Tayside Farms v Agricorp, 2006 ONAFRAAT 19

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

APPEAL: Tayside Farms v Agricorp

NEUTRAL CITATION: 2006 ONAFRAAT 19

STATUTE: Crop Insurance Act

HEARING: May 2, 2006

DATE OF DECISION: June 27, 2006

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 John H. Miller and Karen Miller, Tayside Farms, Perth, Ontario from a decision of Agricorp concerning the adjustment of their claim for their 2005 forage crop under Regulation 380/97 and the Forage Rainfall Plan Insuring Agreement.

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

Appearances: Mr. John Miller, appellant Ms. Karen Miller, appellant Mr. Fred Thomson, on behalf of Agricorp, respondent Tim Borho, witness for Agricorp, the respondent.

DECISION OF THE TRIBUNAL

This appeal was heard in Perth, Ontario on May 2, 2006. Mr. and Ms. Miller appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from the decision of Agricorp concerning the adjustment of claim for their 2005 forage crop.

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

Are Mr. and Ms. Miller entitled to re-adjustment of their 2005 forage claim, and if so, what rationale should be applied in making the adjustment of claim?

Preliminary Matter

Mr. Fred Thomson requested that Mr. Miller’s letter to the Agricorp Issues Review Committee dated November 24, 2005 be introduced as evidence. It was Agricorp’s position that the letter from Mr. Miller provided a background of events leading to the appeal. Mr. Miller did not object to the introduction of the letter. The panel of the Tribunal admitted Mr. Miller’s November 24, 2005 letter to the Agricorp Issues Review Committee.

The Evidence

Mr. John Miller stated in his opening comments that he had purchased crop insurance from Agricorp every year for the last 35 years. He stated that he was one of the initial customers for the forage program; he relied upon crop insurance as a risk management tool. Mr. Miller told the Tribunal that he understands that under the forage plan, drought is the only insured peril. Mr. Miller explained that he takes no issue with Agricorp’s method of determining rain fall, however, his appeal is based on Agricorp’s neglecting to inform him of the existence of rain stations that he may have selected for the adjustment of his 2005 forage claim. Mr. Miller told the Tribunal that his farm occupies lands spread out over several municipalities. He stated that the hay crop suffered from level three drought in 2005.

Mr. Fred Thomson stated that Agricorp acknowledged that the region where Mr. Miller’s farm was located produced lower than average quantities of forage in 2005. He stated that Agricorp had discovered administrative errors in the forage program at the close of the growing season, but had made every effort to correct the errors in the discharging its obligations to its customers.

John and Karen Miller

Mr. John Miller submitted to the Tribunal that his farm management practices include methods of farming that are sensitive to the environment and ground water management. He submitted that his cow calf operation produces 210 calves each year; in addition to forage he grows corn, barley, wheat and soybeans. Mr. Miller submitted that he has been involved in local associations and committees whose purpose is to provide advocacy and education on numerous aspects of farm management and environmental stewardship.

Mr. Miller explained to the Tribunal that he and his wife had relied on the protection of crop insurance for many years. He said that he and his wife farm approximately 1100 acres located in several geographical townships. He stated that the forage program was changed in 2004. Mr. Miller told the Tribunal that initially, under the revised forage program Agricorp gave him a choice of two rain stations where rain fall data would be collected to determine the level of insured peril under the forage plan. He stated that there are numerous microclimates within the area where he farms and that the rain stations maintained by Agricorp do not adequately capture the various weather patterns in the region. Mr. Miller told the Tribunal that he has repeatedly requested that Agricorp create a rain station in North Burgess Township; a rain station located there would more accurately reflect the conditions at his farm locations. He said that Agricorp has not set one up. Mr. Miller said that, of the two rain stations from which he could choose, one was located near Balderson and one was located near Rideau Ferry.

