Robert G. Fletcher v. Agricorp, 2008 ONAFRAAT 27

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.omafra@ontario.ca

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

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL:

Fletcher v Agricorp

Fletcher v Agricorp 2008 ONAFRAAT 27

STATUTE:

Crop Insurance Act

HEARING:

July 21, 2008

DATE OF DECISION:

August 18, 2008

2008-27

NEUTRAL CITATION:

2008 ONAFRAAT 27

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 Robert G. Fletcher, Rockwood, Ontario from a decision of Agricorp concerning the adjustment of his claim for his 2005 canola crop under Ontario Regulation 380/97 and the Crop Insurance Plan for Grain and Oilseeds.

Before: Kirk Walstedt, Chair; Doug Flook, Member; Euclid Mailloux, Member

Appearances:

Robert Fletcher, appellant

Fred Thomson, representative of the respondent, Agricorp

Jim Zavitz, witness for the respondent

Ana Suderius, witness for the respondent

John Good, witness for the respondent

DECISION OF THE TRIBUNAL

This appeal was heard on Monday, July 21, 2008, in the Tribunal Boardroom, of the Ontario Government Building, at 1 Stone Road West, in Guelph, Ontario.

Opening Statements

Mr. Fred Thompson briefly outlined the circumstances which lead to the hearing of July 21^st, 2008, in stating that the appeal by Mr. Robert Fletcher was the result of a serious problem faced by Ontario canola industry in 2005.

The Issue

Is it fair and equitable for Robert G. Fletcher to retain payments received from Agricorp, in the claim for his 2005 canola crop, subsequent to receiving retroactive compensation from Woodrill Farms, for this crop?

The Facts

Robert G. Fletcher

1. Mr. Fletcher farms approximately 200 acres of land within which he has successfully grown canola until 2005. In the spring of 2005, Mr. Fletcher planted 19 acres of spring canola, which he cared for to the best of his ability, with normal farming practices. He was given a premium from Agricorp for this crop, which he paid.

2. 2005 was a difficult farming year for canola producers. Many crops were harvested with no available market within which they could be sold.

3. On August 29, 2005, Mr. Fletcher hired someone to combine his canola. On August 30, 2005, a net weight of 10,820 kg of canola was delivered to Woodrill Farms Ltd. (“Woodrill”), as per the document from Woodrill in Exhibit 2. At the time of delivery, the canola was not assigned a grade, and 6.2% was identified as having heat damage, and 6.1% consisting of “greens”.

4. On September 6, 2005, the Canadian Grain Commission (“CGC”) assigned a grade of “Sample Canada AC Heated” to Mr. Fletcher’s 2005 canola crop, as per the document from the CGC in Exhibit 2. This document indicates that 3.60% of Mr. Fletcher’s canola crop was “heated”.

5. By letter dated September 21, 2005, (in Exhibit 2) Agricorp contacted Mr. Fletcher with respect to his 2005 canola crop. In this letter, Agricorp stated that:

a. Customers with “downgraded” and “unmarketable” canola, found to be of “grade three or sample”, be sure to follow specific steps, outlined in this letter; and

b. It “will not accept a regrade” on crops delivered to commercial elevators, and added that “[customers] with grade one and two canola must report their yield by October 31, 2005.”

6. By letter dated September 27, 2005, (Exhibit 4) Mr. Fletcher was informed that Woodrill would purchase canola of grading “#1” and “#2”, to be delivered to its elevators. In this letter, Woodrill also informed Mr. Fletcher that, upon request by a producer, it would settle canola graded at “#3” and “Sample Grade” at $4.00 per metric tonne.

7. On October 15, 2005, Mr. Fletcher settled his 10.474 dry metric tonnes of canola with Woodrill, at a base price of $4.28 per metric tonne, including GST.

8. On October 31, 2005, after reporting his yield to Agricorp, Mr. Fletcher was visited by Mr. John Good, who prepared a Crop Inspection Report (Exhibit 6). At the time of inspection, Mr. Fletcher provided Mr. Good with copies of the grading slips from the CFC and from Woodrill, and informed Mr. Good of the insured peril, drought, which lead to crop damage.

