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VOLUME 17, NUMBER 8, WHOLE NUMBER 201 JULY 2000

ederal
F eder affirms
al Circuit aff irms dismissal of
claims against FGIS
In its decision in Collehon Farming v. United States, 207 F.3d 1373 (Fed. Cir. 2000),
the Federal Circuit has affirmed the dismissal of a damages action brought by wheat
farmers and grain elevators against the United States. The action alleged negligence
and mismanagement by the USDA Federal Grain Inspection Service (FGIS) in its
transition from near-infrared reflectance technology (NIRR) equipment to near-
infrared transmittance technology (NIRT) equipment to measure wheat protein

INSIDE content. The plaintiffs claimed that they lost money on their wheat sales because the
NIRT equipment under-represented the protein in wheat during the transition period.
FGIS establishes uniform grain standards and provides grain inspection and
measurement services under the Grain Standards Act, 7 U.S.C. §§ 71-87. Though it
• Agricultural law is not the only measurer of the quality and condition of wheat and other grains, it
bibliography provides official measurement services when wheat is shipped from elevators
pursuant to its sale. These measurements include ascertaining the wheat’s protein
content. Wheat with a higher protein level typically commands a higher price.
• The Agricultural Elevators also measure protein levels when they acquire wheat from farmers.
Risk Protection Act Because a FGIS measurement will apply to their sale of the wheat, elevators have
of 2000: crop insurance a strong incentive to correlate their equipment with the equipment used by FGIS.
During a period in the transition by FGIS from NIRR equipment to NIRT
equipment, the NIRT equipment under-represented wheat protein content because
of calibration problems. Elevators responded by adjusting their equipment, most of
which used NIRR technology, so that their equipment also under-represented
protein content. As a result, the farmers whose wheat was measured by the elevators
and the elevators whose wheat was measured by FGIS allegedly received less money
for their respective wheat than they should have received.
The plaintiffs premised their action to recover their alleged losses on the Little
Tucker Act, 28 U.S.C. § 1346(a)(2), and the Federal Tort Claims Act (FTCA), 28
U.S.C. §§ 1346(b), 2671-2680.
Solicitation of articles: All AALA The Tucker Act claim essentially asserted that FGIS had violated the Grain
members are invited to submit Standards Act by failing to ensure that the NIRT equipment was properly calibrated.
articles to the Update. Please in- To state a claim under the Tucker Act, however, the plaintiffs were required to show
clude copies of decisions and leg- that the statute upon which their claim was founded, the Grain Standards Act, is
“money-mandating” in the sense that it can be “fairly interpreted as mandating
islation with the article. To avoid
compensation from the United States.” Gollehon Farming, 207 F.3d at 1379 (citing
duplication of effort, please no- United States v. Mitchell, 463 U.S. 206, 216-17 (1983)). The plaintiffs attempted to
tify the Editor of your proposed make this showing by arguing that the Grain Standards Act imposed on FGIS a
article. fiduciary duty in their favor, the breach of which through the erroneous measure-
ment of protein content mandated compensation. They argued that their relation-
ship with FGIS was analogous to the role assigned by law to the Department of

IN FUTURE Interior over Native American timberlands that the Supreme Court held created a
fiduciary relationship mandating compensation for its breach in United States v.
Mitchell, 463 U.S. 206 (1983).

I SSUES The Federal Circuit rejected this argument. It contrasted the comprehensive
control over Native American timberlands exercised by the Department of Interior
in Mitchell with the absence of any FGIS authority to control wheat production and
distribution. While acknowledging that FGIS “was an important component of the
nation’s grain production and distribution system,” the court reasoned that “this
• Crop share rental cannot imply that the United States has, via the Grain Standards Act, assumed the
arrangements and responsibility to ensure that farmers and grain elevators generate a minimum
return on investment.” Id. at 1380. Thus, concluded the Federal Circuit, the “Grain
sample lease Standards Act cannot be fairly read to mandate compensation.” Id.
The plaintiffs’ FTCA claims fared no better. The Federal Circuit held that the
farmers’ tort claim amounted to a misrepresentation claim because it was based on
the contention that the elevators had lowered the protein measurements for their
wheat in response to the misinformation provided by the faulty FGIS measure-
ments. Id. at 1380-81. Misrepresentation claims are not within the FTCA’s waiver
Continued on page 2
CROP INSURANCE/CONTINUED FROM PAGE 1

certain specified features, and it estab- ity for maintenance to the FCIC. tions as a hedging transaction to reduce
lishes research and development priori- The Act provides that the reimburse- production, price, or revenue risk; or
ties, including the development of a pas- ment amount for an approved policy is to (F) conduct any other activity related
ture, range, and forage program. be based “on the complexity of the policy to the activities described in subpara-
The Act also authorizes the FCIC to and the size of the area in which the graphs (A) through (E), as determined by
reimburse any applicant seeking reim- policy or material is expected to be sold.” the Secretary.
bursement for its crop insurance policy Reimbursement payments are “consid- Beginning in the 2001 fiscal year, the
research and development costs if the ered as payment in full by the Corpora- Commodity Credit Corporation is autho-
policy is approved by the FCIC Board of tion for the research and development rized to make available $10 million in
Directors and, if applicable, is offered for conducted with regard to the policy and cost share funds for this assistance. Indi-
sale. Such costs will also reimbursed any property rights to the policy.” vidual producer payments are limited at
with respect to policies approved by the $50,000 per person.
