[Federal Register Volume 62, Number 119 (Friday, June 20, 1997)]
[Proposed Rules]
[Pages 33575-33579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16232]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

RIN 0563-AB07


General Administrative Regulations; Insurance Coverage by Written 
Agreement

AGENCY: Federal Crop Insurance Corporation.

ACTION: Proposed rule.

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SUMMARY: The regulations contained in this subpart are issued pursuant 
to the Federal Crop Insurance Act, as amended, to prescribe the 
procedures for offering insurance coverage by written agreement and are 
applicable to limited and additional coverage policies insured or 
reinsured by the Federal Crop Insurance Corporation (FCIC).

DATES: Written comments and opinions on this proposed rule will be 
accepted until close of business August 19, 1997 and will be considered 
when the rule is to be made final.

ADDRESSES: Written comments on this proposed rule should be sent to the 
Chief, Product Development Branch, Federal Crop Insurance Corporation, 
United States Department of Agriculture, 9435 Holmes Road, Kansas City, 
MO 64131.

FOR FURTHER INFORMATION CONTACT: For further information, contact Bill 
Smith, Supervisory Program Analyst, Research and Development Division, 
Product Development Branch, FCIC, at the Kansas City, MO address listed 
above, telephone (816) 926-7743.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has determined this rule 
to be significant for the purposes of Executive Order 12866 and, 
therefore, this rule has been reviewed by 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 producers will benefit from this regulation because 
a greater number of producers will be able to obtain insurance coverage 
to meet their risk

[[Page 33576]]

management needs. The benefit to producers on obtaining insurance 
coverage not otherwise available outweighs the associated cost.

Paperwork Reduction Act of 1995

    The information collection requirements contained in these 
regulations are being reviewed by OMB pursuant to the Paperwork 
Reduction Act of 1995 (44 U.S.C. chapter 35) under OMB control number 
0563-0053. The written agreements are described in the background.
    The title of this information collection is ``Multiple Peril Crop 
Insurance.''
    The burden associated with the written agreement is estimated at 20 
minutes per response from approximately 23,597 respondents each year 
for a total number of 7,865 hours.
    The information requested is necessary to for the insurance 
providers and FCIC to provide insurance and reinsurance, determine 
eligibility, determine the correct parties to the agreement or 
contract, determine and collect premiums, and pay indemnities. Failure 
to furnish this number will result in rejection of or substantial 
reduction in any claim for indemnity, ineligibility for insurance, and 
a unilateral determination of the amount of premium due.
    FCIC is requesting comments for the following: (a) Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the agency, including whether the 
information shall have practical utility; (b) the accuracy of the 
agency's estimate of the burden of the proposed collection of 
information; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
the collection of information on respondents, including through the use 
of automated collection techniques or other forms or information 
gathering technology.
    Comments regarding paperwork reduction should be submitted to the 
Desk Officer for Agriculture, Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, D.C. 20503.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed regulations between 30 and 60 
days after submission to OMB. Therefore, a comment to OMB is best 
assured of having full effect if OMB receives it within 30 days of 
publication. This does not affect the deadline for the public to 
comment on the proposed regulation.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 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. Under section 202 of the UMRA, FCIC 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, or tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires FCIC to identify and consider a reasonable 
number of regulatory alternatives and adopt the least costly, more 
cost-effective or least burdensome alternative that achieves the 
objectives of the rule.
    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 12612

    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.

Regulatory Flexibility Act

    This regulation will not have a significant impact on a substantial 
number of small entities. 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.

Federal Assistance Program

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

Executive Order 12372

    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.

Executive Order 12778

    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 
published at 7 CFR part 11 must be exhausted before action for judicial 
review may be brought.

Environmental Evaluation

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

Background

    FCIC publishes actuarial tables which exclude certain land, farming 
practices, crop classes or types from insurability since the associated 
risk does not conform to general methods of establishing insurance 
yields and rates employed by FCIC. This proposed rule provides the 
regulatory authority for FCIC to make insurance offers on any insurable 
crops in counties where insurance coverage is not provided for the 
crop, crop type, land, or farming practice and to allow written 
agreements to amend specified terms of insurance. This authority 
provides a risk management tool to the greatest number of producers in 
a cost-effective manner and is fair to the participants yet does not 
expose FCIC to excessive insurance risk. Authority for reinsured 
companies to issue and approve written agreements designated by FCIC is 
provided.

