Robbie Kiwan v. Agricorp

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 Robbie Kiwan, in Gloucester, Ontario from a decision of Agricorp concerning the adjustment of his claim for his 2007 pepper, eggplant, pumpkin and melon crops.

Before:
Marthanne Robson, Vice Chair; Denis Perrault, Member; Richard Smelski, Member

Appearances:
Robbie Kiwan, the appellant
Fred Thompson, representative for the respondent, Agricorp
Mark Van Vliet, witness for the respondent
Dean Patterson, witness for the respondent
Kevin Schooley, witness for the respondent
Richard Charlebois, witness for the respondent
Wendell Gourlay, witness for the respondent

This appeal was heard in Ottawa, Ontario, on October 20, 2008.

Decision of the Tribunal

Background

Mr. Robbie Kiwan is a farmer in the Ottawa area who, in 2007, grew peppers, eggplants, pumpkins, and melons, as well as other crops. Kiwan Farms is a business that belongs to Mr. Kiwan's sister, and consists of a greenhouse operation and some fields. Mr. Kiwan manages the field crops and has also been farming some of his own fields. He recently began renting a portion of a larger property that is entirely managed by himself.

In 2007, Agricorp offered a new crop insurance plan, the "Fresh Market Vegetable Plans". Agricorp described the Plan as innovative as it deals with acreage loss, as opposed to average farm yield. The program included certain eligibility requirements such as the planting of a minimum of two acres per crop.

The program offered various percentages of coverage (60-85%) based on three levels of insurable value per acre of crop. Claims could be made for loss or damage due to certain weather conditions or wildlife, insects and plant diseases. A minimum of one continuous acre of damage was required to make an eligible claim.

Horticultural crops are considered high value crops, with high costs of production. Payments for loss under the Plan were made based on a schedule of costs of production per crop per acre less any "non-incurred expenses" or "non-incurred costs". If a farmer incurred fewer costs than Agricorp estimated for the crop, the difference between the estimated amount and what was actually spent was deducted from the claim payment. This issue will be discussed in greater detail later. Claims can also be reduced if in Agricorp's judgment, the farmer failed to follow good farm management standards and practices, for example poor weed control, inappropriate row spacing and neglect of crop.

Mr. Kiwan applied for and submitted premiums to Agricorp for all of his crops. He chose the multi-peril option at 80% coverage and the maximum value per acre of crop. Mr. Kiwan's crops did not flourish. Mr. Kiwan informed Agricorp of crop damage. An adjuster measured the area covered by each of his crops and determined that only the eggplant, pumpkin, and melon crops met Agricorp's minimum two acre requirement. Mr. Kiwan's remaining crops, tomatoes, peppers, cucumbers, and zucchini, were disqualified for failing to meet the minimum acreage requirement. He received reimbursement for the relevant portion of the premium paid for those crops. Agricorp paid claims for eggplants due to drought, wildlife and flooding; and for pumpkin and melons due to wildlife damage.

Mr. Kiwan appealed to the Tribunal because he was dissatisfied with: 1) the way in which the acreage of his crops were measured at the time of adjustment of his claims; 2) Agricorp's non-measurement of his crops prior to the adjustment of his claims; and 3) the claim amounts received from Agricorp for his eggplant, pumpkin, and melon crops.

Preliminary Matters

At the onset of the Hearing, Mr. Fred Thompson, representing Agricorp, made a motion for the Tribunal to dismiss the appeals by Mr. Kiwan, regarding the adjustment of his claims for his eggplant, pumpkin, and melon crops, on the basis that Mr. Kiwan signed Final Release forms. This motion was made without notice to Mr. Kiwan or the Tribunal. Mr. Thompson advised the Tribunal that he had just thought of the idea on his way up to Ottawa the day before.

Mr. Kiwan testified that Sean McGowan of Agricorp advised him that he could sign the release forms, receive his check and still be able to have a hearing before the Tribunal. Mr. Thompson submitted it was not within the purview of any Agricorp employee to tell a customer that they cannot proceed to the Tribunal for hearing. Mr. Thompson declined the Tribunal's invitation to call Mr. McGowan as a witness.

