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: Van Diepen v Agricrop Van Diepen v Agricrop 1998 ONAFRAAT 17
STATUTE: Crop Insurance Act
HEARING: April 7, 1998
DATE OF DECISION: April 21, 1998
1998-17
NEUTRAL CITATION: 1998 ONAFRAAT 17
Van Diepen v Agricrop
IN THE MATTER OF: Ontario Regulation 140/96 under the Crop Insurance Act (Ontario) 1996, S.O. 1996, C. 17, Sched. C.
AND IN THE MATTER OF: An Appeal to the Crop Insurance Appeal Board by John Van Diepen, Warwick Orchards & Nursery Ltd., Watford, Ontario, from the decision of AGRICORP concerning the adjustment of loss under Regulation 216, Crop Insurance Plan for Apples.
Before: James Rickard, Vice-Chair; Andrew Osyany, Vice-Chair; Douglas Flook, Member.
Appearances: John Van Diepen, appellant, in person. Martin Kiefer, on behalf of the respondent, AGRICORP.
DECISION OF THE BOARD
This appeal was heard in Guelph, Ontario on Tuesday, April 7, 1998.
Mr. John Van Diepen, Warwick Orchards & Nursery Ltd., appealed the decision of AGRICORP concerning the adjustment of loss under Regulation 216, Crop Insurance Plan for Apples.
The Background
The Apple Production Plan (the Plan) guarantees a certain level of both fresh and juice production in any year depending on the yield history of the orchard. If the actual production is less than the guaranteed production, a claim is paid for the difference. Quality losses due to specific perils are also covered in this Plan. An optional hail rider is available for an additional premium fee.
The final average yield (F.A.Y.) is the average of the six most recent years of historical fresh production and juice production. These histories are maintained separately. The fresh history includes all apples sold on the fresh market and all processing apples (peelers). The juice history includes all apples sold for juice or cider.
The guaranteed production for apples refers to actual fresh and juice yield produced in the orchard, up to the point of harvest, and does not imply any guarantee of markets for the apples. Any production in the orchard for which the insured grower does not have a market, will be assessed at the appropriate potential yield and recorded as yield to count for the current year.
The hail rider is a quality rider to provide coverage when apples are reduced to juice grade by hail. When a hail storm significantly damages an apple orchard, a claim is paid for the value of the fresh fruit that is reduced to juice grade. Apples that are already juice grade, are considered normal juice and are not included in the hail claim payment. Hail counts will be made as close to harvest as possible to accurately determine the grade reduction by hail.
If an insured peril reduces the total production below the level of the guaranteed production, a claim payment is made. The guaranteed insurance price is 14.5 cents/lb. for fresh apples and 4.0 cents/lb. for juice apples. (This insurance price is the five-year average price minus the harvesting costs.)
In 1997, Mr. Van Diepen purchased the following coverage:
Guaranteed Fresh Yield - 585,442 lb. x 80% coverage = 468,354 lb. guaranteed production times fresh price of $0.145 = $67,911.27 guaranteed value of fresh apples.
Guaranteed Juice Yield - 139,242 lb. x 80% coverage = 111,394 lb. guaranteed production times juice price of $0.040 = $4,455.74 guaranteed value of juice apples.
Total Guaranteed Value of insurance=$72,367.01
Mr. Van Diepen also purchased the hail rider. His insurance premium was $7,692.59.
In 1997, it was determined by an AGRICORP adjuster and Mr. Van Diepen that there was 74.8% hail damage to his crop.
The Evidence
Mr. Van Diepen said in 1997 he had 74.8% hail damage to his crop. He objected to the fact that his payout was only 51% of the damage. He also stated that his natural juice factor is presently 20% and, because of the hail damage, next year it will be approximately 25% due to the six-year averaging. He said by doing this AGRICORP eliminates their risk and the growers still have all of the risk.
Mr. Van Diepen also presented into evidence AGRICORP’s Proof of Quality Loss - Hail Rider - Apples. He objected to the fact that his guaranteed production for fresh apples had been adjusted to $67,911.04 whereas he stated he paid premium on $72,367.01. Mr. Van Diepen also took issue with the fact that the cheque he received for $36,784.37 had no information attached, or enclosed, as to how AGRICORP arrived at that payout amount.
Also presented into evidence was a newspaper clipping titled “Ambitious AGRICORP seeks new business”. Mr. Van Diepen referred specially to a comment of the Chair of AGRICORP - “make it lean and keen”. In his opinion, AGRICORP’s mandate should be to insure farmers, not make money. He also referred to a document which states there is a $7 million surplus in the Plan. He said it is unacceptable to the fruit growing industry to have those kinds of excess funds made out of their program.
Mr. Van Diepen said he also objects to the fact that there is no payout for the extra costs a producer incurs when separating good fruit and hail damaged fruit.
In response to a question of the Board, Mr. Van Diepen admitted that the claim calculations were completed in accordance with the regulations. However, when he purchased the policy he didn’t fully understand how a claim would be calculated.
Mr. Martin Kiefer testified on behalf of AGRICORP. He said the policy purchased by Mr. Van Diepen was as follows:
Guaranteed production for fresh apples - 468,352 lb. Guaranteed price/lb. for fresh apples - 14.5 cents Guaranteed Value for Fresh Apples= $67,911.04
Guaranteed production for juice apples -111,393 lb. Guaranteed price/lb. for juice apples - 4 cents Guaranteed Value for Juice Apples= $4,455.72.
