Bill Text: MI SB1397 | 2009-2010 | 95th Legislature | Engrossed
Bill Title: Trade; other; claims from farm produce insurance fund; revise eligibility requirements and authorize payments to state for certain enforcement costs. Amends title and secs. 3, 7, 9, 15, 17 & 21 of 2003 PA 198 (MCL 285.313 et seq.).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2010-12-29 - Assigned Pa 0300'10 With Immediate Effect [SB1397 Detail]
Download: Michigan-2009-SB1397-Engrossed.html
SB-1397, As Passed Senate, November 10, 2010
SUBSTITUTE FOR
SENATE BILL NO. 1397
A bill to amend 2003 PA 198, entitled
"Farm produce insurance act,"
by amending the title and sections 3, 7, 9, 15, 17, and 21 (MCL
285.313, 285.317, 285.319, 285.325, 285.327, and 285.331), sections
3 and 15 as amended by 2008 PA 140.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to provide insurance to farm produce producers against
losses from the failure of grain dealers; to establish a farm
produce insurance authority; to prescribe the powers and duties of
the authority and its board; to establish a farm produce insurance
fund;
to provide for assessments on grain dealers certain producers
of farm products; to prescribe certain powers and duties of certain
state agencies and officers; to authorize the promulgation of
rules; and to repeal acts and parts of acts.
Sec. 3. As used in this act:
(a) "Acknowledgment form" means that term as defined in
section 2 of the grain dealers act, MCL 285.62.
(b) "Administrative expenses" means the costs described in
section 9(2).
(c) "Authority" means the farm produce insurance authority
created in section 5.
(d) "Board" means the board of directors of the authority
described in section 7.
(e) "Claimant" means a producer who makes a claim for
reimbursement from the fund under section 15.
(f) "Cooperative association" means that term as defined in 12
USC 1141j.
(g) (f)
"Department" means the
department of agriculture.
(h) (g)
"Depositor" means that
term as defined in section 2 of
the grain dealers act, MCL 285.62.
(i) (h)
"Director" means the
director of the department or his
or her designee.
(j) "Facility" means that term as defined in section 2 of the
grain dealers act, MCL 285.62.
(k) (i)
"Failure" of a licensee
or grain dealer means that
term as defined in section 2 of the grain dealers act, MCL 285.62.
(l) (j)
"Farm produce" means that
term as defined in section 2
of the grain dealers act, MCL 285.62.
(m) (k)
"Farm produce insurance
program" or "program" means
the program for reimbursement of claims described in this act.
(n) (l) "Financial
institution" means that term as defined in
section 2 of the grain dealers act, MCL 285.62.
(o) (m)
"Financial loss" means
the loss to a producer who is
not paid in full for farm produce that the producer sold to a grain
dealer and delivered under the terms of the sales contract, after
deducting any outstanding charges against the farm produce.
(p) (n)
"Fund" means the farm
produce insurance fund created
in section 9.
(q) (o)
"Grain dealer" means that
term as defined in section 2
of the grain dealers act, MCL 285.62.
(r) (p)
"Grain dealers act" means
the grain dealers act, 1939
PA 141, MCL 285.61 to 285.88.
(s) (q)
"Licensee" means that
term as defined in section 2 of
the grain dealers act, MCL 285.62.
(t) (r)
"Net proceeds" means the
sale price of farm produce,
less usual and customary charges and costs of sale of the farm
produce.
(s)
"Participant" means a producer that has never requested a
refund
from the fund or a producer who has reentered the program
under
section 13(5).
(u) (t)
"Person" means an
individual, corporation, limited
liability company, partnership, association, cooperative
association or other cooperative organization, or other legal
entity.
(v) (u)
"Price later agreement"
means that term as defined in
section 2 of the grain dealers act, MCL 285.62.
(w) (v)
"Producer" means a person
that owns, rents, leases, or
operates a farm on land and who has an interest in and receives all
or any part of the proceeds from the sale and delivery in Michigan
of farm produce produced from the land to a grain dealer licensed
under the grain dealers act.
(x) (w)
"Producer premium" means
the amount of money charged
to and collected from a producer under section 11.
