Shanahan v. Agricorp, 2001 ONAFRAAT 41

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: Shanahan v Agricorp Shanahan v Agricorp 2001 ONAFRAAT 41

STATUTE: Crop Insurance Act

HEARING: August 22, 2001

DATE OF DECISION: September 6, 2001

2001-41

NEUTRAL CITATION: 2001 ONAFRAAT 41

Shanahan v Agricorp

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

AND IN THE MATTER OF: An Appeal to the Agriculture Food and Rural Affairs Appeal Tribunal by Brain and Patrick Shanahan, Watford, Ontario, from the decision of AGRICORP to deny them a claim concerning their 2000 soybean crop under Regulation 380/97 and the Crop Insurance Plan For Soybeans.

Before: John Taylor, Vice Chair; Jim Gibb, Member; Bill Olson, Member

Appearances: Brian Shanahan, appellant Paul Shanahan, agent of appellant Patrick Shanahan Leo Shanahan, agent of appellant Patrick Shanahan Jim Zavitz, Senior Manager, Provincial Claims, AGRICORP Bill Quipp, Regional Claims Manager, AGRICORP John Timmermans, Adjuster AGRICORP Eric Brouwer, Adjuster AGRICORP

DECISION OF THE BOARD

This appeal was heard in London, Ontario on Wednesday, August 22, 2001. Brian and Patrick Shanahan appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal a decision of AGRICORP concerning the adjustment of loss under Ontario Regulation 380/97 and the Crop Insurance Plan for Soybeans for their 2000 crop year.

Preliminary Matter

A letter was filed with the Tribunal to the effect that Patrick Shanahan authorized Brian Shanahan, Leo Shanahan and Paul Shanahan to speak on his behalf at the hearing. Representatives of AGRICORP indicated they had no objection to this.

The Background

Section 10 of the Crop Insurance Act (Ontario), 1996, states:

10 (1) If AGRICORP and a person disagree whether the 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, 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 Tribunal.

10(2) To appeal a matter in dispute, the appellant shall file a written notice of appeal with the Tribunal and send a copy of the notice to the other party within the time specified by the regulations made under this Act.

Ontario Regulation 380/97, Sections 3 states:

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.

3 (2) In the event of a conflict between the terms of a contract of insurance and this Regulation, this Regulation prevails. O. Reg. 380/97, s. 3.

Include in AGRICORP’s Crop Insurance Policy Contract of Insurance are the following provisions:

Part I Section K. 3

Where, in discretion of AGRICORP, the Insured is engaged in farming practices, farm management procedures or operations, or improper conduct or improper procedure, which directly or indirectly contributed to a loss for which the Insured is claiming an indemnity, or where the loss in respect of which the Insured claims has been caused by the conduct of any person or persons other than an Insured, AGRICORP may:

(a) deny liability under the Contract;

(b) reduce the amount of the indemnity by the amount AGRICORP determines was caused by the conduct of such person or persons, or by such farming practices, management procedures or operations, or other improper conduct or improper procedure.

Part I Section K. 4 (u)

Without in any way limiting the scope of sections K. 1, K.2, and K.3, the Insured shall be deemed to have engaged in farming practices, farm management procedures or improper conduct or improper procedure, which directly or indirectly contributed to a loss where the insured has:

(u) sustained loss as a result of any peril where the peril or loss is deemed avoidable by AGRICORP

Facts not in dispute were:

• Brian and Patrick Shanahan were properly insured for 123 acres of soybeans in 2000.
• Their coverage level was 90% of their average farm yield at a fixed price option.
• Their guaranteed production was 29.41 bu/acre.
• The fixed price was $6.50/bu.
• They harvested 2159.3 bu of soybeans.
• Their final acreage report was filed within the prescribed time.
• A crop inspection report was made out by the AGRICORP adjuster on December 10, 2000.
• No proof of loss form was filed, but as the appellants were in contact with AGRICORP, this does not disqualify their claim.
• A total of 72 acres of soybeans were not harvested in the fall, a 64-acre field and an 8-acre field.

The Issue

The issue before the Tribunal is did AGRICORP fairly adjust the 2000 claim of loss by Brian and Patrick Shanahan.