9. By letter dated November 21, 2005, (Exhibit 7) Woodrill informed Mr. Fletcher that “other markets appeared for the #3 and sample grade canola” and that “the canola did move for higher values … and we are passing that increase on to you.” Mr. Fletcher received a total $154.28 per metric tonne for his 10.474 dry metric tonnes of canola. Shortly after receiving this letter, Mr. Fletcher informed Agricorp of this payment.

10. By letter dated August 25, 2006, Agricorp informed Mr. Fletcher that since he “received market compensation” for his canola, he was “not eligible for the crop insurance payment of $2851.77” and that his “insurance claim has been readjusted to $0.” In this letter, Agricorp informed Mr. Fletcher that they are required to recover this overpayment, and requested that, by September 16, 2006, Mr. Fletcher either:

a. forward the full amount of overpayment to Agricorp; or

b. contact an account lead, whose contact information was provided, to make arrangements for repayment.

11. The Ontario Canola Growers Association (“OCGA”) issued a document entitled “Agricorp and the 2005 Canola Claims Problem”, received by the Tribunal as Exhibit 9. This document provides a background of events regarding the 2005 canola year.

12. By letter dated October 25, 2007, (Exhibit 10) Agricorp requested that Mr. Fletcher pay to Agricorp the amount of the “additional payment instead of the Production Insurance Claim” and requested to meet with Mr. Fletcher to discuss repayment. After receiving this letter, Mr. Fletcher met with Mr. Barry Roberts, a field manager, and Mr. John Good, an adjuster. During that meeting, the Adjuster’s Special Report, dated November 6, 2007, (Exhibit 11) was completed. Exhibit 11 stated that Mr. Fletcher received a total of $1,615.93 for his 2005 canola crop, from Woodrill, which Agricorp “considered to be an overpayment from Woodrill”.

13. By letter dated, January 25, 2008, (Exhibit 12) Agricorp informed Mr. Fletcher of the overpayment, in the amount of $1,615.93, to be repayed to Agricorp by February 29, 2008, in full, or by December 31, 2008, with 12 post-dated cheques sent to Agricorp by February 29, 2008. After receipt of this letter, Mr. Fletcher paid the amount noted of $1,615.93, to Agricorp.

Mr. Fletcher told the Tribunal that once he settled his 2005 canola crop with Woodrill, on October 15, 2005, this crop no longer belonged to him.

With respect to the letter from Woodrill, dated November 21, 2005, Mr. Fletcher stated that Woodrill’s “passing that increase on” to him was their decision.

With respect to the letter from Agricorp dated August 25, 2006, Mr. Fletcher stated that he attempted to contact Agricorp for 2 days, unsuccessfully. He added that he was only given 1.5 weeks to repay almost $3,000. Mr. Fletcher told the Tribunal that the OCGA held a meeting with many producers, to discuss the 2005 canola situation. The OCGA, he added, met with Agricorp on behalf of producers, attempting to resolve issues surrounding canola in 2005.

Mr. Fletcher referred to Exhibit 9, the document prepared by the OCGA, and directed the Tribunal’s attention to the following sections in this document:

a. On page 2, it states that samples of canola were sent to CGC labs in Chatham and Winnipeg, “with over 80% of samples graded as 3 or sample.”;

b. On page 4, it states that Agricorp received calls, in December of 2005, “from customers who had settled their canola claims, but later received payments from Woodrill Farms to distribute profit on canola sales amongst growers.”;

c. On page 4, it states that in May of 2006 “Agricorp announces its investigation into the marketing of the 2005 canola crop” and “On August 28, 2006 Agricorp sent letters to ten producers demanding a full repayment of their 2005 canola insurance claims…”;

d. On page 5, it states that “Producers sold their canola to Woodrill Farms with the clear intent that this was a FINAL SALE at disposal value.”; and

e. On page 7, it states that cheques that producers received from Woodrill were “pooling in nature and cannot be specifically related to any particular producer’s canola.”

