[Federal Register Volume 73, Number 145 (Monday, July 28, 2008)]
[Rules and Regulations]
[Pages 43607-43611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17187]



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  Federal Register / Vol. 73, No. 145 / Monday, July 28, 2008 / Rules 
and Regulations  

[[Page 43607]]



DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Part 457

RIN 0563-AC15


Common Crop Insurance Regulations; Coverage Enhancement Option 
Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes the 
Coverage Enhancement Option (CEO) Provisions. The intended effect of 
this action is to restrict the effect of the current Pilot Coverage 
Enhancement Option to the 2008 and prior crop years and replace with 
revised permanent CEO provisions, and to better meet the needs of 
insured producers. The changes will apply for the 2009 and succeeding 
crop years.

DATES: Effective Date: August 27, 2008.

FOR FURTHER INFORMATION CONTACT: William Klein, Risk Management, 
Specialist, Product Management, Product Administration and Standards 
Division, Risk Management Agency, United States Department of 
Agriculture, 6501 Beacon Drive, Stop 0812, Room 421, Kansas City, MO 
64133-4676, telephone (816) 926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be non-significant for the 
purposes of Executive Order 12866 and, therefore, it has not been 
reviewed by the Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), the collections of information are approved by OMB under control 
number 0563-0053.

E-Government Act Compliance

    FCIC is committed to complying with the E-Government Act of 2002, 
to promote the use of the Internet and other information technologies 
to provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

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 UMRA.

Executive Order 13132

    It has been determined under section 1(a) of Executive Order 13132, 
Federalism, that this rule does not have sufficient implications to 
warrant consultation with the States. The provisions contained in this 
rule will not have a substantial direct effect on States, or on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.

Regulatory Flexibility Act

    FCIC certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. Program 
requirements for the Federal crop insurance program are the same for 
all producers regardless of the size of their farming operation. For 
instance, all producers are required to submit an application and 
acreage report to establish their insurance guarantees and compute 
premium amounts, or a notice of loss and production information to 
determine an indemnity payment in the event of an insured cause of crop 
loss. Whether a producer has 10 acres or 1,000 acres, there is no 
difference in the kind of information collected. To ensure crop 
insurance is available to small entities, the Federal Crop Insurance 
Act authorizes FCIC to waive collection of administrative fees from 
limited resource farmers. FCIC believes this waiver helps to ensure 
small entities are given the same opportunities to manage their risks 
through the use of crop insurance. A Regulatory Flexibility Analysis 
has not been prepared since this regulation does not have an impact on 
small entities, and, therefore, this regulation is exempt from the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

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 in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. With respect to any direct action taken by FCIC 
under the terms of the crop insurance policy, the administrative appeal 
provisions published at 7 CFR part 11 must be exhausted before any 
action for judicial review of any determination or action by FCIC 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.

Background

    On June 6, 2007, FCIC published a notice of proposed rulemaking in 
the Federal Register at 71 FR 4056-4061 to revise 7 CFR 457.172 
Coverage Enhancement Option. Following publication of the proposed 
rule, the public was afforded 60 days to submit written comments and 
opinions. A total

[[Page 43608]]

of 3 sets of comments, with a total of 33 comments, were received from 
insurance providers and an insurance service organization. The comments 
received and FCIC's responses are as follows:

