Common Crop Insurance Regulations, Basic Provisions; and Various Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AB96

Common Crop Insurance Regulations, Basic Provisions; and Various Crop Insurance Provisions

AGENCY:

Federal Crop Insurance Corporation, USDA.

ACTION:

Final rule.

SUMMARY:

The Federal Crop Insurance Corporation (FCIC) finalizes the Common Crop Insurance Regulations, Basic Provisions, Small Grains Crop Insurance Provisions, Cotton Crop Insurance Provisions, Sunflower Seed Crop Insurance Provisions, Coarse Grains Crop Insurance Provisions, Malting Barley Crop Insurance Provisions, Rice Crop Insurance Provisions, and Canola and Rapeseed Crop Insurance Provisions to provide revenue protection and yield protection. The amended provisions replace the Crop Revenue Coverage (CRC), Income Protection (IP), Indexed Income Protection (IIP), and the Revenue Assurance (RA) plans of insurance. These individual plans of insurance will no longer be available. The intended effect of this action is to offer producers a choice of revenue protection (protection against loss of revenue caused by low prices, low yields or a combination of both) or yield protection (protection for production losses only) within one Basic Provisions and the applicable Crop Provisions to reduce the amount of information producers must read to determine the best risk management tool for their operation and to improve the prevented planting and other provisions to better meet the needs of insured producers. In addition, FCIC has revised the Texas Citrus Tree Crop Insurance Provisions, Pear Crop Insurance Provisions, Sugarcane Crop Insurance Provisions, Macadamia Tree Crop Insurance Provisions, Macadamia Nut Crop Insurance Provisions, Onion Crop Insurance Provisions, Dry Pea Crop Insurance Provisions, Plum Crop Insurance Provisions, and Cabbage Crop Insurance Provisions to correct specific references to the revised Common Crop Insurance Regulations, Basic Provisions. Further, FCIC has revised certain provisions to incorporate provisions from previous rules implementing the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill).

DATES:

Effective Date:

This rule is effective April 29, 2010.

Applicability date:

The changes will apply for the 2011 and succeeding crop years for all crops with a 2011 contract change date on or after April 30, 2010, and for 2012 and succeeding crop years for all crops with a 2011 contract change date prior to April 30, 2010.

FOR FURTHER INFORMATION CONTACT:

Janice Nuckolls, Risk Management Specialist, Product Management, Product Administration and Standards Division, Risk Management Agency, United States Department of Agriculture, P.O. Box 419205, Stop 0812, Room 421, Kansas City, MO 64141-6205, telephone (816) 926-7730. For a copy of the Cost-Benefit Analysis, contact Leiann Nelson, Economist, at the office, address, and telephone number listed above.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, it has been reviewed by the Office of Management and Budget (OMB).

Cost-Benefit Analysis

A Cost Benefit Analysis has been completed and is available to interested persons at the Kansas City address listed above. In summary, the analysis finds the revised provisions in the final rule will have positive potential benefits for producers and insurance providers. The PayGo impact of changing the rapeseed price mechanism for revenue coverage to make the harvest price equal to the projected price is estimated at $5,233. The effect of this change is to reduce the risk, which will lower the premium rate for MPCI coverage, lower the amount of premium subsidy paid due to the lower premium, and decrease the indemnity paid.

A misreported information penalty was put into place in the 2005 crop year. The misreporting penalty was based on any reported information that resulted in liability greater than 110.0 percent or lower than 90.0 percent of the actual liability determined for the unit. The policy already provided a penalty for misreported acres and yields and when the misreporting factor was also applied to the indemnity, the penalty was overly harsh. In addition, the penalty was difficult to determine and administer. The total indemnity withheld in 2005 due to the misreported information factor penalty was slightly under $2.7 million and involved just over 608,000 acres.

Combining yield protection (protection for production losses only) and revenue protection (protection against loss of revenue caused by changes in prices, production losses or a combination of both) within the current Basic Provisions and applicable Crop Provisions will minimize the quantity of documents needed in the contract between the producer and the insurance provider. A producer benefits because he or she will not receive several copies of largely duplicative material as part of the insurance contract if he or she elects to insure different crops under different plans of insurance. Insurance providers benefit because there is no need to maintain inventories of similar materials, thus eliminating the potential for providing an incorrect set of documents to a producer by inadvertent error. Benefits will accrue due to avoided costs (the resources needed to duplicate and administer contract documents), which are intangible in nature. The cost to prepare, publish, store, and mail multiple copies of similar documents is avoided.

Revisions to the prevented planting provisions will clarify certain terms and conditions to reduce fraud, waste, and abuse. For example, the prevented planting payment amount has been changed so that it will not exceed the payment level for the crop prevented from being planted. Current provisions allow payment based on another crop when there are no remaining eligible acres for the crop prevented from being planted. Previously, the payment was based on the other crop even when its value was higher. The provisions still allow eligible acres for another crop to be used but limit the payment amount to the crop prevented from being planted.

The CRC, RA, IP, and IIP plans of insurance currently use a market-price discovery method to determine prices. This final rule generally uses the same method for determining the projected price for crops with both revenue protection and yield protection. The benefits of this action to FCIC are that it will no longer be required to make multiple estimates of the respective prices for these crops. Insurance providers benefit because they no longer will be required to process multiple releases of the expected market price for a crop year. Producers also benefit because the price at which they may insure the crops included under yield protection should more closely approximate the market value of any loss in yield that is subject to an indemnity. In addition, the variation in prices between yield protection and revenue protection will be reduced. There are essentially no direct costs to provide these pricing benefits because

the pricing mechanisms to be used are essentially the same as those currently being used for the revenue plans of insurance listed above. All required data are available and similar calculations are currently being made.

These changes will simplify administration of the crop insurance program, reduce the quantity of documents and electronic materials prepared and distributed, better define the terms of coverage, provide greater clarity, and reduce the potential for fraud, waste, and abuse.

Many of the benefits and costs associated with this rule cannot be quantified. The qualitative assessment indicates the benefits outweigh the costs of the regulation.

Paperwork Reduction Act of 1995

Pursuant to the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the collections of information in this rule have been approved by OMB under control number 0563-0053. The revisions made in this regulation may result in minor changes in how the information is collected, but the fundamental nature of the information collection is not changing.

E-Government Act Compliance

FCIC is committed to complying with the E-Government Act of 2002, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

Executive Order 13132

It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Program requirements for the Federal crop insurance program are the same for all producers regardless of the size of their farming operation. For instance, all producers are required to submit an application and acreage report to establish their insurance guarantees and compute premium amounts, and all producers are required to submit a notice of loss and production information to determine the amount of an indemnity payment in the event of an insured cause of crop loss. Whether a producer has 10 acres or 1000 acres, there is no difference in the kind of information collected. To ensure crop insurance is available to small entities, the Federal Crop Insurance Act authorizes FCIC to waive collection of administrative fees from limited resource farmers. FCIC believes this waiver helps to ensure that small entities are given the same opportunities as large entities to manage their risks through the use of crop insurance. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have an impact on small entities, and, therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

Federal Assistance Program

This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450.

Executive Order 12372

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983.

Executive Order 12988

This rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith. With respect to any direct action taken by FCIC or to require the insurance provider to take specific action under the terms of the crop insurance policy, the administrative appeal provisions published at 7 CFR part 11 must be exhausted before any action against FCIC for judicial review may be brought.

Environmental Evaluation

This action is not expected to have a significant economic impact on the quality of the human environment, health, or safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

Background

This rule finalizes changes to the Common Crop Insurance Regulations; Basic Provisions, Small Grains Crop Insurance Provisions, Cotton Crop Insurance Provisions, Sunflower Seed Crop Insurance Provisions, Coarse Grains Crop Insurance Provisions, Malting Barley Crop Insurance Provisions, Rice Crop Insurance Provisions, and Canola and Rapeseed Crop Insurance Provisions to provide revenue protection and yield protection in one policy and to make other changes that were published by FCIC on Friday, July 14, 2006, as a notice of proposed rulemaking in the

Federal Register

at 71 FR 40194-40252. The public was afforded 60 days to submit written comments after the regulation was published in the

Federal Register.

Based on comments received and specific requests to extend the comment period, FCIC published a notice in the

Federal Register

at 71 FR 56049 on September 26, 2006, extending the initial 60-day comment period for an additional 30 days, until October 26, 2006.

A total of 897 comments were received from 88 commenters. The commenters were insurance providers, attorneys, trade associations, State agricultural associations, agents, an insurance service organization, producers, State departments of agriculture, grower associations, agricultural credit associations, and other interested parties.

The public comments received regarding the proposed rule and FCIC's responses to the comments are listed below (under applicable subject headings) identifying issues and concerns, and the changes made, if any, to address the comments.

Commodity Exchange Price Provisions

FCIC received a number of comments regarding the Commodity Exchange Price Provisions (CEPP). Numerous comments were received with respect to the CEPP including, but not limited to, comments requesting: (1) Reinstating revenue coverage for sunflowers; (2) Increasing the maximum percentage the harvest price can move from 160

percent of the projected price to a larger amount; (3) Changing the projected price discovery period to 30 days; and (4) Establishing an earlier price discovery period to allow more time for sales.

The CEPP was provided for comment as a courtesy to the public and it is not part of the regulation and will not be published in the Code of Federal Regulations. Therefore, it is not subject to the formal notice and comment rulemaking process. As a result, FCIC is not publishing its responses to all of these comments in this final rule. FCIC thanks the public for their assistance in reviewing the CEPP and will consider all comments received and make appropriate changes in the CEPP.

Basic Provisions—General

Comment:

Many commenters commended FCIC for their efforts to combine CRC, RA, IP, and Actual Production History (APH) into a single policy. They stated it will strengthen the efficiency and integrity of the program, simplify product selection, reduce unnecessary documents, and facilitate producers' understanding of coverage options. The commenters stated they were encouraged by many of the revisions proposed by FCIC, as they believe these provisions will reduce program vulnerabilities, resolve existing ambiguities and increase the accountability and responsibility of the producers. They recognized the high value of Federal crop insurance to producers and appreciated the continuing efforts of FCIC to further improve the effectiveness and administration of this important program. A commenter stated using the same method for determining prices for both revenue and yield protection is a move in the right direction. A commenter stated that yield protection prices will more truly reflect expected market prices. Another commenter stated that with the price being the same for the two coverages, producers will be able to more easily compare revenue protection against yield protection, thereby making a more informed decision. The commenters stated the procedures proposed by FCIC should provide a smooth transition. A commenter stated the combination policy also eliminates potential conflicts and mistakes that occur when individual plans of insurance are revised independently and differently. A commenter stated the proposed rule will govern the future terms and conditions by which producers will be insured against price and production risks under the Federal crop insurance program, and believed the ultimate success of the rule will be measured in direct proportion to the level of attention paid to each and every detail and the level of collaboration with insurance providers who deliver these important risk management products. The commenter stated careful avoidance of any unintended consequence, as well as substantive and procedural changes that have not been thoroughly vetted, whether such changes are express or implied, is absolutely critical.

Response:

FCIC agrees combining the different plans of insurance into one program will be beneficial. FCIC also agrees generally using the same projected price by crop for both yield protection and revenue protection for all crops for which revenue protection is available should reflect expected market prices and assist the producer to make an informed decision when choosing between revenue and yield protection. However, the projected price for yield and revenue protection may not always be the same because FCIC reserves the right to set the projected price for yield protection to a price determined by FCIC. FCIC also agrees the revisions will reduce program vulnerabilities, resolve existing ambiguities, and increase the accountability and responsibility of the producers. The regulation is thoroughly reviewed to ensure the crop insurance program provides producers with viable risk management tools and can be marketed successfully.

Comment:

A commenter stated the Federal crop insurance program is unique among Federal programs. Insurance providers must market and sell the products authorized under the program and farmers and ranchers, in turn, must make significant financial investment in risk management products most appropriate to their operations. Accordingly, the commenter believed it is inappropriate to review the proposed rule in the same context as an entitlement program, which is made available by the government and received by beneficiaries free of cost and usually without choices. Rather, the proposed rule should be reviewed to ensure risk management products offered under the program can be effectively marketed and sold by insurance providers in such a manner that consumers can make prudent risk management investments based on informed decisions.

Response:

FCIC agrees that the Federal crop insurance program should not be reviewed strictly as an entitlement program. Unlike entitlement programs that are offered free of cost, most producers invest their premium dollars in the purchase of insurance. However, those premiums are also heavily subsidized by taxpayer dollars so FCIC has a heightened duty to protect program integrity and ensure the program operates in an actuarially sound manner and the review has been conducted accordingly.

Comment:

A commenter suggested the proposed regulation did not simplify the regulations and they saw no benefit to the public. Another commenter stated the proposed rule is a serious and complex proposal that should be fully explained to companies, agents, and producers in order for FCIC to get the maximum benefit from their input. The commenter stated they have some concerns and reservations about the effectiveness of the proposed rule in achieving its stated objectives of providing greater simplification. The proposed rule presents new definitions and new changes that could make things even more complicated and difficult to learn than the present system. For instance, for just corn and soybean producers, there are 51 changes and 32 new definitions. While they applaud FCIC's intent to simplify what is nearly universally identified as an overly complex and burdensome program, they believe the agency could use this major restructuring as an opportunity to truly simplify the program for producers and agents alike and not merely shift 5 complicated and complex coverages (APH, RA, CRC, IP, and IIP) into one massively complicated and complex Basic Provisions and the applicable Crop Provisions.

Response:

Previously, CRC, RA, IP and IIP all provided revenue coverage with different pricing mechanisms, varying unit structure, different underwriting rules, different rating structures, and different availability of crops and options. This meant that agents and producers were required to examine the coverages and terms and conditions, for each separate plan of insurance every year to determine which plan of insurance offered the best risk management fit for the producer. In this final rule, most of the differences between these plans of insurance have been eliminated so that now there is only one pricing mechanism for revenue coverage, the unit structures have been standardized, the options have been standardized, and the rating methodology has been standardized. This effort alone will eliminate considerable complexity within the program. As a result, except for the addition of revenue coverage, the policy terms remained substantially the same because all the unit structures, options,

etc.,

were already available under the APH Basic Provisions. This should also simplify the training of agents.

