HB-4311, As Passed House, June 26, 2003                                     

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                              SUBSTITUTE FOR                                    

                                                                                

                           HOUSE BILL NO. 4311                                  

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                 A bill 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; 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.                                       

                                                                                

                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      

                                                                                

1       Sec. 1.  This act shall be known and may be cited as the                    

                                                                                

2   "farm produce insurance act".                                               

                                                                                

3       Sec. 3.  As used in this act:                                               

                                                                                

4       (a) "Acknowledgment form" means that term as defined in                     

                                                                                

5   section 2 of the grain dealers act, MCL 285.62.                             

                                                                                

6       (b) "Administrative expenses" means the costs described in                  

                                                                                


                                                                                

1   section 9(2).                                                               

                                                                                

2       (c) "Authority" means the farm produce insurance authority                  

                                                                                

3   created in section 5.                                                       

                                                                                

4       (d) "Board" means the board of directors of the authority                   

                                                                                

5   described in section 7.                                                     

                                                                                

6       (e) "Claimant" means a producer who makes a claim for                       

                                                                                

7   reimbursement from the fund under section 15.                               

                                                                                

8       (f) "Department" means the department of agriculture.                       

                                                                                

9       (g) "Depositor" means that term as defined in section 2 of                  

                                                                                

10  the grain dealers act, MCL 285.62.                                          

                                                                                

11      (h) "Director" means the director of the department or his or               

                                                                                

12  her designee.                                                               

                                                                                

13      (i) "Failure" of a licensee or grain dealer means that term                 

                                                                                

14  as defined in section 2 of the grain dealers act, MCL 285.62.               

                                                                                

15      (j) "Farm produce" means that term as defined in section 2 of               

                                                                                

16  the grain dealers act, MCL 285.62.                                          

                                                                                

17      (k) "Farm produce insurance program" or "program" means the                 

                                                                                

18  program for reimbursement of claims described in this act.                  

                                                                                

19                                                                               (l) "Financial institution" means that term as defined in                           

                                                                                

20  section 2 of the grain dealers act, MCL 285.62.                             

                                                                                

21      (m) "Financial loss" means the loss to a producer who is not                

                                                                                

22  paid in full for farm produce that the producer sold to a grain             

                                                                                

23  dealer and delivered under the terms of the sales contract, after           

                                                                                

24  deducting any outstanding charges against the farm produce.                 

                                                                                

25      (n) "Fund" means the farm produce insurance fund created in                 

                                                                                

26  section 9.                                                                  

                                                                                

27      (o) "Grain dealer" means that term as defined in section 2 of               


                                                                                

1   the grain dealers act, MCL 285.62.                                          

                                                                                

2       (p) "Grain dealers act" means the grain dealers act, 1939                   

                                                                                

3   PA 141, MCL 285.61 to 285.88.                                               

                                                                                

4       (q) "Licensee" means that term as defined in section 2 of the               

                                                                                

5   grain dealers act, MCL 285.62.                                              

                                                                                

6       (r) "Net proceeds" means the sale price of farm produce, less               

                                                                                

7   usual and customary charges and costs of sale of the farm                   

                                                                                

8   produce.                                                                    

                                                                                

9       (s) "Participant" means a producer that has contributed to                  

                                                                                

10  the fund and never requested a refund from the fund or a producer           

                                                                                

11  who has reentered the program under section 13(5).                          

                                                                                

12      (t) "Person" means an individual, corporation, limited                      

                                                                                

13  liability company, partnership, association, cooperative                    

                                                                                

14  organization, or other legal entity.                                        

                                                                                

15      (u) "Price later agreement" means that term as defined in                   

                                                                                

16  section 2 of the grain dealers act, MCL 285.62.                             

                                                                                

17      (v) "Producer" means a person that owns, rents, leases, or                  

                                                                                

18  operates a farm on land and who has an interest in and receives             

                                                                                

19  all or any part of the proceeds from the sale in Michigan of farm           

                                                                                

20  produce produced from the land to a grain dealer licensed under             

                                                                                

21  the grain dealers act.                                                      

                                                                                

22      (w) "Producer premium" means the amount of money charged to                 

                                                                                

23  and collected from a producer under section 11.                             

                                                                                

24      (x) "Sale" means transfer of title.                                         

                                                                                

25      (y) "Storage loss" means a loss to a depositor resulting from               

                                                                                

26  the failure of a licensee that has not fully satisfied its                  

                                                                                

27  storage obligation to the depositor, net of any outstanding                 


                                                                                

1   charges against the farm produce.                                           

                                                                                

2       (z) "Valid claim" means a claim arising from a failure of a                 

                                                                                

3   licensee that occurs after the effective date of this act, is               

                                                                                

4   found valid by the department, and is approved by the board, less           

                                                                                

5   all credits and offsets associated with farm produce sold by a              

                                                                                

6   producer to the licensee.                                                   

                                                                                

7       (aa) "Warehouse receipt" means that term as defined in                      

                                                                                

8   section 2 of the grain dealers act, MCL 285.62.                             

