Fergus v. Agricorp, 2006 ONAFRAAT 14

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:appeals.tribunal@omaf.gov.on.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: appeals.tribunal@omaf.gov.on.ca

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Fergus v Agricorp

Fergus v Agricorp 2006 ONAFRAAT 14

STATUTE:

Crop Insurance Act

HEARING:

April 6, 2006

DATE OF DECISION:

May 10, 2006

2006-14

NEUTRAL CITATION:

2006 ONAFRAAT 14

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:

Martin Fergus, Stittsville, ON Gordon Sample, Richmond, ON

William Sample, Richmond, ON Herb Henderson, Ashton, ON

Glen Featherstone, Richmond, ON Steven Lewis, Ashton, ON

Audrey Bobier, Stittsville, ON Glenn Fisher, Richmond, ON

Stewart Crabb, Stittsville, ON

from a decision of Agricorp concerning the adjustment of their claims for their 2005 forage crops under Regulation 380/97 and the Crop Insurance Plan for Hay and Forage.

Before: Rod Stork, Chair; Gene Trotman, Vice Chair; Corry Martens, Member

Appearances:

Martin Fergus, appellant and representative of appellants Gordon Sample, William Sample, Glenn Fisher and Audrey Bobier

Glen Featherstone, appellant

Stewart Crabb, appellant

Herb Henderson, appellant

Steven Lewis, appellant

Fred Thomson, representing Agricorp, the respondent

Tim Borho, witness for the respondent

DECISION OF THE TRIBUNAL

This appeal was heard in Black’s Corners, Ontario on Wednesday, April 6, 2006. Mr. Martin Fergus initiated appeals on behalf of himself and eight other forage growers who sought payments of claims related to their 2005 forage crops, which they had insured with Agricorp. All parties agreed that these nine appeals could be combined and heard together. All of the appellants (forage growers) farmed in the former Goulbourn Township and all had their forage crops tied to the Goulbourn rain station.

Preliminary Matters

Mr. Allan Lowry sought standing at the hearing. He said that he farmed in an area adjacent to the appellants, had the same concerns and would be pleased to speak if he could add anything to the proceeding. Mr. Fergus had no objection to his participation; Mr. Thomson indicated he had received no disclosure as to what Mr. Lowry wanted to say and did not know if he would object or not. Mr. Lowry was unsure as to whether he would initiate his own appeal. The Tribunal decided not to grant him party status at the hearing but indicated he was welcome to observe the hearing.

Mr. Thomson told the Tribunal that a map included in his advance documentation showed the location of rain stations in 2006 and asked to be able to provide a 2005 map as that was the year in question. He also had additional documentation regarding the monitoring stations that he wished to submit into evidence. Mr. Fergus indicated he had no objection and the documents were accepted.

Later in the hearing, Mr. Henderson asked to submit a letter from an agricultural consultant. Agricorp did not object. The Tribunal accepted the document.

Statutory Context

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

Referral of disputes

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.

Notice of appeal

(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.

Exclusive jurisdiction

(3) The Tribunal has exclusive jurisdiction to hear and determine all appeals arising under subsection (1).

Decision binding

(4) The decision of the Tribunal in an appeal is binding on the parties, 1999, c. 12, Sched. A, s. 7 (2).

The Issue

The issues before the Tribunal are:

Should any or all of these nine forage growers receive a payment under their 2005 crop insurance policies for forage, and if so, what amount should be paid?

The Evidence

Appellants’ Case

Martin Fergus

Mr. Fergus told the Tribunal that the present forage program did not satisfy forage growers and the previous program – SIMFOY – was better. He said that he and another grower, Glenn Featherstone, had collected rainfall data on their farms in 2005 and their total rainfall was considerably lower than that recorded at the Goulbourn rain station used by Agricorp. He said his and Mr. Featherstone’s farms were approximately five miles from each other and they received rain on different dates but the totals were similar. The total rainfall recorded was:

Featherstone: 225.4 mm

Fergus: 238.4 mm

Goulbourne station: 283.4 mm

Mr. Fergus said Agricorp had not paid the appellants in their second round of calculations when they looked to the best rain station in the area. He said that Agricorp would only consider the rain stations at Marlborough, Nepean and North Gower, none of which triggered a payment. He said their rainfall was closer to that recorded at the Fitzroy rain station, one township to the North.

