Lloyd Prins and Wilma Prins v. Agricorp, 2007 ONAFRAAT 2

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, chemin Stone Ouest

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:

Prins v Agricorp

Prins v Agricorp 2007 ONAFRAAT 02

STATUTE:

Crop Insurance Act

HEARING:

December 18, 2006

DATE OF DECISION:

January 30, 2007

2007-02

NEUTRAL CITATION:

2007 ONAFRAAT 02

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 Lloyd Prins and Wilma Prins, Corbyville, 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: Gene Trotman, Vice Chair; Corry Martens, Member; Denis Perrault, Member

Appearances:

Fred Thomson, for the respondent, Agricorp

Lloyd Prins, appellant

Wilma Prins, appellant

Tim Borho, witness for the respondent, Agricorp

Bill White, witness for Agricorp

HEARING OF THE APPEAL BY THE TRIBUNAL

The Agriculture, Food and Rural Affairs Appeal Tribunal ( The Tribunal) heard this appeal in Brighton, Ontario on Monday, December 18, 2006; brought by Mr. and Mrs Prins seeking a higher payment of a claim related to their 2005 forage crop.

STATUTE AND CONTRACT CONDITION INVOKED AND CONSIDERED

1. Section 10 of the Crop Insurance Act (Ontario) which stipulates as follows:

2. (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).

2. The Forage Rainfall Plan Insuring Agreement , Part 1, Section O.4 which states as follows:

“Mailed notice shall be deemed to be received seven (7) days after it is sent.”

PRELIMINARY MATTER

Mr. Fred Thomson, Agricorp’s representative, asked the Tribunal to dismiss the appeal because the appellants had alleged that Agricorp had treated them unfairly but had not provided details to substantiate the allegations. The motion for dismissal was denied.

Mrs. Wilma Prins sought to introduce two documents into evidence which had not been disclosed in advance. Agricorp did not object to the introduction of the documents. Moreover, Mr. Thomson indicated he would have sought to introduce one of the documents as well. The documents were received into evidence.

THE EVIDENCE

Appellants’ Case

Mrs. Prins told the Tribunal that she and her husband had been dairy farmers for 11 years and had purchased forage insurance in some years but not in others. She said they enrolled under the current forage rainfall plan in 2004 after being visited by an insurance salesman, and renewed the forage insurance in 2005.

Mrs. Prins said their forage fields yielded half the usual crop in 2005 and that despite purchasing an additional field of hay and selling all excess stock their forage inventory was low and they had to purchase additional feed.

Mrs. Prins said she and Mr. Prins had expected a large payout from the crop insurance they purchased but only received $800, less than the premium. She said that when Agricorp started readjusting 2005 forage claims she expected they would receive a second payout as they had not received a letter in April 2005 which identified a new rain station in their township, which was available for their selection. She said even if they had received that letter, it did not give them much time to make changes in their forage insurance coverage.

Mrs. Prins said Agricorp had an unfair advantage over insured growers and should have followed up when there was no response to the letter Agricorp claimed was sent in April 2005, as Agricorp did when their premium was not paid on time. She said that she had spoken to several forage growers who had favourable decisions on appeal and suggested that their case was similar to the case of Mr. Patterson, as he also did not receive a letter notifying him of a new rain station in his township. She asked that the Prins farm be reassigned to the Sophiasburgh 2 rain station in Prince Edward County.

Mrs. Prins and Mr. Lloyd Prins answered questions as a panel and in response to questions by Mr. Thomson, they indicated:

• They had 210 acres of forage in 2005 and that was their normal acreage.
• No new acreage was planted in 2005; a new 100-acre alfalfa stand was started in 2006 with seed purchased at a good price two years earlier.
• At year end, Mrs. Prins’ practice was to go through her files and discard unnecessary documents.
• She was sure that a letter from Agricorp dated April 12, 2005 was never received.
• The Prins did receive correspondence from Agricorp dated December 20, 2005 and January 23, 2006, as well as a payment claim in October 2005.
• The address on a copy of the April 12, 2005 letter in question was the same address as on the other correspondence.
• They did not receive the April 12, 2005 letter and discard it.
• They had received daily rainfall records from the Tyendinaga rain station which Agricorp had provided.
• The Tyendinaga rain station was closest to their farm in 2004 when they first selected a rain station.
• Mr. Bill White was the Agricorp salesman and they understood the forage rainfall program when he explained it to them.
• They knew the forage plan was based on rainfall recorded at a rain station, as compared to historical average rainfall for an area.

Agricorp's Case

Mr. Tim Borho told the Tribunal he was an Account Lead with Agricorp and was responsible for the forage rainfall program. He said he grew up on a dairy farm, studied crop science at the University of Guelph and farmed for six years before taking a position with Agricorp in August 2005.

