Many agricultural producers across the nation obtain insurance coverage for the commodities they produce through the Federal Crop Insurance Program (“FCIP”). When a producer suffers a loss that is covered under their insurance policy, they make a loss claim to their insurance provider known as an Approved Insurance Provider (“AIP”). If approved, the AIP issues an indemnity to the producer. In some instances, however, the Risk Management Agency (“RMA”)—the agency that administers the FCIP and serves as a reinsurer for AIPs—conducts a review of certain producers’ policies after an indemnity has been issued.
After a review, RMA sometimes discovers a producer’s policy does not satisfy certain requirements needed to have an eligible crop insurance policy and the agency does not reinsure the policy. When this occurs, the AIP generally notifies the producer that their policy is invalid and requests repayment of the overpaid indemnity. If the producer does not satisfy this debt, they risk being placed on the Ineligible Tracking System (“ITS”) List, which makes them ineligible to participate in the FCIP until the delinquent debt is repaid.
Recently, a producer appealed an RMA decision to place him on the ITS List for failing to timely repay the overpaid indemnity payments. According to the producer, his debt was not delinquent because he entered into a valid payment agreement with his AIP in accordance with FCIP regulations. Ultimately, the administrative judge presiding over this administrative appeal ruled in favor of RMA because the producer failed to satisfy the debt in accordance with his crop insurance contract.
An AIP provided 2020 apiculture insurance to a producer under two policies. Although apiculture is the practice of maintaining bee colonies, the FCIP offers insurance policies for this type of agricultural production. The producer made loss claims under these policies, and after the AIP approved the claims, it issued the producer an indemnity of $40,791 under the policies.
Afterwards, RMA conducted a review of the producer’s 2020 insurance policies. RMA discovered that the producer did not sign his insurance application or the colony reports associated with the policies. Because the producer did not satisfy these requirements, RMA decided it would not reinsure the policies. In response, the AIP determined that it improperly issued the policies and had paid insurance claims that the producer did not earn because the policies were invalid.
The AIP notified the producer by a letter that the 2020 policies were invalid and that the producer must repay the overpaid indemnities received under these policies. This letter informed the producer that he could request RMA to review the debt, and that he had the right to contest the debt if he believed the amount was incorrect. According to the letter, contesting the debts does not replace the producer’s right to mediation, arbitration, or judicial review. The letter made it clear, however, that contesting the debts would not change the producer’s responsibility to pay the entire debt or enter into a payment agreement with the AIP by the due date. Further, the AIP’s letter warned the producer that he would be placed on the ITS List and would be denied FCIP benefits if he failed to satisfy the debt or execute a payment agreement.
Attached to the letter was a billing statement that specified a debt amount of $40,791 and a due date of November 30, 2021. Also enclosed was a blank payment agreement that divided the debt into four monthly payments. The letter explained that the producer would need to sign and return the agreement to the AIP by the due date.
In response to the letter, the producer informed the AIP that they are contesting the debt and requesting an administrative review of the insurance policies. Additionally, the producer signed the payment agreement and sent the contract by email to RMA and the AIP on November 30, 2021. However, the AIP did not receive the signed agreement because the producer sent it to the incorrect email address. Thus, the AIP considered the producer’s debt to be delinquent and notified RMA. As a result, RMA placed the producer on the ITS List and notified him that he was ineligible to participate in the FCIP. Shortly after, the producer appealed this decision to the National Appeals Division (“NAD”).
The producer appealed RMA’s decision to place him on the ITS List to the U.S. Department of Agriculture’s (“USDA”) National Appeals Division (“NAD”). When RMA makes an adverse decision regarding a producer’s crop insurance policy, such as placing them on the ITS List, the producer must generally appeal such determinations through the administrative process established by the Federal Crop Insurance Corporation (“FCIC”). 7 C.F.R. § 400.91. This requires the producer to request mediation, arbitration, administrative review, or administrative appeal in order to resolve the dispute between the producer and RMA. In this case, the producer elected to appeal RMA’s decision directly to NAD.