(y) "Producer security activities" means any action by the
director under section 22 of the grain dealers act, MCL 285.82, to
administer or enforce that act.
(z) (x)
"Sale"
means transfer of title.
(aa) (y)
"Storage loss" means a
loss to a depositor resulting
from the failure of a licensee that has not fully satisfied its
storage obligation to the depositor, net of any outstanding charges
against the farm produce.
(bb) (z)
"Valid claim" means a
claim arising from a failure of
a licensee that occurs after the effective date of this act, is
found valid by the department, and is approved by the board, less
all credits and offsets associated with farm produce delivered and
sold in this state by a producer to the licensee or to a location
in this state designated in advance of the delivery.
(cc) (aa)
"Warehouse receipt" means
that term as defined in
section 2 of the grain dealers act, MCL 285.62.
Sec. 7. (1) A board of directors shall govern and administer
the authority. The board shall consist of the following 9 members:
(a) The director, or his or her designee, is a nonvoting
member and the chairperson and secretary of the board. This member
shall not receive per diem or other compensation or reimbursement
for expenses for serving on the board.
(b) One nonvoting member appointed by the governor with the
advice and consent of the senate, from recommendations received
from the largest Michigan organization representing the interests
of licensees in Michigan, as determined by the director.
(c) Three voting members appointed by the governor with the
advice and consent of the senate for staggered terms, from
recommendations received from the largest Michigan organization
representing general farm interests in Michigan, as determined by
the director. Only a producer is eligible for appointment under
this subdivision. For the first board, the governor shall appoint 1
voting member appointed under this subdivision for a term of 1
year, 1 voting member for a term of 2 years, and 1 voting member
for a term of 3 years.
(d) One voting member appointed by the governor with the
advice and consent of the senate, from recommendations received
from the largest Michigan organization exclusively representing the
interests of corn producers in Michigan, as determined by the
director. Only a producer is eligible for appointment under this
subdivision.
(e) One voting member appointed by the governor with the
advice and consent of the senate, from recommendations received
from the largest Michigan organization exclusively representing the
interests of soybean producers in Michigan, as determined by the
director. Only a producer is eligible for appointment under this
subdivision.
(f) One voting member appointed by the governor with the
consent and advice of the senate, from recommendations received
from the largest Michigan organization exclusively representing dry
bean producers in Michigan, as determined by the director. Only a
producer is eligible for appointment under this subdivision.
(g) One voting member appointed by the governor with the
advice and consent of the senate, from recommendations received
from the largest Michigan organization representing the interests
of agricultural lenders in Michigan, as determined by the director.
(2) Except as provided in subsection (1)(b) and (c) for the
first board, each member of the board appointed by the governor
shall serve for a 3-year term and may be reappointed for 1 or more
additional terms. The governor may remove a member appointed by the
governor from the board for good cause.
(3) The governor shall fill a vacancy on the board for an
unexpired term for the remainder of the term and in the same manner
as an original appointment. A vacancy does not impair the right of
a quorum to exercise all the rights and perform all the duties of
the board.
(4) Four voting members constitute a quorum. The affirmative
vote of 4 or more voting members is necessary for an action of the
board other than adjournment of a meeting of the board. An
adjournment of a meeting of the board requires a vote of a majority
of voting members present at the meeting and voting.
(5) The board shall hold an annual meeting and at least 1
additional meeting each calendar year. The secretary of the board
shall provide written notice of each meeting to the members of the
board at least 5 days before the meeting.
(6) A member of the board may waive any notice required by
this section, before or after the date and time stated in the
notice, in writing and delivered, mailed, or electronically
transmitted to the authority for inclusion in the minutes or filing
with the records of the authority.
(7) A board member's attendance at a meeting waives any
objection to any of the following:
(a) No notice or a defective notice of a meeting, unless the
member at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting.
(b) Consideration of any particular matter at a meeting that
is not within the purpose or purposes described in the notice,
unless the member objects to considering the matter when it is
presented.
(8) The board shall do all of the following:
(a) Elect from among its members a vice-chairperson and
treasurer.
(b) Create forms, and establish policies and procedures to
implement this act.
(c) Establish the amount of the producer premium under section
11.
