[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Rules and Regulations]
[Pages 42979-42988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21117]


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DEPARTMENT OF AGRICULTURE
7 CFR Part 402

RIN 0563-AB09


Catastrophic Risk Protection Endorsement

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes part 
402 chapter IV of title 7 of the Code of Federal Regulations (CFR). The 
intended effect of this rule is to provide for a catastrophic risk 
protection plan of insurance. This coverage is the lowest level 
required to be purchased by a producer to be eligible for certain other 
agricultural farm program benefits. The producer may execute a waiver 
of any eligibility for emergency crop loss assistance in connection 
with the crop rather than obtain insurance coverage to be eligible for 
certain other agricultural farm program benefits. This action is needed 
to comply with statutory mandates of the Federal Crop Insurance Act 
(Act), as amended by the Federal Crop Insurance Reform Act of 1994 
(Reform Act) and the Federal Agriculture Improvement and Reform Act of 
1996 (1996 Act).

EFFECTIVE DATE: August 20, 1996.

FOR FURTHER INFORMATION CONTACT: Louise Narber, Program Analyst, 
Research and Development Division, Product Development Branch, Federal 
Crop Insurance Corporation, United States Department of Agriculture, 
9435

[[Page 42980]]

Holmes Road, Kansas City, MO 64131, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order No. 12866 and Departmental Regulation 1512-1

    This action has been reviewed under United States Department of 
Agriculture (USDA) procedures established by Executive Order No. 12866. 
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 December 1, 2001.
    This rule has been determined to be economically significant for 
the purposes of Executive Order No. 12866 and, therefore, has been 
reviewed by the Office of Management and Budget (OMB).

Cost Benefit Analysis

    A Cost Benefit Analysis has been completed and is available to 
interested persons at the address listed above. In summary, the 
analysis finds that crop insurance reform, generally is expected to 
result in net positive benefits to producers, taxpayers, and society. 
The effects on individual producers compared to payments under ad hoc 
disaster programs depends primarily on the farm program payment yield 
compared to the farm's actual yield and market prices. In general, 
however, the reform is expected to result in less volatility of 
producers' incomes and less risk of no income due to adverse weather 
events. Rural communities and producers will benefit from the certainty 
of payments in times of catastrophic yield losses. The Government and 
taxpayers will benefit from a single disaster protection program and 
consequent reduced Federal outlays. Although producers who had not 
previously participated in the Federal crop insurance program will have 
an added burden to make application and report yields and acreage, the 
benefits in terms of greater risk protection outweigh the costs.

Paperwork Reduction Act of 1995

    In accordance with the Paperwork Reduction Act of 1995, the 
information collection requirements contained in these regulations have 
been previously approved by OMB and assigned OMB control number 0563-
0003 through September 30, 1998. The 1996 Act alleviates producers from 
the requirement to obtain at least catastrophic coverage on crops of 
economic significance to be eligible for certain other USDA program 
benefits if the producer waives any eligibility for emergency crop loss 
assistance in connection with the crop. Due to this provision, FCIC 
anticipates that fewer producers will obtain insurance coverage. This 
will reduce the paperwork burden. We estimate that approximately 30 
percent of the insureds with CAT coverage will cancel their crop 
insurance coverage. As a result the paperwork burden approved under OMB 
Number 0563-0003 will be reduced by 44,176 hours. Copies of the 
information collection may be obtained from Bonnie Hart, USDA, FSA, 
Advisory and Corporate Operations Staff, Regulatory Review Group, P.O. 
Box 2415, Ag Box 0572, Washington, D.C. 20013-2415, 8:15 a.m.-4:45 
p.m., Monday through Friday, except holidays, telephone (202) 690-2857.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule contains no Federal 
mandates (under the regulatory provisions of Title II of the UMRA) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
UMRA.

Executive Order No. 12612

    It has been determined under section 6(a) of Executive Order No. 
12612, Federalism, that this rule does not have sufficient Federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions 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.

Regulatory Flexibility Act

    This regulation will not have a significant impact on a substantial 
number of small entities. However, it does provide additional 
flexibility and cost savings for small entities in the following three 
areas. First, producers are no longer required to obtain at least CAT 
coverage for economically significant crops. Instead, they may sign a 
waiver foregoing emergency crop loss assistance. Insureds likely to 
decline coverage are those who believe that the costs associated with 
obtaining insurance exceed the benefits. The producers most likely to 
fall into this category are those who have insurance policies with low 
liabilities. For these producers, the $50 fee for CAT would be most 
likely to outweigh expected indemnities. Second, an allowance has been 
made to allow all producers with a share in a tobacco crop under one 
marketing card to insure the crop under one insurance policy. To 
qualify under this provision, none of the shareholders may have an 
interest in another tobacco crop in the county. It is estimated that 
35,100 policyholders may utilize this allowance, thereby saving the $50 
processing fee for each. Third, with specified restrictions, persons 
who hold an undivided interest in a crop may be eligible to purchase 
one insurance policy covering all shares to satisfy linkage 
requirements. The restrictions associated with this allowance include: 
all landowners must agree in writing to the arrangement; none of the 
landowners may hold any other interest in the given crop in the county 
for which they are required to buy at least CAT coverage; and the total 
liability under the CAT endorsement for all landowners must be $2,500 
or less. Because no data are available providing an indication of 
insureds with an undivided interest, it is not possible to estimate the 
savings associated with not paying the $50 processing fee in these 
situations. However, some small entities will benefit from this 
allowance.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order No. 12372

    This program is not subject to the provisions of Executive Order 
No. 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.

Executive Order No. 12778

    The Office of the General Counsel has determined that these 
regulations meet the applicable standards provided in sections 2(a) and 
2(b)(2) of Executive Order No. 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 
published at 7 CFR parts 11 and 780 must be exhausted before any action 
for judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant impact on the 
quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

[[Page 42981]]

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review Initiative to eliminate unnecessary or duplicative 
regulations and improve those that remain in force.