Total Guaranteed Production for Fresh & Juice Apples = $72,366.76.
The amount of claim was calculated as follows:
Fresh Hailed Undamaged to Damaged 25.2% 74.8% Fresh to Hailed Production 118,025 350,327 Insurance Prices 14.5 cents 4 cents Value of production $17,113.58 $14,013.09
Total Value of Harvested Production $31,136.67
TOTAL INDEMNITY $36,784.37
Mr. Kiefer stated that in his opinion, AGRICORP have compensated Mr. Van Diepen for his claim in accordance with the policy he purchased. Mr. Kiefer said the Apple Production Plan brochure is sent in the fall to all producers who are enrolled. It is intended to be an information brochure - it is not intended to replace the regulation.
He said if an insured has a hail claim, AGRICORP’s adjuster inspects the orchard along with the insured. The inspection is done on a random basis. 100 apples are taken from a tree and inspected. The sample is then separated into those damaged by hail and those not damaged. That is how the 74.8% damage figure was arrived at for Mr. Van Diepen’s orchard. This was completed August 29, just prior to harvest. The assessment is completed just prior to harvest to enable both parties to determine all the damage that has been done to the crop.
Mr. Kiefer said that the information being used by Mr. Van Diepen to arrive at a 51% payout figure is not the guaranteed value of his crop. He said Mr. Van Diepen had no loss in the value of juice apples, so in determining percentage of payout, the guaranteed value of the juice apples should not have been included.
Mr. Kiefer referred the Board to the Production Guarantee Report which was signed by Mr. Van Diepen and AGRICORP’s adjuster, Jack Johnson, on April 3, 1997. That form shows the guaranteed insurance values and that the Hail Rider had been chosen. It clearly states that hail claims are settled on a fresh value less hailed value basis. He said the assessment on hail damage is on fresh fruit only. Mr. Kiefer admitted that AGRICORP recognizes there is an additional cost incurred by clients who need to sort apples that have received hail damage but there is no coverage for this.
In response to a question of the Board, Mr. Kiefer said AGRICORP insures approximately 1/3 of the apple growers in Ontario. He said that AGRICORP is presently consulting with the industry and reviewing the Plan as it recognizes there is some dissatisfaction with the Plan.
Mr. Kiefer said the Plan had $19 million in liability in 1997, so, in his opinion, $7 million is not an excess surplus. He said in the last few years far less premiums have been collected than has been paid out in claims.
In response to questions of the Board, Mr. Kiefer agreed that in 1998, Mr. Van Diepen’s guaranteed coverage would drop down to approximately 72% fresh and 28% juice. In 1997, his guaranteed production was 80% fresh and 20% juice.
In his summation, Mr. Van Diepen said claim calculations are a complex issue. It is hard for a producer to understand the complexity of the program. In his opinion, it is high cost with low payout, and that AGRICORP has changed its attitude and is now in the business to make money.
In his summation, Mr. Kiefer stated that the claim was settled in the manner as stated in the brochure. Mr. Van Diepen has no problem with the mathematics of the claim settlement, he has a problem with the policy. He said the comments from the Chair of AGRICORP about becoming “lean and keen” are referring to administration costs which are reflected in the Plan. He said that although there is a surplus in the Plan at the moment, it could just as easily be in a deficit position in a few years. AGRICORP receives no benefits from having a surplus. His position is that the claim was settled in the method stated in the contract that was purchased.
The Findings
Mr. Van Diepen took issue with the fairness of the Apple Production Plan. It was clear to the Board that Mr. Van Diepen was appearing before them on a matter of principle. He was not disputing the settlement arrived at which was in tune with the contract purchased. In his opinion, the Apple Plan is a poor plan that is too expensive and provides too little protection. The Plan is too complex and is not understood by growers.
Mr. Kiefer admitted that the Plan is complex and that only about 1/3 of the apple growers are insured. AGRICORP is aware that the Plan needs some revisions. Active discussions are ongoing with the industry.
Given that the Board is satisfied that AGRICORP has applied its claim adjustment in the manner as prescribed in the policy purchased, the Board finds it difficult to grant specific relief to this appellant. The Board does not wish to inject into the Apple Production Plan any exceptions that might have adverse consequences to the integrity and financial stability of the Plan. Therefore, the Board is unwilling to change the amount of claim awarded to this appellant.
The Board recommends that AGRICORP continue its efforts to develop a Plan that meets the needs of the industry.
The Board also recommends that when AGRICORP reviews this Plan it:
◼ considers implementing “buffering” in order to limit the effect of aberrations.
◼ gives some consideration to the cost of harvesting low value crops which might be equal to the value of harvested crops.
◼ considers giving some recognition of additional cost to salvage for hail or damaged fruit which is of little or no value.
◼ considers enclosing with claim cheques an explanation of how the claim settlement was arrived at.
Decision and Reasons
After careful consideration of all the evidence and submissions before it, the Board decided to deny the appeal for the following reason:
Mr. Van Diepen did not dispute the fact that the claim settlement was arrived at in a manner consistent with the contract he purchased. Therefore the Board could not find any reason to adjust the settlement. The Board only has authority to adjust the amount of settlement.
DATED AT Guelph, Ontario this 21st day of April, 1998.