[Federal Register Volume 63, Number 105 (Tuesday, June 2, 1998)]
[Rules and Regulations]
[Pages 29933-29937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14545]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

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having general applicability and legal effect, most of which are keyed 
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Federal Register / Vol. 63, No. 105 / Tuesday, June 2, 1998 / Rules 
and Regulations

[[Page 29933]]


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DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

7 CFR Parts 401 and 457


General Crop Insurance Regulations, Stonefruit Endorsement; and 
Common Crop Insurance Regulations, Stonefruit Crop Insurance Provisions

AGENCY: Federal Crop Insurance Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The Federal Crop Insurance Corporation (FCIC) finalizes 
specific crop provisions for the insurance of stonefruit. The 
provisions will be used in conjunction with the Common Crop Insurance 
Policy, Basic Provisions, which contain standard terms and conditions 
common to most crops. The intended effect of this action is to provide 
policy changes to better meet the needs of the insured, include the 
current stonefruit endorsement with the Common Crop Insurance Policy 
for ease of use and consistency of terms, and to restrict the effect of 
the current stonefruit endorsement to the 1998 and prior crop years.

EFFECTIVE DATE: July 2, 1998.

FOR FURTHER INFORMATION CONTACT: Richard Brayton, Insurance Management 
Specialist, Research and Development, Product Development Division, 
Federal Crop Insurance Corporation, United States Department of 
Agriculture, 9435 Holmes Road, Kansas City, MO 64131, telephone (816) 
926-7730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be exempt for the purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Paperwork Reduction Act of 1995

    Pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 
35), the collections of information for this rule have been approved by 
the Office of Management and Budget (OMB) under control number 0563-
0053 through October 31, 2000.

Unfunded Mandates Reform Act of 1995

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This rule contains no Federal mandates (under the 
regulatory provisions of title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 12612

    It has been determined under section 6(a) of Executive Order 12612, 
Federalism, that this rule does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in this rule will not have a substantial direct 
effect on States or their political subdivisions or on the distribution 
of power and responsibilities among the various levels of government.

Regulatory Flexibility Act

    This regulation will not have a significant economic impact on a 
substantial number of small entities. The amount of work required of 
the insurance companies will not increase because the information used 
to determine eligibility is already maintained at their office and the 
other information required is already being gathered as a result of the 
present policy. No additional actions are required as a result of this 
action on the part of either the insured or the insurance companies. 
Additionally, the regulation does not require any action on the part of 
the small entities than is required on the part of large entities. 
Therefore, this action is determined to be exempt from the provisions 
of the Regulatory Flexibility Act (5 U.S.C. 605), and no Regulatory 
Flexibility Analysis was prepared.

Federal Assistance Program

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.450.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372 which require intergovernmental consultation with State and local 
officials. See the Notice related to 7 CFR part 3015, subpart V, 
published at 48 FR 29115, June 24, 1983.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988 on civil justice reform. The provisions of this rule will not 
have a retroactive effect. The provisions of this rule will preempt 
State and local laws to the extent such State and local laws are 
inconsistent herewith. The administrative appeal provisions published 
at 7 CFR part 11 must be exhausted before any action against FCIC for 
judicial review may be brought.

Environmental Evaluation

    This action is not expected to have a significant economic impact 
on the quality of the human environment, health, and safety. Therefore, 
neither an Environmental Assessment nor an Environmental Impact 
Statement is needed.

National Performance Review

    This regulatory action is being taken as part of the National 
Performance Review Initiative to eliminate unnecessary or duplicative 
regulations and improve those that remain in force.

Background

    On Tuesday, July 22, 1997, FCIC published a notice of proposed 
rulemaking in the Federal Register at 62 FR 39189-39194 to add to the 
Common Crop Insurance Regulations (7 CFR part 457), a new section, 7 
CFR 457.159, Stonefruit Crop Insurance Provisions. The new provisions 
will be effective for the 1999 and succeeding crop years. These 
provisions will replace and supersede the current provisions for 
insuring stonefruit found at 7 CFR 401 (Stonefruit Endorsement). FCIC 
also amends Sec. 401.122 to limit its effect to the 1998 and prior crop 
years.
    Following publication of the proposed rule, the public was afforded 
60 days to submit written comments and opinions.