Mr. Miller explained to the Tribunal that:

In the spring of 2005, he received a confirmation of forage insurance with information to contact Agricorp about a new rain station in his area that he could select for rainfall data under the plan.
He telephoned Agricorp for further information about the new rain station and was notified that his choice could include the rain station known as Bathurst 7009351.
He chose rain station Bathurst 7009351. In the year previous he had chosen Elmsley 7061152 rain station.
At the time that he was notified of his eligibility to choose the Bathurst 7009351 station, he was not notified that there were also three other rain stations that he could have chosen from.
In the spring of 2005 the weather was cold with little rain causing uneven germination of seed; the drought continued into the summer and the crop was stunted.
Pasture grasses were so scarce that his cattle ate it all by early July. On July 12, 2005 he and his wife had to begin feeding the cattle the forage that was reserved for winter feeding. They began hauling drinking water to the cattle in July also.
They had cropped only 60 percent of the hay needed for winter 2005/2006 and they were feeding it to cattle in July 2005.
It cost $33,950 to feed the cattle because of the lack of forage.
Agricorp paid his claim for forage based on the weather data recorded at Bathurst 7009351 rain station.
The rain that fell in the spring and summer of 2005 fell in the area north of highway 7 which was recorded at the rain stations that were located north and east of the town of Perth, Ontario.
In the Townships of North Bathurst and South Elmsley rainfall in 2005 was only 40 percent of normal.
His home farm is located closer to the Bathurst 7009351 rain station, however, he rents pasture land that is located south of the Bathurst 7009351 rain station.
A neighbour was re-assigned to a rain station by Agricorp. The re-assignment resulted in a claim payment level of 54 percent of total coverage under the plan.
Another neighbour did not realize that he had not been re-assigned by Agricorp to Bathurst 7009351 rain station; the neighbour was paid a claim based on the weather data recorded at Elmsley 7061152.
In the summer of 2005 the rain fell in narrow bands from activity that had its start in Kincardine, Ontario. Storm fronts moving eastward reach the Perth area from Kincardine about 36 hours later.
Ms. Miller works off farm; she has reported rainfall 6 km away; at the same time the home farm received no rain.
His Bank Manager expressed his puzzlement and concern that Tayside Farms’ forage claim was not calculated based on the data recorded at the rain station that claims for neighbouring farmers’ claims were calculated.

Mr. Miller submitted a rainfall chart with rainfall measurements taken weekly from June 16, 2005 until September 24, 2005. He submitted that the rainfall charted was recorded by the Department of Engineering, Queen’s University. Mr. Miller told the Tribunal that the rainfall data was recorded at a location close to his farm. He submitted excerpts from a ground water movement study made by the Ministry of the Environment. Mr. Miller said that the ground water movement study was prepared at a location just west of his home farm. Mr. Miller said that the ground water study and the rainfall chart indicated that there was a difference in levels of precipitation; the site of the ground water study was located 500 m from the site where the rainfall data was collected by Queen’s University. He said that the machinery used by Queen’s University to measure the rainfall was professionally calibrated.

Mr. Miller stated that despite the mental and financial hardship brought on by the drought in summer 2005, he and his wife decided to maintain their livestock herd. He stated that in addition to feed that was produced on the farm, it cost $34,000 to feed their cattle. Mr. Miller told the Tribunal that he also sent heifers off farm to be fed.