Further, the changes made to incorporate the revenue plans of insurance into the APH Basic Provisions and Crop Provisions should not be confused with the other changes made to enhance coverage and protect program integrity. While these changes will also have to be explained to producers and agents, such changes were necessary regardless of whether the revenue coverage was added to the APH Basic Provisions and Crop Provisions. FCIC believes the additions and revisions in this regulation simplify and improve the crop insurance program.

Comment:

Several commenters urged FCIC to hold a public hearing or a series of public hearings on the proposed rule and extend the public comment period. They stated public hearings will further enable the producer, agent, and insurance groups to fully understand the scope and potential impact the proposed changes will have on the entire Federal crop insurance program so they can offer additional comments to FCIC. A commenter stated it is vital the agency provide adequate time for both producers and private insurance providers to fully educate themselves about the proposed changes. A commenter stated the comment period established from July 14, 2006 to September 12, 2006 has come at the busiest time for most farmers in the Pacific Northwest because it is harvest season, then it is time to begin the fall seeding of winter wheat. A few commenters believed it would improve the opportunity for many more farmers to respond if the comment period could be extended another 50-60 days. Growers across the country rely heavily on the Federal crop insurance system and allowing them the opportunity to provide direct input is vital to improving the effectiveness of this program.

Response:

FCIC determined that public hearings were not appropriate. To provide meaningful participation of all program participants, numerous meetings would have been required. Further, the scheduling, implementation, and efforts to record and collect comments would have required massive resources and could have delayed the implementation of this rule by years. Instead of public hearings, FCIC elected to reopen the comment period and on September 26, 2006, a notice of reopening and extension of the comment period was published in the

Federal Register

. Written comments and opinions on the proposed rule were accepted until close of business on October 26, 2006.

Comment:

A few commenters applauded FCIC for moving forward with consultation of producer and insurance groups. They thanked FCIC for engaging in this comprehensive review of the impact the proposed rule could have on all participants in the crop insurance program.

Response:

FCIC did not consult with producer groups or insurance groups during the comment period. FCIC held requested informational meetings where it provided explanations regarding the proposed provisions. FCIC did not solicit or accept comments during these informational meetings. FCIC hopes such meetings were helpful in explaining the proposed changes so that audience members could provide meaningful written comments through the rulemaking process.

Comment:

A few commenters stated one issue that is not fully explained, but that is of critical importance, is the impact these changes may have on premium rates. If a significant level of re-rating becomes necessary, it could have significant impacts on producers. A commenter noted that, while not part of the proposed rule, the rating of Group Risk Protection (GRP) and Group Risk Income Protection (GRIP) policies nevertheless affect policies included in the proposed rule. The commenter believed any rating method changes should be fully vetted with insurance providers to ensure a complete understanding of the proposed rule and its impact on farmers and ranchers. The commenter strongly urged FCIC to clearly disclose and discuss rating methods and impacts without which a full appreciation of the rule cannot be known by companies, agents, or the producers they serve. By providing additional information on this issue and others that will arise, FCIC will assure the shift to the revised Basic Provisions and applicable Crop Provisions is more transparent and will provide adequate opportunity for producers to have additional input on issues that might negatively impact them.

Response:

Under this rule, one revenue protection approach will replace the current multiple approaches contained in the RA, CRC, IP, and IIP plans of insurance. The current revenue plans each have a different rating methodology. Therefore, the change to a single rating methodology for all revenue coverage under the revised Basic Provisions and applicable Crop Provisions will make the premium rates less variable. As with every crop insurance policy, the risk under such policy must be assessed and premium must be calculated to cover that risk. This will also occur under this final rule. A preliminary review shows that the amount of premium will change by less than five percent in the majority of states/crops as a result of the combination of these plans of insurance.

The actual premium rating methodology is a complex process that could not be adequately explained in a proposed rule. To the extent that persons are interested in FCIC's ratemaking process, information is available and can be requested from FCIC. FCIC does not know the basis of the commenter's assertion that the premium rating assessment under GRP and GRIP will affect the premium under this rule. GRP and GRIP offer a significantly different type of coverage than is provided under this rule (area versus individual coverage).

Comment:

A commenter stated modern producers need individualized risk management and individually rated policy premiums. County data, individual production history, and loss ratio data is available. The commenter stated that low loss ratios and stable yields get the discounts and high loss ratios and variable yields pay the higher price and that regardless of the cause for excessive loss (bad farming, fraud, or bad luck), those policies should pay a recapture premium. The commenter stated that like T-yields, high-risk areas would only need to be identified until the actual data was sufficient to take over. The actual data should drive the premium. The commenter asserted that producers also need a guarantee based on the ability to produce a crop in an average year, which is not the same as an average yield. Other lines of insurance rely on comparable, not simple, averages. The commenter stated the combo process may also be applied to GRP and GRIP. The commenter stated that from his desire to provide the best individual coverage and premium possible, he saw little reason to waste time on group policies. The commenter stated that the term “group” is misleading (should be called “County Risk Plan”), because these plans do not identify loss nor indemnify for loss and, therefore, the word “insurance” should never be allowed when referencing these plans. The commenter provided additional details regarding the problems of product misrepresentation brought on by these plans. The commenter stated rather than combining county plans, he would just as soon scrap them. A lottery (with house odds) is not a proper substitute for insurance.

Response:

Premium rates use actual data and reflect the producer's loss history because the lower the yield average, the higher the premium rate. If the commenter is suggesting that

premium rates be developed for each individual producer, such an effort would be impossible given the number of insureds and the variability in information at the individual level.

With respect to GRP and GRIP, since FCIC did not propose any changes to GRP or GRIP, no changes can be made in the final rule.

Comment:

A commenter was concerned about the implementation timeline of the new policy. The commenter stated insurance providers will need to receive the final version of the revised Basic Provisions and applicable Crop Provisions in adequate time to make the necessary system changes, rewrite the agent and adjuster training materials and procedure manuals, and then train agents, adjusters, underwriters,

etc.

The commenter asked if there is a timeline available that FCIC plans to follow to provide insurance providers adequate time to make the required changes and provide training for implementing the new policy. The commenter also asked what information FCIC will provide insurance providers to assist with implementation.

Response:

At this time, FCIC expects the final rule to be implemented for the 2011 crop year. To accomplish this, FCIC will work diligently to get the final rule published in the

Federal Register

in time for insurance providers to make system changes, prepare procedural documents, and train underwriters, loss adjusters and agents.

Comment:

A commenter recommended creating an insurance policy like hail insurance so the producer could insure each crop by field for a certain amount of dollars an acre.

Response:

The commenter is proposing a substantive change that would require considerable research, development, and notice and comment rulemaking. Further, FCIC does not currently have plans to conduct a feasibility study for such a policy. However, the commenter can develop such a policy and submit it under section 508(h) of the Act.

Comment:

A commenter stated Congress passed the Agricultural Risk Protection Act of 2000 (ARPA) with a clear intent of expanding crop insurance availability, improving coverage levels, and encouraging planting flexibility. The commenter urged FCIC to carefully consider and assure changes made through this rule are not contradictory to the intent of ARPA and/or diminish producer program participation.

Response:

Before provisions are proposed, changes are reviewed with consideration given to potential impacts on participation. FCIC does not believe that any of the final changes will adversely affect program participation, available coverage levels, or planting flexibility. The elimination of program complexity may encourage more producers to participate.

Comment:

A commenter stated acreage reporting dates for FCIC and Farm Service Agency (FSA) should be the same. The commenter believes different acreage reporting dates pose a problem for insurance providers, agents, and producers and the matter should be revisited to ensure the dates are the same (or at least closer) and appropriate. The commenter would support making the FSA date closer to or the same as the FCIC date.

Response:

Acreage reporting dates are listed in the Special Provisions, not in the regulations. Further, no changes have been proposed regarding the acreage reporting dates. Therefore, no change can be made as a result of this comment. However, FSA and FCIC are already reviewing acreage reporting dates with the goal of making them the same when practical.

Comment:

A commenter stated FCIC is only meeting the needs of a small segment of the economy, rather than meeting the needs of the American citizens, as a whole. The commenter stated crop insurance is being paid out when there is no damage to the crop. The agency does not physically go out and check what is reported to them by agribusiness; it just issues checks from the U.S. Treasury. This kind of payout is completely unacceptable. The commenter also stated the agency needs regular and close auditing to ascertain only actual losses are paid.

Response:

FCIC takes its program oversight responsibilities very seriously. However, given the large magnitude of the crop insurance program and FCIC's limited resources, it is impossible for it to review all or even a large portion of the claims. FCIC has no choice but to rely on the activities and audits of insurance providers to ensure that claims are properly paid. Further, the Risk Management Agency (RMA) Compliance Division conducts routine audits and reviews of the insurance providers, taking corrective actions as appropriate. FSA also assists this effort by monitoring producers whose losses have been outside the norm and notifying RMA when there is suspected fraud, waste, or abuse.

Comment:

A commenter questioned whether the premium discount for good experience will be applicable to the revised Basic Provisions and applicable Crop Provisions. Under CRC, IP, and RA, the good experience discount was suspended but retained by the insurance provider in the event the insured would change back to APH coverage, at which time the experience would be reinstated and applicable. The commenter asks whether the good experience discount will now apply to both yield and revenue coverage since the new combo product offers both yield and revenue coverage.

Response:

Many years ago, FCIC offered a good experience discount for producers. This discount was eliminated from the 1985 through 1998 Crop Provisions as they were revised. However, FCIC allowed those producers who had previously qualified for the discount under those old policies to continue to receive such discount as long as they continued to qualify. There are very few producers who continue to qualify for such discounts and they can only qualify for the discount under the same terms and conditions that were in effect for the last year such discount was available for the crop. Although the good experience discount is only available to crops that were insurable at the time the discount was offered, the good experience discount did not apply to the revenue plans of insurance. Therefore, the discount will be available to previously insured crops that now have yield protection, but will not be applicable to revenue protection.

Comment:

A commenter stated it was their understanding once the proposed rule is finalized, there are plans to combine the GRIP and GRP plans of insurance into an area plan revenue and yield product. There are some significant changes being recommended in this proposed rule that will likely carry over to the area plan products (

i.e.,

removal of the misreporting information factor). It would be advantageous to everyone who works with these programs that the implementation timeframes be as close as possible so that multiple systems and different ways of handling things will be minimized.

Response:

FCIC has not proposed any revisions to the GRIP and GRP plans of insurance in this rule. Therefore, no changes have been made. However, FCIC hopes to propose changes to the GRIP and GRP plans of insurance as soon as practicable.

Comment:

A commenter stated there appears to be a geographic discrimination favoring southern U.S. farmers that should be addressed, if not in the hearings for the proposed rule, at least by RMA/USDA, perhaps via administrative directive. Southern farmers have a distinct advantage in terms of evaluating the growing season prior to determining whether to

purchase crop insurance. For instance, the closer to planting time a decision can be made to buy crop insurance, the better off the farmer is in making a sound decision. In Wisconsin, the sales closing date is March 15 for corn and soybeans. This date was previously April 1 and was changed to March 15 some time ago with no justifiable reason provided. It is also 27 days prior to when corn can first be planted. The further south you go, the closer those days become (Illinois is 22 days, Kentucky is 16 days, Mississippi is 11 days, Alabama is 1 day). Obviously, this is very discriminatory and should be corrected by FCIC.

Response:

There are locations where the number of days between the sales closing date and planting varies. However, section 508(f)(2)(B) of the Act limits FCIC's ability to change sales closing dates because it requires sales closing dates to be established 30 days earlier than the sales closing dates in effect for the 1994 crop year. In addition, section 508(f)(2)(C) of the Act specifies that if the revised sales closing date would be earlier than January 31, the spring sales closing dates will be January 31. This means that there are locations where FCIC cannot change the sales closing dates to make the number of days between sales closing and planting more consistent. No change has been made.

Comment:

A few commenters stated they disagree with the proposed elimination of revenue protection to the producers of sunflowers, canola, rapeseed, and corn silage. If market and/or agronomic decisions suggest producers should produce these crops, Federal crop insurance should not create a disincentive. They urged FCIC to provide revenue protection for these crops in the final rule.

Response:

There was never an intent to provide a disincentive to produce a particular crop. However, FCIC has an obligation to ensure that the revenue prices reflect the market price as accurately as possible. To determine the revenue price, these products rely on commodity exchange prices for the crop or methodology based on a commodity exchange price for another crop that would produce a price that closely reflects the market price. There is no commodity exchange price for the crop or methodology based on a commodity exchange price for another crop that has proven to reflect the price of corn silage. Therefore, there is no basis upon which to offer protection against a change in price for corn silage. With respect to canola, there is a commodity exchange price for canola so coverage against a change in price will still be offered. With respect to rapeseed, there is no commodity exchange price available for rapeseed and the methodology previously used based on the canola commodity exchange price has proven to no longer be adequate in reflecting the market price for rapeseed. Additionally, commenters have provided suggested methodologies to be used to reflect the market price for sunflowers and FCIC has studied these methodologies. FCIC has determined that there is a sunflower pricing methodology that can reflect the market price for sunflowers so protection against a change in price can be offered. Even though protection against a change in price is not available for rapeseed and corn silage, they may be insured under revenue protection in order to preserve the existing whole-farm units currently available under RA.

Comment:

A commenter stated they are not sure how the Texas citrus tree and Texas citrus fruit policies are classified (

i.e.,

yield policy or revenue policy) and, therefore, are concerned how these policies may be affected by the amended Common Crop Insurance Policy even though these policies may not be the primary target for the changes.

Response:

The revenue protection discussed in the proposed rule will only be applicable to the crops that previously had CRC, IP, IIP, or RA coverage. Texas citrus trees and Texas citrus fruit were not included in any of these plans of insurance. Therefore, Texas citrus trees and Texas citrus fruit will not be affected by the revenue protection or yield protection provisions. However, Texas citrus trees and Texas citrus fruit will be affected by other applicable changes in the Common Crop Insurance Policy Basic Provisions.

Comment:

A commenter cautioned that the Crop Insurance Handbook and the Loss Adjustment Manual will interpret the new policy language and write them into rules to which Standard Reinsurance Agreement holders have to adhere. The commenter stated it is vital the proposed policy enhancements for simplification, integrity and efficiency are carried over into both the Crop Insurance Handbook and Loss Adjustment Manual. The commenter stated these improvements cannot be lost in the interpretation.

