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

Horne v Agricorp

Horne v Agricorp 1999 ONAFRAAT 16

Crop Insurance Act

June 16, 1999

DATE OF DECISION:

June 30, 1999

1999-16

1999 ONAFRAAT 16

Horne v Agricorp

Ontario Regulation 140/96 under the Crop Insurance Act (Ontario) 1996, S.O. 1996, C. 17, Sched. C.

An Appeal to the Crop Insurance Appeal Board by Donald R. Horne, Stratford, Ontario, from the decision of AGRICORP concerning the adjustment of loss under Ontario Regulation 380/97 and the Crop Insurance Plan For Corn.

Before:

James Rickard, Vice-Chair; Andrew Osyany, Vice-Chair; Nick Doelman, Member.

Appearances:

Donald Horne, appellant.

Bill Quipp, regional claims manager for the respondent, AGRICORP.

Doug Green, adjuster for the respondent, AGRICORP.

DECISION OF THE BOARD

This appeal was heard in Guelph, Ontario on Wednesday, June 16, 1999.

Donald R. Horne, Stratford, Ontario, appealed to the Crop Insurance Appeal Board (the Board) from the decision of AGRICORP concerning the adjustment of loss under Ontario Regulation 380/97 and the Crop Insurance Plan For Corn for his 1998 crop year.

The Background

In proposing and administering the Corn Plan, AGRICORP derives its authority from Section 5 of the Crop Insurance Act (Ontario), 1996 and Regulation 380/97, Crop Insurance Act (Ontario) 1996 and the 1998Crop Plans.

The Crop Insurance Act (Ontario), 1996, specifically, sections 5(1), (2), (4),(10) state:

(1) AgriCorp shall fix the terms of contracts of insurance, or proposed contracts of insurance, subject to section 4 and the regulations made under section 12.

(2) AgriCorp has all the powers necessary to perform its duties including the power to,

(a) determine the qualifications and requirements for a person to enter into a contract of insurance:

(b) enter into contracts of insurance:

(c) fix terms of contracts of insurance relating to replanting benefits and unplanted acreage benefits;

(d) fix premium rates payable by insured persons;

(e) fix the duration of contracts of insurance;

(f) specify the circumstances in which an insured person may terminate a contract of insurance and the methods that the person may use to terminate the contract;

(g) specify penalties imposed on an insured person who breaches the terms of a contract of insurance;

(h) reinsure with any other insurer the risk or any portion of the risk under its contracts of insurance; and

(i) terminate a contract of insurance on the terms that it considers appropriate.

(4)AgriCorp shall not enter into a contract of insurance with a person to insure an agricultural crop or a type of perennial plant if,

(a) the contract insures less than the entire crop or all the plants of the type of perennial plant, as the case may be, in respect of which the person could enter into a contract of insurance under this Act; or

(b) a contract of insurance is already in effect to insure the crop or the type of perennial plant, as the case may be, in which the person has an interest.

(1) If AgriCorp and a person disagree on a matter described in subsection (2) or if AgriCorp and an insured person fail to resolve a dispute arising out of the adjustment of a claim under a contract of insurance, either may appeal the matter in dispute to the appeal board for the purpose of this section.

(2) Subsection (1) applies to a question whether a person qualifies for a contract of insurance except if the disagreement relates to the time during which a person may apply for a contract of insurance or file a final acreage report or its equivalent.

Ontario Regulation 380/97, sections 3 and 10 state:

3.(1) A contract of insurance consists of,

(a) the application;

(b) the renewal notice and change notice, if any;

(c) the final acreage report or its equivalent;

(d) the terms fixed by AgriCorp under section 5 of the Act; and

(e) this Regulation.

No term of a contract of insurance shall be deemed to be waived or altered by AgriCorp unless the waiver or alteration is given in writing.

The role of the Board is set out in Ontario Regulation 140/96. Specifically, clauses 2 and 3 of the regulations state:

2 The Board has exclusive jurisdiction to hear and determine all disputes between the Commission and an insured person arising out of the adjustment of a loss under a contract of insurance.

3(1)If the Commission and an insured person have failed to resolve any dispute arising out of the adjustment of a loss under a contract of insurance and have complied with all requirements respecting the filing of proof of loss forms, either party may appeal the matter in dispute to the Board.

