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
AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL
APPEAL: Staples v Agricorp
Staples v Agricorp 2004 ONAFRAAT 26
STATUTE: Crop Insurance Act
HEARING: July 15, 2004
DATE OF DECISION: July 26, 2004
2004-26
NEUTRAL CITATION: 2004 ONAFRAAT 26
Staples v Agricorp
IN THE MATTER OF: The Crop Insurance Act (Ontario) and 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 Barry Staples, Cavan, Ontario, from the decision of AGRICORP concerning the adjustment of their claim for his 2003 industrial hemp crop under Regulation 380/97 and the Industrial Hemp Insuring Agreement.
Appearances:
Barry Staples, appellant
Fred Thompson, representing the respondent, AGRICORP
Barry Roberts, Regional Manager, AGRICORP, witness
Dennis Yellowlees, Adjustor, AGRICORP, witness
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Thursday, July 15, 2004. Mr. Barry Staples appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal from the decision of AGRICORP concerning the adjustment of his claim related to his 2003 industrial hemp crop.
Statutory Context
Subsection 10(1) 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 the Tribunal order AGRICORP to adjust the claim of loss by Barry Staples to:
Include 21.5 acres of crop which was abandoned before harvest
Account for a lower than expected value of the crop
Vary the proportion of the loss attributed to uninsured perils?
The Evidence
Barry Staples
Mr. Barry Staples told the Tribunal he had farmed for several years and purchased insurance from AGRICORP for 25 years. He said he began growing organic crops in 1995 and was currently completely organic. He explained that he had been approached in 2002 by Cool Hemp, a food processing company, to grow hemp for an ice cream product. He said he successfully grew 20 acres in 2002 despite weed competition from mustard and volunteer buckwheat.
With regard to his 2003 crop, Mr. Staples explained he had double seeded 145 acres in a grid pattern (cross seeded) for weed control, and had worked the land well prior to seeding. He said he planted the crop from June 17th – June 21st and there was no rain until June 29th and this was hard on the crop. He said the crop was later coming up and the plants were less robust than the previous year. He said he destroyed one field as it failed to thrive.
Mr. Staples said he purchased crop insurance for hemp for the first time in 2003. He said his yield guarantee was reduced by 30% because of his organic production practices. He said he was required to have a contract for the crop in order to get insurance coverage and he contracted with Cool Hemp for 60 cents/lb.
Mr. Staples said his mentor for the hemp crop Mr. Jerzy Przytyk visited his farm on August 9, 2003 and estimated the crop yield from each field. The estimates ranged from 200 lbs. per acre to 1,100 lbs. per acre, with an average of 650 lbs. per acre. Mr. Staples said Mr. Przytyk had grown hemp south of Montreal for seven years and was knowledgeable about the Finola variety that Mr. Staples grew. Mr. Staples told the Tribunal that AGRICORP representatives viewed the crop a few days after Mr. Przytyk and became obsessed with the number of weeds in the fields. He explained the weeds were not a concern to him, given the yield estimate provided by Mr. Przytyk.
Mr. Staples said the hemp crop was swathed between September 7th and September 14th and all but 40 acres were eventually combined. He explained that combining was delayed due to rain during swathing on September 14th, 15th, and 17th, heavy dew on September 18th and more rain on September 23rd, 24th, 25th and 27th. He said by September 25th there had been a total of 3.6 inches of rain since the first field of hemp was swathed. He said he informed AGRICORP that he was having harvest problems on September 22, 2003. Mr. Staples said he ultimately harvested 18,000 lbs. of hemp but the quality was poor and he expected to receive only 15-20 cents per lb. for it.
In response to questions, Mr. Staples indicated:
His contacted average yield was 625 lbs. per acre which guaranteed production of 437.5 lbs. per acre.
AGRICORP’s planting deadline for hemp was June 10, 2003. He planted later on the advice of Mr. Przytyk. AGRICORP had agreed to insure the crop even though the planting deadline was missed.
His soil type varied between fields from light loam to heavy loam with a few spots of clay.
His initial soil moisture was generally good, his seed depth was fine and he had good seed-to-soil contact.
He felt poor soil moisture was a factor in the field that was destroyed. The plants emerged late and were not strong so weeds moved in. He did not think a crop could be harvested from that field.
He used two different batches of seed and initially thought germination of one batch might be poorer, but the fields evened out over the growing season.
The growing season was slightly wetter than usual; once it was established the crop grew well.
No weed control is possible after the crop is planted. His variety did not grow as high as most varieties and was not as good at controlling weeds as other hemp varieties.
There was shattering loss during the harvest and a substantial amount of seeds fell off in the drying process.
Approximately 50% of the harvested product was hemp seed and 50% was a combination of weed seeds and debris.
The most problematic weeds on his farm are thistles, milkweed, foxtails and twitch grass. He agreed foxtail germinates from late May to mid-June, before his hemp was planted.