                                                                                

9       Sec. 5.  The farm produce insurance authority is created as                 

                                                                                

10  a public body corporate and politic.  The authority is within,              

                                                                                

11  but not a part of, the department.  The authority shall exercise            

                                                                                

12  its prescribed statutory powers, duties, and functions                      

                                                                                

13  independently of the director, the department, and the commission           

                                                                                

14  of agriculture.  The budgeting, procurement, and related                    

                                                                                

15  functions of the authority shall be performed under the direction           

                                                                                

16  and supervision of the board.                                               

                                                                                

17      Sec. 7.  (1) A board of directors shall govern and                          

                                                                                

18  administer the authority.  The board shall consist of the                   

                                                                                

19  following 10 members:                                                       

                                                                                

20      (a) The director, or his or her designee, is a nonvoting                    

                                                                                

21  member and the chairperson and secretary of the board.  This                

                                                                                

22  member shall not receive per diem or other compensation or                  

                                                                                

23  reimbursement for expenses for serving on the board.                        

                                                                                

24      (b) Two voting members appointed by the governor for                        

                                                                                

25  staggered terms, upon the recommendation of the largest Michigan            

                                                                                

26  organization representing the interests of licensees in Michigan,           

                                                                                

27  as determined by the director.  For the first board, the governor           


                                                                                

1   shall appoint 1 voting member appointed under this subdivision              

                                                                                

2   for a term of 1 year and 1 voting member for 2 years.  The member           

                                                                                

3   appointed to the first board for a 2-year term under this                   

                                                                                

4   subdivision is the first treasurer of the board.  When a member             

                                                                                

5   who is the treasurer leaves the board, the member appointed to              

                                                                                

6   the board under this subdivision who has been a member of the               

                                                                                

7   board for the longest period is the treasurer.                              

                                                                                

8       (c) Three voting members appointed by the governor for                      

                                                                                

9   staggered terms, upon the recommendation of the largest Michigan            

                                                                                

10  organization representing general farm interests in Michigan, as            

                                                                                

11  determined by the director.  Only a producer is eligible for                

                                                                                

12  appointment under this subdivision.  For the first board, the               

                                                                                

13  governor shall appoint 1 voting member appointed under this                 

                                                                                

14  subdivision for a term of 1 year, 1 voting member for a term of 2           

                                                                                

15  years, and 1 voting member for a term of 3 years.  The member               

                                                                                

16  appointed to the first board for a 3-year term under this                   

                                                                                

17  subdivision is the first vice-chairperson of the board.  When a             

                                                                                

18  member who is the vice-chairperson leaves the board, the member             

                                                                                

19  appointed to the board under this subdivision who has been a                

                                                                                

20  member of the board for the longest period is the                           

                                                                                

21  vice-chairperson.                                                           

                                                                                

22      (d) One voting member appointed by the governor, upon the                   

                                                                                

23  recommendation of the largest Michigan organization exclusively             

                                                                                

24  representing the interests of corn producers in Michigan, as                

                                                                                

25  determined by the director.  Only a producer is eligible for                

                                                                                

26  appointment under this subdivision.                                         

                                                                                

27      (e) One voting member appointed by the governor, upon the                   


                                                                                

1   recommendation of the largest Michigan organization exclusively             

                                                                                

2   representing the interests of soybean producers in Michigan, as             

                                                                                

3   determined by the director.  Only a producer is eligible for                

                                                                                

4   appointment under this subdivision.                                         

                                                                                

5       (f) One voting member appointed by the governor, upon the                   

                                                                                

6   recommendation of the largest Michigan organization exclusively             

                                                                                

7   representing dry bean producers in Michigan, as determined by the           

                                                                                

8   director.  Only a producer is eligible for appointment under this           

                                                                                

9   subdivision.                                                                

                                                                                

10      (g) One voting member appointed by the governor, upon the                   

                                                                                

11  recommendation of the largest Michigan organization representing            

                                                                                

12  the interests of agricultural lenders in Michigan, as determined            

                                                                                

13  by the director.                                                            

                                                                                

14      (2) Except as provided in subsection (1)(b) and (c) for the                 

                                                                                

15  first board, each voting member of the board shall serve for a              

                                                                                

16  3-year term and may be reappointed for 1 or more additional                 

                                                                                

