that this is most likely to
occur at acreage reporting time. The written agreement process must be
very streamlined and flexible.
Response: The written agreement provisions allow written agreements
to be requested after the sales closing date if the producer was not
aware, or should not have been aware of the condition that required the
existence of a written agreement before the sales closing date, or if
it is submitted in accordance with written agreement regulations.
Written agreements will be prepared and submitted in accordance with
the provisions in the Basic Provisions, written agreement regulations
and FCIC approved procedures. Therefore, no change has been made.
Comment: An insurance service organization suggested that, if
perennial crops are limited to trees, vines or bushes, this should be
stated in the definitions instead of in section 9(a)(1)(i)(D).
Response: Perennial crops, under its common usage includes any
plant that regrows each crop year without replanting and would
encompass more than just tree, vine, and bush crops. However, section
9(a)(1)(i)(D) is intended to only include tree, vine and bush crops.
Therefore, no change has been made.
Comment: A reinsured company stated the language in section 15(d)
of the proposed rule that requires a crop to be destroyed or put to
another use prior to payment of an indemnity is unnecessary and should
not be implemented. Such language indicates lack of confidence in
appraisal methods and will require two contacts to resolve a claim (one
contact to appraise and another contact to confirm destruction or other
use).
An insurance service organization stated that we should have more
confidence in appraisals than section 15(d) of the proposed rule
indicates. The commenter stated that if harvest is general in the area,
it may not be prudent to require destruction. The producer may want to
maintain the damaged crop as a cover crop on highly erodible land. The
commenter asked who would be responsible to determine the crop had been
destroyed or the acreage put to another use before the indemnity is
paid. If this is intended to make insureds aware of their
responsibility in this matter and is treated as one of the facts
insureds certify to as part of the loss adjustment process, it may be
useful.
A reinsured company stated that section 15(d) of the proposed rule
appears to put in writing that use of a certification form for this
purpose will continue to be acceptable. However, if this section means
that such acreage must be physically inspected prior to an indemnity
payment, the company definitely opposed it.
Response: FCIC has redesignated proposed section 15(d) as 15(e) to
recognize the new section 15(d) that was added in the interim rule that
was published in the Federal Register on July 30, 1998. Actual
production is always more accurate than appraisals. FCIC has revised
newly designated section 15(e) to specify that appraised production
will be used if the acreage is not harvested. If the acreage is
harvested, the insured must report the harvested production, which will
be used to determine the indemnity, unless otherwise specified in the
policy.
Comment: A national commodity group stated that a producer should
be allowed to plant a noninsured ``ghost crop'' on the same acreage
without losing a prevented planting payment for a crop that was
prevented from being planted due to an insured cause.
Response: Prevented planting ``substitute crop'' coverage was
provided for producers with coverage greater than catastrophic risk
protection beginning with the 1995 crop year. During the three crop
years this provision was effective, FCIC received numerous complaints
from agents, reinsured companies, commodity groups, and producers, that
the provision was subject to abuse, and that it was difficult to
establish ``intent'' as required under those provisions.
If a producer is prevented from planting the ``intended'' crop, it
is the producer's choice to leave the acreage idle, plant a cover crop,
or plant another crop for harvest. Only one crop normally is produced
per acre, per crop year. Instead, FCIC has discovered that producers
were receiving windfalls by receiving a benefit from the crop they were
prevented from planting and the benefit associated with producing
another crop on the acreage. This was never an intended effect of
prevented planting. Therefore, no change has been made.
Comment: A reinsured company and an insurance service organization
stated that the entire prevented planting concept should be
reconsidered. The reinsured company stated that the prevented planting
provisions are overly complex and not workable. The company recommended
that the entire prevented planting process would be more understandable
and easier to administer if a set dollar amount per acre was
established (the amount could vary by geographic area) that would be
paid for acres that remained unplanted due to insurable causes after a
set date (which would also vary by geographic area), rather than making
prevented planting payments on a crop-specific basis.
The insurance service organization stated that the proposed changes
provide only minor remedial relief to the prevented planting portions
of the policy that continue to be complicated and burdensome. These
areas of the policy are major concerns of the industry that elevate
both loss and administrative costs, and subject providers to excessive
scrutiny by RMA's Risk Compliance Division. The insurance service
organization stated that it was unable to adequately address the
prevented planting provisions within the time constraints allowed. It
stated that the rule does not remedy larger problems of the current
concept and that they will work with FCIC to improve the prevented
planting provisions.
Response: The recommended changes, which are materially beyond the
scope of the proposed rule, cannot be accomplished without benefit of
public comment. FCIC considered similar ideas from the insurance
industry in the past and found the
[[Page 66709]]
recommendation lacked detail, would create additional administrative
burden, and may not be in the best interest of the insureds. FCIC is
willing to review any detailed proposal for improving prevented
planting for possible use in future crop years. Therefore, no change
has been made.
Comment: A reinsured company suggested expanding the definition of
``field'' to be more consistent with the Farm Service Agency (FSA)
definition. That definition incorporates references to ``crop lines
being acceptable to delineate a field, if past farming practices
indicate the crop lines are not subject to change.''
