Agriculture, Food and Rural Affairs Appeal Tribunal
1Stone 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:
Pohorly v Agricorp
Pohorly v Agricorp
2006 ONAFRAAT 09
STATUTE:
Crop Insurance Act
HEARING:
March 27, 2006
DATE OF DECISION:
April 18, 2006
2006-09
NEUTRAL CITATION:
2006 ONAFRAAT 09
IN THE MATTER OF Ontario Regulation 140/96 under the Crop Insurance Act (Ontario) 1996, S.O. 1996, C. 17, Schedule C.
AND IN THE MATTER OF: An appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by Frank Pohorly, Niagara on the Lake, Ontario from a decision of AGRICORP concerning the adjustment of his claim for his 2005 grape crop under Regulation 380/97 and the Fruit Crops Insuring Agreement.
Before:
Rod Stork, Chair; Kirk Walstedt, Vice Chair; Claire Belluz, Member.
Appearances:
Susan Pohorly, representing the appellant, Frank Pohorly
Steven Pohorly, representing the appellant, Frank Pohorly
John Barkovic, representing the respondent, Agricorp and witness for Agricorp
Jim Zavitz representing the respondent, Agricorp
Teresa MacNeil, witness for the respondent, Agricorp
Marty Byl, witness for the respondent, Agricorp
Mark Neufeld, witness for the respondent, Agricorp
DECISION OF THE TRIBUNAL
This appeal was heard in Guelph, Ontario on Monday March 27, 2006. Mr. Frank Pohorly appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal) from the decision of Agricorp concerning the adjustment of his claim for his 2005 grape crop under Regulation 380/97 and the Fruit Crops Insuring Agreement.
Statutory Context
Section 10 of the Crop Insurance Act (Ontario) states:
Referral of disputes
- (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
- Was Mr. Pohorly’s claim for the grape crop varieties of Chancellor, Syrah and Sauvignon Blanc for 2005, adjusted fairly and according to the policies and procedures for the Fruit Crops Insuring Agreement?
The Evidence
In her opening remarks Ms. Susan Pohorly told the Tribunal that the dispute over the 2005 grape crop claim had been taken to Agricorp’s Internal Review Committee; it was denied. Ms. Pohorly stated that Frank Pohorly appealed to the Tribunal because the claim was not adjusted to his satisfaction because of a disagreement with Agricorp’s application of yield potentials, historical cap placed on yield potentials and the underwriting of the policy.
Mr. John Barkovic commenced Agricorps’s response to the appeal by telling the Tribunal that the contract of insurance for Mr. Pohorly’s 2005 grape crop was underwritten correctly. Mr. Barkovic stated that the relatively small claim of $5,100 had been adjusted correctly. He stated that the reference to an historical cap on yield potentials was only a guideline and was not relevant to the matter being heard.
Mr. Jim Zavitz explained to the Tribunal that pursuant to Section 8 of Ontario Regulation 380/97 to The Crop Insurance Act, Agricorp had the authority to establish methods for determining yields, average farm yields, insurance price, value of insurance coverage and levels of production guarantee. Mr. Zavitz referred to Agricorp’s Crop Insurance Policy which states that insurance is deemed to be accepted unless a written cancellation notice from the insured is sent to Agricorp within 15 days of the issuing of the confirmation of insurance. Mr. Zavitz told the Tribunal that Mr. Pohorly had not rejected coverage for the 2005 grape crop, therefore, a contract of insurance was in place.
Mr. Barkovic stated that Mr. Pohorly had an opportunity to cancel the insurance policy in the Spring of 2005 if he was dissatisfied. He stated that Agricorp would have returned the unused portion of the premium, had the policy been cancelled. Mr. Barkovic told the Tribunal that Mr. Pohorly’s policy and claim were administered according to Agricorp’s policies and that he was not treated any differently from any other insured.