Background

    The amendments to the Act, made by the Reform Act, were effective 
on October 13, 1994. This regulation provides the policy and procedures 
to carry out the catastrophic risk protection insurance requirements of 
those amendments.
    On Friday, January 6, 1995, FCIC published an interim rule in the 
Federal Register at 60 FR 2000-2005 to add a new catastrophic risk 
protection (CAT) level of insurance through the Catastrophic Risk 
Protection Endorsement which amends new and existing crop insurance 
policies, endorsements, and crop provisions when elected by the 
insured. Following publication of that interim rule, the public was 
afforded 60 days to submit written comments, data, and opinions. On 
Monday, August 7, 1995, by publication at 60 FR 40055, FCIC reopened 
and extended the comment period to August 18, 1995. A total of 40 
comments were received from the crop insurance industry, FSA, producer 
groups, and producers. The category, comments received, and FCIC 
responses are as follows:
General Comments
    Comment: One comment received from the crop insurance industry 
suggested that the phrase ``at the option of the Secretary'' should be 
added after, ``Catastrophic risk protection coverage may be offered 
through approved insurance providers and'' in Section 402.1, to be 
consistent with the Act. This change is needed to enable the FSA to 
cease delivering CAT coverage in counties in which such coverage 
becomes unnecessary.
    Response: The Federal Agriculture Improvement and Reform Act of 
1996 provides for CAT coverage to be offered by approved insurance 
providers if there are a sufficient number available within an area. If 
approved insurance providers are not sufficiently available, local 
offices of the USDA will provide CAT coverage. FCIC agrees that the 
Secretary must now make an affirmative determination that CAT can be 
delivered through local FSA offices. The provision has been changed 
accordingly.
Comments Regarding Definitions
    Comment: One comment received from a producer group suggested that 
the definitions should include a reference to the standards that will 
be used in determining whether a producer's crop loss was due to 
drought, flood, or other natural disaster as determined by the 
Secretary. The comment recommended referencing other FCIC regulations 
that are applicable in making this determination and similarly 
referencing coverage exclusions.
    Response: The insured is responsible for demonstrating that any 
loss of production or value has been directly caused by one or more of 
the insured causes during the insurance period. Catastrophic risk 
protection is only available through an endorsement which becomes part 
of the crop insurance policy. Each crop policy contains a section 
regarding the causes of loss for which insurance is provided. Coverage 
exclusions, such as failure to follow good farming practices, are also 
specified in these policies. Therefore, a change to the definitional 
section of this rule is not necessary.
    Comment: Another comment received from a producer group indicated 
that sustainable and alternative agricultural practices are frequently 
and erroneously labeled as not being ``good farming practices'' simply 
because they may be different from the traditional approach in the 
area.
    Response: The definition of ``good farming practices'' contained in 
various crop policies does not exclude the use of sustainable or 
alternative practices. However, farming practices must control weeds, 
provide sufficient nutrients, protect against disease and insects, 
etc., to be considered good farming practices. The definition will not 
be changed.
    Comment: Another comment received from the crop insurance industry 
suggested clarifying the definition of ``catastrophic risk protection'' 
by deleting the word ``minimal'' and replacing it with either the word 
``minimum'' or ``lowest.''
    Response: FCIC agrees with the comment and has amended the 
definition of ``catastrophic risk protection'' by replacing the word 
``minimal'' with the word ``minimum.''
    Comment: The crop insurance industry suggested clarifying the 
definition of ``crop of economic significance'' to explain the 
consequences if a crop planted in 1994, is planted in 1995 although 
originally there was no intent to plant the crop in 1995; and to 
clarify who is responsible for determining which crops are of economic 
significance.
    Response: FCIC agrees with the comment and has added provisions in 
section 12 to clarify requirements regarding crops of economic 
significance. Producers who do not intend to plant a crop do not have 
to obtain crop insurance or execute a waiver of any eligibility for 
emergency crop loss assistance in connection with the crop to remain 
eligible for certain USDA program benefits, even if they produced the 
crop the previous year. However, if the producer decides to plant the 
crop after the sales closing date, the producer cannot obtain insurance 
on the crop and must execute a waiver of any eligibility for emergency 
crop loss assistance in connection with the crop to be eligible for 
certain other USDA program benefits. If a waiver is not executed, the 
producer must return those benefits already received. Provisions were 
also added indicating that it is the producer's responsibility to 
determine crops of economic significance in the county and that the 
producer may have to provide records to permit the insurance provider 
to verify whether a crop is a crop of economic significance. FCIC has 
issued a worksheet that may be used by producers to assist them in 
determining crops of economic significance. USDA will be ultimately 
responsible for determining eligibility and paying any amount due a 
person for any applicable USDA program.
    Comment: A producer group suggested that the definition of ``crop 
of economic significance'' is contrary to the Act and invites legal 
action to test it. They stated that the Act looks to a percentage of 
all crops grown by the producer and the definition in this regulation 
provides for a county by county test to be done.
    Response: FCIC agrees that Sec. 508(b)(7) and (8) of the Act does 
not specifically indicate that crops of economic significance are 
determined on a county basis. However, an administrative interpretation 
was made to operate on a county basis because of the language in 
Sec. 508(b)(7)(A) of the Federal Crop Insurance Act. In addition, 
operating on a county basis is consistent with the long standing 
practice of insuring acreage on a county basis. Although the provisions 
of the Act may have changed, the insurance rationale has not. No 
changes will be made to conform to this suggestion.
    Comment: The Farm Service Agency requested that the term ``limited 
resource farmer'' be changed to ``limited income farmer.'' Farm Credit 
Programs, which are part of FSA, have used the term ``limited resource 
farmer'' for many years and it has a very different definition than the 
definition of

[[Page 42982]]