Response: A more permanent boundary, such as those required by the
insurance policy, rather than the more liberal definition of FSA, is
simpler to administer and best serves the purpose of field designation
for the prevented planting provisions. The suggested revision would
increase the administrative burden on the reinsured companies, which
the current definition avoids. Therefore, no change has been made.
Comment: A reinsured company recommended that the definition of
``Palmer Drought Severity Index'' be expanded to state that the
classification is determined on a weekly basis. Also, the rule must
clarify how this index is to be administered when the sales closing
date or final planting date occur between two weekly indexes. The
company suggested that FCIC do additional research because it believes
that neither the Palmer Drought Severity Index, which is a long term
index, nor the Crop Moisture Index, which is a short term index,
adequately define drought for all planting situations. The company
stated that some combination of the two indexes or other alternatives
might be useful.
Response: FCIC has received numerous complaints that although
drought was a major problem, the Palmer Drought Severity Index did not
reach the required ``severe or extreme'' category because it did not
accurately reflect actual drought conditions at the time of planting.
FCIC has reviewed the Crop Moisture Index and does not believe that it
would be a viable alternative. Therefore, FCIC has deleted the
definition of the Palmer Drought Severity Index and its reference in
section 17(d).
Instead of the Palmer Drought Severity Index, FCIC has added
language in section 17(d) to clarify when drought will be considered as
an insurable cause of loss for prevented planting.
Comment: Reinsured companies and an insurance service organization
commented on the definition of ``prevented planting.'' A reinsured
company stated that the phrase ``general in the surrounding area and
that prevents other producers from planting acreage with similar
characteristics'' is very vague and is subject to many interpretations.
This company was concerned whether oversight organizations would rely
on a company's interpretation or question the determinations made by
the company.
The insurance service organization questioned the intent of the
revised definition. It asked that if insureds are prevented from
planting until the final planting date due to an insurable cause and
are not required to plant in the late planting period (even if
possible) to qualify for a prevented planting payment, whether it
matters if there is an insurable cause of loss within the late planting
period. The commenter also stated that a crop planted in the late
planting period is covered with a late planting guarantee and if no
crop is planted in the late planting period, it is covered with a
prevented planting guarantee because planting was prevented before the
final planting date. The language, ``if you elect to plant the insured
crop during the late planting period, failure to plant the insured crop
within the late planting period . . .'' is not necessary since an
insured would not need a cause of loss in the late planting period.
Another reinsured company suggested that, for crops with a late
planting period, insureds be allowed to report prevented planting
acreage up to ten days after the final planting date, to encourage
producers to plant during that period.
Response: The proposed language ``general in the surrounding area
and that prevents other producers from planting acreage with similar
characteristics'' is intended to require the comparison of acreage,
which is a major factor in determining whether acreage is prevented
from being planted, and allow a producer legitimately prevented from
planting due to an insurable cause to qualify for prevented planting
coverage without requiring that over 50 percent of the producers in the
surrounding area also be prevented. Reasonableness will be the standard
used by oversight organizations examining the conduct of the reinsured
companies.
The intent of the language regarding the late planting period is to
allow producers to collect a prevented planting payment if they were
prevented from planting by the final planting date. The previous
definition made it unclear whether producers were required to be
prevented from planting by the end of the late planting period to be
eligible for a prevented planting payment. FCIC has amended the
definition of prevented planting in section 1 for clarification.
The reduction in the guarantee already provides a sufficient
incentive for producers to plant early in the late planting period.
Requiring the producer to declare that he has been prevented from
planting before the end of the late planting period may subject the
producer to sanctions if the producer later plants the crop. All
reporting must occur after the late planting period to give producers a
chance to plant the crop. Therefore, no change has been made.
Comment: A reinsured company suggested that section 17(a)(3) should
be revised to specify that prevented planting coverage is not available
if the insured planted any crop (not just the ``insured crop'') during
or after the late planting period, except an approved cover crop
planted for haying or grazing.
Response: Section 17(a)(3) is intended to clarify that prevented
planting provisions do not apply to any acreage when the insured crop
is prevented from being planted and that same insured crop is planted
during or after the late planting period. FCIC has revised section
17(a)(3) to specify that such acreage is covered under the late
planting provisions. Provisions in section 17(f)(5) exclude prevented
planting coverage for any acreage on which another crop is planted for
harvest. FCIC does not see any reason to repeat this provision.
Comment: A reinsured company and an insurance service organization
stated that section 17(d) provides that if a late planting period is
applicable, that period will also be considered when determining if
drought or failure of the irrigation water supply is an insurable cause
of loss for the purposes of prevented planting. They questioned why the
late planting period would matter if the date for determining prevented
planting under the proposal is the final planting date.
The insurance service organization asked if the phrase ``if a late
planting period is applicable'' means if the insured planted or
attempted to plant the insured crop during the late planting period, or
only if a late planting period is available for the crop in question.
