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:
Peer v Crop Insurance Commission of Ontario
Peer v CICO 1997 ONAFRAAT 19
STATUTE:
Crop Insurance Act
HEARING:
May 7, 1997
May 23, 1997
1997-19
NEUTRAL CITATION:
1997 ONAFRAAT 19
Peer 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 Kenneth L. Peer from the decision of the Crop Insurance Commission of Ontario, denying him a claim under Regulation 232, Crop Insurance Plan for Oil Seed and Regulation 222, Crop Insurance Plan for Corn.
Before: Mr. John Taylor, Vice-Chair; Mr. Ed Mailloux, Vice- Chair.
Appearances: Mr. Donald Good, counsel for the appellant.
Mr. Kenneth L. Peer, appellant in person.
Mr. Tom Graham, counsel for the respondent, and
Mr. Peter Ilnyckyj, senior commodity specialist for the respondent, AgriCorp.
DECISION OF THE BOARD
This appeal was heard in Guelph, Ontario on May 7, 1997. The hearing began at 9:00 a.m. and was completed after 8:00 p.m.
This was an appeal to the Crop Insurance Appeal Board (the Board) by Kenneth L. Peer from the decision of the Crop Insurance Commission of Ontario (AgriCorp), denying him a claim under Regulation 232, Crop Insurance Plan for Oil Seed and Regulation 222, Crop Insurance Plan for Corn.
Background
This appeal was brought by Kenneth L. Peer who operates a rather large farming operation in Glanbrook Township in the regional municipality of Hamilton-Wentworth. His claim upon the insurance fund was with respect to 445 acres of soybeans that was planted in the year 1995. His guaranteed production was 31.59 bushels to the acre, while his alleged yield was only approximately 21 bushels to the acre. AgriCorp denied compensation principally on the grounds that his yield for 1995 was understated. Mr. Peer also had some 230 acres of corn which was insured and for which he made a claim alleging that he only had a yield of 10,391 bushels. AgriCorp makes no allegation with respect to understating of the corn crop yield. Nevertheless, it denied coverage on the corn as well because of the alleged understating of the soybean crop yield.
In addition to cash crop farming, Mr. Peer milks between 35 and 40 cows per day. Apparently, Mr. Peer has been a client of AgriCorp since the year 1989 at least. It is also to be noted that Mr. Peer submitted claims to AgriCorp in each of the years 1992, 1993, 1994, 1995 and we understand as well in 1996.
The Evidence and the Findings
In 1990 and 1991, Mr. Peer was operating a much smaller operation and at that time rented his mother’s farm and some adjacent fields. He was able to enrich the soil in these farms by the spreading of cattle manure from his dairy operation. These farming practices, along with good weather, resulted in some rather high yields for those years. His records indicate the following:
1990 - 75 acres 65.50 bushels of beans per acre
1991 - 90 acres 70.56 bushels of beans per acre
The above averages allowed Mr. Peer to build a relatively high guaranteed production for subsequent years. It was also about that time that Mr. Peer took on the farming of an additional 700 to 800 acres of rented land. On his own evidence, he rented much of this land for little or no rent. Some of it, he says, was given into his hands by landowners who had taken it away from other renters who impoverished the soil. In any event, it seems that the records show that from 1992 and subsequent years, his average yield kept declining to the point where in 1995 his guaranteed production was about 31.59 bushels to the acre. In 1996, his guaranteed production was about 29.74 bushels to the acre.
Mr. Peer’s records show that from the year 1989 or earlier, he began to accumulate substantial numbers of bushels of beans in his home storage. He testified that when he acquired these additional lands, he also acquired a substantial amount of storage capacity which he moved onto his property. In 1995, he seems to have had storage in at least five bins that included modern aerating equipment and legs for the easy moving of the beans. As will be seen later in the evidence, it is the amount of stored beans that played a significant role in the dispute between Mr. Peer and AgriCorp with respect to the 1995 crop.