With respect to Exhibit 11, Mr. Fletcher stated that he should be able to keep the $50 per tonne amount, which was to be the salvage price, which would amount to over $500, for his 10.474 dry metric tones of canola.

In cross-examination of Mr. Fletcher, Mr. Fred Thompson submitted to the Tribunal a package from Agricorp, received as Exhibit 13. In response to questions from Mr. Fred Thompson, Mr. Fletcher told the Tribunal that:

• He has contacted Woodrill regarding the repayment of the additional amount sent to him, although he has not yet repaid that amount to Woodrill;
• He agrees that he should not be able to keep the additional payment received from Woodrill, since he has been paid a full production claim by Agricorp;
• He has had many conversation with Mr. Jim Zavitz;
• His 2005 canola was delivered to Woodrill on August 30, 2005, with the delivery slip indicating that 6.2% suffered “Heat Damages”, and an omitted grading;
• For the 2005 year, it was not normal practice for the grain elevator to assign a grade to canola upon delivery;
• He only became aware of the grade of his canola by the CGC inspection slip dated September 6, 2005;
• His 2005 canola was received as consignment and classified as stored;
• When he settled his 2005 canola crop with Woodrill, on October 15, 2005, he was paid for a crop which was essentially valueless;
• He paid the amount of $1,615.93 to Agricorp by February 29, 2008, as stated in the letter from Agricorp of January 25, 2008, because he needs a positive credit rating;
• He received $154.28 per tonne of canola, from Woodrill, as a total amount received after the payment of the production insurance claim;
• He agrees that there were some “vagueries” in the marketplace in 2005, for canola;
• He is not aware of whether non-insured growers received any additional payment for the sale of their canola; and
• His understanding was that producers were entitled to receive up to $50 per tonne as a salvage price, and that higher values were to be reported to Agricorp.

John Good

In response to questions from Mr. Thompson, Mr. Good told the Tribunal that:

• He is a regional adjuster with Agricorp, and has been in this position since before 2005;
• Mr. Fletcher is a customer of Agricorp, in the area which he serves while reporting to Barry Roberts;
• In October of 2005, he visited Mr. Fletcher and produced a Crop Inspection Report dated October 31, 2005, following the grading and settlement of Mr. Fletcher’s 2005 canola crop
• It is not normal practice for grain elevators to not assign a grade at the time of receipt;
• The difference between the percentages for heat damage shown on delivery slips for Woodrill and the CGC, of 6.2% and 3.6%, respectively, are not normal, in his opinion;
• The delivery slip from Woodrill, on Page 9 of Tab 4 in Exhibit 13, shows a grade of “Sample”, by John Taylor, which appears to have been added at a later date than the delivery date;
• Adjusters were instructed by Agricorp to ensure that customers understood they were to notify Agricorp of any later payment received;
• Mr. Fletcher’s 2005 canola crop was lost due to drought;
• The customer is responsible for obtaining and submitting a Proof of Loss form, which is significant in confirming the details of a crop;
• The shortfall of Mr. Fletcher’s 2005 canola crop equaling his total overall production made him eligible for the full production claim, in the amount of $2,884.19; and
• During the meeting with Mr. Fletcher, on November 6, 2007, Mr. Fletcher was of the opinion that an amount of $50 per tonne should be deducted from the amount he would need to repay to Agricorp.

In response to a question from Mr. Fletcher, Mr. Good told the Tribunal that all auditors are supposed to be licensed by the CGC, and that it is the responsibility of the grain elevator to ensure they are licensed.

