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March 15 Deadline: What Michigan Farmers Need to Know About Crop Insurance

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Allison M. Collins and Co-Author Matt Thelen, Farm Bureau
Foster Swift Agricultural Law News
January 24, 2020

In life, and in business, it’s smart to expect the unexpected. Insurance is a tool that helps mitigate risks from unexpected events. Few Michigan farmers could have expected the cool, wet spring that we experienced in 2019. Nonetheless, those who took steps to guard against that risk, no matter how unlikely it may have seemed in advance, weathered the storm (literally and figuratively). Many of those who did not, suffered significant losses.

The primary means to mitigate against risks like crop damage or, as we experienced last year, the inability to even plant crops due to saturated fields, is crop insurance. The purpose of crop insurance is to protect farmers and ranchers against losses from floods, drought, wildlife, and other natural causes, as well as declines in prices. Crop insurance is different from other forms of insurance in that it is backed by the federal government and administered through the Federal Crop Insurance Corporation (“FCIC”).

The terms and conditions of crop insurance policies are determined by the government through the United States Department of Agriculture (“USDA”) and FCIC. It is sold and serviced by private-sector crop insurance companies and agents who must enter into contracts with the USDA.
Because it is a federally-administered program, the rates for crop insurance premiums, which are determined county by county, are the same no matter who you buy from. Accordingly, in the crop insurance marketplace, agents and agencies distinguish themselves through market knowledge and customer service rather than cut-rate pricing.

Given last year’s challenges, many Michigan farmers are now investigating their options for crop insurance in 2020. It is important to act swiftly, as the sale closing date for crop insurance in Michigan is March 15, 2020.

To help in your considerations, we have put together resources and information in this article about: (1) recent changes in crop insurance rules and regulations, (2) common overlooked and misunderstood issues with crop insurance policies, and (3) some best practices to follow in the event you have to file a claim. To help guide your decision-making, consider consulting with an insurance agent and an agricultural law attorney well-versed in crop insurance.

Crop Insurance Changes for 2020
Flexibility for Cover Crop Management
The 2018 Farm Bill mandated changes to the treatment of cover crops for USDA programs, which are intended to add more flexibility to when cover crops must be terminated while remaining eligible for crop insurance.

The USDA’s Farm Service Agency (“FSA”), Natural Resources Conservation Service (“NRCS”), and Risk Management Agency (“RMA”) created new guidelines and policies to enact these changes, which will take effect for the 2020 crop year. Previously, cover crop termination guidelines had to be strictly adhered to or a farmer had to receive approval in advance for a deviation, in order to retain crop insurance eligibility. The strict guidelines dissuaded many farmers from planting cover crops for fear of jeopardizing their coverage.

The new guidelines are more flexible and provide that, “For crops planted in the 2020 crop year and later, insurance will now attach at time of planting the insured crop and cover crop management practices will be reviewed under Risk Management Agency rules for Good Farming Practice (“GFP”) determinations similar to other management decisions (e.g. fertilizer application, seeding rates, etc.).”

According to the USDA, the new guidelines are not intended to usurp locally adaptive management for cover crop termination timing.

Rather, they are meant to provide farmers with more options and additional assurance that their crops are insured and their cover crop management decisions will be considered within “good farming practices,” particularly for producers that may be unfamiliar with cover crops.

Industrial Hemp Crop Insurance Coverage
The USDA’s Risk Management Agency announced in August 2019, that certain industrial hemp growers will be able to obtain insurance coverage under the Whole-Farm Revenue Protection program for crop year 2020.

Prior to the passage of the 2018 Farm Bill, which amended the Controlled Substances Act to address how industrial hemp is to be defined and regulated at the federal level, this type of coverage was unavailable.

Coverage is available for hemp grown for fiber, flower or seeds to producers who operate in areas covered by USDA-approved hemp plans or who are part of approved state or university research pilot programs.

Expansion of Supplemental Coverage Option
The Supplemental Coverage Option (SCO) provides additional coverage for a portion of a policyholder’s underlying crop insurance policy deductible. SCO was established by the 2014 Farm Bill but is now more widely available following the passage and implementation of the 2018 Farm Bill. SCO payments are determined only by county average revenue or yield. County revenue must fall below 86% of expected revenue before SCO makes a payment. SCO can benefit many farmers, especially those that purchase lower crop insurance coverage levels.

Misunderstood Crop Insurance Issues
Like most forms of insurance, there are misconceptions and misunderstandings when it comes to procuring crop insurance. Two of the most common misunderstandings are:

1. “It’s too expensive to carry.”
Crop insurance is affordable because it is subsidized by the federal government, to an extent, and risks are spread across the entirety of the United States’ acreage.

2. “You should have the same policy as your neighbor.”
The policy that is right for you will be based on your unique circumstances, irrespective of any decisions made by nearby farmers. To determine the right policy for you, it’s critical to sit down with a knowledgeable and experienced crop insurance agent to explore issues such as what you’re going to plant, where you’re going to plant it, and what your expenses are. These and other issues will inform the decision on the right policy.

What to do in the Event of a Claim
Insurance is an asset that is important to have but you hope to never use. However, as 2019’s weather demonstrated, events completely out of our control do occur and can have serious negative consequences. While no farmer relishes the idea of filing a crop insurance claim, it’s important to know what to do in the event it becomes necessary.

First and foremost, it’s critical to have an understanding of the notice provisions in your policy. Claims can be denied to the extent they are not timely filed, and the clock typically starts upon the first sign of damage.

Throughout the process of filing a claim—and ideally before—maintain good records and get everything related to your policy and claim in writing. This includes following up any verbal report of damage to your insurance agent with a writing summarizing the date, time, and content of your verbal notification. Document your harvest records, the timing of your planting and replanting, soil temperatures, expenses, and evidence of damage (take photos). If you’re insured, you want to be able to demonstrate good farming practices throughout the year, because otherwise your claim may be denied on that basis.

The process of filing a claim can be confusing, and the stakes are high, so it’s important to contact your crop insurance agent at the first sign of damage so he or she can walk you through the process. You may also want to consider contacting an attorney if you experience difficulties with your claim, or if your claim is denied in whole or in part. A knowledgeable attorney can help you navigate the various options available for overcoming hurdles in proving your claim, as well as the numerous legal options for challenging or appealing a denied claim.

Farmers, should thoroughly consider their crop insurance options for the 2020 planting and harvest seasons, whether they have invested in crop insurance in the past or are considering it for the first time. In this article, we have touched upon some of the most timely and important issues that farmers should be taking into account when investigating policies. In our experience, crop insurance is an important investment for farmers to make in their businesses. Relative to other forms of insurance, crop insurance tends to be affordable, include reasonable terms and conditions, and claims are fairly adjusted. Generally, the best starting point to determine what type of crop insurance policy may be right for you is to have a conversation with an experienced agent and/or agricultural law attorney.

If you have further questions about coverages your operation may qualify for, contact Matt Thelen at (989) 640-0570. If you are concerned over the legal analysis and coverage policies surrounding insurance, contact Allison Collins (517) 371-8124.