In response to questions, Mr. Fergus indicated:

• The Goulbourn rain station was approximately 8 miles from his farm.
• The Goulbourn station is in the northwest (Rod’s comment – my notes and the map submitted by Agricorp indicate the station is in the northwest corner) corner of the township and many growers are in the southeast corner.
• He had been in the forage crop insurance program for at least 10-12 years.
• Agricorp’s rain measurements were too fine as it recorded rainfall as low as .2 mm and that was not enough to do any good to the crops.
• He was not aware that Agricorp would record rainfall in tenths of mm when he joined the program; he did know it collected rainfall over 24 hours.
• He knew the forage program had been changed to a strictly rainfall program and that the only insured peril was drought.
• Letters indicating that growers were not in a claim position came in November or December.
• He just assumed he would be assigned to the Goulbourn station; he did not recall having a choice.
• All day rains were more helpful than scattered showers; 283 mm may have been enough if it had come at the right times and the right quantities.

Glenn Featherstone

Mr. Glenn Featherstone said he had been on the forage program for 30 years and did not agree with the rainfall based system used in 2005. He said he still had a rainfall gauge that Agricorp had provided him and said that of the rainfall he measured, 35 mm came in the last few days of August, which was too late. He said there was no rain on his farm between July 14, 2005 and August 11, 2005. He also stated that a sump pump he had installed in 1974 ran dry in 2005 for only the third time since it was installed.

Mr. Featherstone said he was concerned with Agricorp’s rainfall readings because it recorded each tenth of a millimetre of rainfall, rather than rounding up or down. He said the location of the rain station in Goulbourn was in a campground, 8-10 feet from a swimming pool and he was concerned that splashes from the pool were recorded. He said children at the campground could have tampered with the gauge.

Mr. Featherstone said his farm was approximately 14 km east of the Goulbourn rain station, approximately 11 km from the Marlborough rain station and approximately 32 km from the Fitzroy rain station.

In response to questions, Mr. Featherstone indicated:

• He actually received 123 mm rain in June 2005 but capped his measurement at 110 mm as per Agricorp policy.
• His rain gauge was on a bracket 2-3 inches above a fence post that was 70-75 feet from the nearest building and farther from the nearest tree. He collected data daily around breakfast time.
• He agreed that rainfall was scattered in 2005. He did not recall thundershowers.
• He agreed that the rainfall he measured varied from that recorded by Mr. Fergus but noted that the total was similar. Mr. Fergus received more rain in July whereas he received it in August.
• The current forage program had been in place two years. He understood that it was only based on rainfall and the only insured peril is drought.
• The Goulbourn rain station was 18 km from the most distant of the nine growers.
• He did not recall purchasing the new type of forage insurance in 2004 or selecting a rain station. He did receive a letter indicating he no longer needed to measure rainfall.

Stewart Crabb

Mr. Stewart Crabb testified that he lived between Mr. Fergus and Mr. Featherstone. He said his pasture and hay yield was down quite a bit from previous years. He said he had to start feeding on August 1, 2005, the earliest ever, and he had to buy hay for the first time since the 1960s.

In response to questions, Mr. Crabb said:

• He had collected rainfall data in the past but did not do so in 2005.
• He had farmed since the 1960s. 2005 was one of the worst years for drought that he had experienced.
• He did see variation in rainfall in different areas in 2005.
• When he went on the new forage program he knew it was based only on rainfall and drought was the only peril covered.
• He did not recall signing up for the new program or selecting a rain station.

Herb Henderson

Mr. Herb Henderson said the hearing should have been held in the fall of 2005 when the Tribunal could have seen the burned off pastures. He said the only question he asked when he purchased insurance was ‘is the rain pro-rated according to the time of year it falls’ and he was told it was. He said he had since learned that it was not.