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

The site where the rainfall data was recorded by Queen’s University was located 13 km southwest of the location of the rain station where data for his forage plan was gathered.
He was not able to ascertain the quantity of rain that fell from June 16, 2005 through August 31, 2005 based on the Queen’s University chart.
There is a disclaimer printed on the Ministry of the Environment’s report that the information may contain errors or omissions.
In May 2004 he met with a representative of Agricorp to sign up for the forage program; it was explained to him at the time that he was permitted to choose the rain station where data would be gathered for his forage plan. In May 2004 he chose the South Elmsley rain station (Elmsley 7061152).
Upon receipt of Agricorp’s letter dated April 12, 2005 stating that a new rain station was added within his township, he telephoned Agricorp and was told that a new station was available; it was Bathurst 7009351 rain station. He chose Bathurst 7009351 rain station for his 2005 forage plan.
Bathurst 7009351 rain station is located 6 km from his home farm.
He calculated that if he had stayed with the Elmsley 7061152 rain station, he would have received approximately $10,000 in addition to the claim paid.
He believed the choice of Bathurst 7009351 rain station was a prudent business decision, however, he did not know of the existence of other stations that he could have chosen from at the time.
He spoke with neighbours who had purchased the forage plan, and found that some of them did not realize that they had been reassigned to weather stations by Agricorp. One neighbour had been re-assigned to a rain station less than a kilometer from his farm.
He lives in Lanark County which is known for its irregular rainfall.
The Elmsley 7061152 rain station was more representative of the conditions he experienced at his farms than the Bathurst 7009351 rain station.
The Big Rideau Lake system creates a microclimate so that the weather at the south end of the lake system may not be the same as the weather at the north end of the system.
He did not realize the ramifications of requesting Bathurst 7009351 rain station.
The site where Queen’s University recorded data is north of Highway 7. Most of Agricorp’s rain stations are located north of Highway 7.
His operation is self sufficient; he produces all the necessary cattle feed in years when the weather is normal. There are no off farm feed costs in normal years. He produces top quality forage eliminating the need for purchasing protein supplements.
When the Agricorp representative visited the farm in Spring 2004, he was fully aware that the only insured peril under the forage plan is drought.

Mr. Tim Borho testified before the Tribunal. He stated that he is the Account Lead and administers the forage rainfall plan. He explained that he oversees the delivery of the plan. Mr. Borho told the Tribunal that he was raised on a dairy farm and holds a degree in Crop Science from the University of Guelph. Mr. Borho told the Tribunal that he has also produced cash crops in addition to growing 100 acres of hay and 200 acres of pasture.

Mr. Borho told the Tribunal that:

Generally, rainfall is the major factor affecting the production of forage, however, the timing of the rainfall, species, hours of daylight and presence of frost or winter kill also impacts forage growth.
Agricorp forage plan customers choose the rain station where the data for the insured peril is gathered.
Drought is the only insured peril under the Agricorp forage plan. Sometimes the rainfall station data does not reflect the weather conditions experienced at farms that are tied to it.
Agricorp locates its rain stations within its own plan of geographical townships, rather than existing municipal townships in Ontario. Customers may choose the rain station located in the same township as their farm or any township adjacent to the farm’s township.
Rain fall data for the program is collected from May 1 through August 31. The program caps rainfall at 70 mm per day or 125 percent of the total long term monthly average.
Agricorp contracts with the Ontario Weather Network to provide professional weather data collection. Weather data is collected bi-weekly.
Crop insurance is issued pursuant to the Crop Insurance Act.
Customers are provided with Agricorp’s policy book when they sign up for crop insurance. Each year, Agricorp mails to its customers any amendments to its insuring agreements.
When an individual indicates that he/she wishes to purchase crop insurance, they are visited by an Agricorp representative who explains the plan and shows them area maps indicating the location of the rain stations that are available. The customer chooses the rain station for their plan.
Customers have a choice of any rain station within the township where their farm is located or within any township that is adjacent to the home farm township.
Customers are considered by Agricorp to have renewed their coverage from one year to the next, unless they cancel coverage in writing. The deadline for canceling insurance coverage is April 1 each year.
The deadline for changing selection of rain station is May 1, each year.
Agricorp does not make the changes to rain stations without the customer’s knowledge.
The cool dry spring of 2005 followed by a hot dry summer, affected the forage yield. In some areas, winter kill may also have been a factor affecting yield.
In 2005 Agricorp informed new customers of available rain stations; it also informed its repeat customers of the availability of new rain stations within their townships, however, repeat customers were not informed of new rain stations in adjacent townships.
Prior to making the first of its payments against claims in October, 2005, Agricorp held public meetings where it was explained to customers how the plan worked, and why the claims were calculated as they were.
In October 2005, Agricorp made claim payments to 1,650 forage customers in the amount of $4.2 million. A second round of adjustments against claims was paid to 1,410 customers in the amount of $4.3 million.
The second round of payments were made based on Agricorp’s adjustment of claim based on the rain stations that were available to existing customers who were not aware of the existence of the rain stations in adjacent townships when they signed onto the plan.
Mr. Miller’s operation is spread over a few townships; however, customers are limited to a choice of only one rain station under the plan.
In 2004 Mr. Miller chose South Elmsley rain station (Elmsley 7061152) but he switched to Bathurst 7009351 for 2005.
The weather network service recorded 229.4 ml of rain at Bathurst 7009351 rain station for the period of May 1, to August 31 2005. The data was capped at 227 ml which is consistent with the data recorded on the Queen’s University chart as submitted by Mr. Miller.
Agricorp acknowledges that there was a drought in Eastern Ontario in 2005.
Agricorp paid a claim to Tayside Farms in the first round of claim payments in October 2005.
The data accuracy disclaimer on the Ministry of the Environment groundwater study indicates that the data is not reliable.

