Subject: Request dated January 25, 2011, and resubmitted to the Risk Management Agency (RMA) on March 10, 2011, requesting a Final Agency Determination for the 2007 and succeeding crop years regarding the interpretation of section 20(b)(1) of the Common Crop Insurance Policy Basic Provisions (Basic Provisions), published at 7 C.F.R. 457.8. This request is pursuant to 7 C.F.R. part 400, subpart X.
Section 20 of the Basic Provisions states, as here pertinent:
20. Mediation, Arbitration, Appeal, Reconsideration, and Administrative and Judicial Review
(a) If you and we fail to agree on any determination made by us except those specified in section 20(d), the disagreement may be resolved through mediation in accordance with section 20(g). If resolution cannot be reached through mediation, or you and we do not agree to mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA), except as provided in sections 20(c) and (f), and unless rules are established by FCIC for this purpose. Any mediator or arbitrator with a familial, financial or other business relationship to you or us, or our agent or loss adjuster, is disqualified from hearing the dispute.
(b) Regardless of whether mediation is elected:
(1) The initiation of arbitration proceedings must occur within one year of the date we denied your claim or rendered the determination with which you disagree, whichever is later;
(2) If you fail to initiate arbitration in accordance with section 20(b)(1) and complete the process, you will not be able to resolve the dispute through judicial review;
(3) If arbitration has been initiated in accordance with section 20(b)(1) and completed, and judicial review is sought, suit must be filed not later than one year after the date the arbitration decision was rendered; an
If a policyholder does not agree with an Approved Insurance Provider's (AIP) determination, such as the adjustment of a claim, calculation of the loss indemnity, or denial of claim, the policyholder may have the determination decided through arbitration.
The requestor believes the right to dispute a determination made by the AIP is not open-ended, but limited to occur within one year beginning on the date the claim was denied or the date when a determination was rendered by the AIP. Denial of claims would be evidenced by a dated and written denial notice. A determination would be evidenced by a signed and dated production worksheet and the issuance of the resultant payment of any calculated payable indemnity due.
The requestor notes FAD-106, issued by RMA on January 21, 2010, clarifies that a similar time limit is not imposed on the AIP. The AIP, as clarified by FAD-106, may go back and adjust data in previous crop years due to, for example, misreporting or non-compliance, and recover overpayments. It is not clear if the AIP is allowed by the policy to go back and adjust data in previous crop years as a result of new information of mediated settlements that would increase indemnity payments at the policyholder's request more than a year after the initial determination and without a timely initiation of arbitration proceedings.
The requestor states section 20(b)(1) of the Basic Provisions is unambiguously written that a one year deadline is imposed on the policyholder to begin arbitration proceedings if the policyholder disputes a determination. The requestor interprets this time limit to be specific to each crop year (i.e., an arbitration filed and pending in one crop year does not satisfy this requirement for all future crop years).
The requestor states the Basic Provisions govern the insurance coverage for insurable crops grown by an eligible producer for a specified crop year. A separate policy is issued for each crop year. While crop insurance policies are described as "continuous," they are automatically renewed based on previous coverage. In fact, a policyholder may, in a succession of crop years, change policies (e.g., APH to RA to CRC to GRIP to APH), transfer to a different insurance provider, or both.
The requestor believes section 20 of the Basic Provisions is applicable only for the insured crops of the crop year for which the coverage attaches. A dispute in one crop year does not automatically carryover to put successive crop years' determinations in dispute. Arbitrating a dispute in a past crop year does not carry forward to place all future crop years in dispute until it is resolved. Further, the arbitration of a dispute in one crop year does not toll the one year limitations period within which a policyholder must demand arbitration pursuant to the insurance policy provisions. Therefore, the deadline to initiate arbitration proceedings is not satisfied by having initiated arbitration proceedings in a previous crop year, perhaps with a different insurance provider.
The requestor believes a finding in an arbitration or settlement in mediation of a previous crop year is not binding on a determination already made in a successive crop year unless the policyholder disputes the successive determination and initiates a separate arbitration proceeding (which may or may not uphold the previous finding) within the one-year time limit imposed by section 20 of the Basic Provisions.
FAD-106 clarifies that the AIP may correct any errors or non-compliance in previous crop years that would result in an overpayment. But the AIP is not restricted by the policy to dispute and then correct within one year of its determination, unlike the policyholder.
