[Federal Register Volume 67, Number 56 (Friday, March 22, 2002)]
[Rules and Regulations]
[Pages 13249-13253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6888]



 ========================================================================
 Rules and Regulations
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
 to and codified in the Code of Federal Regulations, which is published 
 under 50 titles pursuant to 44 U.S.C. 1510.
 
 The Code of Federal Regulations is sold by the Superintendent of Documents. 
 Prices of new books are listed in the first FEDERAL REGISTER issue of each 
 week.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 56 / Friday, March 22, 2002 / Rules 
and Regulations  

[[Page 13249]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 400

Farm Service Agency

7 CFR Part 780


Appeal Procedures

AGENCIES: Federal Crop Insurance Corporation and Farm Service Agency, 
USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Crop Insurance Corporation (FCIC) and the Farm 
Service Agency (FSA) are amending the general administrative 
regulations and appeal procedure regulations. The intended effect of 
this rule is to establish procedures for program participant appeals of 
adverse decisions made by the Risk Management Agency (RMA) and to 
incorporate the appeals procedures created by the Agricultural Risk 
Protection Act of 2000 regarding the appealability of determinations of 
good farming practices.

DATES: This rule is effective April 22, 2002.

FOR FURTHER INFORMATION CONTACT: Nancy Kreitzer, Director, Appeals, 
Litigation and Legal Liaison Staff, Federal Crop Insurance Corporation, 
United States Department of Agriculture, 1400 Independence Avenue, SW., 
AG STOP 0820, Washington, DC 20250-0820, telephone (202) 690-1683.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has determined this rule 
to be exempt for the purposes of Executive Order 12866 and, therefore, 
this rule has not been reviewed by OMB.

Paperwork Reduction Act of 1995

    This rule does not constitute a collection of information under the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
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. Therefore, 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 
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 economic impact on a 
substantial number of small entities. This action does not increase the 
burden on any entity because this action merely clarifies and 
establishes provisions for producers to use in filing appeals of 
adverse decisions. The effect on small entities is the same as that for 
large 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 12988

    This rule has been reviewed under the provisions of Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect prior to the effective date. 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 any 
action for judicial review may be brought against FCIC.

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.

Background

    This rule amends FCIC and FSA informal appeal regulations to 
reflect the establishment of RMA and the reorganization of crop 
insurance functions. On September 30, 1999, FCIC and FSA published a 
notice of proposed rulemaking in the Federal Register at 64 FR 52678-
52680 to amend 7 CFR part 400, subpart J and 7 CFR part 780.

Discussion of Comments

    Following publication of the proposed rule the public was afforded 
60 days to submit written comments and opinions. A total of three 
timely comments were received in response to the request for comment on 
the proposed rule. The comments received and FCIC's responses are as 
follows:
    Comment 1: A reinsured company requested clarification regarding 
(1) the type of adverse decision with respect to ``Compliance with 
program requirements'' that is envisioned to be subject to the rule; 
(2) the intent of the term ``indebtedness,'' notification to the 
private company, and the option to participate in any appeal 
proceedings involving Fiscal Operations and Systems Division (FOSD) 
decisions that involve contracts of insurance of the private insurance 
company; and (3) the ambiguity of the definition of the term ``adverse 
decision.''
    Response: (1) Section 400.91(c) involves catastrophic risk 
protection

[[Page 13250]]