Response:

One purpose of the changes is to simplify the program. This should be reflected in the reduction in the number of underwriting rules needed to administer the program. The appropriate procedural documents will be revised as necessary to reflect the changes made in the policy provisions.

Comment:

A commenter recommended extending the sales closing date from March 15th to March 30th to give them more time to sell the product with accurate prices/rates.

Response:

FCIC cannot extend the sales closing date to March 30. Section 508(f)(2) of the Act requires sales closing dates to be established 30 days earlier than the applicable sales closing date for the 1994 crop year. The current March 15 sales closing date was previously April 15 in 1994. Therefore, no change can be made.

Comment:

A few commenters stated they greatly appreciated the agency's extension of the comment period for the proposed rule to allow more time to study the provisions.

Response:

The extended comment period served its purpose in providing the public additional time to study the provisions and offer comments.

Comment:

A few commenters stated they believe the issues are significant enough to warrant an interim final rule rather than a final rule.

Response:

Even though the issues may be significant, they did not require such major changes to the proposed rule to warrant the necessity for an interim final rule. The public was afforded additional time to comment and FCIC has considered all of the comments and made appropriate revisions in accordance with the recommendations.

As stated more fully below, there were many comments recommending changes to provisions where no changes were proposed. Since changes were not proposed, the public was not afforded an opportunity to comment. FCIC considered addressing those comments that may not be substantive in nature but this was too subjective because there may be disagreement with respect to what is considered substantive. Therefore, as a general rule, these recommended changes were not considered unless they were addressing conflicting provisions or program integrity issues.

The Application and Policy

Comment:

A few commenters stated it appears coverage equivalent to the producer's current coverage will be provided to the producer without having to get a new signature from the producer, when the current programs are rolled into the Basic Provisions and applicable Crop Provisions. The commenters stated that, though this process will not be without pitfalls, not requiring a cancel and rewrite of all revenue policies should help provide a seamless transition to the new provisions. The commenters were supportive of this proposal as it will

help in administering the conversion of all carryover policyholders to the Basic Provisions and applicable Crop Provisions. Another commenter stated they were interested in the details underlying this process (for example, the revisions to plans of insurance, insurance choices, and premium calculations).

Response:

Given the number of policies affected by this rule, it was impractical to require cancellation and rewriting of all of these policies. It will be imperative that agents explain the affects of these changes to the policyholder and assist them in their selection of the most appropriate risk management tool. However, without the additional paperwork burden, agents should have more time to fulfill these responsibilities. FCIC will release the details of the transition process and any other necessary information in time to allow insurance providers to take appropriate actions.

Section 1 Definitions

Comment:

A commenter stated the definition of “acreage reporting date” was not proposed to be revised but it would read better by either putting the phrase “contained in the Special Provisions or as provided in section 6” in parentheses or rearranging as “The date by which you are required to submit your acreage report, and which is contained * * *”

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A few commenters suggested adding something in the definition of “actual yield” about the possibility of actual yields being reduced (or adjusted) instead of in the definition of “average yield” (and elsewhere as well). The commenters suggested two possibilities for consideration: (1) Add language to the end of the first sentence so it reads something like “The yield per acre for a crop year calculated from the production records or claims for indemnities and reduced [or “adjusted” if this refers to anything besides the maximum yield edits] if required * * *”; and (2) Add a sentence at the end such as “* * * Actual yields may be reduced as required * * *”

Response:

The producer's actual yield is and should be the yield per acre for a crop year calculated from the production records or a claim for indemnity and determined by dividing the producer's total production by planted acres. The producer's yield would not be an actual yield if it were adjusted. No change has been made.

Comment:

A few commenters recommended FCIC consider whether the term and/or definition of “actuarial documents” should be revised since the intended implementation of eWA will result in actuarial “information” (rather than “documents”) being made available on the RMA Web site. A commenter also questioned whether the “actuarial documents” include the Special Provisions, or just everything else.

Response:

FCIC believes the defined term of “actuarial documents” will still be appropriate with the implementation of a new information technology system because even though the actuarial information will be filed electronically on RMA's Web site, the information still can be printed out as a hard-copy document. The definition of “actuarial documents” contains information that is found in the Special Provisions. However, because the Special Provisions contain the terms and conditions of insurance, it is provided to the insured with the Common Crop Insurance Policy Basic Provisions and Crop Provisions. No change has been made.

Comment:

A commenter stated the existing, unrevised definition of “administrative fee” reads as though one fee applies to both levels of coverage, or possibly even that one fee serves to provide both catastrophic risk protection (CAT) and buy-up coverage on the same crop/county. They suggested revising this definition to read: “The applicable amount you must pay for either catastrophic risk protection or additional coverage * * *” At a minimum, “and” should be changed to “or.”

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

Several comments were received regarding the definition of “agricultural experts.” A commenter stated FCIC defines “agricultural experts” to include “other persons approved by FCIC”, however, the Basic Provisions do not indicate how an insurance provider may learn the identity of such experts. The commenter believed FCIC has an obligation to inform the public of the persons who qualify as experts and should amend the definition of “agricultural experts” to state: “A list of the agricultural experts approved by FCIC is published on RMA's Website.” A commenter requested that FCIC identify guidelines they will use to determine who is an approved agricultural expert and the process by which an individual will become an FCIC approved agricultural expert. The commenter stated guidelines do not belong within the Basic Provisions, but insurance providers, agents, and insureds have a right to know the standards and guidelines used to determine who an agricultural expert is and the process by which they are determined. A commenter disagreed with using the Cooperative Extension System in the definition of “agricultural experts.” The commenter also suggested the RMA Regional Offices (ROs) put together a list of agricultural experts that can be used as a resource. The commenter stated that, according to the recent Good Farming Practices Bulletin, there is a need in the field for unbiased and experienced resources. A few commenters stated they believe Certified Crop Advisers (CCAs) should also be included in the definition of “agricultural experts” given their required training and expertise and their widespread use in the field. A commenter stated the definition of “agricultural experts” should be expanded to read as follows: “Persons who are employed by the Cooperative Extension System or agricultural departments at universities; persons approved by FCIC, whose research or occupation is related to the specific crop or practice for which such expertise is sought; and other persons, whether or not approved by FCIC, whose research or occupation is related to the specific crop or practice for which such expertise is sought and whose experience is equivalent to persons approved by FCIC.” The proposed revision recognizes there may be persons with recognized expertise in addition to employees of the Cooperative Extension System and agricultural departments in universities, as well as any persons approved by FCIC. The proposed revision also is desirable because it gives insurance providers the option of consulting with and utilizing the skills of persons in addition to those set forth in the definition as written. When time is critical, having this option would be important.

Response:

FCIC has developed procedures that can be used to determine who qualifies as agricultural experts in Manager's Bulletin MGR-05-010. Insurance providers and producers can use these procedures in selecting their experts. However, it is not practical to list all FCIC approved “agricultural experts” on RMA's Web site or for the ROs to maintain such a

listing because it would be impossible to list the name of every potential agricultural expert and it would be impossible to keep it up-to-date. In MGR-05-010, agricultural experts are not listed by name but by categories of people who are currently approved by FCIC to be agricultural experts. Any person who falls within the category is considered approved by FCIC. CCAs are included as a category of experts approved by FCIC. There is no basis to exclude Cooperative Extension System from categories of approved agricultural experts. These persons have experience in the production of the crop in the area. The phrase “whether or not approved by FCIC” should not be included in the definition. There must be a clear standard set for who qualifies as an agricultural expert and FCIC has established that through MGR-05-010. If insurance providers or producers know of other persons that should qualify as agricultural experts but they are not included in one of the listed categories, they may submit the person's name to FCIC for approval. If approved, FCIC will include the category of such person in the Bulletin. No change has been made.

Comment:

A commenter stated the third sentence in the definition of “application” is problematic. As worded, it suggests that any time a policy is canceled or terminated, “* * * a new application must be filed for the crop.” Certainly, this is true if the producer is willing and eligible to reinstate the canceled/terminated coverage, but not if the application would be unacceptable because the entity is ineligible.

Response:

New applications must always be made after a policy has been canceled or terminated. The insurance provider should not accept the application if the applicant is ineligible. No change has been made.

Comment:

A commenter stated the definition of “approved yield” is not revised in the proposed rule but requested FCIC to see their comments to the definitions of “actual yield” and “average yield” regarding the term “actual yield.”

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A few comments were received regarding the definition of “assignment of indemnity.” A commenter questioned the meaning of the term “legitimate” and whether FCIC intends on setting forth the standards by which an insurance provider is to determine whether an assignment of indemnity is legitimate. The commenter stated it is noteworthy that section 29, entitled “Assignment of Indemnity,” does not employ the term “legitimate.” The commenter stated FCIC must provide additional guidance in this regard. Another commenter opposed FCIC's proposal that would restrict a producer's ability to assign an indemnity to a third party other than “legitimate creditors.” The commenter stated their opposition is based on the fact that some companies have worked to create programs that directly incorporate crop insurance and marketing plans into one comprehensive program. For example, their company has worked with their grain division to create a cash grain contract that guarantees a producer a dollar per acre amount. It is a “production contract” as opposed to a typical “bushel” contract. The producer can sell the total production to the elevator at a guaranteed minimum (dollar/acre) and maintain the upside on price. This instrument is very sophisticated. It involves over-the-counter options, the assignment of indemnity to the elevator, and a cash delivery obligation of the producer. FCIC's educational efforts encourage these sorts of integrated programs. The private marketplace has responded by creating them. The commenter stated they will not work without an assignment of indemnity and they encourage FCIC to reconsider this change.

Response:

FCIC agrees it may be difficult for an insurance provider to determine if a creditor is legitimate. Therefore, FCIC has removed the word “legitimate” and instead has specified the producer may assign his or her right to an indemnity for the crop year only to creditors or other persons to whom the producer has a financial debt or other pecuniary obligation. The insurance provider will have the ability to request that the producer show proof of the debt or pecuniary obligation before accepting the assignment of indemnity. FCIC also agrees assignments used in pricing/delivery agreements should be allowed. Such agreements would be considered “pecuniary obligations.”

Comment:

A few comments were received regarding the definition of “average yield.” A commenter stated the definition is confusing and needs to be clarified. The commenter noted the definition states “* * * including actual yields reduced * * *”, and later states “* * * prior to any yield adjustments.” Another commenter suggested instead of adding the phrase “* * * (including actual yields reduced in accordance with the policy) * * *” to “clarify the reference to actual yields”, they suggested revising the definition of “actual yield.” Otherwise, the commenter believes it would be necessary to add a similar phrase in the definition of “approved yield” and in other references to actual yields throughout the policy provisions. A commenter suggested the remainder of the phrase proposed in the “average yield” definition, “* * * in accordance with the policy,” needs to be reconsidered. The commenter stated the maximum yield procedure does not appear to be addressed in the Basic Provisions. The commenter added since the Basic Provisions are part of the “policy” any reference should be to the specific provisions, or to the procedure (which might be preferable instead of including detailed procedures in the policy that cannot easily be revised if and as needed).

Response:

FCIC agrees the definition may be confusing and has revised it by removing references to “adjusted yields” (except adjusted transitional yields) and “actual yields adjusted in accordance with the policy.” The revised definition includes actual yields, assigned yields in accordance with redesignated sections 3(f)(1) (failure to submit a production report), 3(h)(1) (excessive yields) and 3(i) (second crop without double cropping records for prevented planting), and adjusted and unadjusted transitional yields. The definition of “actual yield” should not be revised because it refers to the actual production produced in the unit. As revised, these actual yields will become a component of the “average yield.”

Comment:

A few comments were received regarding the definition of “catastrophic risk protection.” A commenter recommended the first sentence in the definition that states “The minimum level of coverage offered by FCIC that is required before you may qualify for certain other USDA program benefits” be verified with the Farm Service Agency (FSA). The commenter stated he has received information from FSA stating the minimum level of coverage required for linkage is one level above CAT. A commenter stated catastrophic risk protection is not available for revenue protection under the definition of “catastrophic risk protection”, however, under section 523(c)(2)(B) of the Crop Insurance Act (Act) it states, “Revenue insurance under this subsection shall offer at least a minimum level of coverage that is an alternative to catastrophic crop insurance.” To date, the commenter is unaware of any product offered by FCIC,

which addresses this provision and the commenter suggested FCIC consider this aspect in the Basic Provisions. A commenter stated they respectfully oppose the proposed regulations for the simple reason the proposed pricing structure creates a disincentive for producers to cover their risks by purchasing the least amount of crop insurance required to accept Federal disaster assistance. A commenter suggested that levels of crop insurance below 65 percent be eliminated from the policy. The commenter stated CAT policies in particular require the same amount of paperwork and have no real value and many producers with lower levels would buy up. A few commenters stated the proposed rule allows CAT coverage under yield protection. They requested CAT coverage be eliminated, or, at the least, be subject to the same actuarial parameters for calculation of premiums to which other coverage levels are held. A commenter requested a paper drafted by another person be submitted into the record and thoroughly analyzed prior to the adoption of the final rule pertaining to the Basic Provisions. A commenter asked why there is no revenue coverage available on catastrophic risk protection policies. Many producers need the revenue coverage on high risk ground, where premiums are too high to be insured on their other policy, which may have revenue protection. The commenter asked if there has been any thought given to allowing a producer to have revenue coverage on a catastrophic risk policy if the companion policy is revenue protection.