List of Subjects in 7 CFR Part 400

    Crop insurance.

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation proposes to add a new subpart S to 7 CFR part 
400, as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

Subpart S--Insurance Coverage by Written Agreement

Sec.
400.511  Basis and applicability.
400.512  OMB control numbers.
400.513  Definitions.
400.514  Availability of written agreements.

[[Page 33577]]

400.515  Qualifications for written agreements to provide insurance 
for insurable crops in counties without an actuarial table.
400.516  Qualifications for written agreements in counties with 
actuarial tables.
400.517  Responsibilities.
400.518  Issuance and approval of written agreements by a reinsured 
company.

    Authority: 7 U.S.C. 1506(1), 1506(p).

Subpart S--Insurance Coverage by Written Agreement


Sec. 400.511  Basis and applicability.

    The regulations contained in this subpart are issued pursuant to 
the Federal Crop Insurance Act, as amended (7 U.S.C. 1501 et seq.) to 
prescribe the rules and criteria for offering insurance coverage by 
written agreement and are applicable to limited and additional coverage 
policies insured or reinsured by FCIC.


Sec. 400.512  OMB control numbers.

    The collecting of information requirements in this subpart has been 
approved by the Office of Management and Budget and assigned OMB 
control numbers 0563-0053.


Sec. 400.513  Definitions.

    Acreage reporting date. The date contained in the Special 
Provisions by which the insured is required to submit an acreage 
report.
    APH form. An FCI-19A Actual Production History (APH) or FCIC 
approved company form which is used to report the yield history of the 
insurance unit for the purpose of calculating the approved insurance 
yield.
    Actual yield. Refer to 7 CFR part 400, subpart G.
    Actuarial table. The forms and related material for the crop year 
approved by FCIC, which are available to the public, and show premium 
rates, practices, price elections, levels of coverage, production 
guarantees, amounts of insurance, special provisions, insurable and 
uninsurable acreage, insurance program dates, and other related 
information for a crop program in a county.
    Applicant. The named person as shown on the application submitted 
to a reinsured company or FSA office. This term does not extend to any 
other person having a share or interest in the crop unless specifically 
indicated on the application.
    Approved APH yield. Refer to 7 CFR part 400, subpart G.
    Assigned yield. Refer to 7 CFR part 400, subpart G.
    Base period. Refer to 7 CFR part 400, subpart G.
    CCC. The Commodity Credit Corporation, a wholly owned corporation 
within the United States Department of Agriculture.
    CCC program crop. Barley, corn, cotton, ELS cotton, grain sorghum, 
oats, rice, and wheat. These regulations also include hybrid corn seed, 
hybrid sorghum seed, and soybeans.
    Crop year. Refer to 7 CFR part 400, subpart G.
    Days. Calendar days.
    Expiration date. The date established in the written agreement by 
which it must be accepted by the applicant or insured.
    FCIC. The Federal Crop Insurance Corporation, a wholly owned 
corporation within the United States Department of Agriculture.
    FSA. The Farm Service Agency (formerly the Agricultural 
Stabilization and Conservation Service).
    FSA program yield. For barley, corn, cotton, ELS cotton, grain 
sorghum, oats, rice, and wheat, the yield established by the FSA county 
committee or proven from production records for individual farms by FSA 
farm serial number (FSN). Generally, these yields are provided on an 
ASCS-156EZ, ASCS-423, ASCS-424 or ASCS-476 form or their successor 
forms. Historical Weighted Yields (HWY) shown on these forms are not 
considered program yields and are not used for APH purposes.
    Insured. The named person as shown on the application for insurance 
which has been accepted by a reinsured company or FSA office. This term 
does not extend to any other person having a share or interest in the 
crop unless specifically indicated on the accepted application.
    Local producing area. An area in a county without an actuarial 
table that has similar production capabilities, cropping practices and 
conditions and which borders a county with an actuarial table for the 
subject crop.
    Marketing outlet. A place where the crop is bought and sold.
    Nonprogram crop. Includes all crops that are not defined as CCC 
program crops and for which an insurance policy is established by FCIC.
    Production guarantee. The quantity determined by multiplying the 
approved yield per acre times the coverage level percentage elected.
    Production report. Refer to 7 CFR part 400, subpart G.
    Reference county. The county, designated in the written agreement, 
used to obtain the information normally provided in the actuarial table 
for the county where the insured is farming.
    Reference state. The state, designated on the written agreement, 
used to obtain the information normally provided in the actuarial table 
for the county where the insured is farming.
    Request for actuarial change form. An FCI-5 or FCIC approved 
company form that provides information required by the FCIC to evaluate 
requests for written agreements.
    Sales closing date. The date designated in the Special Provisions 
on which sales for each crop year ceases. For the purposes of requests 
for written agreements in counties without an actuarial table, the 
sales closing date will be the applicable crop cancellation date in the 
policy or Special Provisions for the area where the county is located.
    Special Provisions. A document which displays specific information 
concerning the county crop program including, but not limited to, 
administrative dates (sales closing date, final planting date, acreage 
reporting date, and billing date) and statements pertaining to 
insurance coverage, price elections, and amounts of insurance.
    Transitional yield (T-yield). Refer to 7 CFR part 400, subpart G.
    Verifiable records. Refer to 7 CFR part 400, subpart G.
    Verifier. Refer to 7 CFR part 400, subpart G.
    Viable markets. An outlet for the production of the crop that is 
located within a reasonable distance and capable of accepting the 
volume that is reasonably expected to be produced from the insured 
acreage.