policies that may be sold directly by FCIC through local FSA offices. 
While none are currently sold in this manner, the authority to offer 
such coverage through local FSA offices still exists. In such cases, 
FCIC would be the entity that makes the decisions regarding 
eligibility, compliance with the policy provisions, and indemnity 
payments made. For the purpose of clarity, FCIC has revised the 
provisions to specifically refer to the crop insurance program. (2) 
Indebtedness, as used in the definition of the term ``FOSD,'' is one of 
the grounds upon which an insured can be determined to be ineligible 
for insurance. Under 7 CFR part 400, subpart U, either FCIC or the 
reinsured companies make the initial determination that an insured owes 
a debt and that the debt has not been timely paid based on whether the 
policy is insured or reinsured by FCIC. Since FCIC makes some direct 
determinations of indebtedness, the review process of these 
determinations must be included in the rule. For reinsured policies, 
the reinsured company provides notice to the producer that the producer 
owes a debt and the producer must be given an opportunity to dispute 
the debt. After this process is complete and the debt is determined to 
be delinquent, the reinsured company notifies FCIC, who then verifies 
that the debt is delinquent before listing the producer on the 
Ineligible List. FOSD's role is to determine indebtedness for FCIC 
insured policies and verify indebtedness for reinsured policies. The 
definition of the term ``FOSD'' has been revised to clarify its 
function with respect to policies that FCIC insures and reinsures. Even 
though FCIC only verifies the debt, since it is the agency that 
determines that the producer is ineligible, producers are entitled to 
appeal FCIC's listing of them on the Ineligible List. However, current 
regulations limit the reinsured company's role in the review process to 
that permitted by 7 CFR part 11. That rule does not permit the 
insurance company participation in these disputes. Until 7 CFR part 11 
is revised, reinsured companies are not permitted to directly 
participate in the administrative review process. (3) FCIC recognizes 
that the definition of ``adverse decisions'' in 7 CFR part 11 is much 
broader than its applicability to FCIC decisions and, therefore, FCIC 
has revised the definition to limit its applicability to the crop 
insurance program.
    Comment 2: A reinsured company questioned whether: (1) Section 
400.91(a)(1) could be removed as no contracts were issued by FCIC; all 
are issued by private insurance companies; (2) the findings of the 
Compliance Division are intended to be included under section 
400.91(c)(2); (3) section 400.91(c)(3) includes reinsured companies' 
decisions on claims since it is the reinsured company's decision with 
respect to whether a claim is paid; (4) sections 400.91(c)(4) and 
400.91(d) are in conflict since subsection (c)(4) provides that 
participants may request an administrative review, mediation or appeal 
of adverse decisions made by the Agency relative to issuance of 
payments or other benefits to an individual or entity who is not a 
participant in the program and subsection (d) states that only a 
participant may seek an administrative review or mediation under this 
subpart; (5) the reinsured company will be held harmless by RMA if a 
mediation decision is arrived at that is counter to policy or 
procedural provisions; (6) the reinsured company will be made aware of 
the fact an appellant is seeking mediation, and what time frames apply 
for such notification; and (7) if ``FSA'' is included correctly in 
780.2(a)(iv), under what authority, circumstances and provisions would 
FSA make decisions on private insurance carriers' policies.
    Response: (1) As stated above, even though all policies are 
currently reinsured by FCIC, FCIC still has the authority to offer 
insurance directly to producers. As long as such authority exists, the 
appeal provisions must remain in effect. (2) Section 400.91(c)(2) only 
applies to decisions of FCIC regarding whether producers have complied 
with policy requirements under policies insured by FCIC. This provision 
has no bearing on those policies insured by the insurance companies 
since decisions regarding compliance are made by the reinsured company 
and are not appealable under this rule. (3) As stated above, section 
400.91(c)(3) is only applicable to policies insured by FCIC and where 
FCIC is making the decision with respect to whether claims should be 
paid. (4) There is no conflict between section 400.91(c)(4) and section 
400.91(d). Section 400.91(c)(4) specifically refers to situations where 
the payment was made to a non-participant such as assignments, etc. 
where the participant may be challenging the payment made under such an 
assignment to a non-participant. However, it is still only the 
participant who may challenge the action, not the non-participant. This 
is consistent with section 400.91(d). (5) A settlement in mediation is 
no different than any other appeals process whereby the parties 
determine their litigative risk. Mediation often assumes a compromise 
that may entail paying money when it is believed that the producer is 
not entitled. Reinsured companies do it every day when they settle 
disputes. If settlement of a dispute can be presumed to be an error or 
omission, then FCIC would not be required to reinsure such claims when 
reinsured companies settle a dispute. As in other settlement cases, the 
risk sharing provisions of the Standard Reinsurance Agreement continue 
to apply. (6) If the appeal involves a dispute regarding FCIC's conduct 
regarding a policy it reinsures, the reinsured company will be notified 
of such appeal in the manner as established in FCIC handbooks. (7) With 
respect to FSA's 7 CFR 780.2(a)(1), (a)(1)(iii), and (iv) are revised 
as the references to FCIC exceed the intended current scope of part 780 
and because the explicit reference to FSA noninsured crop assistance 
program is unnecessary in light of other provisions in the section.
    Comment 3: A trade association (1) commented that the proposed rule 
should include notification of companies when appeals are requested; 
(2) questioned whether section 400.93 is meant to refer to ``one 
administrative review'' or whether it should say ``an administrative 
review''; and (3) suggested several editorial or grammatical changes.
    Response: (1) As stated above, reinsured companies will be notified 
in writing of any appeal of a FCIC decision regarding a policy that the 
reinsured company insures. (2) Section 400.93 refers to one 
administrative review to make it clear that producers only have one 
level of appeal in the informal administrative appeals process, which 
in some cases may be different than the appeals process that was 
available under 7 CFR part 780. (3) Some of the grammatical changes 
have been made.
    FCIC also made other technical changes to improve the readability 
of this rule and remove conflicts with other provisions in this rule or 
with parts 11 or 780 of this title and other ambiguities that may have 
existed. FCIC has not made any substantive changes as a result of these 
technical corrections.
    After the proposed rule was published and the comments received, 
Congress enacted ARPA, which created specific limitations on the 
appeals of determinations of good farming practices made by FCIC. Since 
these limitations are statutorily mandated, they are incorporated into 
this final rule. This entails revisions to many of the provisions to 
incorporate this new appeals process because mediation and