[[Page 29934]]

A total of 16 comments were received from an insurance service 
organization and reinsured companies. The comments received and FCIC's 
responses are as follows:
    Comment: A reinsured company expressed a concern that sales 
closing, production reporting, and acreage reporting all have the same 
date of January 31. The commenter stated it would be difficult to 
service these policies when all reporting requirements must be 
completed at the same time.
    Response: FCIC disagrees with the comment. The sales closing and 
acreage reporting dates have been January 31 in previous years. The 
production reporting date is March 17, which would be 45 days after the 
earlier of the cancellation date or the acreage reporting date. This is 
consistent with other crop policies. Therefore, no change has been 
made.
    Comment: An insurance service organization suggested in the 
definition of ``good farming practices'' the reference to ``county'' be 
changed to ``area.''
    Response: The term ``area'' is less clear than the term ``county'' 
and would cause determinations to be more subjective. The actuarial 
documents are on a county basis. Therefore, no change has been made, 
except the definition of ``good farming practices'' has been moved to 
the Basic Provisions.
    Comment: An insurance service organization questioned the 
definition of ``interplanted'' in the proposed rule. The commenter 
stated that the current stonefruit policy does not consider acreage 
interplanted unless more than 10% of the insured acreage is planted to 
another crop.
    Response: Although the current stonefruit policies issued by most 
reinsured companies contain the 10% requirement in the definition of 
interplanted, the current stonefruit regulation contained in 7 CFR 
401.122 does not. All reinsured MPCI policies will be brought to 
conformance with this regulation. FCIC believes that introducing an 
exact percentage of acres that must be exceeded before stonefruit is 
considered interplanted is too restrictive. The definition is 
consistent with other perennial crop policies. Therefore, no change has 
been made.
    Comment: An insurance service organization questioned the 
definition of ``lug'' in the proposed rule. The commenter stated the 
current policy refers to ``average'' net pounds of packed fruit and 
questioned if the word ``average'' should not be included in the 
proposed rule.
    Response: FCIC agrees and has amended the definition to refer to 
``average net pounds of packed fruit.''
    Comment: An insurance service organization recommended rewording 
section 2(a) of the proposed provisions to read: ``In addition to the 
basic units as defined in section 1 of the Basic Provisions, each 
stonefruit crop designated in the Special Provisions will be a basic 
unit.''
    Response: FCIC has removed section 2(a) of the proposed provisions 
which stated, ``A unit as defined in section 1 of the Basic Provisions, 
will be divided into additional basic units by each stonefruit crop 
designated in the Special Provisions that you elect to insure.'' FCIC 
instead has revised section 2 to conform with the new unit language in 
the Basic Provisions. As defined in the Basic Provisions, each 
stonefruit crop designated in the Special Provisions will be a basic 
unit.
    Comment: An insurance service organization and a reinsured company 
expressed concerns with sections 2(f)(3)(i) and (ii) of the proposed 
rule. One commenter stated the proposed language restricts 
policyholders to optional units either by non-contiguous land or by 
type, or by varietal group. The commenter recommended allowing optional 