``limited resource farmer'' used for crop insurance purposes.
    Response: Section 508(b)(5) of the Act expressly authorizes FCIC to 
waive the administrative fee for ``limited resource farmers.'' Since 
``resources'' include more than the producer's ``income'' such as farm 
size, the definition will not be changed.
    Comment: The crop insurance industry and a producer group 
questioned what the phrase ``a need to maximize farm income'' meant in 
the definition of ``limited resource farmer'' and recommended an 
explanation be added to the endorsement or the phrase deleted.
    Response: FCIC has reconsidered this provision and amended the 
definition of ``limited resource farmer'' by deleting the phrase ``a 
need to maximize farm income.''
     Comment: A producer group recommended defining or omitting the 
phrase ``small or family farm'' in the definition of ``limited resource 
farmer.'' They also questioned how a person is categorized as a limited 
resource farmer and whether or not such person is required to obtain at 
least catastrophic risk protection (CAT) coverage, if available. The 
comment also asked if the limited resource status could be used as a 
defense if a producer is denied benefits for failure to meet linkage 
requirements.
    Response: FCIC agrees that the terms ``small'' and ``family farm'' 
are not necessary in the definition and has amended the definition 
accordingly. All producers, including limited resource farmers, are 
required to obtain at least CAT coverage, if available, to be eligible 
for certain other USDA program benefits, unless the producer executes a 
waiver of any eligibility for emergency crop loss assistance in 
connection with the crop. The limited resource farmer status only 
authorizes FCIC to waive payment of the administrative fees and may not 
be used as a defense for failure to obtain CAT coverage. Producers may 
request limited resource farmer status at the time the application for 
insurance is made.
    Comment: A producer stated that a spouse's salary from a job in 
town should not be included in total income when considering all 
sources of revenue for a limited resource farmer.
    Response: The purpose of this provision is to excuse producers from 
paying the administrative fee when it would impose a financial 
hardship. Since part of the farm's income is usually used to defray the 
personal expenses of the producer, outside income such as a spouse's 
salary will affect the determination. All of the income within the 
family entity, from all sources of revenue, including the spouses' will 
be considered as the annual gross income.
    Comment: A producer group suggested that the word ``producer'' be 
defined and used rather than the word ``person'' because it would be 
less confusing since ``person'' is specifically defined with regard to 
payment limitation rules. If this change is not made, the comment 
suggested adding provisions to indicate that the definition in these 
provisions does not reference the term ``person'' for payment 
limitation purposes.
    Response: A definition of ``person'' contained in any other statute 
or regulation is not applicable to the Federal crop insurance program 
unless expressly provided. Therefore, the definition of a person with 
respect to payment limitation purposes is not relevant. The term 
``person'' is defined for this program and has been used in the crop 
insurance program for longer than payment limitation has existed. The 
term ``person'' cannot be replaced with ``producer'' because not all 
``persons'' are producers within the context of the program and to 
alternate between the two terms would be confusing. No change to the 
provisions will be made.
Comments Regarding Insurance Units
    Comment: A producer observed that coverage was available only by 
basic units, and stated that unit division on share basis was very 
misleading.
    Response: Unit division on a share basis is explained in section 3 
(Unit Division) of the Catastrophic Risk Protection Endorsement. This 
document is provided to all insureds who elect the endorsement. 
Provisions contained therein are complete with examples and should not 
be misleading to insureds. No change will be made.
Comments Regarding Linkage Requirements
    Comment: Twenty-three (23) comments were received from producers 
who disagreed with the mandatory requirement to purchase crop insurance 
to remain eligible for certain other USDA program benefits. One 
additional comment received from a FSA employee discussed producers' 
aversion to the mandatory requirement to purchase crop insurance to be 
eligible for certain other USDA benefits.
    Response: (1) The mandatory requirement that producers obtain crop 
insurance has been amended in the 1996 Act. (2) Now, section 508(b)(7) 
of the Act requires the producer to obtain at least a CAT plan of 
insurance or comparable coverage unless the producer executes a waiver 
of any eligibility for emergency crop loss assistance in connection 
with the crop, to remain eligible for certain other USDA program 
benefits. The intent of the Act is to encourage the fullest possible 
participation in the Federal Crop Insurance program since ad hoc 
disaster legislation is repealed. Crop insurance provides greater 
assurance that producers are protected from the impacts of widespread 
disaster causing a crop loss. The CAT endorsement will be amended to 
conform to the statutory change.
    Comment: Nine comments received from producers stated that it is 
unfair to have to obtain insurance on other crops such as corn, wheat 
and soybeans in order to remain eligible for the tobacco price support 
program.
    Response: The statutory requirement to obtain insurance for all 
crops of economic significance, unless the producer executes a waiver 
of any eligibility for emergency crop loss assistance in connection 
with the crop, is applicable to all Agriculture Marketing Transition 
Act benefits, the conservation reserve program, and certain farm credit 
programs. Producers who do not participate in these programs are not 
required to obtain insurance on any of their crops. However, with the 
elimination of ad hoc disaster assistance, a producers only available 
protection is through crop insurance.
Comments Regarding Administrative Fees
    Comment: Twenty-two (22) comments received from producers and 1 
comment received from FSA state that: (1) Charging the same 
administrative fee for both small producers and large producers was 
unfair; (2) the larger producer will receive greater payments than the 
small producer due to the differences in the acreages; (3) the number 
of people involved in an operation does not increase the risk; (4) the 
size of the operation affects the liability covered; (5) in determining 
the administrative fees, factors should be used to compensate the 
differences in the size of the acreage, not the number of crops; (6) 
the amount of coverage or size of the operation should be a 
consideration in determining the administrative fee; and (7) fees 
should be pro-rated based on the size of the operation, a given amount 
per acre, or something fair for the small farmer in respect to the 
benefit they could attain from it.
    Response: Section 508(b)(5) of the Act mandates the amount of 
administrative

[[Page 42983]]