Response:

FCIC agrees the phrase “that is required before you may qualify for certain other USDA program benefits” is no longer appropriate. Many current FSA programs do not require linkage. Some past disaster programs have required crop insurance coverage, however, each disaster program stipulates its own criteria and catastrophic risk protection may not be the level of coverage required. The definition has been revised accordingly. Section 523 of the Act contains provisions applicable only to pilot programs and FCIC implemented this section when it offered the IP policy. However, the statutory mandate in section 523(c) of the Act to require CAT was only for the 1997 through 2001 crop year. When combining all the revenue products in this rule, FCIC declined to include revenue coverage in CAT policies because it would provide a disincentive for producers to purchase additional levels of coverage. CAT was only intended to be a minimal coverage risk management tool and not compete with the additional coverage policies. Therefore, as stated in the background section of the proposed rule, the definition of “catastrophic risk protection” is revised to preclude producers who elect revenue protection from obtaining CAT coverage because revenue protection is considered an option and CAT policies are not eligible for optional coverage. Since the paper referenced by the commenter was not submitted to FCIC as a comment to this rule, FCIC cannot consider the individual comments or recommendations contained in the paper in finalizing this regulation. FCIC does not have the authority to eliminate CAT coverage. Such coverage is mandated by section 508(b) of the Act and cannot be eliminated without a change in the law. Questions remain with respect to whether coverage levels less than 65 percent can be eliminated. However, since FCIC has not proposed or sought comments on such a change, it cannot be considered in this rule.

Comment:

A commenter stated they recommend additional clarification for the definition of “claim for indemnity” because it is often confused with a notice of loss. The commenter stated additional language might include “Additionally, you must provide any documents required by the policy to determine the amount of indemnity, including but not limited to, harvested production records, crop input records, documents needed for verification of reported information,

etc.,

as stated in section 14.” Alternatively, this could be included in section 14 rather than the definition.

Response:

Notice of loss is simply a written notice, or an oral notice followed up with a written notice, that damage has occurred or production has been reduced. A claim for indemnity is a document executed by the producer and loss adjuster that contains the information necessary to pay the indemnity as specified in the applicable procedures. While the claim for indemnity must be supported by the production records,

etc.,

as required by section 14, such records are not generally transmitted to the insurance provider. FCIC will clarify that the claim for indemnity is the document that contains the information necessary to pay the claim.

Comment:

A comment was received regarding the definition of “Commodity Exchange Price Provisions (CEPP).” A commenter requested FCIC explore the possibility of determining and releasing the projected price 20 to 30 days prior to the end of the sales period versus the current 15 days (approximate). The commenter stated they believe the current methodology to determine the price is good, but with the current projected price release date; there is a significant time crunch to properly service insureds. They believe the change in release dates will not materially change the projected price offered.

Response:

The definition of “Commodity Exchange Price Provisions (CEPP)” does not contain any discovery period dates or commodity exchanges. The dates, commodity exchanges and other relevant information are located in the actual CEPP. However, FCIC has reviewed all comments related to the CEPP and will consider changes to provide additional time between the price release date and the sales closing date if reliable prices can be established and it is in the best interests of producers.

Comment:

A few comments were received regarding the definition of “common land unit.” A commenter recommended adding the phrase “as determined by FSA” to the end of the definition of “common land unit” because it helps to clarify the common land unit is determined by FSA and is not a determination made by the insurance provider. A few commenters questioned whether the term “common land unit” should be defined and used in the Basic Provisions at this point before the implementation issues between FCIC and FSA have been resolved. The commenters suggested keeping the definition rather generic, such as “The smallest unit of land as defined by FSA” if it is added. A commenter stated it appears the definition would define corn and soybean acreage in the same field on the same farm as being different common land units. The commenter questioned if that was the intent. The commenter also questioned if this definition matches FSA's definition of common land unit. A commenter strongly opposed use of a “common land unit” without a meaningful definition that specifies the insurance unit definition of what it constitutes for a unit at the farm level. The commenter stated that, unless the summary of protection reflects the insurance guarantee for each unit, the producer does not have a basis for determining whether crop damage constitutes a covered loss. Furthermore, without knowing the insurance guarantee by unit, the producer cannot fulfill the notice of damage reporting requirements. Therefore, when USDA decides to allow producers to file a common acreage report for both FCIC and FSA programs, the commenter strongly recommended that the common

units for each agency become FSA tract numbers. A commenter stated they are concerned about the definition of “common land unit” since citrus in south Texas has a rather unique legal description. The commenter stated he hopes the new definition does not place citrus growers at a disadvantage.

Response:

There are several issues that need to be resolved before the definition of “common land unit” is included in the policy provisions. Therefore, the proposed definition will not be retained in the final rule. However, it is possible that common land unit numbers may be used by FSA and provided to producers. If this occurs, such numbers may be utilized for the purposes of crop insurance. Therefore, FCIC has added a reference to common land unit numbers in section 6 with respect to the reporting of acreage but made it clear that such information need only be reported if a common land unit number has been provided to the producer by FSA and it is required to be reported by the acreage report form.

Comment:

A commenter questioned whether the definition of “conventional farming practice” needed both phrases “* * * for producing an agricultural commodity * * *” and “* * * that is necessary to produce the crop * * *” The commenter was concerned that there were so many separate phrases in this sentence as it is. The commenter questioned if a producer really has to “* * * conserve or enhance natural resources and the environment * * *” in order for it to be considered a conventional farming practice.

Response:

There is no need to include the provisions regarding to “* * * conserve or enhance natural resources and the environment * * *” because this language is contained in the definition of “sustainable farming practices. ” Therefore, FCIC is revising the definition to remove the language. FCIC is also removing the redundancy regarding the production of the crop.

Comment:

A few comments were received regarding the definition of “Cooperative Extension System.” A commenter supported the proposed definition and stated the issue of who should be considered “agricultural experts” has been a tricky one and adding this definition would help to make it clearer. Another commenter stated the definition of “Cooperative Extension System” refers to “* * * offices staffed by one or more agronomic experts * * *” instead of the defined term “agricultural experts.” The commenter stated if there is a distinction, perhaps a definition of “agronomic experts” might be needed as well.

Response:

The references to “Cooperative Extension System” are more accurate than “Cooperative State Research, Education and Extension Service (CSREES)” because the agricultural experts may not have been employees of CSREES but they worked in cooperation with CSREES. Further, the term “agricultural experts” should be used instead of “agronomic experts” to be consistent with other provisions in the policy. Therefore, this change has been made in the final rule.

Comment:

A few comments were received regarding the definition of “delinquent debt.” A few of the commenters suggested delinquent debt be defined in the policy to alleviate the chance of misunderstanding between the insurance provider and the insured on what constitutes a delinquent debt. A commenter stated current procedures allow a corporation not to pay the premium and then the substantial beneficial interests (SBIs) of the corporation get insurance via an individual policy. The commenter recommended the wording be changed to the following: A delinquent debt for any policy will make you (as an individual) or a person with a substantial beneficial interest in you, ineligible to obtain crop insurance authorized under the Act for any subsequent crop year and result in termination of all policies in accordance with section 2(f)(2). A commenter stated there could be misunderstandings of certain details that are included in the current definition—whether administrative fees are included in a delinquent debt, when it is considered delinquent (not postmarked versus not received),

etc.

Some of this information should be retained in the Basic Provisions, whether in this definition or in section 24 [Amounts Due Us]. A few commenters stated FCIC has cited the definition contained in 7 CFR part 400 subpart U, but they suggested it is unlikely that many insureds have access to the Code of Federal Regulations. The commenters stated simply referring to the regulations does not seem very helpful to insureds, who need to know exactly what is included in their contracts. A commenter stated the insurance providers could put the CFR link on their Web sites to make it easier for their policyholders to locate the referenced regulations; however, if a difference of opinion results in a legal dispute, there might be some question as to whether something not specified in the policy itself would be considered something the policyholder should be expected to know and understand.

Response:

FCIC understands the commenters concerns of referring the readers to another document for the definition of “delinquent debt.” However, it is not uncommon for the Basic Provisions to contain cross references to other provisions in 7 CFR part 400 (

e.g.,

definition of “actual production history (APH)” refers to 7 CFR part 400, subpart G). Further, these regulations are part of the policy as it is defined. Maintaining one definition of “delinquent debt” in 7 CFR part 400, subpart U and a cross reference in the Basic Provisions will prevent any conflicts between the Basic Provisions and subpart U. Further, the definition of “Code of Federal Regulations (CFR)” specifies the Web address where the applicable CFR can be found. In addition, FCIC has added a link on RMA's Web site to 7 CFR part 400, so that interested parties may have access. With respect to the issue of postmarked versus received, these terms go to the core of the definition of “delinquent debt” and will be addressed in subpart U. No change has been made in response to these comments.

Comment:

A commenter suggested it might be helpful in the definition of “disinterested third party” to list the people who have a familial relationship in a sequential order (generational or relational, where spouse would come before children).

Response:

FCIC has considered this change but it does not substantially clarify the rule or improve readability. No change has been made.

Comment:

A comment was received regarding the definition of “earliest planting date.” The commenter stated the defined term is “earliest” but the Special Provisions refer to “initial” planting date. The commenter asked why not choose one or the other to make it consistent; then the definition could begin “The date in the Special Provisions * * *”.

Response:

The Special Provisions now refer to the earliest planting date so the provisions are consistent. No change has been made.

Comment:

A commenter questioned whether the definition of “economic significance” should be updated to refer to “agricultural commodity” instead of “crop” or if the definition is still needed.

Response:

The definition of “crop of economic significance” is not in the Basic Provisions in 7 CFR part 457. No change has been made.

Comment:

A commenter agreed with moving most of the details from the definition of “enterprise unit” to proposed section 34(a)(2)(i) but stated a reference to that section would be helpful.

Response:

FCIC has changed the provision accordingly.

Comment:

A commenter questioned whether the term “agricultural commodity” is necessary in the definition of “first insured crop” when the rest of the definition uses “crop” and makes it clear we are talking about the first crop “planted” (so it is not going to be livestock as “first insured” followed by soybeans as the “second”).

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A commenter suggested the definition of “good farming practices” is not proposed to be changed but contains a serious deficiency. Specifically, the language in clause (1) relating to practices “generally recognized by agricultural experts for the area” and in clause (2) relating to “generally recognized by the organic agricultural industry for the area” should be modified. The deficiency becomes apparent in those situations in which a processor is either the exclusive or dominant determiner of farming practices in a geographic area. Such processors generally specify the acceptable seed varieties to plant, cultivation practices (including inputs necessary to produce a crop), harvesting times and practices, and storage practices. The commenter stated insurance providers are concerned that the definition, as written, effectively delegates to processors the determination of good farming practices with respect to the crop to be processed simply by repetition of past practices. Under the definition, a processor's routine practices simply become “good” because they have been repeated yearly in the local area. In short, once a processor's practices become routine, they become a self-fulfilling embodiment of “good” practices no matter how inadequate or outdated they are and no matter how poorly implemented. The commenter stated this issue is an important one, as it potentially affects several crops with high dollar values such as sugar beets, green peas, hybrid seed corn, sweet corn, processing beans, processing tomatoes, dry peas, and dry beans. The problem identified in the existing definition can be solved by adding the term “conditions in the” after the word “for” and preceding the word “area” in each clause of the definition. Making this change eliminates the “closed circle” approach of the existing definition. The change would permit utilization of comparative practices involving similar conditions from comparable geographic areas in determining whether a good farming practice has been applied. Stated bluntly, the change would eliminate the situation in which a processor's negligence in failing to update its requirements based on new research, testing, or experience, or its negligence in administering its requirements for planting, growing, and harvesting a crop, divests an insurance provider, and ultimately, FCIC from determining what constitutes a good farming practice for loss adjustment purposes.

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A few comments were received regarding the definition of “harvest price exclusion option.” A commenter stated that allowing producers to exclude the Harvest Price Option rather than having to elect to receive it helps avoid the potential for producers not receiving a benefit. They urged FCIC to maintain this provision in the final rule. A commenter suggested language be added to indicate and clarify the projected price will be used to determine the guarantee and further clarify the harvest price will be used in the calculation of revenue to count for indemnity purposes. A commenter stated FCIC proposes that the revised policy provide coverage for both an increase and decrease in price, unless the producer selects the harvest price exclusion option. If a producer is allowed to eliminate coverage for upward price protection, the commenter asks why they should not also be allowed to eliminate downward price protection, if they so choose. This may be a viable additional option for many producers given the downward price protection already built into the current farm program provisions such as the counter-cyclical payments and loan deficiency payments. Many producers also cover their downward price risk through use of hedges, hedge-to-arrive contracts, forward contracts, and options.

Response:

It is not necessary to include the uses of the projected price and harvest price in the definition of “harvest price exclusion” because the definitions of “harvest price” and “projected price” and section 3 already specify how each price will be used. Since the option to exclude downside price protection was not proposed, no changes were required as a result of conforming amendments, and the public was not provided an opportunity to comment on the recommended change, the recommendation cannot be incorporated in the final rule. All references to “option” have been removed because it was redundant with the ability of the producer to elect to exclude the upward price protection.

Comment:

A few commenters suggested the definition of “insurable interest” be expanded to further clarify and define the term as used in the Crop Insurance Handbook (CIH) and Loss Adjustment Manual (LAM). The commenters stated “share” is defined in the proposed rule as “Your percentage of insurable interest in the insured crop * * *” while “insurable interest” is defined as “The value of your interest in the crop * * *” This suggests “share” is only the percentage figure (not sure this is the intent), while the “insurable interest” is a value amount (not entirely clear on this either). The commenters requested FCIC to consider whether it is intended for “share” to apply to “the insured crop” while “insurable interest” applies to “the crop” (insured or not). The commenters stated the last sentence of each definition addresses the maximum share or insurable interest for loss purposes but they do not match exactly. For “share,” it reads “* * * your share will not exceed your share at the earlier of the time of loss or the beginning of harvest.” For “insurable interest,” it reads “* * * The maximum indemnity payable to you may not exceed the indemnity due on your insurable interest at the time of loss” and does not include the reference to “* * * or the beginning of harvest.” If both definitions are kept, one of these sentences probably should be deleted; keep the one that is most accurate. A commenter stated it is unclear how one would pinpoint “* * * the time of loss.”

Response:

The applicable procedures will be revised to conform to the definitions in the policy. Further, it is intended that both the definition of “insurable interest” and “share” refer to the producer's percent interest in a crop so the definition of “insurable interest” is revised to refer to the percentage of the insured crop that is at financial risk and the definition of “share” is revised to cross-reference “insurable interest” to eliminate any conflicts. Both the definitions of “insurable interest” and “share” were intended to refer to the insured crop and the definitions have been revised accordingly. There was an apparent conflict between “insurable interest” and “share” with respect to the time each was determined. FCIC has revised the definition of “insurable interest” to remove all references to timing because it was intended to determine the percentage of the crop that was at risk. The definition of

“share” still refers to the time of loss or the beginning of harvest.

