John D. Fittler v. Crop Insurance Commission of Ontario, 1997 ONAFRAAT 12

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West

Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Fittler v Crop Insurance Commission of Ontario

Fittler v CICO 1997 ONAFRAAT 12

STATUTE:

Crop Insurance Act

HEARING:

April 23, 1997

DATE OF DECISION:

May 6, 1997

1997-12

NEUTRAL CITATION:

1997 ONAFRAAT 12

Fittler v Crop Insurance Commission of Ontario

IN THE MATTER OF: Ontario Regulation 140/96 under the Crop Insurance Act (Ontario) R.S.O. 1990, c. C.46.

AND IN THE MATTER OF: An Appeal to the Crop Insurance Appeal Board by John D. Fittler, Kingsville, Ontario from the decisions of the Crop Insurance Commission of Ontario denying him:

1. eligibility for a contract separate from his father, John Fittler, and

2. a claim under Regulation 222, Crop Insurance Plan for Corn.

Before: Mr. Ed Mailloux, Vice-Chair; Mr. Doug Flook, Member.

Appearances: Mr. John D. Fittler, appellant in person.

Mr. John Fittler Sr., father of appellant.

Mr. Peter Ilnyckyj, Senior Commodity Specialist, on behalf of Agricorp.

DECISION OF THE TRIBUNAL

This appeal was heard in Kingsville, Ontario on April 23, 1997.

Mr. John D. Fittler, Kingsville, Ontario appealed the decisions of the Crop Insurance

Commission of Ontario (AgriCorp), denying him:

1. eligibility for a contract separate from his father, John Fittler, and

2. a claim under Regulation 222, Crop Insurance Plan for Corn.

The Background

In making their decision, AgriCorp relied on the following regulations:

Regulation 256, Crop Insurance Plans - General

“Section 6(a) The Commission may refuse to make a contract of insurance with an applicant for insurance who,

(a) in the Commission's opinion, has a substantial interest in more than one crop of the same designation;

“Form 1, Section 8(3) Where loss or damage to the insured crop occurs and it appears, or ought reasonably to appear, to the insured person at any time after planting and before the completion of harvesting of the insured crop that the production of the insured crop may thereby be reduced, the insured person shall, as soon as the loss or damage is apparent, notify the Commission in writing forthwith.

Regulation 222, Crop Insurance Plan for Corn,

“Section 4 The following are designated as perils for the purposes of this plan:

1. Drought,

2. Excessive moisture.

3. Excessive rainfall.

4. Flood.

5. Frost.

6. Hail.

7. Insect infestation.

8. Plant disease.

9. Wildlife.

10. Wind.”

On April 15, 1996, Mr. John D. Fittler purchased his first crop insurance contract for land he farmed in Mersea Township, County of Essex. He purchased 85% coverage on 15 acres of corn with a guaranteed production of 102 bu. per acre or a total guaranteed production of 1,530 bushels. He also purchased 85% coverage on 29 acres of soybeans for a guaranteed production of 34 bu. per acre or a total guaranteed production of 986 bushels.

Mr. John D. Fittler is a graduate of Ridgetown College with a diploma in field and horticultural crops. He also has an Honours Bachelor of Science degree from the University of Guelph. He also has a teacher’s certificate and teaches at a private Mennonite highschool in Leamington. He lives on a farm originally purchased by his father in 1965 but which he now owns. This farm has 13 arable acres. In April 1996, John D. Fittler and his father, purchased the Watson farm which is just over 90 acres. John D. owns 1/3 interest and John has 2/3 interest. He and his father had a mutual agreement that he would crop 44 acres of this property and his father would crop 44 acres.

The Evidence

Mr. John D. Fittler said he contacted Mr. Harry Fraser, District Co-ordinator for AgriCorp, to obtain coverage for his father and to purchase separate coverage for himself. He said he told Mr. Fraser that:

• his father would be sharecropping the 13 acres on his home farm

• he would be cropping 44 acres of the Watson farm and his father would be cropping 44 acres on the Watson farm.