(d) Collect and deposit all producer premiums authorized under
this act into the fund.
(e) Take any legal action it considers necessary to compel a
failed licensee to repay the fund for any payment made from the
fund to a claimant for a valid claim against that licensee.
(f) Take any legal action it considers necessary to compel a
claimant to participate in any legal proceeding in relation to the
claim or the failure of a licensee.
(g) Within 5 business days of receiving notice of failure of a
licensee, publish notice of the failure in a manner described in
the grain dealers act.
(h) Request the services of the department or arrange for
legal services through the department of attorney general if the
board considered it necessary in the execution of its duties.
(i) Procure insurance against any loss in connection with its
operations, in amounts and from insurers as determined by the
board.
(j) Borrow money from a bank, an insurance company, an
investment company, or any other person, and pay or include in the
loan any financing charges or interest, consultant, advisory, or
legal fees, and other expenses the board determines are appropriate
in connection with the loan. Any loan contract must provide for a
term of not more than 40 years, allow prepayment without penalty,
and plainly state that the loan is not a debt of this state but the
sole obligation of the authority, payable solely from the fund or
from any appropriation from this state made to the authority for
repayment of the loan.
(k) Employ personnel as required in the judgment of the board
and fix and pay compensation from money available to the authority
from the administrative expenses account described in section 9(2).
(l) Make, execute, and carry out any contract, agreement, or
other instrument or document with a governmental department or
other person it determines is necessary or convenient to accomplish
the purposes of this act.
(m) If requested by the director and approved by the board,
make payment from the fund to compensate a claimant for a valid
claim.
(9) The board may do any of the following:
(a) Establish policies and procedures in connection with the
performance of the functions and duties of the authority.
(b) Adopt a policy establishing a code of ethics for its
employees and board members, consistent with 1973 PA 196, MCL
15.341 to 15.348.
(c) Accept gifts, devises, bequests, grants, loans,
appropriations, revenue sharing, other financing and assistance,
and any other aid from any source and deposit them in the fund and
agree to and comply with any conditions attached to them.
(d) Enter into a memorandum of understanding with the director
that provides for reimbursement of the director for producer
security activities from the fund.
(10) A voting member may receive per diem compensation and
mileage reimbursement for attending meetings of the board or while
engaged in the performance of his or her duties on behalf of the
authority, in amounts established by the board, and may receive
reimbursement for other expenses approved by the board. The amounts
established by the board shall not exceed the maximum commission of
agriculture rates for per diem compensation and mileage
reimbursement. A voting member shall not receive any other
compensation for serving on the board or for services performed for
the authority.
(11) The department shall inspect the books and records of a
licensee during normal business hours to verify whether the
licensee is complying with the provisions of this act.
Sec. 9. (1) The farm produce insurance fund is established
under the direction and control of the board. The fund shall
consist of producer premiums, money from any other source, and
interest and earnings from any other source. The board shall direct
payments from the fund only for the following purposes:
(a) Payment of valid claims under section 15.
(b) Payment of producer premium refunds under section 13.
(c) Payment of administrative expenses under subsection (2).
(d) Payment of legal fees and legal expenses under subsection
(3).
(e) Reimbursement of the director for producer security
activities.
(2) The board shall allocate money from the fund to a separate
administrative expenses account to pay administrative expenses and
to reimburse the director for producer security expenses. This
allocation shall not exceed $250,000.00 in any fiscal year.
Administrative expenses under this subsection include the actual
cost of processing refunds of producer premiums, enforcement,
record keeping, ordinary management and investment fees connected
with the operation of the fund, verification cost under section
11(5), and any other expenses approved by the board. Administrative
expenses do not include legal fees and legal expenses described in
subsection (3).
(3) For legal services requested by the board, the board shall
pay for any legal services and legal expenses required by the
authority, board, or fund from money in the fund. Legal services
and expenses described in this subsection are not administrative
expenses and shall not be paid from the administrative expenses
account.
(4) The treasurer of the board shall act as the investment
officer of the fund and shall invest or direct a financial
institution to invest the money in the fund that is not currently
needed to meet the obligations of the fund. The treasurer of the
board shall invest or direct the investment of the money only in
the manner permitted in section 1 of 1943 PA 20, MCL 129.91.
