Leeds Belrock Farm Ltd. v. Agricorp, 2006 ONAFRAAT 20

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

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West 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: Leeds Belrock Farm Ltd. v Agricorp

Leeds Belrock Farm Ltd. v Agricorp 2006 ONAFRAAT 20

STATUTE: Crop Insurance Act

HEARING: June 8, 2006

DATE OF DECISION: June 30, 2006

2006-20

NEUTRAL CITATION: 2006 ONAFRAAT 20

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 Leeds Belrock Farm Ltd., Portland, Ontario from a decision of Agricorp regarding the adjustment of its claim for its 2005 forage crop under Regulation 380/97 and the Forage Rainfall Plan Insuring Agreement.

Before: Rod Stork, Chair; Gene Trotman, Vice Chair; Denis Perrault, Member

Appearances: Dr. Robert Rinfret, representing the appellant, Leeds Belrock Farm Ltd. Peter Wechselmann, counsel to the respondent, Agricorp Paul Patterson, Leeds Belrock Farm Ltd., appellant Fred Thomson, Agricorp, respondent Tim Borho, Agricorp, respondent

DECISION OF THE TRIBUNAL

This appeal was heard in Forfar, Ontario on Thursday, June 8, 2006. Mr. Paul Patterson, on behalf of Leeds Belrock Farm Ltd., appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal) from the adjustment of the company’s crop insurance claim on the 2005 forage crops.

Preliminary Matters

Both parties sought to introduce additional documentation at the onset of the hearing. There were no objections and the Tribunal accepted theses documents, attaching them to documentary evidence which was circulated in advance of the hearing.

Mr. Peter Wechselmann asked the Tribunal to dismiss the appeal either on the ground that it lacked the jurisdiction to hear the matter or on the ground that there was no tryable issue. Alternatively, he asked that the Tribunal limit the scope of the hearing.

Mr. Wechselmann submitted that the materials submitted by the appellant indicated dissatisfaction with the 2005 forage program, material related to the 2006 forage plan and a claim that a letter sent by Agricorp, dated April 12, 2005, was not received. He argued that the Tribunal did not have the jurisdiction to amend the forage insurance policy offered by Agricorp in 2005 and that the material related to the 2006 policy was irrelevant. He said that Agricorp would show that it sent the letter in question to Mr. Patterson and he was deemed to have received it seven days later, under Part 1, Section O of the contract of insurance.

Mr. Wechselmann said the Tribunal could only address the question of the adjustment of loss on the forage policy and said that there was no dispute in that regard as Agricorp agreed with the mathematical calculations made by the appellant. He said the only dispute was over which rain station was to be used in adjusting the claim and that was a matter of interpretation of the contract of insurance, not a dispute with regard to the manner in which the claim is to be adjusted.

Mr. Wechselmann asked that if the Tribunal did not agree that it lacked jurisdiction or that there was no tryable issue, that it limit the scope of the hearing to determine whether the letter notifying Mr. Patterson of an additional rain station was adequately served or not. He said he did not want to deal with the issue of the fairness of the forage plan. He referenced two cases where the Tribunal found that it could not amend the terms of the contract of insurance.

Dr. Robert Rinfret replied that it was not simply a matter of whether or not the contract of insurance was fair. He said the appellant felt the contract was not fulfilled properly as Agricorp did not send the letter outlining Leeds Belrock Farm Ltd.’s options at an appropriate time. He agreed that the question as to when the letter was sent and received was one of the main points but said he did not want the scope of the hearing to be limited to that one issue.

The Tribunal indicated there was a matter of law and a matter of equity to be considered and did not agree that it did not have the jurisdiction to hear the dispute with regard to the adjustment of the appellant’s claim on the 2005 forage crop. The Tribunal directed the appellant that the onus was on him to show the Tribunal why the claim should be adjusted in the manner he preferred.

The Tribunal noted that it was aware that 2005 had been a difficult year and that both parties agreed on this point. The Tribunal also stressed that its hearing was a hearing de novo (new hearing) and the parties should not assume it had any knowledge of an earlier proceeding before Agricorp’s internal review committee.