17  terms.  The governor may remove a voting member from the board              

                                                                                

18  for good cause.                                                             

                                                                                

19      (3) The governor shall fill a vacancy on the board for an                   

                                                                                

20  unexpired term for the remainder of the term and in the same                

                                                                                

21  manner as an original appointment.  A vacancy does not impair the           

                                                                                

22  right of a quorum to exercise all the rights and perform all the            

                                                                                

23  duties of the board.                                                        

                                                                                

24      (4) Five voting members constitute a quorum.  The affirmative               

                                                                                

25  vote of 5 or more voting members is necessary for an action of              

                                                                                

26  the board other than adjournment of a meeting of the board.  An             

                                                                                

27  adjournment of a meeting of the board requires a vote of a                  


                                                                                

1   majority of voting members present at the meeting and voting.               

                                                                                

2       (5) The board shall hold an annual meeting and at least 1                   

                                                                                

3   additional meeting each calendar year.  The secretary of the                

                                                                                

4   board shall provide written notice of each meeting to the members           

                                                                                

5   of the board at least 5 days before the meeting.                            

                                                                                

6       (6) A member of the board may waive any notice required by                  

                                                                                

7   this section, before or after the date and time stated in the               

                                                                                

8   notice, in writing and delivered, mailed, or electronically                 

                                                                                

9   transmitted to the authority for inclusion in the minutes or                

                                                                                

10  filing with the records of the authority.                                   

                                                                                

11      (7) A board member's attendance at a meeting waives any                     

                                                                                

12  objection to any of the following:                                          

                                                                                

13      (a) No notice or a defective notice of a meeting, unless the                

                                                                                

14  member at the beginning of the meeting objects to holding the               

                                                                                

15  meeting or transacting business at the meeting.                             

                                                                                

16      (b) Consideration of any particular matter at a meeting that                

                                                                                

17  is not within the purpose or purposes described in the notice,              

                                                                                

18  unless the member objects to considering the matter when it is              

                                                                                

19  presented.                                                                  

                                                                                

20      (8) The board shall do all of the following:                                

                                                                                

21      (a) Create forms, and establish policies and procedures to                  

                                                                                

22  implement this act.                                                         

                                                                                

23      (b) Establish the amount of the producer premium under                      

                                                                                

24  section 11.                                                                 

                                                                                

25      (c) Collect and deposit all producer premiums authorized                    

                                                                                

26  under this act into the fund.                                               

                                                                                

27      (d) Take any legal action it considers necessary to compel a                


                                                                                

1   failed licensee to repay the fund for any payment made from the             

                                                                                

2   fund to a claimant for a valid claim against that licensee.                 

                                                                                

3       (e) Take any legal action it considers necessary to compel a                

                                                                                

4   claimant to participate in any legal proceeding in relation to              

                                                                                

5   the claim or the failure of a licensee.                                     

                                                                                

6       (f) Within 5 business days of receiving notice of failure of                

                                                                                

7   a licensee, publish notice of the failure in a manner described             

                                                                                

8   in the grain dealers act.                                                   

                                                                                

9       (g) Request the services of the department or arrange for                   

                                                                                

10  legal services through the department of attorney general if the            

                                                                                

11  board considered it necessary in the execution of its duties.               

                                                                                

12      (h) Procure insurance against any loss in connection with its               

                                                                                

13  operations, in amounts and from insurers as determined by the               

                                                                                

14  board.                                                                      

                                                                                

15      (i) Borrow money from a bank, an insurance company, an                      

                                                                                

16  investment company, or any other person, and pay or include in              

                                                                                

17  the loan any financing charges or interest, consultant, advisory,           

                                                                                

18  or legal fees, and other expenses the board determines are                  

                                                                                

19  appropriate in connection with the loan.  Any loan contract must            

                                                                                

20  provide for a term of not more than 40 years, allow prepayment              

                                                                                

21  without penalty, and plainly state that the loan is not a debt of           

                                                                                

22  this state but the sole obligation of the authority, payable                

                                                                                

23  solely from the fund or from any appropriation from this state              

                                                                                

24  made to the authority for repayment of the loan.                            

                                                                                

25      (j) Employ personnel as required in the judgment of the board               

                                                                                

26  and fix and pay compensation from money available to the                    

                                                                                

27  authority from the administrative expenses account described in             


                                                                                

1   section 9(2).                                                               

                                                                                

2       (k) Make, execute, and carry out any contract, agreement, or                

                                                                                

3   other instrument or document with a governmental department or              

                                                                                

4   other person it determines is necessary or convenient to                    

                                                                                

5   accomplish the purposes of this act.                                        

                                                                                

6                                                                                (l) If requested by the director and approved by the board,                         

                                                                                

7   make payment from the fund to compensate a claimant for a valid             

                                                                                

8   claim.                                                                      

                                                                                

9       (9) The board may do any of the following:                                  

                                                                                

10      (a) Establish policies and procedures in connection with the                

                                                                                

11  performance of the functions and duties of the authority.                   

