Common Crop Insurance Regulations; Nursery Crop Insurance Provisions

DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AA96

Common Crop Insurance Regulations; Nursery Crop Insurance

Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) hereby adopts

regulations for specific crop provisions to insure nursery plants.

These provisions will supplement the Common Crop Insurance Policy Basic

Provisions which contains standard terms and conditions common to most

crops. The intended effect of this rule is to move specific crop

provisions for insuring nursery from the Nursery Crop Insurance

Regulations (7 CFR part 406) to the Common Crop Insurance Policy

(Sec. 457.8) for ease of use by the public and conformance among policy

terms, and to add a nursery frost, freeze, and cold damage exclusion

option to better meet the needs of the insured.

EFFECTIVE DATE: June 15, 1995.

FOR FURTHER INFORMATION CONTACT: Diana Moslak, Federal Crop Insurance

Corporation, U.S. Department of Agriculture, Washington, DC 20250.

Telephone (202) 254-8314.

SUPPLEMENTARY INFORMATION: This action has been reviewed under United

States Department of Agriculture (``USDA'') procedures established by

Executive Order 12866 and Departmental Regulation 1512-1. This action

constitutes a review as to the need, currency, clarity, and

effectiveness of these regulations under those procedures. The sunset

review date established for these regulations is June 1, 2000.

This rule has been determined to be ``not significant'' for the

purposes of Executive Order 12866 and, therefore, has not been reviewed

by the Office of Management and Budget (``OMB'').

The information collection or record-keeping requirements contained

in these regulations (7 CFR part 457) were submitted to OMB in

accordance with the provisions of 44 U.S.C. 3501 et seq., and have been

assigned OMB control number 0563-0050.

It has been determined under section 6(a) of Executive Order 12612,

Federalism, that this rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment. The

policies and procedures contained in this rule will not have a

substantial direct effect on states or their political subdivisions, or

on the distribution of power and responsibilities among the various

levels of government.

This regulation will not have a significant impact on a substantial

number of small entities. This action reduces the paperwork burden on

the insured and the reinsured company. Therefore, this action is

determined to be exempt from the provisions of the Regulatory

Flexibility Act (5 U.S.C. 605) and no Regulatory Flexibility Analysis

was prepared.

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.450.

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.

The Office of the General Counsel has determined that these

regulations meet the applicable standards provided in subsections

(2)(a) and 2(b)(2) of Executive Order 12778. The provisions of this

rule will preempt state and local laws to the extent such state and

local laws are inconsistent herewith. The administrative appeal

provisions located at 7 CFR part 400, subpart J or promulgated by the

National Appeals Division, whichever is applicable, must be exhausted

before judicial action may be brought.

This action is not expected to have any significant impact on the

quality of the human environment, health, and safety. Therefore,

neither an [[Page 31376]] Environmental Assessment nor an Environmental

Impact Statement is needed.

By separate rule, FCIC will amend 7 CFR part 406 to restrict the

crop years of application to those prior to the crop year for which

this rule will be effective. FCIC will terminate the provisions of the

present policy at the end of the crop year and later remove that part.

On Friday, January 27, 1995, FCIC published a notice of proposed

rulemaking in the Federal Register at 60 FR 5339 proposing to revise

the Common Crop Insurance Regulations by adding new provisions for

nursery crop insurance.

Following publication of the proposed rule, the public was afforded

30 days to submit written comments, data, and opinions. The comments

received and FCIC responses are as follows:

Comment: One comment received from an insurance company disagreed

with using the insured's wholesale price list in determining the

insurance coverage rather than using the projected market price

because:

(1) The proposed rule ties price levels (i.e., ``monthly market

value'') to growers' wholesale price lists, while the Federal Crop

Insurance Reform Act of 1994 (Act) ties price levels to projected

market prices. Wholesale price lists represent offers; however, market

prices represent offers and acceptance. It was questioned whether FCIC

had the authority to determine that wholesale price lists are the

``projected market prices'' when: (a) FCIC has never seen and never

validated such price lists; (b) they are not the product of independent

economic forces or analysis; and (c) they are the estimates of insureds

who have an economic interest in inflating the prices on their

wholesale price lists. The company believes that allowing each grower

to define his or her own market price by quoting an offering price

invites fraud; and

(2) The Act requires FCIC, not individual growers, to determine

``projected market price''. The company acknowledged that FCIC has the

authority to determine that a grower's wholesale price list is the

``projected market price'' but questions whether this is a lawful

exercise of that authority. It was recommended that FCIC base the price

level for nursery crops on the actual market price at the time of

harvest (as determined by the Corporation).