Susan Pohorly, Steven Pohorly
Ms. Pohorly told the Tribunal that she had reviewed the potentials that were applied to the 2004 crop and these were correct. She submitted that previous data indicated that the 2004 potentials were at 2.5 kg per vine but that the correct figure of 3 kg per vine had been applied. Ms. Pohorly told the Tribunal that the corrected figure meant that the carry over to potentials for 2005 were correct as recorded.
Ms. Pohorly explained to the Tribunal that in the context of insurance, a potential is a reality of what can be produced in future as speculated upon from any given point in time. She stated that average production data is derived from crops harvested in the past. Ms. Pohorly told the Tribunal that:
Vines must be visually inspected prior to assigning a potential for production.
Average yield data cannot be used to predict future yield unless the average yield data is used in combination with an inspection.
No one from Agricorp attended at the farm to inspect the vines that were insured for the 2005 crop insurance year.
Agricorp policy indicates that the “best information” available is used by adjusters to underwrite and adjust claims, however, in this instance this was not done as no inspection of the vines was made for the 2005 crop insurance year.
Agricorp added 1 kg per vine production potential to the Chancellor variety of grapes for 2005. A request for potential of 1.6 kg was denied due to what Agricorp referred to as a potential cap of 6 kgs per vine.
The Chancellor vines were thinned appropriately in 2005 and some vines had sustained winter injury.
The yield for Chancellor was 4.15 kg per vine in 2005. The 2005 yield was less than that of 2004 due to the insured perils of winter injury and drought.
There is no stipulation for applying a ‘potential cap’ in Agricorp’s policy and procedures for underwriting grapes.
As an employee of Agricorp from 1987 to 2004 in sales, underwriting and adjusting, she had never heard of a ‘potential cap’ for grape production.
Ms. Pohorly told the Tribunal that Syrah vines were planted in 2001 and 2002. She submitted that a potential increase of 2 kg per vine during 2005 was projected for the Syrah vines that were planted in 2002. She said that she wished the same 2 kg potential for 2005 to be applied to the Syrah vines that were planted in 2001. Ms Pohorly stated that no one came from Agricorp to inspect the Syrah vines.
Ms. Pohorly told the Tribunal that the winter weather was severe in the years 2003, 2004 and 2005. Ms. Pohorly stated that she did not agree with the underwritten potential applied to the 2005 Sauvignon Blanc grape crop. She said that though the vines looked healthy there was considerable winter injury. Ms. Pohorly stated that there is little reference data available for the Sauvignon Blanc variety, however her Sauvignon Blanc crop should have been underwritten with every regard for the excellent condition of the vines going into the 2005 insurance period. She told the Tribunal that winter injury was an insured peril. Ms. Pohorly said that no one from Agricorp came to inspect their Sauvignon Blanc grapes at the beginning of the 2005 insurance year.
Ms. Pohorly submitted that farmers should be notified of production potential caps in the underwriting of insurance contracts in order to make the appropriate management decisions. She said that in one instance she had been informed that production potentials to a maximum of 6 kgs per vine were underwritten however, her farm had been given production potentials in excess of 6kgs per vine in the past. Ms. Pohorly said that crop insurance coverage for grapes commences December 20, and applies to the crop grown in the following year. Ms. Pohorly told the Tribunal that the production potentials of .6 kg for Chancellor, 1.5 kg for Syrah and .4 kg for Sauvignon Blanc were in dispute. She said that these varieties were insured at a coverage level of 85% for 2005. Ms. Pohorly submitted that $5,103.56 was in dispute with respect to the 2005 insurance claim.
In response to questions Mr. and Ms. Pohorly told the Tribunal that:
Despite its “winter sensitive” characteristic the choice of planting such varieties as Sauvignon Blanc lies with the farmer. Farmers must accept the perils that are inherent in each variety.
Winter sensitive varieties were not affected during the 1980’s as it proved to be an excellent decade for grape growing.
Varietal selection on her farm is based on the requirements of the wineries.