                                                                                

12      (b) Adopt a policy establishing a code of ethics for its                    

                                                                                

13  employees and board members, consistent with 1973 PA 196,                   

                                                                                

14  MCL 15.341 to 15.348.                                                       

                                                                                

15      (c) Accept gifts, devises, bequests, grants, loans,                         

                                                                                

16  appropriations, revenue sharing, other financing and assistance,            

                                                                                

17  and any other aid from any source and deposit them in the fund              

                                                                                

18  and agree to and comply with any conditions attached to them.               

                                                                                

19      (10) A voting member may receive per diem compensation and                  

                                                                                

20  mileage reimbursement for attending meetings of the board or                

                                                                                

21  while engaged in the performance of his or her duties on behalf             

                                                                                

22  of the authority, in amounts established by the board, and may              

                                                                                

23  receive reimbursement for other expenses approved by the board.             

                                                                                

24  The amounts established by the board shall not exceed the maximum           

                                                                                

25  commission of agriculture rates for per diem compensation and               

                                                                                

26  mileage reimbursement.  A voting member shall not receive any               

                                                                                

27  other compensation for serving on the board or for services                 


                                                                                

1   performed for the authority.                                                

                                                                                

2       (11) A representative of the board or the department may in                 

                                                                                

3   accordance with this act inspect the books and records of a                 

                                                                                

4   licensee during normal business hours to verify whether the                 

                                                                                

5   licensee is complying with the provisions of this act.                      

                                                                                

6       Sec. 9.  (1) The farm produce insurance fund is established                 

                                                                                

7   under the direction and control of the board.  The fund shall               

                                                                                

8   consist of producer premiums, money from any other source, and              

                                                                                

9   interest and earnings from any other source.  The board shall               

                                                                                

10  direct payments from the fund only for the following purposes:              

                                                                                

11      (a) Payment of valid claims under section 15.                               

                                                                                

12      (b) Payment of producer premium refunds under section 13.                   

                                                                                

13      (c) Payment of administrative expenses under subsection (2).                

                                                                                

14      (d) Payment of legal fees and legal expenses under subsection               

                                                                                

15  (3).                                                                        

                                                                                

16      (2) The board shall allocate money from the fund to a                       

                                                                                

17  separate administrative expenses account to pay administrative              

                                                                                

18  expenses.  This allocation shall not exceed $250,000.00 in any              

                                                                                

19  fiscal year.  Administrative expenses under this subsection                 

                                                                                

20  include the actual cost of processing refunds of producer                   

                                                                                

21  premiums, enforcement, record keeping, ordinary management and              

                                                                                

22  investment fees connected with the operation of the fund,                   

                                                                                

23  verification cost under section 11(5), and any other expenses               

                                                                                

24  approved by the board.  Administrative expenses do not include              

                                                                                

25  legal fees and legal expenses described in subsection (3).                  

                                                                                

26      (3) For legal services requested by the board, the board                    

                                                                                

27  shall pay for any legal services and legal expenses required by             


                                                                                

1   the authority, board, or fund from money in the fund.  Legal                

                                                                                

2   services and expenses described in this subsection are not                  

                                                                                

3   administrative expenses and shall not be paid from the                      

                                                                                

4   administrative expenses account.                                            

                                                                                

5       (4) The treasurer of the board shall act as the investment                  

                                                                                

6   officer of the fund and shall invest or direct a financial                  

                                                                                

7   institution to invest the money in the fund that is not currently           

                                                                                

8   needed to meet the obligations of the fund.  The treasurer of the           

                                                                                

9   board shall invest or direct the investment of the money only in            

                                                                                

10  the manner permitted in section 1 of 1943 PA 20, MCL 129.91.                

                                                                                

11  Interest and earnings shall be credited to the fund.                        

                                                                                

12      (5) The fund shall operate on a fiscal year established by                  

                                                                                

13  the board.                                                                  

                                                                                

14      Sec. 11.  (1) Except as provided in this section, beginning                 

                                                                                

15  January 1, 2004, each producer shall pay to the authority a                 

                                                                                

16  producer premium of not more than 0.2% of the net proceeds from             

                                                                                

17  all farm produce sold by the producer to a licensee in this                 

                                                                                

18  state.  If the farm produce is sold to a licensee, the licensee             

                                                                                

19  shall deduct the producer premium from the proceeds of sale and             

                                                                                

20  pay the premium to the authority on behalf of the producer as               

                                                                                

21  provided in subsection (3).                                                 

                                                                                

22      (2) A producer premium imposed under this section is in                     

                                                                                

23  addition to any other fees or assessments required by law.                  