(2)To appeal the matter in dispute, the appellant shall file a notice of appeal with the Board and send a copy of the notice to the other party within one year of filing the proof of loss form.

(3)Where a party has appealed in accordance with subsection (2), the Board shall fix a day, a time and a place for considering the matter in dispute and hearing the parties, and shall notify the parties accordingly.

(4)On the day, and at the time and place so fixed, the Board shall hear the evidence of the parties respect the matter in dispute, and shall make a decision on the matter.

In 1998, Mr. Horne insured 41 acres of corn with an average farm yield of 107.46 bu./acre. He purchased 80% coverage which gave him a guaranteed yield of 85.97 bu./acre. He purchased the floating price option which in 1998 was $2.739/bu.

In June, 16 acres of his corn crop was badly damaged with frost for which he received a reseeding claim. About June 8, this field was replanted. Mr. Horne had intended this field to be grain corn but since it did not mature, he harvested this crop as silage corn. 81.19 bu./acre were harvested from the 41 acres putting Mr. Horne in a claim position. His claim payout was $536.24 (shortfall of 4.78 bu./acres x 41 acres x $2.739/bu.).

Mr. Horne deemed the settlement to be inadequate and unfair and thus filed this appeal.

Preliminary Issue

At the outset of the hearing, AGRICORP indicated they wished to raise a preliminary matter.

Bill Quipp, Regional Claims Manager for AGRICORP, raised the issue of jurisdiction.

He said AGRICORP’s position is that Mr. Horne’s appeal is a policy issue and thus this Board does not have jurisdiction to hear this matter. The Corn Crop Plan is a plan that insures all acres of corn whether grown for grain or silage. He said at issue here is that Mr. Horne wants separate coverage for grain corn and silage corn and that he is suggesting that his salvage corn should be adjusted differently than is AGRICORP’s policy. AGRICORP’s submission is that the Board has no jurisdiction to deal with a policy issue or to make changes to the contract of insurance. Ontario Regulation 140/96 clearly states that the Board’s jurisdiction is limited to resolving disputes arriving out of an adjustment of loss.

Ontario Regulation 380/97 states that a contract of insurance consists of terms fixed by AGRICORP under Section 5 of the Act. The Crop Insurance Act, Section 5, gives AGRICORP the authority to fix the terms of the contract of insurance and powers necessary to perform its duties. In the opinion of AGRICORP, the Crop Insurance Committee is the proper forum for this issue to be heard.

Mr. Horne argued that he is not asking for separate coverage even though he is saying his grain corn crop and the salvage corn crop are two separate crops. In his opinion, what he is requesting is not a policy issue but a dispute about the manner in which AGRICORP calculated his loss in 1998.

He argued that the 16 acres of corn in question was frozen in June, replanted, suffered under drought conditions and never matured or developed grain. He objects to the fact that he is being assessed as though he was able to harvest good quality silage corn that he felt he was forced to harvest. He said the 1998 Crop Plan brochure states that the Board is independent of AGRICORP and resolves crop insurance claim disputes between insured farmer and AGRICORP. He submitted that the Board has jurisdiction to hear this appeal.

The Board recessed to consider the jurisdictional arguments. After a short recess, the Board announced that it would continue hearing evidence and reserve its decision concerning jurisdiction until all evidence had been presented.

After hearing all of the evidence, the Board is of the opinion that Ontario Regulation 140/96 gives it authority to hear and determine this appeal. The Board agrees that it does not have authority to deal with changes to a contract or the terms of a contract. However, no copy of a contract was presented to the Board at the hearing. The 90% factor used by AGRICORP in determining the amount of loss is not part of any terms fixed by AGRICORP under Section 5 of the Crop Insurance Act. The Board agrees that if both parties make a change to the contract and both agree to the change, that is not an issue over which the Board has jurisdiction. However, the Board does have authority to deal with the assessment of loss. In the opinion of the Board this is an assessment of loss issue.

The Issue

The issue before the Board is, did AGRICORP fairly adjust the 1998 claim for loss of corn on the Horne farm?