Mr. Wechselmann said Agricorp would stipulate that if the appellant had chosen a different rain station he would have received a larger payment on the claim. He said the parties agreed on the math.

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 in this matter were:

1. Did Agricorp adequately communicate to Mr. Patterson of the Leeds Belrock Farm Ltd. the rainfall station options in 2005 so as to allow him to make an informed choice? If the answer to this issue is in the affirmative there will be no need to proceed to Issue 2.

2. If the answer to issue (1) one is in the negative, then, this triggers the second issue which simply put is as follow: Should Leeds Belrock Farm Ltd. receive a higher adjustment of its claim for its 2005 forage crop under Regulation 380/97 and the Forage Rainfall Plan Insuring Agreement?

The Evidence

Appellant’s Case

Dr. Rinfret told the Tribunal he was very familiar with the appellant’s situation and had assisted Mr. Patterson in preparing his case. He and Mr. Paul Patterson testified together.

Dr. Rinfret said:

• The policy of insurance provided that if the rainfall measured at specific rain stations between May and August is less than 80% of historic average Agricorp will pay a claim.
• Agricorp claimed that it sent a letter to Mr. Patterson, allowing him to change to the Bastard rain station, which was new in 2005, but that letter was not received and Leeds Belrock Farm Ltd. was left on the South Crosby station.
• The adjustment of the claim using the South Crosby rain station was $726; the payment would have been $5,358 if the Bastard rain station had been used.
• The difference in rainfall between the two stations was over 40% of the rainfall that the Bastard station received in the whole season.
• Agricorp should have taken steps to ensure this important letter arrived. It could have been sent by courier or registered mail or the adjuster could have made a phone call or farm visit to ensure the information was received.
• It was impossible to prove the letter was not received but Agricorp’s assumption that letters get through was faulty.
• A letter sent by the Tribunal with an incorrect postal code was received; a package sent by Agricorp was received but was 20 hours late.
• Agricorp acknowledged in a letter dated December 20, 2005 that it did not adequately communicate the option to change rain stations and it therefore reassigned 1,300 forage growers, 79% of its forage customers, to the most beneficial station that they could have chosen.
• He understood some customers were not even sent letters.
• The Patterson family has had to purchase hay since late 2005.
• The 2005 forage yield was one third of the yield of the two previous years – baling records were referenced.
• The rainfall shortage encountered in 2005 is why the appellant purchases insurance from Agricorp.

In response to questions from Mr. Wechselmann, Dr. Rinfret and Mr. Patterson indicated:

• They had written a letter to Ms. Heather Van Kooy, Agricorp together.
• Leeds Belrock Farm Ltd.’s claim was paid but they sought an additional payment as the claim should have been paid on the basis of rainfall recorded at the Bastard rain station.
• They did not agree that Agricorp had mailed the letter dated April 12, 2005. The address on the letter was correct.
• Prior to January 23, 2006, Mr. Patterson was not aware that some forage growers could pick a different rain station. His brother heard at a hockey game sometime after Christmas that a neighbour received an enhanced claim. He read in a newspaper that the process was being adjusted and Agricorp was making additional payments on claims.
• Mr. Patterson thought his company would receive an additional payment from Agricorp because it had been a bad year with little rain and everyone around them was getting additional payments.
• Both Dr. Rinfret and Mr. Patterson thought the April 12, 2005 letter was ambiguous and did not convey a sense of urgency. They acknowledged it did advise customers to call Agricorp for more information.
• Had the letter been received, it only provided 19 days to change the rain station and that was not enough time.
• They did not know if the letter was sent or not but it was not received. Agricorp was a big company and mistakes could be made.
• Mr. Patterson had received other documents from Agricorp. He was not aware of other mail not being received but would not necessarily know if any were not delivered. No one was telling him their bills had not been paid.
• His address had not been changed in the past year.
• If Agricorp followed the requirements of Section O of the contract of insurance it would have fulfilled its duty under that clause.
• Leeds Belrock Farm Ltd. was still attached to the South Crosby rain station for 2006. Mr. Patterson had tried to change the rain station but did not reach the correct person at Agricorp.

