AGR-Lite: A Whole-Farm Revenue Risk Management Tool

1. AGR-Lite:A Whole-Farm Revenue Risk Management Tool 2007 Ag-Lender Meetings Rodney L. Sharp, Colorado State University Jeffrey E. Tranel, Colorado State University The AGR-Lite course is designed to provide an overview of the AGR-Lite Whole-Farm Revenue Insurance program. The course will provide information on how AGR-Lite works for agricultural producers and covers eligibility and record keeping requirements. This educational course is sponsored by the Risk Management Agency, Western Center For Risk Management Education Committee, University of Wyoming, Colorado State University, and the RightRisk Education Team.The AGR-Lite course is designed to provide an overview of the AGR-Lite Whole-Farm Revenue Insurance program. The course will provide information on how AGR-Lite works for agricultural producers and covers eligibility and record keeping requirements. This educational course is sponsored by the Risk Management Agency, Western Center For Risk Management Education Committee, University of Wyoming, Colorado State University, and the RightRisk Education Team.

2. AGR-Lite Whole Farm Revenue Protection Plan Protection Against: Unavoidable natural disasters Market fluctuations Government pays a portion of the premium AGR-Lite is a whole-farm revenue product that provides protection for most crop and animal revenues. It is available to eligible farmers with adjusted gross revenues of up to $2,051,282 (based on a maximum protection limit of $1,000,000 annually at the 65 percent coverage level and the 75 percent payment rate). Unlike regular AGR, AGR-Lite is streamlined in various ways and has no limitation on livestock income or requirement for the purchase of MPCI. Premiums are subsidized by about 50 percent, which makes the program a good value if the coverage matches your needs. AGR-Lite is a whole-farm revenue product that provides protection for most crop and animal revenues. It is available to eligible farmers with adjusted gross revenues of up to $2,051,282 (based on a maximum protection limit of $1,000,000 annually at the 65 percent coverage level and the 75 percent payment rate). Unlike regular AGR, AGR-Lite is streamlined in various ways and has no limitation on livestock income or requirement for the purchase of MPCI. Premiums are subsidized by about 50 percent, which makes the program a good value if the coverage matches your needs.

3. AGR-LiteCommodities Eligible for Protection Most Farm-Raised Crops Grain/non-grain crops Fruits and vegetables Nuts Nursery plants Floriculture Christmas trees Etc. Animals and Animal Products Livestock Aquaculture Milk Eggs Etc. The AGR-Lite program covers revenue losses for most farm-raised crops, animals and unprocessed animal products including several commodities that are not insurable with other federally-subsidized insurance plans. This is good news for organic producers, natural beef ranchers, nursery farms, small acreage landowners, and other farm operations that have not had coverage in the past. A wider variety of farm operations are now eligible to use AGR-Lite insurance as an tool for managing risk. The AGR-Lite program covers revenue losses for most farm-raised crops, animals and unprocessed animal products including several commodities that are not insurable with other federally-subsidized insurance plans. This is good news for organic producers, natural beef ranchers, nursery farms, small acreage landowners, and other farm operations that have not had coverage in the past. A wider variety of farm operations are now eligible to use AGR-Lite insurance as an tool for managing risk.

4. AGR-Lite:Eligibility Requirements U.S. citizen/resident File a federal farm tax return (Schedule F) Eligible county Liability not exceeding $1 million Same tax entity for 7 years Revenue less than 50% from commodities purchased for resale No more than 83.35% of revenues from potatoes To be eligible for AGR-Lite coverage, a producer must: Be a US Citizen or resident; File a calendar year or fiscal year federal farm tax return (Schedule F or equivalent forms). Produce agricultural commodities primarily in counties where AGR-Lite is available. This includes income from contiguous counties. Have liability not exceeding $1,000,000 (less than $2,051,282 in approved gross income); Have had the same tax entity for seven years and filed five consecutive years of Schedule F tax forms, plus previous year and insurance year, unless a change in tax entity is reviewed and approved by the insurance provider. Have no more than 50 percent of the total revenue from commodities purchased for resale; Have no more than 83.35 percent of the total revenue from potatoes. To be eligible for AGR-Lite coverage, a producer must: Be a US Citizen or resident; File a calendar year or fiscal year federal farm tax return (Schedule F or equivalent forms). Produce agricultural commodities primarily in counties where AGR-Lite is available. This includes income from contiguous counties. Have liability not exceeding $1,000,000 (less than $2,051,282 in approved gross income); Have had the same tax entity for seven years and filed five consecutive years of Schedule F tax forms, plus previous year and insurance year, unless a change in tax entity is reviewed and approved by the insurance provider. Have no more than 50 percent of the total revenue from commodities purchased for resale; Have no more than 83.35 percent of the total revenue from potatoes.

