Conklin Farms v. Agricorp, 2003 ONAFRAAT 18

Agriculture, Food and Rural Affairs Appeal Tribunal

Appeal: Conklin Farms v Agricorp

Statute: Crop Insurance Act

Hearing: May 2, 2003

Date of Decision: June 12, 2003

Neutral Citation: 2003 ONAFRAAT 18

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 Ian Conklin, Conklin Farms, Prescott, Ontario from the decision of AGRICORP concerning the adjustment of his claim for an Unseeded Acreage Benefit on 958 acres of land.

Before: Murray Cardiff, Chair; Terry Denison, Vice Chair; Tim Sutton, Member.

Appearances: Ian Conklin, appellant. Al Goode witness, on behalf of the appellant. Mark Mailloux witness, on behalf of the appellant. Fred Thompson, Regional Claims Manager AGRICORP. Jim Zavitz, Senior Manager Claims AGRICORP. Barry Roberts, Regional Claims Manager AGRICORP. John Seabrook, Claims Adjuster AGRICORP.

DECISION OF THE TRIBUNAL

This appeal was heard in Prescott, Ontario on May 2, 2003. Ian Conklin appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from a decision of AGRICORP to deny his claim for Unseeded Acreage Benefit (USAB) for 958 acres of crops.

Statutory Context

Section 10 of the Crop Insurance Act (Ontario) 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.

Section 5 of the Crop Insurance Act states:

5. (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.

An applicant for a contract of insurance or an insured person who receives notice from AgriCorp of the terms of a contract of insurance or amendments to the terms, as the case may be, shall be deemed to have accepted them unless the recipient notifies AgriCorp to the contrary within the time period that AgriCorp specifies.

(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. 1996, c. 17, Sched. C, s. 5.

The Background

AGRICORP administers crop insurance plans wherein the insured is indemnified against perils that affect a crop as it is growing, or that prevent a producer from planting all or part of a crop. The indemnity for conditions that prevent the planting of a crop is referred to as Unseeded Acreage Benefit (USAB).

Producers must notify AGRICORP before June 15th each year, if they are unable to plant all or part of their intended acreage. All USAB claims must be filed before June 15th of the year in which the claim is made.

If the size of the acreage that a producer intends to plant increases by more than 10%, from the previous year's acreage that was planted; the producer must notify AGRICORP by May 1st that the increased acreage is to be planted or he/she may be denied the USAB benefit. There are several other conditions under which the producer will not be paid a claim of USAB that are specified in AGRICORP's policy book. For example, the producer may not insure a portion of any one crop type but must insure all his/her planted acres of any crop type to qualify for the USAB.

No USAB claims will be paid for less than three acres on tiled land nor any acreage less than six on untiled land. In addition, in the USAB plan there is 1% deductible for tiled land where 1% or three acres remain unplanted, and six acres or 3% of untiled land remains unplanted. An additional amount is deductible per acre for each crop type as outlined in the policy for each crop type.

The calculation of the USAB is based on the average farm yield which is derived from the insured's records of yield from the year previous to the year in which the claim is made. In the case of producers who did not carry insurance in the previous year; AGRICORP will assign a value for the average farm yield.

The Issues

The issues before the Tribunal are:

1. Did Mr. Conklin have entitlement for unseeded acreage benefit for 958 acres?

2. Was any of Mr. Conklin's acreage planted and reported to AGRICORP before the June 30th, 2002 deadline for making a Final Acreage Report (FAR).

Agreed Facts

AGRICORP and Mr. Conklin have no dispute regarding 130 acres of soybeans that were inspected by, and insured by AGRICORP. AGRICORP submitted a transaction notice from the AGRICORP Customer Service Call Center, June 14, 2002, indicating that Mr. Conklin had reported that he had planted the 130 acres of soybeans to a Customer Service Representative at the Call Center.

The Evidence

Mr. Ian Conklin told the Tribunal that he came from a farming background and had operated a dairy farm with his father prior to beginning his own cash crop operation. Mr. Conklin said that he cropped 1,400 acres on land that he owned and/or leased from other landowners. He said that his largest acreage crops were soybeans and corn, planted using the no-till method. Mr. Conklin told the Tribunal that the subject of his appeal is for the 2002 crop year.