Response: FCIC believes using the growers' wholesale price lists to

establish the projected market prices does not violate the Act because

the Act authorizes the Corporation to determine the wholesale market

price as the projected market price. Due to numerous varieties of

nursery plants eligible for insurance, FCIC believes that it is

impractical to establish a price for each insured plant in the various

states prior to the crop year. FCIC will determine whether the

wholesale market price of the plant is reasonable before accepting it

as the projected market price. The Federal Crop Insurance Corporation

will investigate options on how nursery prices should be established

for the 1997 crop year. Therefore, FCIC does not believe that it is

necessary to change these provisions at this time.

Comment: One comment received from an insurance company disagreed

with the elimination of the 10 percent reduced valuation in subsection

1.(a) (definition of ``Amount of insurance''). The company stated that

the 10 percent value reduction must remain in the policy to account for

salvage valuation because many damaged plants can be restored to

marketability or the Standard Reinsurance Agreement should be amended

to reimburse insurance companies for this change. A concern was raised

that deletion of the 10 percent reduction would result in increased

premiums to insureds.

Response: The 10 percent reduction was originally incorporated to

eliminate costs for packing, shipping, sales commissions and other

expenses that would not be incurred due to the loss. The proposal to

eliminate this 10 percent reduction was made to offset the expense of

disposing of the destroyed inventory. However, eliminating the 10

percent factor would increase premium by 10% to cover the additional

liability. No data is available at this time to determine if the costs

of inventory disposal approximates the amount of 10%. Therefore, FCIC

agrees that the 10 percent reduced valuation should remain in the

nursery provisions and has amended the provisions accordingly.

Comment: One comment received from an insurance company requested

the term ``Annual loss deductible'' contained in subsection 1.(b) be

changed to ``Crop year loss deductible''.

Response: FCIC agrees with the comment and has adopted this change.

Comment: One comment received from an insurance company suggested

that the word ``unit'' be removed from the definition of ``Field market

value A'' in subsection 1.(e) and from the definition of ``Field market

value B'' in subsection 1.(f) because it is redundant and invites the

unintended interpretation that field market value A and field market

value B include both insured and uninsured plants.

Response: FCIC agrees with this comment. FCIC has added ``insurable

plants'' or ``insured plants'' to the term to clarify these provisions.

Comment: One comment received from an insurance company suggested

the definition of ``Standard nursery containers'' contained in

subsection 1.(n) be changed to read as follows: ``Rigid containers not

less than three (3) inches across the smallest dimension which are

commercially sold to nurseries, and for the plant contained, are

appropriate in size with the proper drainage holes and used in

conjunction with an appropriate growing medium''. Justification for

this change was that too often growers permit plants to become root

bound or use containers with drainage holes that are too high or too

low for the plant or use an inappropriate growing medium. The company

stated that FCIC should make clear that insurance does not attach

unless all of these conditions are satisfied.

Response: FCIC agrees with the comment and has modified the

provisions with language similar to that recommended.

Comment: One comment received from a national trade organization

for the nursery industry strongly disagreed with the proposed

definition of ``Standard Nursery Containers'' which excludes trays and

cellpacks. This organization stated that trays and cell packs are

indeed standard containers for a large segment of the nursery industry

and that many trays, flats, and cell packs are larger than three inches

across the smallest dimension. FCIC was urged to reconsider the

proposed definition to explicitly incorporate flats, trays, and cell

packs.

Response: FCIC disagrees with this comment. These types of

containers are not insurable under the nursery policy. The nursery

policy is based on plants grown in standard nursery containers not less

than three (3) inches across the largest dimension at the top of the

container. FCIC will study the feasibility of insuring nursery plants

grown in other types of containers for the 1997 crop year. Therefore,

FCIC does not believe that it is necessary to amend these provisions at

this time.

Comment: One comment received from an insurance company suggested

that subsection 6.(d) be amended to specify that insurers have no duty

or contractual obligation to consent to a revision of the nursery plant

inventory summary. The company also recommended that paragraphs

6.(d)(1) and 6.(d)(2) be deleted. The company stated that an inspection

should be made before insurance attaches on any proposed increase in

inventory and that [[Page 31377]] because an insurer has no duty to

accept a proposed increase, it should have no duty to inspect it. The

company stated that the policy should state that a refusal to inspect

constitutes a refusal to accept a proposed increase.

