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2009 Special Provisions of Insurance Red River Valley Sugar Beet SPOI Statement Minnesota and North Dakota
FAQs

Mar 17, 2009

Statement: If there are separate persons that claim a share of the same crop in a field, each person who has an insurance policy in effect for the crop must insure all of the crop acreage of the same crop in the field on a share basis, unless the person has at least four years of separate verifiable actual production history for the specific acreage in which they claim a share and such yields are used to establish your production guarantee. If a person has an approved master yield (MY), all of the crop acreage in the field must be insured on a share basis.

Definition of field: All acreage of tillable land within a natural or artificial boundary (e.g. roads, waterways, fences, etc.). Different planting patterns or planting different crops do not create separate fields.

Q: The first half of the first sentence states “…persons that claim a share of the same crop in a field, each person who has an insurance policy in effect must insure all of the crop acreage of the same crop in the field on a share basis…” Does RMA intend this Special Provisions of Insurance (SPOI) statement to only apply to those producers who have a bona fide share arrangement with the other producers on that field? Or does RMA intend this SPOI statement to apply to producers regardless of whether they actually share in each others’ operations, production, contracts, etc?
A: RMA intends this statement to apply only to separate persons (legal entities), who have a common operator [most often called the general partner (GP), farming Limited Liability Company (LLC), or operating LLC] for different sugar beet entities in the same field. In this case, there will be a common social security number (SSN) or employer identification number (EIN) for the common operator or for those with a substantial beneficial interest (SBI) in the insured persons.

For example, if two joint ventures each have a 100-percent share in 100 acres of sugar beets in a 360-acre field and have the same common operator, the statement is applicable (see table). An exception is allowed if an entity has at least four years of a separate verifiable actual production history (APH) for the 100 acres and the APH is used to establish the production guarantee. Any entity who does not have four years of separate verifiable APH or who uses an approved MY to determine the production guarantee must insure all of the crop acreage of the same crop in the field on a share basis. In accordance with the definition of field in the Basic Provisions (BP) (05-BR), different planting patterns or planting different crops do not create separate fields.

Example: In this example, there is one field consisting of 360 acres with 300 acres of sugar beets and 60 acres of corn. There are 200 acres of sugar beets operated by GP Jones and 100 acres of sugar beets operated by GP Smith.

100 Acres Sugar Beets 60 Acres Corn 100 Acres Sugar Beets 100 Acres Sugar Beets
JV 1
60-percent share

JV 2
100-percent share
JV 3
100-percent share
GP Jones/
Brown

GP Jones/
Green
GP Smith

Joint Venture (JV) 1/GP Jones with Brown – The statement requires 200 acres of sugar beets to be insured at a 50-percent share. In this case, 200 acres are all operated by GP Jones. Any claim from JV 1 and JV 2 will reflect the total production to count from the entire 200 acres farmed by GP Jones. The production reports from JV 1 and JV 2 will reflect the total production to count from the entire 200 acres farmed by GP Jones and would be included in calculating any applicable MY.

JV 2/GP Jones with Green – The statement requires 200 acres of sugar beets to be insured at a 50-percent share. In this case, 200 acres are all operated by GP Jones. Any claim from JV 1 and JV 2 will reflect the total production to count from the entire 200 acres farmed by GP Jones. The production reports from JV 1 and JV 2 will reflect the total production to count from the entire 200 acres farmed by GP Jones and would be included in calculating any applicable MY.

JV 3/GP Smith - The statement does not affect JV 3 because GP Smith does not have other acreage farmed under another joint venture in the field. The corn field is included in the example to illustrate that a different crop does not create separate fields.

Q: If RMA intends this statement to apply to all producers regardless of whether they share in each others’ operations, production, contracts, etc., this SPOI statement would force persons who do not operate together, and do not share information, to begin doing so. This would be difficult to enforce. Sugar beet producers who may all farm specific acreages on a large plot of land generally do not share. Therefore, they report their 100-percent acreage, and their production, but do not report – nor do they even know – the acreage and production of the others who may be farming other areas of that land. Finally, how will this first statement work with persons who have a Master Yield? Is it not applicable?
A: As indicated in the previous response, only those entities with the same common operator, (GP, farming LLC, or operating LLC) will be required to insure all acreage in a field on a share basis.

Q: How should this acreage be reported, and losses worked, if it is determined that JV 1 and JV 2 have at least four years of separate verifiable APH for each specific 100 acre portion of the field being farmed by these two entities and are using regular APH procedures to establish the production guarantee rather than a master yield for the GP operator Jones?
A: JV 1 would report 100 acres at 100-percent share and JV 2 would also report 100 acres at 100-percent share. For loss adjustment purposes, each 100 acre portion of the field for these two entities would be worked independently.

Q: The final sentence states, “If a person has an approved master yield, all of the crop acreage in the field must be insured on a share basis.” Master Yields (MY) are created on an operator/tenant basis. They are a function of data for all acreage of the crop that the operator has in the county (Crop Insurance Handbook Exhibit 7). Does RMA intend for individual approved MY to remain intact and in force?
A: MY can still be used. However, if a producer uses a MY to insure only a portion of the acreage within a field, the SPOI statement requires that all of the acreage in a field farmed by a common operator to be insured on a share basis. This will not require changing past production reports. Future production reports will reflect the total acreage and total production from the field as indicated in the example above.

