Federal Crop Insurance policies are “unique creatures” in that they contain an arbitration clause that requires most disputes between an approved crop insurance provider or an AIP and an insured farmer to be arbitrated.
“The qualifier to that,” according to Grant Ballard, an attorney with Arkansas Ag Law based in Little Rock, “is that if there’s a question of policy or procedure interpretation that issue is to be submitted to the USDA Risk Management Agency.
“And then, any ruling on the policy, procedure, application or interpretation is considered binding on the arbitrator,” said Ballard, who gave a legal issues update on the Federal Crop Insurance Program for the National Agricultural Law Center’s monthly webinar series. Ballard spoke on Feb. 17.
While all Federal Crop Insurance policies say disputes must be mediated and then taken to arbitration if not resolved, the Risk Management Agency, which oversees the Federal Crop Insurance Program, attempted to clarify the rules in its 21.1-BR Common Crop Insurance Policy guidance issued last November.
The new rule states the insured farmer must initiate arbitration if a disputed claim cannot be resolved through mediation. Previous rules did not specify whether the insurance provider or the insured farmer had to request arbitration.
“So arbitration is required, but the state of the law as the courts have addressed it across the country is unclear on who has the burden to initiate arbitration,” said Ballard. “There were district court opinions going both ways. I would say no appellate court in this country that I'm aware of ever addressed this question.
“I think RMA tried to solve that issue, but I don't think it's been resolved in my opinion. I’m not sure an appellate court will affirm a finding that the failure of an insured to initiate arbitration when the insured did not seek a judgment or any relief means a farmer has waived his rights to contest an alleged debt to an AIP.
“I think there's some issues to be resolved, especially in cases where it is the crop insurance company that seeks relief or damages as opposed to the farmer,” he said. “I think it's clear now that if a farmer's claim is denied and that farmer seeks relief in the form of a money judgment, the farmer has to initiate the arbitration process.”
If an insurance provider says an insured farmer owes it money, “I think there's some unique issues there that will make their way into the courts in the future.”