901:5-11-07 Financial responsibility.

 

 

 

Rule Summary and Fiscal Analysis (Part A)

 

Department of Agriculture

Agency Name

 

Plant Industry                                                     David E Miran

Division                                                                  Contact

 

8995 East Main Street Reynoldsburg OH 43068-0000

614-728-6390

Agency Mailing Address (Plus Zip)                                       Phone                     Fax

[e-mail]

Email

901:5-11-07

Rule Number

AMENDMENT

TYPE of rule filing

Rule Title/Tag Line              Financial responsibility.

RULE SUMMARY

1.  Is the rule being filed for five year review (FYR)? Yes

2.  Are you proposing this rule as a result of recent legislation? No

3.  Statute prescribing the procedure in accordance with the agency is required to adopt the rule: 119.03

4.  Statute(s) authorizing agency to adopt the rule: 921.16

5.  Statute(s) the rule, as filed, amplifies or implements: 921.10

6.  State the reason(s) for proposing (i.e., why are you filing,) this rule:

OAC § 901:5-11-07 has been review by the Department of Agriculture and industry stakeholders pursuant to Revised Code 119.03 and the five year rule review process.

7.  If the rule is an AMENDMENT, then summarize the changes and the content of the proposed rule; If the rule type is RESCISSION, NEW or NO CHANGE, then summarize the content of the rule:

The rules in Chapter 901:5-11 of the Administrative Code (hereinafter #OAC#) regulate pesticide application in the State of Ohio. These rules protect the citizens of Ohio by training and regulating pesticide applicators on proper pesticide use and application. Many of the rules housed in OAC Chapter 901:5-11 of the Administrative Code were brought in front of CSI and JCARR in a previous rule package. OAC § 901:5-11-07 was placed on a separate track in order to work more closely with industry while not delaying the other rules.

OAC § 901:5-11-07 sets forth the financial responsibility requirements of pesticide businesses and applicators. As it currently exists, the rule requires #a comprehensive general liability insurance policy and, either a separate professional liability insurance policy or an endorsement covering liability arising from the application of pesticides.#

Leading up to the five-year rule review of this rule, the Department received calls from pesticide applicator businesses stating that their insurance companies were not covering claims that the businesses were making against their insurance policies.

During initial stakeholder outreach conversations between the Department and the insurance industry, it was discovered that the language present in the rule was being interpreted by the insurance industry as requiring less coverage than the Department wished to require.

In order to protect consumers and applicators, the Department and insurance industry stakeholders worked to amend the rule to ensure that the proper coverage was being provided to the pesticide applicator industry. The amendments to this rule represent the best possible resolution to ensure that the pesticide businesses, insurance companies, and consumers are protected should damages occur.

Specifically, the amended rule includes clarifying phrases to ensure that insurance companies covers #properties under the care, custody, and control of the pesticide application business# and #the damage to the actual properties the pesticide business is treating or working on.# These changes were made to ensure that not only third party damages were covered but also damages to the actual property which the pesticide business is applying pesticides to is also covered. Further, the amendments do not require coverage damages as a result of the intentional acts of the applicator. Additionally, small stylistic changes were made to make the rule easier to read and comprehend.

8.  If the rule incorporates a text or other material by reference and the agency claims the incorporation by reference is exempt from compliance with sections

121.71 to 121.74 of the Revised Code because the text or other material is generally available to persons who reasonably can be expected to be affected by the rule, provide an explanation of how the text or other material is generally available to those persons:

This response left blank because filer specified online that the rule does not incorporate a text or other material by reference.

9.  If the rule incorporates a text or other material by reference, and it was infeasible for the agency to file the text or other material electronically, provide an explanation of why filing the text or other material electronically was infeasible:

This response left blank because filer specified online that the rule does not incorporate a text or other material by reference.

10.  If the rule is being rescinded and incorporates a text or other material by reference, and it was infeasible for the agency to file the text or other material, provide an explanation of why filing the text or other material was infeasible:

Not Applicable.

11.  If revising or refiling this rule, identify changes made from the previously filed version of this rule; if none, please state so. If applicable, indicate each specific paragraph of the rule that has been modified:

Leading up to the five-year rule review of this rule, the Department received calls from pesticide applicator businesses stating that their insurance companies were not covering claims that the businesses were making against their insurance policies.

During initial stakeholder outreach conversations between the Department and the insurance industry, it was discovered that the language present in the rule was being interpreted by the insurance industry as requiring less coverage than the Department wished to require.