Drought can have an effect on vines where every appearance of health is soon followed by collapse of the vines.
The Chancellor, Syrah and Sauvignon Blanc varieties are new to the area where her farm is located. There is not a lot of historical production data for the area for these varieties.
It may take three or four years from planting for a vine to become established.
Going into spring 2006 the vines look very healthy due to the mild winter.
Production potentials replace historical production data because there is no history of production for young vines.
Adjusters had visited her farm in years prior to 2005.
Generally, an inspection of the vines is made when an insured makes a claim.
No one from Agricorp inspected any of the three varieties in dispute.
Ms. Pohorly replied to questions that the process of underwriting and adjusting insurance contracts/claims as described by Agricorp’s witnesses, was consistent with her understanding of the process from when she worked for Agricorp with the exception that, inspection of the vineyards was necessary to resolving issues/disputes. Ms. Pohorly told the Tribunal that she cannot recall an occasion when she did not first inspect the vineyard before underwriting the contract of insurance. Ms. Pohorly stated that Agricorp policy and procedures stated that adjusters must be familiar with a vineyard prior to underwriting a contract of insurance.
Teresa MacNeil
Ms. Teresa MacNeil testified that she has worked as an Adjuster for Agricorp since 2002. Ms. MacNeil testified that her duties included the underwriting of fruit crops in spring, inspection, damage report filing and the collection of yield information.
Ms. MacNeil told the Tribunal that:
She received training in inspection procedures from Mr. John Barkovic and that she received notes on underwriting procedures from Ms. Pohorly in 2003. She referred to Ms. Pohorly’s notes on underwriting during her first season of underwriting in 2003.
Ms. Pohorly’s notes on underwriting were consistent with those policies and procedures as stated in Agricorp’s underwriting manual.
Producers may or may not agree with the production potential applied to their vines. In cases where potentials were in dispute, she discussed the potential with the producer and/or sought the advice of other adjusters in an effort to resolve the dispute.
In her notes on underwriting, Ms. Pohorly advised that she uses her own best judgement of future production when applying production potentials to vines.
Mr. Marty Byl contacted her during the 2005 underwriting of Frank Pohorly’s insurance contract. Mr. Byl informed her that Ms. Pohorly was not satisfied with the underwriting of the contract.
She reviewed the underwriting with Mr. Byl and found that the underwriting was fair and that the appropriate potentials were applied to each of the three varieties in dispute.
Using the Vitis Vine Management System, a report of production from 10 growers in the region of Mr. and Ms. Pohorly’s farm was prepared. The report data indicated that the fourth leaf Sauvignon Blanc grapes yielded an average of 3.29 kg per vine. Ms. Pohorly’s yield for this variety was 3.59 kg per vine.
Syrah and Chancellor are varieties new to the area therefore, there was insufficient data available to assess average yields.
The yields sampled in the report were from fair to good growing years.
The underwriting for Mr. Pohorly’s grape contract in 2005 was done fairly and pursuant to Agricorp’s underwriting policies and procedures. Mr. and Ms. Pohorly were treated fairly and in accordance with Agricorp’s policies and procedures.
In response to questions Ms. MacNeil told the Tribunal that:
The yield data from the report was taken from 10 farms nearest Ms. Pohorly’s farm where the varieties of Chancellor, Syrah and Sauvignon Blanc were produced.
Details such as soil conditions and micro climate conditions were not surveyed in the report which contained data from 10 producers.
She remembers that Ms. Pohorly had indicated to her during her training, that if she was in doubt about any aspect of the underwriting of a contract of insurance, she should inspect the vineyard.
In her discussions with Mr. Byl with respect to the disputed underwriting for 2005, she had confidence that Mr. Byl used his best judgement in arriving at the potentials applied to the crop. She had not personally inspected Mr. and Ms. Pohorly’s vineyard.
The grape crop was very small in 2003 – 2004. Vines were still recovering from damage during 2005.
She had inspected vines in numerous vineyards in 2004.