Sec. 400.514  Availability of written agreements.

    For limited and additional coverage policies, FCIC authorizes the 
use of written agreements for insurable crops for the following 
purposes:
    (a) To provide insurance coverage for insurable crops in counties 
without a published actuarial table;
    (b) To assign actuarial classifications if such classifications are 
not provided, or amend actuarial classifications contained in the 
actuarial documents if information is provided in a request for 
reconsideration of the published classification which would 
substantially change the classification;
    (c) To provide insurance coverage for farming practices for which a 
premium rate is not included in the actuarial table;
    (d) To provide insurance coverage for crop classes, types, or 
varieties for which a premium rate is not included in the actuarial 
table or Special Provisions;
    (e) To provide insurance for acreage designated as unrated or 
unclassified by the actuarial table;
    (f) To provide alternative methods of unit division on an 
individual basis

[[Page 33578]]

when geographic features or good farming practices make it impossible 
for the insured to conform to optional unit division guidelines;
    (g) To insure overage stands of forage provided an acceptable stand 
exists;
    (h) To insure portions of fields which extend across a county line 
when the exact location of the county line is not determinable;
    (i) To amend the terms of insurance provided in the insurance 
policy when specifically permitted by the policy;
    (j) To offer alternative rates and or coverages based on a request 
for reconsideration of actuarial classifications assigned to land which 
is designated as high risk by the actuarial table;
    (k) To amend or remove Nonstandard Classification System (NCS) as a 
result of an appeal determination or error in assignment of such 
classifications; or
    (l) To amend other actuarial classifications as a result of appeal 
determinations.


Sec. 400.515  Qualifications for written agreements to provide 
insurance for insurable crops in counties without an actuarial table.

