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:

Horner et al. v Agricorp

Horner et al. v Agricorp 2001 ONAFRAAT 1

STATUTE:

Crop Insurance Act

HEARING:

December 6, 2000

DATE OF DECISION:

January 5, 2001

2001-01

NEUTRAL CITATION:

2001 ONAFRAAT 1

Horner et al. v Agricorp

IN THE MATTER OF Ontario Regulation 140/96 under the Crop Insurance Act (Ontario) 1996, S.1996,C.17, Schedule C.

AND IN THE MATTER OF:

An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Edwin Horner and Jim Cole of the decision by AGRICORP to deny their claims for the 1999 hay and pasture crops under Regulation 380/97 and the Crop Insurance Plan for Hay and Forage.

Before:

Jim Rickard, Chair; Denis O’Connor, Vice-Chair; Andrew Osyany, Vice-Chair; Armand Bechard, Member.

Appearances:

Edwin Horner, appellant

Jim Cole, appellant

Judith Kay-Schecter, Director of Claims for AGRICORP

Husseinali Shivji, Crop Insurance Commodity Specialist for AGRICORP

DECISION OF THE TRIBUNAL

This appeal was heard in Owen Sound, Ontario on Wednesday, December 6, 2000. It is an appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) by Edwin Horner and Jim Cole from the decision of AGRICORP concerning adjustment of the 1999 hay crop under Regulation 380/97 and the Crop Insurance Plan For Hay and Forage.

Background:

The Forage Plan covers loss against drought only. It is an area-based plan based on a computer model that simulates forage growth. The individuals may experience yields that are significantly different from the simulated yields. The minimum amount of coverage that can be purchased is $2,000. The maximum coverage is determined by the client and the local District Coordinator from AGRICORP.

A computer generated yield simulation is used to establish an area average which is used as the insured’s yield for each crop year. Since 1977, the computer program called “Soil Moisture-Based Simulation of Forage Yield” (SYMFOY) has been used to calculate area averages for the purposes of the Forage Plan.

The SYMFOY simulation is based on the following variables:

• soil moisture at the beginning of the growing season

• rainfall

• temperature

• sunshine

• co-operator yields

• cutting dates

Based on these variables, the SYMFOY model simulates forage growth using assumptions about:

• good farm management

• the predominant soil type within the township where the insured grower is located

• a 30 inch minimum soil depth

• a specified species mix

Each grower is tied to a main weather station and a substation in the geographic vicinity of the grower. Each grower has the opportunity to submit rainfall information for their farm. Twenty-five main stations in the province supply daily minimum/maximum temperature and sunshine data for the simulation. Approximately 175 substations in the province supply additional rainfall data for insured growers who do not report their own rainfall. The substation rainfall data is not used unless the insured fails to report the rainfall data for their farm.

For the purposes of the simulation, the SYMFOY model uses cutting dates that are the average of all of the insured growers’ first cutting date for each main station. Dates for the second and/or third cut are assumed thereafter, at fixed intervals, after the first and second cut respectively and are determined by the SYMFOY model by reference to the average date of the first cut. In Southern Ontario, it is assumed that three cuts of hay will be harvested. An insured grower’s actual rainfall records are used in the SYMFOY model to simulate growth for that grower.

A “cooperator” is a grower for a given area who works with AGRICORP field staff to provide actual first cut forage yields on an annual basis. An average of the measured cooperators’ yields within a 15 mile radius of the insured grower’s location accounts for 50% of the first cut growth and the SYMFOY simulated growth accounts for the other 50% of the simulated first cut growth. If there is no cooperator within a 15-mile radius of the client, AGRICORP may use the average cooperator yields from the county/district in which that particular grower is located.

In other words, if:

1. the average yield of the cooperators within a 15 mile radius of the insured property is 70% of the average of the cooperators 10 year actual first cut yield and,

2. the SYMFOY model simulated first cut yield for the insured property is 60% of the insured’s 30 year average,

then the insured’s simulated first cut yield is 65% of average [ (70 + 60)/2 ].

The first cut yield percentage is then converted to a kilogram/hectare yield by multiplying the calculated percentage yield by the 30 year average yield simulated by the SYMFOY model at the producer’s main station.