1. General

    Comment: An insurance provider commented that the contractor hired 
by FCIC to review the Coverage Enhancement Option (CEO) looked at 
participation and loss experience on crops which had CEO available, and 
compared the experience of policyholders having only Multiple Peril 
Crop Insurance (MPCI) versus those that had both MPCI and CEO. While 
their study was inconclusive, concerns were noted regarding a possible 
increase of poor or high-risk producers using CEO to obtain a higher 
amount of coverage, particularly for apples and rice. The contractor 
recommended that CEO be terminated for all crops except Texas Citrus 
Trees. The commenter further stated that FCIC indicated they only plan 
to offer CEO on Texas Citrus Trees at this time, however, CEO could be 
expanded in the future. Based on the concerns expressed in this study, 
the commenter has serious reservations about any future expansion of 
CEO and recommends that it remain limited to Texas Citrus Trees. If 
FCIC considers expansion of CEO in the future, the commenter recommends 
it be reviewed with the insurance providers before expansion occurs.
    Response: FCIC will consider the contractor's conclusions and all 
insurance experience should there be any consideration to expand CEO to 
additional crops in the future. However, there are currently no plans 
to expand CEO. FCIC will not undertake such expansion without 
significant research into the risk and feasibility of adding CEO to a 
crop, and determining whether it can be properly rated and 
underwritten.
    Comment: An insurance service organization and an insurance 
provider recommend the title be modified to ``Coverage Enhancement 
Option,'' by deleting the words ``Pilot'' and ``Insurance Provisions.'' 
They believe this would make it clearer this option is available only 
to eligible Crop Provisions.
    Response: FCIC has modified the title accordingly.
    Comment: An insurance service organization and an insurance 
provider commented that they agree with the deletion of the order of 
priority provisions at the beginning of the option, because it is 
contained in the Basic Provisions. However, FCIC might consider if 
there is a need, either in an opening statement or in a numbered 
section of the option, to address the order of priority in the event of 
any contradictions between the CEO and other policy provisions. They 
further commented this reference might be necessary since options are 
not specifically mentioned in the order of priority in the Basic 
Provisions.
    Response: FCIC has added a provision stating that if there is a 
conflict between the terms of CEO and any other provision of the 
policy, the terms of CEO control.
2. Section 1. Definitions
    Comment: An insurance service organization and an insurance 
provider noted that several of the definitions in section 1 are set up 
on a unit basis such as: MPCI dollar amount of insurance, MPCI 
indemnity, MPCI indemnity factor, and Option Dollar Amount of 
Insurance. They further commented that they do not believe this is 
consistently applied and cite the definition for ``Total value of the 
insured crop.'' If FCIC uses a ``unit basis'' in the terms, it should 
consider a consistent phrase instead of the ``MPCI dollar amount of 
insurance'' and ``Option Dollar Amount of Insurance'' using the phrase 
``for the unit,'' ``MPCI indemnity,'' ``for each unit,'' and ``MPCI 
indemnity factor,'' ``for a unit.''
    Response: FCIC believes that the definitions in section 1 including 
MPCI dollar amount of insurance, MPCI indemnity, MPCI indemnity factor, 
and Option Dollar Amount of Insurance (now CEO dollar amount of 
insurance) are appropriately defined on a unit basis. FCIC has modified 
the term ``Total value of the insured crop'' by using the phrase ``for 
each unit'' and then adding provisions regarding summing the total of 
all units if there is more than one unit for the crop. Additionally, 
FCIC agrees with the commenters that the unit phrase needs to be 
consistent and has modified the provisions accordingly, making each 
unit phrase read, ``for each unit.''
    Comment: An insurance service organization and an insurance 
provider commented that presumably the parenthetical details in the 
term ``MPCI dollar amount of insurance'' (the amount of insurance 
selected by you for dollar or similar plans of insurance or the amount 
determined by multiplying the production guarantee (per acre) times the 
price election, times the number of acres in the unit, times the MPCI 
coverage level you selected) are being added so the CEO would not have 
to be revised if it is subsequently expanded to cover more crop 
policies that are not insured under the Dollar Plan. The provisions 
would allow the guarantee to be converted to a dollar amount of 
insurance. They further commented that section 3(b)(2) of the Texas 
Citrus Tree Crop Provisions (the only crop to which the CEO is proposed 
to apply) refers to the amount of insurance per acre rather than ``for 
the unit'' as in this definition.
    Response: The commenters are correct, the language in parentheses 
under the term ``MPCI dollar amount of insurance'' was added to allow 
for flexibility should CEO be expanded to crops under plans of 
insurance other than the dollar plan. The guarantee per acre as 
referenced in section 3(b)(2) of the Texas Citrus Tree Crop Provisions 
is summed up to the unit level as provided for in section 12 Settlement 
of Claim of those crop provisions. Additionally, FCIC has revised the 
definition of ``MPCI dollar amount of insurance'' to clarify that if 
the amount of insurance selected under the policy is on a per acre 
basis, the amount must be multiplied by the number of acres in the 
unit.
    Comment: An insurance provider commented that the parenthetical 
details in the term ``MPCI dollar amount of insurance'' which reads in 
part ``* * * or the amount determined by multiplying the production 
guarantee (per acre) times the price election, times the number of 
acres in the unit, times the MPCI coverage level you selected * * *'' 
is not correct. The commenter pointed out that the production guarantee 
(per acre) already accounts for the MPCI level of coverage but this 
statement indicates that the production guarantee (per acre) will be 
multiplied by the price election, the number of acres and the MPCI 
coverage level again. The commenter recommends that FCIC either needs 
to start with the approved Actual Production History (APH) yield and 
multiply it by the MPCI coverage level or use the production guarantee 
(per acre) and not multiply it by the MPCI coverage level as it has 
already been taken into account to determine the production guarantee 
(per acre).
    Response: FCIC has revised the provisions in the second half of the 
language contained in the parentheses to remove the reference to the 
coverage level selected because the commenter is correct that the 
definition of production guarantee (per acre) already incorporates the 
coverage level selected.
    1 ``MPCI Indemnity'' references ``* * * replant and prevented 
planting indemnities * * *.'' The Basic Provisions as well as section 
6(b) of the CEO reference these as being a ``payment'' rather than an 
``indemnity.''