                                                                                

24      (3) Beginning January 1, 2004, when purchasing farm produce                 

                                                                                

25  from a producer, a licensee or its agent or representative shall            

                                                                                

26  deduct the producer premium described in subsection (1) from the            

                                                                                

27  proceeds of sale and notify the producer of the amount of the               


                                                                                

1   deduction in writing.  The licensee shall forward the producer              

                                                                                

2   premium to the authority for deposit into the fund on behalf of             

                                                                                

3   the producer within 30 days of the close of each quarter of the             

                                                                                

4   fiscal year.  Until the authority has received $5,000,000.00 in             

                                                                                

5   producer premiums under this act from licensees, a licensee that            

                                                                                

6   forwards producer premiums it has collected to the authority                

                                                                                

7   within the time period described in this subsection may retain              

                                                                                

8   0.1% of the producer premiums collected.                                    

                                                                                

9       (4) Before January 1, 2004, the department by first-class                   

                                                                                

10  mail shall notify each licensee of the requirements of subsection           

                                                                                

11  (3).                                                                        

                                                                                

12      (5) A licensee shall clearly indicate in its books and                      

                                                                                

13  records the individual producer premiums collected by the                   

                                                                                

14  licensee under subsection (3) and retain those books and records            

                                                                                

15  for at least 3 years.  A licensee shall make the portion of the             

                                                                                

16  books and records of the licensee reflecting the premiums                   

                                                                                

17  collected available for inspection by the director during regular           

                                                                                

18  business hours.  The department shall take steps reasonably                 

                                                                                

19  necessary to verify the accuracy of the portion of the licensee's           

                                                                                

20  books and records that reflect the premiums collected.  The board           

                                                                                

21  shall reimburse the department for the costs related to the                 

                                                                                

22  verification from the fund as an administrative expense under               

                                                                                

23  section 9(2).                                                               

                                                                                

24      (6) The director shall require that a licensee make its books               

                                                                                

25  and records available to the department for the inspection or               

                                                                                

26  verification described in subsection (5).  Financial information            

                                                                                

27  submitted to the department or the authority by a licensee for              


                                                                                

1   purposes of this subsection and subsection (5) is confidential              

                                                                                

2   and is not subject to the disclosure requirements of the freedom            

                                                                                

3   of information act, 1976 PA 442, MCL 15.231 to 15.246, except               

                                                                                

4   that disclosure of financial information may be made in any of              

                                                                                

5   the following circumstances:                                                

                                                                                

6       (a) With the written consent of the licensee.                               

                                                                                

7       (b) Pursuant to a court proceeding.                                         

                                                                                

8       (c) The disclosure is made to the director or an agent or                   

                                                                                

9   employee of the department.                                                 

                                                                                

10      (d) The disclosure is made to an agent or employee of a state               

                                                                                

11  or the federal government authorized by law to see or review the            

                                                                                

12  information.                                                                

                                                                                

13      (e) The information is disclosed in the form of an                          

                                                                                

14  information summary or profile, or as part of a statistical study           

                                                                                

15  that includes data on more than 1 grain dealer, that does not               

                                                                                

16  identify the grain dealer to whom any specific information                  

                                                                                

17  applies.                                                                    

                                                                                

18      (7) At each annual meeting, the board shall certify the                     

                                                                                

19  amount of money in the fund at the end of the preceding fiscal              

                                                                                

20  year.  A producer shall continue to pay and a licensee shall                

                                                                                

21  continue to collect producer premiums until the board certifies             

                                                                                

22  that the fund contained more than $5,000,000.00 at the end of the           

                                                                                

23  preceding fiscal year.  In any fiscal year where the board has              

                                                                                

24  certified that the fund contained more than $5,000,000.00 at the            

                                                                                

25  end of the preceding fiscal year, a producer is not required to             

                                                                                

26  pay and a licensee is not required to collect producer premiums             

                                                                                

27  until 1 of the following occurs:                                            


                                                                                

1       (a) The board certifies that the fund contained less than                   

                                                                                

2   $3,000,000.00 at the end of the preceding fiscal year.  In any              

                                                                                

3   year where the board has certified that the fund contained less             

                                                                                

4   than $3,000,000.00 at the end of the preceding fiscal year, the             

                                                                                

5   obligation of each producer to pay and each licensee to collect             

                                                                                

6   producer premiums is reinstated.                                            

                                                                                

7       (b) The obligation of each producer to pay and each licensee                

                                                                                

8   to collect producer premiums is reinstated in any fiscal year in            

                                                                                

9   which all of the following are met:                                         

                                                                                

10                                                                               (i) The board certifies that the fund contained at least                            

                                                                                

11  $3,000,000.00 at the end of the preceding fiscal year.                      