[[Page 13251]]

NAD appeal are not applicable to determinations regarding good farming 
practices. However, except as stated above, the substantive appeals 
process for adverse decisions remains the same.

List of Subjects in 7 CFR Parts 400 and 780

    Administrative practice and procedure, Claims, Crop insurance, 
Fraud, Reporting and record keeping requirements.

Final Rule

    For the reasons stated in the preamble, the Federal Crop Insurance 
Corporation amends 7 CFR part 400, subpart J, and the Farm Service 
Agency amends 7 CFR part 780 as follows:

PART 400--GENERAL ADMINISTRATIVE REGULATIONS

    1. Revise subpart J of part 400 to read as follows:
Subpart J--Appeal Procedure
Sec.
400.90   Definitions.
400.91   Applicability.
400.92   Appeals.
400.93   Administrative review.
400.94   Mediation.
400.95   Time limitations for filing and responding to requests for 
administrative review.
400.96   Judicial review.
400.97   Reservations of authority.

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


Sec. 400.90  Definitions.

    Act. The Federal Crop Insurance Act (7 U.S.C. 1501-1524).
    Administrative review. A review within the Department of 
Agriculture of an adverse decision.
    Adverse decision. A decision by an employee or Director of the 
Agency that is adverse to the participant. The term includes the denial 
of program benefits, written agreements, eligibility, etc. that results 
in the participant receiving less funds than the participant believes 
should have been paid or not receiving a benefit to which the 
participant believes he or she was entitled.
    Agency. RMA or FCIC, including the RSO, FOSD or any other division 
within the Agency with decision making authority.
    Appellant. Any participant who appeals or requests mediation of an 
adverse decision of the Agency in accordance with this subpart. Unless 
otherwise specified in this subpart, the term ``appellant'' includes an 
authorized representative.
    Authorized representative. Any person, whether or not an attorney, 
who has obtained a Privacy Act waiver and is authorized in writing by a 
participant to act for the participant in the administrative review, 
mediation, or appeal process.
    Certified State. A State with a mediation program, approved by the 
Secretary, that meets the requirements of 7 CFR part 1946, subpart A, 
or a successor regulation.
    FCIC. The Federal Crop Insurance Corporation, a wholly owned 
Government corporation within USDA.
    FOSD. The Fiscal Operations and Systems Division established by the 
Agency for the purpose of making determinations of indebtedness for 
policies insured by FCIC and for determining ineligibility for policies 
both insured and reinsured by FCIC.
    FSA. The Farm Service Agency, an agency within USDA, or its 
successor agency.
    Good farming practices. The farming practices used in the area 
where the crop is produced, including sustainable farming practices, 
that are determined by FCIC to be necessary for the crop to make normal 
progress toward maturity and produce at least the yield used to 
determine the production guarantee or amount of insurance and to be 
compatible with the agronomic and weather conditions in the area or, 
for crops grown under an organic practice, the farming practices 
recommended by a private organization or government agency that 
certifies organic products and is accredited in accordance with the 
requirements of the Federal Organic Food Production Act of 1990.
    Mediation. A process in which a trained, impartial, neutral third 
party (the mediator), meets with the disputing parties, facilitates 
discussions, and works with the parties to mutually resolve their 
disputes, narrow areas of disagreement, and improve communication.
    NAD. The USDA National Appeals Division. See 7 CFR part 11.
    Non-certified State. A State that is not approved by the Secretary 
of Agriculture to participate in the USDA Mediation Program under 7 CFR 
part 1946, subpart A, or its successor regulation.
    Participant. An individual or entity that has applied for crop 
insurance or who holds a valid crop insurance policy that was in effect 
for the previous crop year and continues to be in effect for the 
current crop year. The term does not include individuals or entities 
whose claims arise under the programs excluded in the definition of 
participant published at 7 CFR 11.1.
    Reinsured company. A private insurance company, including its 
agents, that has been approved and reinsured by FCIC to provide 
insurance to participants.
    Reviewing authority. A person assigned the responsibility by the 
Agency of making a decision on a request for administrative review by 
the participant in accordance with this subpart.
    RMA. The Risk Management Agency, an agency within USDA, or its 
successor agency.
    RSO. The Regional Service Office established by the Agency for the 
purpose of providing program and underwriting services for private 
insurance companies reinsured by FCIC under the Act and for FCIC 
insurance contracts delivered through FSA offices.
    Secretary. The Secretary of Agriculture.
    USDA. United States Department of Agriculture.