    (a) FCIC is authorized to provide insurance coverage by written 
agreement for insurable crops, at its own discretion and upon its sole 
determination that:
    (1) Adequate information is available to develop an actuarially 
sound premium rate and insurance coverage;
    (2) The crop, including practice, type, and variety, is suited and 
adapted to the prevalent conditions in the county including, but not 
limited to, soils, topography, climate, rainfall, length of growing 
season, and other such considerations, with reasonable production 
risks;
    (3) The crop is commercially grown in the county;
    (4) All required information is received by the specified 
deadlines; and
    (5) All other criteria outlined in this subpart are satisfied.
    (b) FCIC will deny any request that does not meet the requirements 
of these regulations, or which involves a crop that:
    (1) Is not insurable;
    (2) FCIC does not have adequate data to establish actuarially sound 
premium rates and insurance coverage;
    (3) Is not commercially grown in the county; or
    (4) FCIC cannot determine that viable markets are available.
    (c) A Request for Actuarial Change Form must be submitted to an 
agent of a reinsured company or the FSA office by the applicant no 
later than the sales closing date and must include the following:
    (1) A completed APH form based on verifiable records of actual 
yields for at least the most recent three consecutive crop years during 
the base period: (If the producer expands the farming operation across 
a county or state line into a local producing area, FCIC may consider 
existing production reports from the current crop production to be 
sufficient);
    (2) The dates the applicant and other growers in the area normally 
plant and harvest the crop;
    (3) The name and location of, and approximate distance to, the 
location at which the crop will be marketed by the applicant;
    (4) A copy of the ASCS-156EZ, ASCS-423, ASCS-424, or ASCS-476 forms 
(or successor forms) providing notice of crop acreage bases, program 
yields, allotments or quotas for the acreage on which insurance is 
requested, if applicable; and
    (5) The legal description of the land and FSA aerial photographs or 
maps delineating field boundaries where the applicant intends to plant 
the crop for which insurance is requested.
    (d) If FCIC authorizes a written agreement, the written agreement 
will include:
    (1) Transitional yields or factors, APH yields, classifications or 
any other basis of insurance coverage as appropriate for the crop;
    (2) The premium rate;
    (3) The reference state and county for determining the Special 
Provisions, if applicable;
    (4) Terms and conditions including any exceptions to the Special 
Provisions of the reference state and county;
    (5) The expiration date; and
    (6) Other necessary administrative statements as determined by 
FCIC.


Sec. 400.516  Qualifications for written agreements in counties with 
actuarial tables.

    (a) FCIC is authorized to provide written agreements for such 
purposes as noted in Sec. 400.514 (b)(1) at its own discretion and upon 
its determination that:
    (1) Adequate information is available to develop an actuarially 
sound premium rate and insurance coverage;
    (2) The requested insurance or variation to the terms of insurance 
represents practices, types, varieties, or other conditions which are 
suited and adapted to the prevalent production practices of the county 
and able to produce the yield upon which the insurance guarantee would 
be based;
    (3) All required information is received by the specified 
deadlines; and
    (4) All other criteria outlined in this subpart are satisfied.
    (b) FCIC will deny requests that do not meet the requirements of 
this subpart or which:
    (1) FCIC does not have available data to establish actuarially 
sound premium rates and insurance coverage;
    (2) The requested change to the terms of insurance does not conform 
to sound insurance principles as determined by FCIC;
    (3) FCIC determines the risk is excessive;
    (4) The requested change would result in an insignificant variation 
from the terms established by the policy or actuarial table as 
determined by FCIC; or
    (5) The requested change to the terms of insurance are prohibited 
by the Federal Crop Insurance Act, applicable laws and regulations, or 
by the insurance policy or not specifically authorized by the 
regulations or policy.
    (c) If a request for written agreement is denied, an authorized 
written agreement is not executed by the expiration date, the written 
agreement is rejected or the written agreement is not approved, the 
original terms of the insured's contract will remain in force. The 
request must specify that the original terms of the contract are 
effective if any of these actions apply.
    (d) A Request for Actuarial Change Form must be submitted to an 
agent of a reinsured company or the FSA office by the applicant or 
insured no later than the sales closing date and must include:
    (1) A copy of the most recent APH forms;
    (2) A copy of the ASCS-156EZ, ASCS-423, ASCS-424, or ASCS-476 (OMB 
control number 0560-0092) forms (or successor forms) providing notice 
of crop acreage bases, program yields, allotments and quotas for the 
acreage on which insurance is requested, if applicable;
    (3) The legal description of the land and FSA aerial photographs 
or, legible maps delineating field boundaries where the acreage is 
planted or intended to be planted to the crop for which insurance is 
requested or requested to be amended;
    (4) Evidence of adaptability if the request is to provide insurance 
for practices, types or varieties that are not designated as insurable 
or are specifically excluded from insurability by the Special 
Provisions;
    (5) A copy of the contract between the wildlife management agency 
and the insured if the request is to insure land contained in a 
wildlife protection or management area;