Mr. Borho testified that:

• The Forage Rainfall Plan started in 2000 as a pilot project.
• It measured rainfall and used that as an indicator of what forage production could be. In general increased rainfall leads to increased forage production.
• The plan was based on rainfall collected at specific rain stations; not customers’ own farms.
• The only insured peril is drought. Forage production could also be affected by a number of other factors including species mix, management practices, and hours of sunshine.
• Customers select the site that will be used to calculate their claims. An Agricorp representative visits customers and shows them a map that indicates the location of rain stations when they first sign up for the plan.
• Agricorp does not have rain stations in all townships; customers can choose a rain station in their own geographic township or any adjacent geographic township.
• Geographic townships are used to administer the plan because their boundaries do not change, whereas municipal boundaries do change.
• All rainfall from May 1^st to August 31^st inclusive is measured; daily and monthly caps are applied to the raw data as Agricorp recognizes that at a certain point additional rainfall will not help a forage crop. The adjusted data is used to calculate claims.
• Weather data is purchased from the Ontario Weather Network (OWN), a division of the University of Guelph.
• OWN owns the weather stations used to collect data for Agricorp but Agricorp determines the sites where they will be placed.
• OWN staff collect data twice per month and check the condition of the equipment at the same time.
• Other rainfall data providers were either not as quick or not as accurate as OWN. Agricorp relied on Environment Canada data for long term historic records.
• Agricorp receives its legal authority from the Crop Insurance Act (Ontario) and the Agricorp Act.
• In the Contract of Insurance, Part I applies to all contracts and the other sections are commodity specific. For the Forage Rainfall Plan Insuring Agreement the relevant parts are Part I and Part X.
• Federal and Ontario governments approve the design of insurance plans and pay 60% of the insurance premium; the customer pays the balance of the premium.
• Agricorp cannot change an insurance plan without the approval of both levels of government.
• Agricorp calculates claims payable under the Forage Rainfall Plan by first taking the difference between 80% of historic rainfall and the actual percentage of historic rainfall measured, after daily and monthly caps are applied, then doubling this number and multiplying it by the coverage purchased.
• Claims were normally paid by the end of September.
• In 2005, the early spring was dry and cool; by June it was still dry and warmer than usual; from late July through mid August there was a lot of rain. The rainfall records in the Prins’ area reflected this trend.
• There were 125 new rain stations installed in 2005. One was installed in Thurlow Township, where Mr. and Mrs. Prins reside.
• All insured forage growers residing in a township where a new rain station was placed were informed by letter that there was a new station in their geographic township; Mr. and Mrs. Prins were on a list of 192 growers who were sent such a letter.
• Other insured growers who should have been notified of the new rain stations in their area were not sent a letter in April 2005. Agricorp reassigned those growers to the most favourable rain station that they could have chosen, had they been fully aware of their options.
• The claims of new customers, customers who changed rain stations in 2005 and the 192 customers who were informed by mail that there were new rain stations in their townships were not adjusted.
• There was nothing unusual in a forage plan renewal package sent to insured growers in spring 2005.
• Lack of hay yield is not a ground for making a payment under the Forage Rainfall Plan. Yield is affected by more than just rainfall.
• Agricorp’s normal business practice is to send correspondence to growers by regular mail.
• The Contract of Insurance, Part I, Section O, Paragraph 4 provided that mailed notice shall be deemed to be received seven days after it is mailed.
• Agricorp includes its return address on its envelopes. The letter dated April 12, 2005 and sent to Mr. and Mrs. Prins was not returned to Agricorp.
• When mail is returned, it is forwarded by the mail room staff to the account Lead who originally sent the letter.
• The letter was intended to inform the recipients that there was a new station in their township and to tell them to call Agricorp if they wanted more details.
• In 2004, Mr. and Mrs. Prins had the choice of rain stations in Sidney Township, Rawdon Township, Huntingdon Township and Tyendinaga Township. In 2005, they had the added option of the new rain station in Thurlow Township.
• Apart from Rawdon, which had rainfall recorded as 66% of the historical average, the rain stations available to Mr. and Mrs. Prins had similar results, ranging from 78-84% of the historical norm. Rawdon may have missed a few rains and it did not receive ‘Hurricane Katrina effect’ rainfall on August 31, 2005.
• The Sophiasburgh 2 station was not an option available to the appellants as the township is not adjacent to Thurlow Township.
• Where a body of water is a boundary between townships, Agricorp will consider them adjacent if it is less than 100 metres wide.
• To the best of his knowledge the rainfall data collected at the Tyendinaga rain station was accurate.