If the latter, they recommended that FCIC consider revising the phrase
to state, ``* * * or within the late planting period (for crops with a
late planting
[[Page 66710]]
period)'' and place a comma before the word ``either'' and delete the
comma that now follows the word. The insurance service organization
also asked if the Palmer Drought Severity Index is still used. If so,
will the acreage qualify for prevented planting as long as the index
classifies the acreage as ``extreme'' or ``severe'' within the late
planting period, even though it did not reach one of those categories
by the final planting date?
Response: As stated above, FCIC has eliminated all references to
the Palmer Drought Severity Index and substituted another standard.
Section 17(d) is revised to clarify that drought will be considered an
insurable cause of loss for non-irrigated acreage if the drought exists
through the planting period to the final planting date, or within the
late planting period if the producer elects to try to plant the crop.
Comment: An insurance service organization stated that both column
headings in section 17(e)(1) refer to the four most recent crop years,
and asked if this means ``APH crop years'' or ``policy crop years.'' If
the former, this could mean having to verify backward an unlimited
number of years due to crop rotation, etc. They also questioned the
wording of the last phrase in both columns, ``* * * (have/have not)
received a prevented planting insurance guarantee,'' asking if a
prevented planting guarantee is considered the same as a prevented
planting indemnity for this purpose. If so, they suggested referring to
it as an indemnity. The commenter also stated that the headings are so
lengthy that it might be at least as clear to change this back from
table format to the standard outline format of the rest of the policy.
Response: Reference to the ``four most recent crop years'' means
the crop year as defined in the Basic Provisions, not APH crop years.
However, the heading also specifies ``any crop''. Therefore, reinsured
companies only have to verify the total acreage planted in each of the
previous four crop years. Reference to prevented planting insurance
guarantee in section 17(e)(1) is not the same as a prevented planting
payment. The term prevented planting insurance guarantee is necessary
to recognize acreage that received a prevented planting guarantee prior
to 1998, when payment began on an acre by acre basis, where an
indemnity may not have been paid under previous prevented planting
rules. While the column headings may be somewhat lengthy, FCIC believes
the chart format is the easiest format to present this information.
Therefore, no change has been made.
Comment: A reinsured company, an insurance service organization,
and crop insurance agents commented about removing the requirement that
a minimum number of prevented planting acres be contiguous from section
17(f)(1). The reinsured company strongly objected to removing the
contiguous requirement, stating that the potential negative effects on
loss ratios and delivery costs (loss adjustment expenses) are too
great. The commenter stated that it does not support the action because
they have no knowledge of proposed rate increases and because the
Standard Reinsurance Agreement, that governs company risk sharing and
administrative expense reimbursement is already in place for 1999. The
company stated that this would greatly increase loss adjustment
expenses and workload, as potholes and small acreages must be
determined and accumulated, resulting in an increased number of payable
prevented planting claims and increased indemnities. The company stated
that these prospects were not contemplated in the Standard Reinsurance
Agreement. The company further stated that, while FCIC may project
additional indemnities of $500,000 per year, they are not comfortable
that this figure is correct. They also stated that the increased loss
adjustment expenses are not identified in the Cost-Benefit Analysis,
but they will be greatly increased. The company was concerned that,
while the Cost-Benefit Analysis suggests higher premium rates, they
have no detail concerning these rates, and they doubt that they will
provide enough increased premium or administrative expense subsidy to
cover the increased indemnities or loss adjustment expenses.
The reinsured company challenged the statement in the Regulatory
Flexibility Act section in the preamble of the proposed rule which
states that, ``the amount of work required of the insurance companies
delivering and servicing these policies will not increase from the
amount of work currently required.'' The company stated that this is an
untrue statement given the loss adjustment process that will be
required to determine prevented planting acreage that would not have
been required if the ``contiguous'' requirement remained.
The reinsured company also stated that language contained in
section 17(f)(1) requiring knowledge of the crops planted by field in
the four most recent crop years is not workable. In many cases, the
provider will have no way of determining this information.
The crop insurance agents supported FCIC's proposal to remove the
contiguous acreage requirement from section 17(f)(1), stating that this
change is needed to fairly treat producers who might have a high
percentage of their land prevented from being planted but do not have a
contiguous block of prevented planting acres that is of sufficient
size.
The insurance service organization stated that section 17(f)(1)
requires that, in order for unplanted acreage to be considered
prevented planting acreage for a different crop than the crop planted
in the field, the insured must have produced both crops in the same
field in the same crop year within any of the four most recent crop
years. They stated that four years is not enough. The commenter also
suggested rewording the beginning of the second sentence to, ``Any
prevented planting acreage within a field that contains planted acreage
will be considered to be acreage of the same crop unless * * *'' or
similar wording. This avoids the problems of saying acreage that was
prevented from being planted ``will be presumed to have been planted *
* *''
Response: FCIC proposed to remove the ``contiguous'' acreage
requirement due to the numerous complaints received since the
requirement was implemented. This change was intended to recognize that
potholes and other small portions of fields are wet in most years,
although planting occasionally may be possible. However, this provision
has prevented some producers having a substantial number of acres that
could not be planted from qualifying for prevented planting coverage
because a single block of prevented planting acreage was not large
enough.
