Petition for Writ of Certiorari — M&T Farms, Petitioner v. Federal Crop Insurance Corporation, et al.
Supreme Court briefNov 8, 2024
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APPENDIX TABLE OF CONTENTS
OPINIONS AND ORDERS
Opinion, U.S. Court of Appeals for the Ninth
Circuit (June 4, 2024) ......................................... 1a
Order on Cross-Motions for Summary Judgment,
U.S. District Court for the Northern District
of California (March 9, 2023) ........................... 17a
REHEARING ORDER
Order Denying Petition for Rehearing,
U.S. Court of Appeals for the Ninth Circuit
(August 13, 2024) ............................................. 47a
STATUTORY AND REGULATORY PROVISIONS
5 U.S.C.A. § 706 ...................................................... 49a
7 U.S.C.A. § 1502 .................................................... 50a
7 U.S.C.A. § 1503 .................................................... 57a
7 U.S.C.A. § 1506 .................................................... 57a
7 C.F.R. § 400.767 ................................................... 66a
APPENDIX TABLE OF CONTENTS (Cont.)
OTHER DOCUMENTS
FCIC Response to M&T Farms Request for
Policy Interpretation
(September 15, 2020)........................................ 71a
FCIC Whole-Farm Revenue Protection Pilot
Policy (August 2016)......................................... 78a
App.1a
OPINION, U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
(JUNE 4, 2024)
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
________________________
M&T FARMS, a California General Partnership,
Plaintiff-Appellant,
v.
FEDERAL CROP INSURANCE OPINION
CORPORATION, a wholly-owned government
corporation that administers the Federal Crop
Insurance Program; RISK MANAGEMENT
AGENCY, the United States Department of
Agriculture’s agency that manages the FCIC and
administers federal crop insurance policies,
Defendants Appellees.
________________________
No. 23-15837
D.C. No. 5:21-cv-09590-SVK
Appeal from the United States District Court
for the Northern District of California
Susan G. Van Keulen, Magistrate Judge, Presiding*
* The parties consented to proceed before a magistrate judge.
See 28 U.S.C. § 636(c).
App.2a
Before: Milan D. SMITH, JR., Andrew D. HURWITZ,
and Anthony D. JOHNSTONE, Circuit Judges.
OPINION
HURWITZ, Circuit Judge:
In this Administrative Procedure Act (“APA”)
action, M&T Farms challenges an official interpretation
of an insurance policy by the Federal Crop Insurance
Corporation (“FCIC”).1 The district court granted
summary judgment to the FCIC, and we affirm.
BACKGROUND
M&T Farms is a California general partnership
between two farmers, Paul Missou and Gary Tognetti.
M&T Farms and a third farmer, Ed Tognetti, sell
farm commodities through a storefront, B&T Farms,
which owns their business name and goodwill. B&T
Farms is also a California general partnership, in
which two partners, M&T Farms and Ed Tognetti,
hold 65% and 35% interests, respectively.
M&T Farms purchased crop insurance for the
2017 crop year under the Whole-Farm Revenue Protection Pilot Policy (“WFRP Policy”) from Producers
1 The FCIC is a government corporation within the Department
of Agriculture created “[t]o carry out the purposes” of the Federal Crop Insurance Act (“FCIA”). 7 U.S.C. § 1503; 31 U.S.C.
§ 9101(3)(D). The Risk Management Agency (“RMA”) supervises
the FCIC and administers FCIA programs. 7 U.S.C. § 6933(a),
(b)(1)-(3). “For all relevant and practical purposes, the RMA and
the FCIC are one and the same.” William J. Mouren Farming,
Inc. v. Great Am. Ins. Co., No. 05-cv-0031, 2005 WL 2064129, at
*2 (E.D. Cal. Aug. 24, 2005). We therefore refer to the two
defendant agencies in this opinion collectively as “the FCIC.”
App.3a
Agriculture Insurance Company (“ProAg”), an insurer
approved and reinsured by the FCIC. M&T Farms
later filed a claim seeking the full policy amount,
$1,991,876. In January 2019, ProAg cancelled the
policy and denied the claim, stating that M&T Farms
was not a “qualifying person” under section 3(a)(4) of
the WFRP Policy, which provides:
The [IRS] Schedule F, or Substitute Schedule
F, must cover 100 percent of your farm
operation. (A tax entity which reports a
fractional share of farming activity conducted
by a partnership, corporation or any other
“joint venture” does not qualify for WFRP
coverage on the fractional share of farming
activity).
ProAg denied the claim because M&T Farms “reports
a fractional share of farming activity conducted by a
partnership”—B&T Farms.
M&T Farms then instituted arbitration against
ProAg. The arbitrator authorized the parties to seek
an interpretation of the WFRP Policy from the FCIC,
as allowed by federal law. See 7 U.S.C. § 1506(r); 7
C.F.R. § 400.767. In December 2019, M&T Farms
and ProAg each requested an interpretation of section
3(a)(4).2
2 M&T Farms and ProAg also requested an interpretation of
section 3(e) of the WFRP Policy and paragraph 21(1)(d) of the
WFRP Handbook. Section 3(e) states: “Originating passthrough entities may insure the allowable revenue from
commodities produced by the farm operation under WFRP.
Owners of a pass-through entity that are not the originating
entity may not insure pass-through revenue or loss under
WFRP.” Paragraph 21(1)(d) of the WFRP Handbook largely
restates section 3(a)(4) of the WFRP Policy but also states: “a
App.4a
In March 2020, the FCIC responded to the
requests, stating that the WFRP Policy “does not
allow a partner whom [sic] files taxes on a fractional
share of farming activity conducted by a partnership
[to be] eligible for WFRP coverage for the fractional
share of that farming activity.”3
In August 2020, M&T Farms submitted another
request for interpretation, providing this hypothetical,
in which Entity A corresponds to B&T Farms and
Entity B to M&T Farms:
Entity A is a general partnership made up
of Entity B (a partnership) and individual
C.
Entity A is not a “farm operation” because it
reports no farm activity to the IRS in the
form o[f] revenues or expenses. Moreover,
Entity A is not an “originating entity”
because it physically produces no commodities. Instead, Entity A is a store-front that
holds the business name and goodwill for
Entity B and individual C.
Entity B is a “single farm operation” because
it reports 100 percent of its farm activity to
the IRS in the form of revenue and expenses
on its tax forms under a single taxpayer
tax entity may still qualify for WFRP coverage on a fractional
share of a commodity in which they have an insurable interest.”
Those provisions are not at issue in this litigation.
3 In July 2020, M&T Farms submitted a second request for
interpretation, which the FCIC rejected because it contained
“specific facts” about the requestor’s case in violation of 7 C.F.R.
§ 400.767(a)(8).
App.5a
number. Entity B is also an “originating
entity” because it actually physically produces
its percentage share of the commodities
grown nominally under the name of Entity
A.
Individual C is likewise a “single farm operation” because it reports 100 percent of its
farm activity to the IRS in the form o[f]
revenue and expenses on its tax forms
under a single taxpayer number. Individual
C also actually physically produces its
percentage share of the commodities grown
nominally under the name of Entity A.
M&T Farms then suggested that in this scenario,
“Entity A is not a ‘farm operation’ and has no
farming activity,” and that Entity B therefore qualifies
for WFRP coverage under section 3(a)(4).
The FCIC responded in September 2020, stating
that “[a] farm operation must meet eligibility requirements of both sections 3(a)(4) and 3(e) for coverage
under WFRP.” Addressing M&T Farms’ hypothetical,
it said:
Using the example from the requestor’s
interpretation, Entity A is a partnership that
includes Entity B and individual C. Entity
A, holding the business name and goodwill
of Entity B and individual C (i.e., marketing
and selling the commodities produced), is
the pass-through entity. Although Entity B
may be considered an originating passthrough entity with regards to itself, it
reports a fractional share of the general
partnership (Entity A). Therefore, Entity B
App.6a
and individual C do not meet the requirements of eligibility within section 3(a)(4)
under WFRP.
M&T Farms then filed this action challenging
the FCIC’s interpretation of section 3(a)(4). The district
court granted summary judgment to the government
defendants and M&T Farms timely appealed.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction under 28 U.S.C. § 1291 and
review a summary judgment de novo. Hells Canyon
Pres. Council v. U.S. Forest Serv., 593 F.3d 923, 929
(9th Cir. 2010). Under the APA, we must uphold a
final agency decision unless it is “arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance
with law.”4 5 U.S.C. § 706(2)(A). The “court simply
ensures that the agency has acted within a zone of
reasonableness and, in particular, has reasonably
considered the relevant issues and reasonably explained
the decision.” FCC v. Prometheus Radio Project, 592
U.S. 414, 423 (2021).
4 An FCIC regulation provides that its interpretation of a crop
insurance policy is a “final agency action” subject to judicial
review under the APA, 5 U.S.C. § 704. See 7 C.F.R. § 400.765
(defining “final agency determination” as “[m]atters of general
applicability regarding FCIC’s interpretation of provisions of
the [FCIA] or any regulation codified in the Code of Federal
Regulations, including certain policy provisions, which are
applicable to all participants in the Federal crop insurance
program and the appeals process”). Section 33(a)(1)(iii) of the
WFRP Policy additionally provides that “[a]n interpretation by
FCIC of a policy provision is considered a determination that is
a matter of general applicability.”
App.7a
An agency’s interpretation of a regulation may
also be entitled to deference under the framework
announced in Auer v. Robbins, 519 U.S. 452 (1997).
Although the WFRP Policy is not technically a regulation, the parties do not challenge the district court’s
holding that the FCIC’s interpretations of the WRFP
Policy are entitled to Auer deference. We therefore
assume without deciding that Auer deference applies.
See Bottoms Farm P’ship v. Perdue, 895 F.3d 1070,
1074 (8th Cir. 2018) (“Given the [FCIA’s] broad grant
of authority to the [FCIC], and the specific authority
over the provisions of insurance and insurance contracts . . . we must give substantial deference to the
FCIC’s interpretation of the special provision.”); see
also Davis v. Producers Agric. Ins. Co., 762 F.3d
1276, 1286 (11th Cir. 2014) (“[I]nterpretive issue[s]
within the exclusive province of the FCIC” receive
“substantial weight because they were made by the
agency charged with administration of the statute.”).
DISCUSSION
M&T Farms challenges the FCIC’s decision that
a partnership “holding the business name and good
will of [others] (i.e., marketing and selling the commodities produced)” is engaged in “farming activity” under
section 3(a)(4) of the WFRP Policy and that, therefore,
any entity reporting a fractional share of the partnership’s activity on its tax returns is ineligible for
WFRP Policy coverage.
Under the arbitrary and capricious standard of
review, a court cannot
vacate an agency’s decision unless it has
relied on factors which Congress had not
intended it to consider, entirely failed to
App.8a
consider an important aspect of the problem,
offered an explanation for its decision that
runs counter to the evidence before the
agency, or is so implausible that it could not
be ascribed to a difference in view or the
product of agency expertise.
Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551
U.S. 644, 658 (2007) (cleaned up). If Auer deference
applies, we must also defer to an agency’s interpretation
of a “genuinely ambiguous” regulation if its interpretation is reasonable and entitled to controlling
weight. Kisor v. Wilkie, 588 U.S. 558, 574-76 (2019).
We conclude that the FCIC’s interpretation of “farming
activity” in the WFRP Policy passes muster under
both standards of review.
I.
APA Analysis
APA “arbitrary and capricious” review is “highly
deferential, presuming the agency action to be valid
and affirming the agency action if a reasonable basis
exists for its decision.” Ranchers Cattlemen Action
Legal Fund v. U.S. Dep’t of Agric., 499 F.3d 1108,
1115 (9th Cir. 2007) (cleaned up).
Neither the governing statute, regulations, WFRP
Policy, nor the WFRP Handbook define “farming
activity.” See, e.g., 7 U.S.C. § 1502; 7 C.F.R. §§ 400.402,
400.765. And, as the district court noted, dictionaries
provide no definitive answer about whether the
marketing and sales of agricultural commodities by a
“store-front” owned by entities that grow the commodities is “farming activity.” See Yith v. Nielsen, 881
F.3d 1155, 1165 (9th Cir. 2018) (courts may consult
dictionary definitions when interpreting statutes);
Farm, Black’s Law Dictionary (11th ed. 2019) (defining
App.9a
“to farm” as “to cultivate land” and “to conduct the
business of farming”).
M&T Farms argues that, read as a whole, the
“WFRP Policy provides a clear answer.” Its argument
begins with the definition of “farm operation” in the
WFRP Policy: “All of the farming activities for which
revenue and expenses are reported to the IRS under
a single taxpayer identification number.” M&T Farms
argues that only a “farm operation” can carry out
“farming activity.” It also notes that the WFRP Policy
ties “allowable revenue” and “allowable expenses” (used
to calculate coverage in the event of losses) to the
production of commodities.5 M&T Farms argues that
these provisions compel the conclusion that an entity
like B&T Farms, which markets and sells commodities produced by its general partners but does not
itself report revenue or expenses to the IRS (because
its general partners do), is not engaged in “farming
activity.”
As the FCIC notes, however, M&T Farms overlooks that the WFRP Policy defines “[d]irect marketing”
as “[m]arketing commodities directly to consumers
5 The WFRP Policy includes the following definitions:
Allowable expenses—Farm expenses, specified by
this policy and adjusted as applicable, that are
incurred in the production of commodities on your
farm and reported to the IRS on farm tax records.
Allowable revenue—Allowable revenue is farm
revenue, specified by this policy and including
applicable adjustments, from the production of
commodities produced by your farm operation, or
purchased for further growth and development by
your farm operation, that the IRS requires you to
report on farm tax records.
App.10a
without the involvement of a third party (e.g., farmer’s
markets, u-pick, roadside stands, internet sales, etc.)”
and links “[d]irect marketing sales records” to “allowable revenue.”6 Thus, the WFRP Policy envisions that
marketing and sales can qualify as “farming activity.”
And, the WFRP Policy’s definitions of farm operation
and allowable costs and expenses do not directly
define “farming activity.” As the FCIC stresses, these
terms all pertain only to insured entities, not affiliated
partnerships that sell the insured’s goods, like B&T
Farms.
In light of this ambiguity, the FCIC’s conclusion
that a partnership selling its partners’ products and
holding their goodwill and business name is engaged
in “farming activity” under section 3(a)(4) of the
WFRP Policy has a reasonable basis. Under the arbitrary and capricious standard of review, “the agency’s
action need only be a reasonable, not the best or most
reasonable, decision.” River Runners for Wilderness v.
Martin, 593 F.3 d 1064, 1070 (9th Cir. 2010) (per
curiam) (cleaned up). The FCIC’s interpretation of
“farming activity” in the WFRP Policy satisfies this
requirement.
The example M&T Farms submitted to the FCIC
acknowledged that the “store-front” partnership (i.e.,
B&T Farms) “holds the business name and goodwill”
6 The WFRP Policy defines “[d]irect marketing sales records”
as:
Contemporaneous records that document the sale of
commodities through direct marketing. If you sell a
commodity through direct marketing, you must provide the contemporaneous records used to determine
allowable revenue on the Schedule F farm tax form.
App.11a
for its general partners (i.e., M&T Farms and Ed
Tognetti) and their farm commodities are nominally
grown in B&T Farms’ name. From this information,
the FCIC reasonably inferred that the hypothetical
store-front partnership marketed and sold the commodities produced by its general partners, an inference
that M&T Farms concedes. That direct marketing
and sales activity, the FCIC concluded, was “farming
activity” under WFRP Policy section 3(a)(4).
This is a reasonable conclusion given the WFRP
Policy’s definitions of “direct marketing” and “direct
marketing sales records.” From there, the FCIC’s
conclusion that the store-front’s general partners are
not covered under the WFRP Policy flows inexorably
from the plain language of section 3(a)(4)—“A tax
entity which reports a fractional share of farming
activity conducted by a partnership . . . does not qualify
for WFRP coverage on the fractional share of farming
activity.”
The FCIC’s interpretation is also reasonable as a
matter of policy. First, denying WFRP Policy coverage
to entities that report the marketing and sales activities
of other entities allows insurers to effectively evaluate
coverage, claims, and audit records. Second, the
interpretation helps to avoid “double dipping,” under
which two entities make claims arising from the
same loss. See Kalvinskas v. Cal. Inst. of Tech., 96
F.3d 1305, 1309 (9th Cir. 1996) (addressing “double
dipping” in the disability context). Although there is
no allegation of double-dipping in this case, it is reasonable for the FCIC to interpret the WFRP Policy to
prevent the practice in general.
M&T Farms’ contention that the FCIC’s interpretation would lead to “clearly absurd” results is
App.12a
unpersuasive. M&T Farms’ suggestion that the interpretation would only allow farmers to sell their
commodities through direct marketing is incorrect.
As the FCIC points out, farmers selling through
unaffiliated third parties would not report a fractional
share of those parties’ farming activity and would
therefore qualify for WFRP coverage.