Anna Siderius

In response to questions from Mr. Thompson, Ms. Siderius told the Tribunal that:

• She has been with Agricorp for 12 years, and has been a manager for 20 years;
• She was responsible for overseeing the current and future status of canola in Ontario, in 2005;
• She was involved in the decision-making process on the issue of 2005 canola, being involved in discussions with the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) regarding what was happening in the industry at that time. Her department, she added was the point area for commodity groups, and due to the unusual situation, they were liaising with provincial and federal governments;
• For insurance purposes, canola yield is measured in pounds per acre;
• Drought is an insured peril;
• On page 16 of Agricorp’s “Crop Insurance Policy” “Contract of Insurance”, in Tab 1 of Exhibit 13, the section on “Production Shortfall Indemnity” states that Agricorp would indemnify the holder of the contract in the event where a production shortfall claim was paid;
• She recalls canola prices in the fall of 2005 were substantially lower than usual, considering there had never been an issue with grades in Ontario;
• Throughout meetings with the OCGA, in the fall of 2005, a consensus for the cause of the canola problem was reached, which was due to drought;
• The mood in the industry at that time was of indescribable frustration and fear;
• The $50 value per tonne of canola was used by Agricorp to determine whether a crop would be considered marketable;
• Adjusters were meeting with customers in late October and November of 2005, and claims began to be paid at that time;
• Agricorp became aware of customers’ additional receipt of payments, after the payment of claims, in late November and December;
• If Agricorp had known that additional payments would be issued to producers by Woodrill it would not have paid those production insurance claims, because the production insurance program does not provide insurance for what a producer receives in a marketplace;
• Throughout pages 15 to 18 of Agricorp’s “Contract of Insurance”, there is no reference that prevents Agricorp from adjusting a producer’s claim on the basis of a quality issue; and
• Based on her knowledge, an issue of this magnitude had never affected the Ontario canola industry.

In response to questions from Mr. Fletcher, Ms. Siderius told the Tribunal that:

• Agricorp determined that if a producer received less than $50 per tonne, it would be considered full claim;
• She is not sure whether Woodrill was involved in meetings that took place between Agricorp and elevators;
• Agricorp would consider selling the crop at disposal value to be the same as destroying the crop;
• The crop specialist for OMAFRA advised that a canola crop should not be left on the field, due to uncertainty in the damage it may cause;
• It was her understanding that, although ADM reduced their prices, they were only accepting canola grades 1 and 2;
• A grader from another province was brought in at a later date because the amount of grain produced in Ontario is substantially less than in other provinces, and graders from western provinces are more experienced;
• She does not agree that Agricorp’s policy changed in the fall of 2005; and
• There were approximately 100 claims for canola in 2005.

Jim Zavitz

In response to questions from Mr. Thompson, Mr. Zavitz told the Tribunal that:

• In August of 2005, he was a senior manager of customer service, and has been associated with the crop insurance program since 1994. Since that time, he has been involved in dispute resolution and claim coordination, as well as for Tribunal hearings;
• His background is with agriculture in Canada, and is appointed as the chief inspector of the Crop Insurance Act, as Agricorp’s representative under this act;
• Regarding the 2005 canola situation, customers were calling Agricorp to inform of additional claims they were receiving, following documentation they had received from Agricorp;
• The statement for producers to contact Agricorp in the event of additional payment is included as a standard statement on all adjustment reports;
• Neither Agricorp, nor the customers, had any knowledge of any change of market activity for the sale of canola in 2005;
• Mr. Fletcher received a market value for his canola, and was asked to return the entire production claim, which he opposed. It was considered unfair for producers to receive both a production claim and a fair market price for their crop;
• As of January of 2006, approximately 200 customers received production claims for their 2005 canola crops, some of whom destroyed their crops and received no further payment;
• He agrees that there was a considerable discrepancy with the grading of canola in 2005, which lead to Agricorp deciding to investigate the issue. Agricorp hired an outside investigations group to gather, collate, and draw conclusions on the issues at hand;
• He participated in the fact-finding aspect of the investigation, as a liaison. He added that meetings with customers went very well, and noted that the overall assessment throughout the process was that everyone acted with integrity and due diligence in a stressful and confusing situation;
• The investigator concluded that Agricorp “stepped up” and did the best that it could to help an industry that was in crisis at that time;
• As for producers receiving additional payment, it was the investigator’s conclusion that Agricorp should recover the overpayment to offset the claim, as it has the authority to do so when it subrogates the rights of the insured once a claim is paid;
• He doesn’t feel that Mr. Fletcher’s request to keep $50 per tonne is reasonable, because $50 per tonne wasn’t meant as an entitlement to all producers because, from an insurance perspective, the crop insurance fund wasn’t meant to support the market;
• By Mr. Fletcher keeping $50 per tonne, plus $274 per tonne, for his 2005 canola crop, he would be treated very differently from other customers; and
• In September of 2006, as per Page 7 of Tab 7, in Exhibit 13, Agricorp was asking that all money be repaid from the claim, and Mr. Fletcher was asking for the initial market value on his crop. In his opinion, if Mr. Fletcher was given was he is asking for, a fair decision would not have been reached; further, it would not be consistent with the recommendations of the investigator.

