Froese v. Agricorp, 2004 ONAFRAAT 15

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

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1, chemin Stone Ouest Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email:Tribunal@OMAF.gov.on.ca

APPEAL: Froese v Agricorp Froese v Agricorp 2004 ONAFRAAT 15

STATUTE: Crop Insurance Act

HEARING: April 21, 2004

DATE OF DECISION: May 3, 2004

2004-15

NEUTRAL CITATION: 2004 ONAFRAAT 15

Froese 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 Dan Froese, Straffordville, Ontario, from the decision of AGRICORP concerning the adjustment of his claim for his 2003 cucumber crop under Regulation 380/97 and the Crop Insurance Plan For Vegetable Crops.

Before: Murray Cardiff, Chair; Andrew Osyany Vice Chair; George Klosler, Member

Appearances: Dan Froese, appellant Harry Fraser, Regional Manager, AGRICORP Jim Zavitz, Senior Manager, AGRICORP Roger Geysens, Crop Adjuster, AGRICORP

This appeal was heard in Guelph, Ontario on Wednesday, April 21, 2004. Mr. Dan Froese appealed to the Tribunal from the decision of AGRICORP to deny his claim on his 2003 cucumber crop.

Statutory Context

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

(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.

The Issue

The issue before the Tribunal is:

Should a disputed crop insurance claim in the amount of $31,039.76 be paid to Mr, Froese?

The Evidence

Appellant’s Case

Mr. Dan Froese told the Tribunal he had grown cucumbers for five years and that he first purchased crop insurance for cucumbers in 2003. He said he was assured that he was able to insure cucumbers to be sold in the fresh market and the pickle market, and that double cropping was fine, as long as both crops were planted by the deadline date. He said he paid $29 per acre for crop insurance and was guaranteed a return of $1487.50 per acre. He said he had not seen a copy of the AGRICORP contract of insurance until recently.

Mr. Froese explained that he did not open a damage report on his first crop of cucumbers, but he did for his second crop in mid-September 2003. He said by that time the first planting had been destroyed, but that it was not the crop that was under appeal. He said he abandoned the first planting at the direction of Leo Strubs of Strubs Bros., his processor. He said he marketed to both the fresh market and the processing market for the first time in 2003, but that because the fresh market was flooded mid-season he also delivered some cucumbers on his brother’s contract with Strubs Bros.

In response to questions, Mr. Froese indicated:

For the past three years he had destroyed part of the cucumber crop mid-year; this was a normal practice for growers supplying Strubs Bros.
In retrospect he thinks he should have called AGRICORP when the first planting of cucumbers looked poor and showed signs of blossom end rot. At the time he thought the plants would pull out of it.
There was blossom end rot in cucumbers throughout Elgin County but very few cucumber growers insure their crop.
He finished harvesting his first planting on August 20, 2003.
He started harvesting his second planting on August 10 or 11, 2003.
He rented beehives to assist in pollination.
He employed one person per acre to harvest the crop.
He viewed his two plantings of cucumbers as separate crops.
When he destroyed his first planting he did not think it would regenerate and if it had the quality of the cucumbers would not have been good enough to market to his processor.
He did not have a written release from his processor but he expected it was on record with his marketing board.
He had in the past phoned in damage on other crops he had insured with AGRICORP. Cucumbers were very different than corn as one warm day can turn the crop around.
He supplied the fresh market and the processing market from both plantings of cucumbers. He used six or seven machines with five people on each machine picking for the processing market, and two people on each machine picking for the fresh market.
He planned to supply the fresh market as well as the processing market at the time of planting.
He destroyed the first planting within one week of abandoning it.
His cucumber sales, net of the pickers’ share, were $73,085 in 2003. This included sales of cucumbers shipped on his brother’s contract, for which his brother was paid.
He understood he was guaranteed $104,125 under his crop insurance contract.
His processing contract was for 250 tons; he actually shipped 391.27 tons.
He knew when he purchased insurance that his contract with Strubs Bros. would not cover the insured crop but he can usually ship more than the contracted amount to his processor.
As well as cucumbers he grows corn, soybeans, cabbage, peppers, pumpkins and occasionally wheat. He insured the soybeans, wheat and corn. He insured cabbage and cucumbers in 2003.
Planting his cucumbers in two plantings accommodates the processor’s needs.
Daily weigh slips were received for cucumbers shipped to the processor and it was easy to distinguish which cucumbers were shipped on his contract and which on his brother’s contract. The actual cucumbers were never mixed together.
He also had some machine harvested cucumbers in his wife’s name grown in the same township. They were also insured with AGRICORP. There was an above average yield on those acres.
There were very few cucumbers left at the end of the harvest. Strubs Bros. stopped accepting cucumbers on September 11 or 12, 2003 and it was very cold at that time.

Respondent’s Case

Mr. Jim Zavitz, Senior Manager, Customer Service, AGRICORP explained that after Mr. Froese’s claim was denied, it was reviewed by AGRICORP’s Issues Review Committee and by a Director and that AGRICORP was of the view Mr. Froese was treated fairly.