                                                                                

12      (ii) The board is aware of a failure of a licensee.                          

                                                                                

13      (iii) As determined by the board, the amount required to                     

                                                                                

14  satisfy valid claims equals or exceeds the amount of money in the           

                                                                                

15  fund.                                                                       

                                                                                

16      Sec. 13.  (1) Subject to subsection (7), a producer that has                

                                                                                

17  paid, either directly or collected by a licensee, a producer                

                                                                                

18  premium may receive a refund of the producer premium from the               

                                                                                

19  fund by submitting a written demand for refund to the board,                

                                                                                

20  delivered personally or by first-class mail within 12 months                

                                                                                

21  after the producer paid the producer premium, or within a longer            

                                                                                

22  period granted by the board if it determines that good cause for            

                                                                                

23  an extension exists.                                                        

                                                                                

24      (2) A producer shall submit a demand for refund under                       

                                                                                

25  subsection (1) on a demand for refund form developed by the                 

                                                                                

26  board.  The board shall make the form available to a licensee,              

                                                                                

27  producer, or member of the public upon request.                             


                                                                                

1       (3) If a producer is entitled to a refund of a producer                     

                                                                                

2   premium under this section, the board shall pay the refund within           

                                                                                

3   60 days of its receipt of the demand for refund.                            

                                                                                

4       (4) If producer premiums were assessed in the immediately                   

                                                                                

5   preceding calendar year, the board shall by January 31 send a               

                                                                                

6   notice to each producer who requested a refund of a producer                

                                                                                

7   premium in any previous calendar year.  The notice must inform              

                                                                                

8   the producer of the deadline for and method of submitting a                 

                                                                                

9   demand for refund to the board under subsections (1) and (2) and            

                                                                                

10  the method for reentering the program under subsection (5).                 

                                                                                

11      (5) A producer that receives a refund of a producer premium                 

                                                                                

12  under subsection (1) is not entitled to participation in the                

                                                                                

13  program or to receive any payment under this act unless it                  

                                                                                

14  reenters the farm produce insurance program by meeting all of the           

                                                                                

15  following conditions:                                                       

                                                                                

16      (a) The producer submits a request for reentry into the farm                

                                                                                

17  produce insurance program to the board.  The producer shall                 

                                                                                

18  submit the request in the form required by the board and shall              

                                                                                

19  deliver the request to the board by hand or by certified mail,              

                                                                                

20  return receipt requested.                                                   

                                                                                

21      (b) The board reviews the producer's request for reentry and                

                                                                                

22  approves the request.                                                       

                                                                                

23      (c) The producer pays into the fund all previous producer                   

                                                                                

24  premiums refunded to the producer, and interest on the refunds as           

                                                                                

25  determined by the board.                                                    

                                                                                

26      (6) Beginning 90 days after the reentry, a producer that                    

                                                                                

27  reenters the farm produce insurance program under subsection (5)            


                                                                                

1   is eligible for reimbursement of claims under the program.                  

                                                                                

2       (7) A producer is not eligible for a refund of a producer                   

                                                                                

3   premium under this section if the producer has received                     

                                                                                

4   reimbursement from the fund for a valid claim within the                    

                                                                                

5   preceding 36 months.                                                        

                                                                                

6       Sec. 15.  (1) A producer that meets both of the following                   

                                                                                

7   may submit a claim for reimbursement from the fund under this               

                                                                                

8   section:                                                                    

                                                                                

9       (a) The producer is a participant at the time the producer                  

                                                                                

10  submits the claim.                                                          

                                                                                

11      (b) The producer satisfies 1 of the following conditions:                   

                                                                                

12                                                                               (i) The producer possesses written evidence of ownership of                         

                                                                                

13  farm produce that discloses a storage obligation of a licensee              

                                                                                

14  that has failed, including, but not limited to, a warehouse                 

                                                                                

15  receipt, acknowledgment form, or settlement sheet.                          

                                                                                

16      (ii) The producer has surrendered warehouse receipts as part                 

                                                                                

17  of a sale of farm produce to a licensee that failed not more than           

                                                                                

18  21 days after the surrender of the warehouse receipts and the               

                                                                                

19  producer surrendering the warehouse receipts was not fully paid             

                                                                                

20  for the farm produce.                                                       

                                                                                

21      (iii) The producer possesses written evidence of the delivery                

                                                                                

22  and sale of farm produce or transfer of price later farm produce            

                                                                                

23  to a failed licensee, including, but not limited to, an                     

                                                                                

24  acknowledgment form, settlement sheet, price later agreement, or            

                                                                                

25  similar farm produce delivery contract, but the grain dealer did            

                                                                                

26  not pay the producer in full for the farm produce.                          