In response to questions from Mr. Fletcher, Mr. Zavitz told the Tribunal that:

• There were 17 elevators with canola in 2005;
• No producers from elevators other than Woodrill contacted Agricorp to inform it that additional payments had been received; and
• Agricorp received producers’ information from all elevators, for immediate and additional payments.

Summations

Mr. Fletcher told the Tribunal that he does not understand why Agricorp wants $1,615.93 from him, and added that after he sold his crop to Woodrill in 2005, the crop belonged to them. He questioned why he is not entitled to keep the $50 salvage rate, if Agricorp feels that the initial payment is owed to them in full. He added that at the time of the claim payment, he was not in possession of the canola crop. Mr. Fletcher told the Tribunal that the additional payment should be repaid to Woodrill, since they were the only elevator to pass on the higher market prices received, to their producers.

Mr. Thompson told the Tribunal that, at some point, Mr. Fletcher appeared satisfied with the payment of his initial claim, although subsequently, he was paid for the full market price of his canola. Mr. Thompson further restated that Agricorp subrogates the rights of the insured once a claim is paid.

Mr. Thompson stated that Agricorp acted appropriately, and the outside investigator confirmed this. He added that the investigator’s report recommended that Agricorp recover the overpayment received by producers who had subsequently received additional payment, and, to date, most affected customers have participated in the repayment process. He further added that Mr. Fletcher has currently repaid $1,615.93, and for Mr. Fletcher to receive any payment from Agricorp for this crop would be neither just nor equitable, because the crop insurance fund would be the source for Mr. Fletcher’s payment, making Mr. Fletcher’s overall income from his 2005 canola crop to be over $300 per tonne.

The Findings

After reviewing the submissions and hearing the evidence, the Tribunal finds that:

1. There is no dispute with respect to the chronology of events that took place during the 2005 canola crop season.

2. The problem with canola crop adjustment, for the crop in question, originated with the grading of this crop, and that once the crop was deemed marketable, Woodrill shared its increased revenues from the regraded crops with its producers.

3. It cannot justify a recovery policy for Mr. Fletcher other than what his fellow producers have been presented.

4. It is not equitable or fair for Mr. Fletcher to receive $322 per tonne as a market price, when the remainder of canola producers in the province received $272 per tonne, as the market price for their 2005 canola crops.

5. Mr. Fletcher acted responsibly and reasonably by returning said monies to Agricorp, then pursuing an appeal to the Tribunal.

6. Agricorp acted responsibly, reasonably and within their authority, in appointing an outside consultant, and that Agricorp made every effort to deal with their customers in a fair and equitable manner.

7. The confusion within the 2005 canola market, which lead to the matter under appeal, could have been avoided with a grading system that is more conclusive and unambiguous.

Order of the Tribunal

After careful consideration of the evidence filed and submissions made, the Tribunal orders that the appeal by Robert G. Fletcher with respect to his crop insurance claim for his 2005 canola crop, be denied.

DATED at Maidstone, Ontario, this 18^th day of August, 2008.