His ground had been worked for six weeks before planting, and was freshly black when the hemp was seeded. None of the fields had been planted in hemp the year before.
Weeds are present all the time; they just proliferated in 2003.
The growing season is 85 days for the Finola variety that he planted.
He has had bad seed in the past but the 2003 hemp seed was not bad. The germination of the crop was poorer than usual and this may have had an impact on the crop but he did not think it would be much of an impact.
He was familiar with an Ontario Ministry of Agriculture and Food (OMAF) factsheet on hemp.
Mr. Staples said he did not believe there was a fertility problem with his land as he had an excellent crop of wheat in 2004 on the land on which he had grown hemp.
Dennis Yellowlees
Mr. Dennis Yellowlees said he was the AGRICORP Field Adjuster in Mr. Staples’ area in 2003. He said he had been an adjuster for 13 years and was also in the seed cleaning business.
Mr. Yellowlees said he was on Mr. Staples’ farm on July 22, 2003 adjusting an unseeded acreage claim when he learned that the hemp crop was also insured. He said he viewed the field that was later taken out of production and that the hemp was not thick and foxtail was prevalent. He said he later visited the farm with his supervisor, Barry Roberts.
Mr. Yellowlees said he had visited the seed buyers who took the 2003 Staples crop. He said Peter Leahy told him that he received 6,496 lbs. of pre-cleaned hemp seed, but that he cleaned it twice more and took it down to 4,330 lbs. He said Mr. Leahy told him there was sprouting of seeds and they could not be used for the Cool Hemp product. Mr. Yellowlees said the amount of weed seed harvested indicated the weeds in the fields had reached maturity and were in competition with the hemp all season. Based on his experience with other crops, he said he thought that the weeds would affect yield, as they were competing with the crop for sunlight, water and nutrients. Seeds shipped to Hickson were meant for the seed market but the germination rate was not good enough.
In response to questions, Mr. Yellowlees said:
This was the first hemp crop he had adjusted so he called in his supervisor.
He has a growing number of organic clients. He used the same process to adjust organic and conventional crops. He looks for the cause of the loss and then checks the contract to see if it is an insured peril.
In July 2003, Mr. Staples told him he was disappointed with the hemp crop so he returned on August 22, 2003 to view it with Mr. Roberts.
In August the fields were varied with some fields looking reasonable and other fields where it was difficult to find the hemp plants due to weeds. He said about one third of the crop looked reasonable, one third was quite poor due to weeds and one third was somewhat impacted by weeds.
The poorest field was the one that was swathed but not harvested. About half the harvested acreage looked reasonable in August; the other three harvested fields were half hemp, half weeds.
In organic crops weed seeds can range as low as 10% in a crop with good weed control to 90% in a crop that would not be worth harvesting.
Wet conditions at harvest caused some of the quality problems with the seed.
The presence of weeds in the swath slows down the drying process.
Barry Roberts
Mr. Barry Roberts said he was currently a Regional Manager with AGRICORP but that in 2003 he was responsible for handling and processing claims in his region. He said in his current position he also underwrites contracts.
Mr. Roberts said that to determine an average farm yield for a new client or new crop, AGRICORP looks at historic crop yield data, soil type, drainage, and the previous history of the grower. He said organic producers tend to have a lower yield due to fertility, weed control and insect and disease issues and this is taken into account when contracts are provided. He said AGRICORP does not expect to see weed free fields on organic farms but if the weeds affect the yield they are not an insured peril.
Mr. Roberts said he saw Mr. Staples’ hemp crop in August and walked in a criss cross pattern in all the fields but the worst one. He said there was an overwhelming amount of weeds and that this would seriously limit the potential yield. He said that there were whole areas of fields where he did not see any hemp at all, and that he saw spindly, poor doing plants.
Mr. Roberts said he did not have expertise with hemp but he understood it normally grew quickly and crowded out weeds. He said he attempted to learn more about it by reviewing an OMAF factsheet, speaking with Health and Welfare to confirm that Finola was a registered variety and speaking with Mr. Przytyk for approximately one hour.
Mr. Roberts said Mr. Przytyk told him that when he viewed Mr. Staples’ crop he estimated the yield at 1000 lbs./acre on one third of the crop, 500 lbs./acre on 1/3 of the crop and 300 lbs./acre on the poorest fields. He said Mr. Przytyk also gave him general information on the growing of hemp and in particular the Finola variety.
Mr. Roberts explained that when he adjusted the claim for loss on Mr. Staples’ hemp crop he:
Started with the original guaranteed production of 437.5 lbs./acre on 145.1 acres for a total of 63,481.25 lbs.
Deducted the guaranteed production on the acres that were destroyed early in the year as he judged they were lost due to weed competition, and possibly poor fertility, neither of which were insured perils.