Board before the enactment of the Act. In Crop insurance pilot programs
either case, reimbursement will be made The Agricultural Risk Protection Act Other miscellaneous changes
only if the Board determines that the authorizes the FCIC to conduct pilot pro- The Agricultural Risk Protection Act
policy is marketable based on a reason- grams to test the marketability and suit- makes various other changes to the FCIA.
able marketing plan. ability of new crop insurance policies. In In general terms, these changes include
Reimbursement will also be made for addition to giving the FCIC the general the following:
the maintenance costs associated with the authority to conduct pilot programs, the ·Removing any federal crop insurance
annual cost of underwriting a policy for Act specifically directs the FCIC to con- policy or plan from the jurisdiction of the
which the research and development costs duct at least one pilot program for live- Commodity Futures Trading Commis-
have been reimbursed for up to four years. stock, revenue insurance, and a premium sion or the Securities and Exchange Com-
Thereafter, the approved insurance pro- rate reduction pilot program. Otherwise, mission.
vider responsible for the maintenance of the range of permissible and required ·Requiring the FCIC to make informa-
the policy may charge a fee to other ap- pilot programs is remarkable for it ex- tion electronically available to producers
proved insurance providers that elect to tends from the destruction of bees due to and approved insurance providers and,
sell the policy or transfer the responsibil- pesticides to coverage for wild salmon “to the maximum extent practicable,” to
losses. The Act also expands the existing “allow producers and approved insur-
options pilot program. ance providers to use electronic methods
to submit information required by the
Education and risk management Corporation.”
assistance programs · Permitting the FCIC to renegotiate
The Agricultural Risk Protection Act the Standard Reinsurance Agreement
requires the FCIC and the Secretary, once during the 2001 through 2005 rein-
VOL. 17, NO. 8, WHOLE NO. 201 July 2000 acting through the Cooperative State surance years.
AALA Editor..........................Linda Grim McCormick
Research, Education, and Extension Ser- · Limiting revenue coverage for pota-
Rt. 2, Box 292A, 2816 C.R. 163 vice, to provide crop insurance education toes to whole farm policies or plans of
Alvin, TX 77511 and information in states where crop insurance.
Phone: (281) 388-0155
FAX: (281) 388-0155 insurance participation has traditionally · Beginning with the 2001 crop year,
E-mail: lgmccormick@teacher.esc4.com been low and where producers are under- requiring the FCIC to offer coverage for
Contributing Editors: Christopher R. Kelley, University served by the crop insurance program. cotton and rice losses resulting from the
of Arkansas, Fayetteville, AR; Drew Kershen, The Act also authorizes the transfer of failure of irrigation water supplies due to
University of Oklahoma
For AALA membership information, contact
monies from the insurance fund for the drought and saltwater intrusion.
William P. Babione, Office of the Executive Director, purpose of awarding grants to colleges, · Permitting producers who had ob-
Robert A. Leflar Law Center, University of Arkansas, universities, and other qualified public tained a 1999 Crop Revenue Coverage
Fayetteville, AR 72701.
and private entities to educate producers policy that had been voided by FCIC
Agricultural Law Update is published by the about risk management strategies. Bulletin MGR-99-004 to receive full in-
American Agricultural Law Association, Publication
office: Maynard Printing, Inc., 219 New York Ave., Des The Secretary must provide cost share demnities under the policy.
Moines, IA 50313. All rights reserved. First class assistance to producers in not less than
postage paid at Des Moines, IA 50313.
ten nor more than fifteen states in which
This publication is designed to provide accurate and participation in the crop insurance pro-
authoritative information in regard to the subject gram is low historically. Producers may FGIS/continued from page 1
matter covered. It is sold with the understanding that
the publisher is not engaged in rendering legal, use this assistance for the following uses: of sovereign immunity. Id. at 1380 (citing
accounting, or other professional service. If legal advice (A) construct or improve– 28 U.S.C. § 2680(h)).
or other expert assistance is required, the services of
a competent professional should be sought. (i) watershed management As to the elevators’ tort claim, the
Views expressed herein are those of the individual structures; or Federal Circuit held that the claim was
authors and should not be interpreted as statements of
policy by the American Agricultural Law Association.
(ii) irrigation structures; barred by the “discretionary function
(B) plant trees to form windbreaks or exception” to the FTCA’s waiver of sover-
Letters and editorial contributions are welcome and to improve water quality; eign immunity. The court reasoned that
should be directed to Linda Grim McCormick, Editor,
Rt. 2, Box 292A, 2816 C.R. 163, Alvin, TX 77511. (C) mitigate financial risk through pro- the various decisions involved in making
duction diversification or resource con- the transition from NIRR technology to
Copyright 2000 by American Agricultural Law
Association. No part of this newsletter may be servation practices, including– NIRT technology involved choices and
reproduced or transmitted in any form or by any means, (i) soil erosion control; judgments of a policy nature that were
electronic or mechanical, including photocopying,
recording, or by any information storage or retrieval
(ii) integrated pest management; not directly constrained by applicable
system, without permission in writing from the or transition to organic farming; statutes or regulations. Hence, the dis-
publisher. (D) enter into futures, hedging, or op- cretionary function exception embodied
tions contracts in a manner designed to in 28 U.S.C. § 2680(a) applied to bar the
help reduce production, price, or revenue plaintiffs’ claim. Id. at 1381-82.