Comment:

A few comments were received regarding the definition of “insurable loss.” The commenters asked if it would be considered an insurable loss if the insured did not accept payment.

Response:

In accordance with the definition of “insurable loss,” if the insured does not accept an indemnity payment, the loss will not be considered to be an insurable loss under the policy.

Comment:

A few comments were received regarding the definition of “liability.” A commenter had some concerns with this revised definition since “* * * determined in accordance with the claims provisions * * *” instead of referring to the “premium computation” takes share out of the equation. This would seem to have implications for when misreported information is corrected, second crop (for prevented planting purposes) and data processing. The commenter also recommended the reference should be to “* * * the Settlement of Claim provisions * * *” rather than “* * * the claims provisions * * *”

Response:

The liability is based on the total value of the crop for the unit, not the producer's share of the crop. For the purpose of determining a claim, the total production to count is subtracted from this total liability and the result is multiplied by the share to obtain the producer's share of the indemnity. This is because all determinations are done on a unit basis, which would include the whole value, all production,

etc.,

for the unit, not just the producer's share. If the liability were to refer to the premium computation, it would result in a double reduction for the share, once in the determination of liability and again in the indemnity calculation. This means it is not necessary to take share into consideration when determining misreporting or prevented planting payment reductions for second crops or for data processing because share is factored into any payments. FCIC agrees “the claims provisions” should be “the Settlement of Claim provisions” and has modified the definition accordingly.

Comment:

A commenter stated “optional unit” is not defined in the definitions, yet “basic unit”, “enterprise unit” and “whole-farm unit” are defined. The commenter suggested that either all types of units should be defined in the definitions, or all should be addressed in section 34.

Response:

It is not practical to define the term “optional unit” because there are a large number of variations available and FCIC has determined that such variations are best left in section 34 of the Basic Provisions and the applicable Crop Provisions. No change has been made.

Comment:

A commenter requested the defined term of “organic agricultural industry” be changed to “organic agricultural experts” to reflect the meaning of the definition as given. This would also be consistent with the new term “agricultural experts” that is proposed in the rule. The commenter noted the industry is composed of a broad variety of businesses and believe the industry as a whole should not be confused with those who are expert in organic agriculture. In addition, they would hope experiment stations would be eligible to be the employers of “organic agricultural experts” along with the other institutions listed. The commenter stated they appreciate the consideration given to organic farming methods, especially the recognition that organic farming practices may vary from non-organic practices.

Response:

The commenter is correct and “organic agricultural industry” is a misnomer and the definition really describes organic agricultural experts in the same manner as agricultural experts. Therefore, the name has been changed, along with the other references in the policy.

Comment:

A comment was received regarding the definition of “perennial crop.” A commenter stated that with the implementation of the Basic Provisions it would be an appropriate time to include some kind of qualifier such as “* * * that has an expected life span of more than one year” or “* * * that normally has a life span * * *” to the definition of “perennial crop.” This revision would make the “perennial crop” definition consistent with the one for “annual crop.”

Response:

Since no change to this definition was proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A commenter questioned if the definition of “policy” should be revised. They requested FCIC to note their comments regarding whether “* * * the Commodity Exchange Price Provisions, if applicable * * *” must be provided to policyholders along with the Basic, Crop and Special Provisions or whether information can be made available on the web site or in the agent's office like the other actuarial documents.

Response:

The CEPP, if applicable, is a part of the policy so the definition of “policy” must be revised to include those provisions. Like the Basic Provisions, Crop Provisions and Special Provisions, the insurance provider will be responsible for providing to producers who purchase revenue or yield protection those pages of the CEPP that correspond to the crops the producer insures. The CEPP will also be available on RMA's Web site. In subsequent years, the insurance provider will only be required to provide the producer with changes to the CEPP. FCIC has revised section 4(c) to specify changes to the CEPP must be provided in writing to the insured not later than 30 days prior to the cancellation date for the insured crop. The CEPP will be formatted so that the page(s) applicable to the crop and sales closing date can be printed exclusive of other information.

Comment:

A commenter recommended the definition of “premium billing date” be revised as follows: “The earliest date upon which premium and/or administrative fees are due for insurance coverage based on your acreage report. The premium billing date is contained in the Special Provisions.” This has been an issue on reviews by FCIC regarding the wording needed on premium billings and notices.

Response:

The premium billing date is not the date the premium is due. It is the date that premium bills are to be sent to the producers by insurance providers. Premium is due thirty days after the premium billing date. No change has been made.

Comment:

A few comments were received regarding the definition of “prevented planting.” A commenter stated the second sentence of the definition of “prevented planting”, which addresses “[t]he failure to plant the insured crop within the late planting period,” is misleading in light of the final sentence of section 17(d)(2). To wit, an insured who initially seeks to plant during the late planting period will not receive a prevented planting payment if other producers had planted prior to the late planting period. The commenter stated this inconsistency must be reconciled. A commenter stated they view as positive the prevented planting provisions being changed to clarify prevented planting coverage is not available because of lack of equipment or labor or failure to plant when others in the area are planting. A commenter stated FCIC proposes to revise the definition of prevented planting to clarify failure to plant because of lack of equipment or labor is not considered prevented planting because lack of equipment or labor are not insured causes of loss. The commenter noted prevented planting claims, which implicate the issue of

inputs such as manpower and equipment, are always very difficult. The commenter stated while the proposed amendment to the definition goes a long way in clarifying this troublesome issue, it may not go far enough to encompass other often-recurring problems associated with uninsured causes of loss. The commenter stated with minimum, and particularly no-till, farming practices becoming more and more prevalent, insurance providers are often met with an argument from insureds that “my land was wet because I am a no-till farmer. My neighbor's land was drier and he was able to plant because he follows a conventional tillage method.” The commenter stated a farming practice such as no-till or minimum till is not a characteristic of the land; rather, it is a farm management decision. Consequently, a decision relative to a farming practice is not an insured cause of loss for prevented planting purposes. The commenter stated the definition of prevented planting should be revised to clarify this increasingly encountered problem.

Response:

FCIC has revised the definition of “prevented planting” by combining the first and second sentences. This clarifies the provisions regarding a cause of loss general to the surrounding area and that prevents other producers from planting acreage with similar characteristics is applicable to both situations in which planting is prevented by the final planting date and during any applicable late planting period. This revision also removes any potential conflict between the definition and section 17(d)(2). FCIC also has clarified that the use of a particular production method does not constitute an insured cause of loss. Management decisions are never an insured cause of loss.

Comment:

A commenter stated FCIC should consider whether the definition of “production guarantee (per acre)” should be identified as for yield protection only (unless it also applies to revenue protection).

Response:

The definition of “production guarantee (per acre)” should not specify for yield protection only. The definition of “revenue protection guarantee (per acre)” includes a reference to the “production guarantee (per acre),” so the term is applicable to both yield and revenue production. No change has been made.

Comment:

A comment was received regarding the definition of “production report.” The commenter suggested that “* * * planted acreage and harvested production” is not necessarily wrong, but may be somewhat outdated now that yields are assigned for prevented planting acreage when a second crop is planted and there is no double cropping history and sometimes appraised production. The commenter also recommended replacing the “or” before “* * * by measurement of farm-stored production” with a comma to set off the three separate phrases.

Response:

The definition is not totally accurate because there are situations where yields are assigned for prevented planting acreage when a second crop is planted and there is no double cropping history and appraised yields may be used. However, there are also situations where there are appraised yields but they are not used, such as appraisals for uninsured causes. Therefore, to eliminate any potential conflict with other policy provisions and FCIC issued procedures, FCIC is removing the term “harvested.” Further, FCIC has removed the term “or” and added a comma in its place.

Comment:

A commenter stated the definition of “projected price” is potentially ambiguous. Because “[a] price” is singular, and the reference is to the plural “all crops,” it could be read to mean that an identical price is used for each insured crop. Thus, we recommend rewriting this definition.

Response:

FCIC has revised the definition to specify that the price is for each crop.

Comment:

A few comments were received regarding the definition of “replanted crop.” The commenters referenced Bulletin No. MGR-06-008—Grain Sorghum Planting in South Texas that was issued on June 9, 2006. A commenter stated it is their understanding the position taken in the bulletin was developed as a result of the following portion of the language in the “replanted crop” definition “* * * if the replanting is specifically made optional by the policy and you elect to replant the crop and insure it * * *;” The commenter understands this portion of the definition was only intended to address winter wheat or barley, which is damaged under the Wheat or Barley Winter Coverage Endorsement. In this situation the insured has the option not to replant, and be paid based on the appraisal. This language was not intended to address grain sorghum or any other crops as indicated in the bulletin. The commenter recommended additional language be added to clarify whenever an insured plants the same crop back on the same acreage in the same crop year this is always considered being a replanted crop. Another option would be to remove the above referenced language from the definition and redefine replanted crop in either the Small Grains Crop Provisions or the Wheat or Barley Winter Coverage Endorsement to include this language where it was intended. The commenter also questioned if the definition is intended to exclude the use of this term for a second crop. Another commenter stated the bulletin indicated a crop replanted to the same crop after it was no longer practical to replant the damaged first insured crop would be considered an uninsurable second crop. Although the bulletin addressed grain sorghum, the provisions cited were all from the Basic Provisions. The commenter believes the bulletin was written such that its direction will lead to unintended consequences and should not have cited provisions applicable equally to all crops and should not have triggered solely on a determination of whether or not it was practical to replant. The commenter recommended the definition be rewritten so it is clear that, if a crop is replanted back to the same crop on the same acreage in the same crop year, it is always considered the same original crop unless specified otherwise in the Crop Provisions. Then, particular issues such as the grain sorghum issue dealt with in MGR-06-008 could be better addressed in the Crop Provisions.

Response:

Section 508A(a)(2) of the Act makes it clear that a second crop can be the same crop as the first crop unless such crop qualifies as a replanted crop. Section 508A(a)(3) of the Act defines a replanted crop as “any agricultural commodity replanted on the same acreage as the first crop for harvest in the same crop year if the replanting is required by the terms of the policy of insurance covering the first crop.” Therefore, unless replanting is required under the policy, a second planting of the same crop has to be considered a second crop. This would apply to all crops. However, there are only certain crops where it is appropriate to allow replanting to be optional. FCIC has previously revised the Basic Provisions to specify that if the policy makes replanting optional and the producer elects to replant (

i.e.,

replanting spring wheat after the failure of winter wheat and continue carrying insurance on the winter wheat under the Winter Coverage Endorsement), the second planting is considered a replanted crop. Therefore, the Basic Provisions should contain the rule and the Crop Provisions the exception. No change has been made in this rule.

Comment:

A comment was received regarding the definition of “revenue protection.” A commenter suggested replacing the first “or” in both sentences with a comma and making other

changes as follows: “* * * against production loss, price decline/increase, or a combination of both * * * only against production loss, price decline, or a combination of both.”

Response:

FCIC has revised the definition to remove each “or” between “production loss” and “price decline” and added commas. Additionally, FCIC has revised the “Causes of Loss” sections in the Crop Provisions to clarify that a price change is an insurable cause of loss as long as the cause of the price change is not determined to be an uninsurable cause of loss. This change is consistent with the definition of “revenue protection” which states both price declines and increases are covered.

Comment:

A commenter stated the defined term is “RMA's Web site.” This is sometimes referred to as “RMA's Web site” and other times as “the RMA Web site” in the Basic Provisions. It would be helpful to use one term consistently.

Response:

FCIC has revised the provisions to consistently use the defined term.

Comment:

A commenter suggested deleting the parentheses in the definition of “section” and beginning “For the purposes of unit structure, a unit of measure * * *”.

Response:

FCIC has revised the provision as suggested because it could be perceived that the parenthetical was not actually part of the definition.

Comment:

A commenter recommended revising the third sentence in the definition of “second crop” for clarification.

Response:

FCIC has considered this change but does not know how to write the provision any clearer. If there are specific suggestions, FCIC will consider them when it next revises the Basic Provisions. No change has been made.

Comment:

A few commenters stated clarifying the definition of “share” is appropriate, especially since the proposed rule adds a definition of “insurable interest,” which speaks to the “value of your interest in the crop.” The definition of “share” is relevant to performing calculations in the sale and service of the MPCI policies. The definition can be improved, therefore, by changing it to read as follows: “Your insurable interest in the insured crop, expressed as a percentage, as an owner, operator, or tenant at the time insurance attaches. However, only for the purpose of determining the amount of indemnity, your share will not exceed your share at the earlier of the time of loss or the beginning of harvest.” This minor change makes the definition consistent with its utilization in the program, and it avoids creating any ambiguity when this definition is read along with the definition of “insurable interest.” The commenter referred FCIC to their comments above to the proposed new definition of “insurable interest” and asked whether they match and/or are redundant. Also consider changing “* * * your share will not exceed your share * * *” to “* * * your share will not exceed your insurable interest * * *”

Response:

As stated above, FCIC revised the definition of “insurable interest” in response to other comments to specify that “insurable interest” is expressed as a percentage. Therefore, it is no longer necessary to clarify “share” is expressed as a percentage. FCIC revised the definition of “share” to remove the reference to percentage and only refer to insurable interest.

Comment:

A few comments were received regarding the definition of “substantial beneficial interest.” A commenter stated the proposed rule amends the definition to provide, in part, that a “spouse * * * will be considered to have a substantial beneficial interest unless the spouse can prove they are legally separated or otherwise legally separate * * *”. In its explanatory discussion portion of the proposed rule (71 FR 40215), FCIC states this change is to clarify “that spouses are presumed to share in the spouse's share.” If, as it seems, FCIC's intention is to create a presumption, then the definition of “substantial beneficial interest” should reflect this. Moreover, the terms “presumed” and “presumption” create an evidentiary standard that will be relevant to a legal action involving this issue. For this reason, the commenter urged FCIC to amend the definition to state that a “spouse will be presumed to have a substantial beneficial interest unless the spouse can prove they are legally separated or otherwise legally separate * * *”. In addition, a commenter questioned the continued inclusion of the phrase “legally separated or otherwise legally separate under applicable State dissolution of marriage laws.” The 2007 Crop Insurance Handbook (CIH), specifically Exhibit 32 section 2G(l), sets forth seven criteria that, if met, entitle a spouse to a separate policy regardless of marital status. Thus, there appears to be an inconsistency between the Basic Provisions and the CIH, as currently written. A few commenters recommended FCIC consider if the definition of “substantial beneficial interest” is affected by the proposed changes in sections 10(a) & (b), where the interest of any children or other household members are to be included as well as the interest of the spouse. The commenters also suggested FCIC might need to clarify whether a “child” is limited to minor children, or to offspring residing with the individual insured, or in some other way.