fee. The Act expressly states that the fee will be paid on a per crop 
and per county basis. FCIC does not have the authority to change this 
requirement. Further, this fee is not related to the amount of 
liability or the risk associated with the size of the operation. The 
fee is intended to defray the costs associated with calculating the 
actual production history and processing applications, acreage reports, 
etc., which do not normally vary greatly between small and large 
farming operations. Producers who do not wish to obtain insurance and 
pay the administrative fee for any or all of their crops may execute a 
waiver of any eligibility for emergency crop loss assistance for the 
crop. Therefore, no change will be made.
    Comment: Seven comments received from producers claimed the 
administrative fee is not fair because separate fees are required for 
(1) each crop; (2) each county; and (3) crops in two or more counties 
when farms are consolidated in one FSA Farm Serial Number and 
administered in one FSA office.
    Response: Section 508(b)(5) of the Act mandates that the fee be 
paid on a per crop and per county basis. FCIC does not have the 
authority to change this requirement. Producers who do not wish to 
obtain insurance and pay the administrative fee for any or all of their 
crops may execute a waiver of any eligibility for emergency crop loss 
assistance for the crop. Therefore, no change will be made.
    Comment: One comment from a producer claimed that as a result of 
the narrow definition of ``limited resource farmer'' and ``crop of 
economic significance,'' small farmers with several crops are required 
to pay $200 plus idle acreage to be eligible for certain other USDA 
program benefits. In return, they receive little more in program 
benefits than the administrative fees incurred. The producer stated 
that he would like to pay the administrative fee for each farm rather 
than one fee per crop or have the fee based on acreage or something 
fair for the small farmer.
    Response: FCIC is statutorily mandated to charge an administrative 
fee on a per crop basis. However, if the amount of liability under the 
policy is equal to or less than the administrative fee, the crop is not 
considered a ``crop of economic significance'' and the producer is not 
required to obtain insurance for the crop. Further, under the 1996 Act, 
producers of program crops are no longer required to idle acres. 
Producers who do not wish to obtain insurance and pay the 
administrative fee for any or all of their crops may execute a waiver 
of any eligibility for emergency crop loss assistance in connection 
with the crop. Therefore, no change will be made.
    Comment: Seven (7) comments received from producers stated that it 
is unreasonable for each person sharing in a crop to pay separate 
administrative fees.
    Response: (1) Section 508(b)(7) states that each ``person'' must 
obtain crop insurance on any crop of economic significance in which the 
person has an interest. (2) The Act further states that each producer 
must pay an administrative fee. However, persons who execute a waiver 
of their eligibility for emergency crop loss assistance are still 
eligible for the specified USDA benefits. FCIC has amended section 7 to 
specify that, for tobacco producers, only one administrative fee will 
be charged when one policy is issued for multiple shareholders, 
provided: (1) A tobacco marketing card has been issued by FSA for a 
specific producer and Farm Serial Number; (2) all of the shareholders 
agree in writing; (3) this producer and other persons have a share in 
the crop; and (4) neither this producer nor the other persons hold any 
interest in another tobacco crop for which they are required to obtain 
at least CAT coverage. Linkage requirements will be satisfied for each 
shareholder of the crop. Section 7 has also been amended to allow a 
landowner to obtain catastrophic risk protection and establish linkage 
for all other landowners who hold an undivided interest in the 
insurable acreage provided: (1) The landowners do not have multiple 
farming interests; (2) all the landowners agree in writing to such 
arrangement and have their social security number or employer 
identification number listed on the application without regard to the 
actual amount of their interest in the insured acreage; (3) the total 
liability for all landowners is $2,500 or less; and (4) the landowner 
insuring the crop will make application for insurance, provide name and 
identification number for each person, pay the one administrative fee 
for all the producers within the county, fulfill all agreements under 
the contract, and receive and distribute the indemnity payments. This 
is a new provision that will alleviate each producer in an undivided 
interest from being required to pay a separate administrative fee when 
all of the producers share in the crop and have no other insurable 
interest in that crop and the total liability is $2,500 or less.
    Comment: The crop insurance industry suggested that the 
administrative fees for CAT coverage should be addressed separately 
from those for limited coverage (see section 6).
    Response: The provisions of the Act mandate aggregation of the fees 
for CAT and limited coverage in order to ensure that the producer does 
not pay any administrative fee in excess of the amount required on a 
per county per producer basis. Further, the use of the administrative 
fee to offset the costs of delivery of the program is the same for both 
CAT and limited coverage. This aggregation of fees is more clearly 
communicated by the proposed language than it would be if the 
provisions were separated therefore, no revisions will be made.
    Comment: The crop insurance industry suggested clarifying the 
language in section 5 (now 6) which explains that an insured may not 
receive a refund of an administrative fee if the producer has insured 
enough crops to generate fees in excess of the caps included in the 
regulations.
    Response: This provision has been clarified. Administrative fees 
will not be refunded if, after the purchase of the additional coverage, 
the producer still has 4 or more crops insured in the county, or 4 or 
more crops insured in each of three or more counties, at the CAT or 
limited coverage level.
    Comment: The crop insurance industry stated that the endorsement 
fails to include provisions requiring an insured to refund any benefits 
received prior to the policy being terminated for nonpayment of fees.
    Response: FCIC agrees with the comment and has amended section 6(f) 
of the endorsement accordingly.
Comments Regarding Insureds' Duties and Rights
    Comment: A producer group suggested that there is insufficient 
guidance as to appeal rights or the procedure that will be followed in 
the event of a loss.
    Response: Each crop policy contains provisions for procedure to be 
followed in the event of a crop loss. These policies are published in 
chapter IV of Title 7 of the CFR. The applicable appeal procedures are 
published at 7 CFR parts 11 and 780. In addition, each reinsured 
company has established mediation, arbitration, or similar procedures 
to address insureds concerns. Therefore, no change will be made.
Claim for Indemnity
    Comment: The crop insurance industry recommended that the CAT 
endorsement contain a provision indicating that when the insured with

[[Page 42984]]

CAT coverage files a claim for indemnity under the policy, that filing 
indicates the insured has made the election to receive a CAT indemnity 
rather than a benefit under any other USDA program that compensates for 
the same crop loss. It stated that the regulations need to specify how 
the producer is to make this election, when he or she must make it, and 
who is responsible for enforcing it.
    Response: (1) The Act expressly provides the producer with the 
choice of which program under which to receive benefits. (2) Since 
information about other program benefits may not be available until 
long after the crop loss has occurred, producers cannot be presumed to 
have made a choice because they have not delayed receipt of benefits to 
which they are entitled. (3) Producers cannot make informed choices 
with respect to which program benefits to choose until they know what 
benefits will be available. Therefore, section 9(b) of the endorsement 
has been amended to permit producers to receive a CAT indemnity and, if 
other program benefits are later made available, to reimburse the 
entire amount of the CAT indemnity to be eligible for a benefit under 
the other program. USDA will be responsible for determining if a crop 
insurance payment has been made prior to making payment under any other 
applicable USDA program.
    Comment: Another comment from FSA stated that previous legislation 
required emergency loan applicants to have obtained crop insurance the 
previous year. The reform legislation forbids the applicant from 
collecting the CAT indemnity, or noninsured crop disaster assistance 
program (NAP) payment for the same loss that qualifies for the 
emergency loan. This requires the producers to pay for coverage on 
which they are never allowed to collect because if they collect the CAT 
or NAP payment, they will immediately become ineligible for an 
emergency loan. The commentor suggested a more reasonable approach 
would be to limit the total benefits from all sources for a loss to the 
total amount of loss, rather than limiting the benefit to a single 
source. Otherwise the producer will often collect the payment and then 
apply for a regular farm operating or farm ownership loan, rather than 
an emergency loan. Denying the producer the opportunity to collect the 
CAT or NAP payment will put a further strain on the Farm Credit 
Programs already limited loan funds.
    Response: The provision in previous legislation that required 
emergency loan applicants to have obtained crop insurance the previous 
year was removed in the Reform Act. The statute is clear that, for CAT 
coverage policies, if another program provides compensation for the 
same crop loss, the producer must elect only one program under which to 
receive benefits. Therefore, the producer cannot receive benefits from 
all sources up to the total amount of the loss. Further, since the Act 
expressly provides the producer with the choice of which program to 
receive benefits, FCIC cannot administratively abrogate that right. 
However, any producer who receives a CAT indemnity payment is not 
automatically prohibited from receiving assistance for the same loss 
under other USDA programs. Such producers will be given the opportunity 
to reimburse the entire amount of the indemnity and receive assistance 
under the other USDA program. No change will be made.
Comments Regarding Eligibility
    Comment: One comment was received from within FCIC recommending 
that language be included that would deny benefits from other USDA 
programs if the producer fails to carry out the producer's 
responsibilities in accordance with policy provisions. It was suggested 
that language be added to indicate that such failure would be 
considered a scheme or device to circumvent the insurance requirement. 
The comment indicates that some people are interpreting current 
provisions to mean that once a producer applies for crop insurance on a 
crop of economic significance, by signing an application for insurance, 
that he or she has met the requirement for eligibility for certain 
other USDA program benefits, even though he or she has not met the 
requirements for crop insurance coverage to be in effect.
    Response: FCIC agrees that failure to comply with all policy 
provisions may result in ineligibility for certain other program 
benefits specified in section 12(e). A new section 12(f) has been added 
that states this requirement.
    Comment: A producer group stated that section 9(b), which provides 
that a person can receive either CAT benefits or other USDA benefits 
for the same loss, but not both, should be clarified to state that a 
producer will not have to forego other USDA payments that are not 
specifically related to the crop loss, e.g., regular deficiency 
payments.
    Response: Deficiency payments do not compensate a producer for a 
crop loss, they provided compensation for changes in the market price. 
Therefore, deficiency payments could be made regardless of whether or 
not the producer collected an indemnity. No changes have been made in 
the provisions in response to this comment.
    Comment: FSA suggested that the requirement for a producer to have 
at least CAT coverage only applies to ``new'' Farm Credit loans not 
``new and amended'' loans. The Act specifically listed the applicable 
benefits in three loan-making authorities and the authority to service 
(reschedule, reamortize, subordinate, write-down or otherwise amend) 
loans is given in other sections of the Consolidated Farm and Rural 
Development Act. There is a discrepancy over the effective date of the 
CAT requirement. The requirement was effective upon enactment, however, 
applicants could not be required to purchase CAT coverage before it was 
available. The commentor continued to say that the effective 
implementation date for their loan programs is January 23, 1995.
    Response: Section 508(b)(7)(A) of the Act was effective on October 
13, 1994, and mandated that the producer obtain at least CAT coverage 
on crops of economic significance to be eligible for certain farm 
credit benefits. Therefore, producers who obtained farm credit 
programs, loans, or amended existing loans after October 13, 1994, are 
statutorily required to comply with this provision. Amendments to 
existing loans were included because such amendments can have a 
significant effect on the terms and duration of such loans. Further, 
Congress realized that some producers obtained loans in 1995, prior to 
enactment of the Act. To permit producers to comply with the 
requirements of section 508(b)(7)(A), sales closing dates for CAT 
coverage were extended to April 13, 1995.
    Comment: One comment received from FSA disagreed with provisions 
that require the producer to obtain CAT coverage for the crop year in 
which a farm credit loan is sought. The producer is not always able to 
anticipate credit needs by the CAT sales closing date so it would be 
more workable to allow the producer to obtain coverage for the 
following year if the sales closing date had passed and it was not 
possible to obtain coverage for the current year.
    Response: The requirement for CAT coverage in the crop year for 
which a benefit is sought is a statutory requirement, although now 
producers may execute a waiver of any eligibility for emergency crop 
loss assistance in connection with the crop and remain eligible for 
certain USDA program benefits. Therefore, no changes have been made. It 
is the responsibility of the producer and the lender to anticipate 
credit needs in the worst case scenario