Mr. Byl is the Adjuster assigned to Mr. Pohorly’s farm.
She has inspected farms during the growing season as a means of gaining knowledge of the conditions existing in the vineyards.
Marty Byl
Mr. Byl testified that he had been an Adjuster with Agricorp since June 2002. He said that he has been a grape producer since 1964. Mr. Byl explained to the Tribunal that his family farms over 150 acres of grapes and that he has served as District Committeeman to the Grape Growers of Ontario. Mr. Byl said that he received training in his duties from Mr. John Barkovic, Mr. Mark Neufeld and to a lesser extent from Ms. Pohorly. Mr. Byl told the Tribunal that he had received a copy of Ms. Pohorly’s notes on underwriting from Ms. MacNeil: he found the notes to be consistent with Agricorp’s policies and procedures for underwriting.
Mr. Byl explained to the Tribunal that;
Young unproven vines are assigned a production potential because there is no production history for young vines.
Crop insurance for grapes is based on the production history of the individual producer’s farm.
Grape vines are generally not considered to be producing until the 3rd year after planting.
In accordance with Agricorp’s underwriting manual, application of production potential is a method of estimating the year to year increase in grape production.
Production potentials do not affect a producer’s production average as calculated from the year in which a potential is applied.
In cases where the underwriting is in dispute methods of resolution such as discussions with the customer, consultation with other Adjusters and the Regional Manager may lead to a resolution. He attempted to resolve the dispute with Ms. Pohorly by this means.
Grape yields are usually measured in tonnes per acre however the measurement of kg per vine must also be considered as a viable measurement. Dense planting of vines per acre will not necessarily yield more tonnage per acre.
Data from Mr. Pohorly’s production insurance indicates that for 2004 the Chancellor grape yield was 2.62 metric tonnes per acre: an exceptionally high yield.
In 2005 the Chancellor yield was insured to a level of 7.5 metric tonnes per acre. Given his knowledge of the yields of the Chancellor variety in the region, he could not conscientiously expect that production would increase above this level.
He insured Mr. Pohorly’s crop as optimistically as he could. In 2004, Mr. Pohorly produced 10 percent more grapes than his policy covered.
Underwriting is not based on the prediction of anomaly or bumper crop production years.
Hybrid yields were generally above the level estimated. In 2004 Mr. Pohorly had excellent yields for his Chancellor grapes.
Mr. Pohorly’s 2001 and 2002 planting of Syrah were not given identical potentials because it was not known if the high production level of the 2001 Syrah vines was due to an anomaly. In addition high production of Syrah vines in one year may be followed by a sharp decline the following year because Syrah vines are prone to stress from over cropping.
He insured Mr. Pohorly’s Sauvignon Blanc grapes to a level of 4.3 tonnes per acre, having applied a production potential of 1 kg over the 2004 yield. This was the maximum that he felt the vines could be reasonably expected to produce.
Given the individual characteristics of the three varieties in dispute and his knowledge of Mr. Pohorly’s historical yield, the location of the farm and Mr.. Pohorly’s excellent farm management practices, he is confident that he generously estimated the production potentials for 2005 and that he applied the policy and procedures for underwriting fairly.
He misspoke in identifying a “production potential cap” however there is a firm guideline that indicates production potentials are estimated to produce a maximum of 6 kg per vine.
Cumulative production potentials in excess of 6 kg per vine had been applied to Mr. Pohorly’s crop in the past.
In response to questions Mr. Byl told the Tribunal that:
He does not believe that Mr. Pohorly’s Sauvignon Blanc and Syrah grapes could have produced any more than the actual yield if they had not suffered winter injury in 2004.
He inspected Mr. Pohorly’s farm in 2004. Ms. Pohorly was not home at the time of the visit.
Underwriting takes place in March and April annually. He did not make a farm visit in 2005 because there was no purpose in inspecting vines in order to determine how they may have appeared prior to suffering winter injury.