Response:

FCIC has revised the definition to use the term “presumed.” There appears to be confusion regarding SBI and separate shares for the purposes of having separate policies. SBI is only applicable to identify those persons who are required to provide their social security numbers because of their interest in the applicant or insured. This is different than insurable interest or share because those refer to the interest in the crop. To have a separate share or separate policies, there must be an insurable interest in the crop. Therefore, the phrase “legally separated or otherwise legally separate under the applicable State dissolution of marriage laws” should be included in the definition because it is necessary to specify when a spouse is no longer considered to have a SBI in the producer. The term “child” is intended to take its common meaning, which would include a child of any age. For the purposes of SBI, no child is presumed to have a SBI in the insured. To have a SBI, a child must have some other legal relationship to the insured, such as entering into a partnership of some other entity. However, FCIC has revised section 10 to clarify that although a child can be of any age, only children who reside in the same household as the insured are considered to be included in the insured's share. Children who reside outside of the insured's household are not included in the insured's share and can only obtain insurance if they have a separate share of the crop and obtain a separate policy.

Comment:

A few comments were received regarding the definition of “whole-farm unit.” The commenters asked why it could not also be applied to a producer who only requests yield protection coverage for all of his/her insurable crops in the county.

Response:

The definition just described whole-farm units. The restriction of the applicability of whole-farm units is contained in section 34. Currently whole-farm units are only available under the Revenue Assurance plan of insurance and are incorporated into revenue protection. However, a rating methodology has not yet been developed for whole-farm unit coverage under yield protection. To allow greater flexibility, FCIC has revised section 34 to allow the Special Provisions to include a whole-farm unit for policies other than revenue protection in the

event rating methodology is developed in the future.

Comment:

A few commenters stated it is unclear why the definition of “yield protection” should be restricted to those crops/counties for which revenue protection is available (whether elected or not). It would seem to be appropriate terminology also for crops/counties where revenue protection is not available (instead of having to distinguish between “yield protection” and “APH coverage”). In that case, this definition should be revised to something like “Insurance coverage that provides protection against a production loss only.” [delete the phrase “* * * for crops for which revenue protection is available but was not elected”]. If this is not done, it would seem to be necessary to add a definition of “APH coverage” (the term used in the “Background” of the Proposed Rule) for those other crops/counties; otherwise, it could be interpreted that the Basic Provisions apply only to those crops/counties that have the choice.

Response:

There is apparently some confusion about yield protection and its relationship to revenue protection and APH coverage. FCIC has clarified in section 3 that yield protection is a different plan of insurance than APH, revenue protection and any of the other plans of insurance, such as the dollar amount plan of insurance. Further, revenue protection and yield protection will be available for the applicable crops in all counties with actuarial documents for such crops. Once revenue protection and yield protection plans of insurance are available for a crop, the APH plan of insurance will not be available for the crop. Because yield protection and APH are different plans of insurance, the definition of yield protection cannot simply refer to protection against loss of production. The most important distinction between yield protection and APH is that the yield protection pricing mechanism is based on a projected price determined in accordance with the CEPP. Therefore, yield protection and revenue protection will be available for the same crops in the same counties. For this reason, yield protection correctly references the crops for which revenue protection is available. FCIC has clarified in the definitions of “yield protection” and “revenue protection” that they are separate plans of insurance. In this rule, the distinction is only made between revenue protection, yield protection and all other plans of insurance. Therefore, it is not necessary to include separate definitions for these other plans of insurance. Their terms and conditions are very well explained in the Crop Provisions, Special Provisions, and actuarial documents.

Comment:

A few comments were received regarding the definition of “yield protection guarantee (per acre).” Some commenters recommended deleting the phrase “* * * for a crop that has revenue protection available” so this applies to any crop/county not insured under revenue protection. Some commenters recommended deleting this definition since yield protection coverage would be addressed by the existing definition of “production guarantee (per acre)”, or group the definitions of “production guarantee (per acre),” “revenue protection guarantee (per acre)” and “yield protection guarantee (per acre)” as subparagraphs under the overall general definition of “guarantee (per acre)” to clarify the distinctions and similarities between the three. Commenters also suggested that FCIC might also need to add something for the non-revenue protection crops that are insured under a dollar amount plan rather than under an APH/yield plan.

Response:

As stated above, the “dollar amount plan of insurance,” “APH plan of insurance,” and “revenue protection plan of insurance” are separate and distinct. The phrase “for a crop for which revenue protection is available” cannot be deleted because this definition is only applicable to the yield protection plan of insurance, which is only available for crops for which revenue protection is available. It is not applicable to the dollar amount plan of insurance or the APH plan of insurance. Further, the definition cannot be deleted because, under yield protection, the guarantee is based on both the yield and the price to obtain the dollar value of the insurance coverage. Under the APH plan, the guarantee is only based on the yield. FCIC does not need to add additional definitions or terms for the dollar amount plans of insurance since their guarantees are explained in the Crop Provisions. No change has been made in response to these comments. Minor editorial changes were made for clarity.

Section 2 Life of Policy, Cancellation, and Termination

Comment:

A commenter stated they agree the social security numbers (SSN), employer identification number (EIN), or identification numbers must be provided on the application.

Response:

FCIC has retained the provisions requiring identification numbers on the application.

Comment:

A commenter stated proposed section 2(b) indicates the applicant must provide a SSN if the applicant is an individual or an EIN if the applicant is a person other than an individual. However, the Crop Insurance Handbook (CIH) (Exhibit 32) and Appendix III of the Standard Reinsurance Agreement (SRA) do allow individual entities to be insured using an EIN and some entities other than individuals to use an SSN. The commenter stated a literal reading of this policy language would not seem to support how these entities are currently being administered per the CIH and Appendix III. The commenter recommended the policy language be rewritten to support how these entities are currently being insured. They suggested the provision could indicate something to the effect that the applicant must provide a SSN or EIN, whichever is applicable. Another commenter stated because proposed section 2(b)(1)(i) refers to “* * * SSN, EIN or identification number,” the first sentence of (b) should refer to that third possibility as well.

Response:

EINs can still be included on the application for any entity. However, under the Basic Provisions, the CIH, and Appendix III, all individuals with a SBI in the entity must also provide the SSNs for such individuals. For example, a producer who operates a farm and has an EIN, can report the EIN on the application but the producer must also provide their SSN. The provisions have been clarified to allow EINs to be used as long as the SSNs are also provided. However, the producer cannot be allowed to make the election of whether to provide the EIN or the SSN because EINs can change and it would be impossible to track the producer for the purposes of eligibility and yield history. FCIC has removed all references to “or identification number” in section 2(b)(1), (2), (3) and (5) and added a new section 2(b)(10) to specify a person who is not eligible to obtain a SSN or EIN must request an assigned number.

Comment:

Several commenters disagreed with the provisions proposed in section 2(b)(1)(ii) (redesignated section 2(b)(5)(ii)) that specify no insurance will be provided if the SSN, EIN, or identification numbers are not corrected prior to any indemnity being paid. A commenter stated if the producer is eligible for insurance, there should be no penalty for misreporting. The commenter believes corrections should be allowed without loss of program benefits. A few commenters stated errors can occur at virtually every stage of information transfer. They believe producers should not automatically have their coverage canceled, as is now the case, if they

inadvertently provide, through their mistake or someone else's, an inaccurate SSN, EIN, or ID Number. The commenter believes this is an overly harsh punishment for what is usually an inadvertent clerical error and the provisions should be revised. The commenter stated the only necessary exception to this would be when, upon further investigation, the numbers provided identify the producer as being ineligible to participate in programs under the Federal Crop Insurance Act or shows them to be listed on the Ineligible Tracking System (ITS). A few commenters stated they believe an erroneous SSN or other number should not automatically cause coverage to cancel unless the number or numbers indicate the person is ineligible to participate in the program. A commenter stated as an alternative, a less draconian penalty other than complete denial of coverage should be meted out to those who make an error in providing a SSN or other ID number. A commenter supported the ability to correct an EIN/SSN before payment.

Response:

Section 506(m)(1) of the Act requires the producer to provide a SSN as a condition of eligibility. This means a correct SSN. Therefore, failure to provide a correct SSN makes the producer ineligible for insurance and FCIC does not have the discretion to change this requirement. However, there may be instances producers may not be aware that they provided the incorrect SSN because application was made years ago. Therefore, FCIC is revising the provisions to allow a producer to correct errors the producer can prove were inadvertent. While FCIC is allowing a small amount of leeway with respect to a producer's eligibility for past years, producers must be aware that a producer's certification of incorrect identification numbers generally constitutes a false statement that can subject the producer to criminal, civil and administrative sanctions and if a claim has been paid there may be additional consequences. FCIC has revised the provisions to notify the producer that the submission and certification of an incorrect identification number may subject the producer to civil, criminal or administrative sanctions. FCIC has left in the requirement that if a producer provides and certifies an incorrect identification number and fails to correct it, that producer is ineligible for insurance for any year for which the incorrect information was used and any payments made during such period must be repaid. Further, the provisions are revised to state that, even if the identification number information is corrected, the producer will still be ineligible for insurance for any year for which the incorrect information was used (and any payments made during such period must be repaid) if the producer received a disproportionate benefit, was otherwise ineligible for crop insurance, or avoided any obligation or requirement under any State or Federal law.

Comment:

A commenter stated FCIC proposes to revise section 2(b) to better define the ramifications for an applicant or insured whose application either does not include the requisite SSNs, EINs or other identification numbers or includes erroneous information for persons that have a SBI in the policy. Further and more specifically, proposed section 2(b)(2)(ii) (redesignated section 2(b)(5)(ii)) addressed situations in which the subject person is not eligible for insurance and provides, with one exception, that such policy is void and no indemnity is due. With regard to the premium and fees, FCIC distinguished between policies for which the premium and fee are paid and those policies for which they are not. The former is entitled to a refund less 20 percent of the premium; the latter is not liable for any premium. The commenter did not understand and did not agree with FCIC's application of differing penalties. The commenter added that presumably, the work expended by the insurance provider in reviewing an application does not vary based on whether or not premium is paid. Thus, the commenter believes if the 20 percent premium charge is intended to offset expenses incurred by the insurance provider, such compensation is warranted regardless of whether the premium is paid. The commenter stated that likewise, if the 20 percent assessment is a punitive measure, there is no reasonable basis to distinguish between persons who pay premium early and those who do not. The commenter believes the disparate treatment set forth in proposed section 2(b)(2)(ii)(A) and (B) may encourage insureds to delay the payment of premium until the last possible minute. The commenter recommended FCIC eliminate the arbitrary distinction underlying sections 2(b)(2)(ii)(A) and (B)), and amend section 2(b)(2)(ii) to provide that 20 percent of the premium is due on any policy for which the subject person is ineligible for insurance. Another commenter stated administrative fees and 20 percent of the premium should be applicable regardless if the premium has or has not been paid by the producer prior to the policy being voided. The commenter believes the insurance provider should have the option to bill for these amounts and the producer and SBIs should be considered ineligible if these debts are not paid by the termination date.

Response:

There is no basis to treat producers who have previously paid the premium different from producers who have not paid the premium. The retention of 20 percent of the premium was intended to offset the expenses of the approved insurance provider, not be punitive in nature. FCIC has revised redesignated section 2(b)(7)(ii) to require all producers to pay 20 percent of the premium the producer would otherwise be required to pay if the policy is voided.

Comment:

A commenter recommended proposed section 2(b)(1)(ii) (redesignated section 2(b)(7)(iii)) be clarified in more detail regarding whether or not the return of premium applies to only the current year or all previous years when the application has the wrong SSN. For example, a producer reported the wrong SSN to an insurance provider and paid the premium for the last three years with no loss. If in the fourth year, the producer is paid a small payment and later it is determined the producer reported the incorrect SSN, would the insurance provider return the prior three years premium or does the return of premium only apply to the year the loss was paid. If it applies to all four years, the program runs the risk of a producer intentionally misreporting his SSN in hopes of receiving a small claim payment, then notifying the insurance provider of the wrong SSN. The producer would have to repay the small payment, but the insurance provider would have to return the prior three years premium.

Response:

If an incorrect identification number is provided and it would result in the application not being acceptable, no insurance would have been, or considered to have been, in place, and the policy is voided under the revised provisions. Therefore, any crop policies associated with that application would be void for all crop years for which such identification number was incorrect. If the policy is void, it has been the practice of FCIC to only require the producer to pay 20 percent of the premium to offset costs (see sections 23 and 27). There is no basis to change this practice for these producers who similarly have their policies voided. There should not be a significant risk that producers will seek to have their policies voided for the return of premium because it presumes that the producer will know that there

will be a number of good years in which no indemnity will be due and only a small claim made in later years. This is unlikely to occur. FCIC has clarified that if the policy is void, no insurance is considered to have attached for any year in which the incorrect identification number has been provided, and the producer would be responsible for 20 percent of the premium for all years covered by the application. FCIC has also moved provisions regarding the effect of voidance to a new section 2(b)(7). Additionally, the provisions in section 27(b) have been clarified to specify the amount of premium that can be retained by the insurance provider when a policy is void is 20 percent of the premium amount the producer would otherwise be required to pay. Current provisions in section 27(b) do not specify whether the 20 percent of premium is based on producer paid premium or the total premium under the policy (producer paid premium plus subsidy). All other sections of the policy that referred to retention of 20 percent of the premium were clear that it is based on the amount paid by the producer. FCIC has revised section 27 to specify the 20 percent is applied to the producer paid portion of the premium.