Nor does the fact that neither M&T Farms
nor B&T Farms would qualify for WFRP
coverage render the FCIC’s interpretation
unreasonable. Nothing in the governing
statute guarantees that every business
structure adopted by farmers will qualify
for WFRP coverage. See 7 U.S.C. § 1508(a)(1)
(“[T]he Corporation may insure . . . producers
of agricultural commodities . . . under 1 or
more plans of insurance”). And the WFRP
Policy makes clear that some businesses
(such as those who do not file a Schedule F)
are ineligible for coverage.7
To be sure, other interpretations of “farming
activity,” including M&T Farms’ proposal,
are possible. If we were simply interpreting
the language of an insurance contract in the
first instance, we might well apply the
familiar canon of construing any ambiguity
against the insurer. See, e.g., State Farm
Mut. Auto. Ins. Co. v. Partridge, 514 P.2d
123, 128 (Cal. 1973). But here, we review a
final agency action; we are not ourselves
7 The FCIC suggests that M&T Farms may be eligible for other
kinds of federal crop insurance coverage. We express no opinion
whether that is so.
App.13a
interpreting the WFRP Policy anew. We
must instead afford considerable deference
to the FCIC’s reasonable interpretation of
its policy provisions. See Muratore v. U.S.
Off. of Pers. Mgmt., 222 F.3d 918, 922 (11th
Cir. 2000); Sternberg v. Sec’y of Health &
Human Servs., 299 F.3d 1201, 1205 (10th
Cir. 2002). Because the FCIC’s interpretation
of “farming activity” in the WFRP Policy is
reasonable, it survives APA arbitrary and
capricious review.
II. Auer analysis
A. Ambiguity
Activity”
of
the
Phrase
“Farming
As discussed, the term “farming activity” under
section (3)(a)(4) of the WFRP Policy is “genuinely
ambiguous” because the governing statute, regulations,
WFRP Policy, and WFRP Handbook do not define
the term. See Kisor, 588 U.S. at 575 (holding that, to
determine whether a regulation “is genuinely ambiguous, a court must exhaust all the traditional tools of
construction” (cleaned up)); 7 U.S.C. § 1502; 7 C.F.R.
§§ 400.402, 400.765. And dictionary definitions provide
little help in clearly identifying whether non-producing
activities like marketing could constitute “farming
activity” under the WFRP Policy. See Yith, 881 F.3d
at 1165.
Although M&T Farms and the FCIC offer competing interpretations of the term, both parties can
find support for their proposed readings of “farming
activity” in the WFRP Policy. Cf. Goffney v. Becerra,
995 F.3d 737, 742 (9th Cir. 2021) (“The parties direct
App.14a
us to various other provisions of the regulations. One
supports Goffney’s reading and others support the
government’s, and they do not clearly resolve the
ambiguity.”). Therefore, the ambiguity requirement
for Auer deference is satisfied.
B. Reasonableness of Agency Interpretation
An agency’s interpretation of a regulation is only
entitled to deference if it is reasonable. Kisor, 588
U.S. at 575-76. “In other words, it must come within
the zone of ambiguity the court has identified after
employing all its interpretive tools.” Id. at 576. “It is
well established that an agency’s interpretation need
not be the only possible reading of a regulation—or
even the best one to prevail.” Decker v. Nw. EnO Def.
Or., 568 U.S. 597, 613 (2013). For the same reasons
outlined above with respect to the APA analysis, the
FCIC’s conclusion that a partnership selling its partners’ products and holding their goodwill and business name is engaged in “farming activity” under the
WFRP Policy has a reasonable basis. It is consistent
with the WFRP Policy’s definitions of “direct marketing”
and “direct marketing sales records,” is not foreclosed
by any other definition, and is justified by legitimate
policy considerations.
C. Weight of Agency Interpretation
To determine whether an agency’s interpretation
of a regulation is entitled to Auer deference, a court
must “make an independent inquiry into whether the
character and context of the agency interpretation
entitles it to controlling weight.” Kisor, 588 U.S. at
576. Under this inquiry, an interpretation must (1)
“be the agency’s authoritative or official position,” (2)
App.15a
“in some way implicate its substantive expertise,”
and (3) “reflect [its] fair and considered judgment.”
Id. at 577-79 (cleaned up). The FCIC’s interpretation
of the WFRP Policy satisfies these criteria.
M&T Farms does not dispute that the FCIC’s
interpretation of the WFRP Policy is an authoritative
official position. See 7 C.F.R. § 400.766(b)(2) (FCIC
interpretations are “binding on the parties to the
dispute”). Nor does M&T Farms claim that the interpretation does not reflect the agency’s fair and considered judgment. See Goffney, 995 F.3d at 745
(“[T]he agency [need not] engage in an exhaustive
interpretive discussion—even an interpretation implicit
in an agency’s order can reflect the agency’s ‘fair and
considered judgment.’”). Indeed, the FCIC carefully
considered M&T Farms’ interpretation request and
responded only after review by nine staff members.
Rather, M&T Farms only challenges the FCIC’s
substantive expertise, urging that its interpretation
“turns on concepts such as legal entities (e.g., partnerships) and tax reporting (e.g., Schedule F and the
like) for which the RMA-FCIC has no special knowledge.” But Congress established the FCIC to administer a system of crop insurance and tasked it with
issuing regulations and interpreting the FCIA and
its regulations. 7 U.S.C. §§ 1502-03, 1506(o), (r). The
FCIA “produced a complex and highly technical
regulatory program,” and “[t]he identification and
classification of . . . eligibility criteria necessarily require
significant expertise and entail the exercise of judgment
grounded in policy concerns.” Pauley v. BethEnergy
Mines, Inc., 501 U.S. 680, 697 (1991). The FCIC’s
interpretation of “farm activity” as part of the WFRP
Policy’s eligibility conditions necessarily implicated
App.16a
the agency’s substantive expertise in administering
crop insurance. And, contrary to M&T Farms’ argument, the FCIC’s expertise necessarily includes knowledge of legal entities and tax reporting in the farming
context, as those considerations are essential to properly
administering a crop insurance program.
CONCLUSION
The judgment of the district court is AFFIRMED.
App.17a
ORDER ON CROSS-MOTIONS
FOR SUMMARY JUDGMENT,
U.S. DISTRICT COURT FOR THE
NORTHERN DISTRICT OF CALIFORNIA
(MARCH 9, 2023)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
________________________
M&T FARMS,
Plaintiff,
v.
FEDERAL CROP INSURANCE CORPORATION,
ET AL.,
Defendants.
________________________
Case No. 21-cv-09590-SVK
Re: Dkt. Nos. 25, 28, 29, 31
Before: Susan Van KEULEN,
United States Magistrate Judge.
ORDER ON CROSS-MOTIONS
FOR SUMMARY JUDGMENT
This is an action for judicial review of a final
agency action under the Administrative Procedure
Act (“APA”), 5 U.S.C. § 701, et seq. This case is before
App.18a
the Court on cross-motions for summary judgment.
Dkts. 25, 28. The Parties appeared before the undersigned for oral argument on January 24, 2023, after
which the Court ordered supplemental briefing. Dkt.
33. Briefing is now complete, and the Parties have
consented to the jurisdiction of a magistrate judge
pursuant to 28 U.S.C. § 636(c)(1). Dkts. 12, 16. For the
reasons discussed below, the Court DENIES Plaintiff’s motion for summary judgment and GRANTS
Defendants’ cross-motion for summary judgment.
I.
Issue to be Decided
1. Whether the Defendants’ conduct was arbitrary
and capricious under the Administrative Procedure
Act (“APA”).
II. Background
Although disputes involving farming insurance
are uncommon in this court, the origin of this case
springs from well-trodden ground: a plaintiff obtained
insurance, suffered a loss, and the defendant insurance
company refused to pay. Thus, this story begins.
Plaintiff M&T Farms (“M&T Farms” or “Plaintiff’)
is a general partnership consisting of two partners,
Gary Tognetti and Paul Missou, that operates a farm
in Gilroy, California. Dkt. 1 at ¶¶ 7-8. Defendants
are the Federal Crop Insurance Corporation (“FCIC”)
and the Risk Management Agency (“RMA”) (collectively, “Defendants” or “the Agencies”). In its Complaint,
Plaintiff seeks a declaratory judgment arising from
administrative determinations issued by the RMA.
Dkt. 1 at 9.
App.19a
The Federal Crop Insurance Act (“FCIA”), 7
U.S.C. § 1501, et seq., was enacted “to promote the
national welfare by improving the economic stability
of agriculture through a sound system of crop insurance
and providing the means for the research and experience helpful in devising and establishing such
insurance.” 7 U.S.C. § 1502(a). Defendant FCIC is a
federal government-owned corporation within the
U.S. Department of Agriculture that was created to
“carry out the purposes” of the FCIA. 7 U.S.C. § 1503;
31 U.S.C. § 9101(3). Defendant RMA supervises the
FCIC and administers all programs authorized under
the FCIC. 7 U.S.C. § 6933(a); 7 U.S.C. § 6933(b)(1)(3); 7 C.F.R. § 400.701. “The United States Department
of Agriculture Risk Management Agency (‘RMA’)
administers FCIC. For all relevant and practical purposes, the RMA and the FCIC are one and the same.”
William J. Mouren Farming, Inc. v. Great Am. Ins.
Co., No. 05-cv-0031, 2005 WL 2064129, at *2 (E.D.
Cal. Aug. 24, 2005).
Under the FCIA, FCIC is authorized to act as a
reinsurer to Approved Insurance Providers (“AIPs”).
7 U.S.C. § 1508. An AIP is “a private insurance provider that has been approved by [FCIC] to provide
insurance coverage to producers participating in the
Federal crop insurance program established under
this subchapter.” 7 U.S.C. § 1502(b)(2). “In order to
qualify for reinsurance through the FCIC, the policies
written by [AIPs] must comply with the FCIA and its
accompanying regulations.” Davis v. Producers Agric.
Ins. Co., 762 F.3d 1276, 1284 (11th Cir. 2014). Accordingly, despite the fact that “the crop insurance policy
is between the farmer and an approved insurance pro-
App.20a
vider,” the FCIA “generally establishes the terms and
conditions of insurance[.]” Id.
One of the types of federal crop insurance is the
Whole-Farm Revenue Protection (“WFRP”) insurance,
which protects against losses for all commodities on
the farm under a single insurance policy. See AR
178. Here, M&T Farms purchased a WFRP Pilot
Policy (the “WFRP Policy” or “Policy”) for the 2017
crop year from Producers Agriculture Insurance Company (“ProAg”) to insure its peppers, tomatoes, corn,
cabbage, and cherries against loss of revenue. Dkt. 1
at ¶¶ 7, 9, 11, Ex. 1 (Dkt. 24, Administrative Record
(“AR”) 178-224). Non-party ProAg is an AIR Id. at
¶ 2. The WFRP Policy is reinsured by Defendant FCIC
under the provisions of the FCA. Id. at ¶ 6, Ex. 1 (AR
178-224). After paying the premiums, M&T Farms
claimed the full amount of insurance, or $1,991,876.00.
Id. at ¶ 10. On January 2, 2019, ProAg cancelled the
2017 WFRP Policy on the grounds that M&T Farms
was not a “qualifying person” under § 3(a)(4) of the
WFRP Policy. Id. at ¶ 11. Section 3(a)(4) of the
WFRP Policy provides:
3. Qualifying Person Criteria and Insurance
Eligibility
(a) To be considered a qualifying person, you
must:
(4) The Schedule F, or Substitute Schedule
F, must cover 100 percent of your farm
operation. (A tax entity which reports a
fractional share of farming activity
conducted by a partnership, corporation
or any other “joint venture” does not
App.21a
qualify for WFRP coverage on the
fractional share of farming activity).
AR 189. In its letter, ProAg explained that it
was cancelling the WFRP Policy because M&T Farms’
business structure disqualified it from coverage under
the policy. Dkt. 25-2 (McFarland Decl.), Ex. 1. M&T
Farms is, itself, a general partner with a 65% interest
in another general partnership, B&T Farms. Dkt.
¶ 31. Mr. Tognetti is the other general partner, with
a 35% ownership interest in B&T Farms. Id. ProAg
interpreted M&T Farms’ earlier presentation of the
facts as indicating that M&T was reporting a fractional
interest in B&T’s farming activities. See McFarland
Decl., Ex. 1.
A. The Arbitration and Requests for Interpretation
In April 2019, M&T Farms timely filed for arbitration to challenge ProAg’s cancellation of the WFRP
Policy. Dkt. 1 at ¶ 13. The arbitrator authorized both
ProAg and M&T Farms to seek an interpretation of
the WFRP Policy from the RMA in accordance with
federal regulations. Dkt. 1 at ¶¶ 15-16; AR 228-33,
234-41; 7 U.S.C. § 1506(r); see Davis, 762 F.3d at
1285 (“The FCIC provides, as necessary, interpretations
of the statute and regulations to interested parties.”).
Final agency determinations from the FCIC are
“[m]atters of general applicability regarding FCIC’s
interpretation of the [FCIA] or any regulation codified
in the Code of Federal Regulations, including certain
policy provisions[.]” 7 C.F.R. § 400.765. Similarly, an
FCIC interpretation is “an interpretation of a policy
provision not codified in the Code of Federal Regulations or any procedure used in the administration of
App.22a
the Federal crop insurance program.” Id. “FCIC will not
provide a final agency determination or FCIC interpretation for any request regarding, or that contains,
specific factual information to situations or cases, such
as acts or failures to act of any participant under the
terms of a policy, procedure, or any reinsurance
agreement.” 7 C.F.R. § 400.768(a). Accordingly, litigants must frame their questions more generally or
as hypotheticals.
On December 13, 2019, M&T Farms requested
FCIC’s interpretation of Sections 3(a)(4) and 3(e) of
the WFRP Policy and Paragraph 21(1)(d) of the
WFRP Pilot Handbook (the “Handbook) (AR 1-176).
AR 228-33. M&T Farms framed the issue as follows:
May a partnership who is an originating
entity that files tax forms reporting a
fractional share of the farming activity
conducted by a partnership obtain WFRP
coverage on the partner’s fractional share of
the partnership’s farming activity for which
the partnership has a financial risk of loss?
AR 230. ProAg, instead, framed the question as
follows: “May a partner who files tax forms reporting
a fractional share of the farming activity conducted
by a partnership obtain WFRP coverage on the
partner’s fractional share of the partnership’s farming
activity?” AR 237. On March 11, 2020, the RMA
responded to both requests for interpretation, indicating
that it agreed with ProAg’s interpretation and disagreed
with M&T Farms’ interpretation. AR 256-57, 259-60.
The RMA emphasized particularly that “[c]overage is
only available to a tax filing entity that reports 100
percent of the farming activity to the IRS, including
a farming activity conducted by a partnership.” AR
App.23a
256. On July 15, 2020, M&T Farms submitted a further request for interpretation to the RMA, and
ProAg did the same on August 4, 2020. AR 344-62,
451-72. This time, M&T Farms framed the question
as follows:
May a partnership that is an originating
pass-through entity that files tax forms
reporting the revenue and expenses from its
percentage share of the commodities it
physically produced qualify for WFRP
coverage for its percentage share of the
revenue from its percentage share of the
commodities?
AR 345. Additionally, M&T Farms provided the
following example:
Entity A is a general partnership made up
of Entity B (a partnership) and individual
C.
Entity A is not a “farm operation” because it
reports no farming activity to the IRS in the
form or [sic] revenues or expenses. Moreover,
Entity A is not an “originating entity”
because it physically produces no commodities. Instead, Entity A is a store-front that
holds the business name and goodwill for
Entity B and individual C.
Entity B is a “single farm operation” because
it reports 100 percent of its farm activity to
the IRS in the form of revenue and expenses
on its tax forms under a single taxpayer
number. Entity B is also an “originating
entity” because it actually physically produces
its percentage share of the commodities
App.24a
grown nominally under the name of Entity
A.
Individual C is likewise a “single farm operation” because it reports 100 percent of its
farm activity to the IRS in the form or [sic]
revenue and expenses on its tax forms
under a single taxpayer number. Individual
C also actually physically produces its
percentage share of the commodities grown
nominally under the name of Entity A.
AR 347-48. ProAg presented the following question
for the RMA’s interpretation: “May a partner who
files taxes on a fractional share of farming activity
conducted by the partnership insure that fractional
share under a WFRP policy if the partner is an
originating pass-through entity for its share of commodities produced through the partnership?” AR 294
(emphasis in original).
On September 15, 2020, the RMA responded
with its interpretations, once again siding with ProAg.
AR 560-65. In rejecting M&T Farms’ proffered interpretation, the RMA explained:
A farm operation must meet eligibility
requirements of both sections 3(a)(4) and
3(e) for coverage under WFRP. A farm operation may meet the requirements of an
originating pass-through entity within itself.
However, if that same entity also reports a
fractional share of another entity (farming
activity), the entity is not eligible for a
coverage under WFRP. Using the example
from the requestor’s interpretation, Entity
A is a partnership that includes Entity B
App.25a
and individual C. Entity A, holding the
business name and good will of Entity B
and individual C (i.e., marketing and selling
the commodities produced) is the passthrough entity. Although Entity B may be
considered an originating pass-through entity
with regards to itself, it reports a fractional
share of the general partnership (Entity A).
Therefore, Entity B and individual C do not
meet the requirements of eligibility within
section 3(a)(4) under WFRP.
AR 562. Following receipt of the RMA’s interpretations, M&T Farms timely appealed to the National
Appeals Division (“NAD”), a division of the U.S.
Department of Agriculture. AR 581-91. On March 4,
2021, the NAD found that the FCIC’s September 15,
2020 interpretations were “not appealable because
they are matters of general applicability.” AR 577-79.