Response: FCIC disagrees with the comment. The proposed provisions

do not require an insurer to make an inspection in some cases. However,

an inspection is necessary for insurance to attach if the conditions of

paragraphs 6(f)(1) and 6(f)(2) apply. FCIC believes removing paragraphs

6(f)(1) and 6(f)(2) would require the insured to request an inspection

for any inventory increase. Therefore, FCIC does not believe that it is

necessary to amend these provisions.

Comment: One comment received from an insurance company stated that

the proposed nursery regulations do not contain provisions for the

inclusion of an amount for operating and administrative expenses in the

calculation of premium and, therefore, are in violation of the Federal

Crop Insurance Corporation Reform Act of 1994.

Response: FCIC disagrees with this comment. All information

concerning subsidies, including the producer premium subsidy and

administrative expenses, is contained in the actuarial table.

Therefore, FCIC does not believe that it is necessary to amend these

provisions.

Comment: One comment received from an FCIC Regional Service Office

suggested that subsection 8.(a), paragraph (4) be amended to read as

follows: ``Are grown in standard nursery containers (not planted in the

ground), at least three (3) inches across the smallest dimension unless

provided for on the actuarial table.'' Justification for this change

was that many requests to insure trays or ``flatted stock'' containers

with multiple plantings have been received. To alleviate the time and

personnel needed to process the number of written agreements, the

actuarial table could authorize such coverage.

Response: FCIC disagrees with this comment. The nursery policy does

not allow insuring trays or ``flatted stock'' containers with multiple

plantings. Only plants grown in standard nursery containers that are at

least three (3) inches across the largest dimension at the top of the

container are insurable. FCIC will study the feasibility of providing

insurance coverage for nursery plants not grown in standard nursery

containers for the 1997 crop year. Therefore, FCIC has amended the

proposed provisions to delete the availability of written agreements

for such plants.

Comment: One comment from a national trade organization for the

nursery industry expressed concern that as many of 5,000 or more plant

species are commercially produced by nursery growers, yet the Nursery

Eligible Plant Listing for the 1994 crop year contained only 494

species. The organization urged FCIC to expand the Nursery Eligible

Plant Listing as soon as possible and stated that until the listing is

more inclusive, the nursery program will remain unattractive to a

sizable segment of the industry.

Response: The Nursery Eligible Plant Listing was amended for the

1995 crop year and will be amended for the 1996 crop year to include

additional plant species. FCIC is continuing to work with nursery

experts to evaluate additional plant species that may be added to this

listing.

Comment: One comment was received from an insurance company

regarding paragraphs 10.(a) (3) and (4) which specify that insects and

plant disease are insured causes of loss. The company stated that: (a)

the only insect and plant disease that should be insured against are

those determined by a state department of agriculture or an accredited

agriculture college in the state to be an unprecedented affliction in

that state to that plant and for which no effective control is

available, because most insect and plant-disease losses are the result

of poor nursery practices; and (b) paragraphs 10.(a) (3) and (4) should

make it clear that policyholders have an obligation to keep all

receipts for purchases of sprays and maintain spraying records.

Response: FCIC disagrees with the comment. The crop provisions

already exclude damage due to insufficient or improper application of

pest and disease control measures. The Common Crop Insurance Policy

Basic Provisions, to which the Nursery Crop Provisions attach, exclude

losses due to failure to follow recognized good practices, and also

require policyholders to maintain records. Therefore, FCIC does not

believe that it is necessary to amend these provisions.

Comment: One comment received from an insurance company disagreed

with providing coverage specified in paragraph 10.(a)(9) for failure or

breakdown of frost/freeze protection equipment or facilities due to

direct damage to such equipment or facilities from an insurable cause

of loss. The company questioned how the loss adjuster is to determine:

that ``direct damage'' caused the loss if protection equipment or

facilities were not properly maintained; whether the proximate cause of

the loss was from owner negligence or insurable causes, or if from

both, how the adjuster makes allowance for contributory negligence; and

that the plants are damaged within 72 hours after the failure of the

equipment or facilities. For the reasons stated above, it was

recommended that paragraph 10.(a)(9) be deleted in its entirety and

paragraph 10.(b)(5) be amended to delete the clause ``unless due to an

insured cause of loss.''

Response: FCIC disagrees with this comment. The intent of the

Nursery Crop Provisions is to protect the producer from unavoidable

causes of loss. Therefore, failure or breakdown of the frost/freeze

protection equipment or facilities due to an unavoidable insurable

cause of loss will be covered. It is the loss adjuster's responsibility

to determine whether an insurable cause of loss directly caused the

damage in accordance with loss adjustment procedure approved by FCIC.