risk; —Christopher R. Kelley, University of
(E) enter into agricultural trade op- Arkansas

2 AGRICULTURAL LAW UPDATE JULY 2000
gr
Ag icultural
ricultur law
al la bibliogr
w bibliog aphy
raph quarter
y: second quarter 2000
Animals — animal rights Farmland in C. Geisler & G. Danekar, Prop-
Comment, “Four Legs Good, Two Legs Environmental issues erty and Values: Alternatives To Public And
Bad”: The Issue of Standing in Animal Legal Centner, Concentrated Feeding Opera- Private Ownership ch. 6, pp. 119-148 (Island
Defense Fund, Inc. v. Glickman and its Impli- tions: An Examination of Current Regulations Press, 2000).
cations For the Animal Rights Movement. and Suggestions for Limiting Negative Exter-
(Animal Legal Defense Fund, Inc. v. Glickman, nalities, 25 Colum. J. Envtl. L. 219-252 (2000). Livestock and packers & stockyards
154 F.3d 426, D.C. Cir. 1998, cert. denied, Comment, The Ones that Got Away: Regu- Head, Local Regulation of Animal Feeding
National Ass’n for Biomedical Research v. lating Escaped Fish and Other Pollutants Operations: Concerns, Limits, and Options
Animal Legal Defense Fund, Inc., 119 S. Ct. from Salmon Fish Farms, 27 B.C. Envtl. Aff. for Southeastern States, 6 Envtl. L. 503- 575
1454, 1999), 65 Brook. L. Rev. 895-933 L. Rev. 75-121 (1999). (2000).
(1999). Legislative Developments, Council Direc-
Kelch, The Role of the Rational and the Forestry tive 98/58/EC Concerning the Protection of
Emotive in a Theory of Animal Rights, 27 B.C. Leffler, Rucker & Munn, Transaction Costs Animals Kept for Farming Purposes, 1998
Envtl. Aff. L. Rev. 1-41 (1999). and the Collection of Information: Presale O.J. (L 221) 23, 5 Colum. J. Eur. L. 497-501
Note, At the Intersection of Constitutional Measurement on Private Timber Sales, 16 (1999).
Standing, Congressional Citizen-suits, and J.L. Econ. & Organization 166-188 (2000). Note, Where’s the Beef? A Reconciliation
the Humane Treatment of Animals: Propos- of Commercial Speech and Defamation Cases
als to Strengthen the Animal Welfare Act, 68 International trade in the Context of Texas’s Agricultural Dispar-
Geo. Wash. L. Rev. 330-360 (2000). Chen, Globalization and its Losers, 9 Minn. agement Law, 19 Rev. Litig. 261-288 (2000).
Note, A Common Law Basis For Animal J. Global Trade 157-218 (2000). Stewart, Cannon, Salonen, Nuxoll, Trade
Rights. (Animal Legal Defense Fund, Inc. v. Kennedy, Resolving International Sanitary and Cattle: How the System is Failing an
Glickman, 154 F.3d 426, D.C. Cir. 1998, en and Phytosanitary Disputes in the WTO: Les- Industry in Crisis, 9 Minn. J. Global Trade
banc.), 29 Stetson L. Rev. 495-530 (1999). sons and Future Directions, 55 Food & Drug 449-587 (2000).
L. J. 81 (2000).
Bankruptcy Koo & Uhm, U.S.-Canadian Grain Disputes, Patents, trademarks & trade secrets
Farmers: general 9 Minn. J. Global Trade 103-119 (2000). Comment, Protein Variants: A Study on
Harl, The Hidden Tax Traps in Abandon- McNiel, Furthering the Reforms of Agricul- the Differing Standards for Biotechnology
ment, 11 Agric. L. Dig. 65-66 (April 28, 2000). tural Policies in the Millennium Round, Minn. Patents in the United States and Europe, 13
J. Global Trade 41-86 (2000). Emory Int’l L. Rev. 629-685 (1999).
Biotechnology Ritchie & Dawkins, WTO Food and Agricul- Ross & Zhang, Agricultural Development
Adler, More Sorry than Safe: Assessing the tural Rules: Sustainable Agriculture and the and Intellectual Property Protection for Plant
Precautionary Principle and the Proposed Human Right to Food, 9 Minn. J. Global Trade Varieties: China Joins UPOV, 17 UCLA Pac.
International Biosafety Protocol, 35 Tex. Int’l 9-39 (2000). Basin L.J. 226-244 (1999).
L.J. 173-205 (2000). Scher, The WTO and America’s Agricul-
Beach, No “Killer Tomatoes”: Easing Fed- tural Trade Agenda, 9 Minn. J. Global Trade Pesticides
eral Regulation of Genetically Engineered 1-7 (2000). Comment, Opportunities to Improve Pesti-
Foods, 53 Food & Drug L. J. 181 (1998). Scott, Exported to Death: The Failure of cide Policy in Central America, 11 Colo. J. Int’l
Casenote, Bioprospecting on Federal Agricultural Deregulation, 9 Minn. J. Global Envtl. & Pol’y 151-181 (2000).
Lands, Public Loss or Public Gain? (Edmonds Trade 87-102 (2000). Watnick, Risk Assessment: Obfuscation of
Institute v. Babbitt, 42 F. Supp. 2d 1, D.C. Cir. Thompson, Globalization, Losers, and Prop- Policy Decisions in Pesticide Regulation and
1999), 4 Great Plains Nat. Resources J. 50-73 erty Rights, 9 Minn. J. Global Trade 602-609 the EPA’s Dismantling of the Food Quality
(1999). (2000). Protection Act’s Safeguards for Children, 31
Comment, Transgenic Crops: A Modern Ariz. St. L.J. 1315-1372 (1999).