The arbitrator subsequently granted ProAg’s motion
for summary disposition. Dkt. 1 at ¶ 29.
B. Federal Court Litigation
M&T Farms initiated this action against Defendants FCIC and RMA on December 10, 2021. Dkt. 1.
Defendants lodged the Administrative Record on
September 12, 2022. Plaintiff moved for summary
judgment on September 22, 2022. Dkt. 25. Defendants
filed their opposition and cross-motion to summary
judgment on October 31, 2022. Dkt. 28. Plaintiff
replied in support of its motion and in opposition to
Defendants’ cross-motion for summary judgment, and
appeared before the undersigned for a hearing on
January 24, 2022. Following oral argument, the
Court asked the Parties to file supplemental briefs
App.26a
addressing whether the action could be remanded to
the RMA. Dkt. 33. The Court has considered the
arguments raised in the Parties’ supplemental briefing
and declines to pursue that avenue. Plaintiff’s motion
for summary judgment and Defendants’ cross-motion
for summary judgment are fully briefed and ripe for
disposition.
III. Standard of Review
In cases involving review of a final agency determination under the APA, a district court’s role is not
fact-finding. Nw. Motorcycle Ass’n v. U.S. Dep’t of
Agric., 18 F.3d 1468, 1472 (9th Cir. 1994). “[T]he
function of the district court is to determine whether
or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did.” Occidental Eng’g Co. v. I.N.S., 753 F.2d
766, 769 (9th Cir. 1985). The reviewing court must
“hold unlawful and set aside agency action, findings,
and conclusions found to be . . . arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance
with law.” 5 U.S.C. § 706(2)(A). “Review under the
arbitrary and capricious standard is deferential.” Nat’l
Ass’n of Home Builders v. Defs of Wildlife, 551 U.S.
644, 658 (2007). Under this standard, the reviewing
court “must determine whether the agency considered
the relevant factors and articulated a rational connection between the facts found and the choices made.”
Friends of Animals v. U.S. Fish & Wildlife Serv., 28
F.4th 19, 28 (9th Cir. 2022) (quoting Ranchers Cattlemen Action Legal Fund v. U.S. Dep’t of Agric., 499
F.3d 1108, 1115 (9th Cir. 2007)). A reviewing court
should not vacate an agency’s decision unless the
agency has “relied on factors which Congress had not
App.27a
intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could
not be ascribed to a difference in view or the product
of agency expertise.” Nat’l Ass’n of Home Builders,
551 U.S. at 2529-30 (quoting Motor Vehicle Mfrs.
Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983)). The APA does not permit a
court to overturn an agency decision because it disagrees with the decision or with the agency’s conclusions. Vt. Yankee Nuclear Power Corp. v. Natural Res.
Def. Council, Inc., 435 U.S. 519, 555 (1978). In other
words, the court “may not substitute its judgment for
that of the agency concerning the wisdom or
prudence of [the agency’s] action.” Or. Env’tl Council
v. Kunzman, 817 F.2d 484, 492 (9th Cir. 1987).
IV. Discussion
Plaintiff asserts that Defendants erred in concluding that, under the hypothetical Plaintiff offered, a
general partnership may be deemed to have engaged
in farming activity where products are sold nominally
under the partnership’s name and the partnership
holds the goodwill and business name of its constituent
partners. Defendants maintain that the RMA reasonable concluded that such activities constitute farming
activity and that, to the extent Plaintiff required
additional clarity, Plaintiff should have asked the RMA
to define the term “farming activity” as it is used in
the WFRP Policy.
Before resolving the above dispute, the Court
must first clarify its role under the APA. Plaintiff’s
motion for summary judgment and reply in support
App.28a
thereof repeatedly conflate the example in its Request
for Interpretation, AR 344-50, with the actual facts
before the arbitrator. See Dkts. 25-1, 29. However,
Defendants did not engage in factfinding; Defendants
simply interpreted their own policy. See AR 560-65; 7
C.F.R. § 400.768(a). The arbitrator made factual findings based on Defendants’ policy interpretations, and
those findings are not the subject of this suit. The
Court’s review under the APA is confined to determining whether Defendants’ interpretations of the
WFRP Policy and Handbook were arbitrary and
capricious. See, e.g., Struss v. U.S. Dep’t of Agriculture,
No. 18-cv-2184, 2019 WL 2490721, at *2 (D. Kan.
June 14, 2019).
Second, the Court must clarify the scope of the
present dispute. The parties agree that to be a “qualifying person,” under the WFRP Policy, an individual
must satisfy the criteria set forth in Sections 3(a) and
3(e) and that the RMA’s interpretation of Section 3(e)
is not in dispute. Dkt. 29 at 5; Dkt. 28 at 15-17.
Therefore, the Court will not consider Section 3(e) in
the below analysis. Second, although Plaintiff purports
to challenge the RMA’s March 2020 and September
2020 interpretations, Plaintiff’s briefing seeks relief
exclusively as to the RMA’s September 2020 decisions. Dkt. 25-1 at 9; Dkt. 29 at 2. Accordingly, the
Court confines its renew to the RMA’s September
2020 decisions.
The parties have narrowed their dispute to the
following passage from the RMA’s September 2020
decision rejecting Plaintiff’s proffered interpretations
of Section 3(a)(4) of the WFRP Policy and Paragraph
21(1)(d) of the Handbook:
App.29a
A farm operation may meet the requirements
of an originating pass-through entity within
itself. However, if that same entity also
reports a fractional share of another entity
(farming activity), the entity is not eligible
for coverage under WFRP. Using the example
from the requestor’s interpretation, Entity
A is a partnership that includes Entity B
and individual C. Entity A, holding the business name and goodwill of Entity B and
individual C (i.e., marketing and selling the
commodities produced) is the pass-through
entity. Although Entity B may be considered
an originating pass-through entity with
regards to itself, it reports a fractional share
of the general partnership (Entity A). Therefore, Entity B and individual C do not meet
the requirements of eligibility within section
3(a)(4) under WFRP.
AR 562 (emphasis added). Here, the RMA holds
that Entity A’s acts of (1) holding the business name
and good will of Entity B and Individual C and (2)
marketing and selling the commodities produced by
Entity and Individual C, together mean that Entity
A is engaged in “farming activity.” See id. As demonstrated at oral argument, the central dispute for the
Court to resolve is whether the RMA’s interpretation
of the term “farming activity,” as used in the WFRP
Policy and Handbook, was arbitrary and capricious.
A. Is the Agency’s Decision Entitled to
Deference?
Before reviewing Defendants’ interpretation of
the WFRP Policy and Handbook provisions, we must
App.30a
determine the level of deference owed to the RMA’s
construction of those provisions. See 7 C.F.R. 400.765.
While the FCIA and pertinent regulations apply to
the WFRP Policy, the policy is not codified in the
Code of Federal Regulations and does not carry the
force of law. AR 11. Nevertheless, courts have treated
FCIC interpretations substantially the same as regulations for purposes of determining the level of deference owed. See, e.g., Bottoms Farm P’ship v. Perdue,
895 F.3d 1070, 1074 (8th Cir. 2018) (“Given the Act’s
broad grant of authority to the Corporation, and the
specific authority over the provisions of insurance
and insurance contracts found in 5 U.S.C. §§ 1505
and 1506, we conclude that we must give substantial
deference to the FCIC’s interpretation of the special
provision.”); Rain & Hail Ins. Serv. Inc. v. Fed. Crop
Ins. Corp., 426 F.3d 976, 979 (8th Cir. 2005) (“[W]e
think that the reasons for deferring to an agency’s
interpretation of its regulations apply equally to the
AGBCA’s interpretation of the Manager’s Bulletin[.]”);
United States v. Gonzales & Gonzales Bonds & Ins.
Agency, Inc., 103 F. Supp. 3d 1121, 1129 (N.D. Cal.
2015) (“[S]everal courts have held that, where an
agency’s action is being challenged pursuant to the
APA, and where the agency has interpreted a contract, that interpretation is entitled to deference and
the arbitrary-and-capricious standard applies—at
least where the agency’s expertise or statutory
domain is implicated.”). In the absence of guidance
from the Ninth Circuit, we, too, shall treat the FCIC
interpretations at issue here as regulations in this
respect.
App.31a
1. Is the Policy Genuinely Ambiguous?
Here, the Parties dispute whether the term “farming activity” is ambiguous. Plaintiff maintains that
the term is unambiguous and that the Court need
only look to the “plain meaning” of the WFRP Policy,
while Defendants argue that the term is ambiguous
and entitled to substantial deference under Kisor v.
Wilkie, 139 S. Ct. 2400 (2019).1 The Court finds
Section 3(a)(4) of the Policy and Paragraph 21(1)(d)
of the Handbook genuinely ambiguous as to what
activities constitute “farming activities.”
In general, “[w]hen an agency interprets its own
regulation, even if through an informal process, its
interpretation of an ambiguous regulation is controlling
under [Auer v. Robbins, 519 U.S. 452 (1997)] unless
‘plainly erroneous or inconsistent with the regulation.’”
Bassiri v. Xerox Corp., 463 F.3d 927, 930 (9th Cir.
2006) (quoting Auer, 519 U.S. at 460). Such deference
to an agency’s construction of its own ambiguous
regulation is known as Auer deference. Kisor, 139
S.Ct. at 2411. However, an agency’s interpretation is
not entitled to Auer deference unless the regulation
is genuinely ambiguous. Amazon.com, Inc. v. Comm’r
of Internal Revenue, 934 F.3d 976, 992 (9th Cir.
2019). “And before concluding that a rule is genuinely
ambiguous, a court must exhaust all the ‘traditional
tools’ of construct.” Kisor, 139 S.Ct. at 2415 (quoting
Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 843 n.9 (1984)). This
requires a court to “carefully consider []” the text,
1 During oral argument, Defendants clarified that they are
arguing that the term “farming activity” is ambiguous.
Compare Dkt. 28 at 16 with Dkt. 31 at 5.
App.32a
structure, history, and purpose of a regulation, in all
the ways it would if it had no agency to fall back on.”
Id. Put more simply, a court “cannot wave the
ambiguity flag” until its “legal toolkit is empty and
the interpretive question still has no single right
answer[.]” Id.
When a court concludes that a regulation is
genuinely ambiguous, it must still find the agency’s
reading reasonable before Auer deference attaches.
Id. “In other words, it must come within the zone of
ambiguity the court has identified after employing
all its interpretive tools.” Id. The inquiry does not
end here, however. A court must still make an “independent inquiry into whether the character and
context of the agency interpretation entitles it to
controlling weight.” Id. To this end, the agency’s
interpretation “must be one actually made by the
agency,” meaning that it reflects the agency’s official
position. Id. Further, the agency’s interpretation “must
in some way implicate its substantive expertise.” Id.
Lastly, the “agency’s reading of a rule must reflect
‘fair and considered judgment’ to receive Auer deference.” Id. (quoting Christopher v. SmithKline Beecham
Corp., 567 U.S. 142, 155 (2012)). In practice, that means
‘that a court should decline to defer to a merely
‘convenient litigating position’ or ‘post hoc rationalization[n] advanced’ to ‘defend past agency action
against attack.’” Id. (quoting Christopher, 567 U.S. at
155). The new interpretation should not create
“unfair surprise” to regulated parties. Id. (quoting Long
Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 170
(2007)).
Pursuant to the Supreme Court’s guidance in
Kisor, the Court accordingly addresses the text of the
App.33a
WFRP Policy, the available FCIC interpretations, and
the FDA’s regulations to the extent relevant. Kisor,
139 S.Ct. at2415. Section 3(a)(4) of the Policy provides:
3. Qualifying Person Criteria and Insurance
Eligibility
(a) To be considered a qualifying person, you
must:
(4) The Schedule F, or Substitute Schedule
F, must cover 100 percent of your farm
operation. (A tax entity which reports a
fractional share of farming activity
conducted by a partnership, corporation
or any other “joint venture” does not
qualify for WFRP coverage on the
fractional share of farming activity).
AR 189. Paragraph 21(1)(d) of the Handbook
states:
21 Eligibility
(1) To be considered eligible for a WFRP policy,
the insured must:
(d) have a Schedule F that covers 100
percent of their farm operation. A tax
entity which reports a fractional share of
farming activity conducted by a partnership, corporation, or any other “joint
venture” does not qualify for WFRP
coverage on the fractional share of
farming activity. However, a tax entity
may still qualify for WFRP coverage on
a fractional share of a commodity in
which they have an insurable interest.
App.34a
AR 20. The Parties agree that neither the FCIA,
the regulations implementing the FCIA, the WFRP
Policy nor the Handbook expressly defines the term
“farming activity.” See, e.g., 7 U.S.C. § 1501 and 7
CFR §§ 400.402, 400.765. Nor have the Parties, or
the Court, identified any prior or subsequent version
of the WFRP Policy or Handbook that offers such a
definition.2 Given the absence of a definition, the
Parties turn to the other defined terms in the WFRP
Policy for guidance. Dkt. 29 at 5-6; Dkt. 31 at 8-10.
The Court agrees that any analysis must begin with
the WFRP Policy’s other definitions and provisions.
Here, only one definition in the WFRP Policy
and Handbook uses the term “farming activity:”
Farm operation — All of the farming activities
for which revenue and expenses are reported
to the IRS under a single taxpayer identification number will be considered a single
farm operation for WFRP purposes (e.g., a
partnership filing a U.S. tax return for
partnership income that includes revenue and
expenses from separate row crop, perennial
crop and livestock farms is a single farm
operation because it files one tax return).
AR 102, 183 (emphasis added). Taking the example provided in the definition of “farm operation,”
Plaintiff argues that the partnership filing a U.S. tax
return for partnership income that includes revenue
and expenses from farming separate row crops qualifies
2 Nor does it appear that the RMA previously has taken up this
issue. See https://www.rma.usda.gov/en/Policy-and-Procedure/
Insurance-Plans/Whole-Farm-Revenue-Protection
(collecting
previous WFRP Interpretations of Procedure).
App.35a
as a single farm operation because “as the definition
holds, it reports the revenue and expenses from the
production of the commodities from its farming activities to the IRS, under a single taxpayer identification
number.” Dkt. 29 at 6. Thus, “farming activities”
must be understood in relation to the term “farm
operation” and the stated purpose of the WFRP Policy—
to protect against loss of revenue from commodities
produced by the farm operation. Id. (citing AR 178).
Stated more concisely, Plaintiff’s argument is that
the definition of “farm operation” clearly links “farming
activities” to revenue and expenses reported to the
IRS, which means that to be engaged in “farming
activities,” an entity must be generating revenue and
expenses from the commodities it produces. See id. In
support of this conclusion, Plaintiff points to the
WFRP Policy’s definitions of “allowable expenses”
and “allowable revenue:”
Allowable expenses—Farm expenses, specified
by the policy and adjusted as applicable,
that are incurred in the production of
commodities on your farm and reported to
the IRS on farm tax records.
Allowable revenue—Allowable revenue is
farm revenue, specified by this policy and
including applicable adjustments, from the
production of commodities produced by your
farm operation, or purchased for further
growth and development by your farm operation, that the IRS requires you to report on
farm tax records.
App.36a
AR 180.3 Because the Policy defines expenses in
terms of costs incurred in the production of commodities
on the insured’s farm and likewise defines revenue in
terms of the monies earned from the production of
commodities produced by the insured’s farm operation,
Plaintiff reasons that the term “farming activities”
necessarily refers to “those things from which revenue
and expenses are reported in connection with the
actual production of commodities.” Dkt. 29 at 6.
Ergo, the absence of revenue and expenses related to
the production of commodities would indicate that an
entity is not engaged in farming activities. See id.;
Dkt. 25-1 at 8.
Defendants rejoin that the definition of “farm
operation” is “largely directed to the reporting requirements, and it does not substantively restrict the
meaning of ‘farming activities.”‘ Dkt. 31 at 4. As
proof of this, they note that the term “farm operation
report” refers to “[t]he form on which you provide all
required information regarding the commodities you
expect to earn revenue from during the insurance
period” and consists of three parts. AR 183. Defendants
further argue that the terms “allowable expenses”
and “allowable revenue” are largely based on tax
reporting requirements and that such requirements
should have no bearing on the definition of “farming
activities.” Dkt. 31 at 4. While Defendants are correct
that the definition of “farm operation” does not go
into detail regarding what is and is not “farming
3 Although not discussed in the briefing, neither the WFRP
Policy nor the Handbook defines the term “revenue” or “expenses” specifically and instead defines the terms “allowable
revenue,” “allowable expenses,” “approved expenses,” and
“approved revenue.” AR 180.
App.37a
activity,” the definition does plainly link “farming
activity” with revenue and expenses. In other words,
though the definition of “farm operation” includes a
reporting component, the “farming activity” is the
reason revenue and expenses are generated that
must be reported to the IRS. The reporting requirements, accordingly, are not constricting the definition
of “farming activities;” they are merely a consequence
of the revenue and expenses generated by “all of the
farming activities” in a farm operation. Moreover, to
discount the definitions of “allowable expenses” and
“allowable revenue” as based chiefly on tax reporting
requirements, as Defendants suggest, ignores the rest
of those definitions.