Comment: One comment received from an insurance company stated that

because nursery plants are portable, section 11 should require that the

insurer's permission to dump be in writing and signed by a loss

adjuster and should require the insured to identify, in advance, the

location where plants will be dumped and require the insured to keep

dumping records.

Response: Section 11 requires the insured to obtain written consent

from the insurer prior to destroying, selling or otherwise disposing of

any plant inventory that is damaged. Further, the Common Crop Insurance

Policy Basic Provisions already require the insured to keep records of

the disposition of the crop. FCIC will study and address this issue for

the 1997 crop year. Therefore, for the reasons stated, FCIC does not

believe that it is necessary to amend these provisions.

Comment: Two comments were received requesting that insurance be

allowed to attach to nursery inventory that produce edible berries,

fruits, or nuts as follows:

(1) One comment received from a national trade organization for the

nursery industry stated that the production and irrigation practices

for nursery plants that are produced as entire plants for subsequent

sale to others, where the purchaser's intent is to use the plants to

produce edible berries, fruits, and nuts for market are similar to the

production and irrigation practices for ornamental plant types. The

organization strongly urged FCIC to allow insurance coverage for

nursery plants that are produced for the wholesale market as entire

plants, and not for berry, fruit, or nut sales; and [[Page 31378]]

(2) One comment received from an FCIC Regional Service Office

requested that insurance be allowed to attach to plants that produce

edible berries, fruits, or nuts due to numerous requests to insure such

plants.

Response: FCIC disagrees with these comments. These plants are

primarily hardwoods with tap roots. The roots are usually severed or

otherwise constricted and stressed when the tree is placed into a

container. These trees are usually grafted as well. When stressed,

disease can more easily attack these trees through the roots or the

graft. Nursery operators cannot assess the quality of the merchandise

and may not be aware of the tree condition if the trees are purchased

from a supplier, nor can the insurer who accepts the risk. FCIC will

study the feasibility of providing insurance on these types of plants

for the 1997 crop year. Therefore, FCIC does not believe that it is

necessary to amend these provisions at this time.

Comment: One comment received from a national trade organization

for the nursery industry questioned the reasoning for and disagreed

with the proposed clarification that stock plants used for

reproduction, growing cuttings, air layering or propagating will not be

insured.

Response: The intent of the nursery crop insurance policy is to

provide coverage for nursery plants that are grown to be sold as entire

plants. Premium rates have been established on this basis. Therefore,

FCIC does not believe that it is necessary to amend subsection 8.(h).

Comment: One comment from a national trade organization for the

nursery industry expressed concern regarding the requirement that the

insured must report monthly market values of nursery inventory. The

organization perceived this as excessively burdensome and, thus, a

strong disincentive to the purchase of crop insurance.

Response: FCIC agrees that this requirement is time consuming and

costly for all parties. However, since indemnity payments are based on

the monthly market values, the insured must continue to provide the

reports until an alternative method is derived. FCIC will study

alternative methods to offer nursery insurance coverage that may

eliminate this requirement. Therefore, FCIC does not believe that it is

necessary to delay implementation of these provisions at this time.

In addition to the changes indicated in the responses to comments,

FCIC has determined that:

1. Subsections 1. (d), (e), (f), and (i), subsection 7.(a)

paragraph (3), subsection 7.(a) paragraph (3), and subsection 12.(a)

paragraph (1)(ii) reference the 10% reduced valuation due to the

comment above regarding subsection 1.(a). FCIC has amended these

provisions accordingly.

2. Subsection 1. (h) and (n), definitions of ``Largest dimension''

and ``Standard nursery containers'' is amended to clarify that standard

nursery containers must be at least three (3) inches across the largest

dimension at the top of the container. This will be consistent with the

nursery industry definition of the largest dimension and standard

nursery containers.

3. Section 6 is amended to: (1) Allow an insured to revise the

Nursery Plant Inventory Summary after the sales closing date to add

plants not listed on the Nursery Plant Listing, if the insured

requested a written agreement to insure such plants by the sales

closing date and it has been offered and accepted; (2) allow the

insured to revise the Nursery Plant Inventory Summary to correct or

change the value of the insurable inventory if a new plant species is

being added which was not originally reported on the nursery plant

inventory summary without regard to the 10%/$25,000 limitation; and (3)

remove the restriction requiring that the increase in inventory value

must have been due to a quantity change.

4. Subsection 9.(b) is amended to clarify that the date of final

adjustment of a loss on the unit, when the total indemnities paid for

the unit equal the amount of insurance for that unit is one of the

events that ends the insurance period.

