Q: What is federal crop insurance?
A: The federal government heavily subsidizes premiums on so-called multi-peril crop insurance for more than 100 crops (“covered crops”) through a wholly-owned government corporation – the Federal Crop Insurance Corporation (FCIC). The FCIC is managed by the U.S. Department of Agriculture’s Risk Management Agency. Additional types of federally subsidized policies (e.g., revenue insurance, yield-based insurance) are offered for some crops. Such insurance is actually offered through, and serviced by, private companies that have entered into reinsurance agreements with FCIC. The Federal Crop Insurance Act and USDA rules and regulations are incorporated into the reinsurance agreements.
Q: Is all crop insurance on covered crops federally subsidized?
A: No. Basic hail and fire insurance are offered through private companies without federal subsidy.
Q: Are all U.S.-grown crops covered by federal crop insurance?
A: No, but most major crops grown in Ohio are covered. If a crop is not covered by federal crop insurance (e.g., Christmas trees), then the crop may be eligible for USDA’s Noninsured Crop Disaster Assistance Program when there are low yields or loss of inventory, or when natural disasters prevent farmers from planting.
Q: If federal crop insurance is offered for a particular crop (such as apples, corn, soybeans or wheat), must agricultural producers buy the insurance?
A: No. However, producers participating in federal government farm programs waive their eligibility to receive emergency crop loss assistance from USDA for any crop for which insurance is available and for which the producer failed to purchase crop insurance.
Q: How long does a producer have to resolve a dispute involving a federal crop insurance policy?
A: A producer should first try to resolve the dispute with the private company offering the crop insurance. However, all FCIC-backed policies require that legal action (though not necessarily a lawsuit) be brought within 12 months of the claim denial. The USDA has interpreted this provision as being a contractual limitations period for bringing claims. In other words, producers cannot seek a legal remedy if they fail to start a legal action within the 12-month period.
Q: Where does a producer go to resolve a dispute involving a federal crop insurance policy?
A: In most situations, a producer must try dispute resolutions methods before a court will review the dispute. Insurance policies that are backed by the FCIC require certain disputes to be resolved through mediation or arbitration. In general, mediation or arbitration is required for any dispute about the facts of a situation. A dispute about a policy or procedure must first be taken to the FCIC for agency review. If arbitration is used, the arbitration must be conducted in accordance with the rules of the American Arbitration Association (AAA). However, any dispute resolution organization may be used, provided the organization applies AAA rules to the proceedings.
Q: Can a producer negotiate the terms of an FCIC-backed crop insurance policy?
A: No. Federal regulations and rules specify the terms of the crop insurance policies.
Law You Can Use is a weekly consumer legal information column provided by the Ohio State Bar Association. This article was prepared by attorney David C. Barrett, Jr., who practices agricultural law and is a founding partner of Barrett, Easterday, Cunningham & Eselgroth LLP in Dublin, Ohio.