Comment:

A commenter stated they agree with the intended change in proposed sections 2(b)(1)(ii) and (ii)(A) through (C) but are concerned implementation could be problematic since the application would have been accepted long before the time a claim payment could be made, and there could be data processing issues as well. The commenter stated these subsections need to be rewritten for clarity. For example, FCIC could delete “If the information is not corrected,” at the beginning of (A) since the lead-in already makes this clear.

Response:

As stated above, FCIC has revised the provisions to reduce the impact on producers who have made inadvertent errors and have received absolutely no benefit from using the incorrect identification number. Further, the reference to correction by the claim payment has been removed because many incorrect identification numbers are discovered after the claims have been paid and the 1099 tax forms are issued. However, there will still be some impact on the program because, if the conditions exist that result in an unacceptable application and the policy is voided, previously paid indemnities must be refunded and the correct premium owed reconciled.

Comment:

A few comments were received regarding the provision proposed in section 2(b)(1)(ii) (redesignated section 2(b)(5)(ii)). A commenter stated they view as positive allowing the correction of incorrect SSNs or EINs before any claim payment is made. A commenter stated since the proposed policy language will allow correction of SSNs, EINs or other identification numbers to be made, they assume the RMA Data Acceptance System will now allow these corrections to be made without a late sales reduction applying. Another commenter stated they expect FCIC will amend Appendix III to the SRA so insurance providers are not penalized for corrections that occur prior to the payment of an indemnity or a replant or prevented planting payment.

Response:

As stated previously, the provisions have been revised to allow revisions upon discovery of errors and removed the reference to the payment date as the deadline for corrections. If corrections to the identification number are allowed by the revised provisions, the insurance provider cannot be penalized for the correction unless the correction was necessary because of agent or insurance provider error.

Comment:

A commenter stated they disagree with the proposed provision in section 2(b)(2)(i), which states the amount of coverage will be reduced proportionately by the percentage interest of such persons. The commenter believes that if the person with a SBI is eligible for insurance, there should be no penalty for misreporting and that corrections should be allowed without loss of program benefits.

Response:

To be consistent, coverage should not be reduced if the correct identification number is provided. As indicated above, the provisions have been revised to allow correction of an inadvertent error. However, if it is determined that the person with the SBI is otherwise ineligible or the incorrect number would have allowed the producer to obtain disproportionate benefits under the crop insurance program, or avoid an obligation or requirement under any State or Federal law, the policy will be void. FCIC is maintaining those provisions that specify that if an identification number is not provided for any SBI holder, the policy will be void. This is because the SBI holder will be presumed to be ineligible. The identification numbers are required to ensure eligibility and the proper administration of the program. These provisions have been moved to section 2(b)(6).

Comment:

A few commenters stated the added phrase “* * * (presumed to be 50 percent for spouses of individuals) * * *” in section 2(b)(2)(i) (redesignated section 2(b)(6)(i)) could be problematic when taken together with section 10(a) and (b). They stated the spouse's interest in the insured entity may be presumed to be half when the spouses are the only ones with such an interest in the entity. If children and/or other household members will be considered to be part of the insured entity as well (as proposed), that leaves less than 50 percent for the actual named insured. Another commenter expressed concern regarding including children and other household members as being among those with a SBI in the insured entity [as proposed in section 10(a) & (b)]. The commenter stated that, with respect to this subsection, such a change would enlarge the pool of people whose eligibility must be determined though they are not officially part of the insured entity.

Response:

There appears to be confusion between having an interest in the insured (SBI) and having an interest in the crop (share). SBI is only for the purpose of determining who must report identification numbers. Spouses are presumed to have an interest in the insured but are not presumed to have an interest in the crop. To have an interest in the crop, the spouse must show a legitimate risk of loss. It is possible that a spouse may not have a share of the crop. Further, simply because a person has a share of the crop does not mean the person has a SBI in the insured. For example, a landlord and tenant can insure their shares under separate policies and unless there is another type of legal relationship,

i.e.,

partnership,

etc.,

the landlord does not have to be reported as a person with a SBI in the tenant. The definition of “substantial beneficial interest” clearly states that children are not considered to have a SBI in the producer unless the child has a separate legal interest in the person. Such interest could include a family trust or the child could be a partner in the insured. No change has been made.

Comment:

A commenter stated they agree with the proposed provision in section 2(b)(2)(ii) (redesignated section 2(b)(6)(ii)), which states the policy is void if the person is not eligible for insurance.

Response:

FCIC agrees that policies should be void when the person with a SBI is not eligible for insurance.

Comment:

A commenter suggested deletion of the words “authorized under the Act” in section 2(e).

Response:

Since no changes to these provisions were proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A commenter asked if the language in section 2(e)(2) means the

date for the Ineligible Tracking System is the date the claim is completed by the adjuster and signed by the insured, the date the insurance provider processes the claim, or the date the claim is submitted to the insurance provider.

Response:

Consistent with the revised definition of “claim for indemnity,” the payment date is the date the form containing all the information necessary to pay an indemnity is submitted to the insurance provider.

Comment:

A commenter stated section 2(f)(2)(i)(C) has caused problems in areas where the crop has a termination date that is different than the sales closing date. For example, wheat in Montana (with the exception of the four spring only counties) has a sales closing and cancellation date of September 30 and a termination date of November 30. If the insured purchases wheat by September 30, 2005 for the 2006 crop year, and does not pay the premium by the termination date of November 30, 2006, per the provision contained in section 2(f)(2)(i)(A), the wheat coverage would be terminated and no coverage should be effective for the 2007 crop. However, the interpretation the commenter has received from the FCIC is that per the language in section 2(f)(2)(i)(C), if the wheat had already been planted prior to November 30, 2006, so that insurance had already been considered to have attached for the 2007 crop year, the wheat could not be terminated until November 30, 2007. Under this interpretation, the insured would be able to insure wheat for two years without having paid a single dollar of premium. The commenter stated it had always been their understanding the intent of this item was to apply to “other” crops insured by the policyholder, not to the insured crop, which is indebted (wheat in the above example). The commenter recommended the policy language be revised so this item is only applicable to “other” crops insured on the policy and not the crop causing the indebtedness. The commenter provided two different recommendations as follows: (1) “For each policy for which insurance has attached before you become ineligible (excluding the crop(s) with unpaid administrative fees or premiums), the termination date immediately following the date you become ineligible;” and (2) The commenter suggested deletion of this item as it becomes administratively difficult to determine if insurance has attached or not on all of the other crops on the policy. This would then default back to item 2(f)(2)(i)(A). The commenter stated that policyholders with unpaid amounts should not get a free grace period of a year of coverage simply because the termination date falls after the cancellation date.

Response:

FCIC has clarified the provision because it never intended to allow continued coverage for the crop for which premium was not paid by the termination date. The purpose of the difference in the termination and sales closing dates was to allow producers who have both spring and winter varieties of the same crop to only have one billing date. It was most practical to move the billing date for the winter variety to coincide with the spring. After the billing date there must be sufficient time to allow for payment and due process before making the producer ineligible and terminating the policy. However, it is not practical to move the sales closing date to coincide with the termination date because it is too close to the date of planting and could lead to adverse selection. FCIC has revised the provision to specify that if the sales closing date is prior to the termination date, and the amount owed is not paid by the termination date, termination is retroactive to the previous sales closing date and insurance is considered not to have attached to the crop for the crop year.

Comment:

A few commenters stated sections 2(f)(2)(i)(E) and 2(f)(3)(iii) should be revised to tie regaining eligibility to the discharge of a bankruptcy petition instead of the filing of a bankruptcy petition. The commenters stated that allowing individuals that have merely filed for bankruptcy to participate in the program creates a program vulnerability that should be stopped. The commenters understand that FCIC adopted the filing of a bankruptcy petition as the trigger for regaining eligibility based upon concerns that denying participation until discharge would violate 11 U.S.C.A. 525(a). The commenters stated that this is not true. Section 525(a) provides: (a) * * * a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

The courts of appeals that have approached the question have read the statute's reach narrowly, focusing upon the specific language of the statute. See,

e.g., Watts

v.

Pennsylvania Hous. Fin. Co.,

876 F.2d 1090, 1093-94 (3d Cir. 1989);

In re Goldrich,

771 F.2d 28, 30 (2d Cir. 1985).

Watts

involved an emergency mortgage assistance program designed by the State of Pennsylvania to prevent imminent mortgage foreclosures by providing for loans to distressed borrowers in the form of direct payments to their mortgage lenders, keeping their mortgages current. When plaintiff borrowers filed for bankruptcy, the program suspended these payments for the duration of the Bankruptcy Code's automatic stay. Plaintiffs contended this suspension violated § 525(a). In response, the court of appeals noted that a loan from the Pennsylvania program simply was not a “license, permit, charter [or] franchise,” and that since those terms “are in the nature of indicia of authority from a governmental unit to pursue some endeavor,” the term “similar grant” should be given the same meaning.

Watts,

876 F.2d at 1093. Similarly, the court in

In re Goldrich

concluded that § 525(a) did not prohibit consideration of prior bankruptcies in credit decisions, since “the language of section 525 may not properly be stretched so far beyond its plain terms.” Goldrich, 771 F.2d at 29.

The items enumerated in the statute-licenses, permits, charters, and franchises are unrelated to insurance. They reveal that the target of § 525(a) is government's role as a gatekeeper in determining who is authorized to pursue certain livelihoods. It is directed at governmental entities that might be inclined to discriminate against former bankruptcy debtors in a manner that frustrates the “fresh start” policy of the Bankruptcy Code, by denying them permission to pursue certain occupations or endeavors. The intent of Congress incorporated into the plain language of § 525(a) should not be transformed by employing an expansive understanding of the “fresh start” policy to insulate a debtor from all adverse consequences of a bankruptcy filing or discharge.

Toth

v.

Michigan State Housing Development Authority,

136 F.3d 477 (6th Cir. 1998) (housing authority did not violate Bankruptcy

Code's antidiscrimination provision when it denied debtor's home improvement loan solely because she had received discharge within three years of application).

The commenters stated that alternatively, if FCIC remains concerned that denying participation until discharge would violate 11 U.S.C.A. § 525(a), the commenters suggest that 2(f)(2)(i)(E) must be changed to make the “termination date” the date of dismissal of the bankruptcy. If disallowing participation during the pendancy of a bankruptcy violates 11 U.S.C.A. § 525(a), which the commenters do not believe is true, then back dating the termination is also a violation as participation is denied “during the case but before the debtor is granted or denied a discharge.”

Response:

Since no changes to these provisions were proposed and the public was not provided an opportunity to comment, the recommendation cannot be incorporated in the final rule. No change has been made.

Comment:

A commenter recommended addressing the situation in section 2(g) regarding when an insured passes away within 30 days of the sales closing date and the insured's holdings convert to an estate, or in the event the death is a family member like a child,

etc.

Response:

There are situations where an individual may die,

etc.,

and the estate may not pass on to a spouse or the spouse may not meet all the criteria. Provisions have been added in section 2(g) to address these issues. A child's death would be covered under the provisions regarding either the individual insured whose beneficiary is the spouse, the entity insured, or the new provisions regarding an individual insured if the beneficiary is someone other than the spouse, whichever is applicable.

Comment:

Many commenters stated the proposed rule states if a married insured dies or is declared incompetent, the policy automatically converts to the spouse's name and will continue in effect until canceled by the spouse. This is a positive change and they urged FCIC to retain it in the final rule.

Response:

FCIC has retained the provision in the final rule.

Comment:

Many comments were received regarding the provision proposed in section 2(g)(1) that specifies the policy will automatically convert to the name of the spouse if the insured individual dies, disappears, or is judicially declared incompetent. A commenter asked if the policy will convert to the name of the surviving spouse, no matter when the insured dies. In other words, if they die anytime during the insurance period, can the insurance provider make this change? A commenter stated the concept in section 2(g)(1) of allowing coverage to convert to the surviving spouse (if listed as SBI holder) should alleviate some of the problems that have been encountered, but there may be some concerns with implementation. For example, the spouse might not be the heir to the farming operation in all cases, yet this proposed language would make that the default. The commenter believes this might be workable as long as other cases, such as a son inheriting the farm, can be handled through the procedures for a successor-in-interest or transfer of right to an indemnity. A commenter stated while theoretically a positive change, there may be situations in which a spouse dies and the farming operation is taken over by a child of the deceased, the deceased's estate, or another farming operation. The commenter stated an option should, therefore, be provided to convert the deceased spouse's coverage over to these individuals or entities. A commenter stated the provision sets forth two conditions under which the policy automatically will convert to the spouse's name. However, the provision does not specify what occurs if either or both of these conditions are not satisfied. The commenter asked if the policy is terminated or if it is void. The commenter asked whether the policy is void, is it void ab initio. The commenter questioned if the insurance provider is obligated to provide a premium refund for a policy that is voided. The commenter asked if, for example, the death occurs after the filing of notice of loss but before the issuance of an indemnity check, if the claim is extinguished. The commenter stated that arbitration and litigation will not arise if the surviving spouse satisfies the criteria in subsection (1)(i) and (ii) but what happens when he or she does not. The commenter suggested FCIC provide guidelines applicable to this eventuality. The commenter stated, in light of the existing procedures relating to successors-in-interest, the Basic Provisions should expressly state that a new application is not required. The commenter added that FCIC must amend Appendix III to ensure that an insurance provider is not penalized when it changes the SSN from that of a deceased policyholder to that of the surviving spouse.

Response:

FCIC has revised the provisions to add the situation where the beneficiary of the insured's estate may be someone other than a spouse or the spouse does not meet the specified criteria. The same terms and conditions that relate to when a member of an entity dies,

etc.,

apply. The policy is never voided. The policy either (1) continues in the spouse's name, or in all other situations, (2) is canceled as of the cancellation date for the current crop year if the event occurs more than thirty days prior to such cancellation date, or (3) continues in effect for the crop year if the event occurs within thirty days of the cancellation date. Even successor in interest must file a new application that will allow the use of the previous experience. Appendix III of the SRA will be made consistent with the Basic Provisions as necessary.