In 1992, he insured 140 acres of soybeans, but harvested no crop. In 1993, Mr. Peer planted some 240 acres of soybeans and harvested an average yield of only 27.51 bushels to the acre. He made a claim against the crop insurance fund in that year as well. In 1994, he planted 325 acres. Unfortunately, much of his crop was struck with a “white mould” condition resulting in a yield of only 20.4 bu/acre. Apparently, white mould was quite common in his township for that year. In 1995, the year which is the subject matter of this appeal, he insured 445 acres. Again, his yield was only 21.18 bu/acre. Lack of rain is claimed to have been the cause.
From the month of October 1995 through to the month of May 1996, Mr. Peer reports that he sold some 382.718 tonnes of beans. Upon receipt of this information, AgriCorp calculated that this was substantially more of a yield than he had reported and with the result that it alleged that he had understated his production. On the other hand, Mr. Peer alleges that 1/3 of the beans sold in that period were “old beans” that he accumulated in storage over the years.
A special adjuster had been appointed by AgriCorp. As late as January 12, 1996, this adjuster had confirmed the sales made up to that date as being approximately 257 metric tonnes. In the weeks following this, the adjuster Sam McGee discovered from other sources that approximately 72 metric tonnes were sold in January of 1996. AgriCorp requested Mr. McGee to confront Mr. Peer about this and he generated a special report under the date of January 23, 1996 looking for an explanation.
One of the additional contributing factors to this suspicion is the fact that on September 19, 1995, at the request of Mr. Peer, Mr. Martin Keifer, who at that time was the District Co-ordinator, attended at Mr. Peer’s place to measure a bin which contained some holdover beans from prior years. The reason for doing this is that the procedure requires that when an insured proposes to store new crop beans in the bin on top of old crop beans, he must ask AgriCorp to measure the quantity of the old beans before the new storage takes place. When Mr. Keifer did this in September of 1995, his report indicated that the bin contained 1,836 bushels or approximately 50 metric tonnes of 1994 beans. That bit of information was available to Mr. McGee on January 23, 1996 when he was asked to prepare a further special report and wondered why Mr. Peer had just recently sold 72 metric tonnes. Mr. Peer explained that these additional beans were part of the accumulated carryover from prior years. There was evidence from one of the buyers that indicated that indeed some of them were old beans. Mr. McGee then examined the remaining bins on the Peer farm. He found a modest amount of beans in another bin. Again, it is Mr. Peer’s evidence that these also were holdover beans from prior years. In fact, he says that some of them may have been beans that were from the 1993 crop year.
It was suggested by witnesses for AgriCorp that Mr. Peer had an obligation in September of 1995, when he had Mr. Keifer attend his farm to measure the remaining beans in one of the bins, that he should have told Mr. Kiefer about the alleged beans stored in other bins that were not examined by Mr. Keifer. When Mr. Peer was confronted with these suggestions, he said he was under no duty or legal requirement to identify stored beans in bins where he did not intend to put new beans on top.
It would be useful at this time to make reference to the wording contained in the “Yield Report and/or Proof of Loss Form” that is usually completed by an adjuster at the end of the crop year. Box 4 of that form is set up as follows:
Is crop stored on top or with other crop?
? Yes ? No
If yes, was other crop measured prior to harvesting insured crop? ? Yes ? No
Witnesses for AgriCorp insist that the only reasonable meaning of this wording is that it asks the insured to identify all holdover crops. On the contrary, the position of Mr. Peer and his counsel is that the plain and ordinary meaning of this portion of the questionnaire is that one is only required by AgriCorp to measure holdover beans when the insured intends to store new beans on top of old beans in the same bin or storage space.
As part of the evidence introduced by Mr. Peer, he submitted a detailed summary of his crop production, sales and amounts in storage for each year commencing with the year 1990. These of course are recaps and prepared by the insured. There was no corroborating evidence or other notebooks or records that were kept on an annual basis that substantiated this information, at least none were offered in evidence. The calculations were supported of course by the sworn testimony of Mr. Peer.