[[Page 33579]]

    (6) The full scientific and common name of the plant, hardiness 
zone, and number of years that the nursery has been growing the plant, 
if the request is to insure nursery crops not listed on the ``Nursery 
Eligible Plant Listing'';
    (7) A report of prices received for a specific class (type) of dry 
beans and either two years of university test plot data and 
recommendations or two years of seed company data supplemented by 
university data, if the request is to insure a class (type) of dry 
beans which is not designated as insurable by the actuarial table. If 
university or seed company data is not available, then two years of 
production data for the requested class and prices received must be 
provided; and
    (8) A statement that the original terms of the contract that will 
be in effect if the written agreement is denied.
    (e) If FCIC authorizes a written agreement, all variations to the 
contract will be specified in the written agreement, including:
    (1) The actuarial document, form, term or condition amended by the 
agreement;
    (2) Applicable transitional yield or factor, APH yield, and 
classifications or any other basis for coverage for the crop;
    (3) Applicable premium rate;
    (4) The terms and conditions of the agreement;
    (5) The expiration date; and
    (6) Other necessary administrative statements as determined by 
FCIC.
    (f) In unusual situations FCIC may, at its discretion, provide or 
amend insurance coverage by written agreements for requests submitted 
after the sales closing date if the insured was unaware of the 
condition requiring a written agreement. In addition to the 
requirements contained in this section, the following apply:
    (1) Such requests should be submitted when the need for a written 
agreement is discovered, but must be submitted to the agent or the FSA 
office by the insured no later than the acreage reporting date.
    (2) FCIC will require a growing season inspection if the written 
agreement establishes insurability and if the crop has been planted at 
the time that the written agreement terms are presented to the insured. 
FCIC will not approve any insurance if the inspection does not 
determine that the crop has the expectancy of making at least ninety 
percent (90%) of the yield per acre used to determine the production 
guarantee or amount of insurance. Insurance liability will be assumed 
as of the date of the inspection if the agreement is given final 
approval by FCIC.
    (3) No prevented planting liability will be established for 
requests submitted after the sales closing date.


Sec. 400.517  Responsibilities.

    A final decision authorizing a written agreement will be made by 
FCIC within 30 days of receipt of all required information. A written 
agreement or letter of rejection will be provided to the reinsured 
company or FSA office by FCIC.
    (a) A reinsured company or FSA may issue the written agreement on 
the form provided by FCIC or use its own form with FCIC authorized 
language, which must include the authorized expiration date. If the 
agreement is accepted by the applicant or insured, the company will 
provide a copy of the agreement to the insured, the agent, and FCIC. 
The FSA office will provide a copy of the accepted agreement to the 
insured and FCIC. If the agreement is not accepted by the applicant or 
the insured by the expiration date, a copy will be returned to FCIC 
with the rejection noted. The reinsured company will provide to FCIC a 
copy of any agreement it does not approve.
    (b) FCIC will provide final approval of written agreements 
requested after the sales closing date, as provided in Sec. 400.516(f), 
and any written agreement for an FSA applicant or insured.
    (c) The written agreement offer is valid until the expiration date 
unless the crop is damaged, as provided in Sec. 400.516(f)(2), prior to 
acceptance by the applicant or insured.
    (d) The applicant or insured may reject a written agreement if FCIC 
determines the approved offer differs from the original request made by 
the applicant or insured.
    (e) The approved written agreement is valid only for the crop year 
shown in the agreement.
    (f) FCIC may authorize a reinsured company or FSA to reissue a 
written agreement from year to year provided no substantial changes are 
made to the farming operation, actual production reports are properly 
provided, and the agreement is in place prior to the sales closing 
date. All required elements of written agreements must be contained in 
subsequent agreements.


Sec. 400.518  Issuance and approval of written agreements by a 
reinsured company.

    FCIC may permit a reinsured company to issue and approve written 
agreements designated by FCIC, in accordance with the requirements 
contained in this subpart.

    Signed in Washington, D.C., on June 16, 1997.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 97-16232 Filed 6-19-97; 8:45 am]
BILLING CODE 3410-08-P