What every farmer needs to know about the crop insurance appraisal process
Given the difficult weather events being experienced throughout the heartland, it is important that farmers understand their duties and those of the adjuster during the crop insurance appraisal process. The appraisal process consists primarily of an on-farm inspection of the damaged or destroyed crops during the growing season or following the harvest, as applicable. During this inspection, it is the insured’s duty to fully cooperate with the adjuster, including showing the adjuster the damaged crop, allowing the adjuster to remove samples, and providing requested crop records.
While it is the duty of the adjuster to be “thoroughly familiar” with an insured’s insurance contract and coverage, it is important to talk with the adjuster to ensure he has an accurate understanding of the insured’s operation and insurance. Similarly, it is the adjuster’s duty to explain the insured’s responsibilities, filing procedures, and what will be done during the inspection. Take advantage of this opportunity to fully discuss these topics.
As part of the inspection process, the adjuster may grant consent to destroy or abandon the insured acreage, put insured acreage to another use, or replant the acreage. While it is not uncommon for an adjuster to provide this consent verbally (for example, by phone call after the inspection), crop insurance policies expressly require that the insured obtain written consent before destroying insured crops. One of the most common issues that we see raised in crop insurance disputes is the lack of written consent and whether consent was actually given. To avoid such issues, producers should not take any action without first obtaining written consent from the adjuster.
After the inspection, the adjuster will request the insured’s signature on the claim form. The adjuster is required to
- Review all entries on appraisal worksheets and claim forms with the insured,
- Explain any circumstances that may affect the indemnity, and
- Explain the Certification Statement on the claim form, which represents the insured’s certification that the information on the claim form is complete and accurate.
Take this final opportunity to discuss each aspect of the claim with the adjuster, as a signature on this form may waive arguments that it contains incomplete or incorrect information.
Finally, the most important thing that the insured can do throughout the crop year is to retain and organize thorough records relating to the crop. It is the farmer’s duty to retain (and provide upon request) complete records of the planting, replanting, inputs, production, harvesting and disposition of the insured crop on each unit for three years after the end of the crop year. Not only is this required, a thorough and well organized record system can often be the insured’s key to avoiding – or winning – disputes that could delay or decrease an indemnity.
As always, should disputes arise, be sure to review the timelines to challenge an insurer’s or the government’s determinations.
FREQUENTLY ASKED QUESTIONS ABOUT FEDERAL CROP INSURANCE DISPUTES
I just received a determination from my crop insurance provider, and I don’t agree with their findings. What are my next steps?
Your federal crop insurance policy contains a dispute resolution provision (section 20 in the common crop provisions or section 16 in GRIP basic provisions) that outlines your rights. The entire provision is lengthy and complicated, but generally any dispute that you have with your insurance company (or AIP) must be resolved through mediation or arbitration.
If you choose to arbitrate, the dispute resolution provision requires that arbitration be conducted in accordance with the rules of the American Arbitration Association (“AAA”), a neutral body that acts as an administrator of arbitrations. While the AAA is a well recognized and fair arbitration association, it can be very costly to arbitrate within the AAA as you must pay AAA fees plus the fees of the arbitrator(s). It has been previously determined that while arbitrations must be conducted pursuant to the AAA rules, actually using the AAA to administer the arbitration is not required. Thus, in most circumstance we have reached an agreement with insurance companies to select and use an independent arbitrator who is not affiliated with the AAA to conduct the proceedings as long as the arbitrator follows the rules of the AAA.
What’s the difference between mediation and arbitration?
Mediation is a non-binding dispute resolution method where a neutral is hired to assist the parties in reaching a mutually agreeable resolution of the dispute. Because mediation is non-binding, both parties must agree to settle in order for the mediation to be successful. Arbitration is a dispute resolution method where the arbitrator hears evidence from both sides and renders a determination that is binding on the parties. In arbitration there is a winner and a loser. In either case, you will want to be represented by a lawyer who has proven experience handling crop insurance disputes and aggressively negotiating with AIPs.
Are there any drawbacks to mediation?
While mediation is a useful tool in resolving disputes, we generally do not encourage mediation in crop insurance cases. Although you are guaranteed to incur costs associated with mediation, you are not guaranteed of reaching a resolution in mediation. In most cases, before mediation is even suggested, your crop insurance company will voluntarily resolve issues that it has the ability to settle. Because insurance company actions are constantly monitored or subject to audits by the RMA, insurance companies will not or cannot settle more difficult disputes without the blessing of the RMA. Settlements without such approval can result in the AIP being denied reinsurance for the amount paid. In these difficult disputes, the insurance company actually needs a binding determination by an arbitrator so that it can make the payment that you believe is due. In such instances, mediation is generally a waste of time and resources.
How long do I have to begin arbitration proceedings?
Arbitration proceedings must begin within one year of the determination or denial of claim, whichever is later. If you miss the deadline, you lose your opportunity to dispute the determination. In a recent decision, the FCIC interpreted the one year rule to mean that arbitration must actually be initiated by the AAA (or substitute arbitration service) and that simply sending a demand for arbitration to the insurance company within the one-year period is not sufficient.
