Avoiding pitfalls associated with crop insurance
Federal crop insurance is available for most commercial crops to those with a bonafide interest in the crop. The Federal Crop Insurance Corporation (FCIC) manual defines a bonafide interest as an owner-operator, landlord, tenant or sharecropper with a share in the crop. The FCIC manual also sets out a multitude of detailed requirements for crop insurance applications and acreage reports. Particular care should be taken to make sure crop insurance documents are accurately completed. In addition, one should make sure that crop insurance documents are consistent with how the insured crop and land is certified with the Farm Service Agency (FSA). This is sometimes difficult to police because deadlines for crop insurance expire in the fall or spring in advance of a crop whereas FSA certifications are typically in the summer of the crop year. In addition, crop insurance agents who assist in filling out crop insurance documents are typically not involved in certification of the same crop with the FSA.
Differences between crop insurance documents and FSA certifications may also go unnoticed for several years when there are no or only small crop insurance claims. However, they could become very important and have huge financial impacts at the point when the farmer needs the crop insurance the most — namely, when he has a large loss and large insurance claim. The FCIC requires that large claims (any claim that could result in an indemnity in excess of $100,000) be audited by the insurance company. The manual also authorizes the insurance company to utilize FSA certifications during the audit to verify acreage and information reported on the crop insurance documents. Discrepancies are often used by the insurance company to reduce or even deny the large claim.
Avoid the potential pitfall by providing your crop insurance agent with a detailed explanation of your operation and carefully reviewing crop insurance documents in conjunction with how you have or plan to certify your crops with the FSA.
Author Jeff Todd, along with colleagues Spencer Smith and Jeremiah Buettner, form the firm’s Crop Insurance Dispute team. Together, they have successfully represented more than 150 wheat, corn, cotton and grain sorghum farmers in all three crop insurance dispute forums — administrative appeals, arbitration, and federal court judicial reviews — and have had their cases highlighted in the American Agricultural Law Association’s Agricultural Law Update newsletter.