[[Page 43609]]

The commenter recommended that the word ``indemnities'' in the phrase 
be changed to ``payments.''
    Response: FCIC has revised the provision accordingly.
    Comment: An insurance service organization noted that FCIC was 
inconsistent in using the word ``percentage'' and ``percent.'' The 
commenter cited the use of the word ``percentage'' in the definition of 
``Option coverage level'' and the use of the word ``percent'' option 
coverage level in sections 2 and 4.
    Response: FCIC has modified sections 2 and 4 accordingly to use the 
word ``percentage'' consistently in the phrase ``option coverage 
level.''
    Comment: An insurance service organization and an insurance 
provider recommended modifying the term ``Option coverage level'' in 
section 1 to ``CEO Coverage Level,'' or something similar. They further 
commented that this might more closely match the actuarial documents 
which currently show ``(CE) Coverage Enhancement'' in the Common Option 
Factor Table. They suggested that this could also be done for the 
definition of ``Option Dollar Amount of Insurance'' making it the ``CEO 
Dollar Amount of Insurance,'' and the definitions would then need to be 
rearranged alphabetically.
    Response: FCIC has replaced the ``Option coverage level'' and 
``Option Dollar Amount of Insurance'' with ``CEO Coverage Level'' and 
``CEO Dollar Amount of Insurance'' and rearranged the terms 
alphabetically. FCIC has also replaced the terms as they appear in the 
remaining sections of the Coverage Enhancement Option provisions.
    Comment: An insurance service organization and an insurance 
provider commented that the term ``Total value of the insured crop'' is 
defined as ``The value of the crop that is determined by dividing the 
MPCI dollar amount of insurance by the MPCI coverage level.'' However, 
the ``MPCI dollar amount of insurance'' is defined as being on a unit 
basis rather than on a crop basis.
    Response: FCIC has modified the definition to clarify how the value 
for the crop is obtained using the separate units so it now reads, 
``The value of the crop that is determined by dividing the MPCI dollar 
amount of insurance for each unit by the MPCI coverage level and 
summing the total for all units.''
    Comment: An insurance service organization and an insurance 
provider commented that while most people should understand that ``* * 
* an option coverage level percent in the actuarial documents'' refers 
to an option coverage level for the CEO and does not include other 
options that might be available for a crop, still this could be 
reworded to be clearer. They further commented that the ``Option 
Coverage Level'' is defined as the ``coverage level percentage selected 
* * *'' so ``percent'' could be deleted from this section 2 reference. 
Finally they suggested FCIC add a reference in the definition of 
``Option coverage level'' that it can be found in the actuarial 
documents, so that phrase does not have to be repeated in sections 2, 
3, and 4.
    Response: As stated above, FCIC has modified the term ``Option 
Coverage Level'' to read ``CEO coverage level,'' and has used this 
term, ``CEO coverage level,'' to clarify the provisions in section 2. 
FCIC has also revised the definition to clarify that the CEO coverage 
level is contained on the actuarial documents where CEO is available. 
FCIC has removed the words ``percentage'' or ``percent'' in sections 2, 
3, and 4 because the terms are no longer needed. However, when 
determining eligibility, there still must be reference to the actuarial 
documents but FCIC has revised these provisions for clarification.
    Comment: An insurance provider commented that it disagrees with the 
second sentence added in the definition of ``Option coverage level'' 
which indicates this level effectively becomes the coverage level under 
the MPCI policy when losses exceed the deductible. This is simply not 
true, and gives the policyholder the false impression their coverage 
level under the MPCI policy is increased to the option coverage level 
when a loss occurs. The MPCI coverage level remains the same regardless 
of the option coverage level and it is the trigger point for a loss for 
both MPCI and CEO. The commenter states that this sentence is 
misleading and recommends that it be removed.
    Response: The Proposed Rule states the option coverage level 
``effectively'' becomes the coverage level under the MPCI policy when 
losses exceed the deductible. For example, if an insured had a 50 
percent MPCI coverage level and a 75 percent CEO coverage level, the 
CEO indemnity would not trigger until the 50 percent MPCI coverage 
level was penetrated; however, in the case of a total loss, the 
indemnity for the policy would, in fact, be at the 75 percent CEO 
coverage level. However, this could be misleading because the CEO 
coverage level only becomes the effective MPCI coverage level when 
there is a total loss. Therefore, FCIC has modified the sentence to 
read, ``This percentage is applicable under the MPCI/CEO policy when 
losses under such policy exceed the MPCI deductible and an indemnity is 
owed.''

