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When was the last time you read your farm business insurance policy? Under your policy, do you know when coverage is triggered for loss of business profits and loss of assets? In the case below, you will learn about a dairy farm that recently dealt with the issue of stray voltage causing dairy cattle to unexpectedly pass away. Even though the farm had insurance, the farm continued to operate, albeit at a reduced capacity, while it dealt with the silent killer. The farm continued to operate under the assumption that any loss of business income and the loss of its primary assets would be covered under its insurance policy.
Mengel Dairy Farms
Mengel Dairy Farms (“Mengel”) could not begin to fathom why its dairy cattle were unexpectedly dying off. Beyond its loss of livestock, Mengel also suffered loss of milk production and business profits. The farm eventually hired an expert to help it determine the cause of death of its cattle. The expert determined that a stray electrical current was present on the property, causing the dairy cattle to die.
Mengel then proceeded to file an insurance claim with its insurance provider, Hastings Mutual Insurance Company (“Hastings”), hoping to receive insurance benefits for the lost cattle, cost of the investigation into the death of the cattle, the subsequent repairs to correct the stray electrical current, and for its lost business profits.
Hastings, however, sent out its own expert to help determine the cause of death of the cattle. Hastings’ expert could not find any stray voltage on the property but did believe that electrocution may have caused Mengel’s cattle to stop eating and ultimately die.
After its investigation, Hastings paid Mengel for the death of its cattle and the cost of the investigation into the deaths of the livestock, but Hastings rejected coverage for the loss of business income. Hastings then filed an action in the Federal District Court, asking the court to determine that there was no coverage for Mengel’s lost business income as a result of the electrocuted dairy cattle.
After Hastings filed its action, Mengel submitted a second insurance claim to Hastings for the death of additional livestock, costs of additional investigation and repair, and additional lost profits. Hastings did not provide any coverage, this time, to Mengel for its second insurance claim and instead issued a reservation of rights letter to Mengel stating that coverage for Mengel’s second claim may be subject to exclusions under Mengel’s insurance policy. Hastings then asked the court to also determine whether Hastings was required to pay for the loss of the additional dairy cattle and additional lost profits.
Coverage for Electrocuted Dairy Cattle
In its arguement to the court, Hastings claimed that under the dairy farm’s insurance policy, Hastings was not required to pay any insurance benefits for the additional dairy cattle that passed away from the stray electrical current. Hastings argued that even though death or destruction of livestock by electrocution is a covered peril under Mengel’s insurance policy, the term electrocution means instant death, and because Mengel’s cattle did not die instantly, Mengel was not entitled to insurance benefits for the cattle.
The Court disagreed. The court found that the term “electrocution” was an ambiguous term within the insurance policy because it was not expressly defined. Additionally, the court went on to analyze that coverage existed for both the death or destruction of livestock. The court determined that the term destruction encompasses more than just death. Reading the terms destruction and electrocution together, the court held that electrocution can consist of an event that does not necessarily result in instantaneous death but may still cause irreparable harm.
Therefore, the electrocution causing Mengel’s cattle to stop eating and ultimately die could be considered “destruction of livestock” which would be covered under the farm’s insurance policy.
Coverage for Lost Business Income
Since discovering the cause of death to its dairy cattle, Mengel reduced its farming operations to deal with the stray electrical current. Under Mengel’s insurance policy, coverage existed for lost business income “due to the necessary suspension” of operations. The insurance policy also indicated that the necessary suspension of farm operations must have been caused or resulted from an insured peril. Mengel thought that because it reduced operations for a covered peril (the electrocution of its livestock), it was entitled to coverage for its lost business income. Hastings disagreed and claimed that coverage did not exist for Mengel because the farm did not shut down its farming operations completely, it only reduced operations.
The court sided with Hastings. The court found that “necessary suspension” means a complete shutdown of operations, even if temporary. The court noted that a slowing down of business is not covered under the insurance policy. Therefore, Mengel’s claim for lost profits is not covered under the policy because it continued to operate at a reduced capacity.