There was nothing to be gained from inspecting the farm in 2005 that would have enabled him to underwrite the policy with any more optimistic production potentials than were applied.
John Barkovic
Mr. John Barkovic testified that he has been a Regional Manager with Agricorp since 1994. He stated that all Adjusters for grapes report to him. Mr. Barkovic told the Tribunal that he had worked in viticulture research with the Ministry of Agriculture, Food and Rural Affairs and in vineyards. He stated that he personally adjusts several files per year as a means of staying abreast of the conditions in the field. Mr. Barkovic said that:
Historical yield data was used in determining a producer’s average yield.
He is confident that the underwriting for Mr. Pohorly’s 2005 grape crop was prepared fairly and pursuant to Agricorp’s underwriting policies and procedures.
Agricorp Adjusters conducted numerous vineyard inspections in 2004. There was widespread winter injury in 2002 and 2003 so that 2004 was a year in which grape growers worked hard to recover the damage.
The purpose of extensive vineyard inspections in 2004 was a means of gathering information so that accurate potentials could be applied to vines for the following crop year.
He recognized that Mr. Pohorly was an above average producer; in hindsight he may not have been so generous in applying production potentials if he had visited Mr. Pohorly’s farm prior to underwriting for 2005.
He is confident that Agricorp’s Internal Review Committee made every effort to resolve the dispute.
Mr. Barkovic responded to questions that:
Winter injury in 2004 affected all growers.
Agricorp did not apply the same potentials to Mr. Pohorly’s 2001 and 2002 planting of Syrah vines as it determined that the vines would not perform exactly the same.
Crop Insurance for grapes has been in effect since the early 1970’s. The program is constantly reassessed and improved.
Agricorp adjusters are required to “know the vineyard” that they have charge of in underwriting and adjusting a claim. It is up to the individual adjuster to determine whether a farm visit will assist in adding to his/her knowledge of a particular vineyard.
Mark Neufeld
Mr. Mark Neufeld gave evidence before the Tribunal. He testified that:
He has worked as an Adjuster for 13 years. He grew up on a grape producing farm and was a grape producer until 2005. He served as Director and Committee Man for the Grape Growers of Ontario.
He agrees with the testimony of Ms. MacNeil and Mr. Byl with regard to the underwriting and adjustment processes for crop insurance for grapes.
He believes that the application of production potentials is at the core of Mr. Pohorly’s dispute from the adjustment of claim. Production potentials are not to be applied to compensate growers for reduced average yields.
Production potentials are correctly applied to young vines as a substitute value for yields from the young vines, as there is no production history data for young vines. He has worked with this concept of potentials for 13 years as an adjuster.
It is necessary to consider yield in units of kgs per vine and tonnage per acre.
Although he did not participate in any aspect of underwriting Mr. Pohorly’s contract of insurance in 2005, he became involved when Mr. Pohorly made a claim from the 2005 contract.
Underwriting for contracts of insurance should be done with due consideration for historical yields and realistic application of production potentials to young vines.
Mr. Byl insured Mr. Pohorly’s Chancellor grapes with the expected yield of 7.5 tonnes per acre; a reasonable figure for this variety. A yield of 8.3 tonnes per acre requested by Ms. Pohorly is attainable in a “bumper crop” year, however, it is not sustainable as a yearly average.
In his opinion it is unreasonable to expect yields of 4.5 kg per vine for Syrah grapes.
The Sauvignon Blanc variety is economically unproven in Ontario’s grape growing regions. He would be uncomfortable underwriting Mr. Pohorly’s Sauvignon Blanc grapes at the rate requested by Ms. Pohorly.
He believes that Mr. Byl underwrote Mr. Pohorly’s Syrah variety as generously as possible including applying generous production potentials. Mr. Pohorly’s farm is located in an area and with soil type and microclimate that is marginally above average for the production of tender vinifera grapes.
Mr. Pohorly’s history of claims is not unusual in comparison to other grape growers.