[[Page 42985]]

so crop insurance can be obtained prior to the applicable sales closing 
dates.
    In addition to the changes described above, FCIC has made the 
following changes to the CAT endorsement:
    1. Sec. 402.1--Amend this section by adding, ``if provided by the 
Corporation,'' after ``The Federal Crop Insurance Act, as amended by 
the Federal Crop Insurance Reform Act of 1994, requires the Federal 
Crop Insurance Corporation to implement a catastrophic risk protection 
plan of insurance that provides a basic level of insurance coverage to 
protect producers in the event of a catastrophic crop loss due to loss 
of yield, or prevented planting'' to clarify that not all policies 
offer prevented planting coverage.
    2. Section 1--Clarify the definition of ``approved yield'' to cover 
crops not included under 7 CFR part 400, sub- part G.
    3. Section 1--Delete the phrase ``in which you have an insurable 
share'' from the definition of ``crop of economic significance''. The 
Act states that a determination of a ``crop of economic significance'' 
be based on the producer's share of all crops grown in the county, not 
just the insurable crops.
    4. Section 1--Add a definition for ``expected market price,'' 
``linkage requirement,'' and ``zero acreage report'' for clarification 
purposes.
    5. Section 1--Delete the definition of ``price election'' because 
the definition of ``expected market price'' replaced it.
    6. Section 1--Delete the definition of ``CFSA'' and add the 
definition of ``FSA'' to reflect the change in the agency's name.
    7. Section 4--Add a new section 4(e) to clarify that a producer 
must have suffered at least a 50 percent loss in yield to be eligible 
for an indemnity under this endorsement.
    8. A new section 5(a) has been added specifying that acreage 
reports be signed and filed before the acreage reporting date. To 
minimize the burden imposed by the requirement, this provision also 
allows that an operator may sign the acreage report for all other 
persons with an insurable interest in the policy. All producers are 
bound by all statements on the signed acreage report. Since the acreage 
report is an integral part of the insurance contract and the document 
upon which the premium is based it must be properly executed.
    9. A new section 5(b) has been added to consolidate and clarify 
information on share, share leases, cash leases, and insurance coverage 
in multiple owner situations. Consequently, the definition of share and 
section 3(c) of the interim rule has been deleted.
    10. Section 6(c) (now 7(a)) has been amended to allow a producer to 
obtain catastrophic risk protection coverage on high risk land from an 
insurance provider other than the insurance provider where the limited 
or additional coverage was obtained, if the provider of the limited or 
additional coverage does not sell or service CAT policies. This change 
was necessary because some companies who provide limited and additional 
coverage do not provide CAT coverage.
    11. Section 11(a) (now 12(e)) has been amended by replacing the 
specifically named price support and production adjustment programs 
under which producers receive benefits to benefits under the 
Agricultural Market Transition Act.

List of Subjects in 7 CFR Part 402

    Claims, Crop insurance, Reporting and recordkeeping requirements.

Final Rule

    Accordingly, for the reasons set out in the preamble, the interim 
rule, ``Catastrophic Risk Protection Endorsement,'' published at 60 FR 
2000-2005, is adopted as a final rule, effective for the 1997 and 
succeeding crop year for all crops with a 1997 crop year contract 
change date following the effective date of this rule and for the 1998 
and succeeding crop years for all crops with a 1997 crop year contract 
change date prior to the effective date of this rule, with changes as 
follows:
    7 CFR Part 402 is revised to read as follows:

PART 402--CATASTROPHIC RISK PROTECTION ENDORSEMENT; REGULATIONS FOR 
THE 1997 AND SUBSEQUENT CROP YEARS

Sec.
402.1  General statement.
402.2  Applicability.
402.3  OMB control numbers.
402.4  Catastrophic risk protection endorsement.

    Authority: 7 U.S.C. 1506(l) and 1506(p).


Sec. 402.1  General statement.