FCIC acknowledges that removing the ``contiguous'' acreage
requirement may result in an increased number of claims qualifying for
prevented planting payments. However, the reinsured company's complaint
that loss adjustment expenses and workload would greatly increase by
removal of this provision is not accurate. Prevented planting acreage
must be determined to assure the ``contiguous'' requirement is met.
Therefore, the loss adjustment expenses and workload are incurred in
any case. Further, FCIC has simply restored a part of the prevented
planting coverage that was in effect prior to the 1998 crop year.
Therefore, FCIC has ample evidence upon which to base the amount of
premium increase and estimate any additional losses. Although the
recommended change to remove the contiguous requirement is being made
after the date the SRA became effective for 1999, this change is done
within the time required for making contract
[[Page 66711]]
changes and will result in an increase in premium that should offset
any additional costs. Therefore, no change has been made.
The previous four crop years is an appropriate amount of time to
determine if a producer has a history of planting two crops in a field,
and is consistent with the four year time period used to determine the
maximum acreage eligible for prevented planting coverage. It is the
producer's burden to provide evidence of past planting practices. If
the producer cannot meet this burden, the acreage will be considered as
intended to be planted to the crop planted in the field. Therefore, no
change has been made.
FCIC has revised section 17(f)(1) to specify that ``Any prevented
planting acreage within a field that contains planted acreage will be
considered to be acreage of the same crop unless * * *'' and has added
references to crop, crop type, and practice for clarification.
Comment: A reinsured company stated that the 20 acre or 20 percent
acreage requirement to qualify for a prevented planting payment is too
high. The company suggested these parameters be changed to a 5 acre or
5 percent deductible amount and that only acreage in excess of this
amount be paid for prevented planting. The commenter stated that this
threshold would be consistent with NASS figures for acreage
historically left unplanted.
Response: Prevented planting regulations since the 1994 crop year
have had the 20 acre or 20 percent requirement. FCIC did not receive
adverse comments until the word ``contiguous'' was added beginning with
the 1998 crop year. Removing the word contiguous, while still retaining
the 20 acre or 20 percent requirement, best achieves the goal of not
paying prevented planting claims when only a small number of acres are
prevented from being planted. FCIC believes that once the minimum
acreage threshold has been met, all prevented planting acreage should
be indemnified. Therefore, no change has been made.
Comment: A reinsured company commented regarding the language
contained in section 17(f)(5), which states if one of the crops being
double-cropped is not insurable, other verifiable records of it being
planted may be used, recommending that only one crop should be
considered for prevented planting purposes and that no prevented
planting payment should be made for a second crop.
Response: Crop insurance, including prevented planting coverage, is
intended to compensate producers for their actual losses. Therefore,
producers who traditionally plant one crop per year can receive a
prevented planting payment for failure to plant that crop. However, if
producers have the expectation of producing two crops for a single
year, compensating them for their actual losses requires the payment of
a prevented planting payment if the producer is unable to plant one of
the crops. Therefore, no change has been made.
Comment: A reinsured company and an insurance service organization
commented on section 17(f)(12), stating that this section contains
several references to the ``four most recent years.'' The company
recommended that this should be revised to ``four most recent crop
years'' to be consistent throughout section 17.
The insurance service organization asked whether the phrase
``receive a prevented planting insurance guarantee'' means that as long
as such crop type was reported as prevented planting on the acreage
report within the four most recent crop years, it does not matter
whether any prevented planting payment was made on such acreage. If so,
they stated that language conflicts with section 17(e)(1)(i)(A), which
states that the maximum prevented planting acreage will not include
reported prevented planting acreage planted to a substitute crop other
than an approved cover crop.
Response: FCIC has revised section 17(f)(12) to refer to ``four
most recent crop years.'' The phrase ``receive a prevented planting
insurance guarantee'' was added because there are some years where the
producer is prevented from planting a crop, whether indemnified or not.
Now the provision states that no prevented planting payment will be
made for any crop that the producer has not planted, or has not
received a prevented planting guarantee for in at least one of the last
four years. This language does not conflict with the provisions
contained in section 17(e)(1)(i)(A). Provisions in section
17(e)(1)(i)(A) specify the method to determine the maximum acreage
eligible for prevented planting coverage of each crop. Section
17(f)(12) determines the crop acreage eligible for prevented planting.
Comment: A reinsured company stated that FCIC must assure that the
language in section 17(g), along with the provisions contained in 17
(e) and (f), sufficiently limits the high-risk land eligible for
prevented planting in relation to the total acres (planted or not) for
the crop.
Response: The provisions contained in sections 17 (e), (f), and (g)
limit the number of high risk acres eligible for prevented planting
under a catastrophic risk policy to the maximum number of high-risk
acres insured under the catastrophic risk policy in any one of the four
most recent crop years. Therefore, no change has been made.
Comment: Reinsured companies and an insurance service organization
commented on the provisions in section 17(h). They stated that the
provisions are too complex and difficult to administer. The reinsured
companies stated that the provision requires knowledge of the crop
planted on the acreage previously and that this conflicts with the
other prevented planting provisions which are just based on a number of
acres eligible and are not tied to a specific crop on specific acreage.