The Findings

Brian Shanahan, Leo Shanahan and Paul Shanahan

Brian Shanahan, Leo Shanahan and Paul Shanahan testified as a panel of witnesses. They testified to the Tribunal that:

• Part of Brian and Patrick soybean crop suffered from excessive moisture and excessive rainfall and they were unable to harvest the entire crop in the fall.
• The 51-acre field that they did harvest in the fall yielded 40 bu/acre.
• Their claim had been denied under Section K, Misconduct and Farming Practices of the Crop Insurance Policy Contract of Insurance.
• They had the proper equipment to plant and harvest the soybeans, the crop was sprayed twice and they had back-up harvest equipment lined up in the fall.
• They had never before left a crop in the field.
• The crop was planted on June 20, 2000, later than usual due to high rainfall and the presence of cornstalks in the field.
• Emergence was uneven and the summer was cooler than usual so the crop was still not fully mature in September.
• The soybeans had dropped their leaves by September 15, 2000 and were starting to dry down but were still too green to harvest.
• Normally they started harvesting in the second week of September and continued harvesting as late as December 24th if the weather stayed cold.
• The fall of 2000 was very wet, Watford was the wettest area in Middlesex County according to OMAFRA records.
• They were able to harvest soybeans that were planted earlier, but the soybeans in the fields in dispute were immature and the ground was too muddy for the combines. The farm was in a low area and the cornstalks held moisture.
• A snow streamer came in off Lake Huron in November and dropped snow that did not melt and there was no further opportunity to harvest the soybeans until March 2001.
• They were only able to harvest 102 bushels in March 2001, as the soybeans had been flattened by snow. The soybeans were over 20% moisture at that time.
• At least two other soybean producers in the area – Mr. Moons and Mr. Kwarciak - had similar problems and they had been compensated by AGRICORP. They understood a producer named Mr. Hayter was in a similar position. All of these producers were in a fairly direct line to Lake Huron from Brian and Patrick Shanahans’ field.
• Mr. John Timmermans (AGRICORP Adjuster) had agreed that the soybeans looked like a good crop, from what he could see after the snowfall. He did not view the 8-acre field.
• Repairs on a nearby highway ramp which were scheduled to be completed in September 2000 were not completed until Spring 2001, due to wet weather.

In response to questions, Messieurs Shanahan indicated:

• The soybeans were a Round-Up Ready Firstline variety which required 2950 heat units. The Watford area receives 3000 – 3100 heat units. Brian and Patrick Shanahan did not change the variety due to the late planting date, as: the seed had been treated and could not be returned; their experience is it is better to stay with a normal variety as soybeans are affected by light as well as heat units; and they wanted a Round-Up Ready variety so they could eradicate volunteer corn.
• The fields that were not harvested were rented land. This was the first time they had rented the property. They reached an agreement to rent the property late in 1999 but did not sign a contract until Spring 2000.
• Thirty acres of the large field was systematically tiled, the balance was randomly tiled.
• They could combine 10-16 acres per hour, depending on field conditions.
• They custom combined approximately 1000 acres in Fall 2000. This was higher than normal. They turned down some custom work as they had their own crop to harvest. They were under some pressure to harvest corn, as it was susceptible to stalk rot in 2000.
• Rainfall records they provided to the Tribunal indicated there was 19mm of rain from October 10, 2000 to October 31, 2000. There was no measurable precipitation on the Shanahan home farm between November 1, 200 and November 23, 2000, but Mrs. Dolores Shanahan had recorded snowfall. It was difficult to measure snow.
• They contacted AGRICORP in early December when it became apparent the snow was not melting and they would not be able to harvest the fields.

Bill Quipp, AGRICORP

Mr. Quipp told the Tribunal that AGRICORP has been delegated the authority to administer the crop insurance program by regulation. He said AGRICORP does not insure against negligence, bad farming practices or uninsured perils.

Mr. Quipp explained the insured perils for soybeans are: drought, excessive moisture, excessive rainfall, flood, frost, hail, insect infestation and plant disease provided recommended control practices are followed, wildlife and wind. He explained that AGRICORP had the discretion to deny liability or reduce the amount of indemnity, where, in its opinion, the insured has contributed to the loss by engaging in improper farming practices. He said that a loss sustained which is deemed avoidable by AGRICORP was indicative of improper practices.

Mr. Quipp explained that AGRICORP feels there was an opportunity to harvest the soybeans and that there was a good crop in the field. In his view, the Shanahans’ failure to harvest in the fall or early winter was an improper farming practice.

Jim Zavitz, Senior Claims Manager, AGRICORP

Mr. Zavitz told the Tribunal he had been with AGRICORP since 1994, had held several management positions and was made Senior Claims Manager earlier in the year. He told the Tribunal there were 1161 producers in Lambton County with soybean coverage in 2000 and provided information on claims, as follows:

Lambton County Warwick Township Re-seeding claims 372 23 Production claims 165 40 Total 531 63

He also showed the location of the claims, relative to the appellants’ crops. He said AGRICORP insured approximately 60% of the soybeans planted in Lambton County.