                                                                                

27      (2) If the department finds a claim made under subsection (1)               


                                                                                

1   is valid and the board approves of the valid claim, the board               

                                                                                

2   shall within 90 days of the board's approval pay the claimant the           

                                                                                

3   amount described in subsection (3) or (4) from the fund as                  

                                                                                

4   compensation for the claim.  The 90-day time period for payment             

                                                                                

5   may be extended if the board and claimant agree in a writing that           

                                                                                

6   describes the payment terms and schedule.                                   

                                                                                

7       (3) A claimant that incurs a storage loss due to the failure                

                                                                                

8   of a licensee is entitled to payment under subsection (2) in an             

                                                                                

9   amount equal to 100% of the storage loss, less any producer                 

                                                                                

10  premium that would have been due on the sale of the farm                    

                                                                                

11  produce.  The department shall determine the gross amount of the            

                                                                                

12  storage loss based upon local market prices on the date of                  

                                                                                

13  failure.  The department may consider any evidence submitted by             

                                                                                

14  the failed licensee or any claimants concerning the actual                  

                                                                                

15  charges associated with stored farm produce.                                

                                                                                

16      (4) A claimant that incurs a financial loss due to the                      

                                                                                

17  failure of a licensee is entitled to payment under subsection (2)           

                                                                                

18  in an amount equal to 90% of the financial loss.  For farm                  

                                                                                

19  produce that is sold in a transaction subject to the grain                  

                                                                                

20  dealers act, the department shall determine the amount of the               

                                                                                

21  financial loss based on the value of the farm produce less any              

                                                                                

22  outstanding charges against the farm produce.  If the farm                  

                                                                                

23  produce has not been priced, the department shall establish the             

                                                                                

24  amount of the financial loss using the local market on the date             

                                                                                

25  of failure less any usual and customary charges associated with             

                                                                                

26  the sale of farm produce.                                                   

                                                                                

27      (5) A claim under subsection (2) of this section is valid                   


                                                                                

1   only if it is made within 1 year after notice of the failure of             

                                                                                

2   the licensee is published in a newspaper of general circulation             

                                                                                

3   in each county in which a facility of the licensee is located.              

                                                                                

4       (6) The board may require a claimant paid under this section                

                                                                                

5   for a valid claim to subrogate to the board or authority all the            

                                                                                

6   claimant's rights to collect on any bond issued under the grain             

                                                                                

7   dealers act or the United States warehouse act, 39 Stat. 486, 7             

                                                                                

8   U.S.C. 241 to 273, and the claimant's rights to any other                   

                                                                                

9   compensation arising from the failure of the licensee.  If                  

                                                                                

10  required to subrogate under this subsection, the claimant shall             

                                                                                

11  assign the claimant's interest in any judgment concerning the               

                                                                                

12  failure to the board or authority.                                          

                                                                                

13      (7) The board shall deny the payment of a valid claim under                 

                                                                                

14  this section if the board determines any of the following are               

                                                                                

15  met:                                                                        

                                                                                

16      (a) The claimant as payee fails to present for payment a                    

                                                                                

17  negotiable instrument issued as payment for farm produce within             

                                                                                

18  90 days after the date the negotiable instrument is tendered to             

                                                                                

19  the claimant as payment for farm produce purchased by the                   

                                                                                

20  licensee.                                                                   

                                                                                

21      (b) The claimant has engaged in marketing practices that have               

                                                                                

22  substantially contributed to the claimant's loss.  The authority            

                                                                                

23  may consider whether the marketing practices are generally                  

                                                                                

24  accepted marketing practices in this state in making its                    

                                                                                

25  determination.                                                              

                                                                                

26      (c) The claimant has intentionally committed a fraud or                     

                                                                                

27  violated this act in connection with the claim.                             


                                                                                

1       (8) If the department determines that a failure of a licensee               

                                                                                

2   has occurred, the board shall do all of the following:                      

                                                                                

3       (a) Determine the valid claims against the licensee and the                 

                                                                                

4   amount of the valid claims.                                                 

                                                                                

5       (b) Authorize payment of money from the fund when necessary                 

                                                                                

6   to pay claimants for valid claims as provided in this section.              