In order to protect consumers and applicators, the Department and insurance industry stakeholders worked to amend the rule to ensure that the proper coverage was being provided to the pesticide applicator industry. Specifically, the amended rule includes clarifying phrases to ensure that insurance companies covers

#properties under the care, custody, and control of the pesticide application business# and #the damage to the actual properties the pesticide business is treating or working on.# These changes were made to ensure that not only third party damages were covered but also damages to the actual property which the pesticide business is applying pesticides to is also covered. Further, the amendments do not require coverage damages as a result of the intentional acts of the applicator.

Additionally, small stylistic changes were made to make the rule easier to read and comprehend.

At that time, the Department believed that amendments to this rule represented the best possible resolution to ensure that the pesticide businesses, insurance

companies, and consumers are protected should damages occur. The Department has finalized the rules with industry and a business impact analysis was drafted and sent to CSI on September 25, 2015. The public comment period ended on October 19, 2015. No comments were received. The rule package was formally filed with JCARR on November 9, 2015. A public hearing was held at the Department on December 11, 2015 at which comments were submitted by 5 stakeholders. The comments were both positive and negative towards the rule. A few days prior to the JCARR hearing, the Department was asked to table the rule for further discussion. The request was granted and the rule was removed from consideration at that time.

On February 3, 2016, at the request of CSI, the Department held at meeting on campus to discuss this rule with stakeholders from both the pesticide and insurance industries. During this meeting it was discussed and agreed to make a final change to the rule which was satisfactory to all parties. The final amendment to the rule can be found in paragraph (E)(6) which now requires a statement that the policy issued

#provides the coverage listed in paragraphs (B) and (C) of the rule.#

The rule was sent back out to stakeholders for final approval. No additional changes have been requested and at this time the Department believes that the rule is finalized.

12.  Five Year Review (FYR) Date: 11/9/2015

(If the rule is not exempt and you answered NO to question No. 1, provide the scheduled review date. If you answered YES to No. 1, the review date for this rule is the filing date.)

NOTE: If the rule is not exempt at the time of final filing, two dates are required: the current review date plus a date not to exceed 5 years from the effective date for Amended rules or a date not to exceed 5 years from the review date for No Change rules.

FISCAL ANALYSIS

13.  Estimate the total amount by which this proposed rule would increase / decrease either revenues / expenditures for the agency during the current biennium (in dollars): Explain the net impact of the proposed changes to the budget of your agency/department.

This will have no impact on revenues or expenditures.

$0.00

Not applicable.

14.  Identify the appropriation (by line item etc.) that authorizes each expenditure necessitated by the proposed rule:

Not applicable.

15.  Provide a summary of the estimated cost of compliance with the rule to all directly affected persons. When appropriate, please include the source for your information/estimated costs, e.g. industry, CFR, internal/agency:

Every pesticide business shall have in force a comprehensive commercial general liability insurance policy and, either a separate professional liability insurance policy or an endorsement covering the properties under the care, custody, and control of the pesticide application business as it relates to the application of pesticides, including but not limited to the damage to the actual properties the pesticide business is treating or working on, in each of the pesticide use categories in which the commercial applicators employed by the business are licensed.

The policies and endorsements shall provide coverage for each registered location associated with the pesticide business; provide coverage for bodily injury, property damage, products, and completed operations due to the application of pesticides at the location applied and for third party claims; and contain the following minimum limits of insurance:

1.  Three hundred thousand dollars policy general aggregate;

2.  Three hundred thousand dollars per occurrence limit; and

3.  Three hundred thousand dollars products and completed operations aggregate.

Insurance rates depend on the individual, their application history, the number of homes/acres to which they apply, and the insurance company. Due to all of these factors rates vary widely between companies. However, in order to give specific figures, the Department reached out to several stakeholders and asked that they provide quotes for their minimum premiums.

Mr. Jeff S. Smith of the Professional Independent Agents Association of Ohio stated that when he spoke to a couple of agents regarding the cost to comply with the rule he stated, #minimum premiums vary but most companies start at $250 [annually].# Mr. Smith indicated that the premium is usually a percentage of the general liability premium so the premium is higher for larger operations.

Anthony Jebbia of the Insurance Partners Group, LTD., indicated that the majority of their insurance carriers have minimum premiums between $400 and $700 annually. He further indicated that all of his insurance carriers are including the

#Care, Custody, and Control# endorsement.