The second cut yield is simulated by the SYMFOY model using the rainfall data supplied by the insured and the weather data from the main station. This yield is compared to the 30-year average yield for the insured and expressed as a percentage of the insured’s 30-year average second cut yield. The second cut is converted to a kilogram/hectare yield by multiplying the insured’s percentage yield by the 30-year average second cut yield simulated for the main station.

The kilogram/hectare first cut yield is then added to the kilogram/hectare second cut yield and expressed as a percentage of the 30-year total yield simulated at the main station. Similar calculations are performed for the third cut. The resulting percentage is the simulated yield for the insured.

The simulated yield is then averaged with the simulated yield of other insured growers within a three or six mile radius circle of the insured property. If there are not three insured growers (including the insured) in a three-mile radius, then the circle used is six miles in radius. The insured’s simulated yield accounts for 35% of the insured’s computed yields for a crop year with the remaining 65% of the insured’s yield coming from the average of the insured growers within a three or six-mile radius, as the case may be.

In principle, the Forage Plan is intended to insure, on an area basis, a simulated yield that is at least 80% of the average simulated yield for the same area over the previous 30 years. To this end, statistics for the components used in the simulation have been collected for the past 30 years. The simulation calculates the current crop year’s data as a percentage of the 30-year average.

When the calculated yield is below the 80% guarantee, the difference is doubled and then multiplied by the dollar value of coverage selected. For example, if the simulation result is 75%, the claim is the 80% guarantee less the 75% simulated yield for the crop year which equals 5%. This difference is then multiplied by two to produce 10%. In this example, the 10% would then be multiplied by the amount of the coverage selected to determine the total claim amount.

In proposing and administering the Forage Plan, AGRICORP derives its authority from Section 5 of the Crop Insurance Act (Ontario), 1996 and Regulation 380/97 Crop Insurance Act (Ontario) 1996, General, and the Crop Insurance Plan for Forage 1999.

The role of the Tribunal 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.

3(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(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.

3(4) On the day, and at the time and place so fixed, the Board shall hear the evidence of the parties with respect to the matter in dispute, and shall make a decision on the matter.

The Tribunal does not have the authority to amend the contract of insurance.

The Issue

The issue before the Tribunal is:

Did AGRICORP calculate the forage growth for the appellants in accordance with the coverage purchased, and according to the requirements of the plan?

The Evidence

Mr. Edwin Horner stated he had been farming for 31 years. In addition to his home farm at Lot 14, Concession 9, Erin Township, Mr. Horner rented 1000 acres of land. All his crops were insured with AGRICORP in 1999. He was also insured in 2000. In 1999, Mr. Horner grew 450 acres of hay and 170 acres of barley. The balance of the land was pasture.

Mr. Horner explained that according to the AGRICORP data he appeared to have had more rain than his neighbors. He said the rain gauge was not as accurate over the weekend on his farm as there was no one at the farm to check it and empty it. As a result, the weekend rain was added to the next week’s total rainfall.

Mr. Horner indicated that he keeps track of his inventory for tax purposes and that he had 62% less hay in storage at his year-end (May 2000) than the year before. He estimated his yield in 1999 was 2-3 bales/acre, whereas it was normally from 5-6 bales per acre. Mr. Horner did not have copies of his tax forms at the hearing, but he offered to send copies to the Tribunal office.

Mr. Horner submitted data comparing the gain on cattle he fed in 1999 and 2000. Steers averaging 455 lbs. in the fall of 1998 gained 345 lbs. on average over the course of one year. Steers purchased in the fall of 1999 at an average weight of 374 lbs. gained 543 lbs. on average over the course of one year. Mr. Horner stated that he used all his hay and cut his barley to feed the cattle in the summer of 1999. He stated he called AGRICORP three times in an attempt to get them to check his grain stocks, without success. He wanted to know why he had received no response.

Mr. Horner also testified that he had to dig two new wells in 1999 because of the drought. He provided copies of his bills from the well drilling companies.

Mr. Horner stated that he had ten farms but only one, the home farm, had a rain gauge situated on it. He confirmed that AGRICORP had provided the gauge and that rainwater measurements were submitted to AGRICORP. Mr. Horner submitted that two neighbors – Simon DeBoer and Terry Galbraith - both received payments from the forage plan and that their farms were within 1.5 miles of his farm. Mr. Horner stated that he did not have a copy of the Forage Plan until he initiated his appeal.