The companies and the insurance service organization point out the
administrative burden associated with making such determinations and
the problems that arise when there was no crop planted the previous
year or if the eligible acres for the crop that was planted to that
acreage have already been exhausted because the crop was planted on
other acreage. An insurance service organization also asked the
consequences if the previous crop planted on the acreage was not an
insurable crop, is a perennial, was not insured, or the acreage was
just coming out of CRP. It also asked whether the crop that the
producer was prevented from planting has to be insurable and whether
the crop will be eligible for prevented planting the following year.
As a solution, one company suggested providing coverage on a non-
crop specific basis. Another company suggested that the provision be
deleted and all eligible prevented planting acreage be determined in
accordance with section 17(e). A company also stated that it would be
simplest to state the crop acres on which the extra prevented planting
acres should be applied. It suggested that, as an alternative, to
determine the eligible prevented planting acres remaining for all crops
and to prorate the extra prevented planting acres to these crops in
proportion to the number of acres remaining. This would be consistent
with the rest of the prevented planting provisions by using the
eligible acres established over the four previous crop years and taking
into account the remaining eligible acres for prevented planting from
the insurable crops on the policy.
Response: FCIC acknowledges the problems associated with the
requirement that the eligible prevented planting acreage will be based
on the crop planted the previous year on the
[[Page 66712]]
acreage. Instead, FCIC has revised the provision to base the guarantee,
etc., on the crops insured for the current year for which the producer
has remaining eligible prevented planting acreage. The company need
only look at the application or acreage report to see the crops listed.
Most producers who have insured a crop in the farming operation do not
cancel their policy when they elect not to plant the crop during the
crop year. As a result, the crop remains insured and the eligible base
acreage for the crop may be used to determine the guarantee for those
acres where the producer intended to plant a crop without an adequate
base. FCIC has also added a provision that if there are several crops
with eligible base acres that may be used to establish the guarantee,
etc., the crops that would have provided the prevented planting
coverage most like the intended crop will be used first. This is
intended to ensure that the producer receives fair compensation.
Comment: A reinsured company recommended that FCIC develop a means,
such as a flowchart to effectively ``map'' the major options available
in the implementation of the prevented planting provisions. This
information could be presented at a spring update training session
prior to the 1999 spring crop year to assure uniform understanding by
all.
Response: FCIC agrees that a flow chart may be helpful to map the
prevented planting provisions and will work with insurance providers or
their service organization to develop such a chart.
Comment: A reinsured company stated it applauds the provision in
section 24(e) that provides that amounts owed to the company may be
collected through administrative set off from payments the policyholder
receives from U.S. Government agencies and is anticipating procedures
for its implementation.
An insurance service organization asked whether the producer will
be removed from the Ineligible Tracking System once the amount owed is
offset by another government payment.
Response: Unfortunately, FCIC only has the authority to use
administrative offset from payments received from other agencies,
against any portion of the debt that has been paid by FCIC. There is no
authority to offset that portion paid by the company. Section 24(e)
just puts the producer on notice that debts may be subject to such
offset. The producers name will only be removed from the Ineligible
Tracking System once all amounts due have been paid.
Additionally, FCIC received the following comments regarding
provisions that FCIC did not propose to change. These changes cannot be
made without first proposing the recommended changes and allowing the
public to comment. FCIC will consider these recommendations when
additional changes to the regulations are proposed.
Comment: A reinsured company recommended the ``Agreement to
Insure'' section of the policy be amended to clarify the priority order
for crop specific endorsements or options such as malting barley. The
company stated that during recent discussions on malting barley it was
mentioned that the Malting Barley Endorsement takes precedence over the
Special Provisions and the order of priority is currently not clear.
Comment: A reinsured company, a national commodity group, and an
insurance service organization expressed concern regarding the ability
of a producer to collect multiple indemnities for the same acreage
after the first, and possibly additional crops have failed. The
reinsured company recommended adding provisions to limit payment of
indemnities to one per acre per crop year, with the exception of
legitimate fall and spring crops. A national commodity group stated
that the second crop should be considered a ``ghost crop'' if the farm
does not have a history of double-cropping.
An insurance service organization has presented a policy prototype
that includes continued coverage as the producer tries to get a crop
established.
Comment: A reinsured company recommended adding wording to section
7(b) to authorize deducting unpaid premium from replant claims.
Comment: A reinsured company recommended adding language in section
20 to require arbitration proceedings to begin within 12 months.
Comment: A national commodity group stated that producers who plant
corn in areas that historically have been subject to aflatoxin should
not be allowed to insure that corn when they have the option of
planting grain sorghum, which is resistant to aflatoxin.
In addition to the changes described above and minor editorial and
format changes, FCIC has made the following changes:
1. The definition of ``crop year'' in section 1 is revised to
specify that it is the period within which the insured crop is normally
grown, regardless of whether or not it is actually grown, and
designated by the calendar year in which the insured crop is normally
harvested. This change clarifies that any year in which the crop is
prevented from being planted will not affect the crop year designation.