16.  Does this rule have a fiscal effect on school districts, counties, townships, or municipal corporations? No

17.  Does this rule deal with environmental protection or contain a component dealing with environmental protection as defined in R. C. 121.39? No

S.B. 2 (129th General Assembly) Questions

18.  Has this rule been filed with the Common Sense Initiative Office pursuant to

R.C. 121.82? Yes

19.  Specific to this rule, answer the following:

A.) Does this rule require a license, permit, or any other prior authorization to engage in or operate a line of business? No

B.) Does this rule impose a criminal penalty, a civil penalty, or another sanction, or create a cause of action, for failure to comply with its terms? Yes

Failure to possess the adequate financial responsibility will result in a suspension of the business' license by the Department.

C.) Does this rule require specific expenditures or the report of information as a condition of compliance? Yes

Pesticide applicator businesses must demonstrate financial responsibility as defined in the rule.

                                                                                                                                             

March 2, 2016

Mark Hamlin

Director of Regulatory Policy  Ohio Lieutenant Governor's Office

Re: Pesticide Insurance: OAC § 901:5-11-07 Mr. Hamlin,

As you are aware, O.A.C. § 901:5-11-07 has been reviewed by the Ohio Department of Agriculture and industry stakeholders for a period of over two years. The rule outlines the financial responsibility requirements of all pesticide application businesses which operate in the state of Ohio. Specifically, the rule requires pesticide businesses to maintain insurance policies of a certain dollar amount.

Leading up to the five-year rule review of this rule, the Department received calls from pesticide applicator businesses stating that their insurance companies were not covering claims that the businesses were making against their insurance policies. During initial stakeholder outreach conversations between the Department and the insurance industry, it was discovered that the language present in the rule was being interpreted by the insurance industry as requiring less coverage than the Department wished to require.

In order to protect consumers and applicators, the Department and insurance industry stakeholders worked to amend the rule to ensure that the proper coverage was being provided to the pesticide applicator industry. Specifically, the amended rule includes clarifying phrases to ensure that insurance companies covers "properties under the care, custody, and control of the pesticide application business" and "the damage to the actual properties the pesticide business is treating or working on." These changes were made to ensure that not only third party damages were covered but also damages to the actual property which the pesticide business is applying pesticides to is also covered. Further, the amendments do not require coverage damages as a result of the intentional acts of the applicator. Additionally, small stylistic changes were made to make the rule easier to read and comprehend.

At that time, the Department believed that amendments to this rule represented the best possible resolution to ensure that the pesticide businesses, insurance companies, and consumers are protected should damages occur. The Department has finalized the rules with industry and a business impact analysis was drafted and sent to CSI on September 25, 2015. The public comment period ended on October 19, 2015. No comments were received. The rule package was formally filed with JCARR on November 9, 2015. A public hearing was held at the Department on December 11, 2015 at which comments were submitted by 5 stakeholders. The comments were both positive and negative towards the rule. A few days prior to the JCARR hearing, the

Department was asked to table the rule for further discussion. The request was granted and the rule was removed from consideration at that time.

On February 3, 2016, at the request of your office, the Department held at meeting on C?npus to discuss this rule with stakeholders from both the pesticide and insurance industries. During this meeting it was discussed and agreed to make a final change to the rule which was satisfactory to all parties . The final amendment to the rule can be found in paragraph (E)(6) which now requires a statement that the policy issued "provides the coverage listed in paragraphs (B) and (C) of the rule."

The rule was sent back out to stakeholders for final approval. No additional changes have been requested and at this time the Department believes that the rule is finalized. The Department will await your final approval of the rule before re-filing with JCARR.

If you have any questions or concerns please feel free to contact me. Sincerely,

?J?v?

David E. Miran, Jr. Senior Staff Counsel

Ohio Department of Agriculture

@   Serving Farmer5 and Protecting Comumer5 Since 1846

                                                                                                          

ADDENDUM

TO:           David Miran, Ohio Department of Agriculture

FROM:     Cory Bailey, Regulatory Policy Advocate, Lt. Governor's Office

DATE:       March 23, 2015

RE:           CSI Review - Pesticide Insurance - Five-Year Rule Review (OAC § 901:5-11-07)

On behalf of Lt. Governor Mary Taylor, and pursuant to the authority granted to the Common Sense Initiative (CSI) Office under Ohio Revised Code (ORC) § 107.54, CSI has reviewed the abovementioned administrative rule and associated Business Impact Analysis (BIA). This memo represents CSI's comments to the Agency as provided for in ORC § 107.54.