Defendants further argue that even if the term
“farming activity” is linked to revenue and expenses,
the definitions of “direct marketing” and “direct marketing sales records” evidence that “farming activity”
broadly encompasses other aspects of a farm operation beyond the production of commodities. Dkt. 31.
The WFRP Policy defines “direct marketing” and
“direct marketing sales records” as follows:
Direct marketing—Marketing commodities
directly to consumers without the involvement
of a third party (e.g., farmer’s markets, upick, roadside stands, internet sales, etc.).
Direct marketing sales records—Contemporaneous records that document the sale of
commodities through direct marketing. If
you sell a commodity through direct marketing, you must provide the contemporaneous records used to determine allowable
revenue on the Schedule F farm tax form.
App.38a
AR 182. “Direct marketing sales records” also
refers to “allowable revenue” generated by the sale of
commodities through “direct marketing,” as documented
in “contemporaneous records.” Id. “Contemporaneous
records” include “written records developed at the
time the event occurred, recording information such
as planting of a commodity, harvested production,
sale of commodity, daily receipts, etc.” AR 181. Thus,
even though “direct marketing” does not involve the
production of commodities, it still generates “allowable
revenue” from the sale of a commodity. It follows
that being engaged in “farming activities” does not
necessarily require that an entity by engaged in
producing commodities because other activities, like
direct marketing, still generate revenue that must be
reported to the IRS. See id.
At oral argument, Plaintiff claimed that Defendants’ broad interpretation of the term “farming activities” is inconsistent with the other definitions in the
WFRP Policy and the “common understanding” of
what farming activity is—i.e., the production of commodities. Dkt. 32. A “farm” is commonly understood to
refer to the “land and connected buildings used for
agricultural purposes,” while the verb “farm” means
“to cultivate land; to conduct the business of farming.”
Farm (n.), farm (vb.), Black’s Law Dictionary (11th
ed. 2019); see also Yith v. Nielsen, 881 F.3d 1155,
1165 (9th Cir. 2018) (holding, for purpose of statutory
interpretation, courts, “[w]hen determining the plain
meaning of language, . . . may consult dictionary
definitions”). Yet, the dictionary definitions shed no
further light on what falls under the umbrella of
“farming activities” where the verb “farm” broadly
refers to “cultivat[ing] the land” and “conduct[ing]
App.39a
the business of farming.” Farm (vb.), Black’s Law
Dictionary (11th ed. 2019).
The Court is, therefore, unpersuaded that the
plain text of the provisions at issue are clear on their
face. The WFRP Policy and Handbook each fail to
define the term “farming activity.” Plaintiff offers a
narrow interpretation of the term while Defendants
offer a broad interpretation. Both appear plausible,
though not compelled by the language of the Policy
or Handbook. When considered in relation to the
other definitions, the Court finds that the Policy and
Handbook are ambiguous as to what constitutes
“farming activity” or “activities.” See, e,g,, George S.
v. Saul, No. 19-cv-4252, 2020 WL 6149692, at *3
(N.D. Cal. Oct. 20, 2020) (finding that where regulation
failed to “squarely address whether an individual
receiving retirement benefits is eligible for the PASS
program,” the omission rendered the regulation ambiguous on that point within the meaning of Kisor);
JPM-RDP, LLC v. U.S. Dep’t of Agriculture Risk
Mgmt. Agency, No. 17-cv-85, 2018 WL 1167325, at*
10-11 (M.D. Fla. Mar. 6, 2018) (concluding phrase
“no effective control measure exists” in 7 C.F.R.
§ 457.139, ¶ 11(b)(1) was not “plain and unambiguous”
and applying Auer deference).
2. Is the Agencies’ interpretation of
“farming activity” reasonable?
Having determined that the term “farming
activity” is ambiguous, the Court next must consider
whether the Agencies’ decision was reasonable. Kisor,
139 S. Ct. at 2415-16. “In other words, it must come
within the zone of ambiguity the court has identified
after employing all its interpretive tools.” Id. at 2416.
App.40a
“[T]he agency’s reading must fall ‘within the bounds
of reasonable interpretation.’” Id. (quoting Arlington
v. FCC, 569 U.S. 290, 296 (2013)). The Court concludes
that it does.
In Plaintiff s August 2020 Request for Interpretation, Plaintiff proposed the following example:
“Entity A is not a ‘farm operation’ because it reports
no farm activity to the IRS in the form of revenue or
expenses. Moreover, Entity A is not an ‘originating
entity’ because it physically produces no commodities.
Instead, Entity A is a storefront that holds the business name and goodwill for Entity B and individual C.”
AR 348. Plaintiff also posited that Entity B’s and
Individual C’s commodities are grown nominally under
the name of Entity A. Id. From these details, the
Agencies concluded, “Entity A, holding the business
name and goodwill of Entity B and individual C (i.e.,
marketing and selling the commodities produced), is
the pass-through entity. Although Entity B may be
considered an originating pass-through entity with
regards to itself, it reports a fractional share of the
general partnership (Entity A).” AR 562. Under the
WFRP Policy, a “pass-through entity” is an entity
that reports to the IRS but does not pay taxes on
portions of the revenue, instead passing it to each
individual owner who then pays income tax on their
portion of the revenue from the business.” AR 184.
The Agencies reasonably concluded that Entity
A’s acts of holding the business name and goodwill of
Entity B and Individual C and marketing and selling
the commodities they produce qualify as “farming
activities.” Although Plaintiff stresses that Entity A
is a mere “store-front,” Dkt. 29-1 at 2, Plaintiffs
example states that Entity A is a partnership, not a
App.41a
mere fictitious business name for Entity B or Individual
C, that holds assets and markets and sells the
commodities produced by its general partners. See
AR 347-48. As set forth above, “farming activity” is
not defined in the WFRP Policy or the Handbook. In
light of the Policy’s other definitions, particularly the
definitions of “direct marketing” and “direct marketing
sales records,” the Agencies could reasonably conclude
that Entity A is engaged in a form of direct marketing
and selling on behalf of Entity B and Individual C
and that it passes the profits from the sale of
commodities back to Entity B and Individual C. AR
182. Defendants note that the Policy and Handbook
contrast the “verifiable records” requirements for
transactions with third parties with those for “direct
marketing sales records.” See AR 47-48, 182, 186.
“Verifiable records” include “[c]ontemporaneous records
provided from a disinterested third party, such as
records from a warehouse, processor, packer, input
vendor, etc., or by measurement of farm-stored commodities.” AR 186. Based on Plaintiff’s example, Entity A
is not a disinterested third party because it (1)
markets and sells commodities produced by its general partners and (2) holds the business name and
goodwill for its general partners. See AR 347-48.
Thus, in the absence of facts to show that a thirdparty vendor sells commodities for Entity B and Individual C, the Agencies could reasonably find that, in
Plaintiff’s example, Entity A is engaged in a form of
direct marketing, such as marketing and selling
through a farmer’s market or roadside stand. AR
182, 562. Further, the Agencies could reasonably find
that Entity A’s acts of marketing and selling commodities on behalf of its general partners, coupled with
the fact that Entity A holds the business name and
App.42a
goodwill for those same partners, demonstrate that
Entity A is engaged in farming activity, thus precluding
Entity B and Individual C from meeting the eligibility requirement set forth in Section 3(a)(4) of the
Policy.
In sum, the Court finds that the Agencies’ interpretation of the WFRP Policy and Handbook was
reasonable and, further, that the Agencies reasonably concluded that Entity A was engaged in “farming
activities” under the hypothetical Plaintiff offered at
AR 347-48.
3. Is the Agencies’ interpretation
entitled to controlling weight?
The Court next must “make an independent
inquiry into whether the character and context of the
agency interpretation entitles it to controlling weight.”
Kisor, 139 S. Ct. at 2416. To this end, the interpretation
must (1) reflect the agency’s authoritative or official
position, (2) implicate the agency’s substantive expertise, and (3) reflect fair and considered judgment. Id. at
2416-18. The Court finds these criteria satisfied.
First, Defendants’ interpretations reflect the
USDA’s official position. As set forth above, M&T
Farms timely appealed the Agencies’ interpretation
to the NAD. AR 581-91. On March 4, 2021, the NAD
found that the Agencies’ September 15, 2020 interpretations were “not appealable because they are
matters of general applicability.” AR 577-79. Plaintiff
does not dispute that it has exhausted its administrative remedies with respect to the Agencies’ interpretations and that the interpretations, consequently, reflect the FDA’s official position. See Dkt. 35 at 4.
App.43a
Second, Defendants’ interpretations implicate
the Agencies’ substantive expertise. Congress established the FCIC to administer crop insurance under
the FCIA and established the RMA to supervise the
FCIC and administer all programs authorized under
the FCIC. 7 U.S.C. § 1502; 31 U.S.C. § 9101(3); 7
U.S.C. § 6933(a); 7 U.S.C. § 6933(b)(1)-(3); 7 C.F.R.
§ 400.701. Congress also vested the FCIC with the
authority to issue regulations and interpret the FCIA
or any regulations the FCIC might issue. 7 U.S.C.
§§ 1506(o), 1506(r). As relevant here, the FCIC has
issued regulations providing that it will likewise
issue interpretations “of a policy provision not codified
in the Code of Federal Regulations or any procedure
used in the administration of the Federal crop insurance program.” 7 C.F.R. § 400.765. The WFRP Policy
at issue in this case is a pilot policy reinsured by the
FCIC that is not codified in the Code of Federal
Regulations. AR 11, 178. Although the basic issue
here what constitutes “farming activity” is seemingly
prosaic, it nonetheless implicates the Agencies’ specific area of expertise in administering the complexities
of the WFRP Pilot Policy and the circumstances
under which an entity qualifies for coverage under
that Policy. See Kisor, 139 S.Ct. at 2417; Bottoms
Faun, 895 F.3d at 1073-74.
Finally, the interpretations reflect Defendants’
fair and considered judgment and are not “convenient
litigating position[s]” or “post hoc rationalization[ns].”
Kisor, 139 S.Ct. at 2417 (quoting Christopher v.
SmithKline Beecham Corp., 567 U.S. 142, 155 (2012)).
The interpretations reflect that the FCIC carefully
considered M&T Farms’ request and worked directly
App.44a
with the “facts” presented in the hypothetical regarding
Entities A and B and Individual C.
In sum, the Kisor framework being satisfied, the
Court finds that Auer deference is warranted.
B. The Agencies’ Decision Was Not Arbitrary
and Capricious.
Having found that Defendants’ interpretations
of the WFRP Policy and Handbook provisions at
issue are entitled to Auer deference, the Court must
defer to those interpretations “unless ‘plainly erroneous
or inconsistent with the regulation.’” Bassiri, 463
F.3d at 930. As discussed extensively in Section IV
above, the Court finds Defendants’ interpretations
neither plainly erroneous nor inconsistent with the
other WFRP Policy and Handbook provisions. Having
concluded that Entity A was engaged in “farming
activities,” Defendants’ conclusion that neither Entity
B nor Individual C met the eligibility requirements
under § 3(a)(4) is not contrary to the WFRP Policy or
Handbook. Section 3(a)(4) provides:
3. Qualifying Person Criteria and Insurance
Eligibility
(a) To be considered a qualifying person, you
must:
(4) The Schedule F, or Substitute Schedule
F, must cover 100 percent of your farm
operation. (A tax entity which reports a
fractional share of farming activity
conducted by a partnership, corporation
or any other “joint venture” does not
qualify for WFRP coverage on the
fractional share of farming activity).
App.45a
AR 189. In Plaintiff’s hypothetical, Entity B and
Individual C, Defendants conclude, are reporting a
fractional share of partnership Entity A’s farming
activities and therefore do not qualify for WFRP
coverage on the fractional share of farming activity.
AR 347-48. This conclusion follows from the plain
language of the WFRP Policy and, thus, is not arbitrary.
Further, Defendants did not act arbitrarily or
capriciously in interpreting “farming activity” as
encompassing the activities of the partnership Entity
A contained in Plaintiff’s hypothetical—i.e., holding
the business name and goodwill of its constituent
general partners and marketing and selling their
commodities under Entity A’s own name. AR 347-48;
AR 562. As set forth above, the Court found this
interpretation reasonable given the record before the
Agencies at the time the interpretations were provided
and the structure and other definitions of the WFRP
Policy and Handbook.
In sum, the Agencies reasonably determined
that “farming activity” includes holding the business
name and goodwill, “i.e., marketing and selling the
commodities produced,” of a partnership’s constituent
general partners. This determination was not plainly
erroneous or contrary to any other provision of the
WFRP Policy, Handbook, or any regulation. Thus,
the Court finds that the Agencies’ interpretation
should not be vacated on this ground.
V.
Conclusion
For the reasons set forth above, the Court
DENIES Plaintiff’s motion for summary judgment
App.46a
and GRANTS Defendants’ cross-motion for summary
judgment.
SO ORDERED.
App.47a
ORDER DENYING PETITION FOR
REHEARING, U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
(AUGUST 13, 2024)
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
________________________
M&T FARMS, a California General Partnership,
Plaintiff-Appellant,
v.
FEDERAL CROP INSURANCE OPINION
CORPORATION, a wholly-owned government
corporation that administers the Federal Crop
Insurance Program; RISK MANAGEMENT
AGENCY, the United States Department of
Agriculture’s agency that manages the FCIC and
administers federal crop insurance policies,
Defendants Appellees.
________________________
No. 23-15837
D.C. No. 5:21-cv-09590-SVK
Northern District of California, San Jose
Before: M. SMITH, HURWITZ, and JOHNSTONE,
Circuit Judges.
The panel has unanimously voted to deny the
petition for panel rehearing. Judges M. Smith and
App.48a
Johnstone voted to deny the petition for rehearing en
banc, and Judge Jurwitz so recommended. The petition
for rehearing en banc, and Judge Hurwitz so recommended. The petition for rehearing en banc was
circulated to the Judges of the Court, and no judge
requested a vote for en banc consideration. Fed. R.
App. P. 35.
The petition for panel rehearing en banc, Dkt.
31, is DENIED.
App.49a
RELEVANT STATUTORY PROVISION
5 U.S.C.A. § 706
Scope of Review
To the extent necessary to decision and when
presented, the reviewing court shall decide all
relevant questions of law, interpret constitutional
and statutory provisions, and determine the
meaning or applicability of the terms of an
agency action. The reviewing court shall—
(1) compel agency action unlawfully withheld
or unreasonably delayed; and
(2) hold unlawful and set aside agency action,
findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law;
(B) contrary to constitutional right, power,
privilege, or immunity;
(C) in excess of statutory jurisdiction,
authority, or limitations, or short of
statutory right;
(D) without observance of procedure required
by law;
(E) unsupported by substantial evidence in
a case subject to sections 556 and 557
of this title or otherwise reviewed on
the record of an agency hearing provided
by statute; or
App.50a
(F) unwarranted by the facts to the extent
that the facts are subject to trial de
novo by the reviewing court.
In making the foregoing determinations, the
court shall review the whole record or those
parts of it cited by a party, and due account
shall be taken of the rule of prejudicial error.
7 U.S.C.A. § 1502
Purpose; Definitions; Protection of Information;
Relation to Other Laws
(a) Purpose
It is the purpose of this subchapter to promote
the national welfare by improving the economic
stability of agriculture through a sound system
of crop insurance and providing the means for
the research and experience helpful in devising
and establishing such insurance.
(b) Definitions
As used in this subchapter:
(1) Additional Coverage
The term “additional coverage” means a plan of
crop insurance coverage providing a level of
coverage greater than the level available under
catastrophic risk protection.
(2) Approved Insurance Provider
The term “approved insurance provider” means
a private insurance provider that has been
approved by the Corporation to provide insurance
coverage to producers participating in the Federal
App.51a
crop insurance program established under this
subchapter.
(3) Beginning Farmer or Rancher
The term “beginning farmer or rancher” means a
farmer or rancher who has not actively operated
and managed a farm or ranch with a bona fide
insurable interest in a crop or livestock as an
owner-operator, landlord, tenant, or sharecropper
for more than 5 crop years, as determined by the
Secretary.
(4) Board
The term “Board” means the Board of Directors
of the Corporation established under section
1505(a) of this title.
(5) Corporation
The term “Corporation” means the Federal Crop
Insurance Corporation established under section
1503 of this title.
(6) Cover Crop Termination
The term “cover crop termination” means a practice that historically and under reasonable circumstances results in the termination of the
growth of a cover crop.
(7) Department
The term “Department” means the United States
Department of Agriculture.
App.52a
(8) Farm Financial Benchmarking
The term “farm financial benchmarking” means—
(A) the process of comparing the performance of
an agricultural enterprise against the performance of other similar enterprises, through
the use of comparable and reliable data, in
order to identify business management
strengths, weaknesses, and steps necessary
to improve management performance and
business profitability; and
(B) benchmarking of the type conducted by farm
management and producer associations consistent with the activities described in or
funded pursuant to section 5925f of this
title.
(9)
Hemp
The term “hemp” has the meaning given the
term in section 1639 of this title.
(10)
Loss Ratio
The term “loss ratio” means the ratio of all sums
paid by the Corporation as indemnities under
any eligible crop insurance policy to that portion
of the premium designated for anticipated losses
and a reasonable reserve, other than that portion
of the premium designated for operating and
administrative expenses.
(11)
Organic Crop
The term “organic crop” means an agricultural
commodity that is organically produced consistent
with section 6502 of this title.