Mr. Conklin told the Tribunal that he had declared bankruptcy in Spring 2001. He said that at this time some of his family and neighbours took care of some of his business matters and that with the assistance of the bankruptcy Trustee, he was able to maintain some of his land-lease agreements. He said that he was discharged from bankruptcy on July 29th, 2002.

Mr. Conklin told the Tribunal that he rented 300 acres to Paul McAuley and to his father Gordon Conklin, for the purpose of growing oats and spring wheat; two crops that he did not grow in 2002. Mr. Conklin submitted copies of the invoices for spring wheat seed and oat seed made out to these gentlemen and a rental agreement dated April 12th, 2002.

Mr. Conklin submitted a copy of his 2002 Crop Insurance Renewal Notice to the Tribunal. He said that the Notice indicated that he qualified for USAB covering 695 acres.

Mr. Conklin said that:

• He telephoned AGRICORP in the spring 2002 to indicate that he would be cropping and to verify that the records concerning his operation were correct.
• He was told his USAB was established based on the last year in which he bought insurance; 2000.
• AGRICORP had accepted 1,088 acres for insurance in 2000, which was the most recent year that the acreage was measured and inspected by AGRICORP. He still crops those acres.
• His Yield Declaration Report for 2000 corn indicated that 80 acres had been harvested and that excessive rain was the cause of poor yield.
• A record of his telephone call to the AGRICORP Customer Action Center (CAC) of June 16th, 2002 indicated that AGRICORP acknowledged that he had USAB for 695 acres.
• He planted 290 acres of soybeans after the end of June 2002 and AGRICORP reserved the right to insure or deny insurance, after inspecting the crop. Mr. John Seabrook and Mr. Fred Thompson inspected the soybeans and declined to insure the 290 acres; they insured 130 acres which were planted before the end of June, 2002.
• It is his belief that if AGRICORP decides to insure a crop planted after the deadline for reporting the FAR; the yield from the acreage that is insured at AGRICORP's discretion should be used to calculate the USAB.
• His father's interest in a spring wheat and oat crop was transferred to him in August 2002. He provided a receipt of the transfer to the Tribunal. As a result he believes that the total of 300 acres of oats and wheat which were not owned by him at the time when insurance is assigned, should not be included in the calculation of his average farm yield; a component in the formula used to calculate USAB.
• According to his understanding of the plan and the acreage that he insured in Spring 2002, his USAB eligibility should be for 958 acres.

Mr. Al Goode testified on behalf of Mr. Conklin. He said that Mr. Conklin rented land for cropping from him and that he was paid for the rental in cash. He told the Tribunal that he was confident that he would be paid for the land rental regardless of whether the planting conditions were suitable or the yields were good, because Mr. Conklin had USAB coverage.

Mr. Mark Mailloux told the Tribunal that he was a Lead Hand in Mr. Conklin's operation and that he supported Mr. Conklin's testimony.

In response to questions, Mr. Conklin told the Tribunal that:

• He agreed with AGRICORP's records which indicated he qualified for USAB eligibility for 695 acres in 2002.
• He planted 290 acres of soybeans in the first few days of July 2002. The soybeans were not insured by AGRICORP.
• He paid the premium for the 130 insured acres of 2002 soybeans in cash to Mr. Seabrook.
• He paid Mr. McAuley cash for a crop of oats and wheat in August 2002. The balance owing on the wheat and oats is still outstanding. He did not know that the wheat had to be sold through The Ontario Wheat Producer's Marketing Board, as he had not grown wheat before 2002.
• The transfer of the spring wheat and oat crop in August 2002, from his father did not involve payment in funds, but he had agreed to give his father the wheat and oat straw for bedding cattle.
• He combined the wheat and oats and knew that the yields for his area were good. His father sold the oats.
• AGRICORP acknowledged that he had planted 420 acres of soybeans in 2002 and that 130 acres of this 420 acres were accepted for insurance. He made a FAR indicating that the 130 acres of soybeans had been planted before the deadline for planting.
• He mistakenly believed that the deadline for planting soybeans was June 15th each year; it is actually June 30th.
• Mr. Seabrook's presence at the 2002 combining of soybeans was requested so that he could verify the poor yield.
• He agreed to store the soybeans harvested from the 130 acres separately from any other soybeans harvested in 2002.
• He planted 290 acres of soybeans sometime between June 29th, 2002 and July 2nd, 2002. He interpreted the response from the CAC to indicate that he should attempt to plant as many acres of soybeans as possible. He had the land leased and the seed so he attempted to plant as many acres of soybeans as the conditions permitted.
• He did not realize that the additional acres of soybeans planted in late June/early July 2002 would affect the calculation of his USAB.
• He received a claim payment in the amount of $12,000 from AGRICORP, for the 130 acres of soybeans that were insured in 2002.