The Evidence

An agreed upon Statement of Facts signed by Bill Quipp, on behalf of AGRICORP and Mr. Horne, are as follows:

Mr. Horne purchased a contract of insurance for his corn with a guaranteed production of 3524.69 bu.
Mr. Horne planted, enrolled and paid premium for 41 acres of corn for crop insurance coverage.
Mr. Horne replanted 16 acres of corn and received a reseed claim of $800.
Mr. Horne harvested 41 acres of corn in the form of cob corn and silage corn.
Mr. Horne agrees with the measurements recorded on the Corn Yield Report form, silo chart form, and Adjuster’s Special Report, all of November 6, 1998.
Mr. Horne is requesting that AGRICORP not use the salvage silage corn in calculating his 1998 corn yield.

Mr. Horne told the Board he farms 150 acres near Stratford and grows hay, corn and grain. In 1998, he insured 41 acres of corn. 25 acres grew to full maturity and was a good crop. 16 acres was hit with frost, was reseeded, got hit with drought and never did fully mature. He salvaged what he could for silage corn.

He said when the adjuster visited the reseeded field in September, he filed a report saying this field would never develop into grain corn and that it was still forming cobs. He submitted into evidence a copy of his 1998 Renewal Notice that states that AGRICORP guarantees 85.97 bu./acre of corn as his yield. He said all he was able to salvage from the 16 acres was a heap of stocks ground up with no grain corn in them.

Mr. Horne said the adjuster agreed the field would never reach maturity and explained to him two harvesting options. One option was to sell the corn in the field as silage and the other option was to harvest it for silage. He said he was told if he sold the crop the value he sold it for would be deducted from a claim payout. $85/acre was one of the figures mentioned as a reasonable value for the crop if sold in this manner. Mr. Horne said he chose to harvest the crop for silage. He is disputing the fact that he is being assessed as though full feed value was there. He agreed there was some feed value in the corn but admitted he did not have any feed quality tests done.

Mr. Horne told the Board he strongly disagrees with the 90% factor AGRICORP used as a calculation factor and the fact that this was put into place in August, after he purchased the contract, and he was not aware of it.

Mr. Horne said he is asking the Board to order AGRICORP to pay him a claim of $3.00 per bushel x his guaranteed 1998 production of 85.97 bu./acre ($3.00 x 85.97 = $257.91 x 16 acres)= $4,126.56. He also requested that his production level remain at the 1998 level and that he have the option to renew his coverage without any further penalty.

In response to questions of the Board, Mr. Horne said he received a claim cheque for $536.24 but it did not explain how AGRICORP arrived at that figure. He was not given any information as to how the salvaged corn was converted to grain equivalent

Mr. Quipp said that Mr. Horne has purchased corn crop insurance since 1990 and each year has insured his grain and corn silage under one contract. AGRICORP has been consistent in the method of combining and calculating yields of corn. In 1998 the policy was renewed under the same terms and conditions as other years. He said the appellant wants the yield calculation methods changed for his purposes. He submitted the Board has no jurisdiction since this is not a dispute arising out of adjustment of a loss.

Mr. Quipp said the “Harvest Incentive Program for Corn that Won’t Make Grain” was introduced to encourage the large number of customers who had drought stressed corn to harvest this crop. A news release announcing this program was released August 24, 1998. Information on how to adjust these claims was sent to Adjusters on August 20, 1998. Information on this program or how claims would be settled was not sent to customers. The 90% factor was arrived at after reviewing some research articles and receiving input from Soils & Crops Specialists. He said AGRICORP took the yield that came off a field, calculated what the normal yield would be off that field and applied the 90% factor to arrive at the amount of dry grain corn equivalent that it would apply to the insured’s yield.

Mr. Quipp explained to the Board the conversion factors AGRICORP uses when calculating yields of cob corn, grain corn and silage to come up with the yields (number of bushels per acre). The adjuster or yield evaluator collects the yield data from the insured and submits this information to head office for yield calculation. The same methodology is used consistently across the province when calculating yields.

He said AGRICORP has determined the value of silage corn in what it feels is a fair and equitable manner. The 90% salvage value estimated for salvage corn is part of AGRICORP policy and it also favors the insured in calculation of yield and a claim. AGRICORP’s position is that the Board does not have jurisdiction on issue of yield calculation as it does not arrive out of adjustment of a claim. In 1998, AGRICORP changed the terms of the contract during the year in order to provide the customer with additional benefit. Had it not done so, Mr. Horne would not have received any claim.