units for non-contiguous land and by type or varietal group by changing 
section 2(f)(3) to read, ``each optional unit must meet at least one of 
the following criteria, as applicable, unless otherwise specified in 
the Special Provisions,'' and delete the ``or'' between subparagraphs 
(i) and (ii). One commenter questioned if optional units are available 
for non-contiguous land, even if the land is under the same ownership 
and possibly separated only by another crop.
    Response: FCIC agrees that optional units should be offered by non-
contiguous land and by type or varietal group and has deleted ``or'' 
between subparagraphs (i) and (ii) for clarification. Under these 
proposed provisions, optional units are not available for non-
contiguous land, if the land is under the same ownership or separated 
by another crop.
    Comment: An insurance service organization stated that the current 
1988-CHIAA 796 policy includes a statement that fresh market stonefruit 
may be insured as processing stonefruit, with converted or appraised 
production. The commenter asked if this should be included in the Crop 
Provisions, or be covered only in the underwriting procedure.
    Response: FCIC agrees that the statement on the CHIAA 796 allows 
any fresh market stonefruit to be insured as processing stonefruit by 
converting harvested or appraised fresh market stonefruit lugs to 
processing stonefruit tons. The conversion procedure is covered by 
underwriting procedures.
    Comment: An insurance service organization asked if section 8(b)(2) 
indicates that anyone who attempts to acquire a new orchard between the 
cancellation date and the acreage reporting date but is unsuccessful 
will be considered to have coverage and owe premium.
    Response: FCIC believes that the commenter misinterpreted the 
provisions. Section 8(b)(2) allows a producer to avoid liability for 
premium in some circumstances for an orchard on which a policy was in 
force on the cancellation date. Under that section, the insurance can 
be transferred to a qualified third party under certain circumstances.
    Comment: A reinsured company expressed concerns with section 10(b), 
stating that the direct marketing provisions contained in this section 
will be difficult to monitor and control.
    Response: The producer is required to give notice at least 15 days 
prior to any production being marketed directly to consumers, and the 
insurance provider is required to complete the appraisal within that 15 
day period. FCIC believes that 15 days is appropriate to meet the needs 
of both the producer and the insurance provider. Therefore, no change 
has been made.
    Comment: An insurance service organization stated that the language 
in section 10(c) does not address timely notice of damage or loss if 
damage is discovered less than 15 days prior to harvest.
    Response: The notice requirements in section 10 are in addition to 
the requirements of section 14 of the Basic Provisions that require 
notice of loss within 72 hours of initial discovery of damage. If 
damage is discovered during harvest, notice must be given immediately. 
FCIC believes that these provisions, as a whole, are adequate as 
stated. Therefore, no change has been made.
    Comment: An insurance service organization stated that section 12 
of the proposed provisions, which explains how a claim is settled, is 
difficult to follow.
    Response: Settlement of claims is covered in section 11. Section 11 
has been revised to illustrate the calculations of a claim for 
indemnity, and has been explicitly worded to eliminate any 
misunderstanding or confusion.
    Comment: An insurance service organization stated that section