2. Section 6(f) is revised to clarify that when a producer fails to
report a unit and the insurer denies liability for the unreported
units, the insured's share of any production from the unreported unit
will be allocated, for loss purposes only, as production to count to
the reported units in proportion to the liability on each reported
unit; however, such production will not be allocated to prevented
planting acreage or otherwise affect any prevented planting payment.
3. Section 28 is revised to clarify that when a transfer of right
to an indemnity is in effect, that both the transferor and the
transferee are jointly and severally liable for the payment of both the
premium and administrative fees.
Good cause is shown to make this rule effective upon filing for
public inspection at the Office of the Federal Register. This rule
provides prevented planting coverage for crops under the Basic
Provisions, as applicable. This rule must be effective prior to the
November 30, 1998, contract change dates of the crops for which these
revised prevented planting provisions are effective. Therefore, public
interest requires the agency to act immediately to make these
provisions available for as many crops as possible for the 1999 crop
year.
List of Subjects in 7 CFR Part 457
Crop insurance.
Final Rule
Accordingly, as set forth in the preamble, the Federal Crop
Insurance Corporation amends 7 CFR part 457 as follows:
PART 457--COMMON CROP INSURANCE REGULATIONS
1. The authority citation for 7 CFR part 457 continues to read as
follows:
Authority: 7 U.S.C. 1506(1), 1506(p).
Sec. 457.2 [Amended]
2. Section 457.2(e) is amended to remove the words ``paragraph 21''
and insert the words ``paragraph 24'' in their place.
Sec. 457.8 [Amended]
3. Section Sec. 457.8 is amended as follows:
A. Section 1 of the Basic Provisions is amended by adding
definitions for ``enterprise unit'' and ``whole farm unit,'' removing
the definition of ``palmer drought severity index,'' and by revising
the definitions of ``crop year'' and ``prevented planting'' to read as
follows:
[[Page 66713]]
1. Definitions.
* * * * *
Crop year. The period within which the insured crop is normally
grown, regardless of whether or not it is actually grown, and
designated by the calendar year in which the insured crop is
normally harvested.
* * * * *
Enterprise unit. All insurable acreage of the insured crop in
the county in which you have a share on the date coverage begins for
the crop year. An enterprise unit must consist of:
(1) Two or more basic units of the same insured crop that are
located in two or more separate sections, section equivalents, or
FSA farm serial numbers; or
(2) Two or more optional units of the same insured crop
established by separate sections, section equivalents, or FSA farm
serial numbers.
* * * * *
Prevented planting. Failure to plant the insured crop with
proper equipment by the final planting date designated in the
Special Provisions for the insured crop in the county. You may also
be eligible for a prevented planting payment if you failed to plant
the insured crop with the proper equipment within the late planting
period. You must have been prevented from planting the insured crop
due to an insured cause of loss that is general in the surrounding
area and that prevents other producers from planting acreage with
similar characteristics.
* * * * *
Whole farm unit. All insurable acreage of the insured crops in
the county in which you have a share on the date coverage begins for
each crop for the crop year.
* * * * *
B. Section 2(e) introductory text, of the Basic Provisions is
revised to read as follows:
2. Life of Policy, Cancellation, and Termination.
* * * * *
(e) If any amount due, including administrative fees or premium,
is not paid or an acceptable arrangement for payment is not made on
or before the termination date for the crop on which the amount is
due, you will be determined to be ineligible to participate in any
crop insurance program authorized under the Act in accordance with 7
CFR part 400, subpart U.
* * * * *
C. Sections 6(a)(1) and (2), 6(e) and 6(f) of the Basic Provisions
are revised to read as follows:
6. Report of Acreage.
(a) * * *
(1) If you insure multiple crops with us that have final
planting dates on or after August 15 but before December 31, you
must submit an acreage report for all such crops on or before the
latest applicable acreage reporting date for such crops; and
(2) If you insure multiple crops with us that have final
planting dates on or after December 31 but before August 15, you
must submit an acreage report for all such crops on or before the
latest applicable acreage reporting date for such crops.
* * * * *
(e) We may elect to determine all premiums and indemnities based
on the information you submit on the acreage report or upon the
factual circumstances we determine to have existed, subject to the
provisions contained in section 6(g).
* * * * *
(f) If you do not submit an acreage report by the acreage
reporting date, or if you fail to report all units, we may elect to
determine by unit the insurable crop acreage, share, type and
practice, or to deny liability on such units. If we deny liability
for the unreported units, your share of any production from the
unreported units will be allocated, for loss purposes only, as
production to count to the reported units in proportion to the
liability on each reported unit. However, such production will not
be allocated to prevented planting acreage or otherwise affect any
prevented planting payment.