5. AGR-LiteImportant Dates for Application! Timeline Sales Closing Date - March 15 New applications Revised reports for farms insured previous year http://www3.rma.usda.gov/apps/agents Cancellation/Termination Date � January 31 Farms with previous year AGR-Lite policy August 31 - Contract change date There are some important dates that should be observed . Farmers must contact an insurance agent who offers the AGR-Lite program in their state before March 15, the sales closing date or application deadline. The local Farm Service Agency should have listings of insurance agents that offer Federal Crop Insurance. The Risk Management Agency�s website also has a list of agents as well. March 15 of is the �Sales closing date�. This is the date by which new applications for AGR-Lite insurance coverage must be filed or revised Farm Reports must be submitted if there have been changes for farms insured the previous year. AGR-Lite policies are continuous from year to year. The cancellation date or termination date is the designated date on which your coverage will automatically be renewed unless cancelled in writing by either the farmer or FCIC or terminated in accordance with the policy terms. The cancellation and termination date is January 31st. The contract change date is August 31 of the calendar year preceding the calendar year your insurance year begins. Any changes in policy provisions, premium rates, and program dates will be provided to your crop insurance agent or published on the RMA website by the contract change date. There are some important dates that should be observed . Farmers must contact an insurance agent who offers the AGR-Lite program in their state before March 15, the sales closing date or application deadline. The local Farm Service Agency should have listings of insurance agents that offer Federal Crop Insurance. The Risk Management Agency�s website also has a list of agents as well. March 15 of is the �Sales closing date�. This is the date by which new applications for AGR-Lite insurance coverage must be filed or revised Farm Reports must be submitted if there have been changes for farms insured the previous year. AGR-Lite policies are continuous from year to year. The cancellation date or termination date is the designated date on which your coverage will automatically be renewed unless cancelled in writing by either the farmer or FCIC or terminated in accordance with the policy terms. The cancellation and termination date is January 31st. The contract change date is August 31 of the calendar year preceding the calendar year your insurance year begins. Any changes in policy provisions, premium rates, and program dates will be provided to your crop insurance agent or published on the RMA website by the contract change date.

6. AGR-Lite-Availability28 States Alabama Alaska (selected counties) Arizona Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Kansas Maine Maryland Massachusetts Minnesota Montana Nevada New Hampshire New Jersey New Mexico New York (selected counties) North Carolina Oregon Pennsylvania (except Phil. County) Rhode Island South Carolina Tennessee Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming As of November of 2007, AGR-Lite is available in all or parts of 34 states. Up-to-date availability is posted on the Risk Management Agency website. As of November of 2007, AGR-Lite is available in all or parts of 34 states. Up-to-date availability is posted on the Risk Management Agency website.

7. AGR-LiteInsured Causes of Loss Unavoidable natural occurrences Adverse weather (drought, hail, excessive moisture, wind, frost, etc.) Fire Insects Disease Wildlife Earthquakes/volcanic eruptions Failure of irrigation water supplies Market fluctuations AGR-Lite insurance is provided against loss of revenue due to any unavoidable natural occurrences such as adverse weather, fire, insects, disease, wildlife, earthquakes, volcanic eruptions, and failure of irrigation water supplies during the current or previous insurance year or due to market fluctuations that cause a loss of revenue during the current insurance year. AGR-Lite insurance is provided against loss of revenue due to any unavoidable natural occurrences such as adverse weather, fire, insects, disease, wildlife, earthquakes, volcanic eruptions, and failure of irrigation water supplies during the current or previous insurance year or due to market fluctuations that cause a loss of revenue during the current insurance year.