At least two sets of recap information for each of the years noted above were submitted by Mr. Peer. One set was submitted to AgriCorp in August of 1995 while a second set was submitted in April of 1996 as part of the material used on this appeal. In comparing the two sets of recapped information, there is a variance of anywhere from 200-350 bushels. Mr. Peer accounts for the difference due to the fact that in 1991 he retained some 350 bushels of beans to be used as seed for the next crop year. He did not take this amount into account in preparing the first set of reconstructed records and had not included them as part of his harvest for that year. In reconstructing his records, he did show these as being part of his harvest and, therefore, modified the records in the subsequent years. In the opinion of the Board, nothing much turns on the difference in the two sets of reconstructed records. With respect to the reported yields, the final yield report that is filed through the adjuster at the end of each year, it seems Mr. Peer had fairly reported his yields. Of course, the matter of the quantity of carryover of unsold crops in prior years is not a matter that seems to enter into the calculation each year. No specific question on the yield report is directed to that issue.
AgriCorp called as a witness Karen Sillett Andari, office manager for the Ontario Soybean Growers’ Marketing Board. She produced a summary of the records of sales attributed to Mr. Peer for the years 1988 to 1995. Those records were not substantially at odds to the disclosures made by Mr. Peer. With respect to the year 1995, it did confirm that Mr. Peer had sold soybeans after completing the final yield report that was made up in December of 1995. Of course, Mr. Peer does not deny this, his position being that he was selling stored crop.
There was a suggestion that it would be impossible to have marketable beans that had been carried over for more than two to three years. It was said that these would be very old and not wanted by any elevator. Mr. Peer responds to this saying that in most years he would mix some of his new beans with his carryover beans so as to make his carryover beans more marketable. As a result, it could not be said that he was still carrying beans in his inventory of 1995 that went all the way back to the years when he started to accumulate beans in storage. In other words, his practice was to “freshen up” the old beans by the mixing with some new crop beans.
AgriCorp also called on Mr. Allan Neath who at that time was employed by the Ontario Ministry of Agriculture, Food and Rural Affairs as an investigator. Prior to 1973, Mr. Neath was a Toronto policeman. His evidence more or less confirmed other reports that were provided. He put particular emphasis on the fact that Mr. Peer did not reveal the fact that he was carrying a substantial inventory of old beans from year to year. He concluded that there would be insufficient evidence to prosecute Mr. Peer for attempted fraud. In any event, the Board did not find that Mr. Neath’s evidence made any significant difference to what else had been heard at the hearing.
Mr. Martin Keifer, who has been with AgriCorp since July of 1994, was also called as a witness. In 1995, as District Co-ordinator, his geographical area included Mr. Peer’s farming operations. Mr. Keifer was quite adamant that when he was called by Mr. Peer to measure a bin on the farm in September of 1995, the intent of that visit was to verify the quantity of his stored 1994 crop. Therefore, he should have been given the opportunity to measure all of the bins which contained beans, if there were anymore. His evidence was that after the January 12, 1996 special adjuster’s report, which was followed by information that later in the same month an additional 72 metric tonnes were sold, led to the suspicion that Mr. Peer was attempting to defraud AgriCorp.
Mr. Peter Ilnyckyj, senior commodity specialist with AgriCorp, rendered assistance to Agricorp’s counsel at the hearing. He made the following points with respect to this case:
The crop insurance system requires utmost good faith on the part of the participating farmers, honesty must prevail;
That there was a carryover of 1989 beans into the 1990 crop years which Mr. Peer had failed to include in his reconstructed records;
There was evidence that in one year Mr. Peer had purchased over $5,000.00 worth of beans which he alleges he used to feed his cattle;
There was a discrepancy in the 1991 insurance report by Mr. Peer;
That it is hard for anyone to believe, or to conceive, that in 1990 and 1991, anyone in this area could have a crop yield of 50 to 60 bushels per acre. He suggested that it was contrived;
In 1994, there was a discrepancy of 195 bushels that was not included in the yield report;
The quantities reported in the reconstructed records by Mr. Peer kept changing;
Mr. Peer, in his own evidence, stated that in 1995 he did not report to AgriCorp any expected crop failure, but rather he was expecting a very satisfactory crop. Mr. Illncykyj submitted that he should have known that his crop was going to be a failure while the crop was still in the field.