Sec. 400.91  Applicability.

    (a) This subpart applies to:
    (1) Adverse decisions made by personnel of the Agency with respect 
to:
    (i) Contracts of insurance insured by FCIC; and
    (ii) Contracts of insurance of private insurance companies and 
reinsured by FCIC under the provisions of the Act.
    (2) Determinations of good farming practices made by personnel of 
the Agency.
    (b) This subpart is not applicable to any decision:
    (1) Made by the Agency with respect to any matter arising under the 
terms of the Standard Reinsurance Agreement with the reinsured company; 
or
    (2) Made by any private insurance company with respect to any 
contract of insurance issued to any producer by the private insurance 
company and reinsured by FCIC under the provisions of the Act.
    (c) With respect to matters identified in Sec. 400.91(a)(1), 
participants may request an administrative review, mediation, or appeal 
of adverse decisions by the Agency made with respect to:
    (1) Denial of participation in the crop insurance program;
    (2) Compliance with terms and conditions of insurance;
    (3) Issuance of payments or other program benefits to a participant 
in the crop insurance program; and
    (4) Issuance of payments or other benefits to an individual or 
entity who is not a participant in the crop insurance program.
    (d) Only a participant may seek an administrative review or 
mediation under this subpart, as applicable.

[[Page 13252]]

Sec. 400.92  Appeals.

    (a) Except for determinations of good farming practices, nothing in 
this subpart prohibits a participant from filing an appeal of an 
adverse decision directly with NAD in accordance with part 11 of this 
title without first requesting administrative review or mediation under 
this subpart.
    (b) If the participant has timely requested administrative review 
or mediation, the participant may not participate in a NAD hearing 
until such administrative review or mediation is concluded. The time 
for appeal to NAD is suspended from the date of receipt of a request 
for administrative review or mediation until the conclusion of the 
administrative review or mediation. The participant will have only the 
remaining time to appeal to NAD after the conclusion of the 
administrative review or mediation.
    (c) There is no appeal to NAD of determinations regarding good 
farming practices.


Sec. 400.93  Administrative review.

    (a) With respect to adverse decisions, an appellant may seek one 
administrative review or seek mediation under Sec. 400.94, but not 
both. Only an administrative review is available for determinations of 
good farming practices. Mediation is not available for determinations 
of good farming practices.
    (b) If the appellant seeks an administrative review, the appellant 
must file a written request for administrative review with the 
reviewing authority in accordance with Sec. 400.95. The written request 
must state the basis upon which the appellant relies to show that:
    (1) The decision was not proper and not made in accordance with 
applicable program regulations and procedures; or
    (2) All material facts were not properly considered in such 
decision.
    (c) The reviewing authority will issue a written decision that will 
not be subject to further administrative review by the Agency.


Sec. 400.94  Mediation.

    For adverse decisions only:
    (a) Appellants have the right to seek mediation or other forms of 
alternative dispute resolution instead of an administrative review 
under Sec. 400.93.
    (b) All requests for mediation under this subpart must be made 
after issuance of the adverse decision by the Agency and before the 
appellant has a NAD hearing on the adverse decision.
    (c) An appellant who chooses mediation must request mediation not 
later than 30 calendar days from receipt of the written notice of the 
adverse decision. A request for mediation will be considered to have 
been ``filed'' when personally delivered in writing to the appropriate 
decision maker or when the properly addressed request, postage paid, is 
postmarked.
    (d) An appellant will have any balance of the days remaining in the 
30-day period to appeal to NAD if mediation is concluded without 
resolution. If a new adverse decision that raises new matters or relies 
on different grounds is issued as a result of mediation, the 
participant will have a new 30-day period for appeals to NAD.
    (e) An appellant is responsible for contacting the Certified State 
Mediation Program in States where such mediation program exists. The 
State mediation program will make all arrangements for the mediation 
process. A list of Certified State Mediation Programs is available at 
http://www.act.fcic.usda.gov.
    (f) An appellant is responsible for making all necessary contacts 
to arrange for mediation in non-certified States or in certified States 
that are not currently offering mediation on the subject in dispute. An 
appellant needing mediation in States without a certified mediation 
program may request mediation by contacting the RSO, which will provide 
the participant with a list of acceptable mediators.
    (g) An appellant may only mediate an adverse decision once.
    (h) If the dispute is not completely resolved in mediation, the 
adverse decision that was the subject of the mediation remains in 
effect and becomes the adverse decision that is appealable to NAD.
    (i) If the adverse decision is modified as a result of the 
mediation process, the modified decision becomes the new adverse 
decision for appeal to NAD.


