Crop Insurance Fraud
The Federal Crop Insurance program provides a vital service to farmers and our nation’s agricultural industry—protecting financial investments in crops from unexpected losses—but is, unfortunately, often a target for fraud.
The program is primarily a reinsurance program, meaning the federal government does not itself issue the crop insurance policies, but instead financially backs private insurers who offer crop insurance. More specifically, in 1938, Congress passed the Federal Crop Insurance Act (“FCIA”) “to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance . . . .” 7 U.S.C. § 1502.
To implement the program, Congress created the Federal Crop Insurance Corporation (“FCIC”), a wholly-owned government corporation within the United States Department of Agriculture, and the Risk Management Agency (“RMA”), which administers the federal crop insurance program on behalf of the FCIC.
Private insurance companies provide crop insurance coverage to farmers and other agricultural producers through insurance contracts containing standardized policy terms set out by USDA regulations. When an insured farmer makes a claim on their crop insurance policy, the private insurance company pays the policy holder, and then the FCIC reimburses the private insurer. The FCIC also subsidizes a portion of the premiums paid by the insured farmers.
Because of the tiered nature of the crop insurance program, there are a variety of ways the government can be defrauded.
Fraudsters are not just farmers, but also crop brokers and dealers, insurance companies and agents, claims adjusters, and warehouse operators. Sometimes the fraud includes lies about whether and to what extent crops were damaged. In other cases, a claim is made for crops that were actually sold. Some create false documents to suggest that crops harvested from a particular field, were grown in a different location, so that a claim can be made with respect to the first field. Fraudsters have even gone so far as to file claims for crops that were never planted, in fields that lay fallow or were never tilled.
Often, crop insurance fraud pertains less to real or claimed damage to the crops, as to the validity and scope of the private insurance policies involved. For example, in March 2015, Fireman’s Fund Insurance Company agreed to pay over $44 million to settle False Claims Act allegations that it had “knowingly issued federally reinsured crop insurance policies that were ineligible for federal reinsurance. Specifically, Fireman’s Fund allegedly backdated policies, forged farmers’ signatures, accepted late and altered documents, whited-out dates and signatures, and signed documents after relevant deadlines.”