Mr. Henderson said the Goulbourn rain station was only two miles from his farm so it should have reflected the drought he experienced. He testified that his soil fertility was good, he fertilized annually with liquid manure and used only registered seeds. He said that of 300 acres of hay he was only able to harvest second cut on 75 acres and these yielded only one 4X4 round bale per acre, rather than the usual 3-4 bales per acre. He said his management was fine and the only ingredient missing was rain.

Mr. Henderson said his 86 year old father told him it had never been so dry on his farm in his lifetime. He argued that he should have received a claim payment. He said it was poor management on the part of Agricorp to have a rain station in a public place near a swimming pool.

In response to questions, Mr. Henderson indicated:

• If the Goulbourn rain station measured 283 mm, in his opinion that is a drought, based on the conditions on his farm.
• If an adjuster had come out he would have seen there was a drought. He never called Agricorp as he assumed that it knew there was a drought.
• He knew by the end of 2005 that Agricorp had denied his claim.
• If the rainfall data had been pro-rated, the large amount at the end of August would not have counted as much.
• He knew the forage program did not insure for yield and that it strictly measured rainfall. But, he thought the rainfall was pro-rated.
• He knew the forage program only covered drought.
• He did not know rainfall would be measured in tenth of millimetres.
• He agreed that timing of rainfall was an issue in forage production, that rain is needed in April and May for a good first cut and that rain that occurs after the crop starts dying is not useful.
• He knew the program measured rainfall for May, June, July and August.

Steven Lewis:

Mr. Steven Lewis told the Tribunal he usually harvests 1,000 round bales but in 2005 was only able to harvest 565 bales, approximately 40% fewer than normal. He said it was a dry year with a deluge of rain in late August which helped the pastures but did nothing for the hay and beans. He said he was also told that rainfall would be weighted according to when it fell.

Mr. Lewis said his farm was about six miles from the Goulbourn rain station. He said he received crop insurance payments for his corn and soybean crops, both of which yielded 40% of the normal production on his farm and he expected a similar payment for his forage production. He said a neighbour four miles from him was attached to the Drummond rain station and he received a 40% payout.

In response to questions, Mr. Lewis said;

• His entire farm including 300 acres of hay was affected by drought in 2005.
• He knew rainfall data was collected from May through August but thought different months were weighted differently.
• The SIMFOY program also considered sunlight.
• He did understand when he signed on to the new program that it only measured rainfall and only insured against drought.
• He did not recall seeing a map of rain stations or selecting a specific station.

Agricorp Case:

Tim Borho

Mr. Tim Borho said he was Agricorp’s Account Lead on the forage program and had been in that position since August 2005. He said he grew up on a farm, studied crop science at university and farmed himself for five years before joining Agricorp. He said he was familiar with forage production.

Mr. Borho said there is generally a direct correlation between rainfall and hay yield but he acknowledged that the timing of rain has an impact on yield. He said yield was also affected by a number of other factors including spring soil moisture, heat, sunlight, cloud cover, frost, soil type, species of hay and winterkill.

Mr. Borho said he understood April 2005 was very dry and May and June were drier than usual. He understood there was some winterkill in areas of the province. He said the summer was hot and dry except for heavy rainfall in late August.

Mr. Borho confirmed that the forage program offered by Agricorp only considered rainfall and only covered drought. He said it was an area based plan so it did not cover the circumstances on individual farms. He said when customers first purchase forage insurance an adjuster estimates the value of their crop and the customer selects coverage level and the rain station they wish to use and pays the premium. He said there was not a rainfall station in every geographic township but customers could choose a station in an adjacent township. He explained Agricorp used geographic townships because their borders were constant. For Goulbourn, the adjacent townships are Ramsey, Nepean and Marlborough.

Mr. Borho said Agricorp counted all rainfall from May 1^st to August 31^st inclusive but there were some caps. No more than 70 mm is counted in one calendar day and the minimum that can be recorded is 0.2 mm. There is a monthly cap of 125% of the historical rainfall for the area.