Accordingly, the rule, ``Common Crop Insurance Regulations; Nursery

Crop Insurance Provisions and Nursery Frost, Freeze, and Cold Damage

Exclusion Option'' published at 60 FR 5339 as revised and set out below

is hereby adopted as final rule.

List of Subjects in 7 CFR Part 457

Crop insurance, nursery crop.

Final Rule

Accordingly, pursuant to the authority contained in the Federal

Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.), the Federal

Crop Insurance Corporation hereby amends the Common Crop Insurance

Regulations (7 CFR part 457), effective for the 1996 and succeeding

crop years, to read as follows:

PART 457--[AMENDED]

1. The authority citation for 7 CFR part 457 continues to read as

follows:

Authority: 7 U.S.C. 1506(1).

2. 7 CFR part 457 is amended by adding Secs. 457.114 and 457.115 to

read as follows:

Sec. 457.114 Nursery Crop Insurance Provisions.

The Nursery Crop Insurance Provisions for the 1996 and succeeding

crop years are as follows:

United States Department of Agriculture

Federal Crop Insurance Corporation

Nursery Crop Provisions

If a conflict exists among the Basic Provisions (Sec. 457.8),

these crop provisions, and the Special Provisions, the Special

Provisions will control these crop provisions and the Basic

Provisions; and these crop provisions will control the Basic

Provisions.

1. Definitions

(a) Amount of insurance--The result of multiplying the highest

monthly market value reported on the nursery plant inventory summary

(including inventory reported by you and accepted by us on a revised

nursery plant inventory summary) by .9, multiplied by the percentage

for the coverage level you elect.

(b) Brownout--A reduction in electric power that affects the

unit.

(c) Crop year--The 12 month period beginning October 1 and

extending through September 30 of the next calendar year, designated

by the year in which it ends. (The 1996 crop year begins October 1,

1995, and ends September 30, 1996).

(d) Crop year loss deductible--The value calculated by

multiplying the highest monthly market value reported on the nursery

plant inventory summary by .9 and subtracting from this product the

amount of insurance.

(e) Field market value A--Ninety percent (90%) of the wholesale

market value for the insured plants in the unit immediately prior to

the occurrence of the loss.

(f) Field market value B--Ninety percent (90%) of the wholesale

market value remaining for the insurable plants in the unit

immediately following the occurrence of the loss as determined by

our appraisal conducted as soon as reasonably possible after the

loss is reported.

(g) Irrigated practice--A method of producing a crop by which

water is artificially applied during the growing season by

appropriate systems and at the proper times, with the intention of

providing the quantity of water needed to maintain the amount of

insurance on the nursery plant inventory.

(h) Largest dimension--The distance measured at the top of the

standard nursery container from one side directly across to the

opposite at the widest point.

(i) Monthly loss deductible--The smaller of: (1) The highest

monthly market value reported on the nursery plant inventory summary

multiplied by .9; or (2) field market value A; multiplied by the

number derived by subtracting the coverage level percent from one

hundred percent (100%), not to exceed the crop year loss deductible.

[[Page 31379]]

(j) Monthly market value--The dollar amount determined by

multiplying the quantity of each insurable plant by its wholesale

market value for that month, less the maximum discount (stated in

dollar terms) granted to any buyer, and totalling the resulting

values for all insurable plants in the unit.

(k) Nursery--A business enterprise that produces ornamental

plants in standard nursery containers for the wholesale market.

(l) Nursery eligible plant listing--A listing contained in the

Actuarial Table that specifies the plants eligible for insurance and

any mandatory or recommended storage required for such plants in

each hardiness zone defined by the United States Department of

Agriculture.

(m) Nursery plant inventory summary--A report that specifies the

numbers, growing locations, and wholesale prices of plants included

in the nursery inventory.

(n) Standard nursery containers--Rigid containers not less than

three (3) inches across the largest dimension at the top of the

container, and which are appropriate in size and with proper

drainage holes for the plant contained. Grow bags, trays, cellpacks,

and burlap are not standard nursery containers under these crop

provisions.

(o) Stock plants--Plants used for reproduction, for growing

cuttings, for air layering or for propagating.

(p) Wholesale market value--The total dollar valuation of the

insurable plants actually contained within the unit at any time. The

values used will be based on your wholesale price list if properly

supported by your records, less the maximum discount (stated in

dollar terms) granted to any buyer.