In response to questions, Mr. Horner indicated that:

1. He was unsure of when he informed AGRICORP that he believed the rain gauge readings were inaccurate.

2. He did not believe the forage program worked as it was designed to work, as some growers receive payments and some do not, even though they live right next to each other.

3. He only conducts soil tests on his grain fields.

4. He submitted the readings from the rain gauge every month. He knew that he was supposed to empty the gauge every time it rained but he did not empty it when he was away on the weekends.

5. A lot of wells were dug in the area in 1999 and there was a six-month waiting period before he could get his new wells dug.

6. He always purchased Charlois-cross cattle. He did not track their winter to spring yields. In 1999 he had to sell the cattle in September due to lack of feed. Normally he keeps cattle until late October.

7. He was told by AGRICORP that he received 97.4% of normal rainfall.

Mr. Jim Cole had prepared one set of documents and photographs which he submitted to the Tribunal at the hearing. Ms. Kay-Schecter objected to the submission of additional information, as AGRICORP had not had the opportunity to review it. However, upon examination of the documents, AGRICORP representatives had no concern with the written material. They were concerned that the photographs were not dated and there was no indication of who took them. The Tribunal accepted the late filed documents into evidence.

Mr. Cole stated he had farmed on Lot 3 and 4, Concession 5, Keppel Township for 15 years. In addition to his 200-acre farm, he rented 250 acres of pasture and 80 acres of cropland, seeded to wheat in 1999. He testified that he had 80 beef cows and 175 stockers. He stated that he was also a crop consultant and a US certified agrologist.

Mr. Cole indicated that in 1999 he was required to buy hay at $5/bale plus baling costs, which he estimated at $10/bale. In total he said he purchased feed worth $2,700.00 in 1999. He testified his yield in 1999 on 103 acres of hay was 350 bales weighing 1000 lbs. each. He said that was similar to his yield in 1998 when AGRICORP did pay forage claims in his area, but only half of the yield he achieved in 2000. Mr. Cole said that he takes soil samples and that his standard practice is to fertilize his home farm, but not his rented farms.

Mr. Cole testified that he had been a member of Beef Improvement Ontario (BIO) for ten years. His BIO records showed that his 2000 calves gained on average 56 lbs. more than his 1999 calves. He calculated his lost gains due to the drought in 1999 to be 3696 lbs. At a selling price of $1.50/lb his lost gains cost him $5,544.00. He said the only difference between 1999 and 2000 was the amount of rainfall he received.

Mr. Cole submitted that the SYMFOY program was heavily weighted to initial soil moisture. He said that the initial soil moisture used by AGRICORP was not appropriate to his soil conditions as his farm had more rock and natural drainage than the test farm at Mar. He understood that the soil samples were taken at the wettest corner of the sample farms and suggested that the results were not representative for his area.

Mr. Cole pointed out that his nearest weather stations were at Wiarton and Owen Sound and that both those towns received more rain than his township. He said if someone from AGRICORP had come and counted round bales they would have realized there was a drought. He also stated that a spring fed pond had dried up in 1999.

Mr. Cole testified that he had had crop insurance for two years. He said he had seen the drought insurance contract through his committee work but did not get a copy of it until two weeks before the hearing. He stated that AGRICORP had sent him a statement indicating that his rainfall was 98% of the normal amount in 1999.

In response to questions Mr. Cole indicated that:

1. He did not learn what initial soil moisture level was used in the formula until after the fact and he had difficulty obtaining it.

2. He believed that every farm should be dealt with on its own local basis rather than in aggregate.

3. He had received a crop insurance payment on a wheat crop grown on sandy soil approximately 1.25 miles west of his hay field.

4. His calves are grown out with corn silage.

5. He had 82 cows in 2000 but only 70 cows in 1999. Normally he keeps ten breeding heifers each year.

6. His farm was approximately 25 miles south of the village of Mar.

7. His hay is 60-65% alfalfa, 35-40% grasses.

8. He had a rain gauge and submitted his figures regularly.

9. He had no direct evidence that the forage program was not delivered as per the regulations under the Act.

10. He knew how much to pay for his insurance because the salesman told him. The salesman also sent him a statement afterward. He was not aware that AGRICORP had included a copy of the crop insurance contract in that mailing.