Q: Will RMA revise the Crop Insurance Handbook Master Yield procedure for the purpose of this SPOI statement?
A: No.

Q: An insured has a 15-acre sugar beet contract and incorrectly reports 15 acres on the acreage report. The report is incorrect because there are other entities within the same 100-acre field with the same general partner. The 15 acres has a discernible break from the other 85 acres, but does not qualify as a separate field. The 15 acres drowns out and will be replanted. The 15 acres as one unit would qualify for 20/20 and a replant payment. Revising the acreage report to 100 acres with a 15-percent share, the new unit does not qualify for the replanting payment because of the 20/20 rule. Is that correct?
A: Yes, the acreage report must be revised to reflect the 100 acres and at least 20 acres would have to be damaged to receive a replant payment.

Q: An insured has a sugar beet contract for 15 acres and reports 15 acres on the acreage report. When the acreage is reported, the AIP finds out there are three other insureds with the same general partner within the same field. The three other insureds are insured with three different companies. How does the AIP know how many acres to insure? If the other three insureds misreport acreage totaling a difference greater than 10 percent, all entities are subject to the Misreported Information Factor (MIF), including the insured who actually has 15 acres reported accurately. Is that correct?
A: Each of the insureds in the field would be responsible to accurately report the entire acreage in the field. If any one of the four insureds fails to report accurately, they would be subject to the misreporting provisions in section 6 of the Basic Provisions (BP). Insureds who are unsure of the number of acres in the field may have the field measured in accordance with section 6(d)(4) of the BP. Additionally, it seems unlikely the “insureds” would not be aware of the acreage in the field if there is only one common operator (GP, farming LLC, or operating LLC).

Q: When a claim is paid, the indemnified acreage is the lesser of contracted, determined or insured acres in that unit. How should the adjuster determine the entire contracted acreage in a field when three other entities with the same general partner could be insured with three different insurance companies within that field? With privacy concerns, the other entities may choose not to provide their contracts or production.
A: When an entity insures an entire field on a share basis, they will be considered to have a contract for all acreage in the field. For example, if the insured entity has a contract for 15 acres in a 100-acre field, but is required to insure 100 acres with a 15-percent share, the entire 100 acres will be considered to be under contract for the purpose of determining the number of insurable acres for the entity.

Q: An entity with a 20-acre contract incorrectly reported 20 acres at 100-percent share. The field has 100 acres of sugar beets that are farmed by the same general partner. The 20 acres has a 100-percent loss, appraised at zero on June 20. Other acreage in the field was not drowned out and will go to harvest. Is it correct that the entity with the 20-acre contract must wait for the entire 100 acres to be harvested so the total production can be determined?
A: Yes, the claim cannot be completed on the unit until all 100 acres in the field have been appraised or harvested.

Q: How will “field” be defined? Per the SPOI statement, separate persons that claim a share of the same crop in the field must insure all of the acreage on a share basis. An extreme example: There is a solid section that could be farmed as one field, per the policy definition; however, there are four separate operators for each of the four quarters sections. The operator of the SE quarter has beets in the east 80. The operator of the NW quarter has beets in the west 80. Is this all one field? Using the new statement, and per the definition of a “field” in the BP, it appears that it would be considered a single field.
A: Field is defined in section 1 of the BP. In this example, all sugar beet acreage will be considered to be in one field. To be considered separate, fields must be separated by a natural or artificial boundary such as a road, waterway, fence, etc. Different planting patterns or planting different crops does not create separate fields. As indicated in the example above, separate GP’s are not required to insure on a share basis and in this extreme example there are four separate common operators; therefore, the SPOI is not applicable.

Q: What would happen if you have two insureds farming side by side and each plants sugar beets on their own land (one has the SE quarter and the other the SW quarter)? With Global Positioning System, Auto-Steer, etc., and other technologies, these two separate operators could have their field edges side by side on the quarter line so that it appears it is one operator farming that land. Per the statement, it looks like they would need to consider this one field. Is this correct?
A: No, see previous response.

Q: With all of the privacy laws, how can we require someone to disclose their information to another party?  If we have a field that contains more than one entity, but each party has their own separate farm, how can we force them to share their information with each other?  These people are equivalent to two separate businesses in a town; we cannot force one to tell the other what they’re producing for sale.
A: As indicated in the example above, separate common operators will not be required to obtain another operator’s production records.

Q: There are 100 acres in one field and they formerly reported 40 acres on Joe Smith Ltd Partnership 1 with a 100-percent share and 60 acres on Joe Smith Ltd Partnership 2 with a 100-percent share. Under the new rules, do they report 100 acres for both entities?
A: Yes, under the new SPOI statement, when there is only one operator, Joe Smith Ltd Partnership 1 must report 100 acres with a 40-percent share, and Joe Smith Ltd Partnership 2 must report 100 acres with 60-percent share. 

Contact Information

For more information, contact the Billings or St. Paul Regional Offices.