Recently, the 8th Circuit Court of Appeals decided United States ex rel. Kraemer v. United Dairies, L.L.P., a case involving an application for crop insurance and the False Claims Act. The court held that a false claim had not been made, because the record only established that United Dairies received the crop insurance coverage it paid for, and the insurance provider regularly paid these types of claims despite violations of the intended-use policy.
Kraemer displays critical faults in the federal crop insurance program. During the nine-day bench trial, an experienced crop insurance agent testified that a farmer may insure corn as grain even when intended to be chopped as silage so long as the corn is not a silage only variety. However, there is no federal statute, regulation, or RMA agency guidance list that specifies which corn varieties are “adapted for silage use only.” United States ex rel. Kraemer v. United Dairies, L.L.P., 82 F.4th 595, 602 (2023).
The FCIC issues an annual edition of a “Crop Insurance Handbook,” which is used to train AIPs at an annual conference. As a retired director of RMA’s St. Paul office testified, “it is a very thick document.” In Kraemer, the Handbook in question stated: “insureds must report insurable acreage by unit and by type (grain or silage) according to the intended method of harvest; however, a variety of corn adapted for use as silage only is not insurable as grain and must be insured as silage.” Kraemer, 82 F.4th at 599. (emphasis added). At the advice of their insurance agent, United Dairies insured the crop as grain. Then, it chopped the crop down for silage, and received the insurance coverage. Unfortunately, there was no evidence or testimony of whether the AIP inquired into the crops intended use.
See the issue yet? RMA’s own handbook details requirements for silage use only, despite not having a designated list naming which corn seed can only be used as silage. Nor can it be understood how AIPs are expected to be trained on dense insurance policy provisions at a single annual conference. While United Dairies insured a crop that was developed and marketed as silage, it also produced decent grain yields, giving it the opportunity to insure the crop as grain. While we can only speculate, it is not a stretch of the imagination to conclude that United Dairies knew it always intended to chop the crop and use it as silage instead of harvest it for grain.
However, mere speculation is not evidence at trial. Had the AIP followed the RMA’s handbook and made the crop’s intended use a condition of pay, this case may have had a different outcome. Poor training, voluminous regulations, and ambiguous language as to what constitutes as “silage only” left much to be interpreted. As it stands, the United Dairies was found to not have committed a violation of the False Claims Act because the AIP regularly paid out this type of claim despite actual knowledge the alleged intended-use policy requirement was violated. Thus, United Dairies simply received the crop insurance coverages they paid for.