Mengel filed its own claims against its insurer for bad faith and breach of contract. However, after the court’s determination that coverage existed for electrocuted cattle that did not die instantly and the court’s conclusion that Mengel was not owed any insurance benefits for lost profits, the parties settled their dispute out of court.
It may not be as easy as you think to determine what is covered (and what should be covered) under your insurance policy. Insurance companies do their best to draft insurance policies to be as precise as possible. Certain pre-requisites must be met in order for coverage to exist for a farmer and their business. It is vital that you understand what is covered (and not covered) under your insurance policy. You may be taking steps to remediate any issues with the assumption that insurance will cover any expenses or lost revenue you may endure, but as the above case demonstrates, this is not always true.
Ohio landowners have seen it before: when the snow flies, so do the snowmobilers. Landowners are forced to watch snowmobilers crossing their fields and driveways and cutting through woods and homesteads, without permission and apparently without concern for property damage. Two common questions from landowners arise at this time: what can I do about them, and will I be liable if there’s an accident? While the answers aren’t always satisfactory to landowners, several Ohio laws try to address these two questions.
What can you do about snowmobilers on your land?
One possibility for dealing with unwanted snowmobilers is to call local law enforcement. That might not get the results you’d like, given the difficulty of identifying and catching snowmobilers and limited law enforcement resources in rural areas. Trail cameras, pictures, or other ways of verifying the sleds and riders might be helpful. Look for the registration decal on the front of the sled, which allows tracking it to its owner. Despite these challenges, there are two sections of Ohio law that provide for criminal actions against trespassing snowmobilers if you can apprehend them:
- Ohio criminal trespass laws make it a fourth degree misdemeanor to knowingly or recklessly be on another’s land without permission or to fail to leave after seeing “no trespass” or similar signs of restricted access or being notified by an owner. Committing this type of trespass while on a snowmobile doubles the fine to up to $500, and up to 30 days in jail is also possible. The court could also award damages for harm to the landowner victim of the criminal trespass. A second offense can result in impoundment of the title to the snowmobile.
- Ohio motor vehicle laws also address snowmobilers specifically. The law prohibits a snowmobiler from operating on any private property or in a nursery or planting area without the permission of the landowner or tenant of the property. The penalty for doing so is a fine of $50 to $500 and potential jail time of three to 30 days. Note that snowmobilers are also not allowed to operate on state highways, railroad tracks and railroad rights of way, and anywhere after sunset without required lighting. The law does allow snowmobilers to drive on berms and shoulders of roads, across highways if done safely, and on county and township roads if permitted to do so by the county or township.
Another potential legal strategy is to bring a civil action against trespassing snowmobilers. Again, that requires knowing who they are and proving that they were on your property. A few laws that could apply are:
- Ohio’s law on civil trespass is a court made law, and it requires showing that a person intentionally entered another’s land without permission and caused harm to the land. If a snowmobiler harmed the property while trespassing, this type of claim allows a landowner to seek compensation for that harm. Examples of harm that might arise include damaged fences, culverts, drives, and crops.
- If the snowmobiler behaved recklessly and caused damage, another law comes into play. Ohio law prohibits a person from recklessly destroying or injuring vegetation on another’s land, which includes crops, trees, saplings, vines, and bushes. “Recklessly” means with heedless indifference to the consequences of an act. To punish the reckless behavior, the law awards compensation to the landowner for three times the value of the destroyed vegetation. This law can be particularly helpful when the ground is not frozen and snowmobiling damages the crop beneath the snow.
Other than legal action, a few management practices might be helpful in deterring snowmobilers. We’ve removed many of the old fences that used to fence in our farms, but fencing is an obvious although costly solution. If you put up a fence, it should be noticeable and not just a thin wire or two. Consider flagging the fence with neon markers. Beyond fences, other actions can help mark property boundaries clearly. No trespassing signs serve this purpose, but make sure they are easy to see when there’s snow, are visible from a distance, and are placed where snowmobilers might enter the property. You may have other ways to restrict access to the area where snowmobilers enter, but be aware that you could be liable if you set up a “trap” or dangerous situation that harms a snowmobiler, discussed in the next section.