Trojan Horse, 3 J.L. & Soc. Challenges 127- Land use regulation
137 (1999). Land use planning and farmland preser- Public lands
Comment, Chilling of the Corn: Agricultural vation techniques Miller, Public Lands and Waters: Who Will
Biotechnology in the Face of U.S. Patent Law Centner, Curbing the Right-to-Farm , Prevail—Man or Beast? 31 Urban L. 883-899
and the Cartagena Protocol, 4 J. Small & Choices 41-45 (1st Q. 2000). (1999).
Emerging Bus. L. 377-410 (2000). Centner, Anti-Nuisance Legislation: Can Souder & Fairfax, In Lands We Trusted:
Note, The Negotiation of the Cartagena the Derogation of Common Law Nuisance be State Trust Lands as an Alternative Theory of
Protocol on Biosafety, 6 Envtl. L. 577-602 a Taking?, 30 Envtl. L. Rep. 10253-10260 Public Land Ownership in C. Geisler & G.
(2000). (2000). Danekar, Property and Values: Alternatives
Redick & Bernstein, Nuisance Law and the Hamilton, Preserving Farmland, Creating To Public And Private Ownership ch. 5, pp.
Prevention of “Genetic Pollution”: Declining a Farms, and Feeding Communities: Opportu- 87-118 (Island Press, 2000).
Dinner Date with Damocles, 30 Envtl. L. Rep. nities to Link Farmland Protection and Com- If you desire a copy of any article or further
10378 (2000). munity Food Security, 19 N. Ill. U. L. Rev. information, please contact the Law School
Uchtmann, Regulating Foods Derived From 657-669 (1999). Library nearest your office. The AALA website
Genetically Engineered Crops, 17 Agric. L. Jay, Land Trust Risk Management of Legal < http://www.aglaw-assn.org > has a very
Update 4-7, 3 (May 2000). Defense and Enforcement of Conservation extensive Agricultural Law Bibliography in the
Easements: Potential Solutions, 6 Envtl. L. Members Only sector of the website. If you
Cooperatives 441-501(2000). are looking for agricultural law articles, please
General Thompson, “Hybrid” Farmland Protection consult this bibliographic resource on the
Borst, Going Global: Export Certificates a Programs: A New Paradigm for Growth Man- AALA website.
Valuable Tool Helping Co-ops Tap Overseas agement, 23 Wm. & Mary Envtl. L. & Pol’y —Drew L. Kershen, Professor of Law,
Markets, Rural Coop. 18-21 (March/April Rev. 831-355 (1999). The University of Oklahoma,
2000). Norman, OK
Lauck & Adams, Farmer Cooperatives and Leases, landlord-tenant
the Federal Securities Laws: The Case for Grossman, Leasehold Interests and the
Non-application, 45 S.D. L. Rev. 62-93 (2000). Separation of Ownership and Control in U.S.

JULY 2000 AGRICULTURAL LAW UPDATE 3
gr
T he A g icultural
ricultur Protection
al Risk Protection Act of 2000:
ederal
feder crop
al cr insurance
op insurance
By Christopher R. Kelley

On June 20, 2000, President Clinton Revenue insurance generally protects obtaining CAT or additional coverage.
signed the Agricultural Risk Protection against revenue or gross income losses In 1998 and 1999, Congress extended
Act of 2000, Pub. L. No. 106-224, 114 caused by yield or price declines. A emergency crop loss assistance benefits
Stat. 358. The Act makes significant relatively new form of crop insurance, to producers who had waived their claim
changes to the federal crop insurance revenue insurance policies vary in their to them. To receive these benefits, these
program and to the Non-Insured Crop definition of “revenue” and in the manner producers were required to purchase CAT
Disaster Assistance Program (NAP). It in which they provide coverage. For ex- or additional coverage in the subsequent
also provides for direct financial assis- ample, group revenue insurance (GRIP) two years for all crops of economic signifi-
tance to producers of various crops; makes pays indemnities when the average cance produced by such person for which
certain changes to the USDA’s nutrition, county revenue for the insured crop de- insurance is available.
commodity, and credit programs; funds clines below the revenue level chosen by CAT coverage extends to yield losses
biomass research and development; and the farmer. Adjusted gross revenue in- and prevented planting resulting from
establishes the Plant Protection Act as surance (AGR) insures the revenue of the natural disasters, but it is very limited.
an omnibus means for regulating the entire farm, not just the revenue derived An indemnity is paid only if the insured
movement of plant pests, plants, plant from individual crops, by guaranteeing a suffers at least a fifty percent loss in
products, biological control organisms, percentage of the farm’s average gross yield, and the price level is fifty-five
noxious weeds, and related matters. revenue. Crop revenue coverage (CRC) percent of the expected market price for
This Article describes the major protects against price and yield losses the insured crop. These yield loss and
changes made to the federal crop insur- below a guarantee based on the higher of price level percentages were not changed
ance program. In a subsequent Agricul- an early-season price or the harvest price. by the Agricultural Risk Protection Act.