[[Page 29935]]

11(c)(1)(iv) should not allow the insured to defer settlement and wait 
for a later, generally lower appraisal, especially on crops that have a 
short ``shelf life.''
    Response: A later appraisal will only be necessary if the producer 
continues to care for the crop. If the producer does not continue to 
care for the crop, the original appraisal will be used. If the producer 
does not care for the crop, the original appraisal is used. If the 
insurance provider believes the original appraisal is accurate, 
resolution of the dispute may be sought through arbitration or appeal 
procedures, whichever is applicable. Therefore, no change has been 
made.
    Comment: An insurance service organization stated that section 
11(c)(2)(ii) was confusing. The commenter stated the provisions seem to 
mean that harvested production packed and sold as California Utility 
grade fresh fruit was not considered production to count if the 
production was not damaged by an insurable cause. The commenter stated 
that any production that can be packed and sold as fresh fruit should 
be included as production to count.
    Response: FCIC agrees with the comment and has amended the 
provisions, redesignated 11(c)(3)(i) and (ii) to clarify the 
provisions.
    Comment: An insurance service organization suggested that sections 
12 (a) and (e) be combined since both deal with deadlines to request 
written agreements. The commenter suggested this provision might be 
less misleading if the acreage reporting date ``exception'' be 
incorporated. The insurance service organization also asked that the 
requirement for annual renewal be removed from 12(d).
    Response: Section 12 ``written agreements'' has been removed from 
the proposed provisions and placed in the Basic Provisions. FCIC 
believes that the annual renewal date in these provisions are clearly 
stated, so no change will be made in this regard. Written agreements 
are intended to supplement policy terms or permit insurance in unusual 
situations that require modification of the otherwise standard 
insurance provisions. If such practices continue year to year, they 
should be incorporated into the policy or Special Provisions. It is 
important to minimize written agreement exceptions to assure that the 
insured are well aware of the specific terms of the policy. Therefore, 
no change has been made to the requirement that written agreements be 
renewed each year.
    In addition to the changes described above, FCIC has made minor 
editorial changes and has amended the following Stonefruit Crop 
Provisions:
    1. Amended the paragraph preceding section 1 to provide that 
provisions of any Catastrophic Risk Protection Endorsement take 
precedence over any conflicting provision in any other policy 
provision.
    2. Section 1--Removed definitions for ``days,'' ``FSA,'' ``good 
farming practices,'' ``irrigated practice,'' ``non-contiguous,'' 
``production guarantee (per acre),'' ``USDA,'' and ``written 
agreement'' because these definitions now appear in the Basic 
Provisions. Added a new definition of ``grading standards'' to these 
provisions for clarification. Added to the definition of lug the 
weights used for processing apricots, cling peaches, and freestone 
peaches are in tons.
    3. Section 2--Revised the provisions regarding units to conform 
with new language in the Basic Provisions.
    4. Section 9(a)(3) and (6)--Revised the wildlife cause of loss by 
deleting the language ``unless proper measures to control wildlife have 
not been taken'' because it is impossible to control wildlife. Also 
clarified the cause of loss ``failure of the irrigation water supply'' 
by adding ``if due to a cause of loss contained in sections 9(a) (1) 
through (5) that occurs during the insurance period'' to be consistent 
with other crop policies.
    5. Section 10(c)--Deleted the limitation on notifying us at least 
15 days prior to harvest ``if you previously gave notice so we can 
inspect the damaged production,'' because notice prior to harvest is 
required in all cases.
    6. Section 11(b)--Revised and added a settlement of claim example 
for clarity.
    7. Section 11(c)(4)--Revised to clarify when harvested production 
of stonefruit is eligible for quality adjustment when packed and sold 
as fresh fruit and for all other fresh stonefruit. Also this section 
has been reformatted for clarity.
    8. Section 12--Deleted the written agreement provisions since these 
have been placed in the Basic Provisions and added a provision that the 
late and prevented planting provisions of the Basic Provisions are not 
applicable to stonefruit since stonefruit is a perennial crop.

List of Subjects in 7 CFR Parts 401 and 457

    Crop insurance, Stonefruit endorsement, Stonefruit.

Final Rule

    Accordingly, as set forth in the preamble, the Federal Crop 
Insurance Corporation amends 7 CFR parts 401 and 457 as follows:

PART 401--GENERAL CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1988 THROUGH 1998 CONTRACT YEARS

    1. The authority citation for 7 CFR part 401 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(p).

    2. The part heading is revised as set forth above.
    3. Section 401.122 introductory paragraph is revised to read as 
follows:


Sec. 401.122  Stonefruit endorsement.

    The provisions of the Stonefruit Crop Insurance Endorsement for the 
1988 through 1998 crop years are as follows:
* * * * *

PART 457--COMMON CROP INSURANCE REGULATIONS; REGULATIONS FOR THE 
1994 AND SUBSEQUENT CONTRACT YEARS

    4. The authority citation for 7 CFR part 457 continues to read as 
follows:

    Authority: 7 U.S.C. 1506(l), 1506(p).

    5. Section 457.159 is added to read as follows:


Sec. 457.159  Stonefruit Crop Insurance Provisions.

    The Stonefruit Crop Insurance Provisions for the 1999 and 
succeeding crop years are as follows:
    FCIC Policies:

UNITED STATES DEPARTMENT OF AGRICULTURE

Federal Crop Insurance Corporation

Reinsured Policies:

    (Appropriate title for insurance provider)

Both FCIC and Reinsured Policies

Stonefruit Crop Insurance Provisions

    If a conflict exists among the policy provisions, the order of 
priority is as follows: (1) the Catastrophic Risk Protection 
Endorsement, if applicable; (2) the Special Provisions; (3) these 
Crop Provisions; and (4) the Basic Provisions with (1) controlling 
(2), etc.