D. Sections 9(a)(1)(i)(D) and 9(a)(1)(iii) of the Basic
Provisions are revised to read as follows:
9. Insurable Acreage.
(a) * * *
(1) * * *
(i) * * *
(D) Because a perennial tree, vine, or bush crop was grown on
the acreage;
* * * * *
(iii) The Crop Provisions or a written agreement specifically
allow insurance for such acreage;
* * * * *
E. Section 15 of the Basic Provisions is amended to add a new
subsection (e) to read as follows:
(e) Appraised production will be used to calculate your claim if
you will not be harvesting the acreage. To determine your indemnity
based on appraised production, you must agree to notify us if you
harvest the crop and advise us of the production. If the acreage
will be harvested, harvested production will be used to determine
any indemnity due, unless otherwise specified in the policy.
F. Section 16(b)(2) of the Basic Provisions is amended to add the
word ``and'' immediately following the semicolon.
G. Section 16(b)(3) of the Basic Provisions is removed and section
16(b)(4) is redesignated as section 16(b)(3).
H. Section 16(c) of the Basic Provisions is revised to read as
follows:
16. Late Planting.
* * * * *
(c) The premium amount for insurable acreage specified in this
section will be the same as that for timely planted acreage. If the
amount of premium you are required to pay (gross premium less our
subsidy) for such acreage exceeds the liability, coverage for those
acres will not be provided (no premium will be due and no indemnity
will be paid).
I. Section 16(d) of the Basic Provisions is added to read as
follows:
16. Late Planting.
* * * * *
(d) Any acreage on which an insured cause of loss is a material
factor in preventing completion of planting, as specified in the
definition of ``planted acreage'' (e.g., seed is broadcast on the
soil surface but cannot be incorporated) will be considered as
acreage planted after the final planting date and the production
guarantee will be calculated in accordance with section 16(b)(1).
J. Revise section 17(a) of the Basic Provisions to delete the word
``and'' at the end of section 17(a)(1)(ii), add ``; and'' at the end of
section 17(a)(2), and add a new section 17(a)(3) to read as follows:
17. Prevented Planting.
(a) * * *
(3) You did not plant the insured crop during or after the late
planting period. If such acreage was planted to the insured crop
during or after the late planting period, it is covered under the
late planting provisions.
* * * * *
K. Revise sections 17(d) introductory text and 17(d)(1) of the
Basic Provisions to read as follows:
17. Prevented Planting.
* * * * *
(d) Drought or failure of the irrigation water supply will be
considered to be an insurable cause of loss for the purposes of
prevented planting only if on the final planting date (or within the
late planting period if you elect to try to plant the crop):
(1) For non-irrigated acreage, the area that is prevented from
being planted has insufficient soil moisture for germination of seed
and progress toward crop maturity due to a prolonged period of dry
weather. Prolonged precipitation deficiencies must be verifiable
using information collected by sources whose business it is to
record and study the weather, including, but not limited to, local
weather reporting stations of the National Weather Service; or
* * * * *
L. The middle column heading in the table in section 17(e)(1) of
the Basic Provisions is revised to read as follows:
``Eligible acres if, in any of the 4 most recent crop years, you
have planted any crop in the county for which prevented planting
insurance was available or have received a prevented planting
insurance guarantee''.
* * * * *
M. The last column heading in the table in section 17(e)(1) of the
Basic Provisions is revised to read as follows:
``Eligible acres if, in any of the 4 most recent crop years, you
have not planted any crop in the county for which prevented planting
insurance was available or have not received a prevented planting
insurance guarantee''.
* * * * *
[[Page 66714]]
N. Sections 17(f)(1), (f)(11), and (f)(12) of the Basic Provisions
are revised to read as follows:
17. Prevented Planting.
* * * * *
(f) * * *
(1) That does not constitute at least 20 acres or 20 percent of
the insurable crop acreage in the unit, whichever is less. Any
prevented planting acreage within a field that contains planted
acreage will be considered to be acreage of the same crop, type, and
practice that is planted in the field unless the acreage that was
prevented from being planted constitutes at least 20 acres or 20
percent of the total insurable acreage in the field and you produced
both crops, crop types, or followed both practices in the same field
in the same crop year within any of the 4 most recent crop years;
* * * * *
(11) Based on an irrigated practice production guarantee or
amount of insurance unless adequate irrigation facilities were in
place to carry out an irrigated practice on the acreage prior to the
insured cause of loss that prevented you from planting. Acreage with
an irrigated practice production guarantee will be limited to the
number of acres allowed for that practice under sections 17(e) and
(f); or
(12) Based on a crop type that you did not plant, or did not
receive a prevented planting insurance guarantee for, in at least
one of the four most recent crop years. Types for which separate
price elections, amounts of insurance, or production guarantees are
available must be included in your APH database in at least one of
the four most recent crop years, or crops that do not require yield
certification (crops for which the insurance guarantee is not based
on APH) must be reported on your acreage report in at least one of
the four most recent crop years except as allowed in section
17(e)(1)(i)(B). We will limit prevented planting payments based on a
specific crop type to the number of acres allowed for that crop type
as specified in sections 17(e) and (f).