Comment:

A commenter stated in each of subsections 2(g)(1) through (3), FCIC employs the term “automatically” to describe the end result of certain occurrences,

e.g.,

“automatically converts,” “automatically dissolves” and “automatically canceled.” However, a condition precedent to the automatic consequence assumed by section 2(g) is notice to the insurance provider. For example, without notice that a married individual has died, an insurance provider cannot “automatically convert” the policy to the name of the surviving spouse. Therefore, the commenter recommended FCIC amend section 2(g) to provide: “In cases where we have received notice that there has been a death, disappearance, or judicial declaration of incompetence * * *”

Response:

FCIC has added a provision that requires notice in any case except where the beneficiary is the spouse and the spouse is listed as a SBI holder and has a share of the crop. If the beneficiary is such spouse, the policy automatically converts and there is no penalty if notice is not provided. The insurance provider should correct the documents whenever notice is provided. In all other instances, notice is required but whether it is provided timely or not does not change the fact that the policy is cancelled by the date specified in section 2(g). This means that if notice is not provided until three years later, the policy is still considered to have been canceled by the specific date and any indemnities, replant payments, prevented planting payments, administrative fees and premium paid in the interim must be repaid.

Comment:

Several comments were received regarding the provisions proposed in section 2(g)(2). A few commenters urged FCIC to consider revising the provision regarding surviving partners, members, and shareholders, to maintain the policy if the death occurs within 45, rather than 30, days of the sales closing date. A

commenter stated a 30-day time limit seems rather narrow because there are obviously a number of matters, both personal and business related, which must be handled in short order following the death of a partner in a partnership. The commenter believes that requiring the submission of a new application within a short 30 day window following the death may be asking a bit much from the remaining partners. They stated a 45- to 60-day window would seem more reasonable. A commenter stated section 2(g)(2) states if any partner, member, shareholder,

etc.,

of an insured dies * * * it automatically dissolves the entity. The commenter added it depends on when the insured dies to determine if the policy will be canceled or if it continues. The commenter asked if a partner, member, shareholder,

etc.,

dies, and it only changes the entity but does not dissolve the entity, how should this be handled.

Response:

FCIC believes 30 days provides an adequate amount of time for needed changes and has retained the proposed provisions. There is not a single date that can be established by which all estates would be settled. However, in farming situations, there is usually someone carrying on the farming operations and 30 days should provide sufficient time. If no one is carrying on the farming operations, then insurance is not required and there is no harm if the policy is canceled. If a partner, member, shareholder,

etc.,

dies and the entity does not dissolve, the policy would continue in force. Any changes in persons having a SBI would be submitted in accordance with the provisions in redesignated section 2(b)(9). The provision has been clarified to indicate that death, dissolution or declaration of incompetence must be an event that results in dissolution of an entity.

Comment:

A few commenters recommended FCIC consider putting “dissolution” of an insured entity into a separate subsection in section 2(g), to make it clearer that it is handled differently. The commenters stated in fact, (g)(2) might be better addressed by referring first to this being an issue of the dissolution of the insured entity rather than the death, disappearance or declaration of incompetence of any of its members, adding that grouping (2) and (3) together might eliminate some of the duplicate language.

Response:

Whether another basis for dissolution or death, disappearance,

etc.,

is referred to first or second does not change the meaning of the provisions or provide any additional clarity. As revised, it makes more sense to keep the existing order because FCIC has added provisions regarding when the beneficiary is other than a spouse or the beneficiary spouse does not meet all the criteria for automatic conversion to the spouse's name and the consequences are the same for both the entity and such beneficiary when the insured, dies, disappears,

etc.

Dissolution for reasons other than death, disappearance or judicially declared incompetence is covered by the provisions in redesignated section 2(g)(4). Different timeframes are required for cases in which there is a death, disappearance or judicially declared incompetence because of the additional personal matters that generally must be attended to in such cases. These different timeframes should be addressed in separate sections because combining them would result in more complex and confusing provisions. No changes have been made in response to this comment.

Comment:

A commenter stated they disagree with the provisions proposed in section 2(g)(2) establishing a more or less than 30-day time period for required actions prior to the sales closing deadline. The commenter stated although 30 days prior to the sales closing date seems to be adequate time to take appropriate action, these situations are typically discovered much later. The commenter believes corrections based on these circumstances should be handled similar to section 2(g)(1) for spouses.

Response:

FCIC understands some cases of dissolution are not discovered in a timely manner but business relationships should not be treated like spouses. FCIC is considering not only the personal nature but the relationship of the parties under the policy. As stated above, FCIC has clarified that the automatic conversion only applies when the spouse is listed as a SBI holder and has a share of the crop to be insured. In such cases, the spouse is the only possible insured so there is no basis for requiring a new application and novation is permitted. However, with respect to business relationships, if the entity is dissolved, it is unknown who will continue to have a share of the crop or who will be the insured. Therefore, a new application is necessary. FCIC has revised the provision to clarify that it is only when the entity is dissolved that the policy will be canceled. If the entity is not dissolved, insurance continues in the entity name and only those persons with a SBI need to revise the application in accordance with redesignated section 2(b)(9). FCIC has also added provisions requiring notice be provided to the insurance provider by the remaining persons in the dissolved entity or beneficiary. No change has been made in response to this comment.

Comment:

A commenter stated in section 2(g)(2), allowing coverage to continue when the insured entity is dissolved due to death,

etc.,

of one of its members less than 30 days before the sales closing date would alleviate some of the problems that currently exist, but it might create some confusion for those who do not want coverage to continue. The commenter stated this provision seems to run counter to current procedures that consider coverage to have ceased upon death or dissolution of the insured entity. The commenter stated the language in section 2(g)(2)(ii) (redesignated section 2(g)(3)(ii)) needs to be tweaked somewhat. For example, if the entity dissolves “Less than 30 days before the sales closing date, * * * the policy will continue in effect through the crop year * * *” but which crop year? If this occurs before the cancellation date, the “continued” coverage will be only for less than 30 days. Similar concerns need to be addressed with regard to the language in section 2(g)(2)(ii)(A) (redesignated 2(g)(3)(ii)(A)): “prior to the sales closing date for coverage for the subsequent crop year * * *” These “crop years” will be different years depending on whether the occurrence affecting the insured entity happened before or after the sales closing/cancellation date. The commenter stated FCIC also needs to consider what other policy or procedure language is affected and might require revision. The proposed language requiring the remaining party(ies) to sign a timely cancellation request might still present difficulties if the entity dissolution took place only a day or so before the cancellation date. FCIC also should consider those crops where the cancellation date is not the same as the sales closing date.

Response:

The 30-day provisions were added because even businesses need some time to handle the details necessary when a member dies. However, even if less than 30 days, and insurance could automatically continue, there is a provision included in redesignated section 2(g)(3)(ii) that would allow for a voluntary cancellation by the cancellation date. These provisions are clear and should not result in any confusion. FCIC issued procedures will be updated to reflect the new provision. As proposed, if the death, disappearance, or judicially declared incompetence occurred within 30 days of the sales closing date, it was intended that coverage be provided for the crop year immediately following the sales closing date. However, to reduce

confusion associated with crop programs having more than one sales closing date, the provisions have been changed to reference the cancellation date instead of the sales closing date. The provisions have also been clarified in redesignated sections 2(g)(3)(ii) and 2(g)(4)(ii) to indicate the crop year covered is the crop year immediately following the cancellation date. Clarifying these sections with regard to the year coverage is provided makes it unnecessary to clarify the provisions in redesignated section 2(g)(3)(ii)(A) regarding the subsequent crop year. If death occurs very close to the cancellation date, there would be a very limited time to cancel coverage. However, the cancellation date cannot be extended because it could allow situations where producers could adversely select against the program. Since the provisions have been changed to reference the cancellation date, concerns involving different sales closing and cancellation dates are resolved because insurance does not attach before the cancellation date.

Comment:

A commenter stated they agree with the proposed action in section 2(g)(3) (redesignated section 2(g)(4)) if the insured entity is dissolved.

Response:

FCIC has retained the provision in the final rule.

Comment:

A commenter stated that, in section 2(g)(3)(ii) (redesignated section 2(g)(4)(ii)), presumably the phrase “* * * unless canceled by the cancellation date prior to the start of the insurance period” refers to crops with a cancellation date later than the sales closing date; otherwise, this would not be possible when the insured entity dissolved “On or after the sales closing date * * *”

Response:

As stated above, FCIC revised the provision so that the 30 days now refers to the cancellation date. Therefore, cases in which the sales closing date and cancellation date are different should no longer be an issue.

Comment:

A commenter suggested that section 2(k) be revised by changing “* * * any applicable consequences * * *” to “* * * any other applicable consequences * * *” to clarify that these would be in addition to “* * * the consequences in section 6(g) * * *”

Response:

FCIC has revised the provision as recommended because there may be other consequences, such as voidance of the policy under section 27, disqualification and civil fines under 7 CFR part 400, subpart R, or other applicable civil, criminal or administrative sanctions, if information has been misreported.

Section 3 Insurance Guarantees, Coverage Levels, and Prices

Comment:

A few comments were received regarding section 3(b). A few commenters did not think the first parenthetical, which relates to CAT was necessary. A commenter stated the definition of CAT already provides that revenue coverage is not available for CAT. Another commenter stated if FCIC is insistent on restating this exclusion, then a separate subsection would be more appropriate. A commenter stated the provisions could be rewritten to reduce the length and to improve clarity. Since section 3(b) makes no reference to the same price percentage, presumably it is intended to address “the same coverage” (level and type of protection) but with the added phrases, it is not clear. Instead of indicating a choice between CAT and additional coverage, and then a choice of additional coverage level, consider simply requiring the same level of coverage (which will be either CAT or one of the additional levels). The commenter requested FCIC consider their other comments about clarifying the terminology for the different choices of protection (amount of insurance, yield coverage for those crops for which revenue protection is not available, yield protection, or revenue protection). The commenter questioned if it is necessary to distinguish between “yield coverage” and “yield protection.” A commenter stated FCIC employs the term “yield coverage” which is not a defined term. The Basic Provisions define the term “coverage.” If “yield coverage” and “coverage” are synonymous, FCIC should use the defined term,

i.e.,

“coverage.” If the terms are not identical in meaning, the commenter stated FCIC must define “yield coverage.” This provision is unnecessarily confusing and, perhaps, should be further subdivided. A commenter stated the current Crop Provisions require producers to purchase the same levels of coverage on both irrigated and non-irrigated units. It is the commenter's position this provision is unnecessarily restrictive and that producers who grow both irrigated and non-irrigated crops should be allowed to purchase different levels of insurance to better match coverage to the overall level of risk associated with each practice. By not providing producers the flexibility to match coverage to a specific practice, the agency forces producers to underinsure their irrigated crops due to the costs associated with insuring non-irrigated crops at higher levels. Producers should be allowed to select a single level of coverage for irrigated units and a different coverage level for non-irrigated units insured on their policy. To safeguard against possible abuse of this provision, a producer's choice for non-irrigated coverage should be limited to the same level or lower than the coverage level selected for irrigated units. The commenter urged FCIC to include this change in the final rule and provide producers the flexibility to select appropriate levels of coverage for their crops.

Response:

The provisions have been revised by removing the first parenthetical phrase regarding CAT coverage, separating the provisions into subsections, and removing other unnecessary information for clarity. Additionally, the provisions have been revised to clarify the producer must select the same plan of insurance (

e.g.,

yield protection, revenue protection, actual production history, amount of insurance,

etc.

), the same level of coverage (all catastrophic risk protection or the same level of additional coverage), and the percentage of the applicable price. Further, the term “yield coverage” has been removed from the provisions because it was confusing with the term “yield protection.” Therefore, no definition is required. Since no change was proposed to allow separate coverage levels for irrigated and non-irrigated acreage, and the public was not provided an opportunity to comment on the recommended change, the recommendation cannot be incorporated in the final rule.

Comment:

A few comments were received regarding high-risk land. A commenter requested other coverage levels be allowed for high-risk land, not just catastrophic risk protection. The commenter suggested the producer be given the choice of any level of coverage up to the buy-up level of coverage the producer selected for the non high-risk land. Another commenter stated if the producer chose revenue protection on non high-risk ground, then the producer should have the choice of either revenue protection or non revenue protection on the excluded high-risk ground. If the producer did not choose revenue protection on the non high-risk ground, they should not be able to select it on their excluded high-risk ground. Requiring the level and type of coverage on the excluded high-risk ground to be the same or lower than what is allowed on the non high-risk ground alleviates any concern of the risk of adverse selection. This would not affect the producer that farms all non high-risk ground (Producer A) or the producer who farms all high-risk ground (Producer B). These producers can

consider the cost and coverage and arrive at a level and revenue/non revenue selection that best fits their circumstances. The commenter stated there is a large number of producers (the commenter called this group Producer C) who have ground in the same county that is rated both high-risk and non high-risk. Currently and as part of the proposed rule, this group of producers has two choices: insure all high-risk and non high-risk at the same level and type of coverage, or insure the non high-risk ground on a buy-up policy and exclude the high-risk ground and not insure it or only insure it at the catastrophic level. Producer A in this county who farms all non high-risk ground might choose 70-80 percent coverage while Producer B who farms all high-risk ground might choose 55-65 percent coverage (high-risk premium rates are from 1-to-3 times higher—sometimes even higher—than non high-risk rates for the same level and type of coverage). The commenter stated, for example, in Wayne County located in southern Illinois using a 120-bushel APH on corn and 2006 crop year rates: Producer A (non high-risk ground) chooses 70 percent RA coverage, which costs $11.24 per acre and provides $217.56 coverage per acre. Producer B (all high-risk ground classified AAA) chooses 55 percent CRC coverage, which costs $15.57 per acre and provides $170.94 coverage per acre. Producer C, whose farming location is 50 percent non high-risk and 50 percent high-risk under the proposed rule has four choices: (Option 1) insure all of their farm at 70 percent RA coverage (like Producer A) incurring premium on their non high-risk ground of $11.24 per acre and coverage of $217.56 per acre; but their high-risk rate is $30.47 per acre for the same $217.56 per acre coverage (three times higher than non high-risk ground); (Option 2) insure all of their farm at 55 percent RA (like Producer B) incurring premium on their non high-risk ground of only $5.22 but lowering their coverage to $185.19, which makes their entire policy a lot less responsive to drought and revenue losses at this lower coverage level on higher elevation farm ground; (Option

This text is long and has been trimmed here. Open the source document for the complete record.