Huzevka Farms Ltd. v Agricorp, 2007 ONAFRAAT 22

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@ontario.ca

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

Huzevka Farms Ltd. v Agricorp

Huzevka Farms Ltd. v Agricorp 2007 ONAFRAAT 22

Crop Insurance Act

July 10, 2007

DATE OF DECISION:

September 7, 2007

2007-22

2007 ONAFRAAT 22

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 Huzevka Farms Ltd., Petrolia, Ontario from a decision of Agricorp concerning the adjustment of Huzevka Farms’ claim for its 2006 winter wheat crop under Regulation 380/97 and the Crop Insurance Plan for Grain and Oilseeds.

Before:

Mr. Rod Stork, Chair
Mr. John O’Kane, Vice Chair
Mr. Euclid Mailloux, Member

Appearances:

Mr. Matt Huzevka, appellant
Mr. Fred Thomson, representing the respondent
Mr. Graham Glasgow, witness for the respondent
Mr. Bill McDonald, witness for the respondent

This appeal was heard in London, Ontario on Tuesday, July 10, 2007. Mr. Huzevka appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from a decision of Agricorp regarding his claim for Huzevka 2006 winter wheat crop.

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

Is Mr. Huzevka entitled to payment of his 2006 winter wheat claim, and if so, what rationale should be applied in making the adjustment of the claim?

Preliminary Matter

Mr. Huzevka requested that he be permitted to introduce additional evidence, including:

a) Copies of three invoices from the City of Sarnia for compost (Exhibit 4)

b) A sample of a report for the period of May 1, 2006 to May 10, 2006 inclusive, from rain stations for Lambton County from Weather Innovations Incorporated (Exhibit 5)

c) A “Certificate of Analysis” from A& L Canada Laboratories Inc. (Exhibit 6)

d) A Report Summary for Huzevka Farms Ltd. from Agricorp (Exhibit 7)

e) An “AgTest” report from Agri-Food Laboratories dated September 15, 2000 (Exhibit 8)

The panel of the Tribunal admitted these five documents as evidence.

Mr. Thomson asked to introduce a photocopy of a screen print from the Agricorp Call Centre as evidence. The screen print described a call from Mr. Huzevka to the Call Centre on June 29, 2007. It was the position of Agricorp that the screen print provided relevant information regarding interactions between Mr. Huzevka and Agricorp staff. Mr. Huzevka acknowledged that the call did take place, but, did not agree with what was recorded in the document. He indicated that he had advised Agricorp staff during the call that the winter wheat crop was organic.

The panel of the Tribunal admitted Mr. Thomson’s screen print.as Exhibit 3.

The Evidence

Matt Huzevka

Mr. Huzevka related that he and his parents are full-time family farmers and today farm more than 1000 acres. He stated that he was just as puzzled as the Agricorp Adjuster when, in September 2006, his winter wheat crop failed to exceed his average farm yield (AFY).

He indicated that he would argue that he had not reported damage to the crop and that he would prove that there was no doubt that there was no visible damage. He indicated that he would prove that he had not made any changes to his management practices and further that there was an insurable peril involved in his claim.

He told the panel that he would use factual evidence - based on sound academic research - Agricorp records and his own records that his claim for the 2006 winter wheat crop had merit, was insurable and that therefore it must be upheld.

He stated that the decisions made by Agricorp and its representatives were speculative and in some cases unreasonable.

In a summary timeline of events, Mr. Huzevka noted that:

In early October, 2005, approximately 1750 yards of composted turkey manure was applied to 357 acres to provide the required nitrogen (N) for the forthcoming wheat crop.
Winter wheat was planted on the 357 acres, as well as an additional 269 acres for a total of 626 acres. Deducting 28.5 acres under a sharecropping agreement left a net total of 597.5 acres.
Winter wheat acreage was reported to Agricorp on or before October 31, 2005, as required.
Red clover was seeded on all wheat acreage between March 23 and 27, 2006.
On March 5, 2006, an inquiry was made to Agricorp regarding the intent to farm organic/transitional wheat. Huzevka Farms was informed that the Regional Manager would come to the farm to assess the transitional winter wheat acreage that was, at the time, insured by Agricorp.
There was no follow-up to this commitment on the part of Agricorp.
As requested, Cargill AgHorizons sent a crop scout to Huzevka Farms on May 2nd and 3rd. The scout reported that the fields, in general, looked good. The scout noted that some fields might have N deficiency. Specifically, the scout noted visual N deficiency on fields that had 46% Urea or 28% UAN applied.
Due to the reports from Cargill and the results of Huzevka Farms’ own scouting, the latter decided to keep the winter wheat crop.
From mid-June to mid-July 2006, it was observed that the red clover stands were even, thick and growing rapidly; a measure of 2 to 10 plants per square foot was noted.
The winter wheat was harvested from July 14 – August 8, 2006.
On August 17, 2006 Agricorp was contacted and proof of loss was documented based on the insured peril of drought.
On September 25, 2006, the Agricorp Adjuster reported that he could not identify a peril.
On October 4, 2006, the Special Report of the Agricorp Adjuster denied the claim.
On November 17, 2006, Huzevka Farms Ltd. faxed a formal complaint to Agricorp requesting a review of the 2006 winter wheat crop claim.
A letter dated March 16, 2007 indicated that the 2006 winter wheat claim had been denied.