1. Definitions

    Direct marketing. Sale of the insured crop directly to consumers 
without the intervention of an intermediary such as wholesaler, 
retailer, packer, processor, shipper, or buyer. Examples of direct 
marketing include selling through an on-farm or roadside stand, 
farmer's market, and permitting the general public to enter the 
field for the purpose of picking all or a portion of the crop.
    Grading standards. The California Tree Fruit Agreement Marketing 
Order, or California State Department of Food and Agriculture Code 
of Regulations in effect for the appropriate crop, type, or varietal 
group.

[[Page 29936]]

    Harvest. The picking of mature stonefruit either by hand or 
machine.
    Interplanted. Acreage on which two or more crops are planted in 
any form of alternating or mixed pattern.
    Lug. A container of fresh stonefruit of specified weight. Lugs 
of varying sizes will be converted to standard lug equivalents on 
the basis of the following average net pounds of packed fruit:

------------------------------------------------------------------------
                                                                  Pounds
                              Crop                               per lug
------------------------------------------------------------------------
Fresh Apricots.................................................       24
Fresh Nectarines...............................................       25
Fresh Freestone Peaches........................................       22
------------------------------------------------------------------------

    Weight for Processing Apricots, Processing Cling Peaches, and 
Processing Freestone Peaches are specified in tons.
    Marketable. Stonefruit production acceptable for processing or 
other human consumption, even if it fails to meet the State 
Department of Food and Agriculture minimum grading standard.
    Processor. A business enterprise regularly engaged in processing 
fruit for human consumption that possesses all licenses and permits 
for processing fruit required by the state in which it operates, and 
that possesses facilities, or has contractual access to such 
facilities, with enough equipment to accept and process contracted 
fruit within a reasonable amount of time after harvest.
    Stonefruit. Any of the following crops grown for fresh market or 
processing:

(a) Fresh Apricots,
(b) Fresh Freestone Peaches,
(c) Fresh Nectarines,
(d) Processing Apricots,
(e) Processing Cling Peaches, and
(f) Processing Freestone Peaches.

    Ton. Two thousand (2,000) pounds avoirdupois.
    Type. Class of a stonefruit crop with similar characteristics 
that are grouped for insurance purposes.
    Varietal group. A subclass of type.

2. Unit Division

    Notwithstanding the provisions of section 34 of the Basic 
Provisions that allow optional units by section, section equivalent, 
or FSA farm serial number and by irrigated and non-irrigated 
practices, optional units will only be allowed as stated herein or 
by written agreement.
    (a) Optional Units on Acreage Located on Non-contiguous Land: 
Optional units may be established if each optional unit is located 
on non-contiguous land.
    (b) Optional Units by Type or Varietal Group: Optional units may 
be established by type or varietal group if allowed by the Special 
Provisions.

3. Insurance Guarantees, Coverage Levels, and Prices for Determining 
Indemnities

    In addition to the requirements of section 3 of the Basic 
Provisions:
    (a) You may select only one price election and coverage level 
for each crop grown in the county and listed in the Special 
Provisions that is insured under this policy. If separate price 
elections are available by type or varietal group of a crop, the 
price elections you choose for each type or varietal group must have 
the same percentage relationship to the maximum price offered by us 
for each type or varietal group. For example, if you choose 100 
percent of the maximum price election for one type of cling peaches, 
you must choose 100 percent of the maximum price election for all 
other types of cling peaches.
    (b) You must report, by the production reporting date designated 
in section 3 of the Basic Provisions, by type or varietal group, if 
applicable, for each stonefruit crop:
    (1) Any damage, removal of trees, change in practices, or any 
other circumstance that may reduce the expected yield below the 
yield upon which the insurance guarantee is based, and the number of 
affected acres;
    (2) The number of bearing trees on insurable and uninsurable 
acreage;
    (3) The age of the trees and the planting pattern; and
    (4) For the first year of insurance for acreage interplanted 
with another perennial crop, and any time the planting pattern of 
such acreage is changed:
    (i) The age of the interplanted crop, and type or varietal group 
if applicable;
    (ii) The planting pattern; and
    (iii) Any other information that we request in order to 
establish your approved yield.
    We will reduce the yield used to establish your production 
guarantee as necessary, based on our estimate of the effect of 
interplanting a perennial crop, removal of trees, damage, change in 
practice, and any other circumstance that could affect the yield 
potential of the insured crop. If you fail to notify us of any 
circumstance that may reduce your yields from previous levels, we 
will reduce your production guarantee as necessary at any time we 
become aware of the circumstance.

