Back in August 2022 the Federal Crop Insurance Corporation (FCIC) released revisions to the Rainfall Index Common Policy, Basic Provisions which became effective on January 1, 2023. The changes included revising certain definitions to match those of the Common Crop Insurance Policy and adding a 30-day deadline to appeal a determination of good farming practice.
Furthermore, the FCIC added a provision which would allow for the correction of a missing SSN or EIN of a “substantial beneficial interest” (SBI). A SBI is a foreign or domestic person who has a 10% interest in the insured. The insured’s spouse is the most common SBI.
We have fielded more than one call inquiring what options an insured may have if the insured failed to include an SBI on the insurance application. The problem arises when the insured failed to notify the agent, or the agent failed to ask, about the insured’s marital status. Usually, it is a combination of both.
Before 2023, the insured’s options were essentially zero. A failure to identify a SBI in the application prior to the applicable sales closing date would result in an outright denial of the coverage. Worse yet, an insured would have to pay back any indemnity that may have been paid on the policy if an insurance provider or the Risk Management Agency (RMA) discovered an unidentified SBI after a claim was paid.
However, due to the FCIC’s recent generosity, the “application will be accepted and insurance will be provided if you: (i) correct or provide the SSN or EIN prior to earning an indemnity; (ii) you can prove that any error or omission was inadvertent; and (iii) are eligible for insurance.” Rainfall Index Common Policy, Basic Provision Sec. 2(d). The FCIC can still claw back any indemnity paid and pay 20% of the premium if you do not meet the exception.
It is not often the FCIC grants an insured a chance to correct mistakes on a crop insurance application after the sales closing date. This new revision will help prevent a draconian result from what is usually an innocent miscommunication between the insured and the agent. On the other hand, it is still a good policy for one to remember whether they are married even when applying for crop insurance.
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