|Legal Opinion Summary|
|Topic:||Incidental Authority/Excess Capacity: May an association process crop insurance applications from independent insurance agents seeking insurance for their own clients?|
An association proposed to set up a Crop Insurance Servicing Center to process crop insurance applications from independent insurance agents acting on behalf of their clients. Relying on its existing programming capability, which it uses for its own crop insurance clients, the association would be able to calculate premiums almost immediately. An independent agent who lacked this capability could take as long as a week to obtain that information for a client. The services would be provided directly to the independent agents. The association would have little or no contact with the agents’ customers, the ultimate beneficiaries of this service. The customers would not pay a separate fee for the service. The association’s fee would be paid out of the general commission from the insurance companies.
OGC concluded that the association may provide crop insurance application processing services under an incidental authority/excess capacity theory. The servicing arrangement is essentially the same as a loan application processing service, which OGC has opined institutions may perform for other lenders under their incidental authority, using their excess capacity. See Summary No. 01-05, September 27, 2001. As we have noted many times, a System institution may use excess capacity, acquired and maintained in good faith, to minimize waste and reduce the costs of its business operations. In this case, the association’s staff already performs crop insurance application processing for its borrowers using a program that quickly calculates insurance premiums. The information submitted by the association clearly indicates that the association has excess staff capacity, necessary to the conduct of its business, with which to perform these same services for independent agents.