4. Contract Changes

    In accordance with section 4 of the Basic Provisions, the 
contract change date is October 31 preceding the cancellation date.

5. Cancellation and Termination Dates

    In accordance with section 2 of the Basic Provisions, the 
cancellation and termination dates are January 31.

6. Insured Crop

    In accordance with section 8 of the Basic Provisions, the crop 
insured will be all of each stonefruit crop you elect to insure, 
that is grown in the county, and for which premium rates are 
provided in the actuarial documents:
    (a) In which you have a share;
    (b) That is grown on trees that:
    (1) Were commercially available when the trees were set out;
    (2) Is adapted to the area; and
    (3) Is grown on a root stock that is adapted to the area;
    (c) That is irrigated;
    (d) That have produced at least 200 lugs of fresh market 
production per acre, or at least 2.2 tons per acre for processing 
crops, in at least 1 of the 3 most recent actual production history 
crop years, unless we inspect such acreage and give our approval in 
writing;
    (e) That are regulated by the California Tree Fruit Agreement or 
related crop advisory board for the state (for applicable types);
    (f) That are grown in an orchard that, if inspected, is 
considered acceptable by us; and
    (g) That have reached at least the fifth growing season after 
set out. However, we may agree in writing to insure acreage that has 
not reached this age if it meets the requirements of subsection (d) 
of this section.

7. Insurable Acreage

    In lieu of the provisions of section 9 of the Basic Provisions 
that prohibit insurance attaching to a crop planted with another 
crop, stonefruit interplanted with another perennial crop is 
insurable unless we inspect the acreage and determine that it does 
not meet the requirements for insurability contained in your policy.

8. Insurance Period

    (a) In accordance with the provisions of section 11 of the Basic 
Provisions:
    (1) Coverage begins on February 1 of each crop year, except that 
for the year of application, if your application is received after 
January 22 but prior to February 1, insurance will attach on the 
10th day after your properly completed application is received in 
our local office unless we inspect the acreage and determine that it 
does not meet insurability requirements. You must provide any 
information that we require for the crop or to determine the 
condition of the orchard.
    (2) The calendar date for the end of the insurance period for 
each crop year is:
    (i) July 31 for all apricots; and
    (ii) September 30 for all nectarines and peaches.
    (b) In addition to the provisions of section 11 of the Basic 
Provisions:
    (1) If you acquire an insurable share in any insurable acreage 
after coverage begins but on or before the acreage reporting date 
for the crop year, and after an inspection we consider the acreage 
acceptable, insurance will be considered to have attached to such 
acreage on the calendar date of acquisition.
    (2) If you lose or relinquish your insurable share on any 
insurable acreage of stonefruit on or before the acreage reporting 
date for the crop year and if the acreage was insured by you the 
previous crop year, insurance will not be considered to have 
attached to, and no premium or indemnity will be due for such 
acreage for that crop year unless:
    (i) A transfer of coverage and right to an indemnity, or a 
similar form approved by us, is completed by all affected parties;
    (ii) We are notified by you or the transferee in writing of such 
transfer on or before the acreage reporting date; and
    (iii) The transferee is eligible for crop insurance.