The Crop Insurance Act provides for a referral of disputes arising out of the adjustment of a claim to the Tribunal. The Final Release form signed by Mr. Kiwan provides that "the undersigned... release and forever discharge Agricorp... from any action, cause of action, or claim for damages specified above where the injury or, as the case may be, the damage, has been sustained as the date hereof..."

The Tribunal declined to make a ruling at the time and took the matter under advisement. The hearing proceeded.

The motion is denied. While the Rules of the Tribunal permit motions to be made at the hearing, the hearing of the motion is at the Tribunal's discretion. Mr. Thompson had ample time to consider the validity of the releases prior to the date of the hearing. It would be unfair to grant Mr. Thompson's motion because of the delay and lack of notice in making the motion. The Tribunal advised Mr. Thompson that if he intended to bring a motion for dismissal at a hearing in the future, the Tribunal would expect to hear about it with due notice.

In addition, the Tribunal is not persuaded that the language of the release is sufficient to displace a statutory right of appeal.

Issues

The issues before the Tribunal are:

1. The measurement of the acreage covered by Mr. Kiwan's pepper crop; and
2. The calculation of Mr. Kiwan's crop insurance claims for his eggplant, pumpkin, and melon crops.

1. Crop Acreage Measurement

Mr. Kiwan told the Tribunal that he initially purchased insurance for his crops with the understanding that he met the eligibility requirements for the program. He submitted the respective acreages for each crop. Agricorp took his information and processed his premium cheque. Mr. Dean Patterson, Agricorp's adjuster came to file the claim and measured the size of the crops to confirm the acreages insured. At that point the adjuster determined that, except for the eggplants, pumpkins, and melons, there was insufficient acreage to be eligible for insurance.

Mr. Kiwan stated that Mr. Patterson had told him early in the growing season that he was going to visit Mr. Kiwan's farm to take GPS measurements of his crops. However, after Mr. Kiwan had already transplanted his 2007 crops, Mr. Patterson told him to measure his crops on his own and to inform Agricorp of the respective acreages. Mr. Kiwan reported two acres of peppers.

Mr. Kiwan took approximate measurements of his fields by observing the proportion of the field occupied by given crops. For example, where his watermelons occupied one seventh of a seven acre field, he noted this measurement as though his watermelons occupied one acre. Mr. Kiwan noted that he relied on the measurements of his fields that were provided by the previous farmer, whose measurements were very accurate based on his follow up measurements of some of the areas noted by the previous farmer.

Agricorp noted three different values for the measurements of the pepper crop, ranging from 1.3 acres to 1.5 acres. Mr. Kiwan explained that the differences between his measurements and the GPS measurements taken by Mr. Patterson were because the plants in his crops branch out and that room is needed between rows and around the perimeter of the fields for easier cultivation. He noted that he was informed by Agricorp that spacing between his rows was too large. He understood that Agricorp's measurements only account for the area taken by the plants, and did not include additional space required to grow each crop.

Mr. Patterson, the Agricorp adjuster, is also a grain inspector, and has been a farmer since 1976. Mr. Patterson has been doing GPS measurement work for Agricorp for eight years and has measured between 20,000 and 28,000 acres of beans, apple orchards, pumpkins, sweet corn, and horticultural crops. He said that he was one of the first people within Agricorp to learn and use GPS technology.

Mr. Patterson told the Tribunal the 1.4 acres of peppers included an incomplete row, which he understood was because Mr. Kiwan ran out of pepper plants. The incomplete row also accounted for the varying measurements that he took. Mr. Kiwan admitted that he planted all the pepper plants he had available, but if he'd realized that his acreage was short, he would have planted more.

Mr. Patterson said he was present when Mr. Kiwan filled out the acreage values for his insurance coverage and he was not concerned about whether Mr. Kiwan was going to meet the two acre requirement because he seemed to be working with a large number of plants. He admitted he told Mr. Kiwan that he would measure his crops at some other time; though he didn't until after the claim was made. He added, however, that Mr. Kiwan should have been aware that he would not meet the two acre minimum requirement based on the amount of plastic to be used and the overall number of transplants prepared. He stated the grower is responsible for accurately reporting acreage to Agricorp.