Analysis

This rule package, consisting of one amended rule, was submitted by the Ohio Department of Agriculture (ODA) on October 5, 2015 as part of the five-year rule review requirement contained in Ohio statute. The rule establishes financial responsibility requirements for commercial users of pesticides. On November 6, 2015, the CSI Office issued a recommendation encouraging ODA to proceed with filing the rule package with the Joint Committee on Agency Rule Review. However, prior to the filing of the rule package, stakeholder issues were brought forward that had not been raised during the public comment period. Specifically, concerns were expressed regarding the insurance industry's ability to meet certain requirements in the rule. In order to address the issues, ODA held a meeting with various stakeholders from the pesticide and insurance industries, as well as CSI, on February 3, 2016. The meeting, summarized in a revised memorandum provided by ODA, resulted in a compromise acceptable to the parties involved.

The CSI Office is satisfied with the outcome and has no further comment on this rule package.

Recommendations

For the reasons discussed above, the CSI Office does not have any recommendations for this rule package.

77 South High Street | 30th Floor | Columbus, Ohio 43215-6117 [e-mail]

Conclusion  

Based on the above comments, the CSI Office concludes that the Ohio Department of Agriculture should proceed with the formal filing of this rule package with the Joint Committee on Agency Rule Review.

MEMORANDUM

TO:           David Miran, Ohio Department of Agriculture

FROM:     Cory Bailey, Regulatory Policy Advocate, Lt. Governor's Office

DATE:       November 6, 2015

RE:           CSI Review - Pesticide Insurance - Five-Year Rule Review (OAC § 901:5-11-07)

On behalf of Lt. Governor Mary Taylor, and pursuant to the authority granted to the Common Sense Initiative (CSI) Office under Ohio Revised Code (ORC) § 107.54, CSI has reviewed the abovementioned administrative rule and associated Business Impact Analysis (BIA). This memo represents CSI's comments to the Agency as provided for in ORC § 107.54.

Analysis

On October 5, 2015, the Ohio Department of Agriculture (ODA) submitted a draft rule package consisting of one amended rule to the CSI Office as part of the five-year rule review requirement contained in Ohio statute. The official public comment period closed on October 27, 2015 with one comment submitted.

The draft rule establishes financial responsibility requirements for all individuals and businesses that apply restricted use pesticides or pesticides in a commercial setting in the state of Ohio. The rule requires that pesticide businesses have a commercial general liability insurance policy, as well as a separate professional liability insurance policy or endorsement covering liability arising from the application of pesticides. Policies specific to pesticide businesses licensed in wood- destroying insect diagnostic inspections and those that conduct aerial pest control applications are also outlined in the rule. Additionally, every person applying for a pesticide business license must submit a certificate of insurance or binder verifying that they meet the rule's requirements. The rule specifies the information that must be submitted along with the minimum coverage amounts for each of the insurance policy requirements.

The draft rule was originally part of a rule package consisting of several related pesticide rules, but as stated in the BIA, was placed on a different track to work more closely with industry stakeholders to address concerns. According to ODA, insurance companies were not covering

claims made by pesticide businesses due to the way the coverage requirements in the rule were being interpreted. Following conversations between ODA, pesticide businesses, and the insurance industry, language was agreed upon that creates clarity and understanding among the different stakeholders.

One comment was submitted during the CSI comment period from the Ohio Ecological Food and Farm Association (OEFFA). The comment suggested a considerable increase in the minimum coverage amounts set forth in the rule. In the BIA, ODA stated that other stakeholders made similar suggestions during early stakeholder outreach. However, there were also stakeholders that claimed the minimum coverage amounts were too high. As a result, ODA chose to keep the amounts the same.

The primary adverse impact to business in the draft rule is the cost of maintaining the required insurance policies. The premiums for the minimum coverage amounts can range from $250 to

$700 annually. The time committed to submitting a certificate of insurance with the license application is also considered an adverse impact to business. ODA cites the need to protect consumers from damage caused by the misapplication of pesticides as the justification for the adverse impacts.

Following review of the draft rule, BIA, and stakeholder outreach, it has been determined that the standards espoused by the CSI Office have been met, and the adverse impacts of the draft rule and amendments are justified.

Recommendations

For the reasons discussed above, the CSI Office does not have any recommendations for this rule package.

Conclusion  

Based on the above comments, the CSI Office concludes that the Ohio Department of Agriculture should proceed with the formal filing of this rule package with the Joint Committee on Agency Rule Review.