Field Fires May Cause Double Loss

September 27, 2010 08:13 AM

It’s bad enough to lose your crop to a fire on the eve of harvest, as some producers did in Indiana last week. But that’s not the end of the bad news. As we stated last week, there’s a very good chance your loss won’t be covered by crop insurance. That’s not the end of the bad news, either. If your production is zero, it may pull down your APH (actual production history), since it is based on a simple average of several year


Although the strict legal reading of the Risk Management Agency’s statutory authority specifies that only natural causes are covered, "this is a long-standing issue that we are continually trying to work with," says Tim Hoffman, RMA’s Director of Product Administration and Standards. "It more commonly affects wheat in the Northwest. During the California wildfires [2007], the winds raised the question ‘At what point does a manmade fire become an act of nature?’ Similarly, there have been cases of tobacco barn fires used to dry the tobacco flaring up due to wind."

Hoffman directed us to the Final Agency Determination that applied to the California case ( The third paragraph (bold face added) keeps the door open, but the case may be complex, and will require local data such as seasonal rainfall to prove fields were extremely dry, wind speed that cause the fire to spread, etc.

Final Agency Determination

FCIC disagrees with the requestor’s interpretation that the cause of loss does not have to be the result of a natural cause or natural disaster, or that the producer does not have to prove the cause of loss. First and foremost, section 508(a) of the Act only authorizes coverage for natural disasters. Therefore, neither the policy provisions nor the procedures can be interpreted in any manner that would conflict with this provision of the Act. Therefore, while section 12(a) of the Basic Provisions specifies negligence, mismanagement, or wrongdoing by the insured’s family or household, the insured’s tenant or employee are not covered, this provision cannot be interpreted to mean that wrongdoing by others, including arson, is covered under the policy.

Further, section 14(e) (Your Duties) of the Basic Provisions clearly states the insured is required to establish "that the loss of production or value was directly caused by one or more of the insured causes specified in the Crop Provisions." Since only losses resulting from naturally occurring events can be paid under the Act and section 12 of the Basic Provisions, this means there must be an affirmative finding that the ignition source of the fire that caused the loss was naturally occurring. Under paragraph 125A(1) of the LAM, any damage resulting from fire when the insured cannot establish that the ignition source of the fire was due to a natural cause or natural disaster is uninsurable.

This does not mean that losses as a result of fires that started as arson, or other man-made causes, can never be covered. It is possible that fire experts may be able to establish that an arson or other man-made fire can eventually become a natural disaster because naturally occurring events, such as excessive wind or drought conditions, may cause the fire to spread much farther than it would without such naturally occurring events.

If the fire experts determine that at some geographical point, a fire started by arson can be considered a naturally occurring fire, then those losses in the area where the expert has determined the ignition source of the fire is considered naturally occurring would be covered. However, those losses in the area where the ignition source of the fire remains attributable to arson or other man-made causes cannot be covered.

In accordance with 7 C.F.R. 400.765(c), this Final Agency Determination is binding on all participants in the Federal crop insurance program for the 2006 and succeeding crop years. Any appeal of this decision must be in accordance with 7 C.F.R. 400.768(g).

Date of Issue: November 16, 2007

Additional information, relating to tobacco:

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