Adjusted the guaranteed production on the remaining acreage to account for the impact of weeds, which are not an insured peril. He estimated half the crop loss was due to the presence of weeds and half due to the wet conditions at harvest, which was an insured peril.
Subtracted the actual production of 18,638 lbs. from the revised guaranteed production of 36,356.5 lbs. to get a shortfall of 17,718.5 lbs.
Multiplied the shortfall by the base contract price of 60 cents per lb. to get a payment of $10,631.10.
Mr. Roberts explained that Mr. Staples disagreed with his adjustment of the claim and in the course of trying to settle the matter he offered to increase he payment to $12,000.
Mr. Roberts pointed out the sections of the crop insurance contract that allowed for reductions in the guaranteed production, and described the insured perils for hemp. He explained that hemp was not insured for quality factors. He said payment of the claim was based on the 60 cent per lb. base price in Mr. Staple’s contract with Cool Hemp. He said he did not penalize Mr. Staples seed loss due to shattering during the harvest or for the 40 acres that could not be combined.
In response to questions, Mr. Roberts indicated:
Fertility problems are not uncommon in organic crops as yields are sacrificed in order to obtain premium prices.
There was not a consensus on what the best practices for growing hemp are. AGRICORP relies on OMAF as the experts on crop production in Ontario.
AGRICORP made a clerical error in cashing Mr. Staple’s premium cheque even though his crop was planted after the planting deadline. Because it was its error, AGRICORP honoured the insurance contract.
It occurred to him to deny the claim altogether due to the weed problem and generally poor look of the hemp plants in August. He decided to attribute half the crop loss to weeds as that seemed fair considering Mr. Przytyk’s yield estimates.
He should have filed a report with Mr. Staples about his concern due to the weeds in August.
He was not present during harvest but agreed that the wet weather was partially responsible for the loss.
AGRICORP insures approximately 60 crops, some are insured for quality as well as volume but most are not.
He thought there was a big seed bank of weed seeds and when the hemp did not get a head start on the weeds they were able to establish in the fields.
Sean McGowan
Mr. Sean McGowan said he was the Chair of AGRICORP's internal Issues Review Committee. He said the committee was made up of field representatives such as adjusters and regional managers as well as persons representing finance, research and development and the chief inspector for grains. Mr. McGowan said the committee looked at seven criteria when reviewing a dispute to ensure that the policy is followed, appropriate actions were taken and clients were treated consistently. He said the committee reviewed Mr. Staples' case and informed him of the outcome
Summations
Mr. Staples asked the Tribunal to grant his appeal and order AGRICORP to pay him the maximum payment of $38,088.35 on his hemp crop. He said he had done everything right but had a poor crop due primarily to weather problems – dry weather after planting and wet weather at harvest. He disputed AGRICORP’s position that weeds in the fields caused the yield problem, as he had been told by Mr. Przytyk in August that he would have a reasonable crop.
Mr. Staples acknowledged that he should have asked more questions when he purchased his insurance coverage, but said that he thought the loss due to the lower-than-contracted value of the harvested hemp should be covered.
Mr. Thomson argued that AGRICORP’s offer of $12,000 was more than fair. He said an AGRICORP representative personally visited Mr. Staples to sign him up for insurance; as a longstanding customer Mr. Staples was aware of the crop insurance contract and policies; information was provided to him; and AGRICORP honoured their contract of insurance even thought the crop was planted late.
Mr. Thomson said the crop was full of weeds when it was viewed by AGRICORP staff in August 2003 and Mr. Staples and Mr. Leahy both indicated there were a substantial amount of weed seeds in the crop. He said that taking into account the on-farm cleaning and the subsequent cleanings by Mr. Leahy there were only 22-28 lbs. of hemp seed in each 100 lbs. harvested, with the balance being weed seed and refuse. Mr. Thomson said weeds were not an insured peril for this crop and weed control is required as a condition of insurance for both conventional and organic growers. He said the guarantee of production was adjusted because of the weed infestation.
Mr. Thomson said the contract of insurance did not cover losses due to quality factors and AGRICORP could not pay any more than the contracted price of 60 cents/lb. on the shortfall in production.
Mr. Thomson acknowledged that wet weather in the Fall contributed to the loss and this was an insured peril. He said AGRICORP was prepared to pay for the loss caused by the insured peril but that it was obligated to reduce the payment because the uninsured peril –weeds – also contributed to the loss. He said Mr. Staples did not follow the best practices recommended in the OMAF factsheet and that it was up to the grower to control weeds.