App.53a
(12)
Secretary
The term “Secretary” means the Secretary of
Agriculture.
(13)
Transitional Yield
The term “transitional yield” means the maximum
average production per acre or equivalent measure
that is assigned to acreage for a crop year by the
Corporation in accordance with the regulations
of the Corporation whenever the producer fails—
(A) to certify that acceptable documentation of
production and acreage for the crop year is
in the possession of the producer; or
(B) to present the acceptable documentation on
the demand of the Corporation or an insurance company reinsured by the Corporation.
(14)
Veteran Farmer or Rancher
The term “veteran farmer or rancher” means a
farmer or rancher who—
(A) has served in the Armed Forces (as defined
in section 101 of Title 38); and
(B)
(i)
has not operated a farm or ranch;
(ii) has operated a farm or ranch for not
more than 5 years; or
(iii) is a veteran (as defined in section 101
of that title) who has first obtained
status as a veteran (as so defined)
during the most recent 5-year period.
App.54a
(c) Protection of Confidential Information
(1) General
Prohibition
Disclosure
Against
Except as provided in paragraph (2), the Secretary,
any other officer or employee of the Department
or an agency thereof, an approved insurance
provider and its employees and contractors, and
any other person may not disclose to the public
information furnished by a producer under this
subchapter.
(2) Authorized Disclosure
(A) Disclosure in
Aggregate Form
Statistical
or
Information described in paragraph (1) may be
disclosed to the public if the information has
been transformed into a statistical or aggregate
form that does not allow the identification of the
person who supplied particular information.
(B)Consent of Producer
A producer may consent to the disclosure of
information described in paragraph (1). The participation of the producer in, and the receipt of
any benefit by the producer under, this subchapter
or any other program administered by the
Secretary may not be conditioned on the producer providing consent under this paragraph.
App.55a
(3) Violations; Penalties
Section 2276(c) of this title shall apply with respect to the
release of information collected in any manner or for any purpose prohibited by this subsection.
(4) Information
(A) Request
Subject to subparagraph (B), the Farm Service
Agency shall, in a timely manner, provide to an
agent or an approved insurance provider authorized by the producer any information (including
Farm Service Agency Form 578s (or any successor
form)) or maps (or any corrections to those forms
or maps) that may assist the agent or approved
insurance provider in insuring the producer under
a policy or plan of insurance under this subchapter.
(B)Privacy
Except as provided in subparagraph (C), an
agent or approved insurance provider that receives
the information of a producer pursuant to subparagraph (A) shall treat the information in accordance
with paragraph (1).
(C)Sharing
Nothing in this section prohibits the sharing of
the information of a producer pursuant to subparagraph (A) between the agent and the approved
insurance provider of the producer.
App.56a
(d) Relation to Other Laws
(1) Terms and Conditions of Policies
and Plans
The terms and conditions of any policy or plan of
insurance offered under this subchapter that is
reinsured by the Corporation shall not—
(A) be subject to the jurisdiction of the Commodity
Futures Trading Commission or the Securities
and Exchange Commission; or
(B) be considered to be accounts, agreements
(including any transaction that is of the
character of, or is commonly known to the
trade as, an “option”, “privilege”, “indemnity”,
“bid”, “offer”, “put”, “call”, “advance guaranty”,
or “decline guaranty”), or transactions involving contracts of sale of a commodity for
future delivery, traded or executed on a
contract market for the purposes of the
Commodity Exchange Act (7 U.S.C. 1 et seq.).
(2) Effect on CFTC and Commodity
Exchange Act
Nothing in this subchapter affects the jurisdiction
of the Commodity Futures Trading Commission
or the applicability of the Commodity Exchange
Act (7 U.S.C. 1 et seq.) to any transaction
conducted on a contract market under that Act
by an approved insurance provider to offset the
approved insurance provider's risk under a plan
or policy of insurance under this subchapter.
App.57a
7 U.S.C.A. § 1503
Federal Crop Insurance Corporation;
Creation; Offices
To carry out the purposes of this subchapter,
there is hereby created as an agency of and
within the Department a body corporate with
the name “Federal Crop Insurance Corporation”.
The principal office of the Corporation shall be
located in the District of Columbia, but there
may be established agencies or branch offices
elsewhere in the United States under rules and
regulations prescribed by the Board.
7 U.S.C.A. § 1506
General Powers
(a) Succession
The Corporation shall have succession in its
corporate name.
(b) Corporate Seal
The Corporation may adopt, alter, and use a
corporate seal, which shall be judicially noticed.
(c) Property
The Corporation may purchase or lease and hold
such real and personal property as it deems
necessary or convenient in the transaction of its
business, and may dispose of such property held
by it upon such terms as it deems appropriate.
App.58a
(d) Suit
Subject to section 1508(j)(2)(A) of this title, the
Corporation, subject to the provisions of section
1508(j) of this title, may sue and be sued in its
corporate name, but no attachment, injunction,
garnishment, or other similar process, mesne or
final, shall be issued against the Corporation or
its property. The district courts of the United
States, including the district courts of the District
of Columbia and of any territory or possession,
shall have exclusive original jurisdiction, without
regard to the amount in controversy, of all suits
brought by or against the Corporation. The Corporation may intervene in any court in any suit,
action, or proceeding in which it has an interest.
Any suit against the Corporation shall be brought
in the District of Columbia, or in the district
wherein the plaintiff resides or is engaged in business.
(e) Bylaws and Regulations
The Corporation may adopt, amend, and repeal
bylaws, rules, and regulations governing the
manner in which its business may be conducted
and the powers granted to it by law may be exercised and enjoyed.
(f) Mails
The Corporation shall be entitled to the use of
the United States mails in the same manner as
the other executive agencies of the Government.
App.59a
(g) Assistance
The Corporation, with the consent of any board,
commission, independent establishment, or executive department of the Government, including
any field service thereof, may avail itself of the
use of information, services, facilities, officials,
and employees thereof in carrying out the provisions of this subchapter.
(h) Collection and Sharing of Information
(1) Surveys and Investigations
The Corporation may conduct surveys and investigations relating to crop insurance, agriculturerelated risks and losses, and other issues related
to carrying out this subchapter.
(2) Data Collection
(A) In General
The Corporation shall assemble data for the purpose of establishing sound actuarial bases for
insurance on agricultural commodities.
(B)National Agricultural Statistics
Service
Data collected by the National Agricultural
Statistics Service, whether published or unpublished, shall be—
(i)
provided in an aggregate form to the Corporation for the purpose of providing insurance under this subchapter; and
App.60a
(ii) kept confidential by the Corporation in the
same manner and to the same extent as is
required under—
(I)
section 2276 of this title; and
(II) the Confidential Information Protection
and Statistical Efficiency Act of 2002
(44 U.S.C. 3501 note; Public Law 107347).
(C)Noninsured
Crop
Assistance Program
Disaster
In collecting data under this subsection, the
Secretary shall ensure that—
(i)
appropriate data are collected through the
noninsured crop disaster assistance program
established by section 7333 of this title; and
(ii) not less frequently than annually, the Farm
Service Agency shares, and the Corporation
considers, the data described in clause (i).
(3) Sharing of Records
Notwithstanding section 1502(c) of this title,
records submitted in accordance with this subchapter and section 7333 of this title shall be
available to agencies and local offices of the
Department, appropriate State and Federal
agencies and divisions, applicants who have
received payment under section 1522(b)(2)(E) of
this title, and approved insurance providers for
use in carrying out this subchapter, such section
7333 of this title, and other agricultural programs.
App.61a
(i) Expenditures
The Corporation shall determine the character
and necessity for its expenditures under this
subchapter and the manner in which they shall
be incurred, allowed, and paid, without regard to
the provisions of any other laws governing the
expenditure of public funds and such determinations shall be final and conclusive upon all other
officers of the Government.
(j) Settling Claims
The Corporation shall have the authority to
make final and conclusive settlement and adjustment of any claim by or against the Corporation
or a fiscal officer of the Corporation.
(k) Other Powers
The Corporation shall have such powers as may
be necessary or appropriate for the exercise of
the powers herein specifically conferred upon
the Corporation and all such incidental powers
as are customary in corporations generally.
(l) Contracts
The Corporation may enter into and carry out
contracts or agreements, and issue regulations,
necessary in the conduct of its business, as
determined by the Board. State and local laws or
rules shall not apply to contracts, agreements, or
regulations of the Corporation or the parties
thereto to the extent that such contracts, agreements, or regulations provide that such laws or
rules shall not apply, or to the extent that such
App.62a
laws or rules are inconsistent with such contracts, agreements, or regulations.
(m) Submission of Certain Information
(1) Social
Security
Account
and
Employer Identification Numbers
The Corporation shall require, as a condition of
eligibility for participation in the multiple peril
crop insurance program, submission of social
security account numbers, subject to the requirements of section 405(c)(2)(C)(iii) of Title 42, and
employer identification numbers, subject to the
requirements of section 6109(f) of Title 26.
(2) Notification by Policyholders
Each policyholder shall notify each individual or
other entity that acquires or holds a substantial
beneficial interest in such policyholder of the
requirements and limitations under this subchapter.
(3) Identification of Holders of Substantial Interests
The Manager of the Corporation may require
each policyholder to provide to the Manager, at
such times and in such manner as prescribed by
the Manager, the name of each individual that
holds or acquires a substantial beneficial interest
in the policyholder.
App.63a
(4) “Substantial
Defined
Beneficial
Interest”
For purposes of this subsection, the term “substantial beneficial interest” means not less
than 5 percent of all beneficial interests in the
policyholder.
(n) Actuarial Soundness
(1) Projected Loss Ratio as of October
1, 1995
The Corporation shall take such actions as
are necessary to improve the actuarial
soundness of Federal multiperil crop insurance coverage made available under this
subchapter to achieve, on and after October
1, 1995, an overall projected loss ratio of not
greater than 1.1, including—
(A) instituting appropriate requirements for documentation of the actual production history
of insured producers to establish recorded
or appraised yields for Federal crop insurance coverage that more accurately reflect
the associated actuarial risk, except that
the Corporation may not carry out this
paragraph in a manner that would prevent
beginning farmers (as defined by the
Secretary) from obtaining Federal crop insurance;
(B) establishing in counties, to the extent
practicable, a crop insurance option based
on area yields in a manner that allows an
insured producer to qualify for an indemnity
App.64a
if a loss has occurred in a specified area in
which the farm of the insured producer is
located;
(C) establishing a database that contains the
social security account and employee identification numbers of participating producers, agents, and loss adjusters and using
the numbers to identify insured producers,
agents, and loss adjusters who are high risk
for actuarial purposes and insured producers who have not documented at least 4
years of production history, to assess the
performance of insurance providers, and for
other purposes permitted by law; and
(D) taking any other measures authorized by
law to improve the actuarial soundness of
the Federal crop insurance programwhile
maintaining fairness and effective coverage
for agricultural producers.
(2) Projected Loss Ratio
The Corporation shall take such actions, including
the establishment of adequate premiums, as are
necessary to improve the actuarial soundness of
Federal multiperil crop insurance made available
under this subchapter to achieve an overall
projected loss ratio of not greater than 1.0.
(3) Nonstandard Classification System
To the extent that the Corporation uses the
nonstandard classification system, the Corporation
shall apply the system to all insured producers
in a fair and consistent manner.
App.65a
(o) Regulations
The Secretary and the Corporation are each
authorized to issue such regulations as are
necessary to carry out this subchapter.
(p) Purchase of American-Made Equipment
and Products
(1) Sense of Congress
It is the sense of Congress that, to the greatest
extent practicable, all equipment and products
purchased by the Corporation using funds made
available to the Corporation should be Americanmade.
(2) Notice Requirement
In providing financial assistance to, or entering
into any contract with, any entity for the purchase
of equipment and products to carry out this subchapter, the Corporation, to the greatest extent
practicable, shall provide to the entity a notice
describing the statement made in paragraph (1).
(q) Redesignated (p)
(r) Procedures for Responding to Certain
Inquiries
(1) Procedures Required
The Corporation shall establish procedures under
which the Corporation will provide a final agency
determination in response to an inquiry regarding
the interpretation by the Corporation of this
App.66a
subchapter or any regulation issued under this
subchapter.
(2) Implementation
Not later than 180 days after June 23, 1998, the
Corporation shall issue regulations to implement
this subsection. At a minimum, the regulations
shall establish—
(A) the manner in which inquiries described in
paragraph (1) are required to be submitted
to the Corporation; and
(B) a reasonable maximum number of days within
which the Corporation will respond to all
inquiries.
(3) Effect of Failure to Timely Respond
If the Corporation fails to respond to an inquiry
in accordance with the procedures established
pursuant to this subsection, the person requesting
the interpretation of this subchapter or regulation
may assume the interpretation is correct for the
applicable reinsurance year.
7 C.F.R. § 400.767
Requestor Obligations
(a) All requests for a final agency determination
or FCIC interpretation submitted under this
subpart must:
(1) Be submitted to the Deputy Administrator
using the guidelines provided on RMA’s
website at www.rma.usda.gov through one
of the following methods:
App.67a
(i)
In writing by certified mail or overnight
delivery, to the Deputy Administrator,
Risk Management Agency, United States
Department of Agriculture, Beacon
Facility, Stop 0801, Room 421, P.O.
Box 419205, Kansas City, MO 64141–
6205;
(ii) By facsimile at (816) 926–3049; or
(iii) By electronic mail at subpartx@rma.
usda.gov;
(2) State whether you are seeking a final agency
determination or FCIC interpretation;
(3) Identify and quote the specific provision in
the Act, regulations, procedure, or policy
provision for which you are requesting a
final agency determination or a FCIC
interpretation;
(4) Contain no more than one request for an
interpretation (You must make separate
requests for each provision if more than one
provision is at issue. For example, if there is
a dispute with the interpretation of Paragraph
3 of the Loss Adjustment Manual, then one
request for an interpretation is required. If
there is a dispute with the interpretation of
Paragraph 3 of the Loss Adjustment Manual
and Paragraph 2 of the Macadamia Nut
Loss Adjustment Standards Handbook, then
two separate requests for an interpretation
are required);
(5) State the crop, crop year(s), and plan of
insurance applicable to the request;
App.68a
(6) State the name, address, and telephone
number of a contact person for the request;
(7) Contain your detailed interpretation of the
specific provision of the Act, regulations,
procedure, or policy provision for which the
request for interpretation is being requested;
and
(8) Not contain any specific facts, alleged conduct,
or hypothetical situations or the request
will be returned to the requestor without
consideration.
(b) You must advise FCIC if the request for a
final agency determination or FCIC interpretation
will be used in a judicial review, mediation, or
arbitration.
(1) You must identify the type of proceeding
(e.g., mediation, arbitration, or litigation), if
applicable, in which the interpretation will
be used, and the date the proceeding is
scheduled to begin, or the earliest possible
date the proceeding would likely begin if a
specific date has not been established;
(2) The name, address, telephone number, and
if applicable, fax number, or email address
of a contact person for both parties to the
dispute;
(3) Unless the parties elect to use the expedited
review process available under the AAA
rules or the appeal is before NAD, requests
must be submitted not later than 90 days
before the date the mediation, arbitration,
App.69a
or litigation proceeding in which the interpretation will be used is scheduled to begin.
(i)
If the rules of the court, mediation, or
arbitration require the interpretation
prior to the date the proceeding begins,
add 90 days to the number of days
required prior to the proceeding. For
example, if a court requires the interpretation 20 days prior to the date the
proceeding begins, you must submit the
request 110 days before the proceeding
is scheduled to begin.
(ii) Failure to timely submit a request for a
final agency determination or FCIC
interpretation may result in:
(A) FCIC issuing a determination that
no interpretation could be made because
the request was not timely submitted;
and
(B) Nullification of any agreement or
award in accordance with § 400.766 if
no final agency determination or FCIC
interpretation can be provided.
(iii) Notwithstanding paragraph (b) of this
section, if during the mediation, arbitration, or litigation proceeding, an
issue arises that requires a final agency
determination or FCIC interpretation
the mediator, arbitrator, judge, or magistrate must promptly request a final
agency determination or FCIC interpretation in accordance with § 400.
767(a).
App.70a
(4) FCIC at its sole discretion may authorize
personnel to provide an oral or written final
agency determination or FCIC interpretation,
as appropriate; and
(5) Any decision or settlement resulting from
such mediation, arbitration, or litigation
proceeding before FCIC provides its final
agency determination or FCIC interpretation
can be nullified in accordance with § 400.766.
(c) If multiple parties are involved and have
opposing interpretations, a joint request for a
final agency determination or FCIC interpretation
including both requestor interpretations in one
request is encouraged. If multiple insured persons
are parties to the dispute, and the request for a
final agency determination or FCIC interpretation
applies to all parties, one request may be submitted
for all insured persons instead of separate requests
for each person. In this case, the information
required in this section must be provided for
each person.