    The Federal Crop Insurance Act, as amended by the Federal Crop 
Insurance Reform Act of 1994, requires the Federal Crop Insurance 
Corporation to implement a catastrophic risk protection plan of 
insurance that provides a basic level of insurance coverage to protect 
producers in the event of a catastrophic crop loss due to loss of yield 
or prevented planting, if provided by the Corporation, provided the 
crop loss or prevented planting is due to an insured cause of loss 
specified in the crop insurance policy. This Catastrophic Risk 
Protection Endorsement is a continuous endorsement that is effective in 
conjunction with a crop insurance policy for the insured crop. 
Catastrophic risk protection coverage will be offered through approved 
insurance providers if there are a sufficient number available to 
service the area. If there are an insufficient number available, as 
determined by the Secretary, local offices of the Farm Service Agency 
will provide catastrophic risk protection coverage.


Sec. 402.2  Applicability

    This Catastrophic Risk Protection Endorsement is applicable to each 
crop for which catastrophic risk protection coverage is available and 
for which the producer elects such coverage.


Sec. 402.3  OMB control numbers.

    The information collection activity associated with this rule has 
been approved by the Office of Management and Budget (OMB) pursuant to 
the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) under OMB 
control number 0563-0003.


Sec. 402.4  Catastrophic Risk Protection Endorsement Provisions.

    The Catastrophic Risk Protection Endorsement Provisions for the 
1997 and succeeding crop years are as follows:

Department of Agriculture

Federal Crop Insurance Corporation

Catastrophic Risk Protection Endorsement

(This is a continuous endorsement)

    If a conflict exists between this Endorsement and any of the 
policies specified in section 2 or the Special Provisions for the 
insured crop, this endorsement will control.

Terms and Conditions

1. Definitions

    Additional coverage--Plans of crop insurance providing a level 
of coverage equal to or greater than sixty-five percent (65%) of 
your approved yield indemnified at one hundred percent (100%) of the 
expected market price, or comparable coverage as established by 
FCIC.
    Administrative fee--The $50 fee the producer must pay on a per 
crop and county basis with a maximum of $200 per producer per county 
and $600 per producer for catastrophic and limited coverage on an 
annual basis.
    Approved insurance provider--A private insurance company, 
including its agents, that has been approved and reinsured by FCIC 
to provide insurance coverage to producers participating in the 
Federal Crop Insurance program.
    Approved yield--The amount of production per acre computed in 
accordance with FCIC's Actual Production History Program (7 CFR part 
400, subpart G) or for

[[Page 42986]]

crops not included under 7 CFR part 400, subpart G, the yield used 
to determine the guarantee in accordance with the crop provisions or 
the Special Provisions.
    Catastrophic risk protection--The minimum level of coverage 
offered by FCIC which meets the requirements for a person to qualify 
for certain other USDA program benefits (see sections 4 and 12).
    County--The political subdivision of a state listed in the 
actuarial table and designated on your accepted application, 
including land in an adjoining county, provided such land is part of 
a field that extends into the adjoining county and the county 
boundary is not readily discernable. For peanuts and tobacco, the 
county will also include any land identified by a FSA farm serial 
number for the county but physically located in another county.
    Crop of economic significance--A crop that has either 
contributed in the previous crop year, or is expected to contribute 
in the current crop year, ten percent (10%) or more of the total 
expected value of your share of all crops grown in the county. 
However, a crop will not be considered a crop of economic 
significance if the expected liability under the Catastrophic Risk 
Protection Endorsement is equal to or less than the administrative 
fee required for the crop.
    Expected market price--(price election) The price per unit of 
production (or other basis as determined by FCIC) anticipated during 
the period the insured crop normally is marketed by producers. This 
price will be set by FCIC before the sales closing date for the 
crop. The expected market price may be less than the actual price 
paid by buyers if such price typically includes remuneration for 
significant amounts of post-production expenses such as 
conditioning, culling, sorting, packing, etc.
    FCIC--The Federal Crop Insurance Corporation, a wholly owned 
Government Corporation within USDA.
    FSA--The Farm Service Agency, an agency of the United States 
Department of Agriculture or any successor agency.
    Insurance is available--When crop information is contained in 
the county actuarial documents for a particular crop.
    Limited coverage--Plans of insurance offering coverage that is 
equal to or greater than fifty percent (50%) of your approved yield 
indemnified at one hundred percent (100%) of the expected market 
price, or a comparable coverage, but less than sixty-five percent 
(65%) of your approved yield indemnified at one hundred percent 
(100%) of the expected market price, or a comparable coverage.
    Limited resource farmer--A producer or operator of a farm, with 
an annual gross income of $20,000 or less derived from all sources 
of revenue, including income from spouse's or other members of the 
household, for each of the prior two years. Notwithstanding the 
previous sentence, a producer on a farm or farms of less than 25 
acres aggregated for all crops, where a majority of the producer's 
gross income is derived from such farm or farms, but the producer's 
gross income from farming operations does not exceed $20,000, will 
be considered a limited resource farmer.
    Linkage requirement--The legal requirement that a producer must 
obtain at least catastrophic risk protection coverage for any crop 
of economic significance as a condition of receiving benefits for 
such crop from certain other USDA programs in accordance with 
section 12(e), unless the producer executes a waiver of any 
eligibility for emergency crop loss assistance in connection with 
the crop.
    Secretary--The Secretary of the United States Department of 
Agriculture.
    USDA--The United States Department of Agriculture.
    Zero acreage report--An acreage report filed by you that 
certifies you do not have a share in the crop for that crop year.

2. Eligibility, Life of Policy, Cancellation, and Termination

    (a) You must have one of the following policies in force to 
elect this Endorsement:
    (1) The General Crop Insurance Policy (7 CFR 401.8) and crop 
endorsement;
    (2) The Common Crop Insurance Policy (7 CFR 457.8) and crop 
provisions;
    (3) The Group Risk Plan Policy, if available for catastrophic 
risk protection; or
    (4) A specific named crop insurance policy.
    (b) You must have made application for catastrophic risk 
protection on or before the sales closing date for the crop in the 
county.
    (c) You must be a ``person'' as defined in the crop policy to be 
eligible for catastrophic risk protection coverage.
    (d) In addition to the provisions specified in the applicable 
crop policy, this Endorsement will terminate for the crop year for 
which:
    (1) You fail to pay the applicable administrative fee, as 
specified in section 6;
    (2) You elect to purchase limited or additional coverage for the 
insured crop; or
    (3) The applicable crop policy, to which this endorsement 
attaches, automatically terminates (i.e., the policy must be renewed 
each year).

3. Unit Division

    (a) This section is in lieu of the unit provisions specified in 
the applicable crop policy.
    (b) For catastrophic risk protection coverage, a unit will be 
all insurable acreage of the insured crop in the county on the date 
coverage begins for the crop year:
    (1) In which you have one hundred percent (100%) crop share; or
    (2) Which is owned by one person and operated by another person 
on a share basis.