(q) Written agreement--Designated terms of this policy may be

altered by written agreement. Each agreement must be applied for by

the insured in writing no later than the sales closing date and is

valid for one year only. If not specifically renewed the following

year, continuous insurance will be in accordance with the printed

policy. All variable terms including, but not limited to, plant type

and premium rate must be contained in the written agreement.

Notwithstanding the sales closing date restriction contained herein,

in specific instances, a written agreement may be applied for after

the sales closing date and approved if, after a physical inspection

of the nursery plant inventory, there is a determination that the

inventory has the expectancy of meeting the amount of insurance. All

applications for written agreements as submitted by the insured must

contain all variable terms of the contract between the company and

the insured that will be in effect if the written agreement is

disapproved. A written agreement will not be approved for other than

standard nursery containers.

2. Unit Division

In lieu of the definition of ``unit'' contained in section 1

(Definitions) of the Basic Provisions (Sec. 457.8), a unit consists

of all growing locations in the county within a five mile radius of

the named insured locations designated on your nursery plant

inventory summary. Any growing location more than five miles from

any other growing location, but within the county, may be designated

as a separate basic unit or be included in the closest unit listed

on your nursery plant inventory summary.

3. Insurance Guarantees, Coverage Levels, and Prices for Determining

Indemnities

The production reporting requirements contained in section 3

(Insurance Guarantees, Coverage Levels, and Prices for Determining

Indemnities) of the Basic Provisions (Sec. 457.8) are not applicable

to the Nursery Crop Provisions.

4. Contract Changes

The contract change date is June 30 preceding the crop year (see

the provisions of section 4 (Contract Changes) of the Basic

Provisions (Sec. 457.8)).

5. Cancellation and Termination Dates

In accordance with section 2 ( Life of Policy, Cancellation, and

Termination) of the Basic Provisions (Sec. 457.8), the cancellation

and termination dates are September 30 preceding the crop year.

6. Nursery Plant Inventory Summary

(a) Section 6 (Report of Acreage) of the Basic Provisions

(Sec. 457.8) is not applicable to the Nursery Crop Provisions.

(b) You must submit a nursery plant inventory summary to us on

or before September 30 preceding the crop year.

(c) The nursery plant inventory summary is a projection of the

expected inventory for the following 12 months. This summary must

include, by unit and by month for each type of plant in the

inventory, the:

(1) Container sizes, as measured at the largest dimension at the

top of the container;

(2) Number of plants;

(3) Wholesale price for each month of the crop year; and

(4) Your share.

If your inventory usually changes within a specific month,

report the largest inventory that you expect to have for that month.

(d) Your annual nursery plant inventory summary will be used to

determine your premium and the amount of insurance for each unit. If

you do not submit the summary by the reporting date, we may elect to

determine the nursery plant inventory for each unit or we may deny

liability on any unit. Errors in reporting units may be corrected by

us at the time of loss adjustment.

(e) Your wholesale price list may be examined to determine

whether the prices listed are reasonable. If the prices are

determined to be unreasonable, the previous acceptable wholesale

price list will be used or we may establish the wholesale price for

each type of plant.

(f) With our consent, you may revise your reported nursery plant

inventory summary to correct or change the value of the insurable

inventory if the amount of the revision is at least ten percent

(10%) of the highest monthly market value reported on the nursery

plant inventory summary or $25,000, whichever is smaller, or if a

new plant species is being added that was not originally reported on

your nursery plant inventory summary or was approved by written

agreement. If you wish to revise the nursery plant inventory

summary, you must notify us in writing at least 14 days before a

change in inventory value. We must inspect and accept the nursery

before insurance attaches on any proposed increase in inventory if:

(1) The storage facilities have changed in any way since our

previous inspection; or

(2) The revision includes plants that have specific over-

wintering storage requirements and that were not previously reported

on your nursery plant inventory summary.

(g) You may not revise your nursery plant inventory summary

after the sales closing date to add plants not listed on the Nursery

Eligible Plant Listing unless a request for a written agreement to

add such plants has been submitted by the sales closing date.

(h) Insurable plants that are not reported on your nursery plant

inventory summary will not be insured, but the value of such plants

after a loss will be included as production to count. Such

unreported inventory may reduce the amount of any indemnity payable

to you.

(i) You must designate separately any plant inventory that is

not insurable.

