[Federal Register Volume 60, Number 115 (Thursday, June 15, 1995)]
[Rules and Regulations]
[Pages 31375-31381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14710]



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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