In response to questioning, Mr Huzevka stated that,

With regard to Exhibit 5, rainfall can vary greatly between townships. There was drought in some fields, and that because of the clover that had been seeded in the winter wheat field, the wheat was unable to take up all available moisture.
The USDA research referenced in Exhibit 1, Tab 5, page 50, had not been done on his farm.
The Cargill AgHorizons report (Exhibit 2, page 97) had been done on May 2, 2006 by Jordan Douglas and that the notation on the top of the page had indicated “conventional production”. However, Mr. Huzevka was uncertain if he had made the notation.
With respect to Exhibit 2, page 99, the AgHorizons report covered the “Chapman Farm”. This farm was organic winter wheat production. The report included a comment that, “This field is light in colour”. The comment regarding colour could mean many things, including; “light” compared to other fields; low in N; impact of drought; other nutrient deficiencies.
With respect to Exhibit 2, page 104, that the Wellington farm was using organic N, it was normal management practice to seed clover into all winter wheat acres and that this was the case in 2006. Mr. Huzevka agreed that based on the Cargill reports, most of the clover was established.
The information from Weather Innovations was a sample only and did not pertain specifically to this case.
The thick growth of clover impacted the yield of the winter wheat.
With respect to Exhibit 2, page 74, the report prepared by Mr. Glasgow, the yield of winter wheat was about 50 bu/ac. This was information Mr. Huzevka or his secretary supplied to Agricorp. He had also reported a winter wheat yield of 70 – 80 bu/ac and agreed that this was a significant difference. He suggested that this was due to variations in rainfall, but, did not know if rain fell on conventional fields, but, not on organic production.
With respect to Exhibit 1, Tab 4, page 50, (USDA research report regarding application of swine manure) he agreed that the “jury is still out” on the fall application of manure and the related economic impacts.
Though he could have done the crop scouting on his own, he had hired Cargill AgHorizons for several reasons, e.g. time factor/opportunity cost, easier for them to identify weeds at early stages, they were more accurate and unbiased. He did not always provide the AgHorizons reports to Agricorp. He had made notations to the reports provided by Jordan Douglas.
Organic production without fertilizer would do worse.
He had been insuring crops since 1996/1997 and that during this time he’d had opportunities to review Agricorp’s policies. He agreed that he had the discretion not to insure, if he felt the policies were unfair. He believed that reasonableness should be used in terms of fairness and that this did not happen in this case.
He had previously used rain gauges on every farm. However, they had been vandalized. For this and other reasons, they had given up on the practice.
They had previously applied fresh turkey manure (from 2001 to 2004). In 2005 they purchased certified organic turkey manure from New Brunswick. He did not know how old the manure was when it came from the turkey breeders.
To the best of his knowledge, there had been no follow-up by Huzevka Farms to Agricorp when Huzevka Farms had not heard back from Agricorp following the call in April 2006 regarding organic production.
He would review policy binders from Agricorp when he received them.
There would be differences in the types of fertilizers used and the amount of fertilizer available to a crop.
A combination of low rainfall and the clover reduced the winter wheat yield.

Fred Thomson

In opening remarks, Mr. Thomson stated:

That the case centred on whether Agricorp had sufficient and required notice of a change in crop management practices that would have enabled it to adequately judge the risk being undertaken in Huzevka Farms 2006 contract for winter wheat.
That Agricorp had not been properly notified that production practices were changing. Not until Agricorp was presented with a declared yield and proof of loss, did that become apparent.

Graham Glasgow

Mr. Glasgow identified himself as Adjuster working for Agricorp. He indicated that he met Mr. Huzevka for the first time on September 25, 2006. In his Crop Inspection Report, dated September 25, 2006 (Exhibit 2, Tab 4, Page 75) he indicated that the stand was good, the yield was 57.45 bu/ac and that a peril could not be identified.