tural Law Update, changes to the NAP Income protection policies (IP) protect
and the domestic commodity and other farmers against reductions in gross in- New alternative for determining loss
farm programs will be discussed. Cita- come when the insured crop’s price or Though the Act did not change the
tions for the discussion of federal crop yield falls from early-season expectations. yield loss and price level percentages, the
insurance are omitted because of space Revenue assurance (RA) allows farmers available bases for determining the yield
limitations. An electronic version with to select a dollar amount of target rev- loss were changed. Beginning with the
citations is available from the author at enue from a range expressed in term of 2001 crop year, producers have a choice
<crkelley@mindspring.com>. percentages of expected revenue. between two alternatives for determin-
Authorized by the Federal Crop Insur- ing yield losses. Under the first alterna-
ance Act (FCIA), the federal crop insur- Changes to Multiple Peril Crop tive, producers can elect to have their
ance program provides subsidized crop Insurance coverage loss determined on an individual yield or
insurance for farmers. It is administered The Agricultural Risk Protection Act area yield basis. This alternative was the
by the Federal Crop Insurance Corpora- substantially amends the MPCI provi- only alternative available under existing
tion (FCIC or the Corporation) under the sions of the FCIA effective with the 2001 law. However, a producer did not always
supervision of the USDA Risk Manage- crop year. have the choice between an individual
ment Agency (RMA). Standard MPCI policies insure pro- yield basis or area yield basis because
Federal crop insurance policies are sold ducers against yield losses caused by the FCIC had the discretion to decide
and serviced by private insurance pro- natural disasters, such as drought, ex- whether both bases would be offered.
viders that are approved by the FCIC. cessive moisture, hail, wind, frost, in- Under the second alternative, the al-
These approved providers are reinsured sects, and disease. In certain circum- ternative created by the Act, a producer
by the FCIC with respect to these poli- stances, however, coverage for fire and can chose protection that:
cies, and they receive an amount for their hail losses can be deleted from an MPCI (i) indemnifies the producer on an area
operating and administrative expenses. policy. yield and loss basis if such a policy or
The FCIC also approves the terms and Two levels of MPCI coverage are avail- plan of insurance is offered for the agri-
conditions of federal crop insurance poli- able. The first is known as “catastrophic cultural commodity in the county in which
cies. risk protection.” This level of protection the farm is located;
Federal crop insurance currently pro- is often called “CAT” coverage. The sec- (ii) provides, on a uniform national
vides both yield-based coverage and rev- ond level is known as “additional cover- basis, a higher combination of yield and
enue insurance. Yield-based coverage age.” Additional coverage provides greater price protection than the coverage avail-
compensates farmers for yield losses, protection than CAT coverage and is of- able under ... [the first alternative]; and
measured either by the quantity or the ten referred to as “buy-up” coverage. An (iii) the Corporation determines is com-
value of their yield, depending on the administrative fee applies to both levels, parable to the coverage available under
policy. A form of yield-based coverage but the premium for CAT coverage is ... [the first alternative] for purposes ...
known as multiple peril crop insurance completely subsidized while the premium [of the premium to be paid by the Corpo-
(MPCI) is the most widely available and for additional coverage is only partially ration].
used type of federal crop insurance. MPCI subsidized.
provides comprehensive protection By its terms, this provision is intended
against losses caused by weather and CAT coverage changes to give producers who obtain CAT cover-
other unavoidable perils. For the 1995 crop year, producers had age the election to insure on an area yield
to obtain at least CAT coverage to be and loss basis in lieu of an individual
eligible for the federal domestic commod- yield basis. It also directs the FCIC to
Christopher R. Kelley is Assistant Profes- ity programs and certain other USDA provide “a higher combination of yield
sor of Law at the University of Arkansas programs. Since then, participants in and price protection” than the coverage
School of Law and is Of Counsel to the these programs could waive any claim to available under the first alternative.
Vann Law Firm in Camilla, GA. emergency crop loss assistance in lieu of Nevertheless, it appears to give the FCIC

4 AGRICULTURAL LAW UPDATE JULY 2000
the discretion to determine the availabil- cies or plans of insurance disclose the The Act also requires the FCIC to es-
ity of this alternative on a commodity and dollar amount of the portion of the pre- tablish an informal administrative ap-
county basis. mium paid by the FCIC. peal process to provide producers with a
Under the existing FCIA, producers right to a review of a determination re-
“Expected market price” defined could increase coverage in one-percent garding good farming practices. Such
CAT indemnities are based on a per- increments. The Agricultural Risk Pro- determinations are expressly deemed not
centage of the “expected market price” tection Act temporarily suspends this to be “adverse decisions” for purposes of
for the insured commodity. This phrase, option by giving the FCIC the authority the USDA National Appeals Division
however, was not defined in the FCIA. to offer only five-percent increments “be- administrative appeal process. Produc-
The Agricultural Risk Protection Act es- ginning at 50 percent of the recorded or ers who receive such a determination
tablishes a statutory definition of “ex- appraised average yield” during each of have the right to seek judicial review
pected market price.” This definition also the 2001 through 2005 reinsurance years. without exhausting the informal admin-
applies to “additional coverage”and to The Act also authorizes the FCIC to istrative appeal process, but the “deter-
revenue insurance, although the result- “provide a performance-based premium mination may not be reversed or modi-
ing price may vary depending on the type discount for a producer of an agricultural fied as the result of judicial review unless
of insurance coverage. commodity who has good insurance or the determination is found to be arbi-
Under the statutory definition, the production experience relative to other trary or capricious.”