8. AGR-LiteNo Coverage For Negligence, mismanagement, or wrongdoing Failure to follow good management and irrigation practices Water contained by any government, public, private dam, or reservoir Failure or breakdown of irrigation equipment or facilities Theft and vandalism Inability to market the commodities due to quarantine, boycott, or refusal of anyone to accept the commodities Lack of labor Failure of buyer to pay for commodities No payments will be made for losses due to negligence, mismanagement, or wrongdoing by the insured, the insured family, members of the household, tenants, employees, or contractors; crop abandonment; bypassing of acreage; or other causes listed in the insurance policy. Any loss due to this list will not be covered. It is important to know that It is the farmers responsibility to establish that any revenue losses were the result of an insurable cause or loss. However, market fluctuations will be presumed to be caused by an insurable cause or loss unless it is determined that something on this list caused the loss. No payments will be made for losses due to negligence, mismanagement, or wrongdoing by the insured, the insured family, members of the household, tenants, employees, or contractors; crop abandonment; bypassing of acreage; or other causes listed in the insurance policy. Any loss due to this list will not be covered. It is important to know that It is the farmers responsibility to establish that any revenue losses were the result of an insurable cause or loss. However, market fluctuations will be presumed to be caused by an insurable cause or loss unless it is determined that something on this list caused the loss.

9. AGR-LiteCoverage Levels Coverage levels and payment rates vary with the number of commodities produced and are selected by the producer. AGR-Lite liability is calculated by multiplying the approved adjusted gross revenue by the selected coverage level and rate. The coverage level will determine when indemnity payments begin. The payment rate will determine how much the producer will be paid for each dollar of loss under the coverage level. A minimum of 3 commodities are required to qualify for the 80 percent coverage level. To qualify as a separate commodity, each commodity must meet a minimum level of income. The Diversification Formula: (1 divided by the Number Of Crops times 0.333) times (Total Expected Income) is used to determine the minimum level. Commodity grouping is available for commodities that do not meet the minimum. Coverage levels and payment rates vary with the number of commodities produced and are selected by the producer. AGR-Lite liability is calculated by multiplying the approved adjusted gross revenue by the selected coverage level and rate. The coverage level will determine when indemnity payments begin. The payment rate will determine how much the producer will be paid for each dollar of loss under the coverage level. A minimum of 3 commodities are required to qualify for the 80 percent coverage level. To qualify as a separate commodity, each commodity must meet a minimum level of income. The Diversification Formula: (1 divided by the Number Of Crops times 0.333) times (Total Expected Income) is used to determine the minimum level. Commodity grouping is available for commodities that do not meet the minimum.

10. AGR-LiteLoss Payment Example Approved AGR - $100,000 Coverage � Level 80%, Rate 75% Actual Revenue - $70,000 Liability - $100,000 x 0.80 x 0.75 = $60,000 Loss Inception Point - $100,000 x 0.80 = $80,000 Loss Scenario - $80,000-$70,000 = $10,000 Indemnity Payment - $10,000 x 0.75 = $7,500 This is a simple example of how the approved AGR, coverage level, and payment rate are used to calculate loss payment. Farmer Joe selects the 80 percent coverage level and 75 percent payment rate. He has an approved gross revenue of $100,000 and his actual revenue was only $70,000. The insurance liability is calculated by multiplying the approved gross revenue of $100,000 by the coverage level of .80 and rate of .75. $100,000 multiplied by .8 and then multiplied by .75 equals $60,000. If Farmer Joe had a 100 percent crop failure, the most he could receive is $60,000. The indemnity payment in this case will be based on the approved adjusted gross revenue of $100,000 times the coverage level of 80 percent ($80,000) minus the actual revenue of $70,000 ($10,000) times the payment rate of 75 percent equals $7,500. This is a simple example of how the approved AGR, coverage level, and payment rate are used to calculate loss payment. Farmer Joe selects the 80 percent coverage level and 75 percent payment rate. He has an approved gross revenue of $100,000 and his actual revenue was only $70,000. The insurance liability is calculated by multiplying the approved gross revenue of $100,000 by the coverage level of .80 and rate of .75. $100,000 multiplied by .8 and then multiplied by .75 equals $60,000. If Farmer Joe had a 100 percent crop failure, the most he could receive is $60,000. The indemnity payment in this case will be based on the approved adjusted gross revenue of $100,000 times the coverage level of 80 percent ($80,000) minus the actual revenue of $70,000 ($10,000) times the payment rate of 75 percent equals $7,500.