11. He did receive letters from AGRICORP with copies of decisions from other Tribunal hearings enclosed. He had scanned those decisions and was aware that several forage claims had been denied.

12. He did not receive any phone messages from AGRICORP through his wife about the appeal.

Ms. Judith Kay-Schecter responded on behalf of AGRICORP. She outlined the methodology used to calculate the appellants’ claims. She explained that neighbors can get different results as the reported rainfall may vary between farms. She noted that growers have ten days in which to refute their reported rainfall data, once they receive notification from AGRICORP. She also pointed out that individual growers’ forage yields can be different than the yield simulated by SYMFOY. She stressed that the forage program was an area based plan and that the only peril covered is drought. Ms. Kay-Schecter submitted that AGRICORP had delivered its forage claim program in a manner that was consistent with its regulations and the coverage purchased by these growers.

Ms. Schecter stated that SYMFOY was developed at the University of Guelph and that it simulates crop growth based on information provided by cooperators, weather stations and insured forage growers. She noted that AGRICORP was testing a new program, also an area based plan, but that to date SYMFOY is the only plan they have and there is no guarantee that individual growers will benefit from it.

Mr. Husseinali Shivji explained he had worked in the crop insurance field for 13 years and had worked with the SYMFOY forage program for five years. He explained it was his duty to administer the forage program and that he was also a commodity specialist for fruit and vegetable crops. Mr. Shivji indicated that he was familiar with the data from the appellants’ claims and that it was his view that the information was accurate. He had verified the accuracy of the data with AGRICORP field staff.

Mr. Shivji explained that soil samples taken for SYMFOY were handled to minimize moisture loss and were tested as soon as possible after they were collected. A total of six samples were taken at each test hole. Samples were taken at six-inch increments down to a depth of 30 inches (72 cm). He testified that soil samples were taken across the province but not in each township. He acknowledged that there could be variability in the initial soil moisture test results between farms and on the same farm.

Mr. Shivji clarified that once a client sends in rainfall data collected on his farm, the area rainfall data from Environment Canada was not used. However, he said Environment Canada data was used to estimate sunlight.

Mr. Shivji said that AGRICORP had approximately 300 cooperator farms where they collected yield data. He said that insured growers could submit their cutting dates and that if they did, they were included in the calculation used to determine an average cutting date for the area.

In response to questions, AGRICORP representatives indicated that:

1. AGRICORP was funded by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) and the Federal government. Growers and the federal governments each paid half the premium. The provincial government pays the administrative costs.

2. The predominant soil type in each township was used in the simulation.

3. SYMFOY used the average actual yields from cooperators combined with simulated yields to estimate the first cut yields. Only simulated yields were used to estimate the second and third cut yields.

4. Clients’ simulated yields were compared to cooperators within a 3-mile radius, or within a 6 mile radius if there were less than three cooperators within a 3-mile radius.

5. He did not know the weight of soil samples used in SYMFOY but they were a normal soil sample size.

6. Data on beginning soil moisture was not adjusted for tiled and non-tiled land.

7. The results on soil moisture tests taken 30 inches below the surface were more consistent than those taken at 12 inches below the surface, but they were still variable.

8. Other Canadian provinces had all dropped the SYMFOY program. Quebec had implemented a complicated system tilizing the gain of beef cattle on pasture, but Quebec growers’ premiums were 811% higher than Ontario growers’ premiums. Alberta had experimented with a methodology that used grass clippings, but had not found any better system than SYMFOY.

9. He did not have the initial soil moisture data from 1998 and 2000 at the hearing. His recollection was that AGRICORP’s results did not support the theory that 1999 was a dry year from the start, as a result of the 1998 drought and low snowfall. He stated that on most soils, the soil came out of the winter of 1998-99 fully re-charged with moisture.

10. He had received no complaints with the SYMFOY model in 1997 or 1998. He acknowledged the model was not perfect for every area.