In response to questions from Mr. and Mrs. Prins, Mr. Borho indicated:

• Mr. and Mrs. Prins purchased the maximum amount of forage coverage that they could.
• The April 12, 2005 letter was sent to 192 growers; an additional 600 insured growers lived in townships adjacent to the townships in which the new rain stations were located and should also have been notified.
• In some cases farmers’ own rainfall records were close to those measured by OWN; in other cases they were not close.
• On occasion he would compare OWN data to Environment Canada data but only if there was an automatic Environment Canada site in the area as those were the only sites that had weather data available at the same time the OWN data was provided.
• OWN employees were hired for the season; they were well trained and knowledgeable.
• The rain stations have an electronic system that record the dates and times that a tipping scale tips, a separate system that records the number of tips and a collection bucket which is measured manually.
• OWN evaluates its data using an overlaying map and compares the patterns of rainfall to see if any are out of the normal pattern. It then takes a closer look at that data to try to discover why there is a variance.

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

• The initial Prins application form indicated there were 575 acres in total, of which 400 acres were under the Forage Rainfall Plan.
• The premium is based on the dollar value of coverage purchased and the acreage is not relevant.
• The Contract of Insurance required that growers select a rain station in their own township or an adjacent geographic township. Agricorp allowed for a 100 metre buffer zone to account for rivers being boundaries but this was not in the contract.
• The rain gauges are sealed except for a hole where the rain enters.
• Normal practice was to send notices, renewal packages and claim cheques by regular mail. Notices of late payment were sent by registered mail to ensure they could be tracked.
• All the correspondence sent to Mr. and Mrs. Prins in 2005 and 2006 was equally important.
• In the past most customers were pleased with the Forage Rainfall Plan. In 2005, customers who lived in townships adjacent to those with new rain stations complained because they had not been notified.
• Also, customers affected when rain station was relocated within a geographic township were not informed.
• Some customers received good communication from Agricorp about the new rain stations; others did not.
• In 2005 the pattern of the rainfall was such that pasture was helped by the late rainfall but hay was not.

Mr. Bill White told the Tribunal he had worked for Agricorp for 19 years and that he was an adjuster but also sold crop insurance in the spring. He said it was his job to explain insurance programs to potential customers fill out the application forms and collect the cheques. He said he met with Mr. and Mrs. Prins in spring 2004 and they purchased forage insurance from him. He said he thought they understood the program.

Mr. White also said that:

• To calculate the maximum coverage he sat down with the grower and looked at the acreage of forage and pasture and the years of growth of the forage fields. They then took a value for the crop and added up its maximum value. The grower could only buy coverage up to the maximum value of the crop.
• Mr. Prins picked rain station 7012205 which is the Tyendinaga rain station.
• He shows customers a map with the rain station sites marked and advises growers to select a site where the rain patterns are similar to the ones that they experience on their farms.
• He was not involved in selecting the Thurlow rain station site in 2005; he understood the site was picked the year before.
• None of the rain stations in the adjacent townships were relocated in 2005.
• 2004 was the first year the Forage Rainfall Plan was available in Thurlow Township.
• He recalled that 2005 was a dry year and agreed there was a poor start to the season that would have affected the first cut of hay.
• Normally the first cut is the largest cut of hay and it is particularly important to dairy farmers.

The appellants had no questions of this witness. In response to questions from the Tribunal, Mr. White indicated:

• There were 300-350 customers in the area he served.
• He only made follow-up calls at the request of the customers – they phoned Agricorp on its toll free line and he was notified by staff in the Guelph office.
• He did not go around to customers to personally tell them about the new stations that were added in 2005.

SUMMATIONS

Mrs. Prins told the Tribunal that the parties did not disagree that 2005 had poor weather for forage and the yields were low. She pointed out that the Agricorp representatives had admitted they did not clearly communicate with 600 growers with regard to the new rain stations. She argued that Agricorp failed to ensure delivery of the April 12, 2005 letter to her and her husband and that as a result they were also not informed of the new rain station. She asked that they be treated the same as the others who were not clearly communicated to and asked the Tribunal to reassign them to the Sophiasburgh 2 rain station. She acknowledged that there was a body of water between that station and Thurlow Township but argued that it was still an adjacent township because Agricorp’s 100 metre buffer was not a contractual requirement.

Mr. Thomson agreed that the growing season in 2005 was dry and hay was in short supply. He told the Tribunal that the Forage Rainfall Plan had been operating since 2000 and the appellants signed up for it in 2004 and renewed their forage insurance in 2005. He argued that the appellants understood the insurance plan and knew that their claim would be paid on the basis of rainfall measured at a rain station of their choosing. Mr. Thomson stated that the data collected was not contested by the appellants.