Mr. Borho said Agricorp purchased its rainfall data from the Ontario Weather Network (OWN) which is part of the University of Guelph and operated out of Ridgetown College. He stated that OWN quality checks its data before submitting it to Agricorp. He said its gauges used an electronic tipping scale but also had a manual back-up. He explained Agricorp had used Environment Canada data in the past but it was not available as quickly and Environment Canada did not stand behind its data. He said rainfall data collected by conservation authorities had been considered but the quality was not up to Agricorp’s standards and the locations of rain stations were not as useful as those manned by OWN.

Mr. Borho said Agricorp’s legal authority came from the Crop Insurance Act and its policy insuring agreement. He said federal and provincial governments covered 60% of the cost of premiums and both levels of government had to approve changes to the design of the forage program.

Mr. Borho said that the forage program had weighted rainfall by month when it was a pilot program but this was dropped after consultation with participants and interested farm organizations. He said it should not have been promoted as a weighted program in 2004 but acknowledged that mistakes could happen. He said that if the rainfall recorded at the Goulbourn rain station in 2005 had been weighted as in the pilot program the calculated yield would have been 82% which was still too high to trigger a payment.

Mr. Borho said forage insurance was automatically renewed each year unless a client cancelled before April 1^st. He said changes to coverage and the rainfall station could be made up to May 1^st. He said yield reports were completed on October 5, 2005 and growers should have received them later that month.

Mr. Borho said due to a communication problem, Agricorp had reassigned some customers to the most advantageous rain station that they could have chosen in the spring of 2005. He said the Goulbourn growers could not be reassigned to the Fitzroy rain station as it was not an adjacent geographic township. He said of 1,650 forage customers, Agricorp paid 1,410 claims. He said claims were paid when a rain station recorded less than 80% of the historic rainfall. The deficit is multiplied by the coverage purchased and the total is doubled to account for the cost of transporting hay.

In response to questions, Mr. Borho indicated:

• Agricorp was providing a weighted rainfall option in 2006.
• OWN hires staff to look after its gauges and check the readings every two weeks.
• Agricorp liked to base its policies on scientific research; there was no good research as to how small a rainfall has to be to have no effect on forage yield. He agreed that 0.2mm of rain would not be much use.
• A heavy dew could not tip the rain gauge tipping device.
• Agricorp picks the properties on which rain stations are to be placed, after consulting with field staff. OWN selects the locations on the properties where the gauge is to be placed.
• Agricorp did not disagree that there was a drought and subsequent hay shortage.
• He recognizes there may be a disconnect between what happened on individual farms and the Goulbourn rain station. The contracts of insurance are based on the rainfall results at that site.
• No one connected to the Goulbourn rain station received a payout in 2005.
• Agricorp tries to pick sites in the midst of an area where it already has insured growers or where it believes there is room for growth in sales. Ideally it would put one in the middle of each geographic township, but it cannot always get landowners to cooperate.
• Approximately 1,200 growers were re-assigned to a more favourable rain station as a result of Agricorp’s communication problem.
• It is difficult to get accurate yield data on hay and that was why rainfall was measured instead.
• The Goulbourn rain station was not unique; the rain stations in the three adjacent townships also recorded more than 80% of the historical average rainfall.
• Agricorp cannot retroactively change the terms of the insurance contract.
• Approximately 240 customers did not receive a forage payment in 2005.
• Agricorp was not aware the Goulbourn rain station was close to a swimming pool; OWN had not mentioned it and neither had any of the field staff.
• Data collected at the Goulbourn station appeared to be consistent with that collected at stations in adjacent townships.
• Agricorp is a Crown agency. It files reports with the federal and provincial governments. Both levels of government had to approve changes to the insurance program.
• The Ontario Federation of Agriculture, the Ontario Forage Council, Dairy Farmers of Ontario and the Ontario Cattlemen’s Association were also consulted before changes were made to the forage program.
• OWN staff pick up electronic data and manually check the manual gauge every two weeks.

