When Mark Hoff’s crop insurance company mailed him a $150,000 check, the Hendrum Minn., farmer considered his payment for sugar-beet crop losses a done deal.

The payment lessened the financial blow struck by root rot disease which left 221 acres of his beet crop worthless.

But Hoff and about 60 other sugar beet farmers in the central Red River Valley have since learned that their crop insurance coverage is far from settled.

About 1½ months after depositing his check, Hoff’s insurance company sent him a letter last week, telling him to return $67,000 of the payment.

Other sugar beet growers in Minnesota’s Clay and Norman counties and in Cass County, N.D., have received letters asking them to do the same.

In some cases, farmers’ insurance companies issued partial payments.

“That’s why you carry crop insurance – to lessen those losses and now they say they want some money back,” Hoff said.

“Right now they say I have 30 days to return that much or I could jeopardize my eligibility in other federal programs,” Hoff said.

The Red River Valley Sugarbeet Growers Association surveyed the region’s beet farmers and found that insurance companies have cut payments on about 9,000 acres of sugar beets, said Mark Weber, the association’s executive director.

Farmers getting reduced insurance payments are members of American Crystal Sugar Co., Weber said.

The fine print:
Problems with the insurance payments stem from a federal insurance regulation that requires farmers to maintain a check strip in damaged fields until harvest.

Farmers are required to keep a strip of the damaged crop so that appraisers can reassess damage at harvest time, said Duane Voy, the deputy director of the Risk Management Agency’s St. Paul office.

The Risk Management Agency, a branch of the U.S. Department of Agriculture, contracts with private insurance companies to provide crop protection to farmers.

Sugar beet growers who received smaller-than-expected settlements, however, plowed under entire fields before harvest.

Hoff and some sugar beet farmers in the Growers Association survey, said their insurance agents never told them a check strip was required.

“That was never brought up to me and we haven’t done that in three years,” Hoff said.

“The insurance company has already been out there so I don’t know how the check strip is going to clear up anything,” he said.

Farmers need to read their insurance policies because they include a listing of the federal regulations that growers must follow – including check strip requirements, said Dick Pflieger, claims manager at American Insurance in Fargo.

“Like they say, read the fine print,” Pflieger said.

Hoff bought an insurance policy for his sugar beets from the Bennett-Houglum Agency which is involved in the vast majority – about 50 – of the problems cases, according to the farmer survey.

The Bennett-Houglum Agency, which sells policies for Rural Community Insurance Services of Anoka, Minn., believed a 1998 variance that eliminated check strip requirements in sugar beet fields was still in effect, said Wayne Lee, co-owner of the insurance agency which has offices in Moorhead and Ada.

“The Risk Management Agency, maintains that (variance) was for 1998 only,” Lee said.

“There’s been a lot of sleepless nights – from the farmers to the adjusters to the agents – all the way around,” he said.

The Federal Crop Insurance Corp. reimburses insurance companies for settlements paid to farmers, but only if the claims are handled according to federal rules, Voy said.

In response to the government’s position, Rural Community Insurance Services is cutting its settlements to farmers by between $300,000 and $400,000, Lee said.

For American Crystal Sugar growers, any beet field with more than 50 percent root-rot damage is worthless.

That’s because the sugar processor will not take delivery from fields with more than 50 percent damage, and the farmers have no where else to market the beets.

Farmers who maintained a check strip are entitled to full insurance coverage for entire fields.

But most of the farmers who did not keep a check strip, cannot show actual losses at harvest time. So instead of getting payments to cover the loss of entire fields, they are receiving settlements based on initial appraisals that list a percent of damage.

Some insurance companies including, Fireman’s Fund and Great American Insurance Companies, did not always tell their policyholders to maintain a test strip, but have decided to make full payment anyway, the survey shows.

Asking for help:
The Red River Valley Sugarbeet Growers Association has asked Congressional representatives to work with the Risk Management Agency in implementing an emergency variance so that the farmers can get full insurance benefits, Weber said.

“The test strip should be irrelevant,” Weber said. “If a field is determined to have 50 percent damage from root rot, then the beets are worthless to the grower.

“It’s as simple as that,” he said.

If the Risk Management Agency does not approve a variance, the association is preparing to file complaints with the insurance commissions in North Dakota and Minnesota, he said.