Therefore, the AIP is not compelled to reopen a claim (via arbitration) more than a year after a determination is made in order to accommodate a previous crop year's arbitration finding that does not result in an overpayment. Furthermore, the AIP's denial to reopen the claim does not constitute a new denial of loss, so it also does not reset the clock (i.e., it is not a new determination or denial of loss) in regards to the arbitration clause. If a simple request to reopen a claim is all that is needed to reset the time limit, the time limit meaningless.
The requestor states an arbitrator has no authority to consider a demand for arbitration brought by a policyholder more than one year after a determination has been made, as evidenced by a signed and dated production worksheet and indemnity issued, under the Basic Provisions. Section 20 of the Basic Provisions requires formal action on the part of the policyholder by a specified deadline. Simply holding intent to dispute, pending other possible eventualities, does not suffice.
Therefore, the requestor proposes the following clarification for section 20:
1. An AIP is not compelled to reopen a closed claim if it does not believe it has been misreported or is non-compliant and any correction would not result in an overpayment, except a timely executed request for arbitration as provided by section 20 of the Basic Provisions.
2. After one year following the determination or denial of claim, the arbitrator has no authority to consider a demand for arbitration. Any award made to the policyholder via arbitration initiated after the one year time limitation exceeds the arbitrator's authority granted under the Basic Provisions.
The requestor states that identical or nearly identical language is set forth in the Crop Revenue Coverage (CRC) and the Revenue Assurance (RA) insurance policies. Accordingly, they request this Final Agency Determination explicitly be made applicable to the CRC and RA policies as well.
Final Agency Determination
The Federal Crop Insurance Corporation (FCIC) agrees in part with the requestor's interpretation. FCIC agrees section 20(b)(1)of the Basic Provisions provides a one year deadline for the policyholder to begin arbitration proceedings if a determination of the AIP is disputed. RMA posted FAD-126 on its website on November 2, 2010, stating the policyholder is required to file the demand for arbitration with the arbitration service within one year of the date of denial of the claim or the date in which the AIP rendered the determination with which the policyholder disagrees, whichever is later.
FCIC agrees that section 20 of the Basic Provisions is applicable only for one crop year at a time. FCIC agrees that a dispute in one crop year does not automatically carryover to put successive crop years' determinations in dispute. FCIC agrees that arbitrating a dispute in a past crop year does not carry forward to place all future crop years in dispute until it is resolved.
FCIC also agrees that an arbitration determination in a previous crop year is not binding on a determination in a successive crop year, unless the policyholder disputes the successive determination and initiates a separate arbitration within one year of such determination.
FCIC agrees in part that the AIP is not compelled to reopen a claim more than one year after a determination is made in order to accommodate a previous crop year's arbitration finding that does not result in an overpayment. An arbitration ruling alone does not require an AIP to reopen a claim that is not the subject of the arbitration more than one year after a determination is made. Additionally, an arbitration ruling in and of itself is not conclusive that an error was made in regards to approved policy and procedure in any year but the year that is the subject of the arbitration because every year is fact specific. However, the AIP is required to correct claims when information is found to be incorrect in accordance with FCIC approved policy provisions and procedures. FCIC agrees that the AIP's denial to reopen the claim does not constitute a new denial of loss. Therefore, a denial to reopen a claim cannot form the basis of a new determination or denial of loss for the purposes of the arbitration clause.
FCIC agrees that if the policyholder fails to request arbitration within one year of any dispute, the policyholder has waived the right to seek arbitration and the arbitrator does not have the authority to hear the dispute.
The Basic Provisions specify when information from prior crop years must be revised when there is no specific arbitration award for the crop year and AIPs are required to comply with those provisions. FCIC agrees that, unlike the one year deadline imposed on policyholders to request arbitration, there is no time limit specified in the policy in which the AIPs must make their correction.
FCIC agrees that each crop year stands on its own. Section 2(a) of the Basic Provisions states each policy is continuous meaning for each subsequent crop year that a policy remains continuously in force; coverage begins on the day immediately following the end of the insurance period for the prior crop year and under the terms of the policy, each crop year forms a separate policy with a separate insurance period.
Even though 7 C.F.R. part 400, subpart X is only applicable to provisions of the Federal Crop Insurance Act and the regulations promulgated hereunder, and the CRC and RA policies are not codified in the Code of Federal Regulations, to the extent those provisions are identical or nearly identical, this Final Agency Determination applies accordingly to assure consistent, uniform, and equitable treatment to all producers insured under the same policy provisions.
In accordance with 7 C.F.R. 400.765 (c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2007 and succeeding crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).
Date of Issue: April 20, 2011