Documentation key ingredient to crop insurance claim
By MATEUSZ PERKOWSKI
Crop insurance will surely be a financial lifesaver for many growers in 2012.
Farmers are expected to file up to $20 billion in insurance claims this year due to the Midwest drought, according to risk modeling company AIR Worldwide.
In 2011, weather-related losses resulted in $11 billion in claims, according to the National Crop Insurance Services, an industry trade group.
Some farmers, however, will have their claims denied. Insurance experts say rejections are most commonly related to inadequate documentation.
To head off any potential disputes, growers should study the requirements of their insurance policies and keep careful harvest and production records, including receipts for inputs, said Grant Ballard, an attorney specializing in crop insurance.
"Crop insurance is important enough that they should pay attention to it," said Ballard.
When a farmer suffers crop loss, he should contact the insurance provider and then follow up in writing to prove the notification was timely, said Dave Paul, regional director of the USDA's Risk Management Agency office in Spokane, Wash., which covers Washington, Oregon, Idaho and Alaska.
"It starts that paper trail and provides the documentation," said Paul.
Farmers must also seek permission from the insurance company before disposing of a crop -- for example, by making hay out of a damaged grain crop, he said.
"It's important to get written consent to put the crop to another use," said Paul, adding that insurers must be able to appraise the damage, much as they would with a vehicle. "How are you going to prove your loss?"
Some disputes arise from more complex situations, such as when farmers claim weather conditions prevented them from planting their crops, said Ballard.
In very rural areas, it can be tough to find data to document events like heavy localized rain, he said. "It's just a factual battle."
If a farmer does encounter a denial of his insurance claim or suspects the company is stalling his claim, he should document all communications and ask to receive every response in writing, said Ballard.
"As soon as they think something's not right, they need to be proactive," he said.
Due to the way most crop insurance contracts are written, farmers are not be able to fight the denial in court but must instead undergo arbitration -- a less formal process in which an arbitrator or panel or arbitrators decides on a legally binding resolution to the dispute, Ballard said.
The process can either be coordinated by the American Arbitration Association or the grower and the insurance company can agree to hire an arbitrator on their own, he said.
Though the process is less formal than a lawsuit, arbitration relies on similar rules of evidence and the exchange of information among the parties, Ballard said. It's also not cheap, since the arbitrator must be paid.
It's worth researching attorneys to find one who has experience specifically with crop insurance disputes, as the regulations and legal precedents are often arcane, he said.
An experienced attorney will be able to explain to the farmer how expensive the process is likely to be, allowing them to decide whether the claim is worth pursuing, Ballard said.
Most people with claims of at least $100,000 decide it's worth the expense, he said.
If a farmer emerges from arbitration with an undesirable result, the odds of getting the decision overturned are much lower compared to appealing a court ruling, Ballard said.
"It's rare because the grounds are pretty narrow," he said.
A federal court can vacate an arbitrator's decision if it was based on fraud or corruption, if there was evident bias, if the arbitrator committed misconduct or if the arbitrator exceeded his powers.
The argument that an arbitrator exceeded his authority is particularly relevant in crop insurance disputes, Ballard said.
That's because an arbitrator cannot interpret a crop insurance policy, and must instead defer to the USDA's Risk Management Agency, he said.
If a federal judge does reverse an arbitrator's decision, however, the proceedings do not stay in federal court -- rather, the matter returns to arbitration, Ballard said.
"Basically, you get another bite at the apple," he said. "You start over."