Mr. John D. Fittler stated that Mr. Fraser told him he could not issue John Fittler separate coverage on the purchased Watson farm as he already had coverage on other farms in different locations. However, Mr. Fraser did say he would issue John D. Fittler a separate contract.

Mr. John D. Fittler said that he and his father received confirmation of insurance in late August and the forms clearly indicated separate coverage, acreages, coverage level and insurance guarantee. He said he does not understand how Agricorp can now average their yields.

He stated that the 29 acre parcel at the Watson farm, on which he planted the soybeans, has a variable soil composition of sand, black sand and sand/clay. He said that because of the wet spring he wasn’t able to plant his soybeans until May 25. He stated that his 15-acre corn field was 95% prime deep sand and is tiled. He said because of the rain, he wasn’t able to get his corn planted until June 20.

Mr. John D. Fittler said he applied 0.34 litres/acre of Sencor to his soybean field. He said that in the early part of June, Essex County received an unusual storm pattern which released 4 to 6 inches of rain in 2 hours. He said that as a result of the heavy rain, the leaves on the soybeans were a bit shredded but they were only in their first trifoliate growth stage so he felt this would not affect their growth. He said by the latter part of June, he started to notice Sencor damage and by the first part of July, the browning was becoming even more prominent on the higher sandy areas. He said he then sprayed with Pursuit to kill patches of ragweed and grass emergence. In his opinion, at this point the weed control was good. However, as the growing season progressed, the soybeans were obviously hurt from the Sencor and the ragweed was growing faster than the crop. He said that the Sencor damage and ragweed infestation account for the low yield at harvest and that his receipts from Wheatley Elevator’s documenting 10.6% dockage confirms this fact.

Mr. Fittler said that this is the first corn crop he has grown on his own. He sprayed the corn field with Primextra at the recommended rate and incorporated it. When he planted the 3100 heat unit corn June 20, he planted 29,000 plants/acre and fertilised with a split application providing approximately 160 lbs. actual N and 75 lbs. actual P205. He said that he does not agree with Mr. Fraser’s argument that he should not have planted 3100 heat unit corn at this late date. Mr. Fittler said that his corn went in the ground only about 10 days later than other farmers in his area. According to Mr. Fittler, Wheatley can often get 3450 heat units in a warm summer. He said he made his decision based on his knowledge of the crop and the soil which was warm, well-drained rich sandy soil. He stated that by the end of the season, his corn crop was approaching 10 to 12 feet in most locations and the cobs were filled almost to the tip and were a good size.

About October 20, his custom combine operator called to see if he was ready to harvest his corn. At that time, he said his corn was testing about 34% moisture. He said he made the decision to wait a couple of weeks for it to dry down. He said that unfortunately for him it began to rain and he couldn’t get on the land until it froze solid enough to harvest which wasn’t until December 24. According to Mr. Fittler, all the rains and winds caused the stalks to break below the cob and then the broken stalks froze to the ground making harvest very difficult.

Mr. Fittler admitted that he did not report any damage to his crops prior to harvest. He said that one of the reasons he didn’t report damage earlier is that the soybean crop still looked good for one or two days after the heavy rain in June. By the time the Sencor damage had really become pronounced, it was July and already past the reseeding date. He said he just hoped the soybeans would recover from the damage. He said his reason for not phoning about the corn crop was that there really was nothing to report. The crop was growing aggressively and cob formation was full. Until the combine pulled into the field, he still believed he would have no difficulty picking up the corn.

He said that he and his Dad are not a corporation or partnership and the reason their yields are so different is the fact that the soils are very different. He said his Dad’s soybean field had organic matter content of 2.4 and is heavier land whereas the scorched Sencor damaged areas of his field had only a 1.7 organic matter content and is sandier land. In his opinion, the higher the organic matter content the less damage you will see from Sencor if heavy rains occur.