Mr. Borho responded to questions that:

Agricorp purchases rainfall data from The Ontario Weather Network to administer its forage plan. The Ontario Weather Network owns the data; therefore it was not included in Agricrop’s submission.
The rain stations are equipped with three devices that record rainfall; there is always a back up if one of the devices fails.
Insurance must be cancelled in writing by the customer prior to April 1 each year. Payment of the premium is considered acceptance of the contract of insurance.
Agricorp Field Staff make recommendations on where to locate rain stations. There are not enough customers in North Burgess Township to justify the installation of a rain station there.
It is approximately 4 km as the crow flies, from Bathurst 7009351 rain station to Mr. Miller’s home farm.
Agricorp issued a letter to customers dated April 12, 2005 informing them that new rain stations may be available in their township. The letter advised customers to call the Agricorp Call Center if they wanted more information.
Agricorp informed customers by way of letter dated December 20, 2005 that approximately 1,300 customers would be re-assigned to rain stations that paid them a higher claim.
Mr. Miller telephoned the Agricorp Call Center in response to the April 12, 2005 letter from Agricorp requesting that he call to obtain more information about a new rain station in his township. A review of the audio tape of the call indicates that he was suitably advised by the Agricorp Client Service Representative who handled the call.
The letter dated April 12, 2005 informing customers of new rain stations could have been more specific and detailed.
Agricorp determined that any customers who had changed rain stations had been informed of the available rain stations in order to make an informed choice on which rain station to select.
Agricorp informed customers of the status of their claim re-adjustment by way of letter dated January 23, 2006.

Mr. Fred Thomson responded to questions on behalf of Agricorp. He told the Tribunal that:

Agricorp is confident that the data recorded at Bathurst 7009351 rain station is accurate.
Agricorp Regional Managers deploy Agricorp Field Staff to make farm visits to sign up new forage insurance customers. New customers are provided with information about the forage plan and provided with maps of the region where their farm is located with respect to the available rain stations.
Winter-kill is not an insured peril under the forage plan.
Payment of premium is deemed to be acceptance of the policy.
Mr. and Ms. Miller were not reassigned to another rain station because knowledge of other eligible stations was implicit in their having switched to Bathurst 700935 in 2005 from Elmsley 7061152, their choice in 2004.
A tape of Mr. Miller’s call to the Agricorp Call Center was reviewed. It was determined that the Agricorp Representative who took his call to change his rain station to Bathurst 700935, gave the appropriate information. Mr. Miller was not persuaded to change rain stations.
Agricorp obtains actuarial advice in establishing its premium prices, however, it does not do so for the calculation of claims.

In closing, Mr. Miller told the Tribunal there was a level three drought in his area in 2005. He said that the payment on the claim was not indicative of the severity of the drought conditions. Mr. Miller argued that Agricorp did not point out all the rain stations for which he was eligible to choose in 2005. He said that he had repeatedly asked Agricorp to make an adjustment to the plan that would give consideration to the fact that his operation is spread out across several townships. Mr. Miller told the Tribunal that a neighbour’s claim had been adjusted based on his being re-assigned to another rain station. He maintained that Agricorp had not provided him with complete information on available rain stations.

