Agriculture, Food and Rural Affairs Appeal Tribunal
Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales
1 Stone Road West / 1, chemin Stone Ouest Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: appeals.tribunal.omafra@ontario.ca
APPEAL: Grasshill Farms Ltd. v Agricorp NEUTRAL CITATION: 2008 ONAFRAAT 32 STATUTE: Crop Insurance Act HEARING: September 16, 2008 DATE OF DECISION: October 9, 2008 FILE NO.: 2008-32
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 Grasshill Farm Ltd. (Lloyd Wicks), in Bobcaygeon, Ontario from a decision of Agricorp concerning the adjustment of his claim for his 2006 corn crop.
Before: John O’Kane, Vice Chair; Doug Flook, Member; John Rudics, Member
Appearances: Lloyd Wicks, appellant Fred Thomson, representative of the respondent, Agricorp Jim Byers, witness for the respondent
DECISION OF THE TRIBUNAL
Overview
Grasshill Farms Ltd. (“Grasshill”) appealed under section 10(1) of the Crop Insurance Act to the Tribunal from Agricorp’s decision to deny Grasshill’s claim for crop insurance benefits for the loss of a 2006 corn crop because of drought. Grasshill filed a claim for $42,540.92 since its 2006 crop yield was short by 11,894.9 bushels. Agricorp denied the Grasshill claim because: (1) they could not confirm an insured peril caused the crop loss; (2) Grasshill’s farming practices voided the insurance coverage; and (3) Grasshill failed to tell Agricorp when the crop damage became obvious.
The Tribunal heard the Grasshill appeal on September 16, 2008 in Guelph. Mr. Lloyd Wicks, a principal of Grasshill testified and presented the appellant’s case. Mr. Fred Thomson was Agricorp’s representative at the appeal and called Agricorp claim adjuster Jim Byers to testify.
The Issue
Is Grasshill entitled to payment of the 2006 corn crop claim?
The Facts
Lloyd Wicks has farmed for 40 years and his family currently farms about 700 acres in Victoria County. He testified that about 500 acres is certified for organic production. His farm management approach has always included a mix of organic and conventional practices. He testified that Grasshill has been buying up surrounding farms that have been unused for long periods for crops and bringing the fields back into production.
Grasshill is in Victoria County in an area ringed by Pigeon Lake, Sturgeon Lake and Emily Lake. Mr. Wicks testified the area around the Grasshill farm is a microclimate distinct from the weather stations in Victoria County.
Mr. Wicks testified that when he planted the 2006 corn crop in early May 2006 the conditions were very wet. He described rainfall of 89 millimetres. However, after planting, it became extremely hot and dry. His cornfields did not get enough rain in June, July or August to produce a good crop. The Grasshill farm was so dry that by July his mother’s garden, which is typically a great source of pride for her was dried and shrivelled. Mr. Wicks had to plough the garden under in July.
There was little evidence from Agricorp to challenge Mr. Wick’s evidence that Grasshill experienced drought conditions in 2006. Mr. Wicks confirmed that during the Summer of 2006 he saw evidence of drought in the growing crop. He described the leaves of the corn stalks curling-up as a symptom of drought. Mr. Byers confirmed that, although he never saw the crop, there would be clear and obvious visual evidence of drought, like the symptoms described by Mr. Wicks. Mr. Byers also confirmed that there were six drought related corn crop insurance claims in the Kawartha Lakes area. Therefore, we find as a fact the 2006 Grasshill corn crop did experience drought.
2006 was the second year that Mr. Wicks had cropped these particular fields. He described how he recovered the fields two to three years previously from buckthorn. The fields had some stress damage because of old previously grown sod.
Mr. Wicks testified he did not harvest the 2006 corn crop in the Fall of 2006 because Grasshill’s custom combiner became ill and tragically never recovered. He harvested the 2006 corn crop during the Spring of 2007. Agricorp did not challenge Mr. Wicks’ evidence about when he harvested the crop. Therefore, we find as a fact that the 2006 corn crop was harvested during the Spring of 2007.
The crop insurance policy for corn is based on a rolling ten year average crop yield. For 2006, the Grasshill average farm yield (AFY) was 114 bushels of corn per acre. The insurance policy was based on a guarantee of 90% of the Grasshill AFY or 102.6 bushels per acre.
After the Spring 2007 harvest, Mr. Wick’s testified Grasshill yielded just 17.64 bushels per acre over the 140 acres planted in corn. Agricorp called no evidence to challenge Mr. Wick’s evidence about the harvested corn yield. Therefore, we find as a fact that Grasshill harvested 17.64 bushels per acre or 2,469.6 bushels of corn.
Based on the guaranteed yield of 102.6 bushels per ace for 140 acres in the insurance policy, or 14,364 bushels, Grasshill made a claim to Agricorp for the loss of 11,894 bushels.