In response to questions, Mr. Glasgow indicated,

That Mr. Huzevka was present at the time the report had been prepared and that Mr. Huzevka had signed the report. Mr. Glasgow indicated that Agricorp was unable to pay for a claim when no insurable peril had been identified.
That on Page 74 of Exhibit 2, his report indicated that 444 acres of winter wheat that had composted turkey manure applied yielded approximately 50 bu/ac. He also reported an additional acreage where commercial N was applied. The yield on this acreage was approximately 70 – 80 bu/ac. Mr. Glasgow felt that, in his opinion, Mr. Huzevka had done a good job applying the N, but, that there was a difference in the timing of the availability of the N in the turkey manure vs. the commercial fertilizer.
That Mr. Huzevka eventually indicated that N availability might have been a factor in the lower yield.
That with respect to Exhibit 2, Tab 4, page 97, the AgHorizons Field Walk Report done for Huzevka Farms indicated that there were weed issues and N deficiency. He stated that neither of these were insurable perils for winter wheat and that Agricorp could not pay, as a result.
That he had prepared the Adjuster’s Special Report (Exhibit 2, Tab 4, page 73). He confirmed that in the special report he had determined that there was a loss due to an uninsured peril.
That the insured did not report a loss, as required in Section J of the Agricorp Crop Insurance Policy (Exhibit 2, Tab 1, Page 31).
To a question from Mr. Huzevka he believed that there was a requirement in the Agricorp Crop Insurance policy that Agricorp be notified if there was a change in inputs from conventional to organic.
In his experience, organic wheat fields did not yield 70, 80 or 90 bu/ac, rather they would yield closer to 50 bu/ac.
That in his view, a “change in Practices” was anything that could change a yield.
That he described the weather as “favourable” in his report in Exhibit 2, Tab 4, page 75. He elaborated saying that the crop year was good and that there was no drought. He stated that both he and Mr. Huzevka had agreed to use this term. He affirmed that all wheat had been weighed at Mr. Huzevka’s farm.
That he hoped that his Agricorp colleagues would interpret and apply the term “change in practices” in the same way. He confirmed that Agricorp Adjusters have training in how to interpret and apply terms in an insurance contract.

Bill McDonald

Mr. McDonald stated that he was the Agricorp Regional Manager for East Kent and Lambton County, a position he had held since 1998. He held a Diploma in Agriculture, had experience in Agri-business, operated his own farm, and was a certified crop advisor.

(At this point, Mr. Thomson made a motion that the Panel consider Mr. McDonald an expert witness in crop production. Following deliberations, the Panel denied the request)

In response to questions, Mr. McDonald stated,

That he agreed that the yellowing of plants was indicative of N deficiency. He agreed that the application of N, as done by the insured, would not provide adequate N at that stage of the season. He also agreed that the management practices of Mr. Huzevka would not be consistent with those used to establish his average yield. To elaborate, he noted that in conventional production, a 28% Nitrogen fertilizer is normally applied in March. This releases quickly and Mr. Huzevka’s AFY corresponded to these practices.
He agreed that the insured must advise Agricorp of any changes in practices. He indicated that a change in practice involved more than changing the tips on sprayers; for example, changing from tillage to no-till or changing from conventional practices to transitional or organic practices.
He agreed that Mr. Huzevka should have been aware that since Agricorp had changed yields for organic soys then they also would have done so for organic winter wheat.
With respect to Exhibit 2, Tab 4, pp 79 – 85, he confirmed that he was familiar with the Report entitled, “Reported Yields and Penalty Detail Report for crop year 2006”, and that it reported all winter wheat production of Agricorp customers in Moore Township. He felt that overall, there were great yields of winter wheat in Moore Township in 2006. He agreed that 11 clients out of 125 experienced 80% or below of AFY. He felt that based on this information, if there had been a drought in Moore Township in 2006, it had not lasted for long.
That he did not get the message related to the Customer Relationship Management screen print (Exhibit 2 Tab 6, page 163)
That the last time he had visited the Huzevka farm was in 2001 regarding winter wheat; one other time after that.
He first knew that Huzevka Farms was producing transition crops in 2005 following a discussion with Greg Rankin.
That it was common practice for him to visit farms that are in transition, if he was notified. At times, he would send some of the work to Adjusters.
That he should have reviewed all the relevant “to dos” prior to the hearing.
That he agreed that if someone in the Agricorp call centre was unable to answer an incoming question, then that question would be referred to someone else in the call centre.
He agreed that in his role as a Regional Manager, he would normally go to a farm and address an issue that could not be handled by the call centre. Alternatively, an Adjuster would go to the farm. He agreed that normally such calls would come to him. He had no recollection of such calls related to winter wheat coming to his attention.
He agreed that an ideal time to report changes in practices would be when the crop is reported.
He had no recollection of receiving anything from the call centre asking him to follow up on a call on February 18, 2005 (Exhibit 2, Tab 6, page 163)