App.71a
FCIC RESPONSE TO M&T FARMS REQUEST
FOR POLICY INTERPRETATION
(SEPTEMBER 15, 2020)
USDA
United States Department of Agriculture
Farm Production and
Conservation Risk Management Agency
1400 Independence Avenue, SW
Stop 0801
Washington , DC 20250-0801
September 15, 2020
Attorneys for M&T Farms:
Darin T. Judd
Erin D. McFarland
Thompson, Welch, Soroko, & Gilber LLP
3950 Civic Center Drive, Suite 300
San Rafael, CA 94903
Phone: 415-448-5000
Emails:djudd@twsglaw.com
emcfarland@twsglaw.com
Subject: Request for Federal Crop Insurance Corporation (FCIC) Interpretation - 2017 WholeFarm Revenue Protection Pilot Policy
App.72a
Crop Year: 2017
Crop: Whole-Farm Revenue Protection
Dear Mr. Judd & Mr. McFarland:
Thank you for your August 4, 2020, letter
requesting a written interpretation regarding whether
a producer is eligible under section 3(a)(4) or 3(e) of
the 2017 Whole-Farm Revenue Protection (WFRP)
Pilot Policy.
Please refer to the attached enclosure for FCIC’s
interpretation.
Sincerely,
Richard H. Flournoy
Deputy Administrator
Product Management
App.73a
RISK MANAGEMENT AGENCY INTERPRETATION
OF FCIC PROVISIONS:
Subject: Request dated August 5, 2020, to the Risk
Management Agency for an interpretation
regarding whether a producer is eligible
under section 3(a)(4) or 3(e) of the 2017
Whole-Farm Revenue Protection (WFRP)
Pilot Policy.
The relevant policy provision provided by the
requestor is section 3(a)(4):
3.
Eligibility
(a) To be considered a qualifying person, you
must:
...
(4) The Schedule F, or Substitute Schedule
F, must cover 100 percent of your farm
operation. (A tax entity which reports a
fractional share of farming activity
conducted by a partnership, corporation
or any other “joint venture” does not
qualify for WFRP coverage on the
fractional share of farming activity); . . .
(e) Originating pass-through entities may insure
the allowable revenue from commodities produced by the farm operation under WFRP.
Owners of a pass-through entity that are
not the originating entity may not insure
pass-through revenue or loss under WFRP.
The relevant handbook procedure provided by
the requestor is subparagraph 21(1)(d):
App.74a
21. Eligibility
(1) To be considered eligible for a WFRP policy,
the insured must:
...
(d) have a Schedule F, or Substitute
Schedule F that covers 100 percent of
their farm operation. A tax entity
which reports a fractional share of
farming activity conducted by a
partnership, corporation or any other
“joint venture” does not qualify for
WFRP coverage on the fractional share
of farming activity. However, a tax
entity may still qualify for WFRP
coverage on a fractional share of a
commodity in which they have an
insurable interest.
Interpretation Submitted by Requestor(s)
The requestors’ interpretation of section 3(a)(4)
and 3(e) of the 2017 WFRP Pilot Policy is that a farm
operation (i.e., a partnership) may qualify for WFRP
coverage under either WFRP Policy Section 3, subsection (a)(4) and/or subsection (e). The requestor is
seeking an interpretation that an originating passthrough entity may qualify under either subsection
(a)(4) or (e), so long as the entity has a percentage
share in the commodities it physically produces, as
opposed to having a percentage share in a separate
farm operation that physically produces the commodities.
App.75a
The requestor offers the following example:
Entity A is a general partnership made up of
Entity B (a partnership) and individual C. Entity A
is not a “farm operation” because it reports no farm
activity to the IRS in the form or revenues or expenses. Moreover, Entity A is not an “originating entity”
because it physically produces no commodities. Instead,
Entity A is a storefront that holds the business name
and goodwill for Entity B and individual C.
Entity B is a “single farm operation” because it
reports 100 percent of its farm activity to the IRS in
the form of revenue and expenses on its tax forms
under a single taxpayer number. Entity B is also an
“originating entity” because it physically produces its
percentage share of the commodities grown nominally
under the name of Entity A.
Individual C is likewise a “single farm operation”
because it reports 100 percent of its farm activity to
the IRS in the form or revenue and expenses on its
tax forms under a single taxpayer number. Individual
C also actually physically produces its percentage
share of the commodities grown nominally under the
name of Entity A.
Entity B and individual C are not reporting a
fractional share of the farming activity of Entity A
because Entity A is not a “farm operation” and has
no farming activity, and because Entity A does not
actually, physically produce commodities.
Thus, in either of the above cases, the Entity B
qualifies for coverage under WFRP Policy Section 3,
subsections (a)(4) and/or (e) for the percentage of
commodities it actually, physically produces. In either
case, Entity B’s percentage share of revenue from the
App.76a
commodities is “allowable revenue” because it was
derived 100 percent from Entity B’s “farm operation”
as defined in the WFRP Policy. Moreover, Entity B’s
percentage share of the commodities was at financial
risk of loss and was therefore an “insurable interest”
as defined in the WFRP Policy.
Federal Crop Insurance
Corporation Determination
FCIC disagrees with the requestors’ interpretation
that a farm operation may be eligible for coverage
when meeting only some of the criteria required
under section 3(a)(4) and 3(e) of the 2017 WFRP Pilot
Policy and subparagraph 21(1)(d) of the 2017 WFRP
Pilot Handbook. A farm operation must meet eligibility
requirements of both sections 3(a)(4) and 3(e) for
coverage under WFRP. A farm operation may meet
the requirements of an originating pass-through entity
within itself. However, if that same entity also reports
a fractional share of another entity (farming activity),
the entity is not eligible for coverage under WFRP.
Using the example from the requestor’s interpretation,
Entity A is a partnership that includes Entity B and
individual C. Entity A, holding the business name
and goodwill of Entity B and individual C (i.e.,
marketing and selling the commodities produced), is
the pass-through entity. Although Entity B may be
considered an originating pass-through entity with
regards to itself, it reports a fractional share of the
general partnership (Entity A). Therefore, Entity B
and individual C do not meet the requirements of eligibility within section 3(a)(4) under WFRP.
For clarity, subparagraph 21(1)(d) of the WFRP
Pilot Handbook does allow a tax filing entity to
App.77a
obtain coverage on a fractional share of commodity
for which the entity has an insurable interest. For
example, an entity owns a farm operation that consists
of 100 acres of commodity A with a 100 percent share
of commodity A. The farm operation also consists of a
50 percent share of commodity B produced on another
100 acres. The entity would be eligible for WFRP
coverage on the 100 percent share of commodity A
and the 50 percent share of commodity B.
In accordance with section 33(a)(1) of the WFRP
Pilot Policy, this FCIC interpretation is generally
applicable and binding in any mediation or arbitration.
In accordance with section 33(a)(1), any appeal of
this interpretation must be in accordance with 7
C.F.R. part 11.
App.78a
FCIC WHOLE-FARM REVENUE
PROTECTION PILOT POLICY
(AUGUST 2016)
17-0076 WFRP- Pilot
Released –Aug. 2016
DEPARTMENT OF AGRICULTURE FEDERAL
CROP INSURANCE CORPORATION
WHOLE-FARM REVENUE
PROTECTION PILOT POLICY
________________________
Whole-Farm Revenue Protection (WFRP) pilot
provides protection against loss of revenue that you
expect to earn or will obtain from commodities you
produce or purchase for resale during the insurance
period. Whole-farm revenue consists of revenue from
all insured commodities on the farm operation,
including revenue from animals and animal products.
This insurance policy is reinsured by the Federal
Crop Insurance Corporation (FCIC) under the provisions of the Federal Crop Insurance Act (7 U.S.C.
1501-1524) (Act). All provisions of the policy and
rights and responsibilities of the parties are specifically subject to the Act. The provisions of the policy
may not be waived or varied in any way by us, our
insurance agent or any other contractor or employee of
App.79a
ours, or any employee of the United States Department of Agriculture (USDA). We will use the procedures, including but not limited to handbooks, manuals,
memoranda, and bulletins, as issued by FCIC and
published on the Risk Management Agency (RMA’s)
web site at http://www.rma.usda.gov/ or a successor
Web site, in the administration of this policy, including
the adjustment of any loss or claim submitted under
this policy.
In the event that we cannot pay your indemnity
because we are insolvent or are otherwise unable to
perform our duties under our reinsurance agreement
with FCIC, your claim will be settled in accordance
with the provisions of this policy, and FCIC will be
responsible for any amounts owed. No state guarantee
fund will be liable for your loss.
Throughout this policy, “you” and “your” refer to
the insured shown on the application accepted by us,
and “we,” “us,” and “our” refer to the insurance provider providing insurance. Unless the context indicates
otherwise, use of the plural form of a word includes
the singular and the singular form of the word
includes the plural. Some of the provisions contained
in this policy require information contained on farm
tax form Schedule F for the Federal tax return (Form
1040) or other alternative farm tax forms. Specific
line numbers from the Schedule F for the cash
accounting method (2013 tax year version) are referenced in the policy. To the extent that the line
numbers may change, the corresponding line number
for the Schedule F for the insurance year the policy
is in effect will apply.
App.80a
AGREEMENT TO INSURE: We agree that in return
for the payment of the premium, and subject to all of
the provisions of this policy, we will provide the
insurance as stated in this policy. If there is a
conflict between the (1) Act; (2) regulations published
at 7 CFR, Chapter IV; (3) policy provisions; and (4)
procedures issued by FCIC, the order of priority is (1)
controlling (2), etc. If there is a conflict between the
policy provisions, the order of priority is the (1)
Special Provisions, (2) actuarial documents; and (3)
these Basic Provisions, with (1) controlling (2).
[TOC Omitted]
TERMS AND CONDITIONS
YOUR INSURANCE CONTRACT
1.
Definitions
Abandon – Failure to continue activities necessary to produce an amount of allowable revenue
equal to or greater than the expected value of a
commodity, performing activities so insignificant as
to provide no benefit to a commodity, or failure to
harvest or market a commodity in a timely manner.
Accrual accounting method – A system of record
keeping in which revenue earned and expenses incurred
for a specified time period are recorded regardless of
whether or not the revenue was received or the
expenses were paid during the specified time period.
Act – The Federal Crop Insurance Act (7 U.S.C.
1501 et seq.)
Actuarial documents – The information for the
insurance year that is available for public inspection
in your agent’s office and published on RMA’s web
App.81a
site and includes available crop insurance policies,
coverage levels, and information needed to determine
amounts of insurance, premium rates, premium
adjustment percentages, program dates, and other
related information regarding the insurance coverage.
Administrative fee – A fee in addition to your
premium that you must pay for insurance for each
insurance year.
Agricultural experts – Persons who are employed
by the Cooperative Extension System, the agricultural
departments of universities, or other persons approved
by FCIC, whose research or occupation is related to
the specific commodity or practice for which such
expertise is sought.
Allowable expenses – Farm expenses, specified by
this policy and adjusted as applicable, that are
incurred in the production of commodities on your
farm and reported to the IRS on farm tax records.
Allowable Expense Worksheet – A worksheet to
be completed by you and accepted by us that adjusts
your expenses by removing any expenses that are not
approved under WFRP.
Allowable revenue – Allowable revenue is farm
revenue, specified by this policy and including
applicable adjustments, from the production of
commodities produced by your farm operation, or
purchased for further growth and development by
your farm operation, that the IRS requires you to
report on farm tax records.
Allowable Revenue Worksheet – A worksheet to
be completed by you and accepted by us that adjusts
App.82a
your revenue by removing revenue that is not allowable
under WFRP.
Animals – Living organisms other than plants or
fungi that are produced or raised in farm operations,
including, but not limited to, cattle, horses, swine,
sheep, goats, poultry, aquaculture species, bees, and
fur bearing animals. For the purposes of this policy,
animals must be propagated or reared in a controlled
environment.
Application – The form required to be completed
by you and accepted by us before insurance coverage
will begin.
Approved expenses – The amount of allowable
expenses your farm operation is expected to incur
during the insurance period, as approved by us.
Approved revenue – The amount of allowable
revenue that your farm operation is expected to earn
or will obtain from the sale of commodities you
produce, or purchase for resale, in the insurance
period as approved by us.
Assignment of indemnity – A transfer of policy
rights, where you assign your right to an indemnity
payment, for the insurance year only, to creditors or
other persons to whom you have a financial debt or
other monetary obligation.
Average allowable expenses – The simple average
of the allowable expenses for all years in your whole
– farm history period.
Average allowable revenue – The simple average
of the allowable revenue for all years in your wholefarm history period.
App.83a
Beginning accounts payable – Allowable expenses, supported by verifiable records, you incurred
prior to the insurance period but that have not been
paid at the beginning of the insurance period.
Beginning accounts receivable – Allowable revenue, supported by verifiable records, you earned
prior to the insurance period, but that has not been
received at the beginning of the insurance period.
This amount includes the value of beginning inventory
that is under a marketing contract with a buyer to be
purchased at a specified price.
Beginning farmer or rancher – An individual who
has not actively operated and managed a farm or
ranch in any state, with an insurable interest in a
crop or livestock as an owner-operator, landlord,
tenant, or sharecropper for more than five insurance
years, as determined in accordance with FCIC procedures. Any insurance year’s insurable interest may,
at your election, be excluded if earned while under
the age of 18, while in full-time military service of
the United States, or while in post-secondary education, in accordance with FCIC procedures. A person
other than an individual may be eligible for beginning
farmer or rancher benefits if all of the substantial
beneficial interest holders qualify as a beginning
farmer or rancher.
Beginning inventory – The commodities you
produced or owned prior to the insurance period, but
that have not been sold or otherwise disposed of at
the beginning of the insurance period and supported
by verifiable records. Any commodity that is under a
marketing contract with a buyer to be purchased
during the previous insurance period at a price that
will not be determined until the current insurance
App.84a
period or subsequent years will be considered as
beginning inventory.
Bypassed acreage – Land on which a commodity,
grown under a processor contract, is ready for harvest
but the buyer elects not to accept the commodity so it
is not harvested.
Calendar year filer – An insured that files taxes
based on the 12 consecutive months corresponding to
January 1 through December 31.
Cancellation date – The date specified in the
actuarial documents on which your coverage will
automatically renew unless canceled in writing by
either you or us or terminated in accordance with the
policy terms.
Carryover insured – An insured that was covered
under WFRP in the insurance year immediately
prior to the current insurance year without respect to
insurance provider.
Cash accounting method – A system of record
keeping where revenue and expenses are recorded
during the time period they are actually received or
paid.
Catastrophic Risk Protection (CAT) – The minimum level of coverage offered by FCIC.
Certified organic acreage – Acreage in the certified
organic farm operation that has been certified by a
certifying agent as conforming to organic standards
in accordance with 7 CFR part 205.
Certificate – With respect to organic crops, a written document that identifies the name of the person
certified, effective date of certification, certificate
App.85a
number, types of products certified, and name and
address of the certifying agency.
Certification – With respect to organic crops, a
determination made by the certifying agency that the
production or handling operation is in compliance
with the certifying agency’s certification standards.
Certifying agent – A private or governmental
entity accredited by the USDA Secretary of Agriculture for the purpose of certifying a production,
processing, or handling operation as organic.
Claim for indemnity – A claim for a loss made on
our form that contains the information necessary to
pay the indemnity, as specified in this policy.
Commodities purchased for resale – Commodities
not produced by your farm operation that are
purchased to be added to your farm operation and
then subsequently sold. This does not include commodities purchased for further growth, development or
maturity for later sale, or commodities purchased to
replace production of your farm operation lost due to
insurable causes.
Commodity – Any agricultural product established
or produced on your farm operation, except timber,
forest, and forest products, and animals for sport,
show, or pets.
Commodity count – The number of commodities
on your farm operation, as determined in accordance
with section 19(c).
Consent – Approval in writing by us allowing
you to take a specific action.
App.86a
Contemporaneous records – Written records
developed at the time the event occurred, recording
information such as planting of a commodity, harvested
production, sale of a commodity, daily receipts, etc.
Contract change date – The date by which changes
to the policy, if any, will be made available.
Contract grower – A person retained under contract to manage the growth of a commodity owned by
another person.
Controlled substance – Any substance whose
manufacture, distribution, or use is federally regulated
under the Controlled Substances Act.
Cooperative Extension System – A nationwide
network consisting of a state office located at each
state’s land-grant university, and local or regional
offices. These offices are staffed by one or more
agricultural experts, who work in cooperation with
the National Institute of Food and Agriculture, and
who provide information to agricultural producers
and others.
County – Any county, parish, political subdivision
of a state, or other area specified in the actuarial documents.
Damage – Injury, deterioration, or loss of production of an insured commodity due to insured or
uninsured causes.
Days – Calendar days.
Delinquent debt – Has the same meaning as the
term defined in 7 CFR part 400, subpart U.
Direct marketing – Marketing commodities directly to consumers without the involvement of a third
App.87a
party (e.g., farmer’s markets, u-pick, roadside stands,
internet sales, etc.).
Direct marketing sales records – Contemporaneous records that document the sale of commodities
through direct marketing. If you sell a commodity
through direct marketing, you must provide the contemporaneous records used to determine allowable
revenue on the Schedule F farm tax form.
Disregarded entity – A single-member tax entity
that does not elect to be treated as a corporation for
income tax purposes and files taxes under another
entity name.
Diversification discount – The discount to your
farm premium rate that your farm operation qualifies
for based on your commodity count as determined in
accordance with section 19(c).
Early fiscal year filer – An insured that files
taxes with a fiscal year that begins prior to August 1
of the insurance year.
End of insurance period, date of – The date upon
which your insurance coverage ceases for the insurance
year.
Ending accounts payable – Allowable expenses,
supported by verifiable records, you incurred during
the insurance period but that have not been paid at
the end of the insurance period.