3. Section 3

    Comment: An insurance service organization and an insurance 
provider commented that it does not seem necessary to add after the 
requirement to ``* * * have an MPCI policy in force for the insured 
crop * * *'' the phrase ``* * * in accordance with the applicable Crop 
Provisions for the insured crop.'' They questioned if it is possible to 
have an MPCI policy in force that is NOT in accordance with the Crop 
Provisions.
    Response: FCIC has revised the provisions to specify that the 
insured must have a MPCI policy in force and comply with all terms of 
the policy.
    Comment: An insurance service organization and an insurance 
provider recommended that FCIC consider rearranging the parenthetical 
phrase in section 3 to read ``* * * for the insured crop (the insured 
type for citrus fruit, citrus trees, and stonefruit) * * *'' The phrase 
``as applicable,'' as shown in the Proposed Rule, seems unnecessary 
since the insured type is applicable for those three crop policies.
    Response: The phrase ``as applicable,'' is not superfluous. FCIC 
inadvertently omitted the additional phrase ``or other crops.'' 
Therefore, FCIC has modified the provision to read ``(or for citrus 
fruit, citrus trees, and stonefruit, or other crops, as applicable, the 
insured type).'' This language allows for the flexibility of bringing 
other crops under CEO in those instances where the insured is allowed 
to insure by type.

4. Section 4

    Comment: An insurance service organization and an insurance 
provider commented that FCIC should consider moving the first sentence 
of section 4 to section 3 so all the requirements for CEO coverage are 
grouped together, and consider rearranging as follows: ``3. To be 
eligible for this coverage, you must: ``(a) Have an MPCI policy in 
force for the insured crop (insured type for citrus fruit, citrus trees 
and stonefruit); and ``(b) Elect this option in writing and choose an 
option coverage level on or before the sales closing date for the 
insured crop.'' Additionally they questioned if it is necessary to 
repeat the phrase ``* * * for the insured crop.''
    Response: FCIC has added the provisions of the first sentence in 
section 4 to section 3(b). FCIC has also added ``CEO,'' and ``for the 
insured crop'' in the first sentence of section 3 which now reads, ``To 
be eligible for CEO coverage on the insured crop, you must: * * *'' 
However, because the