He said he believes he meets the criteria for separate coverage. With regards to legal independence, his deed indicates that he owns 1/3 of the land and not the 44 acres he is farming. He said that his father agreed to let him farm the 44 acres. He stated that if the farm they own together is not considered independent land ownership, why wasn’t he refused insurance in the spring. He said he owns the home farm which has 13 farmable acres. This land was cropped by his father. He said his father shares the profits with him in lieu of help he gives him throughout the year. He said they do not have a formal agreement, they just agree on a settlement at the end of the year. He does not know why that would be a concern now as he pointed this out to Mr. Fraser in the spring when he applied for insurance.

He said that he and his father operate their farm businesses independent of each other and each file separate income tax forms. Wheatley Elevators has both he and his father listed as separate entities. He said that he is in full control of his farming activities deciding what he will spray, amount and type of fertiliser and crop that he will grow. He said he is responsible for his own farm activities and management decisions.

In response to questions of Agricorp, he stated that his father pays the taxes on the Watson Farm and receives the farm tax rebate.

Mr. Peter Ilnyckyj, Senior Commodity Specialist, spoke on behalf AgriCorp. He introduced into evidence a letter dated February 10, 1997, from Mr. Harry Fraser, District Co-ordinator for AgriCorp, addressed to Mr. John D. Fittler. In this letter he states that:

“1. when we gave you separate coverage it was with the understanding that you were

going to be working your own farm which you live on, possibly renting the

adjacent farm and the percentage of the farm you own jointly with your father in

the Wheatley area. Upon reading the adjuster’s report we find that you did not

work your own farm, rent any adjacent land and basically nothing has changed

from 1995, that is, the land is being farmed primarily by your father and you have

a portion of the Wheatley farm. The 1996 yield for soybeans is being joined with

your father’s acreage and average.

2. Regarding your corn for 1996, the above reasons apply, that is nothing has changed from 1995 and the adjuster’s report indicates that you planted Pioneer 3532 on June 20, 1996. This variety of corn is rated at 3100 heat units and must be planted much earlier to fully mature by the normal harvesting season.

3. You did not report damage prior to harvest which had been emphasised to you in the spring.

Mr. Harry Fraser, District Co-ordinator, also testified on behalf of Agricorp. He said the Crop Insurance Act gives AgriCorp authority to issue crop insurance. The Act and Regulations made under the Act are there to make sure all producers are treated equally and fairly. He said that if a farmer has several fields, AgriCorp wants total yield off total acres because it does not give separate coverage for each field.

Mr. Fraser entered into evidence a copy of the “Separate Farm Coverage Policy”, developed by the federal government that adjusters use when selling insurance. This Policy explains the three criteria that need to be met in order to be granted an independent crop insurance contract. They are:

• Legal Independence - confirm independent land ownership/rental, written business arrangements indicating intent and term of the arrangements.

• Financial Independence - is shown by filing of separate income tax returns. Personal equity in the farm operation and an indication of separate farm accounting i.e. active

bank account, own account with suppliers, etc., must also be shown.

• Operational Independence - can be proven by producing crops separately and apart. crops must be stored separately or with third party which can be verified. Operational independence is also indicated by who has responsibility for work performed on the farm and for paying for the cost of that work.

He said that if AgriCorp establishes that two applicants do not operate in an arms-length situation and/or does not meet one of the above criteria, they are not eligible for a separate contract.

Mr. Fraser said he received a call from John D. Fittler inquiring about crop insurance. He said that Mr. Fittler told him that:

• the 13 acres on his home farm would be cropped by him.

• he and his father would each be planting a crop on the Watson farm.

• grain storage would be kept separate and stored at Wheatley Elevators.

• his bookkeeping and banking would be kept separate from his father.

• he would be making his own decisions about planting and cropping.

• there would be some common equity and sharing of equipment.

Mr. Fraser said that based on information he received from John D. Fittler, he determined he met all of the eligibility criteria and issued him a separate contract. He said he told John D. Fittler that his yield on the Watson farm would be pro rated ie. total yield off total acreage and apply pro rate by number of acres each planted. He said that when he issued the contract, he did not know that Mr. John D. Fittler wouldn’t be working his home farm.