Ending accounts receivable – Allowable revenue,
supported by verifiable records, you earned during
the insurance period, but that has not been received
at the end of the insurance period. This amount
includes the value of ending inventory that is under
App.88a
a marketing contract with a buyer to be purchased at
a specified price.
Ending inventory – The commodities you produced
during the insurance period, but that have not been
sold or otherwise disposed of at the end of the insurance period and supported by verifiable records, and
reported on the Inventory Report as ending inventory.
Any commodity that is under a marketing contract
with a buyer to be purchased during the insurance
period at a price that will not be determined until
subsequent insurance years will be considered as
ending inventory.
Expanded operation adjusted revenue – The average allowable revenue adjusted to reflect physical
expansion of the farm operation.
Expanding operation factor – A factor that is used
to calculate the expanded operation adjusted revenue
for farm operations that are physically expanding.
Expected revenue – The amount of revenue you
expect to receive from a commodity, as stated on your
Farm Operation Report.
Expected value – The price that you expect to
receive for a commodity, in accordance with the
expected value guidelines, less the cost of all postproduction expenses.
Expense trend factor – A factor that is used to
measure the year to year growth in expenses of your
farm operation.
Expense reduction factor – A factor that is used
to reduce the approved revenue for claim purposes
when allowable expenses for the current year are
App.89a
less than 70 percent of approved expenses and the
reduction is due to an insurable loss.
Familial relationship – Your parents, brothers,
sisters, children, spouse, grandchildren, aunts, uncles,
nieces, nephews, first cousins, or grandparents, related
by blood, adoption, or marriage.
Farm premium rate – The premium rate for
coverage under this policy calculated based on the
commodities on your farm operation.
Farm operation – All of the farming activities for
which revenue and expenses are reported to the IRS
under a single taxpayer identification number will be
considered a single farm operation for WFRP purposes
(e.g., a partnership filing a U.S. tax return for partnership income that includes revenue and expenses
from separate row crop, perennial crop and livestock
farms is a single farm operation because it files one
tax return).
Farm Operation Report – The form on which you
provide all required information regarding the commodities you expect to earn revenue from during the
insurance period. The Farm Operation Report consists
of three parts, the Intended Farm Operation Report,
Revised Farm Operation Report, and Final Farm
Operation Report, with each part due at the time
specified in these provisions.
Farm tax forms – IRS income tax forms used to
report farm revenue and expenses for a signed and
filed Federal tax return, specifically including Schedule
F (Form 1040) but also other forms used to report
farm revenue and used under this policy to develop a
Substitute Schedule F, if needed.
App.90a
Fiscal year – A period of 12 consecutive months
used for accounting and tax purposes, and ending on
the last day of the twelfth month as long as the
twelfth month is not December.
Farm Service Agency (FSA) – An agency of the
USDA, or a successor agency.
Generally recognized – When agricultural experts
or organic agricultural experts, as applicable, are
aware of the production method or practice and there
is no genuine dispute regarding whether the production
method or practice allows the commodity to make
normal progress toward maturity.
Good farming practices – The production methods
utilized to produce the insured commodities and
allow them to make normal progress toward maturity
resulting in at least the approved revenue, which
are: (1) For conventional or sustainable farming
practices, those generally recognized by agricultural
experts for the area; or (2) for organic farming practices, those generally recognized by organic agricultural
experts for the area or contained in the organic plan.
We may, or you may request us to, contact FCIC to
determine whether or not production methods will be
considered to be “good farming practices”.
Household – A domestic establishment including
individuals with a familial relationship and others
who live on the same property.
Indexed average expenses – The average allowable
expenses adjusted to reflect expense growth during
the whole-farm history period.
App.91a
Indexed average revenue – The average allowable revenue adjusted to reflect revenue growth
during the whole-farm history period.
Insurable interest – Your percentage of a commodity that is at financial risk of loss.
Insurance period – The tax year that begins in
the insurance year.
Insurance year – The calendar year in which the
sales closing date occurs.
Insured – The named person as shown on the
application accepted by us. This term does not extend
to any other person having a share or interest in the
crop such as, a partnership, landlord, or any other
person, unless specifically indicated on the application
accepted by us.
Insured commodity – A commodity you will produce or purchase for resale during the insurance period.
Insured revenue – The total amount of insurance
provided to you by this policy.
Intended commodity – A commodity you reported
on your Intended Farm Operation Report.
Internal Revenue Service (IRS) – A bureau of
the United States Department of the Treasury.
Inventory Report – The form on which you provide
all required information regarding the beginning
inventory and ending inventory of your farm operation.
Lag year – The tax year immediately preceding
the insurance year.
App.92a
Late fiscal year filer – An insured that files
taxes with a fiscal year that begins August 1 or later
in the insurance year.
Limited resource farmer – Has the same meaning
as the term defined by USDA at http://www.lrftool.
sc.egov.usda.gov or a successor Web site.
Local market price – The average price offered
by buyers of the commodity in the area where you
normally sell that commodity.
Market readiness operations – The on-farm activities that are the minimum required to remove the
commodity from the field and make the commodity
market ready, such as washing, packing etc. Since it
is the minimum required to remove the commodity
from the field, the activity must occur on or in close
proximity to the field where the commodity is produced.
Market readiness operations do not include any activities that occur off-farm or on-farm in in-field that
increases the value of the crop, such as canning,
freezing, and processing activities that alter the
physical nature of insurable commodities including,
but not limited to, slicing apples, putting commodities
into gift baskets, jams, jellies, wine, or cider, etc.
Marketing contract – A written agreement
between you and a buyer for the purchase of a
commodity you will produce on your farm operation
at a specified price.
National Organic Program – A regulatory program
housed within the USDA Agricultural Marketing
Service, responsible for developing national standards
for organically-produced agricultural products.
App.93a
Native sod – Acreage that has no record of being
tilled (determined in accordance with information
collected and maintained by an agency of the USDA
or other verifiable records that you provide and are
acceptable to us) for the production of an annual crop
on or before February 7, 2014, and on which the
plant cover is composed principally of native grasses,
grass-like plants, forbs, or shrubs suitable for grazing
and browsing.
Negligence – The failure to use such care as a
reasonably prudent and careful person experienced
in the production of commodities would use under
similar circumstances.
Net value – Value of a commodity at the beginning of the year minus the cost of the commodity.
Noninsured Crop Disaster Assistance Program
(NAP) – A program administered by FSA which provides financial assistance to producers of crops that
do not have a permanent crop insurance program
available.
Notice of loss – A written notice you are required
to file in your agent’s office whenever you initially
discover that your allowable revenue for the insurance
year may be less than your insured revenue.
Nursery and greenhouse commodities – Plants
which are propagated or grown to be sold as plants,
not including commodities produced by plants (e.g.,
tomato plants, but not tomatoes). For the purposes of
this policy, plants for nursery and greenhouse must
be propagated or grown in a controlled environment.
Offset – The act of deducting one amount from
another amount.
App.94a
Organic agricultural experts – Persons who are
employed by the following organizations: Appropriate
Technology Transfer for Rural Areas, Sustainable
Agriculture Research and Education or the Cooperative
Extension System, the agricultural departments of
universities, or other persons approved by FCIC whose
research or occupation is related to the specific organic
crop or practice for which such expertise is sought.
Organic farming operation – An operation that
uses organic farming practices to produce organic
commodities.
Organic farming practice – A system of plant or
animal production practices used to produce the
commodity that is reviewed by a certifying agent in
accordance with 7 CFR part 205.
Organic system plan – A written plan, in
accordance with the National Organic Program
published in 7 CFR part 205, which describes the
organic farming practices and is reviewed annually,
or at other times specified on the certificate, by a
certifying agent.
Organic standards – Standards in accordance
with the Organic Foods Production Act of 1990 (7
U.S.C. 6501 et seq.) and 7 CFR part 205.
Originating entity – An entity that actually physically produces the commodity.
Pass-through entity – An entity that reports to
the IRS but does not pay taxes on portions of the
revenue, instead passing it to each individual owner
who then pays income tax on their portion of the
revenue from the business.
App.95a
Perennial commodity – A commodity produced
on a plant, bush, tree, or vine that has a lifespan of
more than one year, as identified in the actuarial
documents.
Person – An individual, partnership, association,
corporation, estate, trust, or other legal entity, and
wherever applicable, a State or a political subdivision
or agency of a State. “Person” does not include the
United States Government or any agency thereof.
Policy – The agreement between you and us to
insure all insurable revenue on the farm operation,
and consisting of the application accepted by us, these
Basic Provisions, the Special Provisions, any other
applicable endorsements or options, the actuarial
documents and the applicable regulations published
in 7 CFR chapter IV. All farm revenue will be insured
under one policy.
Post-production operations – Any operations not
included in the definition of market readiness
operations, performed after producing and harvesting
an insured commodity to prepare it for sale. These
include, but are not limited to, any activity occurring
on-farm or off-farm to prepare the commodity for sale
or any activity that increases the value of the crop,
such as canning, freezing, and processing activities
that alter the physical nature of insurable commodities
such as slicing apples, putting commodities into gift
baskets, jams, jellies, wine, or cider, or costs for cold
and controlled atmosphere storage.
Premium billing date – The earliest date upon
which you will be billed for insurance. The premium
billing date is contained in the actuarial documents.
App.96a
Produced – An insured commodity will be considered produced when it has matured to the extent that
it is generally saleable at established markets,
regardless of whether or not it is actually harvested
by the end of the insurance period.
Production capacity – Physical land or
structures used for the production of commodities on
your farm operation.
Prohibited substance – Any biological, chemical,
or other agent that is prohibited from use by Federal
statute or is not included in the organic standards for
use on any certified organic, transitional or buffer
zone acreage. Lists of such substances are contained
at 7 CFR part 205.
Qualifying revenue threshold – The minimum
amount of revenue a commodity must be expected to
generate to qualify as a commodity for the purpose of
your commodity count, as determined in accordance
with section 19(b).
Replanted commodity – An annual commodity
replanted on the same acreage as the first insured
commodity for harvest in the same insurance period.
Replanting – Performing the cultural practices
necessary to prepare the land and then replacing the
seed or plants of the damaged or destroyed commodity
on the same acreage.
Revenue trend factor – A factor that is used to
measure the year to year growth in revenue of your
farm operation.
RMA’s Web site – A web site hosted by RMA and
located at http://www.rma.usda.gov/ or a successor
web site.
App.97a
Sales closing date – The date contained in the
actuarial documents by which an application must be
filed and the last date by which you may change your
coverage for an insurance year.
Schedule F – A tax form commonly used to file
Federal taxes for a farm.
Short tax year – A period of less than twelve
consecutive months for which a tax entity may be required to file a tax return due to changing from a
calendar year to fiscal year or vice versa or from
changing the dates of a fiscal year.
Special Provisions – The part of the policy that
contains specific provisions of insurance that may
vary by geographic area or as specified in the policy.
Substantial beneficial interest – An interest held
by any person of at least 10 percent in you (e.g., there
are two partnerships that each have a 50 percent
interest in you and each partnership is made up of
two individuals, each with a 50 percent share in the
partnership. In this case, each individual would be
considered to have a 25 percent interest in you, and
both the partnerships and the individuals would
have a substantial beneficial interest in you. The
spouses of the individuals would not be considered to
have a substantial beneficial interest unless the
spouse was one of the individuals that made up the
partnership. However, if each partnership is made
up of six individuals with equal interests, then each
would only have an 8.33 percent interest in you and
although the partnership would still have a substantial
beneficial interest in you, the individuals would not).
The spouse of any individual applicant or individual
insured will be presumed to have a substantial bene-
App.98a
ficial interest in the applicant or insured unless the
spouses can prove they are legally separated or
otherwise legally separate under the applicable state
dissolution of marriage laws. Any child of an individual
applicant or individual insured will not be considered
to have a substantial beneficial interest in the applicant
or insured unless the child has a separate legal interest
in such person.
Substitute Schedule F – A form used in place of
a Schedule F form if you file farm tax forms for your
farm operation that do not include a Federal Schedule
F tax form.
Summary of coverage – Our statement to you,
based upon your Farm Operation Report that provides
specific information about your policy including the
amount of insurance coverage.
Tax entity – Any person that has a tax reporting
requirement.
Tax year – The annual accounting period for the
farm operation defined by the period used for tax
purposes. The tax years are: (1) a calendar year; or
(2) a fiscal year.
Termination date – The date contained in the
actuarial documents upon which your insurance ceases
to be in effect because of nonpayment of any amount
due us under the policy, including premium.
Total expected revenue – The total amount of
expected revenue you expect to receive from all
commodities on your farm operation during the insurance period, as stated on your Farm Operation Report,
including expected revenue from commodities lost due
to a covered cause of loss.
App.99a
Transitional acreage – Acreage on which organic
farming practices are being followed but the acreage
does not yet qualify to be designated as certified
organic acreage.
Verifiable records – Contemporaneous records provided from a disinterested third party, such as records
from a warehouse, processor, packer, broker, input
vendor, etc., or by measurement of farm-stored commodities. Except for commodities sold through direct
marketing, if you process or pack your insured commodities, you must provide final settlement sheets showing
disposition of the insured commodities and marketing
records reconcilable with revenue reported for tax
purposes for your farm operation.
Vertically integrated operation – A person that
has a substantial beneficial interest in multiple entities
that may buy and sell commodities from each other
or move commodities from one entity to the other to
conduct post-production operations on the commodities.
Void – When the policy is considered not to have
existed for an insurance year.
Whole-farm historic average revenue and expenses
– The historic, average allowable revenue and allowable expenses generated from the farm operation,
adjusted according to this policy, and stated on the
Whole-Farm History Report.
Whole-farm history period – The five consecutive
tax years prior to the tax year immediately before
the insurance year.
Whole-Farm History Report – The report that
documents your farm operation’s allowable revenue and
allowable expenses for each tax year used to deter-
App.100a
mine your whole-farm historic average revenue and
expenses and other information necessary to determine your whole-farm historic average revenue and
expenses.
2.
Application.
(a) For your initial year of insurance, you must
provide the completed, signed, application to your
agent not later than the sales closing date.
(b) If voidance, cancellation or termination of
insurance coverage occurs for any reason, including
but not limited to indebtedness, suspension, debarment,
disqualification, cancellation by you or us or your
policy is voided due to a conviction of the controlled
substance provisions of the Food Security Act of 1985
or Title 21, a new application must be filed for the crop.
(1) Insurance coverage will not be provided if
you are ineligible under the contract or
under any Federal statute or regulation.
(2) Since applications for crop insurance cannot
be accepted after the sales closing date, if
you make any premium payment, or you
otherwise become eligible, after the sales
closing date, you cannot apply for insurance
until the next insurance year. For example,
for the 2012 insurance year, if crop A, with
a termination date of October 31, 2012, and
crop B, with a termination date of March
15, 2013, are insured and you do not pay
the premium for crop A by the termination
date, you are ineligible for crop insurance as
of October 31, 2012, and crop A’s policy is
terminated as of that date. Crop B’s policy
App.101a
does not terminate until March 15, 2013,
and an indemnity for the 2012 insurance
year may still be owed. You will not be
eligible to apply for crop insurance for any
crop until after the amounts owed are paid
in full or you file a petition to discharge the
debt in bankruptcy.
(c) To change your coverage in a subsequent
year, you must provide a policy change form reflecting
the changes by the sales closing date or the policy
terms from the previous year will remain in effect.
(d) You must include the following information
on your application for insurance or your application
will not be accepted and no coverage will be provided:
(1) The coverage level;
(2) Your social security number (SSN) if you
are an individual. If you are an individual
applicant operating as a business, you must
provide an employer identification number
(EIN) and you must also provide your SSN;
(3) Your EIN if you are a person other than an
individual; and
(4) The following for all persons who have a
substantial beneficial interest in you:
(i)
The SSN for individuals; or
(ii) The EIN for persons other than individuals and the SSNs for all individuals that comprise the person with the
EIN if such individuals also have a
substantial beneficial interest in you;
App.102a
(iii) Any child of yours will not be considered
to have an interest in you, unless the
child has a separate legal interest in
you.
(5) Whether your farm taxes, in accordance with
this policy, are filed as a:
(i)
Calendar year;
(ii) Early fiscal year; or
(iii) Late fiscal year.
(6) Any other material information required on
the application for this policy.
(7) The county listed on the application should
be the county where the majority of the
total expected revenue is earned.