                                                                                

7       (c) Deposit into the fund any proceeds of the remaining farm                

                                                                                

8   produce assets of a failed licensee to repay the fund for money             

                                                                                

9   paid to claimants, subject to any priority lien right a holder of           

                                                                                

10  a mortgage, security interest, or other encumbrance may possess             

                                                                                

11  under any applicable law.  The board shall not deposit into the             

                                                                                

12  fund an amount in excess of the sum of the principal amount of              

                                                                                

13  valid claims paid to claimants, plus interest for the period from           

                                                                                

14  the date a claimant was paid for a valid claim to the date that             

                                                                                

15  the remaining farm produce assets were received by the board                

                                                                                

16  under this subsection, at a per annum rate equal to the auction             

                                                                                

17  rate of 91-day discount treasury bills on the date the claimant             

                                                                                

18  was paid.                                                                   

                                                                                

19      (d) If the amount in the fund and any amount the board                      

                                                                                

20  borrows under subsection (9)(b) are insufficient to pay all valid           

                                                                                

21  claims, pay the amount available for payment proportionately                

                                                                                

22  among the valid claims approved by the board and pay the prorated           

                                                                                

23  amount to those claimants.                                                  

                                                                                

24      (9) If the department determines that a failure of a licensee               

                                                                                

25  has occurred, the board may do any of the following:                        

                                                                                

26      (a) Pursue any subrogation rights obtained from claimants                   

                                                                                

27  under subsection (6).                                                       


                                                                                

1       (b) If the fund has insufficient money to pay the valid                     

                                                                                

2   claims, borrow money as authorized under section 7(8)(i) for the            

                                                                                

3   payment of valid claims.                                                    

                                                                                

4       Sec. 17.  The board shall use money in the fund only for a                  

                                                                                

5   purpose described in section 9(1).  This section is not severable           

                                                                                

6   from the whole of this act, and if any portion of this section is           

                                                                                

7   held invalid, it is the manifest intent of the legislature that             

                                                                                

8   this act as a whole shall be held invalid and the money remaining           

                                                                                

9   in the fund distributed to producers in proportion to the amount            

                                                                                

10  of producer premiums each producer has paid to the authority.               

                                                                                

11      Sec. 19.  (1) The department may promulgate rules approved                  

                                                                                

12  by the board and necessary to implement and administer this act             

                                                                                

13  and to exercise the powers expressly granted in this act in                 

                                                                                

14  accordance with the administrative procedures act of 1969, 1969             

                                                                                

15  PA 306, MCL 24.201 to 24.328.                                               

                                                                                

16      (2) This act does not limit the authority of the director or                

                                                                                

17  department to take action against a licensee under the grain                

                                                                                

18  dealers act for a violation of the grain dealers act or the rules           

                                                                                

19  of the department.                                                          

                                                                                

20      (3) It is not a defense to an action by the director or                     

                                                                                

21  department against a licensee under the grain dealers act for a             

                                                                                

22  violation of that act that the grain dealer has fulfilled its               

                                                                                

23  obligations under this act.                                                 

                                                                                

24      Sec. 21.  (1) A person that knowingly or intentionally                      

                                                                                

25  commits any of the following is guilty of a misdemeanor                     

                                                                                

26  punishable by a fine of not more than $5,000.00 for each                    

                                                                                

27  offense:                                                                    


                                                                                

1       (a) Refusing or failing to collect producer premiums as                     

                                                                                

2   required under this act.                                                    

                                                                                

3       (b) Refusing or failing to pay to the authority producer                    

                                                                                

4   premiums collected under this act.                                          

                                                                                

5       (c) Making a false statement, representation, or                            

                                                                                

6   certification, or knowingly failing to make a required statement,           

                                                                                

7   representation, or certification, in a record, report, or other             

                                                                                

8   document the person files with the director, department, board,             

                                                                                

9   or authority, or that the person is required to file with the               

                                                                                

10  director, department, board, or authority, under this act.                  

                                                                                

11      (d) Resisting, preventing, impeding, or interfering with the                

                                                                                

12  director, agents or employees of the department, the board, or              

                                                                                

13  agents or employees of the authority or board in the performance            

                                                                                

14  of their duties under this act.                                             

                                                                                

15      (2) In addition to the criminal penalty described in                        

                                                                                

16  subsection (1), the court in an enforcement action for a                    

                                                                                

17  violation described in subsection (1)(a) or (b) shall order the             

                                                                                

18  grain dealer to pay to the fund any producer premiums collected             

                                                                                

19  by the grain dealer that it owes to the fund and may order the              

                                                                                

20  grain dealer to pay interest on the amount the grain dealer owes            

                                                                                

21  to the fund.                                                                

                                                                                

22      Enacting section 1.  The Michigan agricultural commodity                    

                                                                                

23  insurance act, 1988 PA 366, MCL 285.211 to 285.219, is repealed.