* * * * *
O. Section 17(f)(5) of the Basic Provisions is revised to add the
following text to the end of the paragraph between the word ``acreage''
and the semicolon: ``(If one of the crops being double-cropped is not
insurable, other verifiable records of it being planted may be used)''
* * * * *
P. Section 17(g) of the Basic Provisions is redesignated as 17(i)
and new sections 17(g) and (h) are added to read as follows:
17. Prevented Planting.
* * * * *
(g) If you purchased a limited or additional coverage policy for
a crop, and you executed a High Risk Land Exclusion Option that
separately insures acreage which has been designated as ``high-
risk'' land by FCIC under a Catastrophic Risk Protection Endorsement
for that crop, the maximum number of acres eligible for a prevented
planting payment will be limited for each policy as specified in
sections 17(e) and (f).
(h) If you are prevented from planting a crop for which you do
not have an adequate base of eligible prevented planting acreage, as
determined in accordance with section 17(e)(1), your prevented
planting production guarantee or amount of insurance, premium, and
prevented planting payment will be based on the crops insured for
the current crop year, for which you have remaining eligible
prevented planting acreage. The crops used for this purpose will be
those that result in a prevented planting payment most similar to
the prevented planting payment that would have been made for the
crop that was prevented from being planted.
(1) For example, assume you were prevented from planting 200
acres of corn and have 100 acres eligible for a corn prevented
planting guarantee that would result in a payment of $40 per acre.
You also had 50 acres of potato eligibility that would result in a
$100 per acre payment, 90 acres of grain sorghum eligibility that
would result in a $30 per acre payment, and 100 acres of soybean
eligibility that would result in a $25 per acre payment. Your
prevented planting coverage for the 200 acres would be based on 100
acres of corn ($40 per acre), 90 acres of grain sorghum ($30 per
acre), and 10 acres of soybeans ($25 per acre).
(2) Prevented planting coverage will be allowed as specified in
this section (17(h)) only if the crop that was prevented from being
planted meets all policy provisions, except for having an adequate
base of eligible prevented planting acreage. Payment may be made
based on crops other than those that were prevented from being
planted even though other policy provisions, including but not
limited to, processor contract and rotation requirements, have not
been met for the crop on which payment is being based.
Q. Amend newly designated section 17(i)(2) of the Basic Provisions
by changing the section reference therein from ``17(g)(1)'' to
``17(i)(1).''
R. Amend newly designated section 17(i)(3) of the Basic Provisions
by changing the section reference therein from ``17(g)(2)'' to
``17(i)(2).''
S. Revise section 24(e) to read as follows:
* * * * *
For reinsured policies
24. Amounts Due Us.
* * * * *
(e) Amounts owed to us by you may be collected in part through
administrative offset from payments you receive from United States
government agencies in accordance with 31 U.S.C. chapter 37.
* * * * *
T. Section 28 of the Basic Provisions is revised to read as
follows:
28. Transfer of Coverage and Right to Indemnity.
If you transfer any part of your share during the crop year, you
may transfer your coverage rights, if the transferee is eligible for
crop insurance. We will not be liable for any more than the
liability determined in accordance with your policy that existed
before the transfer occurred. The transfer of coverage rights must
be on our form and will not be effective until approved by us in
writing. Both you and the transferee are jointly and severally
liable for the payment of the premium and administrative fees. The
transferee has all rights and responsibilities under this policy
consistent with the transferee's interest.
U. Section 34 of the Basic Provisions is amended by redesignating
sections 34(a) through 34(d) as sections 34(b) through 34(e)
respectively, and adding a new section 34(a) to read as follows:
* * * * *
34. Unit Division.
(a) You may elect an enterprise unit or a whole farm unit if the
Special Provisions allow such unit structure, subject to the
following:
(1) You must make such election on or before the earliest sales
closing date for the insured crops and report such unit structure to
us in writing. Your unit selection will remain in effect from year
to year unless you notify us in writing by the earliest sales
closing date for the crop year for which you wish to change this
election. These units may not be further divided except as specified
herein;
(2) For enterprise units:
(i) You must report the acreage for each optional or basic unit
on your acreage report that comprises the enterprise unit;
(ii) These basic units or optional units that comprise the
enterprise unit must each have insurable acreage of the same crop in
the crop year insured;
(iii) You must comply with all reporting requirements for the
enterprise unit (You must maintain any required production records
on a basic or optional unit basis if you wish to change your unit
structure for any subsequent crop year);
(iv) The qualifying basic units or optional units may not be
combined into an enterprise unit on any basis other than as
described herein;
(v) If you do not comply with the reporting provisions for the
enterprise unit, your yield for the enterprise unit will be
determined in accordance with section 3(c)(1); and
(vi) If you do not qualify for an enterprise unit when the
acreage is reported, we will assign the basic unit structure.
(3) For a whole farm unit:
(i) You must report on your acreage report the acreage for each
optional or basic unit for each crop produced in the county that
comprises the whole farm unit; and
(ii) Although you may insure all of your crops under a whole
farm unit, you will be required to pay separate applicable
administrative fees for each crop included in the whole farm unit.
* * * * *
[[Page 66715]]
Signed in Washington, D.C., on November 30, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-32156 Filed 11-30-98; 2:18 pm]
BILLING CODE 3410-08-P