(e) With respect to SSNs or EINs required on
your application:
(1) Your application will not be accepted and no
insurance will be provided for the year of
application if the application does not contain
your SSN or EIN. If your application contains
an incorrect SSN or EIN for you, your application will be considered not to have been
accepted, no insurance will be provided for
the year of application and for any subsequent
insurance years, as applicable, and such
policies will be void if:
(i)
The number is not corrected by you; or
(ii) You correct the SSN or EIN but:
(A) You cannot prove that any error
was inadvertent (Simply stating
App.103a
the error was inadvertent is not
sufficient to prove the error was
inadvertent); or
(B) It is determined that the incorrect
number would have allowed you to
obtain disproportionate benefits
under the crop insurance program,
you are determined to be ineligible
for insurance or you could avoid an
obligation or requirement under
any State or Federal law; and
(2) With respect to persons with a substantial
beneficial interest in you:
(i)
If the SSNs or EINs of such persons are
included on your application and the
SSNs or EINs are correct, but the
persons with a substantial beneficial
interest in you are ineligible for insurance, the insurance coverage for all
revenue included on your application
will be reduced proportionately by the
percentage interest in you of persons
with a substantial beneficial interest in
you (presumed to be 50 percent for
spouses of individuals);
(ii) Your policy will be void if the SSN or
EIN of any person with a substantial
beneficial interest in you is incorrect or
is not included on your application and:
(A) The number is not corrected or
provided by you, as applicable;
App.104a
(B) You cannot prove that any error or
omission was inadvertent (Simply
stating the error or omission was
inadvertent is not sufficient to prove
the error or omission was inadvertent);
(C) Even after the correct SSN or EIN
is provided by you, it is determined
that the incorrect or omitted SSN
or EIN would have allowed you to
obtain disproportionate benefits
under the crop insurance program,
the person with a substantial
beneficial interest in you is determined to be ineligible for insurance, or you or the person with a
substantial beneficial interest in you
could avoid an obligation or requirement under any State or Federal
law; or
(D) Except as provided in sections
2(e)(2)(ii)(B) and (C), your policies
will not be voided if you subsequently provide the correct SSN or
EIN for persons with a substantial
beneficial interest in you and the
persons are eligible for insurance;
(f) Your approved revenue will be reduced
proportionately by the percentage interest in you of
persons with a substantial beneficial interest in you
if such persons are ineligible for insurance as long as:
(1) The SSN’s or EIN’s of such persons are
included on your application; and,
App.105a
(2) The SSN’s or EIN’s are correct.
(g) Notwithstanding any of the provisions in this
section, you may be subject to civil, criminal or
administrative sanctions if you certify to an incorrect
SSN or EIN or any other information under this
policy.
(h) If any of the information regarding persons
with a substantial beneficial interest in you, changes:
(1) After the sales closing date from the previous insurance year, you must revise your
application by the sales closing date for the
current insurance year to reflect the correct
information; or
(2) Less than 30 days before the sales closing
date for the current insurance year, you must
revise your application by the sales closing
date for the next insurance year; and
(3) You fail to provide the required revisions,
the provisions in section (f) will apply;
(i) If you are, or a person with a substantial
beneficial interest in you is, not eligible to obtain a
SSN or EIN, whichever is required, you must request
an assigned number for the purposes of this policy
from us:
(1) A number will be provided only if you can
demonstrate you are, or a person with a
substantial beneficial interest in you is,
eligible to receive Federal benefits;
(2) If a number cannot be provided for you in
accordance with (1) your application will
not be accepted; or
App.106a
(3) If a number cannot be provided for any
person with a substantial beneficial interest
in you in accordance with (1), the amount of
insurance for all commodities on the application will be reduced proportionately by
the percentage interest of such person in
you.
(j) You must provide information to us regarding
insurance you obtained from any other insurance
provider or from any FSA office on commodities
insured by this policy. The information provided
must include the date such insurance was obtained.
(k) If your farm operation is vertically integrated,
or you own or have interest in related tax entities,
you must clearly identify and explain the relationship
between such entities at the time you file your application.
(l) Your application will not be accepted, and no
coverage will be provided, if you are ineligible under
the contract or under any Federal statute or regulation.
3.
Qualifying Person Criteria and Insurance
Eligibility.
(a) To be considered a qualifying person, you must:
(1) Be eligible to receive federal benefits;
(2) Be a U.S. citizen or resident;
(3) File either a Schedule F tax form or other
farm tax forms that can be converted to a
Substitute Schedule F;
(4) The Schedule F, or Substitute Schedule F,
must cover 100 percent of your farm operation. (A tax entity which reports a fractional
App.107a
share of farming activity conducted by a
partnership, corporation or any other “joint
venture” does not qualify for WFRP coverage
on the fractional share of farming activity);
(5) Be engaged in the business of farming and
derive revenue from the production of
commodities; and
(6) Derive not more than 50 percent of expected
revenue from commodities purchased for
resale.
(b) To be eligible for insurance under this policy
you must be a qualifying person that has filed a
United States Federal income tax return, including
farm tax forms, for each of the five years of your
whole-farm history period for the same tax entity
and farm operation as the insured person for the
insurance year unless one of the following applies:
(1) Your tax entity (taxpayer identification
number) changed (e.g., you and your spouse
form a partnership and file a U.S. Partnership
Return of Income and you previously filed a
U.S. Individual Income Tax Return that
included your spouse’s interest in the farm
operation); or
(2) You stop farming as an individual and farm
as a tax entity other than an individual;
(3) You form a successor farming operation that
is a different tax entity but is basically the
same operation;
(4) You purchase, inherit, or lease another
person’s farm operation and your use of
App.108a
their records is approved in accordance with
section 16(g);
(5) You are a qualifying person that is not required to file a United States Federal
income tax return because you are not subject to income tax (e.g., a tribal entity) and:
(i)
You must have filed reports with a
third party entity supported by verifiable
records that we agree are sufficient to
develop a Substitute Schedule F for each
year in your whole-farm history period;
and
(ii) The reports used to develop your Substitute Schedule F will be considered
your farm tax forms under this policy;
(6) You did not file farm tax forms or report
farm revenue for a tax year due to circumstances beyond your control (e.g., illness that
prevented you from farming for the year)
provided:
(i)
You only have one year in your wholefarm history period in which you did
not file farm tax forms; and
(ii) You have filed farm tax forms in the
first year of your whole-farm history
period, unless you are a carryover
insured; and
(iii) You must have earned farm revenue
during your lag year; or
(7) You qualify as a beginning farmer or rancher,
or you are a carryover insured who qualified
App.109a
as a beginning farmer or rancher in the previous insurance year, and you have fewer
than five years of farm tax forms in your
whole farm history period provided:
(i)
You provide your farm tax forms for
each year in your whole-farm history
period in which you reported farm
revenue; and
(ii) You have at least three years of farm
tax forms in your whole-farm history
period and must have earned farm
revenue during your lag year.
(c) Your farm operation will be ineligible for
insurance under this policy and no coverage will be
provided if:
(1) Your insured revenue will be greater than
$8.5 million on the sales closing date, based
on your Intended Farm Operation Report;
(2) Your farm operation includes animals and
animal products and;
(i)
Your expected revenue from animals and
animal products intended commodities
is greater than $1 million on the sales
closing date; or
(ii) We are notified by FCIC that the
underwriting capacity for this plan of
insurance has been exceeded (see section
46(j));
(3) Your expected revenue from nursery and
greenhouse intended commodities is greater
than $1 million on the sales closing date;
App.110a
(4) Your commodity count, as determined using
your Intended Farm Operation Report, equals
one and;
(i)
Potatoes are the only commodity with
expected revenue that equals or exceeds
your qualifying revenue threshold. (This
limitation is a legislated requirement
under section 508(a)(3)(C) of the Act);
(ii) Revenue protection is available under
another policy offered under the authority of the Act for the commodity with
expected revenue that equals or exceeds
your qualifying revenue threshold;
(5) You elected CAT coverage for another policy
offered under the authority of the Act that
could provide coverage to any insurable
commodity during the insurance period,
whether acreage was planted or not; or
(6) Your farm operation includes any revenue
from controlled substances.
(d) You will not be considered a qualifying person
for this insurance year if the tax year corresponding
to the insurance period will be a short tax year, if
you have short tax years in your whole-farm history
period, or if your lag year is a short tax year. If you
have any short tax years in your history:
(1) You may resubmit your whole-farm history
based on the calendar or fiscal year used for
the insurance year;
(2) The whole-farm history must accurately
reflect the income from the calendar or fiscal
year; and
App.111a
(3) We may, at our discretion and based on your
resubmitted records, allow you to obtain
insurance.
(e) Originating pass-through entities may insure
the allowable revenue from commodities produced by
the farm operation under WFRP. Owners of a passthrough entity that are not the originating entity
may not insure pass-through revenue or loss under
WFRP.
(f) Disregarded entities are not considered qualifying persons. Allowable revenue from disregarded
entities may be insured by an entity that files farm
tax forms that includes such revenue.
4.
Life of Policy, Termination, and Cancellation.
(a) After we have accepted your application, you
may not cancel this policy for the initial insurance
year.
(b) This is a continuous policy and will remain in
effect for each succeeding insurance year following
the acceptance of the original application until canceled
by you in accordance with the terms of the policy or
by us. In accordance with section 5, FCIC may
change the coverage provided from year to year.
(c) Either you or we may cancel this policy after
the initial insurance year by providing written notice
to the other on or before the cancellation date.
(d) We may cancel your policy if no premium is
earned for 3 or more consecutive years.
(e) If any amount due, including premium or
administrative fees, or overpaid indemnities, is not
paid or an acceptable arrangement for payment is
App.112a
not made on or before the termination date for the
insurance year on which an 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.
(1) For a policy with unpaid administrative fees
or premium, the policy will terminate effective
on the first day of the insurance year immediately subsequent to the insurance year for
which such amount was due (insurance will
be considered not to have attached in the
subsequent year and no premium will be
owed or indemnity paid);
(2) For a policy with other amounts due, the
policy will terminate effective on the termination date immediately after the account
becomes delinquent;
(3) Ineligibility will be effective as of the date
that this policy was terminated and for all
other insurance policies with coincidental
termination dates;
(4) All other crop insurance policies that are
reinsured by FCIC under the authority of
the Act will also terminate as of the next
termination date contained in the policy;
(5) If you are ineligible, you may not obtain any
insurance under the Act until payment is
made in full, you execute an agreement to
repay the debt or you have your debts discharged in bankruptcy;
(6) If you execute an agreement to pay the debt
and fail to make any scheduled payment, all
App.113a
policies will be terminated effective on the
termination date for the insurance year in
which you failed to make the scheduled payment and no indemnity payment or replant
payment, if applicable, will be due for that
crop or insurance year. You will no longer
be eligible to obtain crop insurance by
execution of an agreement to pay the debt.
You will be ineligible for crop insurance until
the debt is paid in full or you have your
debts discharged in bankruptcy;
(7) Once the policy is terminated, the policy
cannot be reinstated for the current insurance
year unless the termination was in error;
(8) After you again become eligible for insurance,
if you want to obtain insurance coverage,
you must reapply on or before the applicable
sales closing date (Since applications for
insurance cannot be accepted after the sales
closing date, if you become eligible after the
sales closing date, you cannot apply for
insurance until the next insurance year);
and
(9) If we deduct the amount due us from an
indemnity, the date of payment for the purpose of this section will be the date you sign
the properly executed claim for indemnity.
For example, if policy A, with a
termination date of January 31, 2015,
and policy B, with a termination date of
March 15, 2015, are issued and you do
not pay the premium for policy A by the
termination date, you are ineligible for
App.114a
insurance as of January 31, 2015, and
policy A is terminated on that date.
Policy B is terminated as of March 15,
2015. If you enter an agreement to
repay the debt on December 31, 2015,
you can apply for insurance for policy A
by the January 31, 2016, sales closing
date and policy B by the March 15,
2016, sales closing date. If you fail to
make a scheduled payment on April 1,
2016, your policy will terminate as of
January 31, 2016, for crop A, and March
15, 2016, for crop B, and no indemnity
payment will be due for that insurance
year for either crop. You will not be
eligible to apply for crop insurance for
any crop until after the debt is paid in
full or you have your debts discharged
in bankruptcy and you make application in accordance with section 4(e).
(f) Any amount due to us for any policy authorized
under the Act will be offset from any indemnity due
you for this or any policy insured with us under the
authority of the Act.
(1) Even if your claim has not yet been paid,
you must still pay the premium and administrative fee on or before the termination
date for you to remain eligible for insurance.
(2) If we offset any amount due us from an
indemnity payment owed to you, the date of
payment for the purpose of determining
whether you have a delinquent debt will be
App.115a
the date that you submit the claim for
indemnity in accordance with section 25.
(g) A delinquent debt for any policy will make
you ineligible to obtain crop insurance authorized
under the Act for any subsequent insurance year and
result in termination of all policies in accordance
with section 4(g)(2).
(1) With respect to ineligibility:
(i)
Ineligibility for crop insurance will be
effective on:
(A) The date that a policy was terminated in accordance with section
4(g)(2) for the insurance year for
which you failed to pay premium,
an administrative fee, or any related
interest owed, as applicable;
(B) The payment due date contained
in any notification of indebtedness
for overpaid indemnity, or replanting
payment, if you fail to pay the
amount owed, including any related
interest owed, as applicable, by such
due date;
(C) The termination date for the insurance year prior to the insurance year
in which a scheduled payment is
due under a written payment
agreement if you fail to pay the
amount owed by any payment date
in any agreement to pay the debt;
or
App.116a
(D) The termination date the policy
was or would have been terminated
under sections 4(g)(2)(i)(A), (B) or
(C) if your bankruptcy petition is
dismissed before discharge.
(ii) If you are ineligible and a policy has
been terminated in accordance with
section 4(g)(2), you will not receive any
indemnity, or replanting payment, if
applicable, and such ineligibility and
termination of the policy may affect
your eligibility for benefits under other
USDA programs. Any indemnity, or
replanting payment that may be owed for
the policy before it has been terminated
will remain owed to you, but may be
offset in accordance with section 14(j)
unless your policy was terminated in
accordance with sections 4(g)(2)(i)(A),
(B), (D) or (E).
(2) With respect to termination:
(i)
Termination will be effective on:
(A) For a policy with unpaid administrative fees or premiums, the termination date immediately subsequent to the premium billing date
for the insurance year (For policies
for which the sales closing date is
prior to the termination date, such
policies will terminate for the
current insurance year even if
insurance attached prior to the
termination date. Such termination
App.117a
will be considered effective as of the
sales closing date and no insurance
will be considered to have attached
for the insurance year and no
indemnity, or replant payment will
be owed);
(B) For a policy with other amounts
due, the termination date immediately following the date you have a
delinquent debt (For policies for
which the sales closing date is
prior to the termination date, such
policies will terminate for the
current insurance year even if
insurance attached prior to the
termination date. Such termination
will be considered effective as of the
sales closing date and no insurance
will be considered to have attached
for the insurance year and no
indemnity, or replant payment will
be owed);
(C) For all other policies that are issued
by us under the authority of the
Act, the termination date that
coincides with the termination date
for the policy with the delinquent
debt or, if there is no coincidental
termination date, the termination
date immediately following the
date you become ineligible;
(D) For execution of a written payment
agreement and failure to make any
scheduled payment, the termination
App.118a
date for the insurance year prior to
the insurance year in which you
failed to make the scheduled payment (for this purpose only, the
insurance year will start the day
after the termination date and end
on the next termination date, e.g.,
if the termination date is March 15
and you fail to make a payment on
March 15, 2015 your policy will
terminate on March 30,2015, for
the 2016 insurance year); or
(E) For dismissal of a bankruptcy
petition before discharge, the termination date the policy was or would
have been terminated under
sections 4(g)(2)(i)(A), (B) or (C).
(ii) For all policies terminated under sections
4(g)(2)(i)(A), (B), (D) or (E), any indemnities, or replanting payments paid subsequent to the termination date must
be repaid.
(iii) Once the policy is terminated, it cannot
be reinstated for the current insurance
year unless:
(A) The termination was in error;
(B) The Administrator of the Risk Management Agency, at their sole discretion, determines in accordance
with 7 CFR part 400, subpart U
and FCIC issued procedures that
the following are met:
App.119a
(1) You provide documentation that
your failure to pay your debt is
due to an unforeseen or
unavoidable event or an extraordinary weather event that created
an impossible situation for you
to make timely payment;
(2) You remit full payment of the
delinquent debt owed to us or
FCIC with your request submitted in accordance with section
4(g)(2)(iii)(B)(3);
(3) You submit a written request
for reinstatement of your policy
to us no later than 60 days after
the termination date or the
missed payment date of a previously executed written payment agreement, or the due date
specified in the notice to you of
the amount due, if applicable;
(4) If authorization for reinstatement is granted, your policies
will be reinstated effective at
the beginning of the insurance
year for which you were determined ineligible, and you will be
entitled to all applicable benefits
under such policies, provided
you meet all eligibility requirements and comply with the terms
of the policy; and
App.120a
(5) There is no evidence of fraud or
misrepresentation.
(C) We determine, in accordance with
7 CFR part 400, subpart U and
FCIC issued procedures, that the
following are met:
(1) You can demonstrate:
(i) You acted in good faith when
you made timely payment and
you omitted the most recent
month’s interest or the amount
of the payment was clearly
transposed from the amount
that was otherwise due; or
(ii) You acted in good faith when
you made the payment and
the payment was delayed and
postmarked by no more than
7 calendar days after the
termination date or the missed
payment date of a previously
executed written payment
agreement, or the due date
specified in the notice to you
of the amount due, if applicable.
(2) You remit full payment of the
delinquent debt owed to us; and
(3) You submit a written request for reinstatement of your policy to your
agent no later than 30 days after the
termination date or the missed payment date of a previously executed
App.121a
written payment agreement, or the
due date specified in the notice to
you of the amount due, if applicable;
and
(4) There is no evidence of fraud or misrepresentation.
(iv) A determination made in section 4(g)(2)
(iii)(B) exhausts all administrative
remedies for purposes of termination.
(h) Any person may sign any document relative
to crop insurance coverage on behalf of any other
person cov
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