Sec. 400.95  Time limitations for filing and responding to requests for 
administrative review.

    (a) A request for administrative review must be filed within 30 
days of receipt of written notice of the adverse decision or 
determination regarding good farming practices. A request for an 
administrative review will be considered to have been ``filed'' when 
personally delivered in writing to the appropriate decision maker or 
when the properly addressed request, postage paid, is postmarked.
    (b) Notwithstanding paragraph (a) of this section, an untimely 
request for administrative review may be accepted and acted upon if the 
participant can demonstrate a physical inability to timely file the 
request for administrative review.


Sec. 400.96  Judicial review.

    (a) With respect to adverse determinations:
    (1) A participant must exhaust administrative remedies before 
seeking judicial review of an adverse decision. This requires the 
participant to appeal an Agency adverse decision to NAD in accordance 
with 7 CFR part 11 prior to seeking judicial review of the adverse 
decision.
    (2) If the adverse decision involves a matter determined by the 
Agency to be not appealable, the appellant must request a determination 
of non-appealability from the Director of NAD, and appeal the adverse 
decision to NAD if the Director determines that it is appealable, prior 
to seeking judicial review.
    (3) A participant with a contract of insurance reinsured by the 
Agency may bring suit against the Agency if the suit involves an 
adverse action in a United States district court after exhaustion of 
administrative remedies as provided in paragraphs (a) and (b) of this 
section. Nothing in this section can be construed to create privity of 
contract between the Agency and a participant.
    (b) With respect to determinations regarding good farming 
practices, participants are not required to exhaust their 
administrative remedies before bringing suit against FCIC in a United 
States district court. Any determination by the Agency, or reviewing 
authority, regarding good farming practices shall not be reversed or 
modified as the result of judicial review unless the determination is 
found to be arbitrary or capricious.


Sec. 400.97  Reservations of authority.

    (a) Representatives of the Agency may correct all errors in 
entering data on program contracts and other program documents, and the 
results of computations or calculations made pursuant to the contract.
    (b) Nothing contained in this subpart precludes the Secretary, the 
Manager of FCIC, or the Administrator of RMA, or a designee, from 
determining at any time any question arising under the programs within 
their respective authority or from reversing or modifying any adverse 
decision.

PART 780--APPEAL REGULATIONS

    2. The authority citation for 7 CFR part 780 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 15 U.S.C. 714b and 714c; 16 U.S.C. 
590h.


Sec. 780.1  [Amended]

    3. Amend Sec. 780.1 to remove the definition of ``Regional Service 
Office,''

[[Page 13253]]

the term ``FCIC'' in the definition of ``agency,'' and ``or the FCIC 
Regional Service Office'' in the definition of ``final decision.''


Sec. 780.2  [Amended]

    4. In Sec. 780.2:
    a. Amend paragraph (a)(2) to remove the initials ``FCIC'' wherever 
they appear.
    b. Remove paragraphs (a)(1)(iii), (a)(1)(iv), and (a)(3).


Sec. 780.7  [Amended]

    5. In Sec. 780.7:
    a. Amend the to remove the phrase ``and reconsideration with the 
regional service offices.''
    b. Amend Secs. 780.7(b), (c) and (e), to remove the phrase ``or the 
Regional Service Office,'' wherever it may appear.


Sec. 780.11  [Amended]

    6. Amend Sec. 780.11 to remove the words ``FCIC,'' and ``the 
Manager of FCIC,'' wherever they may appear.

    Signed in Washington, DC, March 15, 2002.
Ross J. Davidson, Jr.,
Manager, Federal Crop Insurance Corporation.
James R. Little,
Administrator, Farm Service Agency.
[FR Doc. 02-6888 Filed 3-21-02; 8:45 am]
BILLING CODE 3410-08-U