11. AGR-LitePremiums & Administration Fees Premiums Actuarially based Crops grown Geographic location Coverage levels http://www3.rma.usda.gov/apps/premcalc/ Administration Fees $30 per year Waived for limited resource farmers The premiums are determined using actuarial calculations based on projections of utilization and costs for defined risks. The premiums will vary depending on commodities grown, geographic location, and coverage levels. The annual premium is payable at the time the coverage begins. The government will pay a portion of the premium for the AGR-Lite policy that equals 48 percent, 55 percent, and 59 percent of the total premiums for coverage levels of 80 percent, 75 percent, and 65 percent respectively. Risk Management Agency provides an on-line premium calculator. This tool will quote the premium for each individual�s unique operation. The insurance agents can also give premium information. The administration fee for an AGR-Lite policy is $30. This fee can be waived if you make the request and You are a limited resource farmer; or You were insured prior to 2005 insurance year and your administrative fee was waived for one or more of the insurance years because you qualified as a limited resource farmer and you remain qualified as a limited resource farmer under the definition that was in effect at the time the administrative fee was waived. A limited resource farmer is a person with: Farm sales not more than $100,000; and Total household income at or below national poverty level or less than 50 percent of county median household income. The premiums are determined using actuarial calculations based on projections of utilization and costs for defined risks. The premiums will vary depending on commodities grown, geographic location, and coverage levels. The annual premium is payable at the time the coverage begins. The government will pay a portion of the premium for the AGR-Lite policy that equals 48 percent, 55 percent, and 59 percent of the total premiums for coverage levels of 80 percent, 75 percent, and 65 percent respectively. Risk Management Agency provides an on-line premium calculator. This tool will quote the premium for each individual�s unique operation. The insurance agents can also give premium information. The administration fee for an AGR-Lite policy is $30. This fee can be waived if you make the request and You are a limited resource farmer; or You were insured prior to 2005 insurance year and your administrative fee was waived for one or more of the insurance years because you qualified as a limited resource farmer and you remain qualified as a limited resource farmer under the definition that was in effect at the time the administrative fee was waived. A limited resource farmer is a person with: Farm sales not more than $100,000; and Total household income at or below national poverty level or less than 50 percent of county median household income.

12. AGR-Lite What Operations May Find AGR-Lite Useful? Small to mid-sized farms (<$2,000,000 in gross sales) Diversified cropping firms (those that have 3 or more crops can select better coverage) Farms that are susceptible to market and/or production losses (exception: when >50% of sales are from commodities purchased for resale) Organic (alternative enterprise) producers AGR-Lite is not be a useful risk management tool for all producers and agricultural operations. It is primarily designed to help: Small to mid-sized farms, Diversified cropping farms, Farms susceptible to market and or production losses, and Alternative enterprise producers, including organic producers, that are not typically covered by other insurance products. Farm operations not in business or not filing farm tax records for the previous five years, are not eligible for participation in the AGR-Lite program.AGR-Lite is not be a useful risk management tool for all producers and agricultural operations. It is primarily designed to help: Small to mid-sized farms, Diversified cropping farms, Farms susceptible to market and or production losses, and Alternative enterprise producers, including organic producers, that are not typically covered by other insurance products. Farm operations not in business or not filing farm tax records for the previous five years, are not eligible for participation in the AGR-Lite program.

13. AGR-LiteSummary Producer has desire to manage risk Producer is eligible for AGR-Lite insurance Submit a completed application by March 15th Farm Report AGR expense and income histories based on 5 years income tax records Accounting of allowable income expected for insurance year Beginning inventories Production report (if elected 75 or 80 percent coverage levels) Acres planted, location of commodity, production practices, and marketing method For two of most recent years of AGR history In summary, AGR-Lite is a revenue insurance product that may be useful to a producer for managing risk. A producer must submit a completed application by March 15th of the insurance year. If the producer had an AGR-Lite policy in the preceding year, he has until January 31st of the insurance year to cancel the policy. The application will include a farm report, beginning inventories, and a production report, if applicable.In summary, AGR-Lite is a revenue insurance product that may be useful to a producer for managing risk. A producer must submit a completed application by March 15th of the insurance year. If the producer had an AGR-Lite policy in the preceding year, he has until January 31st of the insurance year to cancel the policy. The application will include a farm report, beginning inventories, and a production report, if applicable.

