After a two-year court battle regarding the legality of it’s insurance patronage program, Sunrise Cooperative was given the green light to continue the process of making these payments, when available, to customer-owners as it has been for a decade.
After the 2008 farm bill made insurance rebates illegal, Sunrise was grandfathered around the law as their insurance patronage was structured to be given to members who chose to use Lund & Smith Insurance Services, LLC (L&S) as their crop insurance provider. Sunrise owns one-third of L & S, so the payments were found to be justified.
That is until 2016, when Sunrise was about to merge with TruPointe Cooperative. The United States Department of Agriculture’s (USDA) Risk Management Agency (RMA) had given notice to Sunrise that those insurance patronage payments would have to stop, since TruPointe was not grandfathered in to the aforementioned law and the addition of TruPointe would change the entity structure of Sunrise.
“We looked at what merging with TruPointe and losing the insurance patronage would mean for our customer-owners and it would have been devastating,” said George Secor, President and CEO of Sunrise Cooperative. “At the same time, we looked at all of the benefits of the merger which added up to millions of dollars to a total of 7,000 customer-owners of what would be the new Sunrise Cooperative.”
After legal counsel sat down with both the Sunrise and TruPointe Cooperative boards, the decision was made to move forward with the merger and at the same time defend the practice of divvying out insurance patronage.
The first decision came down from a district court. That ruling was in favor of the RMA, noting that the 2008 farm bill “prohibits large, abrupt increases in the amount of premium-rebating that can occur when, as in this case, a non-grandfathered entity merges with a grandfathered entity.”
Sunrise then took their case to the Sixth Circuit, where they made the argument that nothing about their entity changed after the merger with TruPointe and therefore the insurance patronage should be allowed.
All three judges on the Sixth Circuit panel agreed with that assessment.
“It took a lot of money, time and effort to defend this right for the customer-owners of Sunrise,” Secor said. “But it was definitely the right thing to do and at the end of the day we prevailed.”
Source – http://ocj.com