In May 2007, Mr. Wicks contacted Agricorp to make a claim under Grasshill’s crop insurance policy. Mr. Byers met with Mr. Wicks on June 5th, 2007 and got a signed Proof of Loss and Crop Inspection Report. Mr. Byers never saw the corn crop.
Because the Grasshill insurance claim exceeded $25,000, Mr. Byers directed the claim to his Regional Manager, Mr. Fred Thomson. On August 27th, 2007 Mr. Thomson wrote to Grasshill denying the insurance claim. At Mr. Wick’s request, the Agricorp decision was reviewed internally by Agricorp’s Issues Review Committee (IRC), who upheld the Agricorp denial.
Discussion and Analysis
Was The Crop Loss because of an Insured Peril?
Part II of the Agricorp Crop Insurance Policy, Section B defines the insured perils for corn as:
drought, excessive moisture, excessive rainfall, flood, frost, hail, insect infestation and plant disease provided recommended control practices are followed, wildlife and wind.
The plain wording of Section B is that “drought” is an insured peril.
Mr. Wicks testified in a candid and forthright manner. He is a farmer with 40 years experience. There was no question about his integrity or the truthfulness of his evidence. On Mr. Wicks’ uncontradicted evidence, Grasshill experienced drought conditions in 2006. Mr. Wicks testified that the corn crop suffered drought damage. Agricorp did not lead any evidence that could support a finding that the corn crop did not suffer drought damage.
Therefore, on the facts before the Tribunal in this case, the 2006 corn crop loss was because of the insured peril drought.
Did Grasshill’s Farming Practices Void the Insurance Coverage?
Grasshill’s 2006 cornfields were a mix of both conventional fields and organic fields.
In 2006, Grasshill was amid a three-year process to become organically certified for part of its corn production. Unlike conventional farming practices, that can use chemical fertilizers, weed and insect controls, organic farming practices have more limited choices available to respond to adverse crop conditions.
Mr. Wicks testified that during 40 years farming, he always used a high degree of organic practices. He described those practices as important to his farming principles for land stewardship and sustainability.
Agricorp is a strong supporter of developing certified organic production to give farmers access to these profitable niche markets.
When Agricorp assessed the 2006 corn crop loss filed by Grasshill they learned the following key points from Mr. Wicks. Agricorp considered these points relevant to their adjustment of the insurance claim, since Agricorp was previously unaware of them:
Grasshill was amid a three-year organic certification programme
Grasshill used organic farming practices on part of the 2006 corn crop
Grasshill had only recently, in the previous two years, brought the fields into corn production after being unused for crops for an extended period
Mr. Byers testified that if a farmer changes farming practices, the farmer’s duty is to let Agricorp know of the changes. He also testified that if a farmer brings new fields into crop production, the farmer’s duty is to let Agricorp know of those new fields. Mr. Byers testified that from Agricorp’s perspective those happenings change the risk Agricorp insures. He testified that when advised by a farmer of such changes, Agricorp reassesses the risk. He testified that Agricorp expects lower yields in organic practices because of the limited weed control choices. As a result, the AFY under the insurance contract may change.
In this appeal we are not asked to decide if organic farming practices present greater risks than conventional farming practices. Therefore, our decision is not an endorsement or criticism of any particular farming practice. Similarly, the decision is not an endorsement of the view that organic farming practices are inherently riskier than conventional farming practices.
Agricorp relied on Part 1, Section K, Subsections, 1, 2 and 3 of the Agricorp Crop Insurance Policy. Agricorp relies on those provisions to support its position that, because of misconduct and farming practices, Grasshill voided the insurance contract. The alleged misconduct and farming practices related to Grasshill’s failure to tell Agricorp about its organic farming practices and the newly develop crop fields.
Paraphrased below are the relevant parts of those three sections:
- If … an Insured, in any way…omits to report, whether intentionally or not, any circumstances that is material to Agricorp in order to enable it to judge the risk …the Contract is void as to all crops…
- Any change material to the risk and within the control and knowledge of the Insured will result in the Contract becoming voidable…
- Where, in the discretion of Agricorp, the Insured is engaged in farming practices…which directly or indirectly contributed to a loss for which the Insured is claiming an indemnity…Agricorp may…deny liability under the Contract.
As noted in “Part 1, General Part” of the Agricorp Crop Insurance Policy “the terms contained in this document are fixed by Agricorp pursuant to the Crop Insurance Act (Ontario)”. It is therefore obvious that Grasshill, and its principal Mr. Wicks, had no part in drafting the terms of the insurance contract.
We interpret this insurance contract in the context of the facts presented in this appeal. We give the contract words their plain meaning. If there is any ambiguity or doubt with the words used, we resolve that doubt in favour of the insured Grasshill, who had no part in drafting the insurance contract.
As we interpreted these three sections that Agricorp relied on in this case, we found ambiguity in each one.
Subsection 1 (b) is ambiguous about what circumstances Agricorp considers material.
The Agricorp evidence did not convince us that Mr. Wicks knew what “circumstances” would be “material” to Agricorp in judging the risk.