Mr. Fred Thomson indicated:

• It was difficult to compare the current program with SIMFOY as they were very different but the total claim dollars under each program could be compared. The current plan was much simpler than SIMFOY.
• Enrolment in the forage program peaked in 1988 when there was a federal assistance plan as well; it had dropped off slowly since 1988.
• The rain gauges have an 8-inch diameter opening and have to collect 6-6.5 ml water before tipping. One tip works out to 0.2 mm rain per square inch.
• Customers were not automatically rolled over from SIMFOY to the new program; they had to enter into a new contract.

Summations:

Mr. Lewis told the Tribunal that the nine appellants wanted a fair settlement of a 40% payout on the insured value of their 2005 forage crops. He said they had brought up some facts regarding the accuracy of the rain gauge and the location of the rain gauge. He said his neighbour received a payout and it was not fair that these nine forage growers did not receive a payout as well.

Mr. Thomson said it was always unfortunate when Agricorp customers feel they are not properly served by a program and he acknowledged that 2005 was a difficult year and said Agricorp had tried to improve the program for 2006. He said it delivered a total of $8.5 million dollars to forage growers in 2005, the largest he could recall, and stated that it was unfortunate that these growers cannot share in that benefit. He said that Agricorp had been clear on what it can and cannot do and he asked the Tribunal to rule in favour of Agricorp in this matter.

Mr. Henderson said he hoped the Tribunal could see that the insurance system did not reflect what happened on the farm, and submitted that none of the growers would have appealed if they did not think they were entitled to a claim.

Decision and Reasons

There was no dispute between the parties that 2005 was a generally dry year and that the nine appellants suffered drought on their farms. The disagreement lies in whether or not the growers are entitled to a payment under the contracts of insurance in place in 2005.

The contracts of insurance are based on the amount of rainfall measured at rain stations that are managed by Agricorp’s weather data supplier, OWN. The Tribunal heard a considerable amount of testimony regarding potential corruption of data collected at the Goulbourn rain station, due to its placement in a public campground, near a swimming pool. Mr. Borho’s evidence was that the rainfall measured at this station was not out of line with nearby stations. There was general agreement between the parties that rainfall was sporadic in the region in 2005. The Tribunal acknowledges that there was a concern about the data collected at the Goulbourn rain station but finds there is no substantive evidence that the rainfall was not recorded correctly.

The Tribunal notes that the 2005 forage program was relatively new and understands that many forage growers are not satisfied with it. While the policy may not be entirely fair, it was the policy that the appellants purchased and the Tribunal finds that it was applied correctly. The Tribunal agrees with the position of Agricorp that the contract cannot be changed after the fact.

Some of the appellants indicated that they were informed that rainfall would be weighted, according to the month in which it fell, when they purchased their forage insurance. Mr. Borho testified that weighting the rainfall by month would not have put the appellants into a claim position and the appellants accepted his calculation. The Tribunal finds that the appellants were not disadvantaged by the rainfall not being weighted by the month in which it fell.

ORDER OF THE TRIBUNAL

After careful consideration of the evidence and submissions made, the Tribunal decided to dismiss the appeals of Martin Fergus, Glen Featherstone, Stewart Crabb, Herb Henderson, Steven Lewis, Gordon Sample, William Sample, Audrey Bobier and Glenn Fisher.

The reasons for this decision are:

1. The appellants entered into contracts of insurance for the 2005 crop year and in so doing agreed to the terms and conditions of the contract that they signed. The terms of the contract were applied correctly both in the initial application and in the adjustment that was made by Agricorp.

2. Mr. Featherstone, one of the appellants, indicated during the course of his testimony that "the location of the rain station in Goulbourn was in a campground, 8-10 feet from a swimming pool and he was concerned that splashes from the pool were recorded" and moreover "that children at the campground could have tampered with the gauge." However, no evidence was tendered to the Tribunal to substantiate the genuineness of Mr. Featherstone's concerns. In the absence of such substantiation, the Tribunal could not accord the same any factual status thus leaving unassailed the record of rainfall at Goulbourn used by Agricorp in its determination of the qualification for insurance payments to the Appellants.

3. The growers were treated the same as all other growers under the program.

DATED AT Guelph, Ontario this 10^th day of May, 2006.