9. Causes of Loss

    (a) In accordance with the provisions of section 12 of the Basic 
Provisions, insurance is provided only against the following causes 
of loss that occur during the insurance period:
    (1) Adverse weather conditions;
    (2) Fire, unless weeds and other forms of undergrowth have not 
been controlled or pruning debris has not been removed from the 
orchard;

[[Page 29937]]

    (3) Wildlife;
    (4) Earthquake;
    (5) Volcanic eruption; or
    (6) Failure of the irrigation water supply, if due to a cause of 
loss contained in sections 9(a)(1) through (5) that occurs during 
the insurance period.
    (b) In addition to the causes of loss excluded by section 12 of 
the Basic Provisions, we will not insure against damage or loss of 
production due to:
    (1) Disease or insect infestation, unless adverse weather:
    (i) Prevents the proper application of control measures or 
causes properly applied control measures to be ineffective; or
    (ii) Causes disease or insect infestation for which no effective 
control mechanism is available;
    (2) Split pits regardless of cause; or
    (3) Inability to market the insured crop for any reason other 
than actual physical damage from an insurable cause of loss 
specified in this section. For example, we will not pay you an 
indemnity if you are unable to market due to quarantine, boycott, or 
refusal of any person to accept production.

10. Duties in the Event of Damage or Loss

    In addition to the requirements of section 14 of the Basic 
Provisions, the following will apply:
    (a) You must notify us within 3 days after the date harvest 
should have started if the insured crop will not be harvested.
    (b) You must notify us at least 15 days before any production 
from any unit will be sold by direct marketing. We will conduct an 
appraisal that will be used to determine your production to count 
for production that is sold by direct marketing. If damage occurs 
after this appraisal, we will conduct an additional appraisal. These 
appraisals, and any acceptable records provided by you, will be used 
to determine your production to count. Failure to give timely notice 
that production will be sold by direct marketing will result in an 
appraised amount of production to count of not less than the 
production guarantee per acre if such failure results in our 
inability to make the required appraisal.
    (c) In addition to section 14 of the Basic Provisions, if you 
intend to claim an indemnity on any unit, you must give us notice at 
least 15 days prior to the beginning of harvest. You must not 
destroy the damaged crop until after we have given you written 
consent to do so. If you fail to notify us and such failure results 
in our inability to inspect the damaged production, we may consider 
all such production to be undamaged and include it as production to 
count.

11. Settlement of Claim

    (a) We will determine your loss on a unit basis. In the event 
you are unable to provide separate acceptable production records:
    (1) For any optional units, we will combine all optional units 
for which such production records were not provided; or
    (2) For any basic units, we will allocate any commingled 
production to such units in proportion to our liability on the 
harvested acreage for the units.
    (b) In the event of loss or damage covered by this policy, we 
will settle your claim by:
    (1) Multiplying the insured acreage for each type or varietal 
group by its respective production guarantee;
    (2) Multiplying each result of section 11(b)(1) by the 
respective price election for the type or varietal group;
    (3) Totaling the results of section 11(b)(2). (If there is only 
one type or varietal group, the result of (3) will be the same as 
the result of (2));
    (4) Multiplying the total production to count (see section 
11(c)), for each type or varietal group, by the respective price 
election;
    (5) Totaling the results of section 11(b)(4);
    (6) Subtracting the result of section 11(b)(5) from the result 
of section 11(b)(2). (If there is only one type or varietal group, 
the result of (6) will be the same as the result of (5)); and
    (7) Multiplying the result of section 11(b)(6) by your share.

For example:

    You have a 100 percent share in 50 acres of varietal group A 
stonefruit in the unit, with a guarantee of 500 lugs per acre and a 
price election of $6.00 per lug. You are only able to harvest 5,000 
lugs. Your indemnity would be calculated as follows:

(1) 50.0 acres  x  500 lugs = 25,000 lugs guarantee;
(2) and (3) 25,000 lugs  x  $6.00 price election = $150,000.00 value 
of guarantee;
(4) 5,000 lugs  x  $6.00 price election = $30,000.00 value of 
production to count;
(5) and (6) $150,000.00--$30,000.00 = $120,000.00 loss; and
(7) $120,000.00  x  100 percent = $120,000 indemnity payment.

