McAfee & Taft AgLINC Agriculture & Equine Industry Newsletter - July 2012: The Equal Access to Justice Act - A valuable tool for farmers in crop insurance disputes by Jared Boyer.

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[author: Jared Boyer]

Many farmers are all too familiar with the Risk Management Agency’s (RMA) role in administering the federal crop insurance program. In addition to promulgating regulations, drafting policies, and issuing bulletins affecting crop policies, RMA occasionally elects to participate in the adjustment of an insured’s claim for indemnity. When disputes arise over RMA’s actions (usually involving the calculation or outright denial of an indemnity), crop insurance policies require insureds to pursue their remedies through the National Appeals Division (NAD), a branch of the USDA responsible for resolving disputes involving the USDA’s various agencies.

The NAD appeal process allows an insured to select one of several review options, including a review of the written record, a telephone hearing, or an in-person hearing. Many insureds have found that hiring an attorney to represent them in this process can be helpful, as often complex issues of federal and statutory law and contract construction are at issue. Given the language found in crop insurance policies – “Under no circumstances can [the insured] recover any attorney fees or other expenses” from RMA - Common Crop Insurance Provisions, Section 20(e) – insureds who choose to hire an attorney may be surprised to learn that a federal statute may provide an avenue to recover a substantial portion of the attorneys’ fees incurred during an NAD appeal.

The Equal Access to Justice Act (EAJA), found at 5 U.S.C. § 504, provides that a federal agency that conducts an adversary adjudication (such as an NAD appeal) “shall award, to a prevailing party... fees and other expenses incurred by that party in connection with that proceeding, unless the adjudicative officer of the agency finds that the position of the agency was substantially justified or that special circumstances make an award unjust.” The EAJA is not a “win and get reimbursed” statute, as insureds must meet specific requirements to be eligible for an award of fees and other expenses:

  1. The insured must have “prevailed” in the NAD appeal, meaning that the NAD found that RMA’s decision was erroneous in whole or in part.
  2. The insured must show that RMA’s position was not “substantially justified.”
  3. The insured must meet the “net worth test,” meaning that an individual insured must have a net worth of less than $2 million, and a corporate or other entity insured must have a net worth of less than $7 million and have fewer than 500 employees.

While the first and third criteria are relatively straightforward, it is the second condition that presents the real hurdle for insureds. If RMA’s position was “substantially justified,” then an EAJA award will be denied regardless of the insured showing that RMA’s actions were erroneous. A “substantially justified” position is one that is reasonable in both law and fact. In other words, the RMA’s position must be justified to a degree that would satisfy a reasonable person. If reading these explanations still leaves you wondering what exactly ‘substantially justified’ means, you have identified why the majority of litigation over EAJA awards involves this requirement. In fact, it is possible to be denied an EAJA award because RMA’s position was “substantially justified” even if the insured successfully showed that RMA’s actions were “arbitrary and capricious” during the appeal. This elusive standard makes having an attorney experienced in crop insurance disputes particularly valuable in many cases. 

The determination of whether an insured is entitled to an EAJA award is generally based on the application and any written response submitted by the agency. If the application shows the insured prevailed in the NAD appeal, meets the net worth test, and that RMA’s position was not substantially justified, the insured will be entitled to an award. The amount of the award is based on rates customarily charged by attorneys in the community, and consideration will be given to the reasonableness of time actually spent on the NAD appeal in relation to the difficulty and complexity of the case. Typically, the insured’s attorney will submit an itemized statement of the time spent on the appeal along with the attorney’s customary rate, but federal regulations prohibit any fee award in excess of $150 per hour. Still, EAJA awards will often cover a substantial portion of a farmer’s overall bill.

Like other aspects of crop insurance disputes, applications for an EAJA award are subject to specific regulations that govern such things as the timing and contents of the application. In the experience of attorneys at this firm, the Equal Access to Justice Act can be a valuable tool for lessening the burden on farmers who are forced to litigate disputes with RMA.