Mr. Zavitz also testified that:

• Planting conditions across Ontario were poor in June 2000 as it was very wet. As a result, deadlines for planting were extended, but there was still a record number of unseeded acreage claims, although there were none in Warwick Township.
• In the fall of 2000, AGRICORP adjusters examined the crops of clients who had called with concerns regarding their ability to harvest the crop. The adjusters estimated the yield before the soybeans were covered in snow and multiplied this yield potential by the affected acres, and adjusted the claim accordingly. He said that a complete claim would be paid if there were no harvestable beans before the snowfall.
• This policy was applied the same way across the province. No claims were paid on unarvested soybeans without an inspection. The policy was that as AGRICORP became aware of beans in the snow, it worked with the client to try to determine the potential yield that existed there and it let the client know they had to harvest as soon as possible.

In response to questions, Mr. Zavitz said:

• Adjusters never went from road for road looking for damage, but when customers reported concerns with damage or potential yield loss they followed up.
• AGRICORP records showed the concern with the Shanahan crop was reported December 7, 2000. They should have called when they saw the soybeans were not ripe late in the season, as they are required to notify AGRICORP of problems with the crop as soon as they are aware of them.
• Producers are required to use good farm practices by the policy of insurance. AGRICORP adjusters use the time when 95% of the local crop is harvested as a benchmark in determining whether good farm practices were used.
• Any crop left out will eventually be destroyed by weather. AGRICORP does not pay claims on crops left in the snow if they could have been harvested. If a legitimate peril caused part of the loss, and the balance was caused by the crop being left in the field over the winter, AGRICORP would pay the claim for the damage that occurred before winter, but not the damage that occurred after the date that the soybeans should have been harvested.
• Soybean policies are based on individual performance, not the performance of producers in an area, but AGRICORP considers local conditions in determining a reasonable harvest date for good farm management practices.
• In areas where several farmers have similar problems with crop damage due to early snow, AGRICORP will pay claims related to snow damage, as good farm practices would not have prevented the damage from occurring.
• Based on the clients’ written submission, it appeared they knew there was a potential problem with the crop in late September, and they were required to notify AGRICORP at that time.

John Timmermans, Adjuster, AGRICORP

Mr. Timmermans told the Tribunal he lives approximately 25 km from the appellants. He said he had worked in the crop insurance field since 1987 and that he is the adjuster for nine townships, including Warwick Township. He said he had been an adjuster for seven years.

Mr. Timmermans said:

• There were weather problems in the area in 2000, particularly in the Spring, but there was a good extended period to harvest crops.
• There were two other insured soybean growers with crop damages due to snow in the area. He also knew of two uninsured producers who did not harvest a crop.
• He was informed of the Shanahan damage report on December 8, 2000 but was not able to schedule a site visit until December 16, 2000.
• There was approximately 1.5 feet of snow on the field when he visited but he could see the soybeans were higher than the snow. It appeared to be a regular crop with good height and no evidence of weeds. He did not go right into the field to inspect the soybeans, as there was no mention made of immature beans at that time.
• Leo Shanahan told him the yield on the affected fields would have been comparable to that on the field that was harvested. He had not seen the soybeans before that time. He did not view the 8-acre field.
• He believed good management practices had been followed during the growing season, but he questioned why the field was not harvested before the heavy snowfall in late November. He noted that 95-98% of the soybeans in the area were harvested by that date.
• He had clients who harvested the last day before the snowfall.
• The two other insured producers in Warwick Township who had soybeans left in the field were paid for damages incurred before the snowfall, but not the damages incurred after the snowfall. Brian and Patrick Shanahan were treated the same as Mr. Moons and Mr. Kwarciak in this respect. He said the difference was that the Shanahan field was a good field of beans and was expected to have a normal yield.

Mr. Timmermans provided information on a number of fields of late-planted soybeans in Warwick Township that were harvested before the snow fell. He suggested that the Shanahan soybeans could have been harvested if the appellants had undertaken less custom work.

In response to questions, Mr. Timmermans indicated:

• He agreed that different varieties of soybeans requiring the same number of heat units performed differently.
• He felt the 72 acres that were not harvested should have yielded 2117 bu.
• The soybeans should have been harvested, as it was known the snow was forecast.
• The amount of soybeans harvested by Brian and Patrick Shanahan, added to the potential yield of the 72 disputed acres exceeded the crop guaranteed by the AGRICORP policy.
• The Shanahan claim was denied, as the soybeans were not harvested in timely fashion.
• AGRICORP had no knowledge of muddy conditions in the field or immature soybeans because no problem was reported until December.
• The crop insurance system requires safeguards to ensure that growers will do everything possible to harvest a good crop.