FCIC will either establish or approve a producers of that agricultural commod-
price level for each agricultural commod- ity in the same area, as determined by Assigned yields
ity for which insurance is available. This the Corporation.” Crop yields for crop insurance pur-
price level will be the “expected market Under the existing FCIA, producers poses are based on the farmer’s actual
price.” As a general rule, the expected who purchased additional coverage were production history (APH) for the crop
market price cannot be less than the required to pay an administrative fee, over the preceding four to ten consecu-
projected market price of the commodity, the amount of which varied depending on tive crop years. Farmers who do not have
as established by the FCIC. For some the level of coverage purchased. The Ag- satisfactory evidence for establishing an
types of policies, however, the expected ricultural Risk Protection Act changed APH are assigned a yield. When less than
market price can be different from that this provision so that an administrative four years of actual yield data are avail-
dictated by the general rule. For example, fee of $30 per crop per county will apply able, an estimated yield known as a “tran-
in the case of revenue and other similar to all levels of additional coverage. This sitional yield,” or “T-yield,” established
plans of insurance, the expected market fee can be waived for limited resource by the FCIC for the crop is used.
price can be the actual market price of farmers. The Agricultural Risk Protection Act
the commodity. amends the assigned yields provisions of
Changes to revenue insurance the FCIA by requiring the FCIC to assign
Administrative fee for CAT coverage subsidies a yield for a crop in four instances:
changed The Agricultural Risk Protection Act (1) when the farmer has not provided
Producers who purchase CAT coverage removes a limitation on the percentage of satisfactory evidence of the yield of the
do not pay a premium. Instead, because the premium to be paid by the FCIC for crop;
the FCIC pays the premium, they pay approved policies providing coverage (2) when the farmer has not had a
only an administrative fee. Effective be- other than multiple peril coverage, such share of the production of the crop for
ginning with the 2001 crop year, the as revenue insurance. Except with re- more than two years;
administrative fee will be $100 per crop spect to insurance policies for livestock, (3) when the farmer has not farmed the
per county. This fee can be waived for the premium subsidy for policies other land before; or
limited resource farmers. than MPCI generally will be equal to the (4) when the farmer rotates to a crop
The Act eliminates the additional fees percentage specified for a similar level of that has not been produced on the farm
that were required to be paid under the MPCI coverage of the total amount of the previously.
FCIA. It also authorizes a cooperative premium used to define the loss ratio.
association or a nonprofit trade associa- During a transition period covering the Actual production history adjustments
tion to pay the CAT administrative fee on 2001 reinsurance year, however, the sub- (APH)
behalf of its members if such an arrange- sidy cannot exceed the dollar subsidy Because a farmer’s APH for a crop is
ment is permitted by state law. amount authorized by the Act for MPCI. based on recent past yields, yield losses
in these years caused by natural disas-
Additional coverage changes Changes regarding excluded ters can lower the APH. As a result, the
The Agricultural Risk Protection Act losses, assigned yields, and actual farmer’s yield for crop insurance pur-
makes several changes to “additional” production history adjustments poses is lower than it would have been if
MPCI coverage. The most significant Excluded losses the earlier yield losses had not occurred.
change is an increase in the premium The FCIA excludes coverage for losses The Agricultural Risk Protection Act
subsidies. The following table provides a caused by the producer’s neglect or mal- addresses this situation by providing for
comparison between the percentages of feasance; the producer’s failure to reseed the adjustment of APH beginning with
the premium paid by the FCIC at various the same crop where and when it is the 2001 crop year. The Act provides that
coverage levels before and after the customary to reseed; or the producer’s if in one or more of the crop years used to
amendments made by the Act. The first failure to follow good farming practices. establish the farmer’s APH for a crop,
number of the coverage level represents The Agricultural Risk Protection Act the farmer’s appraised or recorded yield
the percentage of the yield insured and amends this provision by providing that was less than sixty percent of the transi-
the second percentage represents the “good farming practices” includes “scien- tional yield, the farmer may elect to ex-
percentage of the price insured. tifically sound sustainable and organic clude that yield and replace each ex-
In addition to increasing the premium farming practices.” cluded yield with a yield equal to sixty
subsidies, the Act requires that all poli-

Coverage Level 50/100 55/100 60/100 65/100 70/100 75/100 80/100 85/100
Prior Law 55% 46% 38% 42% 32% 24% 17% 13%
2000 Act 67% 64% 64% 59% 59% 55% 48% 38% Continued on p. 6

JULY 2000 AGRICULTURAL LAW UPDATE 5
CROP INSURANCE/Continued from page 5
percent of the applicable transitional on an identity-preserved basis.
yield. If, however, a farmer makes an (ii) All quality determinations are made Under the second option, if the pro-
election under this provision, the FCIC is solely by the Federal agency designated ducer does not suffer an insurable loss to
required to “adjust the premium to re- to grade or classify the agricultural com- the second crop, the producer can collect
flect the risk associated with the adjust- modity. an indemnity payment of 100 percent of
ment made in the actual production his- (iii) All quality determinations are the insurable loss for the first crop less
tory of the producer.” made in accordance with standards pub- the amount previously paid as an indem-
The Act also directs the FCIC to de- lished in the Federal Register. nity on the first crop. Under this option,
velop a methodology for adjusting APH (iv) The discount schedules that reflect the premium related to the first crop will
for farmers who have increased yields as the reduction in quality of the agricul- be adjusted to reflect either the partial or
a result of successful pest control efforts. tural commodity are established by the full indemnity payment.