In response to questions from the Tribunal, Mr. Patterson indicated:

• Mr. Patterson’s father had purchased forage insurance for many years. Mr. Patterson and his brother had purchased it in the past.

• Mr. Patterson was aware the forage program was changed in 2004. Bill White, an Agricorp adjuster from Western Ontario came to his farm that year.

• He remembered a letter coming asking if he wanted to renew the insurance for 2005 and knew a cheque, to cover premiums, had been written to Agricorp but did not recall when this happened.

• His family met each morning to discuss the management of the farm. His mother writes cheques but before anything is signed everything is talked over. She also deposited cheques but everyone in the family was aware of cheques that were sent and received.

• He knew a claim cheque from Agricorp was received but was not sure when. It did not hit him until January 2006 that he would not get any more money from Agricorp.

• He did not know about the Bastard station in 2005.

• He hayed right into November. His first crop was normal and was used to fill silos. Then it got dry and he did not know what he as going to do. He expected that Agricorp would pay his claim.

• His hay fields were spread out, with at least ten miles between them. He grew 150 acres of hay in rotation with corn and soybeans.

• He did not receive a crop insurance payment on corn in 2005.

• Having heard Mr. Borho describe the insurance renewal letter and related information sheets that had been mailed to all forage customers from 2004, Mr. Patterson indicated that he did remember receiving this package.

In response to a question by the Tribunal, Dr. Rinfret stated the Patterson farm was slightly closer to the South Crosby rain station, as the crow flies.

Agricorp Case

Mr. Tim Borho testified that he was Agricorp’s Account Lead for Livestock, which includes the forage plan, and it was his job to ensure the plan is administered properly and forms and letters are sent out at the correct times. He said his predecessor had sent the letter dated April 12, 2005 to Mr. Patterson and that he had reviewed the records and was confident it was sent. He said it was addressed to the insured grower and sent to the address of record. Mr. Borho said Agricorp sent out 192 letters f this nature in total and there was no record of any of them being returned by Canada Post. He said the normal process is that the originator of the letter receives back any returned mail.

In response to questions from Dr. Rinfret, Mr. Borho indicated:

• The 192 letters were sent to customers who bought forage insurance in 2004 who lived in geographic townships which received new rain stations in 2005.
• The communication problem he referred to in his letters was that customers who lived in geographic townships adjacent to those which received new rain stations in 2005 were not sent letters but should have been. They would have had the option to select one of those new stations or staying with the station already assigned to them.
• There were 800 customers who should have been notified about new rain stations; only 192 were notified.
• Mr. Patterson’s farm is in the geographic township of Bastard. Mr. Borho identified the adjacent townships.
• He discovered the communication problem in October 2005 when customers telephoned him about it.
• The 192 letters that were sent were all sent to the printer together through a mail merge function. After letters are mailed an electronic mail confirmation is sent to the originator of the letters. He was confident that all 192 letters were mailed.
• His experience of Agricorp’s system was that letters get mailed. He had not personally received any returned mail but was aware of the process for directing returned mail to the originator.
• Agricorp has personalized letters listing each available rain station for the 2006 forage plan. A new factsheet on changes to the forage program was also sent out. It is updating its website to include a map depicting the rain stations.
• The letter sent on April 12, 2005 was important. He would send that type of letter by regular mail.
• The appellant’s claim was handled properly, the same way that thousands of other claims were processed.

Mr. Borho clarified that:

• The communication problem he referenced in his letters was not related to mailing letters.
• He had no reason to suspect any irregularities in the delivery of the 192 letters sent on April 12, 2005. None were returned to Agricorp.
• Agricorp had no plans to change its mailing practices as by and large they worked.
• Using regular mail was a normal business practice.

In response to questions of clarification from the Tribunal, Mr. Borho indicated:

• The appellant was not the only customer who did not respond to the April 12, 2005 letter; no follow up on non-respondents was undertaken.

• He had heard from other clients who either claimed they did not receive their letter or said they did receive it but were still dissatisfied with their claim payment.