An administrative appeal involves a hearing that is similar to a federal civil trial where both the producer and RMA offer their legal arguments by presenting evidence and calling witnesses to testify. These actions differ from lawsuits filed in a federal court because administrative actions are heard by an Administrative Law Judge (“ALJ”)—who serves as the judge and the jury—rather than a federal judge. After a hearing, the ALJ presiding over the action issues a ruling.
When a producer appeals an agency determination before NAD, the producer has the burden of proving that the agency’s decision was erroneous. 7 C.F.R. § 11.8(e). This means the producer must provide evidence demonstrating that RMA’s adverse decision was inconsistent with the laws and regulations governing the agency and the FCIP. 7 C.F.R. § 11.10(b).
In this appeal, the producer attempted to prove RMA’s decision to place him on the ITS List was erroneous because (1) the AIP did not provide the producer with proper notice or a meaningful opportunity to contest the debt, and (2) the producer’s debt was not delinquent because he entered into a payment agreement with the AIP before the due date. Overall, the ALJ presiding over this case disagreed with the producer and ruled in favor of RMA.
For the first issue, the ALJ determined that the producer received proper notice of the debt. In general, AIPs are required to send a written notice of a debt to a producer before notifying RMA of a delinquent debt. This notice must include: (1) a due date in which the debt must be paid, and (2) explain that the producer has a meaningful opportunity to contest the amount and existence of the debt. 7 C.F.R. § 400.682(a). The ALJ concluded that the AIP satisfied this requirement because it sent the producer a letter explaining the overpaid indemnity debt, the due date, and the producer’s right to contest the debt in accordance with his crop insurance contract. Further, the AIP’s letter detailed the procedures for requesting a review and contesting the debt.
The ALJ also determined that the producer had a meaningful opportunity to contest the debt owed to the AIP. A “meaningful opportunity to contest” means “the opportunity for the insured to resolve disagreements with a decision by the insurance provider through requesting a review of the decision by the insurance provider, mediation, arbitration, or judicial review, as applicable.” 7 C.F.R. § 400.677. The producer’s insurance contract specifically limited him to seek either mediation or arbitration in order to contest the debt. However, the producer requested an AIP review of the debt, not mediation or arbitration. Because the producer received proper notice and had a meaningful opportunity to contest the debt, according to the ALJ, the producer was not excused from paying the full debt or entering into a payment agreement prior to the due date.
For the second issue, the ALJ concluded that the producer failed to satisfy the debt or enter into a valid payment agreement by the due date. The FCIP regulations require both the producer and AIP to sign and date a payment agreement by the due date to be valid. In this case, only the producer had executed the agreement by the due date. Consequently, the producer did not have a binding payment agreement with the AIP and his debt became delinquent. Because of this delinquency, RMA placed the producer on the ITS List. According to the ALJ’s ruling, RMA did not erroneously place the producer on the ITS List because the producer failed to satisfy the debt or enter into a proper payment agreement with the AIP before the debt became delinquent in accordance with the crop insurance policy and notice of indebtedness.
The ALJ presiding over this administrative appeal concluded RMA’s decision was not erroneous because it correctly applied the rules and regulations when deciding to place the producer on the ITS List. Overall, this case demonstrates a situation where a producer’s insurance indemnity can be deemed an “overpayment”, which means the producer will most likely be required to repay an indemnity within a short timeframe. When this occurs, producers should be aware that their AIP must provide them notice of the indebtedness and an opportunity to contest the debt. However, producers should examine their crop insurance contracts to determine what procedures they must use to properly contest a debt. Additionally, producer should pay close attention to the debt due date, and if they elect to enter into a payment agreement with their AIP, producers should make sure their agreement is properly executed and returned to their AIP prior to the due date to avoid a delinquency.
To read the NAD ruling, click here.
To read the other articles of this series, click here.
To read NALC resources on crop insurance, click here.