Three conditions must be satisfied before Secretary. As discussed below, different provi-
such an adjustment can be made: sions apply to established double-crop-
· First, the producer’s farm must be Because of the restrictive nature of ping practices, and producers who plant
“located in an area where systematic, these requirements, not all crops will a crop subsequent to the second crop are
area-wide efforts have been undertaken qualify. Cotton is currently the only crop ineligible for crop insurance and NAP,
using certain operations or measures, or that qualifies. except with respect to established double-
the producer’s farm is a location at which The FCIC is also required to “set the cropping.
certain operations or measure have been quality standards below which quality
undertaken, to detect, eradicate, sup- losses will be paid based on the variabil- Prevented planting
press, or control, or at least to prevent or ity of the grade of the agricultural com- The Act also provides that if a first
retard the spread of, a plant disease or modity from the base quality for the insured crop is prevented from being
plant pest ....” agricultural commodity.” Finally, the Act planted, the producer may elect one of
· Second, “[t]he presence of the plant requires the FCIC to obtain the services two options. First, the producer may elect
disease or plant pest [must have been] of a qualified person to review its quality not to plant a second crop and collect an
found to adversely affect the yield of the loss adjustment procedures “so that the indemnity payment equal to 100 percent
agricultural commodity for which the procedures more accurately reflect local of the prevented planting guarantee for
producer is applying for insurance.” quality discounts that are applied to [in- the acreage for the first crop. This option,
· Third, the efforts must have been sured] agricultural commodities ....” however, is available only in “those situ-
effective. The resulting adjustment must Based on this review, the FCIC must ations in which other producers, in the
“reflect the degree to which the success of modify its procedures, “taking into con- area where a first crop is prevented from
[the] systematic, area-wide efforts ..., on sideration the actuarial soundness of the being planted is located, are also gener-
average, increases the yield of the com- adjustment and the prevention of fraud, ally affected by the conditions that pre-
modity on the producer’s farm, as deter- waste, and abuse.” vented the first crop from being planted.”
mined by the Corporation.” Under the second option, the producer
New procedures for double may plant a second crop and collect an
Availability of quality loss insurance and prevented planting indemnity payment established by the
adjustment coverage Double or “substitute” insurance FCIC for the first crop not to exceed
The Agricultural Risk Protection Act The Agricultural Risk Reduction Act thirty-five percent of the prevented plant-
requires the FCIC to offer quality loss establishes new procedures for handling ing guarantee for the acreage for the first
adjustment coverage, although the FCIC losses when one crop follows another on crop. This option is available only if other
already offered such coverage. Under the the same acreage during the same crop producers in the area where the first crop
Act, an insurance policy offering this year. In such circumstances, the “first is prevented from being planted are also
coverage will provide “for a reduction in crop” is the first insured commodity generally affected by the conditions that
the quantity of production of the agricul- planted for harvest or prevented from prevented the first crop’s planting and
tural commodity considered produced being planted on that specific acreage the producer plants the second crop after
during a crop year, or a similar adjust- during that crop year. The “second crop” the latest planting date established by
ment, as a result of the agricultural com- is a second crop of the same or a different the FCIC for the first crop. If this option
modity not meeting the quality stan- commodity planted on the same acreage is elected, the FCIC is required to “assign
dards established in the policy or plan of as the first crop for harvest in the same the producer a recorded yield for the crop
insurance.” crop year, excluding a replanted crop. A year for the first crop equal to 60 percent
A special “unit” option will be available “replanted crop” is a crop replanted on of the producer’s actual production his-
for quality loss adjustment coverage. the same acreage of the first crop to tory for the agricultural commodity in-
Acreage insured under the federal crop satisfy the requirements of an insurance volved, for purposes of determining the
insurance program is insured in “units.” policy covering the first crop. producer’s actual production history for
A “basic unit” generally is all of the The Act gives producers whose first the subsequent crop years.”
insurable acreage of the insured crop in crop suffered a total or partial insurable As discussed below, established double-
the county in which the farmer has a 100 loss two options: cropping practices are treated differently,
percent share or which is operated by a ·Under the first option, the producer and producers who plant a crop subse-
landowner and tenant on a share basis. may elect not to plant a second crop and quent to the second crop are ineligible for
Under certain policies and in certain collect an indemnity payment equal to crop insurance and NAP, except in the
circumstances, a basic unit can be di- 100 percent of the insurable loss for the case of established double-cropping.
vided into “optional units.” With respect first crop.
to quality loss adjustment coverage, the · Under the second option, the pro- Established double-cropping practices
Act requires the FCIC to offer farmers ducer can elect to plant a second crop and The Agricultural Risk Protection Act
the option of insuring on a smaller than collect an indemnity payment on the first provides that a producer may receive full
a unit basis if all of the following require- crop in an amount established by the indemnity payments on two or more in-
ments are satisfied: FCIC, but not exceeding 35 percent of the sured crops planted for harvest in the
(i) The agricultural commodity is sold insurable loss for the first crop. same crop year if each of the following

6 AGRICULTURAL LAW UPDATE JULY 2000
conditions are satisfied: reconciled annually to identify and ad- inaccurate information to the FCIC or an
(1) There is an established practice of dress any inconsistencies. approved insurance provider with re-
planting 2 or more crops for harvest in The Secretary is also required to de- spect to an insurance policy or plan. The
the same crop year in the area, as deter- velop and implement a plan for the FSA sanctions also apply to any person who
mined by the Corporation. to assist FCIC in conducting ongoing willfully and intentionally fails to comply
(2) An additional coverage policy or monitoring of the crop insurance pro- with a requirement of the FCIC.