Eric Brouwer, Adjuster, AGRICORP

Mr. Brouwer testified that he had been an adjuster with AGRICORP for 10 years, and a District Coordinator 3 years and that his area is Lambton County. He provided details of a late-seeded soybean field located approximately 0.5 km away from the Shanahans’ field. He acknowledged that the soybeans may have been a different variety than the Shanahan soybeans. Mr. Brouwer said that he had only one client who did not get soybeans harvested and that claim was treated the same way as the Shanahan claim.

Summations

Mr. Leo Shanahan said the appellants believed that the fields which representatives of AGRICORP used as examples where late-seeded soybeans were harvested were higher and drier than the fields planted by Brian and Patrick Shanahan. He argued that there was no misconduct or poor farming practices as the appellants had the proper equipment, the crop was planted before the deadline, was properly sprayed and arrangements were made to harvest. He said the appellants had never left a crop in the field before. Mr. Shanahan reminded the Tribunal the appellants had provided sworn statements from other farmers regarding the poor weather conditions in 2000. He said that other growers had been compensated for their losses. He asked that the appellants be compensated to the full extent of their coverage and that they be paid interest on their claim.

Mr. Quipp told the Tribunal that the soybean crop was insured on the principal that the total yield off the total acres planted was included in determining if the client was in a claim position. He submitted that the appellants were required to harvest the crop in a timely manner and that they did not do so. He said that AGRICORP has to consider what the good management practices in area were and that if 99% of growers were able to harvest, then it was very significant where one person does not get crops harvested. Mr. Quipp said AGRICORP believed the loss was avoidable. He reminded the Tribunal that if AGRICORP knew of a possible claim the adjuster would have assessed the damage in the field, but that AGRICORP was not afforded that opportunity.

Mr. Quipp said the appellants were not treated any differently than other insured growers in Ontario and he provided numerical examples to demonstrate this point. He said that the appellants’ claim was not paid as the appellants engaged in a poor farming practice by not harvesting the crop before the winter. He argued that there was a harvest opportunity as AGRICORP had shown that there were beans in the area harvested with respectable yields, which were planted at the same time or later than the appellants’ soybeans. He acknowledged there was high rainfall in early October 2000 but submitted that this should not have been a problem on tiled land, as there was at least three weeks of dry weather before the winter.

Mr. Quipp submitted that the Tribunal should take into consideration the performance of the appellants’ neighbours. AGRICORP was told of the condition of the beans and the potential for a loss claims at Shanahans’. They did not send an adjuster until December 16, 2000 and therefore, could not see the appellants’ field before the snow fell. He asked that AGRICORP’s ruling be upheld.

In rebuttal, the appellants also pointed out that it was not in their best interest to have a crop insurance claim, as they could make much more money harvesting the crop. As fall came and went, they held out hope that most of the crop might be harvested.

Findings

The Tribunal finds that Brian and Patrick Shanahan could not harvest 72 acres of soybeans in 2000 due to excessive rainfall rendering the affected fields impassable to a combine.

The Tribunal notes the witnesses for the appellants gave credible testimony as to the conditions of the soybean crop and the fields. The appellants also produced some testimonials on the weather patterns and field conditions in support of their observations, but the Tribunal gave these little weight, as the witnesses were not available for cross-examination. The evidence provided by AGRICORP with regard to the field conditions was based on assumptions and the general performance of soybean growers in the area, as the insurer did not have the opportunity to observe the crop before a heavy snowfall. The Tribunal finds that it cannot accept the premise that the last few growers to harvest a crop in an area are engaging in poor farming practices, in the absence of supporting evidence to that effect. To do so would effectively deny coverage to these growers on the basis of the crop conditions of their neighbours, rather than on the crop conditions on their farms. The AGRICORP 95% guideline may be an appropriate indicator that farming practices should be investigated, but being in the last 5% of growers to harvest in an area cannot in itself be considered a poor farming practice.

The Tribunal finds the circumstances of Brian and Patrick Shanahan were different from the two other insured growers in Warwick Township, as AGRICORP had the opportunity to view the crop in those cases.

The Tribunal accepts the evidence of the appellants that they believed the crop could be harvested until it became apparent to them that the snow received in late November would not melt and allow them to harvest the crop in December.

Decision and Reasons

After careful consideration of the evidence and submissions made, the Tribunal decided to partially grant the appeal, for the following reasons:

1. Excessive rainfall and/or excessive moisture resulted in a delay in maturity of the soybeans and in the poor field conditions, which prevented the harvesting of 72 acres of soybeans.

Order of the Tribunal

The Tribunal orders AGRICORP to pay the insured, Brian and Patrick Shanahan a claim on 1458.4 bushels of soybeans at the fixed price of $6.50/bushel, for a total of $9,479.60.

The Tribunal orders that there be no interest be paid on the claim.

DATED AT Tilbury, Ontario this 6th day of September, 2001.