Mr. Zavitz told the Tribunal:

Mr. Froese was required to get the permission of AGRICORP and his processor before abandoning a crop of cucumbers.
AGRICORP did not consent to the destruction of the 35-acre first planting of cucumbers. With a continuously harvested crop like cucumbers AGRICORP staff must view the field to ensure that the crop is done and to see if there is an insured peril. AGRICORP did not see this acreage before it was destroyed.
Mr. Froese was obligated to report crop damage at the time it occurs and he did not do so. He was aware of the AGRICORP Customer Actin Centre as he had called it 20 times in 2003 with regard to a winter wheat claim, and 21 times in previous years to report claims on corn and cabbage crops.
Fresh market cucumber sales are not able to be insured. Insurance coverage is limited to the acreage grown under contract to a processor. Mr. Froese over-filled his processing contract by 10-15%.
The contract provides a guarantee of the lesser of the average farm yield multiplied by price or the total tonnage specified in the processing contract. All processing crops are insured in this manner because there is usually no alternative market for the crop.
Mr. Froese was insured for the 250 tons specified in his contract with Strubs Bros.
Without prior permission AGRICORP does not allow an insured grower’s crop to be mixed with any other grower’s crop, otherwise AGRICORP cannot determine which part of an intermingled crop belongs to which grower.
AGRICORP does not offer separate insurance coverage for each planting of cucumbers; the two Froese plantings were considered one crop. Yield is calculated as the total production on the total acres planted.
Average cucumber yields in Mr. Froese’s township were $1,490.24 per acre, just shy of 100% of normal; province-wide cucumber yields were 102% of normal yields.
AGRICORP insures 70 cucumber growers with a total of 6,315 acres. Five re-plant claims were paid on the 2003 crop; two other loss claims were still under investigation. No claims were paid in Elgin County.
Handpicked cucumbers should generate more revenue than machine harvested cucumbers as the handpicked crop is intensively managed to obtain smaller cucumbers.
AGRICORP meets periodically with the Ontario Fruit and Vegetable Growers’ Marketing Board (OFVGMB). AGRICORP did not need to change its insurance policy when the OFVGMB and Strubs Bros, negotiated a double crop agreement. Double plantings of cucumber crops were treated the same as multiple plantings as long as the total crop was planted by the planting deadline.
AGRICORP consults with the OFVGMB when it designs contracts.
In 2003 AGRICORP extended the cucumber planting deadline by 5 days; the OFVGMB had asked that it be extended by ten days.
AGRICORP did not get a chance to see either Mr. Froese’s first planting or his second planting before they were destroyed.
Mr. Virag, the crop insurance salesman, had not acknowledged making a mistake and offering coverage for cucumbers sold to the fresh market to Mr. Froese. Mr. Virag had passed away.
Mr. Virag had worked for AGRICORP for 18 years in the fruit, vegetable and flue-cured tobacco sectors.
Mr. Froese would need to get a release from his processor to sell cucumbers to another processor or the fresh market.
AGRICORP should not have issued separate contracts to Mr. Froese for handpicked cucumbers and his wife for machine picked cucumbers, but it stood by the contracts it issued.

Mr. Roger Geysens, Crop Adjuster, AGRICORP said he had been with the insurer since 1981 and that he adjusted claims for tobacco, grains, oilseeds, processing and fresh market vegetables. He said he was informed by the AGRICORP Call Centre of Mr. Froese’s request to have his yield calculated on September 29, 2003. He said he met four or five times with Mr. Froese and completed his yield calculation in November 2003. He said that it was apparent at that time that Mr. Froese would be in a claim position. Mr. Geysens explained he could not view the crop as it had all been destroyed by late September.

Mr. Geysens also stated:

Mr. Froese had about half the number of pickers that is normal for the industry if he had been continuously harvesting both the first and second planting of cucumbers.
Normally cucumbers are picked every other day and harvested for five to six weeks.
He understood Mr. Froese destroyed his first planting within one week of his second planting maturing.
He had previously dealt with Mr. Froese on claims for winter wheat and cabbage damage. He believed Mr. Froese was aware of the process to use to report crop damage.
Generally hand picked cucumbers average better than machine picked cucumbers.

In response to questions, Mr. Geysens indicated:

The insurance contract does not specify the number of workers to be used per acre to pick cucumbers.
He denied Mr. Froese’s claim because he did not believe the cucumber crop was continuously harvested until completion.
Elgin County was in his territory and he was familiar with the county.
It is more common to progressively plant cucumbers but there are a few growers who plant in two plantings as Mr. Froese did. Both methods are allowed under the policy.
Mr. Froese’s loss of approximately $31,000 would mean he grew only slightly more than half his normal yield. It should have been apparent very early in the crop year that there was a problem in that case.
Growers are obliged to report crop damage even if they do not think they will be in a claim position. This gives AGRICORP a basis to pay the claim if there is one.
Mr. Froese’s last harvest date was September 12, 2003. He did not contact AGRICORP until the harvest was complete and the fields were disced.
Mr. Froese told him there was two or three days of overlap when his pickers picked both his first and second plantings, and then the first planting was abandoned.
He recorded fresh market sales in his yield report, as he had to supply complete information to AGRICORP.
He was never able to identify an insured peril on the Froese crop, as he did not see the crop in the field at any time in its growth.
If there had been drought in the area he could have assumed it affected the Froese crop, but with disease and slow growth claims he needed to see the crop in the field.
There were no reports of similar damage to cucumbers in the area.