In summary, Mr. Illncykyj said that AgriCorp had the right to be concerned about the integrity of the reporting by Mr. Peer and was therefore justified in cancelling his insurance, not only for the soybean crop but as well as for the corn crop.
In response to AgriCorp’s position, Mr. Good, counsel for Mr. Peer, submitted that AgriCorp had failed to prove that Mr. Peer’s reporting was dishonest. With respect to Mr. Peer’s failure to bring to the attention of the adjusters the fact that he had a substantial amount of beans in storage was that there was no requirement to report this. Indeed, the crop yield report questionnaire never zeroed in on the information in respect to carryover beans. It only required him to have measured the bins for carryover beans where new beans would be stored on top of them. He also points out that on September 19, 1995, when Mr. Keifer came out to measure the bin, he had every opportunity at that time to inspect the standing bean crop for that year. Finally, Mr. Good submits that AgriCorp is the author of the regulations and of the yield reports and if there is any uncertainty that arises with respect to their interpretation, that ambiguity or uncertainty must be resolved in favour of the insured rather than AgriCorp.
The Board takes the view that the cancellation of the insurance by AgriCorp on the grounds of dishonesty or fraud is a very serious allegation. There is a higher onus placed against the party who alleges fraud or some quasi-criminal conduct on the part of the other party. While in most civil cases, and in most hearings before this Board, the decision is generally made on the balance of the probabilities, in this case we find that there is an extra onus on AgriCorp when it makes a suggestion that the insured is somehow guilty of quasi-criminal conduct.
In giving his evidence under oath, Mr. Peer appeared to us to be a reasonable and well-qualified farmer. Nothing in his demeanour would lead us to believe or conclude that he gave his evidence in any dishonest manner. In fact, not much of his evidence was contradicted by evidence provided by AgriCorp. While there is in fact some discrepancy in the reconstructed records, we do not believe that this is sufficient to warrant the cancellation of his insurance in this case.
It is possible to partially justify the action of AgriCorp when one looks at the fact that this particular insured began in the early 1990’s with a record of being a very high-yielding soybean producing farmer when all of a sudden he has five consecutive years of claims against AgriCorp. The system is designed to balance itself out over the long run, in that, as a particular farmer continuously reports low yields, his guaranteed production for insurance purposes drops along with that record. At the present time, Mr. Peer’s guaranteed production, based on his track record, is something less than desirable.
We find that while the reconstructed records are not the best evidence of the carryovers that Mr. Peer alleges, we nevertheless find it would be unusual for any farmer to have kept accurate records of all the beans that he carried over from year to year. There is nothing in the requirements under the crop insurance regulations that requires any particular insured to keep better records than Mr. Peer has done. For the purposes of this appeal, he obviously was required to recap or reconstruct records in order to support the quantity of his alleged carryovers to the year 1995. There is nothing in the evidence of the Ontario Soybean Growers’ Marketing Board witness, or others, or through the crop yield reports, that the quantity of the yields reported in each of the years is inaccurate, whether intentionally or unintentionally. The matter of his failure to include the 350 bushels of carryover crop that he used for seed is obviously not correct, but nevertheless we are not sure that all farmers would be educated on how one would treat carryover beans used for seed as part of the prior year’s crop production.
Given the onus that the Board believes is placed on AgriCorp, in this particular case, the Board finds that it has not discharged that onus.
Decision and Reasons
After careful consideration of all the evidence before it, the Board decided to grant the appeal for the following reasons:
AgriCorp agreed that it has no other evidence to disprove the actual yield records other than to suggest that they were dishonest. Given that there is no further evidence of any different numbers than what has been forwarded as a claim by the appellant, the Board finds that AgriCorp will have to allow Mr. Peer’s claim with respect to the soybeans on the basis of the claim put forward.
Moreover, given that the onus of proving fraud or dishonesty has not been met with respect to the soybean crop, the Board can find no valid reason why AgriCorp should deny Mr. Peer’s claims with respect to other crops grown in the year 1995.
Order of the Board
This Board orders AgriCorp to process Mr. Peer’s 1995 claims as submitted, subject only to the usual allowances or deductions that might otherwise be required under the circumstances.
DATED AT Guelph, Ontario this 23rd day of May, 1997.