Are arbitration determinations appealable?
The dispute resolution provisions of your federal crop insurance policy provide for judicial review of arbitration awards. The lawsuit for judicial review must be filed in the judicial district where the insured crop is located and within one year of the decision.
RMA has made a decision that adversely impacts my rights under my crop insurance policy. What should I do?
If RMA has gotten involved in your claim or modifies, revises or corrects the claim prior to payment for reasons other than good farming practices, then the dispute resolution provisions in your crop insurance policy provide that you must pursue the matter through a NAD administrative appeal against the RMA. You are not allowed to pursue mediation or arbitration against your crop insurance company.
As the administrator of the federal crop insurance program, RMA often makes rules that impact your policy. If these rules are questioned, the RMA will often advise producers that their actions are matters of general applicability which are not appealable. However, RMA’s liberal view of matters of general applicability are often successfully challenged. To initiate the challenge, you must seek an appealability determination from the Director of the NAD. RMA determinations and actions are appealable if they constitute an “adverse determination.” An “adverse decision” is defined by the FCIC regulations as “a decision by an employee or Director of the [RMA or FCIC] that results in the participant receiving less funds than the participant believes should have been paid or not receiving a benefit to which the participant believes he or she was entitled.” 7 CFR § 400.90.
What is the deadline for filing a NAD appeal or seeking an appealability determination?
When an adverse decision is received from the RMA, you have 30 days to file an appeal with the NAD. Likewise, if RMA advises you that actions that it took are generally applicable and not appealable, you must seek an appealability determination from the NAD within 30 days.
How are NAD administrative appeals conducted?
NAD appeals are conducted pursuant to federal regulations. After an appeal is filed, the NAD Director appoints a hearing officer who schedules a telephonic preliminary hearing to determine the issue or issues in dispute. You are entitled to select between the following hearing methods: (i) record review, (ii) telephonic hearing, or (iii) in person hearing. In a record review, the parties submit written statements to the hearing officer for consideration. This is a useful and cost effective method when the dispute is centered on legal arguments rather than disputed factual issues. Telephonic and in person hearings are conducted much like an arbitration or bench trial. Each party is entitled to a brief opening statement followed by presentation of evidence and closing argument. In any case, the hearing officer will make a written determination as to whether or not RMA erred in its determination.
What if I do not agree with the hearing officer’s determination?
Within 30 days of an adverse hearing officer decision, you may request review by the Director of the NAD. It is not unusual for the NAD Director to change or modify hearing officer determinations.
What if I don’t agree with the final determination resulting from the NAD Appeal?
You have the right to file a lawsuit in federal court within one year of the date of the decision in order to obtain a judicial review of the decision.
If I win my arbitration or NAD appeal, can I recover my attorneys fees and costs?
In most cases, attorneys fees and costs are not recoverable in federal crop insurance arbitrations. In NAD appeals, the Equal Access to Justice Act (“EAJA”) provides for the recovery of attorney fees – up to pre-established limits – under certain circumstances. In order to be eligible for an EAJA attorney fee award: (1) you must be the prevailing party, (2) you must meet the “net worth test” (meaning that if you are an individual you must have a net worth of less than $2 million, if the insured is an entity it must have a net worth of $7 million), and (3) RMA must not have been “substantially justified” in its position.
What happens after I win an arbitration or NAD appeal?
Because overturning arbitration awards by judicial review are extremely difficult, you can generally expect to receive prompt payment from your insurance company after receiving a successful arbitration award. In NAD appeals, federal regulations require RMA to implement the final administrative determination within 30 days after the decision becomes final. If RMA fails or refuses to implement the decision, a federal court lawsuit may be necessary to enforce the decision.
What do I do if I disagree with my crop insurance company regarding the interpretation of a provision in my crop insurance policy?
If a dispute in any way involves a policy or procedure interpretation, regarding whether a specific policy provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy provision or procedure, you or the crop insurance company must obtain a binding interpretation from RMA pursuant to federal regulation. Failure to obtain the necessary interpretation will nullify an arbitration award.
I received a letter saying my claim was denied because I did not use good farming practices. What are my options for challenging this?
Even if the good farming practice (GFP) determination was made by your crop insurance company, you may not challenge the decision through arbitration. Likewise, you may not challenge a GFP decision via a NAD appeal. Rather, your crop insurance policy outlines a process for challenging a good farming practice (GFP) decision by requesting reconsideration through the FCIC/RMA. RMA has published a memorandum that governs GFP request for reconsideration. This can be a lengthy process that takes months to complete.
Am I required to seek reconsideration before challenging the GFP determination in court?
No. Reconsideration is not required. While your crop insurance policy states that you must request reconsideration of a GFP determination before filing a lawsuit, this provision is in conflict with FCIA § 508(a)(3), which does not require an insured to use all administrative remedies before bringing suit. Despite a final agency determination that recognizes this conflict, the policy language has not been revised and crop insurance company letters often advise that seeking reconsideration is required.