Mr. Fred Thomson made closing arguments on behalf of Agricorp. He told the Tribunal that Agricorp acknowledges that 2005 was a poor year for forage production in the region where Mr. Miller farms. He stated that Agricorp was diligent in addressing administrative issues that led to the re-assignment of customers to rain stations with data that resulted in higher claim payments. He told the Tribunal that Agricorp had a legally binding contract of insurance with Mr. and Ms. Miller in 2005. He said that Mr. and Ms. Miller were asking for results that were outside the provisions of the contract. Mr. Thomson said that the provisions of the contract are not negotiable. He pointed out that the data contained in the rain fall chart prepared by Queen’s University was recorded at a site very close to the rain station that Mr. and Ms. Miller chose for 2005. Mr. Thomson requested that the Tribunal rule in favour of Agricorp in denying the appeal.

Findings

The Tribunal accepts the evidence that a contract of insurance was in place as of April 1, 2005. There were no allegations of any party breaching the contract. Agricorp acknowledged that there was an administrative problem with the 2005 forage plan and it employed measures to inform customers of the situation and to remedy the problem. There was no indication that the amended contract of insurance mailed annually by Agricorp to its customers was not received by Mr. Miller. The Tribunal accepts the evidence with respect to the documents and letters that Agricorp sends to its customers each year, and is convinced that Mr. Miller, a long time farmer and customer of Agricorp, understood the contents of the documents that were mailed to him annually, as well as the letters sent to him in 2005 and 2006 explaining the circumstances with respect to Agricorp’s correction of the administrative error that occurred with the 2005 forage plan. The Tribunal is satisfied that Mr. Miller understood that the only insured peril under the plan is drought.

It is the finding of this Tribunal, that although Agricorp made efforts to address the issue of the administrative error, Mr. Borho’s evidence with respect to the information supplied to Mr. Miller when he contacted the Call Center in response to Agricorp’s letter of April 12, 2005 does not unequivocally indicate that Mr. Miller was fully apprised of all rain stations that he may have selected from.

It is clear that the area of Eastern Ontario, where Tayside Farms is located was affected by drought in 2005. The evidence of the parties was that the drought affected the yields for forage to the extent that approximately $8 million in claims were paid. Mr. Miller’s yield was approximately 60 percent of normal. Mr. Miller had to feed his cattle on forage that was meant to be stored and fed in the winter of 2005-2006.

The Tribunal finds that the parties did not dispute the accuracy of the data that was collected at rain stations. The data collected by Queen’s University indicated rain fall that was similar to the rain fall indicated by data collected at the rain station Bathurst 700935.

Mr. Miller presented evidence to indicate that he purchased forage insurance as part of his farm management plan and that he chose Bathurst 700935 rain station when he was informed that it was available. His evidence however, did not indicate that he switched to Bathurst 700935 due to any dissatisfaction with the way rainfall was reflected in data recorded at Elmsley 7061152. Mr. Miller submitted that he had repeatedly requested that Agricorp set up a rain station in the geographic township of Burgess because he believed a rain station located there, would most accurately indicate the rainfall patterns that occurred at the various locations of his farms.

Mr. Miller’s evidence was that he chose a rain station based on sound farm management risk assessment. His choice was based on the rain station that he thought would best reflect the rainfall at his farms. The Tribunal finds that his choice was limited to only two rain stations, as opposed to the rain stations that were available for him to select from that were located in his township and adjacent townships.

The Tribunal heard how Agricorp corrected the administrative error by re-adjusting and paying claims to forage plan customers who were not fully apprised of the complete list of rain stations from which they could choose. It is not convinced that Mr. Miller was treated equitably with other customers as he was not fully informed of the complete list of rain stations from which he could have chosen.

Decision and Reasons

The Tribunal orders that Mr. and Ms. Miller’s claim for forage 2005 be readjusted based on the rainfall data from Elmsley rainfall station.

The reasons for this decision are evident in the findings above.

DATED AT Guelph, Ontario this the 27th day of June, 2006.