Mr. John Seabrook, Claims Adjuster with AGRICORP told the Tribunal that he and Fred Thompson met with Mr. Conklin August 22nd, 2002 to discuss his insurance claim and USAB coverage and to look at the 2002 crop. He said that they saw red spring wheat, oats and soybeans. Mr. Seabrook said that the inspection was cursory as they wanted only to see how the Conklin crops were growing in comparison to other crops in the area. Mr. Seabrook said that Mr. Conklin leased land over a 15 to 20 km area. Mr. Seabrook told the Tribunal that he observed that the late planted soybeans looked good, though the podding was poor which was indicative of a low yield.

Mr. Seabrook told the Tribunal that:

• At the time of the inspection Mr. Conklin did not own the spring wheat and oats that were transferred to him from his father and Mr. McAuley.
• He and Fred Thompson were given a copy of Mr. Conklin's bankruptcy discharge papers.
• He assessed the 130 acres of soybeans for 2002. Neither he nor Mr. Thompson considered the 290 acres of soybeans for insurance during the August visit.
• There was no discussion about the acres that were not insured being included in the USAB eligibility.
• He calculated Mr. Conklin's insurance with an average farm yield of 23 bushels per acre with 90% indemnity against loss.
• Mr. Conklin's yields had been difficult to confirm in the years previous to 2002.
• The 2002 soybean crop was significantly damaged by drought with some damage resulting from poor management practices. Mr. Conklin was paid a claim of $12,000.

Mr. Seabrook responded to questions that:

• The 290 acres of soybeans were not accepted by AGRICORP for insurance due to their late planting.
• He could not remember if Mr. Conklin had ever grown spring grain.
• He understood that Mr. Conklin was not the owner of the spring wheat and oats at the time of enrolment for insurance, April 1st, 2002.
• He believes that Mr. Conklin did not carry crop insurance in 2001 because it was not available to him. AGRICORP has sold crop insurance to Mr. Conklin since 1998.
• He believes that AGRICORP decided to deny Mr. Conklin's USAB claim partly because he had planted acreage that was not insured.
• He believes he was told by Mr. Conklin at the August 22nd, 2002 farm visit that the wheat and oat crop did not belong to Mr. Conklin.
• The land upon which the wheat and oat crop was grown is usually cropped by and insured by Mr. Conklin each year. This insured acreage was a component in the calculation of Mr. Conklin's USAB eligibility.
• As Mr. Conklin did not carry crop insurance nor was he eligible for USAB in 2001, AGRICORP made calculations for his 2002 USAB eligibility based on Mr. Conklin's insured acres in 2000; the last year in which he was insured. The USAB eligibility can be changed if requested by the insured; or the Claims Adjuster may change the data by no more than 10% to better reflect the current crop year conditions.
• Mr. Conklin did not own the wheat and oat crop during the bankruptcy, but acquired it after being discharged from bankruptcy.
• Mr. Conklin's eligibility for USAB covered 1,088 acres in 2000.
• In Spring 2002 excessive moisture adversely affected planting in the area in which Mr. Conklin farms.

Mr. Thompson told the Tribunal that a formula was used to calculate the USAB claim payment. He said that the average yield (expressed in bushels per acre) is multiplied by the amount of coverage (expressed as a percent) and multiplied by one third of $6.00 per bushel, minus the deductibles and any premium.