Mr. Fraser said that Mr. Fittler did not call crop insurance office to report damage to his crops. He said he first became aware that there was a problem when Harold Douglas, yield evaluator for AgriCorp, sent in his report. He said he then instructed Brad Stevenson, adjuster for AgriCorp, to do an audit as there were no other low yields in that area. He said the audit was completed on both Fittler farms and there was a large disparity in yields between the two farms. He said that the adjuster’s report indicates that John Fittler Sr. grew soybeans on John D. Fittler’s home farm and that proceeds from the home farm were split between father and son.

Mr. Fraser said he combined the crops of John Fittler and John D. Fittler since the home farm was not cropped by John Jr. He said a separate contract was issued on the basis that John D. Fittler was cropping the home farm.

He said that there were no other soybean claims in Mersea Township and no other insured’s had yields at that level. Mr. Fraser said that since AgriCorp did not see the crop, it couldn’t identify an insured peril, so would not likely have paid a claim even if John D. Fittler qualified for a contract separate from his father. He said this is a program where everything has to be verified and since Mr. Fittler didn’t report to Agricorp, it couldn’t verify the loss or insured peril that may have caused the loss. Mr. Fraser said that when he wrote up the contract, he left a 1996 crop insurance plan brochure with Mr. John D. Fittler. Under the section “Your Obligations Once Enrolled”, it states: “Notify your District Coordinator as soon as damage occurs to your crop. Failure to do so may jeopardize your crop insurance claim and market revenue payment”. Mr. Fraser said that he stresses to all new clients that their main responsibility is to report damage and/or a potential claim.

Mr. Fraser said that a farmer likes to plant corn early so he can use longer varieties to take advantage of heat units to produce a larger crop. He said the recommended planting date for corn in Mersea Township is up to May 10th. He introduced into evidence a publication entitled Corn Production which is produced by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA). The publications states: “If planting is delayed beyond mid-May, reduce your estimate of the number of heat units available by 100 for each week that planting is delayed”. It also states: “Under good growing conditions, the stalk may contain enough carbohydrates to fill a large ear while maintaining stalk strength. However, if conditions have been stressful, reserves in the stalk will be low and will be depleted quickly. The result will be premature death of the stalk and severe lodging”. He also introduced into evidence an OMAFRA Factsheet called: “Dollars and Sense of Fieldwork timeliness”. He read the following information: “Crop researchers have known for many years that there are optimum planting and harvesting dates. Planting or harvesting after these dates normally means yield reductions”. Mr. Fraser stated that, in his opinion, the late planting of a high heat unit crop is the cause of loss of Mr. Fittler’s corn crop.

Mr. Fraser said that in 1996 by the end of May there was 325 heat units accumulated and 1102 accumulated by the end of June. He said that the variety of corn that Mr. Fittler planted is rated for 3100 heat units. Since Mr. Fittler chose to plant a longer-maturing variety and his decision in the fall was to leave the corn in the field longer for drying purposes, the risk was taken on by the owner of the corn. He said that management decisions are not insured perils.

Mr. Fraser also introduced into evidence a computer printout of historical yields from 1982 to 1996 for corn in Mersea Township. The report shows a five-year average actual yield of 134.1. In 1996, the actual average was 140.9 indicating an above-average crop in 1996. Soybean average yield for 1996 was 41.1 vs. a five-year average of 42 indicating that 1996 was an average year for soybeans in Mersea Township.

Brad Stevenson, adjuster for AgriCorp, stated that after the crop was harvested, he audited the yield from the Fittlers’ crops. He said he obtained information from John Jr., John Sr. and Wheatley Elevators and everything coincided with information he was given. However, when reviewing financial information, he noted that financial gains from the 13 acres on John Jr.’s home farm were divided amongst father and son. He also noted that the soybean yield came totally from the farm at Wheatley. In his opinion, this is a split risk or breaking of farm units into smaller units. If a producer has more than one contract of insurance, that is splitting your risk.

