HB-4311, As Passed Senate, October 23, 2003                                 

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                                                                                

                          SENATE 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 9 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) One nonvoting member appointed by the governor with the                 

                                                                                

25  advice and consent of the senate, from recommendations received             

                                                                                

26  from the largest Michigan organization representing the interests           

                                                                                

27  of licensees in Michigan, as determined by the director.                    


                                                                                

1       (c) Three voting members appointed by the governor with the                 

                                                                                

2   advice and consent of the senate for staggered terms, from                  

                                                                                

3   recommendations received from the largest Michigan organization             

                                                                                

4   representing general farm interests in Michigan, as determined by           

                                                                                

5   the director.  Only a producer is eligible for appointment under            

                                                                                

6   this subdivision.  For the first board, the governor shall                  

                                                                                

7   appoint 1 voting member appointed under this subdivision for a              

                                                                                

8   term of 1 year, 1 voting member for a term of 2 years, and 1                

                                                                                

9   voting member for a term of 3 years.                                        

                                                                                

10      (d) One voting member appointed by the governor with the                    

                                                                                

11  advice and consent of the senate, from recommendations received             

                                                                                

12  from the largest Michigan organization exclusively representing             

                                                                                

13  the interests of corn producers in Michigan, as determined by the           

                                                                                

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

                                                                                

15  subdivision.                                                                

                                                                                

16      (e) One voting member appointed by the governor with the                    

                                                                                

17  advice and consent of the senate, from recommendations received             

                                                                                

18  from the largest Michigan organization exclusively representing             

                                                                                

19  the interests of soybean producers in Michigan, as determined by            

                                                                                

20  the director.  Only a producer is eligible for appointment under            

                                                                                

21  this subdivision.                                                           

                                                                                

22      (f) One voting member appointed by the governor with the                    

                                                                                

23  consent and advice of the senate, from recommendations received             

                                                                                

24  from the largest Michigan organization exclusively representing             

                                                                                

25  dry bean producers in Michigan, as determined by the director.              

                                                                                

26  Only a producer is eligible for appointment under this                      

                                                                                

27  subdivision.                                                                


                                                                                

1       (g) One voting member appointed by the governor with the                    

                                                                                

2   advice and consent of the senate, from recommendations received             

                                                                                

3   from the largest Michigan organization representing the interests           

                                                                                

4   of agricultural lenders in Michigan, as determined by the                   

                                                                                

5   director.                                                                   

                                                                                

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

                                                                                

7   first board, each member of the board appointed by the governor             

                                                                                

8   shall serve for a 3-year term and may be reappointed for 1 or               

                                                                                

9   more additional terms.  The governor may remove a member                    

                                                                                

10  appointed by the governor from the board for good cause.                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

15  duties of the board.                                                        

                                                                                

16      (4) Four voting members constitute a quorum.  The affirmative               

                                                                                

17  vote of 4 or more voting members is necessary for an action of              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

22  additional meeting each calendar year.  The secretary of the                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

1   transmitted to the authority for inclusion in the minutes or                

                                                                                

2   filing with the records of the authority.                                   

                                                                                

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

                                                                                

4   objection to any of the following:                                          

                                                                                

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

                                                                                

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

                                                                                

7   meeting or transacting business at the meeting.                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

11  presented.                                                                  

                                                                                

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

                                                                                

13      (a) Elect from among its members a vice-chairperson and                     

                                                                                

14  treasurer.                                                                  

                                                                                

15      (b) Create forms, and establish policies and procedures to                  

                                                                                

16  implement this act.                                                         

                                                                                

17      (c) Establish the amount of the producer premium under                      

                                                                                

18  section 11.                                                                 

                                                                                

19      (d) Collect and deposit all producer premiums authorized                    

                                                                                

20  under this act into the fund.                                               

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24      (f) Take any legal action it considers necessary to compel a                

                                                                                

25  claimant to participate in any legal proceeding in relation to              

                                                                                

26  the claim or the failure of a licensee.                                     