Mr. Patterson testified that he decided to measure Mr. Kiwan's crop sizes because they appeared smaller than the required size. Five of Mr. Kiwan's eight crops did not meet the minimum acreage requirement, his pepper, zucchini, tomato, cabbage, and cucumber crops were all disqualified from the program.

Clearly, a GPS measurement is more accurate than Mr. Kiwan eyeballing his field. Notwithstanding a certain variance in different measurements taken by the Agricorp adjuster, each measurement was below the two acre minimum requirement. Mr. Kiwan understood that he was to report the acreage planted and did so. There is a clear expectation that acreage reported should be accurate.

It would no doubt have been useful to Mr. Kiwan to know that any claim would be based on GPS measurements taken by Agricorp. The "Fact Sheet" about the Plan did not specify that it was the producer's responsibility to measure acreage. The Crop Insurance Policy (Part VII "Fresh Market Vegetables") states: "The Insured shall report to Agricorp in each crop year the final acreage planted... [on] the earlier of the completion of planting or July 15".

Mr. Kiwan's appeal on this issue fails.

2. Calculation of the Claim Payment

All the claims were reduced for "non-incurred costs" which appears to include a deduction by Agricorp for poor farm management practices. The link between these two concepts was certainly not made clear at the hearing by Agricorp. A statement of enlightenment is contained in the Compliance Officer's Report issued after Mr. Kiwan's claims were reviewed by the Issues Review Committee of Agricorp: "the reduction in the claim payments due to the non-incurred costs are clearly justified given the differences from the agronomic norms."

The Policy defines "non-incurred costs" as "costs included in the calculation of the insurable value and abandonment threshold at rates determined by Agricorp, but are not expended by the Insured". That would seem to mean that non-incurred costs are in fact expenses the producer did not incur as compared with the estimates developed by Agricorp. "Abandonment threshold" in the policy means "the value established by Agricorp based on economic profitability that is used to determine if abandonment is warranted". Basically, if the yield is below a certain threshold, the crop is considered abandoned or a total loss. This was the case for the eggplant crop.

As part of the General Conditions of the Policy, "The Insured must establish, to the satisfaction of Agricorp, that good farm management practices were followed..." The Policy also provides that "the abandonment threshold may be adjusted downward for... failure to follow good farm management practices".

The Policy also states in Part 1 section K.3.b. that Agricorp may reduce the amount of the indemnity paid if the producer engages in farming practices which directly or indirectly contributed to a loss. Section K.4. sets out what farming practices are deemed to be improper. These include failure to plant the appropriate quantity of seed with row spacing; failure to properly cultivate or fertilize; failure to properly control weeds or neglect of the crop.

So, considering all of the definitions and provisions together, it appears that deduction for "non-incurred costs" means deduction for poor farm management practices as well as expenses not incurred by the producer.

Considerable testimony was presented regarding Mr. Kiwan's farm management practices, including fertilization, weed control, plant spacing and possible abandonment of his crop. The adjuster did attempt to reduce the eggplant claim for low density, but this was rejected when the claim was processed.

Agricorp establishes tables of costs of production for each insured crop in the program. Input costs include seed, fertilizer, pesticide, machinery expense, labor and fixed costs such as interest, taxes, insurance, etc. These tables were not provided to Mr. Kiwan but were used in the calculation of claims. Mr. Kiwan was provided with a "Fact Sheet" about the insurance program, which included the following statement: "Incurred Expenses: Will be deducted from compensation, if any." There was no evidence that Mr. Kiwan had received a copy of the actual Crop Insurance Policy.

Mr. Kiwan told the Tribunal that after he reported his crop damage, the adjuster inspected his farm and requested copies of receipts for the expenses incurred for the production of his crops. He sent some receipts to Agricorp. At the hearing, he filed copies of receipts and invoices showing amounts spent on fertilizers, chemicals, and pesticides to show his incurred costs for growing his eggplant, watermelon, and pumpkin crops. He described his use of granular and water soluble fertilizers for all of the vegetables, leading to significant costs being incurred for each acre of production. He did note, however, that within the receipts provided, some of the product was purchased for his sister and other product was purchased for him, and that he would need to go through each receipt thoroughly to differentiate who received what product.