7. Annual Premium

We will determine your premium as follows:

(a) The annual premium for each unit will be calculated by:

(1) Determing the total value of each plant type and container

size designated on your nursery plant inventory summary for each

month by multiplying the number of plants by the price for that type

and container size shown on your accepted wholesale price list for

that month, less the maximum discount (stated in dollar terms)

granted to any buyer, and totalling the resulting values for each

separate classification shown on the actuarial table;

(2) Adding the total values of all plant types and container

sizes (determined in (1) above) for each month separately to

determine the monthly market values. Then compare the resulting

twelve (12) monthly market values to determine the highest monthly

market value for the crop year;

(3) Taking the total value of each plant type and container size

obtained in (1) above for the month having the highest monthly

market value for the crop year (determined in (2) above) for each

classification specified in the actuarial table and multiplying

these values by .9, then multiplying the results by the percentage

coverage level you have elected;

(4) Multiplying each product obtained in (3) above by the

appropriate premium rate listed on the actuarial table;

(5) Adding the products obtained in (4) above; and

(6) Multiplying the total obtained in (5) above by your share.

(b) The annual premium will be earned in full when insurance

attaches. It is due and payable as follows:

(1) Forty percent (40%) on the later of September 30 preceding

each crop year or the date we accept the inventory for insurance;

(2) Thirty percent (30%) on January 1 of the crop year; and

(3) Thirty percent (30%) on April 1 of the crop year.

[[Page 31380]]

(c) Additional premium earned from an increase in the nursery

plant inventory summary is due and payable when the revised nursery

plant inventory summary is approved by us.

(d) Premium will not be reduced due to a decrease in the nursery

plant inventory summary, unless such decrease results from the

deletion of uninsurable inventory from the summary that was

erroneously reported as insurable.

8. Insured Plants

In lieu of the provisions of section 8 (Insured Crop) and

section 9 (Insurable Acreage) of the Basic Provisions (Sec. 457.8),

the insured nursery plant inventory will be all nursery plants in

the county reported by you or determined by us for which an

application is accepted, a premium rate is provided by the actuarial

table, and that:

(a) Are grown under an irrigated practice for which you have

adequate facilities and water at the time coverage begins in order

to carry out a good irrigation practice;

(b) Are classified as woody, herbaceous, or foliage landscape

plants;

(c) Do not include plants that produce edible berries, fruits,

or nuts;

(d) Are grown in standard nursery containers;

(e) Are grown in an appropriate growing medium;

(f) Are inspected by us and determined to be acceptable;

(g) Are listed on the Nursery Eligible Plant Listing unless a

written agreement provides otherwise;

(h) Are not stock plants;

(i) Are grown in accordance with the production practices for

which premium rates have been established; and

(j) Meet the ``mandatory'' or ``recommended'' storage

requirements, unless you have applied for and received the Frost/

Freeze, and Cold Damage Exclusion Option for those nursery plants.

9. Insurance Period

In lieu of the provisions of section 11 (Insurance Period) of

the Basic Provisions (Sec. 457.8), coverage begins on each unit or

part of a unit the later of October 1 or the date we accept the

inventory for insurance, provided you have complied with the terms

of paragraph 7.(b)(1). Coverage will not attach for plant inventory

added due to a revised nursery plant inventory summary until any

additional premium is paid in full. Insurance ends for each unit at

the earliest of:

(a) The date all plant inventory within the unit is sold or

otherwise removed unless that inventory is replaced and additional

earned premium is paid (If a portion of the plants are sold or

otherwise removed from inventory, and are not replaced, insurance

only ends on that part of the unit.);

(b) The date of final adjustment of a loss on the unit when the

total indemnities paid for the unit equal the amount of insurance

for that unit; or

(c) September 30 of the crop year.

10. Causes of Loss

(a) In accordance with the provisions of section 12 (Causes of

Loss) of the Basic Provisions (Sec. 457.8), insurance is provided

for unavoidable damage caused only by the following causes of loss

which occur within the insurance period:

(1) Adverse weather conditions;

(2) Fire, except as specified in (b)(4);

(3) Insects, but not damage due to insufficient or improper

application of pest control measures;

(4) Plant disease, but not damage due to insufficient or

improper application of disease control measures;

(5) Wildlife;

(6) Earthquake;

(7) Volcanic eruption;

(8) Failure of the irrigation water supply, due to an

unavoidable cause of loss occurring within the insurance period; or

(9) Frost or freeze if there is a failure or breakdown of frost/

freeze protection equipment or facilities and the failure or

breakdown is directly caused by an insurable cause of loss, provided

the insured nursery plants are damaged by freezing temperatures

within 72 hours after the failure of such equipment or facilities

and you establish that repair or replacement was not possible

between the time of failure or breakdown and the time the freezing

temperatures occurred.