In closing, Mr. Huzevka told the panel that he did not realize that his changes in practices had been so significant as to warrant an uninsured peril. He stated that had the Regional Manager got back to them to advise there would have been a 30% yield reduction and a potential related loss, then he could have and would have replanted with a more profitable crop, soys, for example. He requested that the entire claim for the 2006 winter wheat crop be honoured by Agricorp. He acknowledged that there may have been communications issues on both sides.

In summation, Mr. Thomson reiterated that the real issue faced by the panel was whether Agricorp had an opportunity to assess the wheat in question for the degree of risk that organic management practices pose. He noted that the insured had built an average farm yield value based on conventional management, and was now saying that he was entitled to a claim even though the management practices were quite different. Mr. Thomson stated that the crop yield potential occasioned by such organic practices was also different. Mr. Thomson stated that Agricorp had confirmed that it was not an insured peril that caused the loss on Mr. Huzevka’s organic winter wheat acreage. He drew attention to the difference in yields related to the release rate and availability of N in composted manure as compared to commercial nitrogen. He mentioned the reports by Cargill AgHorizons that indicated the winter wheat crop had pressure from weeds and instances of N deficiency.

Mr. Thomson maintained that there was no interaction between the insured and Agricorp that the latter had been advised of organic winter wheat production, nor that it had information in its possession and failed to act on that information. He stated that at no time from when Mr. Huzevka’s crop was planted until it was harvested, did he report damage, even though he must have known that the organic acres were not yielding well in comparison to the conventional production.

To conclude, Mr. Thomson requested that the Panel support Agricorp’s decision to deny Mr. Huzevka’s claim for the 2006 winter wheat crop.

Findings

Part II of the Agricorp Crop Insurance Policy (“Policy”) purchased by the appellant sets out the grains and oilseeds insuring agreement applicable in this appeal. Subsection B of Part II defines the winter wheat perils insured under the policy. Those perils are: drought, excessive moisture, excessive rainfall, flood, frost, hail, insect infestation and plant disease provided recommended control practices are followed, wildlife, wind, and winterkill causing reseeding but only in areas designated by Agricorp.

If a crop is damaged or destroyed by a peril not listed in subsection B the Policy does not cover such a loss.

In this case the appellant asserted the loss to its winter wheat crop was attributed to drought. Subsection 13 b. of section J of the Policy provides that no indemnity shall be paid in respect of an insured crop unless the insured establishes that the production loss resulted from an insured peril.

While drought is an insured peril, the Agricorp field adjuster was not satisfied that there was evidence of drought. Additionally, the Agricorp field adjuster felt that the appellant failed to notify Agricorp it had changed its farm practices from conventional crop production to organic crop production.

The appellant’s evidence did not satisfy us that there were drought conditions. The appellants’ weather evidence was anecdotal. The evidence of winter wheat crops from Moore Township satisfied us that 2006 was a very productive year for winter wheat. Had drought conditions been prevalent, the yields in Moore Township would not have reached the levels that were shown in evidence.

Since we are not satisfied on the appellants’ evidence that there was a drought, our conclusion is the appellant has not proven the loss of production yield for winter wheat was due to an insured peril. Therefore on that basis, the appellant’s appeal is dismissed.

In this appeal Agricorp also relied on an additional ground that we are specifically refusing to rule on, given our determination above.

The Agricorp field adjuster rejected the appellants’ claim because it had changed its farm practices. The change from conventional production to organic production was seen by Agricorp as a material change in risk that the appellants were obliged to report under the Policy. The resolution of that issue is unnecessary for our decision and therefore it will be left for consideration in a case on appropriate facts.

Decision and Reasons

For the reasons cited above the appellant’s appeal is dismissed.

Agricorp’s refusal to pay the appellant an indemnity for a production yield loss for the 2006 winter wheat crop on the basis of no insured peril is upheld.

DATED AT: Guelph, Ontario this 7th day of September, 2007.