(Example: If, in addition to the land you own, you rent land from 
five landlords, three on a crop share basis and two on a cash basis, 
you would be entitled to four units; one for each crop share lease 
and one that combines the two cash leases and the land you own.)

    (c) Further division of the units described in paragraph (b) 
above is not allowed under this Endorsement.

4. Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities

    (a) Notwithstanding any provision contained in any other policy 
document, for the 1995 through 1998 crop years, catastrophic 
coverage will offer protection equal to fifty percent (50%) of your 
approved yield indemnified at sixty percent (60%) of the expected 
market price, or a comparable coverage as established by FCIC.
    (b) Notwithstanding any provision contained in any other policy 
document, for the 1999 and subsequent crop years, catastrophic 
coverage will offer protection equal to fifty percent (50%) of your 
approved yield indemnified at fifty-five percent (55%) of the 
expected market price, or a comparable coverage as established by 
FCIC.
    (c) If the crop policy denominates coverage in dollars per acre 
or other measure, or any other alternative method of coverage, such 
coverage will be converted to the amount of coverage that would be 
payable at fifty percent (50%) of your approved yield indemnified at 
sixty percent (60%) of the expected market price for the 1995 
through 1998 crop years and fifty percent (50%) of your approved 
yield indemnified at fifty-five percent (55%) of the expected market 
price for the 1999 and subsequent crop years.
    (d) You may elect catastrophic coverage for any crop insured or 
reinsured by FCIC on either an individual yield and loss basis or an 
area yield and loss basis, if both options are offered as set out in 
the Actuarial Table or the Special Provisions.
    (e) To be eligible for an indemnity under this endorsement you 
must have suffered at least a 50 percent loss in yield.

5. Report of Acreage

    (a) The report of crop acreage that you file in accordance with 
the crop policy must be signed on or before the acreage reporting 
date. For catastrophic risk protection, unless the other person with 
an insurable interest in the crop objects in writing prior to the 
acreage reporting date and provides a signed acreage report on their 
own behalf, the operator may sign the acreage report for all other 
persons with an insurable interest in the crop without a power of 
attorney. All persons with an insurable interest in the crop, and 
for whom the operator purports to sign and represent, are bound by 
the information contained in that acreage report.
    (b) For the purpose of determining the amount of indemnity only, 
your share will not exceed your insurable interest at the earlier of 
the time of loss or the beginning of harvest. Unless the accepted 
application clearly indicates that insurance is requested for a 
partnership or joint venture, insurance will only cover the crop 
share of the person completing the application. The share will not 
extend to any other person having an interest in the crop except as 
may otherwise be specifically allowed in this endorsement. Any 
acreage or interest reported by or for your spouse, child or any 
member of your household may be considered your share. A lease 
containing provisions for both a minimum payment (such as a 
specified amount of cash, bushels, pounds, etc.) and a crop share 
will be considered a crop share lease. A lease containing provisions 
for either a minimum payment (such as a specified amount of cash, 
bushels, pounds, etc.,) or a crop share will be considered a cash 
lease. Land rented for cash, a fixed commodity payment, or any 
consideration other than a share in the insured crop on such land 
will be considered as owned by the lessee.

[[Page 42987]]

6. Annual Premium and Administrative Fees

    (a) Notwithstanding any provision contained in any other policy 
document, you will not be responsible to pay a premium, nor will the 
policy be terminated because the premium has not been paid. FCIC 
will pay a premium subsidy equal to the premium established for the 
coverage provided under this endorsement.
    (b) In return for catastrophic risk protection, you must pay an 
administrative fee as follows:
    (1) To the insurance provider at the time of application (the 
fee will not be refunded if you file a zero acreage report the 
initial crop year for which the application is accepted);
    (2) Annually, on or before the acreage reporting date for the 
applicable crop for any subsequent crop years that catastrophic risk 
protection is in effect (The fee will not be required if you file a 
bonafide zero acreage report on or before the acreage reporting 
date, however, filing a false zero acreage report could subject you 
to criminal and administrative sanction); and
    (3) Equal to $50 per crop per county, subject to a maximum of 
two hundred dollars ($200) per county and six hundred dollars ($600) 
for all counties in which you insure crops. In calculating the 
maximum amount of administrative fees, the fees paid for both 
catastrophic risk protection and limited coverage will be combined.
    (c) The administrative fee provisions of paragraph (b) of this 
section do not apply if you meet the definition of a limited 
resource farmer (see section 1). If you qualify as a limited 
resource farmer and desire to be exempted from paying the 
administrative fee you must sign the waiver at the time of 
application (on or before the sales closing date.)
    (d) When a crop policy has provisions to allow you the option to 
separately insure individual crop types or varieties, you must pay a 
separate administrative fee in accordance with paragraph (b) of this 
section for each type or variety you elect to separately insure.
    (e) The administrative fee will be refunded if, after applying 
for catastrophic risk protection and paying the administrative fee, 
you elect to purchase additional coverage for such crop in the same 
county on or before the sales closing date. Administrative fees will 
not be refunded, however if, after the purchase of the additional 
coverage, you still have 4 or more crops insured in the county, or 4 
or more crops insured in each of three or more counties, at the CAT 
or limited coverage level.
    (f) If the administrative fee is not paid when due, the crop 
insurance contract will terminate effective at the beginning of the 
crop year for which the administrative fee was not paid. You may be 
ineligible for certain other USDA program benefits as set out in 
section 12, and all such benefits already received for the crop year 
must be refunded. If you fail to pay the administrative fee when 
due, the execution of a waiver of any eligibility for emergency crop 
loss assistance in connection with the crop will not be effective 
for any crop year in which payment was not made.