• There were approximately 300 new forage customers in 2005 and approximately 60 customers who switched rain stations. These growers’ claims were not adjusted by Agricorp as it was clear they knew their options with regard to rain stations.

• The 2005 renewal letter, with enclosures, was mailed before the letters dated April 12, 2005. It was sent to all Agricorp customers who purchased forage insurance in 2004.

• If an envelope is returned to Agricorp it is sent to the Account Lead. The Account Lead follows up with the customer.

• Existing customers have a computer file with Agricorp. New information on the customer is added to the existing file.

• Invoices for the 2005 forage plan were sent out in the first week of April.

• The appellant’s claim payment was approved on October 4, 2005 and would have been mailed one or two days later.

• Data on the rainfall recorded at each rain station is posted on Agricorp’s website. Agricorp does not have historic data for rain stations, just counties.

• Customers can select a rain station in their own geographic township or adjacent townships. This is partly because they may have more land cropped in an adjacent township.

Mr. Borho also indicated:

• He was not aware of any problems in the Agricorp mail room.
• He did not know how many other customers claimed not to have received the letter dated April 12, 2005.

Summations

Dr. Rinfret told the Tribunal that Mr. Patterson had not received the April 12, 2005 letter from Agricorp and submitted that just because he received other mail from Agricorp that did not mean that particular letter was delivered. He pointed out that Agricorp had admitted that it did not send this letter to 600 customers who should have received it and admitted it had heard from other customers who were sent the letter but did not receive it. He argued that Agricorp had failed to ensure the delivery of this important letter and that as a result Mr. Patterson and his family were not made aware of the option of selecting the Bastard rain station. He said they wanted to be treated the same way as other forage growers and asked the Tribunal to order Agricorp to calculate the claim payment using the rainfall recorded at the Bastard rain station.

Mr. Wechselmann said the Tribunal needed to decide if the April 12, 2005 letter was sent or received and if Agricorp had fulfilled its obligations under the contract of insurance. He submitted that Agricorp treated all its customers the same. He said Agricorp sent letters to customers informing them of their option of switching rain stations and that by law its contract obligations were met. He said Agricorp sees this as an important issue because as a business entity it does not usually use registered mail to advise customers of their options and it needed to know if it can rely on the contract of insurance.

Mr. Wechselmann said the circumstances in this case were unfortunate and said Agricorp knew its 2005 forage program did not meet expectations and that rainfall came at the wrong time in 2005.

Mr. Wechselmann argued that the evidence of Agricorp was that mail merging occurred and mail went out to the address of record for Leeds Belrock Farm Ltd. and no mail was returned. He suggested there was no reason to believe that the letter was not sent and received and theorized that the letter may have been seen by another member of the Patterson family and set aside, or Mr. Patterson may have seen it and forgotten about it. Mr. Wechselmann submitted it was hard to believe that Mr. Patterson did not know until January 3, 2006 that Agricorp was re-calculating some of the 2005 forage claims. He said Mr. Patterson had testified he was expecting another cheque and submitted there was no reason for him to expect a second cheque once Agricorp has paid his claim.

Mr. Wechselmann said that Agricorp could not be expected to take actions outside of its contractual obligations or it would not have to live up to its contracts. He argued that Agricorp cannot be responsible for post office, couriers or the like. He said the appellant was asking Agricorp to adopt an unreasonable business practice with its mass mailings if they were all to be sent by registered mail or if follow up calls were to be made to each non-respondent. He said that is why there are deeming provisions in the contract of insurance and the appellant’s suggested practice was not what the 2005 forage contract called for. He submitted that, on the balance of probabilities the appellant had not proven his case and asked the Tribunal to dismiss the appeal.

Dr. Rinfret clarified that he was not asking Agricorp to change its procedures, just to fulfill their contract. He said that mail was not received and Agricorp had not proven that it was sent out. Mr. Wechselmann responded that Agricorp did fulfil its contract.