Interest and earnings shall be credited to the fund.
(5) The fund shall operate on a fiscal year established by the
board.
Sec.
15. (1) A Subject to
subsection (2), a producer that
meets
both satisfies any of the following may submitconditions is
eligible to make a claim for reimbursement from the fund under this
section:
(a)
The producer is a participant at the time the producer
submits
the claim.
(b)
The producer satisfies 1 of the following conditions:
(a) (i) The
producer possesses written evidence of ownership of
farm produce that discloses a storage obligation of a licensee that
has failed, including, but not limited to, a warehouse receipt,
acknowledgment form, or settlement sheet.
(b) (ii) The
producer has surrendered warehouse receipts as
part of a sale of farm produce to a licensee that failed not more
than 21 days after the surrender of the warehouse receipts and the
producer surrendering the warehouse receipts was not fully paid for
the farm produce.
(c) (iii) The
producer possesses written evidence of the
delivery and sale of farm produce or transfer of price later farm
produce to a failed licensee, including, but not limited to, an
acknowledgment form, settlement sheet, price later agreement, or
similar farm produce delivery contract, but the grain dealer did
not pay the producer in full for the farm produce.
(2) A producer is not eligible for reimbursement from the fund
for a claim submitted under this section if any of the following
apply:
(a) The producer previously requested a refund from the fund
under section 13 and the producer did not previously reenter the
program under section 13(5).
(b) The claim relates to delivery of farm produce to a
licensee that is a cooperative association, under the terms of an
agreement between the producer and the licensee that allocated
delivery rights and obligations proportionate to a capital
investment of the producer in the licensee.
(c) At the time the claim is submitted, excluding patronage
interests, the producer is the owner of at least 5% of the voting
shares, other than publicly traded shares, membership interests,
partnership interests, or other ownership interests of the licensee
whose failure is the basis of the claim. As used in this
subdivision, "patronage interests" means shares or membership,
partnership, or other ownership interests in a licensee that is a
cooperative association that are allocated and distributed to the
producer in proportion to that producer's patronage of the
cooperative association.
(d) At the time the claim is submitted, the producer is the
owner of at least 5% of the voting shares, other than publicly
traded shares, membership interests, partnership interests, or
other ownership interests of the parent corporation of the licensee
whose failure is the basis of the claim.
(e) Title to the farm produce that is the subject of the claim
was transferred by the producer more than 2 years before the date
the claim is submitted.
(f) If notice of the failure of the licensee was published in
a newspaper of general circulation in each county in which a
facility of the licensee was located, the claim is submitted more
than 1 year after that publication.
(3) (2)
If the department finds a claim
made under subsection
(1) is valid and the board approves of the valid claim, the board
shall within 90 days of the board's approval pay the claimant the
amount
described in subsection (3) (4)
or (4) (5) from
the fund as
compensation for the claim. The 90-day time period for payment may
be extended if the board and claimant agree in a writing that
describes the payment terms and schedule.
(4) (3)
A claimant that incurs a storage
loss due to the
failure
of a licensee is entitled to payment under subsection (2)
(3) in an amount equal to 100% of the storage loss, less any
producer premium that would have been due on the sale of the farm
produce. The department shall determine the gross amount of the
storage loss based upon local market prices on the date of failure.
The department may consider any evidence submitted by the failed
licensee or any claimants concerning the actual charges associated
with stored farm produce.
(5) (4)
A claimant that incurs a financial
loss due to the
failure
of a licensee is entitled to payment under subsection (2)
(3) in an amount equal to 90% of the financial loss. For farm
produce that is sold in a transaction subject to the grain dealers
act, the department shall determine the amount of the financial
loss based on the value of the farm produce less any outstanding
charges against the farm produce. If the farm produce has not been
priced, the department shall establish the amount of the financial
loss using the local market on the date of failure less any usual
and customary charges associated with the sale of farm produce.
(5)
A claim under subsection (2) of this section is valid only
if
it is made within 1 year after notice of the failure of the
licensee
is published in a newspaper of general circulation in each
county
in which a facility of the licensee is located.
