Pub. 13 2018-2019 Issue 4

WWW.NEBANKERS.ORG 14 by the Food Security Act. Following passage of the Food Security Act of 1985 (7 USC 1631) (Food Security Act), lenders to farmers have had to learn the ins and outs of additional notifications and filing provisions required under that Act to protect the lenders’ interest in “farmproducts” taken as collateral. Nebraska courts have affirmed that for “farm products” defined in Revised UCC Article 9, lenders must file in Nebraska’s central filing system and follow other requirements of the Food Security Act. This is in addition to the normal filing requirements under the Revised UCC Article 9 necessary to perfect the lender’s interest and es- tablish its priority as compared to competing lienholders. Since passage of the Food Security Act, experienced lenders (some of it gained painfully), have established processes and procedures to assure that their liens on the collateral are not circumvented by failed FSA notices. Similarly, lenders should establish standard practices that are followed for all loans to farmers and ranchers using federal crop insurance. At minimum, this should include obtaining and filing an assignment of indemnity using the form from borrower’s crop insurance company. (It should be noted that the FCIC requirement include signatures from both borrower and lender, both of which must be witnessed.) Even with an assignment of indemnity, compliance with all of the other rules related to establishing a security interest in collateral should be followed. Thus, the security agreement and other applicable loan documents should include crop insurance policies and insurance proceeds in the definition of collateral. Further, standard loan covenants should be included requiring the bor- rower to file claims timely (and acknowledge lender filing if not) and to deposit all insurance proceeds in an account under the control of the lender. Finally, as with all collateral, regularly scheduledmonitoring of the status of the crop, and the potential for any federal crop insurance claims should be observed.  1In re Duckworth, 2012 WL 4434681 (Bankr. C. D. Ill. 2012), reversed and remanded on other grounds, 776 F.3d 453 (7th Cir. 2014), relying on In re Cook, 169 F. 3d 271 (5th Cir. 1999) 2Platte Valley Bank v. Tetra Financial Group, LLC, 2011 WL 335595 (D. Neb. 2011). Counselor’s Corner — continued from page 13 David Bracht is an attorney in the Omaha office of Kutak Rock LLP, where he advises agriculture producers, agribusinesses and lenders involved in production and processing of agriculture products, as well as clients involved in renewable energy development such as ethanol, wind and solar projects. David has more than 30 years' experience in business, government and law, including senior executive positions in both federal and state government agencies. Raised on a northeast Nebraska farm and starting his career in agriculture banking, David previously was the Associate Manager for Federal Crop Insurance Corporation, at the time the agency within the U. S. Department of Agriculture that administered the federal crop insurance program. (FCIC is currently administered through the USDA Risk Management Agency.) Prior to returning to Kutak Rock, Dave served as Director of the Nebraska Energy Office and was a member of the Cabinet of Nebraska Governor Pete Ricketts from January 2015 to August 2018. To contact David, email him at David.Bracht@KutakRock.com .