11. The SYMFOY model rarely makes an adjustment to initial soil moisture test results, but will if the initial soil moisture is below 55%. There were two initial soil moisture samples taken in Grey County in 1999 and four taken in Bruce County in 1999. These samples tested at 75% available moisture. The Grey County samples were taken at Sydenham and Normandy.

12. The model assumes that all rainfall is absorbed, even if it may have drained off the surface in a downpour.

13. Historically AGRICORP has always paid out more funds than it collected in premiums. In 1999 the payout was approximately 117% of the premiums collected.

14. AGRICORP will provide a summary of how the simulation works to growers, but only upon request and the two appellants did not request this.

15. There was no individual farm coverage in the forage plan.

16. AGRICORP had approximately 1800 clients with forage insurance. The number of forage clients was in decline.

17. Soil moisture levels were not taken at co-operator farms. The soil testing cost $10,000 per year.

18. The species mix used in the model was relative to the county.

In summary, Mr. Horner believed that he did not get the yield indicated by SYMFOY as he did not get enough rainfall. As a result he had to buy grain and cut half his barley for feed in June. He could not report his yield on barley as AGRICORP would not measure it. Mr. Cole submitted that the drought resulted in half the hay yield he would have normally produced and as a result he had to purchase extra feed and lost gain. He felt the initial soil moisture was critical and he did not think it was tested correctly. He submitted that there were little reserves in the earth in the Spring 1999 and suggested that higher soil moisture was needed to get crops growing in April and May.

Judith Kay-Schecter stated that AGRICORP had demonstrated that it had delivered the forage program in a manner that was consistent with its regulations and the coverage purchased by the growers. She noted that there was no direct evidence presented that either AGRICORP or the University of Guelph did not correctly test the soil samples. She reiterated that the forage program was an area-based plan. She asked that the appeals be denied.

The Findings

The Tribunal notes that while most AGRICORP insurance plans are grower-specific, the Forage Plan is area-specific. Both of the appellants in this matter stated that their individual yields were much less than the area plan indicated that they should have been. The Tribunal finds that there was clearly confusion as to how the forage program was to be administered.

AGRICORP is required to adjust the claims make by policyholders. The jurisdiction of the Tribunal is strictly limited to the adjustment of the claims. As part of the appeal presentation, AGRICORP provided the Tribunal with a series of screen-prints from the SYMFOY program, demonstrating how the claims of each appellant had been calculated. These screen-prints clearly show the relevant factors and their impact on the calculations. These screen prints had never been provided to the appellants by AGRICORP, and as a result, the appellants (like many others before them) came to the Tribunal with evidence regarding the impact of the drought on their operations, purchased of replacement forage, etc. While these are of vital importance to the appellants, they do not affect the adjustment of the claims.

The Tribunal is strongly of the view that adjusting a claim means not only examining the claim and making fair decisions where discretion is called for, but also providing the calculations used by AGRICORP in making a determination. In the case of forage insurance, that clearly means providing the screen-shots or their equivalents to the claimants at a very early stage. Failure to provide them is a failure in adjusting. If the Tribunal had powers to award costs, the Tribunal could very well want to award costs to appellants in such circumstances, even where the appeal would be dismissed because the SYMFOY calculations are allowed to stand.

The Tribunal notes that the Forage Plan has become more client-specific over time, with the inclusion of individual growers’ rainfall data and cutting dates. The Tribunal encourages AGRICORP to continue to allow for more site-specific data to be included, within the area-based plan.

The Tribunal does not have before it any evidence that the Forage Plan coverage has been miscalculated by AGRICORP. The Tribunal finds that the Forage Plan was administered as written.

The Tribunal is satisfied that AGRICORP has applied the Forage Plan in an even-handed way and finds that these two appellants have not been treated any differently than other insured growers either in this general district or elsewhere in the Province.

Decision and Reasons

After careful consideration of the evidence and submissions made, the Tribunal decided to deny the appeals for the following reasons:

1. The appellants were aware or should have been aware that this was an area-based plan when they purchased forage insurance.

2. AGRICORP applied the claim calculations for the Forage Plan according to the regulations and in the same manner to all clients throughout Ontario.

Dated at Guelph, Ontario on this 5th day of January, 2001.