Farmers throughout the United States rely on crop insurance provided through the Federal Crop Insurance Act (“FCIA”) to protect themselves from risks to their crops, livestock, and businesses. Crop insurance is especially critical now as extreme weather events in Indiana and throughout the country are becoming increasingly more common.[1] Crop insurance is a federally run program, therefore, these policies are subject to stricter compliance and requirements compared to other forms of insurance such as farm-owners property policies.

A. What is Crop Insurance?

Congress enacted the FCIA in 1938 as part of President Franklin D. Roosevelt’s response to the Great Depression and Dust Bowl drought of the 1930s.[2] The Act was expanded in 1980 to cover more crops and regions of the country then originally designed.[3] In 1996, to encourage higher participation, Congress began requiring farmers to purchase crop insurance or lose their eligibility for other federal-funded disaster programs for farmers.[4] Congress also created the Risk Management Agency “RMA” to administer the program in coordination with the U.S. Department of Agriculture (“USDA”).[5] In 2000, the RMA began approving private sector insurers to provide crop insurance under a reinsurance program if they met certain requirements and submitted proposals to the agency.[6]

Crop insurance covers most types of agricultural production including row crops, livestock/animal products, specialty crops, and forage crops.[7] In 2024, 543 million acres of farmland totaling over 192 billion dollars in potential liability was covered by the crop insurance program.[8] The vast majority of claimed losses under this program between 2000 to 2024 were caused by extreme weather events such as drought (41% of total indemnity) or excess moisture (27% of total indemnity).[9]

B. Notice and Claims Process

Compliance with the policy’s notice provisions is crucial to ensure your claim is approved after a loss. Notice provisions in crop insurance policies are strictly enforced, and the claim may be denied due to any technical error, no matter how seemingly small, in the notice process.[10] This is different from other insurance policies governed by state law, which frequently give the policyholder a chance to preserve coverage by showing the insurer was not prejudiced by the late notice.[11]

Generally, a policyholder has 72 hours after the initial discovery of the loss to provide written notice to his or her insurer.[12] However, it is imperative that the policyholder review their policy in full to determine if any special requirements apply to their specific crop or insurance company.[13] After notice, the insurer may send a loss adjuster to the farm to inspect the damage.[14] The adjuster will provide information to the insurer, who will provide a coverage determination.

A key difference between crop insurance and other types of policies is a farmer’s remedies if the claim is denied or only partially covered. Typically, a policyholder has a private right of action against their insurer and can file a breach of contract action in a suitable jurisdiction to have their case heard by a judge. However, disputes over coverage in a crop insurance policy are typically required to go to mediation or arbitration.[15]

An arbitrator or mediator is like a judge in that their decision is like a final determination in the case. The State of Indiana has a certified crop insurance mediation program funded through grants from the USDA.[16] A farmer may apply through Indiana Rural Services to participate in this option.[17] On the other hand, to apply for arbitration, a farmer must file a written demand for arbitration with their approved insurance provider within one year of the claim denial or determination, whichever is later.[18] Both options have benefits and potential consequences, and a policyholder should reach out to experienced coverage counsel to discuss what option is right for their particular situation.

It is important to note that an arbitration decision is not appealable in the same way as a court of traditional jurisdiction. The 7^th Circuit applies a highly deferential standard to arbitrator decisions and has stated that the court’s “role is not to substitute our judgment for the arbitrator or even to determine that the arbitration was legally or factually in error… .”[19] The Court’s sole role is to determine whether the arbitrator interpreted the contract at issue.[20] Thus, the arbitrator’s decision is almost always enforced.

Outside of arbitration or mediation, a farmer may appeal a claim denial to the National Appeals Division (“NAD”) under certain circumstances. NAD appeal is authorized “[i]f FCIC elects to participate in the adjustment of [the] claim, or modifies, revises or corrects [the] claim, prior to payment…”[21]  If the FCIC was not involved in the claim, then the claim must be resolved through arbitration.[22] Thus, there may be opportunity to resolve claims disputes outside of these mechanisms, but a policyholder should speak with counsel to determine the right avenue for claim resolution to suit his or her particular needs.

The arbitration requirement is important to keep in mind when pursuing a claim under your crop insurance and underscores the importance of meeting all technical requirements under the policy to avoid coverage denials when possible.

C. Conclusion

Crop insurance is important for farmers to protect their crops and livestock and is a necessary piece of an agricultural business’s overall insurance needs. In addition to notice and claims process considerations, there are several other key provisions of a standardized crop insurance policy to keep in mind when pursuing a claim. A farmer should seek coverage counsel to determine their unique policy considerations and requirements to ensure they are compensated for weather-related destruction and other events causing loss to their business.

The attorneys at Plews Shadley Racher & Braun LLP are here to help you understand these and other crop insurance questions impacting you and/or your business.

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Tagged In: agricultural, Agriculture, Crops, Environmental, FCIA, insurance, Livestock, loss