Findings

The Tribunal heard from the appellant in this matter that a letter informing the company of a new rain station available in its geographic township was not received in Spring 2005 and it therefore did not have the option of selecting the Bastard rain station. Mr. Patterson acknowledged receiving other correspondence related to the forage insurance plan from Agricorp that Spring. The witness for Agricorp testified that the letter in question was sent to Leeds Belrock Farm Ltd. in a mass mailing of 192 letters all dated April 12, 2005. The Tribunal heard from Mr. Borho that electronic confirmation of the mailing of 192 letters was generated, but no record of this electronic confirmation was provided to the Tribunal. Part I, Section O of the contract of insurance provides that “mailed notice shall be deemed to be received seven (7) days after it is mailed.”

When the object and the purpose of Agricorp are considered and indeed the reliance on it by its customers, it is fair to say that Agricorp is in a fiduciary like position vis-a vis its customers. Communications between it and its customers should be such that room for errors and omission are non existent. Agricorp by communicating with 192 of its customers in 2005 when 800 should have been communicated with manifestly demonstrates that its communication was less than adequate for that year.

According to Agricorp, the appellant was not the only one that did not respond to notices and when that happened there was no follow up to determine the reason therefore. This seems to be another weakness in Agricorp’s communication strategy. Being in a position of superior knowledge with respect to rain stations etc, Agricorp had an obligation to insure that all its customers remained fully informed at all times with respect to the insurance they carried and the options available thereunder. This will ensure that there was a meeting of the minds between the contracting parties and disputes will be reduced to a minimum if not completely eliminated.

Having found that Agricorp did not adequately communicate to the Leeds Belrock Farm Ltd., the second issue as to whether the Leeds Belrock Farm Ltd. should receive a higher adjustment of its claim for its 2005 forage crop must likewise be answered in the affirmative. The Leeds Belrock Farm Ltd. claim should be adjusted using the Bastard rain station as it was an option opened to it but due to communication problems with Agricorp that was not done.

The Tribunal is not persuaded that the insured grower was made fully aware of the option of changing rain stations in 2005. Mr. Patterson did not contact Agricorp in Spring 2005 regarding his company’s assigned rain station. Agricorp did not follow up to enquire as to why he did not. As Agricorp had superior knowledge of the contact of insurance, and the location of the rain stations, the Tribunal finds that the benefit should go to the grower.

There was no dispute as to the fact that Leeds Belrock Farm Ltd was affected by drought in 2005.

The Tribunal finds that the claim of this appellant should be adjusted such that Leeds Belrock Farm Ltd. is assigned to the Bastard station, which is the rain station that would have been most beneficial to it, had it been able to make an informed choice in Spring 2005. This grower should be treated in a manner that is consistent with growers who were not sent a letter informing them of new rain stations.

Decision and Reasons

After careful consideration of the evidence and submissions made, the Tribunal decided to grant the appeal of Leeds Belrock Farm Ltd.

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

ORDER OF THE TRIBUNAL

The Tribunal orders that the appellant’s crop insurance claim for forage grown in 2005 be readjusted based on the rainfall data from Bastard rain fall station.

Dated at Guelph, Ontario this 30th day of June, 2006

DISSENTING OPINION AND REASONS

It is my opinion that the letter of April 12, 2005 to Mr. Patterson from Agricorp was mailed. While I acknowledge that electronic conformation of this mailing was not in evidence, I have no reason to doubt that Leeds Belrock Farm Ltd. was not included in the mass mailing of 192 letters. Mr. Patterson indicated that he had received all pre and post April 12, 2005 mailings from Agricorp. This included renewal information, claim cheque and letters of December 2005 and January 2006 providing Agricorp’s response to communications issues identified by Agricorp’s clients. Part 1, Section O of the contract of insurance details normal business practices with regard to how a contract is fulfilled.

I concur with the position put forward by Agricorp that, upon receipt of the April 12, 2005 letter, the onus shifted to Leeds Belrock Farm Ltd to follow up with Agricorp, determine the exact location of the new rain station and then make an informed decision as to whether or not to switch to the Bastard station from the South Crosby station.

I would not have allowed the appeal.

DATED AT Guelph, Ontario this 30th day of June, 2006.