Mr. Kiwan stated that since not all receipts were provided at the time, his claim was lower than it should have been. He noted that he was never informed by Agricorp of these charges being factored into his insurance claim, and questioned whether labour was considered in Agricorp's calculations. Mr. Kiwan also questioned whether the costs incurred for his use of mulch were also into account when Agricorp performed their calculations in his production claim. He added that, as a result of the Tribunal hearing, he has consolidated all receipts for costs incurred for the production of his insured crops; however, in order to confirm the product that was purchased for his fields, he would need additional time to review his submissions.

With respect to the quantity of fertilizer used by Mr. Kiwan, Mr. Patterson stated that Mr. Kiwan provided him with receipts for approximately one tonne of fertilizer for 22 acres of crops, leading to approximately 100 pounds used per acre. He noted that Mr. Kiwan's practice of applying fertilizer by hand is a very inaccurate mode of application. He added that, within his calculations of incurred costs for Mr. Kiwan's production insurance claim, he was willing to factor in the added value of transplants, since that would increase Mr. Kiwan's incurred costs calculations. In terms of calculating labour costs, Mr. Patterson told the Tribunal that 25 hours of labour costs were factored into their calculations, on a per acre basis, leading to a total of 175 hours of labour being paid to Mr. Kiwan for his pumpkin and melon crops. He further noted that these values were taken from OMAFRA, as their estimated production time per acre for these crops.

Mr. Patterson noted that when Mr. Kiwan filed a claim with Agricorp, he requested copies of all receipts for incurred costs on the lost crops. He stated that, at that time, he informed Mr. Kiwan of why these receipts were requested. Based on the receipts he received, Mr. Patterson stated, Mr. Kiwan's farm practices did not follow OMAFRA's recommendations.

In response to questions from Mr. Kiwan, Mr. Patterson told the Tribunal that he did not discuss the plan's eligibility requirement of two acres as a minimum crop size, nor of the requirement for receipts as evidence of incurred costs in the event of a claim, because Mr. Kiwan informed him that he was an experienced grower. He did not feel it was necessary to communicate that information. With respect to the decision to discontinue farming a given crop once it has suffered damage, Mr. Patterson stated that it would not be up to the farmer to abandon the crop; that decision would be made by Agricorp.

For the calculation of Mr. Kiwan's crop insurance claims, Mr. Patterson took into account the receipts and invoices received by Mr. Kiwan, and factored in his considerations of the amount of time required per acre to grow specific crops. Mr. Patterson testified that when a claim is triggered, they perform a claim calculation. In Mr. Kiwan's case, he stated, they met in September of 2007 and this was explained to Mr. Kiwan at that meeting.

Mr. Patterson stated that if a farmer experiences damage to their crop, they are to call Agricorp immediately, and that Agricorp will have an adjuster assess the crop and advise the farmer of whether they should abandon it or not.

Mr. Kevin Schooley, an independent consultant called by Agricorp, testified that the spacing of plants in Mr. Kiwan's watermelon, pumpkin, and eggplant crops were notably greater than standard spacing, based on OMAFRA publications on this topic. He noted that weeds in Mr. Kiwan's pumpkin and watermelon crops were quite high, and that there were moderate weeds in his eggplant crop. He noted, however, that May and June were drier than normal on his farm, and that in July and August they received above average precipitation. He added that the fertilizers Mr. Kiwan used appear to be of an appropriate ratio, based on OMAFRA's recommendations, however, less than recommended amounts of nitrogen were used on the pumpkin and watermelon crops.

Mr. Schooley stated that considering Mr. Kiwan's plant spacing was greater than recommended and that he used less fertilizer than recommended over that area, distributed by hand, his fertilizing amounts were likely appropriate. He noted, however, that hand distribution of fertilizer is not a common practice.

Mr. Kiwan explained that the spacing of his plants was determined by the size of his equipment, as he planted by machine. The machine poked holes thought the mulch and planted a plant. He left larger spaces between rows in order to drive equipment for weeding and tilling, and to allow for spreading of plants.