(6) The board may require a claimant paid under this section
for a valid claim to subrogate to the board or authority all the
claimant's rights to collect on any bond issued under the grain
dealers act or the United States warehouse act, 7 USC 241 to 256,
and the claimant's rights to any other compensation arising from
the failure of the licensee. If required to subrogate under this
subsection, the claimant shall assign the claimant's interest in
any judgment concerning the failure to the board or authority.
(7) The board shall deny the payment of a valid claim under
this section if the board determines any of the following are met:
(a) The claimant as payee fails to present for payment a
negotiable instrument issued as payment for farm produce within 90
days after the date the negotiable instrument is tendered to the
claimant as payment for farm produce purchased by the licensee.
(b) The claimant has engaged in marketing or management
practices that have contributed to the claimant's loss. The
authority may consider whether the marketing or management
practices are generally accepted marketing or management practices
in this state in making its determination.
(c) The claimant has intentionally committed a fraud or
violated this act in connection with the claim.
(d) The claimant did not take reasonable actions to mitigate
farm produce losses.
(8) If the department determines that a failure of a licensee
has occurred, the board shall do all of the following:
(a) Determine the valid claims against the licensee and the
amount of the valid claims.
(b) Authorize payment of money from the fund when necessary to
pay claimants for valid claims as provided in this section.
(c) Deposit into the fund any proceeds of the remaining farm
produce assets of a failed licensee to repay the fund for money
paid to claimants, subject to any priority lien right a holder of a
mortgage, security interest, or other encumbrance may possess under
any applicable law. The board shall not deposit into the fund an
amount in excess of the sum of the principal amount of valid claims
paid to claimants, plus interest for the period from the date a
claimant was paid for a valid claim to the date that the remaining
farm produce assets were received by the board under this
subsection, at a per annum rate equal to the auction rate of 91-day
discount treasury bills on the date the claimant was paid.
(d) If the amount in the fund and any amount the board borrows
under subsection (9)(b) are insufficient to pay all valid claims,
pay the amount available for payment proportionately among the
valid claims approved by the board and pay the prorated amount to
those claimants.
(9) If the department determines that a failure of a licensee
has occurred, the board may do any of the following:
(a) Pursue any subrogation rights obtained from claimants
under subsection (6).
(b) If the fund has insufficient money to pay the valid
claims, borrow money as authorized under section 7(8)(j) for the
payment of valid claims.
Sec. 17. (1) The board shall use money in the fund only for a
purpose described in section 9(1). This section is not severable
from the whole of this act, and if any portion of this section is
held invalid, it is the manifest intent of the legislature that
this act as a whole shall be held invalid and the money remaining
in
the fund distributed to producers
in proportion to the amount of
producer
premiums each producer has paid to the authority at the
time and in the amounts established by the board.
(2)
All expenditures from the fund shall be audited by a
certified
public accountant at least annually. At least annually, a
certified public accountant selected by the board shall audit the
financial records of the fund. Within 30 days after completion of
the audit, the certified public accountant shall give copies of the
audit to the director and the other members of the board. The board
shall publish an activity and financial report annually and make it
available to the public on request.
Sec.
21. (1) A In addition to
any other penalty or remedy
provided by law, a person that knowingly or intentionally commits
any of the following is guilty of a misdemeanor punishable by a
fine of not more than $5,000.00 for each offense:
(a) Refusing or failing to collect producer premiums as
required under this act.
(b) Refusing or failing to pay to the authority producer
premiums collected under this act.
(c) Making a false statement, representation, or
certification, or knowingly failing to make a required statement,
representation, or certification, in a record, report, or other
document the person files with the director, department, board, or
authority, or that the person is required to file with the
director, department, board, or authority, under this act.
(d) Resisting, preventing, impeding, or interfering with the
director, agents or employees of the department, the board, or
agents or employees of the authority or board in the performance of
their duties under this act.
(2) In addition to the criminal penalty described in
subsection (1), the court in an enforcement action for a violation
described in subsection (1)(a) or (b) shall order the grain dealer
to pay to the fund any producer premiums collected by the grain
dealer that it owes to the fund and may order the grain dealer to
pay interest on the amount the grain dealer owes to the fund.