[[Page 43610]]

requirements to have an MPCI policy in effect and elect a CEO coverage 
level are specific to the insured crop, the phrase ``for the insured 
crop'' is not removed from sections 3(a) and 3(b).
    Comment: An insurance service organization and an insurance 
provider commented that FCIC needs to revise the last phrase of the 
remaining sentence in section 4 to read ``* * * or until it is 
cancelled by you or terminated by us * * *'' so it does not appear to 
say that the CEO remains in effect even if it is cancelled or 
terminated.
    Response: FCIC has revised the provisions accordingly.
    Comment: An insurance provider commented that FCIC might want to 
consider adding the requirement that the insured must choose an option 
coverage level which is at least five percent higher than the 
underlying MPCI coverage level.
    Response: FCIC has added the requirement that the CEO coverage 
level selected must be at least five percent higher than the underlying 
MPCI coverage level to the provisions contained in section 3(b) as 
revised.

5. Section 5

    Comment: An insurance service organization and an insurance 
provider commented that FCIC should consider combining section 5 with 
section 2 since section 5 addresses the fact that CAT policies are NOT 
eligible for the CEO.
    Response: FCIC agrees that section 5 could be combined with another 
section, but believes it should more appropriately be combined with 
section 3 rather than section 2. Therefore, FCIC has combined section 3 
with provisions from the previous section 5 to include the requirement 
that insureds select a coverage level greater than CAT because it is a 
condition of eligibility.

6. Section 6

    Comment: An insurance provider commented that the first sentence of 
section 6 reads ``* * * your deductible will disappear in proportion to 
the amount of such loss and indemnity paid * * *.'' The language 
appears to give the impression that the deductible is disappearing or 
getting smaller as a loss occurs, but actually, it remains the same 
(difference between 1 minus the applicable MPCI coverage level). The 
deductible remains the same even after a loss occurs.
    Response: The commenter is correct that the deductible under the 
MPCI policy does not actually disappear. However, CEO is intended to 
provide coverage for losses that would otherwise not be payable because 
of the deductible. The provision has been revised to so clarify and to 
provide an example that demonstrates how such coverage works when the 
loss is greater than the MPCI deductible but less that a total loss.
    Comment: An insurance service organization and an insurance 
provider commented that the opening paragraph in section 6 ends ``* * * 
The amount of the additional indemnity and related terms and conditions 
are described below'' but only (c) and (d) address the CEO indemnity. 
Section 6(b) addresses replant and prevented planting payments so it 
might fit under the ``indemnity'' heading, but (a) and (e) appear to 
belong elsewhere.
    Response: The commenters are correct that section 6 contains a 
mixture of provisions that are not directly related. Some provisions 
only relate to the general coverage provided under CEO and its 
relationship to the MPCI policy and FCIC has left those provisions in 
section 6. However, those provisions relating to how indemnities are 
paid in relation to the MPCI policy have been moved to a new section 7. 
FCIC has also moved section 6(e) to be the new section 5 in response to 
other comments that suggest the premium provisions should be separated. 
The provisions in section 7 in the proposed rule have been moved to a 
new section 8.
    Comment: An insurance provider questioned if an insured had 
prevented planting acreage, would CEO premium be charged for additional 
CEO coverage on such acreage. The commenter added that the way section 
6(e) is written it would indicate there would be an MPCI dollar amount 
of coverage provided for prevented planting coverage.
    Response: The new section 5 specifies how premium is calculated. It 
is based on the total liability under the MPCI policy and the total 
liability under CEO. This is because this is what is at risk when the 
insured enters into the policy. The fact that the insured may 
subsequently be paid a prevented planting payment on some of the 
insured acreage does not eliminate the fact that the total liability 
was originally insured under the policy. Section 6(b) in the Final Rule 
clarifies that any replant or prevented planting payment that is 
payable under the MPCI policy will not be affected by the CEO Option.
    Comment: An insurance service organization and an insurance 
provider commented that subsection 6(e) addresses the calculation of 
the premium under CEO rather than the indemnity, so perhaps it should 
be a separate section (ahead of the indemnity section) since it would 
apply to all policies with the CEO even if there is no CEO indemnity.
    Response: As stated above, FCIC has made the previous section 6(e) 
the new section 5. This places the provisions in a more logical order 
and improves the clarity of the provisions.
    Comment: An insurance service organization and an insurance 
provider commented that the deletion of subsections 6(b) and (c) in the 
current provisions, proposed rule section 7, is not appropriate since 
those provisions are still needed to determine the option dollar amount 
of insurance.
    Response: The commenters are correct that the previous subsections 
6(b) and (c) served to identify how the option dollar amount of 
insurance is determined. FCIC tried to simplify the provisions but in 
the process it did not adequately identify how the option dollar amount 
of insurance (now CEO dollar amount of insurance) is determined. 
Therefore, FCIC has added two additional steps in the current section 8 
to clarify this determination. FCIC has also added two additional steps 
in the Example in section 8 for clarification.