The Findings
While Mr. Staples planted 145.1 acres of hemp, he acknowledges that some 21.5 acres at his Pinewynd farm was plowed down before harvest because it was overrun with weeds. As noted below this area should be taken out of the calculation in determining his crop loss. Mr. Staples also contends that an extended dry period shortly after planting contributed to a poor start of the hemp crop with the result that it lost its competitive advantage against the weeds. There was no corroborating evidence presented to support this allegation and it was not admitted by AGRICORP. Drought is an insured peril but in this case the Tribunal is not persuaded that it had any demonstrable effect on the crop shortfall.
AGRICORP witnesses theorised that there may have been a fertility problem that affected the crop. Mr. Staples’ evidence was that the land provided a good wheat crop. Neither side presented compelling evidence that fertility was a factor in the loss.
The appellant and the respondent agreed that there was damage caused to the hemp crop due to wet weather at harvest. They differ in their view as to whether there was also loss caused by excessive weeds. Mr. Staples takes the view that the weeds did not contribute to the low yield, whereas AGRICORP takes the position that the weeds were responsible for half the loss. Both parties acknowledged that they did not have a great deal of experience with hemp.
Both parties provided hearsay evidence that Mr. Jerzy Przytyk, a grower with some expertise with hemp, had viewed the Staples crop in August 2003 and provided yield estimates. The Tribunal is normally very cautious in weighing hearsay evidence which by its nature cannot easily be tested at a hearing. However in this case, both parties provided hearsay evidence attributed to the same source, both parties acknowledged the source was knowledgeable about hemp and the yield estimates attributed to Mr. Przytyk by each party are not dissimilar. In this circumstance, the Tribunal is prepared to give some weight to the yield estimates attributed to Mr. Przytyk.
The Tribunal was persuaded by the evidence presented by AGRICORP witnesses and Mr. Staples that there was an unusual proportion of weeds in some of the fields planted in hemp in 2003. Weeds were observed in the field and in the harvested crop. However, the Tribunal was not persuaded that the competition from weeds was responsible for fully half the loss.
The Tribunal accepts that the most of the acreage of hemp on the Staples farm showed the promise of a reasonable yield when it was examined by Mr. Przytyk in August 2003, notwithstanding the presence of weeds and sporadic emergence. The parties agree that Mr. Przytyk estimated the crop to have a potential of 650 lbs./acre at this time. The OMAF factsheet indicates that yields for industrial hemp will vary from 300 to 1,300 kg/ha (267 to 1,157 pounds per acre). Mr. Staples’ cleaned yield from the land actually combined was 223 pounds per acre. The Tribunal finds that were it not for excessive rainfall in the harvest period, a much higher volume of hemp seed would have been harvested. The Tribunal attributes 80% of the loss of the crop to excessive rainfall and 20% of the loss to competition from weed infestations in the fields. The Tribunal notes that approximately one-third of the crop could not be harvested at all due to moisture. While the presence of weeds may have exacerbated the problems caused by moisture, it is inconceivable that Mr. Staples would have abandoned this 40 acres after swathing were it not for the problems caused by moisture. In the Tribunal’s view, AGRICORP’s adjustment of the claim gives insufficient recognition to this loss. AGRICORP’s calculation applies a factor of 50% to all land swathed even though one third of it was not harvested. In effect this increases the adjustment penalty for weeds on land actually combined.
On the question of the loss of revenue due to quality downgrading of the hemp seed that was harvested, the Tribunal finds that the contract of insurance did not insure quality factors. The contract provides that the volume of crop harvested by the insured grower is valued at the base contract price – in this case 60 cents/lb. The Tribunal finds for the respondent, AGRICORP, on this issue.
The evidence before the Tribunal was that an AGRICORP agent viewed Mr. Staples’ crop in August but failed to notify Mr. Staples at that time, of its intent to reduce the hemp crop coverage due to the presence of weeds. Mr. Staples received notice in December (giving him no opportunity to call in specialists). While not a factor in this decision, the Tribunal notes that it would have been prudent of AGRICORP to inform Mr. Staples of its intent in a more timely manner.
Decision and Reasons
After careful consideration of the evidence and submissions made, the Tribunal decided to grant the appeal in part for the following reasons:
The Tribunal was persuaded that AGRICORP overestimated the damage caused to the crop by excessive weeds. However, there was evidence that weeds contributed to the loss.
There was evidence that there was a reasonable crop in the field in August 2003.
Both parties acknowledged that excessive rainfall during the harvest period contributed to the loss.
Order of the Tribunal
AGRICORP is ordered to re-adjust the 2003 claim of Barry Staples on his industrial hemp crop as follows:
Reduce the guaranteed production to remove the 21.5 acres that were destroyed early in the planting season.
Reduce the guaranteed production on the remaining acreage by 20% to account for loss caused by weeds.
Subtract the actual production from the revised guaranteed production (see points 1 and 2 above) to obtain the shortfall volume.
Multiply the new shortfall volume by 60 cents/lb. to obtain the amount to be paid to Mr. Staples.
DATED AT Tilbury, Ontario this 26th day of July, 2004.