7. Insured Crop

    The crop insured is specified in the applicable crop policy, 
however:
    (a) Notwithstanding any other policy provision requiring the 
same insurance coverage on all insurable acreage of the crop in the 
county, if you purchase limited or additional coverage for a crop, 
you may separately insure acreage under catastrophic coverage that 
has been designated as ``high risk'' land by FCIC, provided that you 
execute a High Risk Land Exclusion Option and obtain a catastrophic 
risk protection policy with the same approved insurance provider, if 
available, on or before the applicable sales closing date. If 
catastrophic coverage is not available from the same insurance 
provider, you may obtain the catastrophic risk protection policy for 
the high risk land from another approved insurance provider or FSA, 
if available. You will be required to pay a separate administrative 
fee for both the limited or additional coverage policy and the 
catastrophic coverage policy unless the maximum administrative fee 
would be exceeded.
    (b) A tobacco producer may insure one hundred percent (100%) of 
the tobacco crop that is identified by a tobacco marketing card 
issued by FSA for a specific producer and Farm Serial Number under 
one CAT policy, provided the producer and other persons each have a 
share in the crop, all the shareholders agree in writing to such 
arrangement, and none of the persons hold any other interest in 
another tobacco crop for which they are required to obtain at least 
catastrophic coverage. If the tobacco crop is insured under one 
policy:
    (1) The linkage requirements will be satisfied for each 
shareholder of the crop; and
    (2) The producer insuring the crop will:
    (i) Make application for insurance and provide the name and 
social security number, or employer identification number, of each 
person with a share in the tobacco crop;
    (ii) File the acreage report showing a one-hundred percent 
(100%) share in the crop (all insurable acreage covered by such 
marketing card will be considered as one unit);
    (iii) Be responsible to pay the one administrative fee for all 
the producers within the county;
    (iv) Fulfill all requirements under the crop insurance contract; 
and
    (v) Receive any indemnity payment under his or her social 
security number or employer identification number and distribute the 
indemnity payments to the other persons sharing in the crop.
    (c) A landowner will be allowed to obtain catastrophic coverage 
to satisfy linkage requirements for all other landowners who hold an 
undivided interest in the insurable acreage, provided:
    (1) All the landowners must agree in writing to such arrangement 
and have their social security number or employer identification 
number listed on the application, without regard to the actual 
amount of their interest in the insured acreage;
    (2) All landowners must have an undivided interest in the 
insurable acreage;
    (3) None of the landowners may hold any share in other acreage 
for which they are required to obtain at least catastrophic 
coverage;
    (4) The total cumulative liability under the Catastrophic Risk 
Protection Endorsement for all landowners must be $2,500 or less;
    (5) The landowner insuring the crop will:
    (i) Make application for insurance and provide the name and 
social security number or employer identification number of each 
person with an undivided interest in the insurable acreage;
    (ii) Be responsible to pay the one administrative fee for all 
the producers within the county;
    (iii) Fulfill all requirements under the insurance contract; and
    (iv) Receive any indemnity payment under the landowner's social 
security number, or when applicable, employer identification number, 
and distribute the indemnity payments to the other persons sharing 
in the crop.

8. Replanting Payment

    Notwithstanding any provision contained in any other crop 
insurance document, no replant payment will be paid whether or not 
replanting of the crop is required under the policy.

9. Claim for Indemnity

    (a) If two or more insured crop types, varieties, or classes are 
insured within the same unit, and multiple price elections are 
applicable, the dollar amount of insurance and the dollar amount of 
production to be counted will be determined separately for each 
type, variety, class, etc., that have separate price elections and 
then totaled to determine the total liability or dollar amount of 
production to be counted for the unit.
    (b) If you are eligible to receive an indemnity under this 
endorsement and benefits compensating you for the same loss under 
any other USDA program, you must elect the program from which you 
wish to receive benefits. Only one payment or program benefit is 
allowed. However, if other USDA program benefits are not available 
until after you filed a claim for indemnity, you may refund the 
total amount of the indemnity and receive the other program benefit. 
Farm ownership and operating loans, may be obtained from the USDA in 
addition to crop insurance indemnities.

10. Concealment or Fraud

    Notwithstanding any provision contained in any other crop 
insurance document, your CAT policy may be voided by us on all crops 
without waiving any of our rights, including the right to collect 
any amounts due:
    (a) If at any time you conceal or misrepresent any material fact 
or commit fraud relating to this or any other contract issued under 
the authority of the Federal Crop Insurance Act with any insurance 
provider; and
    (b) The voidance will be effective as of the beginning of the 
crop year during which such act or omission occurred. After the 
policy has been voided, you must make a new application to obtain 
catastrophic risk protection coverage for any subsequent crop year. 
If your policy is voided under this

[[Page 42988]]

section, any waiver of eligibility for emergency crop loss 
assistance in connection with the crop will not be effective for the 
crop for the year in which the voidance occurred.

11. Exclusion of Coverage

    (a) Options or endorsements that extend the coverage available 
under any crop policy offered by FCIC will not be available under 
this endorsement, except the Late Planting Agreement Option. Written 
agreements are not available for any crop insured under this 
endorsement.
    (b) Notwithstanding any provision contained in any other crop 
policy, hail and fire coverage and high-risk land may not be 
excluded under catastrophic risk protection.

12. Eligibility for Other USDA Program Benefits

    (a) Even if it was a crop of economic significance for the 
previous crop year, if you do not intend to plant the crop in the 
current crop year, you do not have to obtain crop insurance or 
execute a waiver of your eligibility for any emergency crop loss 
assistance in connection with the crop to remain eligible for the 
USDA program benefits specified in subsection (e). However, if, 
after the sales closing date, you plant that crop, you will be 
unable to obtain insurance for that crop and you must execute a 
waiver of your eligibility for emergency crop loss assistance in 
connection with the crop to remain eligible for the USDA program 
benefits specified in section 12(e). Failure to execute such a 
waiver will require you to refund any benefits already received 
under a program specified in section 12(e).
    (b) You are initially responsible to determine the crops of 
economic significance in the county. The insurance provider may 
assist you in making these initial determinations. However, these 
determinations will not be binding on the insurance provider. To 
determine the percentage value of each crop:
    (1) Multiply the acres planted to the crop, times your share, 
times the approved yield, and times the price;
    (2) Add the values of all crops grown by the producer in the 
county; and
    (3) Divide the value of the specific crop by the result of 
section 12(b)(2).
    (c) You may use the type of price such as the current local 
market price, futures price, established price, highest amount of 
insurance, etc., for the price when calculating the value of each 
crop, provided that you use the same type of price for all crops in 
the county.
    (d) You may be required to justify the calculation and provide 
adequate records to enable the insurance provider to verify whether 
a crop is of economic significance.
    (e) You must obtain at least catastrophic coverage for each crop 
of economic significance in the county in which you have an 
insurable share, if insurance is available in the county for the 
crop, unless you execute a waiver of any eligibility for emergency 
crop loss assistance in connection with the crop to be eligible for:
    (1) Benefits under the Agricultural Market Transition Act;
    (2) Loans or any other USDA provided farm credit, including: 
guaranteed and direct farm ownership loans, operating loans, and 
emergency loans under the Consolidated Farm and Rural Development 
Act provided after October 13, 1994; and
    (3) Benefits under the Conservation Reserve Program derived from 
any new or amended application or contracts executed after October 
13, 1994.
    (f) Failure to comply with all provisions of the policy 
constitutes a breach of contract and may result in ineligibility for 
certain other farm program benefits for that crop year and any 
benefit already received must be refunded. If you breach the 
insurance contract, the execution of a waiver of any eligibility for 
emergency crop loss assistance will not be effective for the crop 
year in which the breach occurs.

    Signed in Washington, D.C., on August 13, 1996.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 96-21117 Filed 8-19-96; 8:45 am]
BILLING CODE 3410-FA-P