He believes that Mr. Byl underwrote Mr. Pohorly’s contract fairly and that he treated Mr. Pohorly as he would have treated any other producer.
Summations
Ms. Pohorly submitted to the Tribunal that her requests for production potentials of: 1.7 kg per vine for 2001 planted Chancellor grapes, 1 kg per vine for 2001 planted Syrah grapes, 3.5 kg per vine for 2002 planted Syrah grapes and 2.5 kg per vine for 2002 planted Sauvignon Blanc grapes were not unreasonable. Ms. Pohorly argued that she had requested the production potentials based on the growth and maturity of the vines. Ms. Pohorly told the Tribunal that adjusters must visit vineyards frequently as a means of becoming familiar with the crop to be insured. She maintained that there were no farm visits made to her farm in 2004. Ms. Pohorly submitted that the contract of insurance was not correctly underwritten as a result of there being no farm visits carried out. Ms. Pohorly asked the Tribunal to readjust the claim by adding to the production potentials applied in the contract underwriting in the amounts of .6 kg per vine to the Chancellor grapes, 1.5 kg per vine to the Syrah grapes and .4 kg per vine to the Sauvignon Blanc grapes for a total claim adjustment increase of $5,103.56.
Mr. Barkovic summarized Agricorp’s position stating that Agricorp has a legal responsibility to provide accurate underwriting. He submitted that inaccurate underwriting threatened the integrity of the program and undermined the policies of the insurance plan. Mr. Barkovic argued that numerous vineyard inspections were carried out in the Niagara grape growing area in 2003 and 2004. He stated that Agricorp underwrote the contract of insurance giving Mr. Pohorly the benefit of any doubt with regard to production yields. Mr. Barkovic asked the Tribunal to uphold the amount of claim.
The Findings
The Tribunal acknowledges that a contract of insurance is based on a framework that includes effective underwriting which is the result of, but not limited to the appropriate calculation of historical yields and the accurate application of production potentials where young vines are to be insured.
It is the finding of this Tribunal that the adjustment of Mr. Porhorly’s claim under a contract of insurance for 2005 was made fairly and in accordance with the policies and procedures governing the Fruit Crops Insuring Agreement. The Tribunal bases this finding on the testimony of Ms. MacNeil, Mr. Byl, Mr. Neufeld and Ms. Pohorly. With the exception of her personal preference to inspect each vineyard prior to underwriting a contract of insurance, Ms Pohorly agreed with the Agricorp witnesses with respect to Agricorp’s policy and procedures for underwriting and adjusting claims of insurance. Ms. Pohorly made no submission to indicate that the claim of insurance was inaccurately or unfairly adjusted based on the contract that was in place for 2005. Based on her testimony that she was employed by Agricorp for many years and the testimony of Ms. MacNeil with respect to using Ms. Pohorly’s adjuster’s notes as a professional reference, the Tribunal concludes that Ms. Pohorly was well informed with respect to the contract of insurance for 2005. The 2005 contract of insurance was not cancelled due to any dissatisfaction with any aspect of how it was administered, though the Crop Insurance Policy provides for the customer’s withdrawal from the plan within 15 days of being served with confirmation of the contract.
The witnesses for Agricorp were credible in their testimony; they demonstrated that there was a consistency to their understanding of the plan and adjustment of a claim under the plan. Their combined expertise as adjusters and as grape growers convinced the Tribunal that the claim was adjusted fairly. The Tribunal is convinced that Mr. Pohorly was not treated any differently from any other producer with respect to the adjustment of his claim.
Decision and Reasons
ORDER OF THE TRIBUNAL
After carefully considering the evidence filed and the submissions made, the Tribunal orders that:
Ms. Pohorly’s appeal for additional payment of claim in the amount of $5,103.56 (net) is denied.
The Tribunal makes this order for the reasons evident in its findings above.
DATED AT Guelph, Ontario this 18th day of April, 2006.