14. AGR-LiteSummary, continued In the event of damage or loss File notice of loss within 72 hours of initial discovery Provide copies of farm tax forms for the 5 years used to calculate AGR history. Amendments applicable to insurance year Additional documentation needed to acrualize allowable income and expenses File an Actual Commodity Report Submit an ending inventory Submit beginning and ending accounts receivable In the event of damage or loss, the producer must give notification within 72 hours of discovering that allowable income for the insurance year could fall below the amount determined by multiplying the approved AGR by the coverage level elected. Failure to provide notice within 15 days after filing the farm tax forms for the insurance year will result in denial of the claim. The producer must provide a copy of the farm tax forms for the five years used to calculate AGR history. Also, tax forms and any amendments for the current insurance year must be provided. There may be need to also provide additional documentation required to convert allowable income and allowable expenses for the insurance year to an accrual accounting method. An Actual Commodity Report must be completed and filed. The producer will have to provide an ending inventory and beginning and ending accounts receivable.In the event of damage or loss, the producer must give notification within 72 hours of discovering that allowable income for the insurance year could fall below the amount determined by multiplying the approved AGR by the coverage level elected. Failure to provide notice within 15 days after filing the farm tax forms for the insurance year will result in denial of the claim. The producer must provide a copy of the farm tax forms for the five years used to calculate AGR history. Also, tax forms and any amendments for the current insurance year must be provided. There may be need to also provide additional documentation required to convert allowable income and allowable expenses for the insurance year to an accrual accounting method. An Actual Commodity Report must be completed and filed. The producer will have to provide an ending inventory and beginning and ending accounts receivable.

15. AGR-LiteSummary, continued In the event of damage to insured commodity Protect commodity from further damage If cost of care will not exceed value of commodity Cooperate in investigation and settlement of claim Allow inspections Allow sampling and determination of extent of damage Provide verifiable records Notify and obtain consent before the insured commodity is abandoned, disposed of, or destroyed Submit a claim for indemnity Not later than 60 days after the original date specified by the IRS for submission of income tax forms In the case of damage to an insured commodity, the producer must protect it from further damage. However, the costs of such protection and care should not exceed the value of the agricultural commodity. The producer is required to cooperate in the investigation or settlement of the claim. The producer must notify RMA and obtain its consent prior to abandoning, disposing of, or destroying the insured agricultural commodity. If the damage is not inspected within seven days following notification, the crop may be abandoned, disposed of, or destroyed without consent. A claim for indemnity declaring the amount of loss must be filed with 60 days after the original date specified by the IRS as the deadline for filing income tax forms.In the case of damage to an insured commodity, the producer must protect it from further damage. However, the costs of such protection and care should not exceed the value of the agricultural commodity. The producer is required to cooperate in the investigation or settlement of the claim. The producer must notify RMA and obtain its consent prior to abandoning, disposing of, or destroying the insured agricultural commodity. If the damage is not inspected within seven days following notification, the crop may be abandoned, disposed of, or destroyed without consent. A claim for indemnity declaring the amount of loss must be filed with 60 days after the original date specified by the IRS as the deadline for filing income tax forms.

16. AGR-LiteSummary, continued In the event of damage to insured commodity, continued Provide complete marketing record Submit to examination under oath Complete an Actual Commodity Report Establish total revenue for all agricultural commodities Establish that loss of production or revenue was caused by perils covered by the AGR-Lite policy. The producer must provide a complete marketing record and completed Actual Commodity Report. He must also submit to an examination under oath pertaining to the indemnity claim.The producer must provide a complete marketing record and completed Actual Commodity Report. He must also submit to an examination under oath pertaining to the indemnity claim.