plan of insurance is offered with respect grams. The Act specifies that the FSA The sanctions include the imposition
to the agricultural commodities planted must report to the FCIC if it has reason of a civil fine for each violation in an
on the same acreage for harvest in the to suspect the existence of program fraud, amount not to exceed either the greater
same crop year in the area. waste, and abuse. The FSA must assist of the amount of the financial gain ob-
(3) The producer has a history of plant- the FCIC and approved insurance pro- tained as a result of the false or inaccu-
ing 2 or more crops for harvest in the viders “in auditing a statistically appro- rate information or noncompliance or
same crop year or the applicable acreage priate number of claims made under any $10,000. Producers may also be disquali-
has historically had 2 or more crops policy or plan of insurance....” fied from other farm program benefits for
planted for harvest in the same crop The FSA may conduct its own inquiries up to five years. Persons other than pro-
year. if the FCIC does not respond within five ducers, such as agents and claims adjust-
(4) The second or more crops are cus- days after receiving a report from the ers, may be disqualified from participat-
tomarily planted after the first crop for FSA. If the FSA concludes that further ing in or benefitting from the crop insur-
harvest on the same acreage in the same investigation is warranted, but the FCIC ance program for up to five years. The
year in the area. declines to undertake that investigation, Secretary is required to consider the grav-
the FSA may refer the results of its ity of the violation in determining whether
Disqualification for planting a crop inquiries to the USDA Office of Inspector a sanction is to be imposed and, if one is
subsequent to the second crop General. The FSA is directed by the Act imposed, the type and amount of the
The Act provides that, except in the to assign appropriate numbers of person- sanction. Insurance policies and plans
case of double-cropping, “if a producer nel within the field offices to carry out the are required to disclose these potential
elects to plant a crop (other than a re- monitoring plan and to train them to the sanctions.
planted crop) subsequent to a second level of competency as is required of loss
crop on the same acreage as the first crop adjusters for approved insurance provid- Measures to protect information
and second crop for harvest in the same ers. furnished by producers
crop year, the producer shall not be eli- The Act obligates the FCIC to notify The Agricultural Risk Protection Act
gible for [federal crop] insurance ... or the appropriate approved insurance pro- establishes a general prohibition against
noninsured crop assistance ... for the vider of reports received from the FSA public disclosure by the USDA and ap-
subsequent crop.” regarding program fraud, waste, and proved insurance providers of informa-
abuse. Providers, however, are not re- tion furnished by a producer with respect
Measures intended to improve lieved of their audit obligations. to federal crop insurance. Producers,
program integrity If an approved insurance provider re- however, may consent to the public re-
The Agricultural Risk Protection Act ports suspected wrongdoing or waste to lease of information furnished by them,
provides for the initiation of a variety of the FCIC, the FCIC must respond with a but crop insurance benefits cannot be
measures to improve the integrity of the written report within ninety days de- conditioned on the producer providing
federal crop insurance program. In gen- scribing its intended actions. If it fails to such consent. The general prohibition
eral, the measures contemplate coordi- do so, the provider may request the FSA does not apply to statistical or aggre-
nated efforts among the FCIC, approved for assistance “in an inquiry into the gated data that does not allow the iden-
insurance providers, and other USDA alleged program fraud, waste, or abuse.” tification of the person who supplied par-
agencies and offices, such as the Farm Under the Act, the Secretary must ticular information. The violation of this
Service Agency and the USDA Office of establish procedures for the FCIC to use prohibition can result in the imposition
Inspector General. in identifying insurance agents with ab- of penalties.
The first of these measures requires normally high loss claims and claims
the FCIC to provide written notification adjusters with abnormally high accepted Research and development for new
to reinsured insurance providers within or denied claims. In addition to review- crop insurance policies
three years after the end of the insurance ing the performance of these agents and The Agricultural Risk Protection Act
period of any error, omission, or failure to adjusters and taking remedial action provides for research and development
follow FCIC regulations or procedures by where appropriate, the FCIC is directed relating to crop insurance policies. Effec-
the provider that may result in a debt by the Act to develop procedures for ap- tive October 1, 2000, the FCIC must
being owed by the provider to the FCIC. proved insurance providers to use in con- terminate its research and development
This limitation, however, does not apply ducting annual reviews of each agent and activities. Thereafter, all research and
“with respect to an error, omission, or claims adjuster used by the provider. development will be done by parties out-
procedural violation that is willful or In support of the compliance measures, side of the FCIC.
intentional.” The FCIC’s failure to give approved insurance providers will be re- The Act gives the FCIC the authority to
timely notice to the provider will relieve quired to report to the FCIC the name contract for research and development
the provider from any debt owed by the and identification number of each in- services with persons or entities with
provider to the FCIC. sured, the commodity insured, and the experience in crop insurance or farm or
The Act also directs the Secretary of elected coverage level approximately ranch risk management, including col-
Agriculture to develop and implement a thirty days after the applicable insur- leges and universities, approved insur-
coordinated plan for the FCIC and the ance sales closing date. Currently this ance providers, and trade or research
Farm Service Agency (FSA) to reconcile occurs after acreage reporting. organizations. The Act also requires the
all relevant information received by each The Act also establishes sanctions for FCIC to enter into research and develop-
agency from a producer who obtains crop any person, including producers and ap- ment contracts for certain types of poli-
insurance coverage. Beginning with the proved insurance providers, who will- cies, such as revenue coverage plans with
2001 crop year, this information must be fully and intentionally provides false or C ontinued on page 2

JULY 2000 AGRICULTURAL LAW UPDATE 7