List of Subjects in 7 CFR Part 457

    Crop insurance, Coverage Enhancement Option.

Final Rule

0
Accordingly, as set forth in the preamble, the Federal Crop Insurance 
Corporation amends 7 CFR part 457, Common Crop Insurance Regulations, 
for the 2009 and succeeding crop years as follows:

PART 457--COMMON CROP INSURANCE REGULATIONS

0
1. The authority citation for 7 CFR part 457 continues to read as 
follows:

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


0
2. Add a new Sec.  457.172 to read as follows:


Sec.  457.172  Coverage Enhancement Option.

    The Coverage Enhancement Option for the 2009 and succeeding crop 
years are as follows:
    FCIC policies: United States Department of Agriculture, Federal 
Crop Insurance Corporation.
    Reinsured policies: (Appropriate title for insurance provider).
    Both FCIC and reinsured policies: Coverage Enhancement Option.
    Both FCIC and reinsured policies:

Coverage Enhancement Option

1. Definitions

    CEO coverage level--The coverage level percentage contained in the

[[Page 43611]]

actuarial documents where the Coverage Enhancement Option (CEO) is 
available and selected by you. This percentage is applicable under the 
combined MPCI/CEO policy when losses under the MPCI policy exceed the 
deductible and an indemnity is owed.
    CEO dollar amount of insurance--The value of the additional 
insurance coverage for each unit provided by the CEO, which is 
determined by multiplying the CEO coverage level by the total value of 
the insured crop and subtracting the MPCI dollar amount of insurance.
    MPCI--Multiple Peril Crop Insurance, the plan of insurance offered 
by the Federal Crop Insurance Corporation as published at 7 CFR part 
457.
    MPCI coverage level--The coverage level percentage you selected in 
the underlying MPCI policy to which CEO is attached.
    MPCI dollar amount of insurance--The value of the insurance 
coverage for each unit provided under the MPCI policy (the amount of 
insurance selected by you for dollar or similar plans of insurance, 
multiplied by the number of acres in the unit if such amount of 
insurance is on a per acre basis, or the amount determined by 
multiplying your production guarantee (per acre), times the price 
election, times the number of acres in the unit).
    MPCI indemnity--The indemnity determined for each unit under the 
MPCI policy to which CEO is attached, not including replant and 
prevented planting payments or any indemnity payable under CEO.
    MPCI indemnity factor--A factor determined by dividing the MPCI 
indemnity by the MPCI dollar amount of insurance for each unit. This 
factor is used to ensure that the indemnity paid under the CEO is 
proportional to the amount of loss and indemnity paid under the MPCI 
policy.
    Total value of the insured crop--The value of the crop that is 
determined by dividing the MPCI dollar amount of insurance for each 
unit by the MPCI coverage level, and summing the total for all units.
    2. CEO is only available for insured crops where the actuarial 
documents contain a CEO coverage level. If there is a conflict between 
the terms of CEO and any other provision of your policy, the terms of 
the CEO will control.
    3. To be eligible for CEO coverage on the insured crop, you must:
    (a) Have an MPCI policy in force for the insured crop (or for 
citrus fruit, citrus trees, and stone fruit or other crops, as 
applicable, the insured type) and comply with all terms and conditions 
of such policy.
    (b) Elect CEO in writing and choose a CEO coverage level (at least 