                                                                                

27      (g) Within 5 business days of receiving notice of failure of                


                                                                                

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

                                                                                

2   in the grain dealers act.                                                   

                                                                                

3       (h) Request the services of the department or arrange for                   

                                                                                

4   legal services through the department of attorney general if the            

                                                                                

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

                                                                                

6       (i) Procure insurance against any loss in connection with its               

                                                                                

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

                                                                                

8   board.                                                                      

                                                                                

9       (j) Borrow money from a bank, an insurance company, an                      

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  made to the authority for repayment of the loan.                            

                                                                                

19      (k) Employ personnel as required in the judgment of the board               

                                                                                

20  and fix and pay compensation from money available to the                    

                                                                                

21  authority from the administrative expenses account described in             

                                                                                

22  section 9(2).                                                               

                                                                                

23                                                                               (l) Make, execute, and carry out any contract, agreement, or                        

                                                                                

24  other instrument or document with a governmental department or              

                                                                                

25  other person it determines is necessary or convenient to                    

                                                                                

26  accomplish the purposes of this act.                                        

                                                                                

27      (m) If requested by the director and approved by the board,                 


                                                                                

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

                                                                                

2   claim.                                                                      

                                                                                

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

                                                                                

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

                                                                                

5   performance of the functions and duties of the authority.                   

                                                                                

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

                                                                                

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

                                                                                

8   MCL 15.341 to 15.348.                                                       

                                                                                

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

                                                                                

10  appropriations, revenue sharing, other financing and assistance,            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

14  mileage reimbursement for attending meetings of the board or                

                                                                                

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

                                                                                

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

                                                                                

17  receive reimbursement for other expenses approved by the board.             

                                                                                

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

                                                                                

19  commission of agriculture rates for per diem compensation and               

                                                                                

20  mileage reimbursement.  A voting member shall not receive any               

                                                                                

21  other compensation for serving on the board or for services                 

                                                                                

22  performed for the authority.                                                

                                                                                

23      (11) The department shall inspect the books and records of a                

                                                                                

24  licensee during normal business hours to verify whether the                 

                                                                                

25  licensee is complying with the provisions of this act.                      

                                                                                

26      Sec. 8.  (1) The board shall conduct its business at public                 

                                                                                

27  meetings held in compliance with the open meetings act, 1976 PA             


                                                                                

1   267, MCL 15.261 to 15.275, and shall give public notice of a                

                                                                                

2   time, date, and place of any meeting in the manner required by              

                                                                                

3   that act.                                                                   

                                                                                

4       (2) Subject to section 11(6), any information submitted to                  

                                                                                

5   the board by any person that is not related to the amount of a              

                                                                                

6   claim is confidential and is not subject to the disclosure                  

                                                                                

7   requirements of the freedom of information act, 1976 PA 442, MCL            

                                                                                

8   15.231 to 15.246, except that disclosure of that information may            

                                                                                

9   be made in any of the following circumstances:                              

                                                                                

10      (a) With the written consent of the person that submitted the               

                                                                                

11  information.                                                                

                                                                                

12      (b) Pursuant to a court proceeding.                                         

                                                                                

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

                                                                                

14  employee of the department.                                                 

                                                                                

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

                                                                                

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

                                                                                

17  information.                                                                

                                                                                

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

                                                                                

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

                                                                                

20  that includes data on more than 1 person, that does not identify            

                                                                                

21  the person to whom any specific information applies.                        

                                                                                

22      (f) The information sought relates solely to the amount of 1                

                                                                                

23  or more claims paid from the fund.                                          

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

6   (3).                                                                        

                                                                                

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

                                                                                

8   separate administrative expenses account to pay administrative              

                                                                                

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

                                                                                

10  fiscal year.  Administrative expenses under this subsection                 

                                                                                

11  include the actual cost of processing refunds of producer                   

                                                                                

12  premiums, enforcement, record keeping, ordinary management and              

                                                                                

13  investment fees connected with the operation of the fund,                   

                                                                                

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

                                                                                

15  approved by the board.  Administrative expenses do not include              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