Mr. Jim Zavitz, Senior Manager of Claims for AGRICORP pointed out that Section 5 of the Crop Insurance Act delegated to AGRICORP, the authority to set regulations and policies for the terms of contracts of insurance. Mr. Zavitz told the Tribunal that each insured producer receives a copy of AGRICORP's policy booklet. He said that each insured is updated with amendments to AGRICORP's policy as necessary. Mr. Zavitz told the Tribunal that the policy clearly indicates that the onus is on the insured to indicate an increase in acreage planted from the previous year, if the change is greater than 10%. He said that the policy states that the increase must be reported by May 1st each year. Mr. Zavitz said that AGRICORP's policy stated that the insured must notify AGRICORP by June 15th when an insured peril prevents any or all of the spring planting from being completed. Mr. Zavitz said that initially, AGRICORP did not construe Mr. Conklin's June 14th, 2002 telephone call to the CAC as making a FAR. Mr. Zavitz said that AGRICORP gave Mr. Conklin the benefit of the doubt with regard to accepting the acreage reported in his June 14th 2002, telephone call to the CAC. He said that AGRICORP did so because Mr. Conklin believed that the representative to whom he spoke was recording the information as his FAR. Mr. Zavitz said that it was not AGRICORP's practice to extend deadlines for insuring crop and/or reporting conditions. Mr. Zavitz told the Tribunal that it was ultimately his decision to deny Mr. Conklin's USAB claim. He said that he did so because Mr. Conklin did not report his inability to plant due to an insured peril before the deadline.

In response to questions Mr. Zavitz told the Tribunal that:

• Mr. Conklin reported on June 17th, 2002 that he was unable to plant 750 acres.
• The deadline for reporting the unseeded acreage is June 15th, each year.
• Customers should refer to their Crop Insurance Renewal form for information regarding the status of their insurance for the upcoming season. The Renewal Notice instructs customers to report their FAR by June 30th each year. If customers make no changes to the data listed on the Renewal Notice; AGRICORP assumes that they are satisfied that the information is correct.
• AGRICORP considered the wheat and oat crop as not being insured.
• The 300 acres that were occupied by the wheat and oat crop were included in AGRICORP's record of 695 acres that were eligible for USAB.
• He does not know how the crop could be insured by Mr. Conklin if they were not his at the time of the deadlines for reporting unplanted acres and USAB.
• If Mr. Conklin had not planted 290 acres of late soybeans he would have been eligible for USAB on the 290 acres.
• A USAB premium is only paid when a claim situation arises.
• AGRICORP has the discretion to exclude a crop from insurance if it is late planted ground cover or feed for wildlife.
• A crop planted between July 1st and July 10th would not be insurable.
• USAB for soybeans covers the perils of excessive moisture, flood, frost, hail, wildlife and insect damage.

Mr. Barry Roberts Regional Claims Manager for AGRICORP told the Tribunal that Mr. Conklin's farms were measured by Global Positioning System in 1999. He said that the acreage reported by Mr. Conklin corresponded with AGRICORP's measurements and tolerance for 3% margin for error. He said that 707 acres were measured whereas Mr. Conklin reported that he cropped 685 acres. Mr. Roberts told the Tribunal that he did not visit Mr. Conklin's farms in 2002. Mr. Roberts told the Tribunal that AGRICORP was critical of Mr. Conklin's farm management practices.

With regard to the testimony about his farm management practices, Mr. Conklin said that he began the no till method of cropping in 1998 and that his farm management practice included the use of herbicides for weed control. He stated that he was unable to spray the crop with pesticide in the 2000 season as the land was too wet due to above average rainfall. His crop insurance claim in 2000 was denied.

In closing, Mr. Conklin told the Tribunal that he cropped 1,088 acres in 2002 and that 130 acres of soybeans were insured. Mr. Conklin said that he wished AGRICORP to acknowledge that he was eligible for 750 acres USAB in 2002. He stated that if AGRICORP's calculation of his eligibility for USAB was for 695 acres plus 10% he wished to be compensated for the balance of 630 acres of bare land for the crop year 2002. Mr. Conklin said that he was certain that his late planted acres of soybeans would be considered as bare land. He said that he had more money invested in the late planted crop than he would receive from a USAB claim. Mr. Conklin told the Tribunal that his father had many of the original documents for transactions that took place with regard to the transfer of the crops, seed that was purchased and fertilizer and herbicide purchases.