Mr. Thomson said that while the appellants testified that they did not remember receiving the April 12, 2005 letter, they had also said they only keep some correspondence sent by Agricorp. He said Mr. Borho had confirmed the letter was sent and not returned as undeliverable to Agricorp. He submitted that given the fact that the appellants had received all other correspondence sent by Agricorp, it was doubtful that this one letter was not received, although they might not be able to recall it. Mr. Thomson argued that legally the letter was deemed to have been received seven days after it was mailed.

Mr. Thomson said that Agricorp held two series of public meetings and acted on what it heard to address its communication problems with regard to the new rain stations. He argued that the appellants were not in the same circumstances as the insured growers who were not sent the April 12, 2005 letter. He submitted the Prins claim had been adjusted in the same manner as the claim of all other customers who were sent the April 12, 2005 letter. He asked the Tribunal to rule in Agricorp’s favour.

THE ISSUE

Whether in the light of the evidence submitted, the appellants were deemed to have received the letter of April 12, 2005 and not having complied with the requirement to contact Agricorp by May 1, 2005 with respect to a change of rain station are not now entitled to an assignment to another rain station and the reassessment of a correspondingly higher claim.

THE FINDINGS

From the totality of the evidence submitted, The Tribunal finds that:

1. The year 2005 was a dry year with poor weather for forage and as a consequence the yields were low and hay was in short supply.

2. According to Mr. Borho, witness for Agricorp, the April 12, 2005 letter in question should have been sent to 792 insured growers; instead letters were sent to only 192 and the other 600 insured growers who lived in townships adjacent to townships in which the new rain stations were located were not notified. That is to say Agricorp inadvertently failed to notify approximately 76% of the insured growers who should have been notified through the April 12, 2005 letter.

3. By letter to the appellants dated December 20, 2005 Agricorp admitted that “ The 2005 crop year has revealed that we did not clearly communicate with forage customers about new and relocated rain stations and the option to switch rain stations from year to year…We will be working with representatives of the Ontario Federation of Agriculture, the Ontario Cattlemen’s Association, Dairy Farmers of Ontario, the Ontario Sheep Marketing Agency, and the Ontario Forage Council to develop improvements to the Forage Rainfall Plan for 2006 and beyond.”

4. By letter to the appellants dated January 23, 2006 Agricorp admitted further that “When responding to concerns about the 2005 Forage Rainfall Plan, Agricorp discovered that some of our forage customers were not made aware of new and relocated rain stations, and the option to switch rain stations from year to year…Of the 1650 customers enrolled in the plan approximately 910 will receive additional payments.” i.e. over 50% of its customers.

5. The letter of April 12, 2005 which was purportedly sent to the appellants conveying fundamental and material insurance contractual information was sent as regular mail and it gave the appellant 12 working days to respond, a relatively short time in view of the importance attached to it. Moreover, mail which Agricorp considers important, such as notice to the appellant that their premium was not paid, was sent by registered mail.

6. Agricorp unilaterally imposed the condition that allowed a 100 meter buffer zone to account for rivers being boundaries, but this very important condition was never enshrined in the contract of insurance.

7. Agricorp did have a communication problem. Agricorp’s representative in summation to the Tribunal stated clearly that Agricorp held two series of meetings and acted on what it heard to address its communication problem.

8. While it is true that “Deeming Provisions” should be interpreted literally, that interpretation if given in this appeal would be manifestly unfair and unjust as the demeanour of the appellants and the evidence they tendered convinced the Tribunal that both were credible and trustworthy, in contradistinction to the errors made by Agricorp in administering the forage program for 2005 and its admittance that it had in fact had communication problems in 2005.

9. Agricorp has vastly superior knowledge regarding the new forage insurance scheme when compared with the appellants, who were relatively young and had only joined the new forage program the year before.

10. The Sophiasburgh 2 rain station is not located in an adjacent geographic township to the township in which appellants reside and they at no time had the option of selecting this rain station. As a consequence, it will be inappropriate to reassign this rain station to them.

11. Mr. and Mrs. Prins should be re-assigned to the highest paying rain station which they could have selected. This is consistent with the treatment of other insured growers who were not properly informed of their options in April 2005. In this case that is the Rawdon rain station.

ORDER OF THE TRIBUNAL

On the basis of the Findings made by the Tribunal, it hereby orders that the appellants’ crop insurance claim for forage grown in 2005 be readjusted based on the rainfall data from Rawdon rain fall station.

DATED AT Ottawa, Ontario this 30th day of January, 2007.