SENATE BILL REPORT

ESB 5571

BYSenators Hansen, Fleming and Barr

Creating the grain indemnity fund.

Senate Committee on Agriculture

Senate Hearing Date(s):February 20, 1987

Majority Report:  Do pass as amended.

      Signed by Senators Hansen, Chairman; Bauer, Vice Chairman; Anderson, Bailey, Barr, Gaspard.

Senate Staff:Tom McDonald (786-7404)

                  April 7, 1987

House Committe on Agriculture & Rural Development

AS PASSED SENATE, MARCH 9, 1987

BACKGROUND:

The Department of Agriculture administers the provisions relating to the licensing and inspection of commodity warehouses and grain dealers.  A warehouse or grain dealer is required to be bonded and insured before a license can be issued.  The Department of Agriculture determines the amount of the bonds after holding a public hearing.  Under no circumstances are the bonds to be less than $50,000 or more than $750,000.

The bonds have become more expensive and more difficult to obtain through the insurance industry.  Currently, several licensed dealers are unable to find available bonds.  The right to provide a certificate of deposit in lieu of a bond has not been a realistic option.

SUMMARY:

The commodity warehouses and grain dealers may give the Department of Agriculture other security, acceptable to the Department, in lieu of a bond for licensing requirements.  Two or more applicants for a license may join together and provide a single bond.  The Department establishes the amount of the single bond, which may not be less than:  (1) 10 percent of the aggregate amount of the individual bonds that would otherwise be required, or (2) the highest individual bond amount otherwise required of any single applicant.  A claim for damages against an individual licensee on this single bond is limited to the bond amount that the licensee would be required to have as an individual bond holder.

Upon a petition of 33-1/3 percent of both the warehouses and grain dealers, the Director implements the grain indemnity fund program.  The provisions of the indemnity fund program will not take effect until the Department of Agriculture is petitioned to implement it.  If implemented, the program is in lieu of the bonding and security requirements for the licensees.

A grain indemnity fund is established which, if the indemnity program is implemented, is funded by assessments on licensees.  The assessments are paid to the Department and deposited in the grain indemnity fund with the State Treasurer as custodian.  This is a non-appropriated fund with the Director having authority over disbursements on approved claims.  The rate of assessment is established by rule and is not to exceed 5 percent of the bond amount the licensee would otherwise have had to pay.

As part of the indemnity program, an indemnity fund advisory committee is established to advise the director concerning assessments, administration and payment of claims.  Procedures are set forth for processing the claims and for payment of approved claims.  The program limits the amount of an individual claim against the fund.

Fiscal Note:      available

Effective Date:The bill contains an emergency clause and takes effect immediately.

Senate Committee - Testified: Representative Steve Fuhrman; Representative Alex M. McClean; Karl Kottman, Washington State Council of Farmer Cooperatives; Elmer Gibbons, Department of Agriculture

HOUSE AMENDMENT:

Technical clarifications and corrections are made, and internal references to other sections of the act are set forth.

Language is deleted which would have required a grain dealer to have actual claims pending against him or her before the Department of Agriculture could, under current law, require the dealer to obtain an additional bond or other security.  Language is added which requires the Director of the Department to appoint the advisory board no later than seven days after the provisions of the grain indemnity fund program take effect.  Also added is language that payments of approved claims from the indemnity fund are to be prorated if they exceed the maximum limit of $750,000.

There is further clarification that, under the indemnity program, payments for claims will only come from funds obtained from assessments or other authorized contributions to the program, and the state will not pay any claims when the funds in the program are not sufficient to cover the payments.  Also, the power of the Director of the Department to recover funds paid on claims is more specifically set forth to include the ability to file a claim or intervene in a pending legal proceeding.