Mr. Thompson told the Tribunal that AGRICORP had initially cancelled Mr. Conklin's insurance for soybeans in 2002 as there was no FAR. He said that AGRICORP conceded that there was a miscommunication with regard to the FAR and subsequently it agreed to insure 130 acres. Mr. Thompson said that at no time did AGRICORP contemplate insuring the 290 acres of soybeans that were planted late. He said that, with the exception of the hand written receipts for seed, there was no documentation to indicate that the spring wheat and oat crops did not actually belong to Mr. Conklin. He said that AGRICORP was not convinced of the veracity of Mr. Conklin's claims based on the evidence of the receipts. He said that the receipt from Duane McKinley, for oat seed was dated June 30th, long after the seed would have been planted. He said that the methods of bookkeeping were delayed. Mr. Thompson said that contrary to the statement contained in Mr. Conklin's appeal to the Tribunal; AGRICORP was not implicated in Mr. Conklin's bankruptcy. Mr. Thompson told the Tribunal that AGRICORP had the legislated authority to set the conditions for insurance.

The Findings

Both parties agreed that Mr. Conklin was enrolled in USAB insurance coverage for 695 acres on June 17th, 2002. In Spring 2002 wet conditions delayed or prevented the planting of some acres that Mr. Conklin intended to plant. Excessive moisture is an insured peril under AGRICORP's Crop Insurance Plan for soybeans. Mr. Seabrook testified that wet conditions in Spring 2002 delayed or prevented planting.

Mr. Conklin communicated with the AGRICORP CAC, on June 14th, 2002. He reported the field conditions and how he felt it affected his ability to plant. On June 17th, 2002 he telephoned the CAC to indicate that he had 750 bare acres. The report of June 17th, 2002 by telephone to the CAC included 290 bare acres that were not planted with soybeans until the first few days of July 2002. Mr. Conklin believed that he would be compensated by his USAB eligibility if he was unable to harvest the late planted soybeans. If Mr. Conklin had waited until after July 10th, 2002 to plant the 290 acres of soybeans, the crop would have been considered to be ground cover by AGRICORP as it would not reach maturity. Mr. Conklin could have been eligible for a USAB payment on the 290 acres of soybeans if he had planted them after July 10th, 2002.

Mr. Conklin Sr. and Mr. McAuley entered into an agreement to grow wheat and oats on land that was previously cropped by Mr. Conklin though AGRICORP raised concerns about the validity of the transaction due to recent bankruptcy proceedings against Mr. Conklin. Receipts for seed for the spring wheat and oat crops were provided to document the transaction. No evidence was presented to contradict the veracity of the documents relating to; the Conklin/McAuley agreement or the seed purchased for the joint crop venture.

Decision and Reasons

After careful consideration of the evidence filed and submissions made, the Tribunal decided to partially grant the appeal.

The Tribunal accepts the evidence that Mr. Conklin was eligible for USAB for 695 acres. The Tribunal also accepts that Mr. Conklin did not own the oat and spring wheat crops at the time of planting and making contracts of insurance.

Mr. Conklin had 130 acres of soybeans that were seeded and insured before the deadline. He planted 290 acres of soybeans after June 30th, 2002 that were not eligible for insurance leaving a total of 420 acres ineligible for USAB.

Mr Conklin qualifies for USAB for 275 acres less the appropriate deductions. The Tribunal orders AGRICORP to pay Mr Conklin for 275 acres of USAB using its standard formulas for settlement of this claim.

This amount is calculated based on the 695 acres minus 130 acres planted before June 30th, 2002 minus the 290 acres planted after June 30th, 2002.

The reasons for this decision are as follows:

The Tribunal accepts the evidence that Mr. Conklin was eligible for USAB for 695 acres. The Tribunal accepts that Mr. Conklin had insured 130 acres of soybeans planted by June 30th, 2002. The Tribunal also accepts that Mr. Conklin planted 290 acres of soybeans after June 30th, 2002 that were ineligible for USAB.

DATED AT Ethel, Ontario this 12th day of June, 2003.