It was clear from the testimony of the witnesses called by Agricorp, that there were a lot of weeds in Mr. Kiwan's fields. Richard Charlebois, another Agricorp adjuster, testified that the biggest reason for crop loss was poor weed control. However, he failed to make any link between poor weed control and wildlife damage. It may be, that had Mr. Kiwan's pumpkin and melon crops grown to maturity, the yield would have been very poor. However, his plants were eaten long before they matured.

The pumpkin and melon crops were damaged by wildlife. According to the Policy, Agricorp can reduce the claim for "poor farm management" practices which are directly or indirectly related to the loss. While Mr. Kiwan may not have followed Agricorp's or OMAFRA recommendations on plant spacing, there was no evidence to suggest the damage by the deer was increased due to the spacing or the weed control. It was therefore improper to deduct for those two factors. As well, Agricorp's own expert, Mr. Schooley testified that Mr. Kiwan did use enough fertilizer, taking into account the method of application. There was no evidence that linked low nitrogen levels to wildlife damage either. It was therefore improper to deduct for poor fertilization.

Damage to the eggplants was caused by wildlife, drought and flooding. Sample yields were taken to determine whether the crop was below the threshold for abandonment. In that case plant spacing is relevant. Mr. Schooley testified that the eggplants were spaced 7 ft apart and that the normal spacing was 1-2 feet. Obviously that difference would significantly impact yield. For this crop, it was appropriate for Agricorp to factor in plant spacing in calculating the claim. However, in processing the claim, Agricrop did not allow the deduction for low density (calculated to be 57%).

It is not clear to what extent poor farm management practices were considered in reducing the claim, as opposed to lack of receipts for expenses. The claims will be referred back to Agricorp for recalculation taking into account all of the applicable receipts submitted by Mr. Kiwan, and only factoring in poor farm management practices directly or indirectly contributing to the loss.

Findings

The Tribunal finds that:

1. Mr. Kiwan's pepper crop did not meet the minimum acreage requirement for the program.
2. The producer is responsible for reporting accurate acreage measurements to Agricorp after planting.
3. Agricorp's insurance adjuster performed due diligence in ensuring that production claims reflected accurate measurements of respective crop acreages.
4. Agricorp did not provide an adequate explanation either in their written material or otherwise to Mr. Kiwan regarding the calculation and deduction for "non-incurred expenses", that it actually included a deduction for poor farm management practices, and did not adequately explain how expense receipts were used to calculate the claim.

Order of the Tribunal

The Tribunal orders as follows:

1. The appeal by Mr. Kiwan of his 2007 pepper crop's ineligibility for the Fresh Market Vegetable Plan is denied.
2. With respect to Mr. Kiwan's 2007 eggplant, pumpkin and watermelon crops, the parties shall proceed as follows:
   1. Mr. Kiwan is to provide complete and detailed information to Agricorp, copying the Tribunal, regarding expenses, including all relevant receipts and invoices, and a summary list of the product used and expenses incurred for the production of the above noted crops.
   2. Agricorp is to recalculate Mr. Kiwan's insurance claim, taking into consideration Mr. Kiwan's actual expenses, as ordered to be provided in point "a.", above, as well as Mr. Schooley's evidence that the fertilizer amounts were appropriate, and specifying any deduction related to poor farm management practices. Agricorp shall provide to Mr. Kiwan, copying the Tribunal, revised claim calculations for the above noted crops.
   3. The parties are to discuss the settlement of Mr. Kiwan's insurance claim for the above noted crops, and attempt to reach an agreement on the new calculations provided by Agricorp, as noted in point "b.", above.
3. The parties shall both report to the Tribunal, in writing, within 30 days of the date of this decision, advising of any agreement reached.
4. If agreement is reached, the Tribunal will incorporate such agreement as part of a final order in this appeal. The parties are invited to submit a draft order for consideration.
5. If no agreement is reached, the parties shall advise the Tribunal in writing and provide written submissions to the Tribunal within 60 days of the date of this order.

Dated at Ottawa, Ontario, this 12th day of February, 2009.