In response to questions of the Board, Mr. Quipp agreed that the insured was not issued a formal contract and that the contract was adjusted during the year. However, he stated that it was adjusted to the benefit of the insured. AGRICORP has the right to set terms and conditions of a contract. However, in 1998 a written contract was not issued to the insured.

In response to questions of the Board as to whether or not the option of the “Corn Salvage Benefit”, as explained in the 1998 Crop Plans brochure, was explained to Mr. Horne as one of his options, AGRICORP staff said no. Mr. Green said he did not mention that option since common sense told him the crop would never mature and it was his opinion that Mr. Horne wanted to maximize his crop and at least harvest it for silage.

Mr. Quipp objected to Mr. Horne’s request for a $3/bu. payout. He said that when Mr. Horne purchased the contract he chose the floating price option which in 1998 was $2.739. He also does not agree that the 16 acres harvested as corn silage has no value.

Doug Green, adjuster for AGRICORP, said he visited Mr. Horne’s farm on September 3 and completed the Adjuster’s Special Report. He said the 16 acre field was very uneven with cobs just being formed in the poorest plants. In his opinion, this corn would not mature to the point that it could be combined or picked. He said the 16 acre field qualifies for the Silage Salvage Program. He said he explained to Mr. Horne that he had two options: one was to sell the corn and the second was to harvest the corn for silage. A figure of $85/acre was mentioned as a reasonable value if the corn was sold in the field as silage corn. He felt there was no thought in either person’s mind to try to harvest the corn as grain. He said if Mr. Horne harvested the corn for his own use as silage corn, AGRICORP would use a factor of 90% of yield when arriving at a claim settlement. He argued that even though the salvage crop did not have much grain, it would still be good feed. He said Mr. Horne made the decision to harvest the crop for silage.

The Findings

In the opinion of the Board, AGRICORP did not fix written terms to the corn contract for the crop year 1998. In effect, it adopted the former crop insurance regulations for corn as a working document. The 1998 Crop Plans brochure speaks briefly about Crop Insurance Claims and the Corn Salvage Benefit. No written contract was issued to the insured nor is there a written contract. The 90% adjustment, introduced by AGRICORP in August, was not specified on any contract presented at the hearing.

A corn contract is a contract with an individual. Thus, in the opinion of the Board, there is an obligation to adjust each corn contract in a similar manner but on an individual basis. Each adjuster needs to be able to exercise some discretion in establishing individual production.

The Board was not satisfied that all of the harvesting options were explained to Mr. Horne. Three harvesting options were available to Mr. Horne. However, AGRICORP staff only explained two of the options to Mr. Horne. In the opinion of the Board, Mr. Horne was encouraged to harvest the 16 acres as silage corn and in fact did so in an attempt to maximize the usefulness of the crop. In the Board’s opinion, the various salvage alternatives should have led to approximately the same salvage value.

In the opinion of the Board, Mr. Horne should not have to suffer because of actions he took in order to minimize his reduced crop yields. In the opinion of the Board, Mr. Horne should receive a claim payout compensating him for the difference he would have received if he had sold his crop at $85/acre and his production shortfall.

Mr. Horne requested that his production level remain at the 1998 level and that he have the option to renew his coverage without any further penalty. The Board feels that to maintain the integrity of the program, the actual production yield for 1998 should be used in calculating the farm average for 1999 and future years.

Decision and Reason

After careful consideration of the evidence before it, the Tribunal decided to recalculate the amount of claim paid to Mr. Horne, as in its opinion, an insured should not be worse off when he minimizes his losses. In the opinion of the Board, the various salvage alternatives should lead to approximately the same equitable results.

Order of the Board

The Board orders AGRICORP to pay to Mr. Horne a claim payout of $2,423.85 less the $536.24 payment already issued to him. This claim payment was calculated as follows:

Guaranteed production 3524.77 bu.

Actual production (from 25 acres) 2143.30 bu.

Shortfall 1381.47 bu.

Payout per bu. $2.739

Sub-Total $3783.85

Less value of 16 acres 1360.00 (if sold @$85/acre)

Total Payout $2423.85

Less Amount Already Received 536.24

Balance Owing $1887.61

(This order subject to change due to any errors of arithmetic.)

DATED AT Guelph, Ontario this 30th day of June, 1999.

Horne v. Agricorp, 1999 ONAFRAAT 16

Case Summary