20  services and expenses described in this subsection are not                  

                                                                                

21  administrative expenses and shall not be paid from the                      

                                                                                

22  administrative expenses account.                                            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

2   Interest and earnings shall be credited to the fund.                        

                                                                                

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

                                                                                

4   the board.                                                                  

                                                                                

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

                                                                                

6   January 1, 2005, each producer shall pay to the authority a                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

12  provided in subsection (3).                                                 

                                                                                

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

                                                                                

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

                                                                                

15      (3) Beginning January 1, 2005, when purchasing farm produce                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

19  deduction in writing.  The licensee shall forward the producer              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  forwards producer premiums it has collected to the authority                

                                                                                

25  within the time period described in this subsection may retain              

                                                                                

26  0.1% of the producer premiums collected.                                    

                                                                                

27      (4) Before January 1, 2005, the department by first-class                   


                                                                                

1   mail shall notify each licensee of the requirements of subsection           

                                                                                

2   (3).                                                                        

                                                                                

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

                                                                                

4   records the individual producer premiums collected by the                   

                                                                                

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

                                                                                

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

                                                                                

7   books and records of the licensee reflecting the premiums                   

                                                                                

8   collected available for inspection by the director during regular           

                                                                                

9   business hours.  The department shall take steps reasonably                 

                                                                                

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

                                                                                

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

                                                                                

12  shall reimburse the department for the costs related to the                 

                                                                                

13  verification from the fund as an administrative expense under               

                                                                                

14  section 9(2).                                                               

                                                                                

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

                                                                                

16  and records available to the department for the inspection or               

                                                                                

17  verification described in subsection (5).  Financial information            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

23  the following circumstances:                                                

                                                                                

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

                                                                                

25      (b) Pursuant to a court proceeding.                                         

                                                                                

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

                                                                                

27  employee of the department.                                                 


                                                                                

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

                                                                                

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

                                                                                

3   information.                                                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

7   identify the grain dealer to whom any specific information                  

                                                                                

8   applies.                                                                    

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

12  continue to collect producer premiums until the board certifies             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  until 1 of the following occurs:                                            

                                                                                

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

                                                                                

20  $3,000,000.00 at the end of the preceding fiscal year.  In any              

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  producer premiums is reinstated.                                            

                                                                                

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

                                                                                

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

                                                                                

27  which all of the following are met:                                         


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

6   fund.                                                                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

14  an extension exists.                                                        

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

18  producer, or member of the public upon request.                             

                                                                                

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

                                                                                

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

                                                                                

21  60 days of its receipt of the demand for refund.                            

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

6   following conditions:                                                       

                                                                                

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

                                                                                

8   produce insurance program to the board.  The producer shall                 

                                                                                

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

                                                                                

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

                                                                                

11  return receipt requested.                                                   

                                                                                

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

                                                                                

13  approves the request.                                                       

                                                                                

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

                                                                                

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

                                                                                

16  determined by the board.                                                    

                                                                                

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

                                                                                

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

                                                                                

19  is eligible for reimbursement of claims under the program.                  

                                                                                

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

                                                                                

21  premium under this section if the producer has received                     

                                                                                

22  reimbursement from the fund for a valid claim within the                    

                                                                                

23  preceding 36 months.                                                        

                                                                                

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

                                                                                

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

                                                                                

26  section:                                                                    

                                                                                

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


                                                                                

1   submits the claim.                                                          

                                                                                

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

                                                                                

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

                                                                                

4   farm produce that discloses a storage obligation of a licensee              

                                                                                

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

                                                                                

6   receipt, acknowledgment form, or settlement sheet.                          

                                                                                

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

                                                                                

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

                                                                                

9   21 days after the surrender of the warehouse receipts and the               

                                                                                

10  producer surrendering the warehouse receipts was not fully paid             

                                                                                

11  for the farm produce.                                                       

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

24  describes the payment terms and schedule.                                   

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

4   failure.  The department may consider any evidence submitted by             

                                                                                

5   the failed licensee or any claimants concerning the actual                  

                                                                                

6   charges associated with stored farm produce.                                