Subsection 2 is ambiguous about what changes would be material to the Agricorp
The Agricorp evidence did not convince us that Mr. Wicks knew what changes would be “material to the risk”.
Subsection 3 is ambiguous about what farming practices would be improper.
The Agricorp evidence did not convince us that any of the Grasshill farming practices directly or indirectly contributed to the loss.
There was no clear evidence that there was any significant change to Grasshill’s farming practices. Mr. Wick’s has used organic farming practices for most of his 40 years as a farmer.
It was obvious from the evidence that Mr. Wicks was unaware that he was duty-bound to report to Agricorp that he used organic farming practices or that he recently brought new fields into crop production.
Part of Agricorp’s evidence was the literature it sends yearly to farmers to help with their decision to reinsure for the next crop season. Agricorp’s witness Mr. Byers candidly admitted the literature does not call to farmers’ attention:
If you use organic farming practices, the risk is different from conventional farming and therefore you must tell Agricorp
If you are aiming for organic certification for your crops, the risk is different therefore you must tell Agricorp
If you bring new fields into crop production, the risk is different and therefore you must tell Agricorp
Mr. Byers agreed those type warnings would better inform farmers.
A clear, unambiguous warning to farmers buying insurance would bring home to farmers their disclosure duties to Agricorp and allow Agricorp much better information about the potential risks.
On the evidence before us and our interpretation of the relevant parts of the insurance contract, there is no basis to deny Grasshill’s 2006 corn crop loss under “Misconduct and Farm Practices”, section K, subsections 1, 2 or 3.
What is the Effect of Grasshill’s Failure to Tell Agricorp of Crop Damage?
Mr. Wicks testified he visited the corn crop weekly during in 2006 and sometimes even daily. He saw evidence the crop was suffering from drought. Mr. Byers’ evidence was consistent with Mr. Wicks that the signs of damage would have been obvious.
Mr. Wicks confirmed that in previous years when he experienced damage to crops from perils such as hail or frost he promptly reported the damage to Agricorp. However, as the summer of 2006 progressed, he kept listening to the weather forecasts and was expecting that Grasshill would get one or two good rainstorms. If it had, then he suggested the crop would have been saved. He explained that he did not call Agricorp to report the obvious drought damage to the crop because he believed the damage, unlike that from a hailstorm or a frost, was insidious, and developing over time. He believed the insurance contract and Agricorp’s literature were unclear about when his duty to report damage arose.
Paraphrased below are the relevant parts of Part 1, Section J of the Agricorp Crop Insurance Policy is entitled “Claims, Notice of Damage, Time of Payment”:
If damage occurs to an insured crop, the Insured shall notify Agricorp within five (5) days …
If damage to an insured crop occurs at any time after planting and before the completion of harvesting, and it appears or ought reasonable to appear to an Insured that production may be reduced, the Insured shall notify Agricorp immediately.
In addition, Agricorp delivered a “Fact Sheet” with its literature to customers about the 2006 insurance programme. On page 3 of that “Fact Sheet” under the title “Reporting Damage”, the following appears:
All crop damage must be reported immediately to Agricorp at 1-888-247-4999, Monday to Friday from 7 a.m. to 5 p.m.
The same approach to interpreting “Part 1, Section J”, subsections 2 and 3 leads to a different result than above. In these words we find there is no ambiguity. The insured reading the contract can be under no confusion about its duties to report damage “immediately” or, at the outside, “within five (5) days”.
Mr. Wicks’ evidence was clear that based on previous claims experience he had promptly reported damage according to the contract requirements.
Mr. Wicks’ evidence that the drought damage was “insidious” does not help him on the facts presented, nor relieve him of the contractual duty to report the damage.
By July Grasshill was experiencing drought so that Mr. Wicks’ ploughed under his mother’s garden. He visited the corn crop at least weekly and he admitted he saw the signs of drought damage in the growing corn crop during the summer of 2006. Mr. Wicks has 40 years of farming experience. Taking these pieces of evidence together there is no doubt Mr. Wicks knew the crop had drought damage in the summer of 2006. However, he did not report drought damage to Agricorp until, at the earliest, May 1, 2007. The Grasshill damage report to Agricorp came, on the most favourable calculation to Grasshill, eight months after Mr. Wicks knew of the crop damage.
Grasshill’s failure to report the damage then brings into play “Part 1, Section K”, Subsection 1(c) of the Agricorp Crop Insurance Policy, reproduced below:
- In an Applicant, or an Insured, in any way:
(c) breaches a provision of the Contract;
the Contract is void as to all crops …
In our view, based on the facts of this case, Agricorp’s decision to deny Grasshill’s 2006 corn crop claim was correct under the combined application of Part 1, Section J, subsections 2 and 3 and Section K, subsection 1(c) of the Agricorp Crop Insurance Policy.
Therefore, for the reasons set out above, we dismiss the Grasshill crop insurance appeal.
DATED at Brampton, Ontario, this 9th day of October, 2008.