(b) In addition to the causes of loss excluded in section 12

(Causes of Loss) of the Basic Provisions (Sec. 457.8), we do not

insure against any loss caused by:

(1) Brownout;

(2) Failure of the power supply unless such failure is due to an

insurable cause of loss;

(3) The inability to market the nursery plants as a direct

result of quarantine, boycott, or refusal of a buyer to accept

production;

(4) Fire, where weeds and other forms of undergrowth in the

vicinity of the building and on your property have not been

controlled; or

(5) Collapse or failure of buildings or structures.

11. Duties in the Event of Damage or Loss

In addition to your duties contained under section 14 (Duties in

the Event of Damage or Loss) of the Basic Provisions (Sec. 457.8),

you must:

(a) Obtain our written consent prior to:

(1) Destroying, selling or otherwise disposing of any plant

inventory that is damaged; or

(2) Changing or discontinuing your normal growing practices with

respect to care and maintenance of the insured plant inventory.

(b) Upon our request, provide complete copies of your nursery

plant inventory wholesale price list for the 12 month period

immediately preceding the loss and your marketing records including

plant shipping invoices for the same period.

(c) Submit a claim for indemnity to us on our form, not later

than 60 days after the earliest of:

(1) The date of your loss; or

(2) The end of the insurance period.

12. Settlement of Claim

(a) The indemnity will be the amount calculated by us for each

unit as follows:

(1) Subtracting field market value B from the lesser of:

(i) Field market value A; or

(ii) The highest monthly market value for the unit reported on

the nursery plant inventory summary multiplied by .9;

(2) Subtracting the monthly loss deductible (not to exceed the

remaining crop year loss deductible) from the product obtained in

(1) above; and

(3) Multiplying the result by your share.

(b) Individual insured losses occurring on the same unit during

the crop year may be accumulated if each loss is reported and valued

by us to satisfy the crop year loss deductible. Paragraph 12.(a)(2)

will not apply to any subsequent individual loss determinations when

the total amount of accumulated monthly loss deductibles is equal to

or greater than the crop year loss deductible. Total indemnities for

a unit will not exceed the amount of insurance for the unit.

(c) The value of any insured plant inventory may be determined

on the basis of our appraisals conducted after the end of the

insurance period.

Sec. 457.115 Nursery Frost, Freeze, and Cold Damage Exclusion Option.

This is not a continuous option. Application for this option

must be made on or before the sales closing date for each crop year

this Option is to be in effect (see exception in item 2 below).

Insured's Name---------------------------------------------------------

Address----------------------------------------------------------------

Contract Number--------------------------------------------------------

Identification Number--------------------------------------------------

SSN/EIN----------------------------------------------------------------

Tax I.D.---------------------------------------------------------------

Crop Year--------------------------------------------------------------

Unit Number------------------------------------------------------------

Hardiness Zone---------------------------------------------------------

For the crop year designated above, the Nursery Crop Provisions

(Sec. 457.114) are amended in accordance with the following terms

and conditions:

1. You must have the Common Crop Insurance Policy Basic

Provisions and Nursery Crop Provisions in force.

2. This option must be submitted to us on or before the final

date for accepting applications for the crop year in which you wish

to insure your nursery plant inventory under this option. If the

provisions of paragraph 6.(f)(2) of the Nursery Crop Provisions

apply, we may accept this option after the sales closing date, or we

may allow additional plants to be added to this option after such

date.

3. Executing this option does not reduce the premium rate for

nursery crop insurance.

4. All provisions of the Basic Provisions (Sec. 457.8) and

Nursery Crop Provisions (Sec. 457.114) not in conflict with this

option are applicable.

5. Upon execution of this option, the following plant varieties

will not have frost, freeze, or cold damage coverage on this unit

because the mandatory (Risk Group A) or recommended (Risk Group B)

over-wintering requirements will not be met.

[[Page 31381]]

------------------------------------------------------------------------

Over-wintering

Scientific name Common name requirements to be

excluded

------------------------------------------------------------------------

................... .......................

................... .......................

................... .......................

................... .......................

................... .......................

------------------------------------------------------------------------

Insured's Signature

----------------------------------------------------------------------

Date-------------------------------------------------------------------

Insurance Company Representative's Signature and Code Number

----------------------------------------------------------------------

Date-------------------------------------------------------------------

Done in Washington, DC, on June 9, 1995.

Kenneth D. Ackerman,

Manager, Federal Crop Insurance Corporation.

[FR Doc. 95-14710 Filed 6-14-95; 8:45 am]

BILLING CODE 3410-08-P