5 percent higher than the MPCI coverage level), by the sales closing 
date for the insured crop.
    (c) Elect a level of coverage greater than the Catastrophic Risk 
Protection (CAT) coverage level and a 100 percent price election. CEO 
is not available for the CAT level of coverage.
    4. CEO is continuous and will remain in effect for as long as you 
continue to have a MPCI policy in effect for the insured crop, the 
actuarial documents contain a CEO coverage level, or until it is 
canceled by you or terminated by us on or before the cancellation or 
termination date, as applicable.
    5. The premium for your policy will be determined by:
    (a) Totaling the MPCI dollar amount of insurance and the CEO dollar 
amount of insurance; and
    (b) Multiplying the result of section 5(a) by the premium rate for 
the insured crop applicable to your MPCI coverage level
    6. With respect to the coverage provided under CEO:
    (a) All acreage of the insured crop insured under your MPCI policy 
will be covered under the CEO;
    (b) The amount of any replant or prevented planting payment that is 
payable under the MPCI policy will not be affected by the CEO;
    (c) An indemnity will be payable under the CEO only after the 
underlying MPCI deductible is met and an MPCI indemnity is paid; and
    (d) The total indemnity for each unit (MPCI coverage plus CEO) 
cannot exceed the combination of both the MPCI and CEO dollar amounts 
of insurance.
    7. If you elect CEO and a MPCI indemnity is paid on any unit, CEO 
will pay a portion of the loss not paid under the deductible of the 
MPCI policy depending on the CEO coverage level you select (For 
example, if you selected a 50 percent MPCI coverage level, selected an 
85 percent CEO coverage level, and had 60 percent loss of the insured 
crop, the total amount of indemnity paid under both the MPCI policy and 
the CEO would be equal to approximately 51 percent of the total value 
of the insured crop). See the example in section 8.
    8. In addition to the settlement of claim section for the 
applicable Crop Provisions, your indemnity will be computed for each 
unit as follows:
    (a) Determine the MPCI indemnity factor;
    (b) Determine the total value of the insured crop;
    (c) Determine the CEO dollar amount of insurance; and
    (d) Multiply the MPCI indemnity factor times the CEO dollar amount 
of insurance to determine the indemnity under the CEO.
    Example:
    Assume a policy with one unit; an MPCI coverage level of 50 percent 
and a CEO coverage level of 85 percent; 100% share; a $120,000 MPCI 
dollar amount of insurance; and a $72,000 payable indemnity under the 
MPCI portion of the policy.
    Your indemnity would be calculated as follows:
    (a) $72,000 MPCI loss / by $120,000 MPCI dollar amount of insurance 
= .60 MPCI indemnity factor;
    (b) $120,000 MPCI dollar amount of insurance, divided by the MPCI 
coverage level of .50 results in $240,000 total value of the insured 
crop;
    (c) $240,000 total value of the insured crop multiplied by the CEO 
coverage level .85, equals $204,000, and subtracting $120,000 MPCI 
dollar amount of insurance equals $84,000 CEO dollar amount of 
insurance;
    (d) .60 MPCI indemnity factor x $84,000 CEO dollar amount of 
insurance = $50,400 unit indemnity under the CEO.

    Note: The total unit indemnity is $122,400 ($72,000 MPCI 
indemnity plus $50,400 CEO indemnity).


    Signed in Washington, DC, on July 22, 2008.
Eldon Gould,
Manager, Federal Crop Insurance Corporation.
[FR Doc. E8-17187 Filed 7-25-08; 8:45 am]
BILLING CODE 3410-08-P