He said that some of the corn was broke over and froze down and it was hard to harvest. He said that other farmers in the area did not experience this peril. In his opinion, the cause of late harvest was not harvesting in a timely fashion.

Mr. Ilnyckyj reiterated the fact that it is AgriCorp’s submission that these applicants are not entitled to separate insurance contracts for 1996 since they do not meet the eligibility criteria. He also stated that AgriCorp was not afforded the opportunity to look at the crop in the field before harvest. In his opinion, planting a 3100 heat unit corn on June 20 increased the risk of crop peril at harvest. The cause of loss was the late harvest due to late planting which is a management decision which is not an insured peril. Since no insured perils were identified under the plan, AgriCorp is denying the claim.

The Issue

The issues for the Board to decide are:

1. Is John D. Fittler eligible for a contract separate from his father, and

2. Is John D. Fittler eligible for a claim under Regulation 222, Crop Insurance Plan for Corn?

The Findings

1. Separate Contract Issue.

AgriCorp issued John D. Fittler a separate policy on the basis that he and his father were a separate operation. According to testimony, it appeared to the Board that there was some misunderstanding between Mr. Fittler and AgriCorp about who was going to be cropping the home farm. Mr. John D. Fittler said he told Mr. Fraser that his father would be sharecropping his home farm. AgriCorp issued the policy based on the fact that John D. Fittler was going to farm the home farm and both he and his father were each separately going to crop land at the Watson farm. However, what actually happened was that John Fittler sharecropped John D. Fittler’s home farm. In the opinion of the Board, this makes him ineligible for a separate contract. Also, the fact that John Fittler pays the taxes on the Watson farm and collects the farm tax rebate, indicates to the Board that they do not have two separate farming operations.

2. Corn Claim Issue.

From testimony before it, the Board was convinced that there was an insured peril of rain which delayed planting in the spring. Since Mr. Fittler had sprayed Primextra on the ground designated to corn, it meant that when the weather turned wet, and planting date became late, he could not have changed the crop to soybeans. The Board also noted that Regulation 222, Crop Insurance Plan for Corn, states that “for the purposes of this plan, the final date for planting corn in a crop year is June 30”. Therefore, even though Mr. Fittler was later than he expected to be planting his corn, he did get it planted within the deadline.

However, in the opinion of the Board, it is not prudent to plant a long-maturing variety, 3100 heat unit corn, on such a late date. This compounded the problem in the fall in that Mr. Fittler had to wait for harvest and as a result achieved a lower yield.

The Board acknowledges the fact that Mr. Fittler failed to report crop damage before or during harvest and therefore must accept some of the responsibility for his loss. Since Mr. Fittler is a new client, even though he should have realized he was required to notify AgriCorp, the Board is willing to be somewhat lenient on his claim.

Decision and Reasons

After careful consideration of all the evidence before it, the Board decided to deny John D. Fittler eligibility for a contract separate from his father John Fittler; and to partially grant John D. Fittler a claim under Regulation 222, Crop Insurance Plan for Corn and assess the costs of the loss as follows: 25% to the insured and 75% to the insurer for the following reasons:

1. In the opinion of the Board, Mr. John D. Fittler does not meet the eligibility criteria to qualify for a separate contract of insurance.

2. In the opinion of the Board, some of the corn crop loss was due to the insured peril of excess rain and some of the loss was due to the uninsured peril of management decisions.

3. Mr. John D. Fittler failed to report crop damage to AgriCorp before or during harvest and therefore must accept some of the responsibility for his loss.

Order of the Board

The Board orders AgriCorp to:

1. Pay the insured 75% of his potential production claim on his corn crop. The Board calculates this as follows:

Shortfall on yield is 822 bushels x 75% = 616.50 bushels

DATED AT Guelph, Ontario this 6th day of May, 1997.