Summations

Mr. Froese said the matter came down to what he was promised by Mr. Virag, who sold him the insurance contract. He said Mr. Virag was aware of his intention to plant his crop in two plantings and he asked the Tribunal to grant his appeal.

Mr. Harry Fraser asked the Tribunal to deny the appeal on the grounds that Mr. Froese did not notify AGRICORP of crop damage when it occurred, abandoned acreage without the permission of AGRICORP and his processor and intermingled his crop with his brother’s crop without permission. He also argued that the crop met the contracted tonnage and that it was insured for the lesser of the contracted tonnage or the guaranteed yield.

Mr. Fraser also pointed out that the machine harvested cucumber crop in which Mr. Froese had an interest had an average crop yield. He submitted that the yields are normally similar between machine harvested and hand picked crops but that the returns are higher on hand picked crops. Mr. Froese responded that the guaranteed return was much lower on machine harvested cucumber crops and that is why the hand picked crop generated a claim but the machine harvested crop did not.

The Findings

The panel accepts that Mr. Froese thought he was buying crop insurance, which would cover his contract shipments to the processor, over-contract shipments to the processor and fresh market sales. Unfortunately for him, no such policy is sold by AGRICORP. Due to the death of Mr. Virag, this panel did not have the benefit of his input about the placement of the policy. This panel intends no criticism of Mr. Virag, an experienced and respected representative. The ultimate responsibility for determining that the policy met Mr. Froese’s needs lay with Mr. Froese. The policy clearly covers only the contracted processor acreage (Policy, Part V, “A”), and the guaranteed production is the lesser of the average yield (multiplied by the selected coverage) or the processor-contracted tonnage (Policy, Part V, “H”). This panel has no authority to change the contract of crop insurance and, since Mr. Froese overfilled his processor contract, there would be nothing payable under the policy.

In addition, Mr. Froese’s claim is defeated by policy violations. The undisputed evidence was that AGRICORP did not have an opportunity to inspect the appellant’s 2003 cucumber crop because it was destroyed before Mr. Froese made his insurance claim. Mr. Froese testified that the first planting of cucumbers was abandoned and destroyed in August 2003 and the second planting in mid September 2003. AGRICORP was not contacted until September 29, 2003. The panel finds that Mr. Froese’s failure to report the damage in a timely manner was a contravention of the crop insurance contract. Mr. Froese also violated the contract when he destroyed the first planting of cucumbers without the permission of AGRICORP.

The reason that the crop needs to be inspected in the field is to ensure that any losses are caused by an insured peril. This is particularly important in a year such as 2003 where a crop was generally at or above its average yield and there are no area-wide perils that could explain Mr. Froese’s loss. While there were suggestions of disease problems with the first planting and a cold September affecting the second planting, the panel was not presented with any compelling proof as to what caused the low yield in the Froese crop.

Mr. Geyser testified that Mr. Froese’s yield data indicated he would have had approximately half his normal cucumber yield in 2003. Yet Mr. Froese’s evidence was that he had difficulty selling the cucumbers he grew, as the fresh market was flooded in mid-harvest and he ultimately shipped cucumbers on his brother’s contract. Both parties agreed that Mr. Froese filled his processing contract in 2003. In fact, he overfilled it.

Mr. Froese is experienced with crop insurance claims and he knew his obligations were to report the loss as soon as he became aware of it, and to allow inspection by AGRICORP of the fields before destroying them.

The crop insurance contract specifically prohibits intermingling. Mr. Froese’s shipping of some of his cucumbers under his brother’s contract, and letting some of his cucumbers go to his brother constitutes intermingling in the view of AGRICORP (Policy, Part V, “H”). This panel has doubts about whether the wording actually supports AGRICORP’s position, and recommends that the policy provisions be clarified in this regard.

Decision and Reasons

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

The contract of insurance was limited to the lesser of the actual production or the processor contracts held by the insured and the insured overfilled the processor contracts. Accordingly, within the provisions of the policy there was no loss.
Mr. Froese did not follow the required procedure with regard to reporting damage to the crop at the time it occurs. This was a contravention of the crop insurance policy.
Mr. Froesse did not follow the required procedure to allow AGRICORP to view the crop before it is destroyed. This was a contravention of the crop insurance policy.
There was no evidence presented to prove that an insured peril caused the reduced crop losses.

DATED AT Ethel, Ontario this 3rd day of May, 2004.