    You also have a 100 percent share in 50 acres of varietal group 
B stonefruit in the unit, with a guarantee of 300 lugs per acre and 
a price election of $3.00 per lug. You are only able to harvest 
3,000 lugs. Your indemnity would be calculated as follows:
    (1) 50.0 acres  x  500 lugs varietal group A = 25,000 lugs 
guarantee; and 50.0 acres  x  300 lugs varietal group B = 15,000 
lugs guarantee;
    (2) 25,000 lugs  x  $ 6.00 price election = $150,000.00 value of 
guarantee for varietal group A; and 15,000 lugs  x  $3.00 price 
election = $45,000.00 value of guarantee for varietal group B;
    (3) $150,00.00 + $45,000.00 = $195,000.00 total value of 
guarantee;
    (4) 5,000 lugs varietal group A  x  $6.00 price election = 
$30,000.00 value of production to count; and 3,000 lugs varietal 
group B  x  $3.00 price election = $9,000.00 value of production to 
count; and
    (5) $30,000.00 + $9,000.00 = $39,000.00 total value of 
production to count;
    (6) $195,000.00--$39,000.00 = $156,000.00 loss
    (7) $156,000.00 loss  x  1.000 = $156,000 indemnity payment.
    (c) The total production to count (in lugs or tons) from all 
insurable acres on a unit will include:
    (1) All appraised production as follows:
    (i) Not less than the production guarantee per acre for acreage:
    (A) That is abandoned;
    (B) That is sold by direct marketing if you fail to meet the 
requirements contained in section 10;
    (C) That is damaged solely by uninsured causes; or
    (D) For which you fail to provide production records that are 
acceptable to us;
    (ii) Production lost due to uninsured causes;
    (iii) Unharvested production that would be marketable if 
harvested; and
    (iv) Potential production on insured acreage that you intend to 
abandon or no longer care for, if you and we agree on the appraised 
amount of production. Upon such agreement, the insurance period for 
that acreage will end. If you do not agree with our appraisal, we 
may defer the claim only if you agree to continue to care for the 
insured crop. We will then make another appraisal when you notify us 
if any further damage or that harvest is general in the area unless 
you harvested the crop. If you harvest the crop we will use the 
harvested production. If you do not continue to care for the crop, 
our appraisal made prior to deferring the claim will be used to 
determine the production to count; and
    (2) All harvested production from the insurable acreage.
    (3) The quantity of harvested production will be reduced if the 
following conditions apply:
    (i) The value of the damaged production is less than 75 percent 
of the marketable value of undamaged production due to an insured 
cause of loss; and
    (ii) For stonefruit insured as fresh fruit only, the stonefruit 
either is packed and sold as fresh fruit and meets only the utility 
grade requirements of the applicable grading standards, or fails to 
meet the applicable grading standards but is or could be sold for 
any use other than fresh packed stonefruit.
    (4) Harvested production of stonefruit that is eligible for 
quality adjustment as specified in section 11(c)(3) will be reduced 
as follows:
    (i) When packed and sold as fresh fruit or when insured as a 
processing crop, by dividing the marketable value per lug or ton by 
the highest price election (for the applicable coverage level) and 
multiplying the result (not to exceed 1.00) by the quantity of such 
production; or
    (ii) For all other fresh stonefruit, multiplying the number of 
tons that could be marketed by the value per ton (for the applicable 
coverage level) and dividing that result by the highest price 
election available for that type.

12. Late and Prevented Planting

    The late and prevented planting provisions of the Basic 
Provisions (Sec. 457.8) are not applicable.

    Signed in Washington, D.C., on May 20, 1998.
Kenneth D. Ackerman,
Manager, Federal Crop Insurance Corporation.
[FR Doc. 98-14545 Filed 6-1-98; 8:45 am]
BILLING CODE 3410-08-P