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

13  outstanding charges against the farm produce.  If the farm                  

                                                                                

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

                                                                                

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

                                                                                

16  of failure less any usual and customary charges associated with             

                                                                                

17  the sale of farm produce.                                                   

                                                                                

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

                                                                                

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

                                                                                

20  the licensee is published in a newspaper of general circulation             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

25  dealers act or the United States warehouse act, 7 USC 241 to 273,           

                                                                                

26  and the claimant's rights to any other compensation arising from            

                                                                                

27  the failure of the licensee.  If required to subrogate under this           


                                                                                

1   subsection, the claimant shall assign the claimant's interest in            

                                                                                

2   any judgment concerning the failure to the board or authority.              

                                                                                

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

                                                                                

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

                                                                                

5   met:                                                                        

                                                                                

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

                                                                                

7   negotiable instrument issued as payment for farm produce within             

                                                                                

8   90 days after the date the negotiable instrument is tendered to             

                                                                                

9   the claimant as payment for farm produce purchased by the                   

                                                                                

10  licensee.                                                                   

                                                                                

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

                                                                                

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

                                                                                

13  may consider whether the marketing practices are generally                  

                                                                                

14  accepted marketing practices in this state in making its                    

                                                                                

15  determination.                                                              

                                                                                

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

                                                                                

17  violated this act in connection with the claim.                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

21  amount of the valid claims.                                                 

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

5   the remaining farm produce assets were received by the board                

                                                                                

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

                                                                                

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

                                                                                

8   was paid.                                                                   

                                                                                

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

                                                                                

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

                                                                                

11  claims, pay the amount available for payment proportionately                

                                                                                

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

                                                                                

13  amount to those claimants.                                                  

                                                                                

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

                                                                                

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

                                                                                

16      (a) Pursue any subrogation rights obtained from claimants                   

                                                                                

17  under subsection (6).                                                       

                                                                                

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

                                                                                

19  claims, borrow money as authorized under section 7(8)(j) for the            

                                                                                

20  payment of valid claims.                                                    

                                                                                

21      Sec. 17.  (1) The board shall use money in the fund only for                

                                                                                

22  a purpose described in section 9(1).  This section is not                   

                                                                                

23  severable from the whole of this act, and if any portion of this            

                                                                                

24  section is held invalid, it is the manifest intent of the                   

                                                                                

25  legislature that this act as a whole shall be held invalid and              

                                                                                

26  the money remaining in the fund distributed to producers in                 

                                                                                

27  proportion to the amount of producer premiums each producer has             


                                                                                

1   paid to the authority.                                                      

                                                                                

2       (2) All expenditures from the fund shall be audited by a                    

                                                                                

3   certified public accountant at least annually.  Within 30 days              

                                                                                

4   after completion of the audit, the certified public accountant              

                                                                                

5   shall give copies of the audit to the director and the other                

                                                                                

6   members of the board.  The board shall publish an activity and              

                                                                                

7   financial report annually and make it available to the public on            

                                                                                

8   request.                                                                    

                                                                                

9       Sec. 19.  (1) This act does not limit the authority of the                  

                                                                                

10  director or department to take action against a licensee under              

                                                                                

11  the grain dealers act for a violation of the grain dealers act or           

                                                                                

12  the rules of the department.                                                

                                                                                

13      (2) It is not a defense to an action by the director or                     

                                                                                

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

                                                                                

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

                                                                                

16  obligations under this act.                                                 

                                                                                

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

                                                                                

18  commits any of the following is guilty of a misdemeanor                     

                                                                                

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

                                                                                

20  offense:                                                                    

                                                                                

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

                                                                                

22  required under this act.                                                    

                                                                                

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

                                                                                

24  premiums collected under this act.                                          

                                                                                

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

                                                                                

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

                                                                                

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


                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

7   of their duties under this act.                                             

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

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

                                                                                

14  to the fund.                                                                

                                                                                

15      Enacting section 1.  The Michigan agricultural commodity                    

                                                                                

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