17. AGR-Lite Claims Process Review and verify approved AGR Check if expenses fall below 70% of allowable expenses � calculate adjustment if necessary Inventory/AR adjustments Multiply approved AGR by coverage level Subtract revenue to count Multiply by payment rate percentage If in fact an actual loss occurred, the claim for indemnity worksheet must be filed within 15 days after filing the tax forms for the insurance year. In the case of an actual loss of revenue by this policy the claim will be settled as follows: Determine approved Adjusted Gross Revenue If allowable expenses for the insurance year falls below 70 percent of approved expenses, the approved AGR will be reduced by .1 percent for each .1 percent actual allowable expenses fell below 70 percent. The approved AGR is then multiplied by the coverage level selected by the insured. The revenue to count is calculated by determining your allowable income from income tax forms and making adjustments for inventories, accounts receivable, commodities purchased for resale, losses not covered in the policy, other indemnity payments paid to the insured. The result of all these calculations will then be multiplied by the selected payment rate to determine how much the producer will receive in indemnity. If in fact an actual loss occurred, the claim for indemnity worksheet must be filed within 15 days after filing the tax forms for the insurance year. In the case of an actual loss of revenue by this policy the claim will be settled as follows: Determine approved Adjusted Gross Revenue If allowable expenses for the insurance year falls below 70 percent of approved expenses, the approved AGR will be reduced by .1 percent for each .1 percent actual allowable expenses fell below 70 percent. The approved AGR is then multiplied by the coverage level selected by the insured. The revenue to count is calculated by determining your allowable income from income tax forms and making adjustments for inventories, accounts receivable, commodities purchased for resale, losses not covered in the policy, other indemnity payments paid to the insured. The result of all these calculations will then be multiplied by the selected payment rate to determine how much the producer will receive in indemnity.

18. AGR-LiteExpense Adjustment Example Approved AGR - $130,000 Coverage Payment � Level 65%, Rate 75% Approved Expenses - $100,000 Actual Revenue - $25,000 Actual Expenses - $68,000 Expense Adjustment - $68,000/$100,000 = 68% (2%) AGR Adjustment - $130,000 x .98 = $127,400 Loss Inception Point - $127,400 x 65% = $82,810 Loss Scenario - $82,810 - $25,000 = $57,810 Indemnity Payment - $57,810 x 75% = $43,358 This is an example of how adjustments are calculated. The insured has approved expenses of $100,000, expenses for the insurance year of $68,000, and an approved AGR of $130,000. The revenue to count is $25,000 with a coverage level of 65 percent and a payment rate of 75 percent. The indemnity would be calculated as follows: Approved AGR - $130,000 Expense Adjustment (if applicable) - $68,000 divided by $100,000 equals 68 percent or 2 percent less than the allowable 70 percent. Therefore the approved AGR is reduced by 2 percent to $127,400 The loss inception point is the adjusted AGR of $127,400 multiplied by the coverage level of 65% equaling $82,810. The loss inception point minus the $25,000 revenue to count equal $57.810. Indemnity paid is $57,810 multiplied by the payment rate of 75 percent or $43,358. This is an example of how adjustments are calculated. The insured has approved expenses of $100,000, expenses for the insurance year of $68,000, and an approved AGR of $130,000. The revenue to count is $25,000 with a coverage level of 65 percent and a payment rate of 75 percent. The indemnity would be calculated as follows: Approved AGR - $130,000 Expense Adjustment (if applicable) - $68,000 divided by $100,000 equals 68 percent or 2 percent less than the allowable 70 percent. Therefore the approved AGR is reduced by 2 percent to $127,400 The loss inception point is the adjusted AGR of $127,400 multiplied by the coverage level of 65% equaling $82,810. The loss inception point minus the $25,000 revenue to count equal $57.810. Indemnity paid is $57,810 multiplied by the payment rate of 75 percent or $43,358.

19. AGR-Lite Mediation, Arbitration, and Appeal Disagreements on any determination Mediation Arbitration Appeal If the insured and FCIC fail to agree on any determination made by FCIC, the disagreement may be resolved through mediation. To resolve any dispute through mediation both parties must: Agree to mediate the dispute; Agree on a mediator; and Be present or have a designated representative who has authority to the case. If resolution cannot be reached through mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association. The arbitrator must provide a written statement describing the issues in dispute, the factual findings, the determinations, and the amount and basis for any award and breakdown by claim for any award. Any decision rendered in arbitration is binding on both parties unless judicial review is sought through an appeal process. Items that cannot be disputed are interpretations regarding whether a specific policy provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy provision or procedure. If the insured and FCIC fail to agree on any determination made by FCIC, the disagreement may be resolved through mediation. To resolve any dispute through mediation both parties must: Agree to mediate the dispute; Agree on a mediator; and Be present or have a designated representative who has authority to the case. If resolution cannot be reached through mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association. The arbitrator must provide a written statement describing the issues in dispute, the factual findings, the determinations, and the amount and basis for any award and breakdown by claim for any award. Any decision rendered in arbitration is binding on both parties unless judicial review is sought through an appeal process. Items that cannot be disputed are interpretations regarding whether a specific policy provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy provision or procedure.