Will you be liable if there’s a snowmobile accident on your land?
Attorneys often prefer to answer a question with “it depends” but in this case, we could add “but probably not.” Generally, Ohio law doesn’t favor making a landowner liable for harm that a trespasser suffers while trespassing. But there are a few exceptions to the general rule:
- One exception is if the landowner commits a willful, wanton, or reckless act that harms a trespasser. Shooting at a snowmobiler is a good example, as is placing a single strand of barbed wire or thin wire across a drive or opening to “stop” snowmobilers. Landowners could be liable for harm resulting from these and similar intentional acts that could harm a snowmobiler.
- Another exception to non-liability is if a landowner knows or should know that a trespasser is in a “position of peril” and fails to take ordinary care to prevent harm from the perilous situation. For example, if you know there’s a big hole in the middle of the field where snowmobilers always cross and you don’t mark it off so the snowmobilers can see it, you might be failing to protect them from a “position of peril.” Remember, the landowner must be aware of the perilous situation and must fail to take any protective measures for this exception to apply. Landowners don’t like knowing they can be liable to trespassers in such a situation, but the law expects us to protect people from harms we know of even if those people are trespassing.
The good news is that Ohio has a law that can make landowners completely immune from any liability for snowmobilers. The Recreational User Statute applies to non-residential premises like farms and parks, and states that the owner or occupant of the premises has no duty to keep a “recreational user” safe and no liability for injuries caused to or by recreational users. The catch, though, is that a recreational user is someone who has “permission” to be engaging in a recreational use on the property and is not paying for that use, unless the payment is through a leasing situation.
The practical outcome of the Recreational User Statute is that it protects landowners only if the snowmobilers have permission to be snowmobiling on the property. What if the snowmobilers never came to you for permission, or you don’t even know who they are in order to go and give them permission? One court in Ohio dealt with this situation, and concluded that a landowner who “acquiesces” to recreational users and does not tell them to leave is in effect granting permission. In that case, a snowmobiler who had snowmobiled across a farm for years without ever asking permission sued the landowners after wrecking in an area where the landowners had installed new drain tiles. Because the landowners had never told the snowmobiler to leave the property, the court held that the landowners had indeed granted permission. If other courts follow this reasoning, landowners have liability protection under the Recreational User Statute if they allow snowmobilers to use the property by way of not telling them to leave.
What solutions are we missing in Ohio?
There currently isn’t a perfect legal solution to the snowmobile problems many landowners are facing this winter. Owners can secure and mark their properties, call the sheriff, file a legal action, and hope the Recreational User Statute protects them from liability. But understandably, landowners may still get agitated and feel hopeless when they hear the snowmobiles coming.
Are there solutions that could better address landowner concerns about snowmobilers? After reviewing how other states have tackled snowmobile problems, it appears that our trespass laws are quite similar to other states. Some states have a "purple paint" law that allows landowners to mark their boundaries with purple paint marks on trees and posts, making it easier to identify the boundaries. Ohio has tried but failed to pass a purple paint law.
A more noticeable difference between Ohio and other states is that Ohio has only 100 miles of groomed snowmobile trails, according to the American Council of Snowmobile Associations. Compare that to 20,000 miles in Minnesota; 6,500 miles in Michigan; 6,000 miles in Pennsylvania and 2,500 in Illinois. Could the lack of available snowmobile trails be a contributor to our problem in Ohio?
Some of the trails in other states are on public lands while others are a mix of public and private lands. Several states work directly with private landowners to enhance their trail systems. In Indiana, local snowmobile clubs maintain and monitor 200 miles of groomed trails that the state leases from private landowners. Minnesota’s United Snowmobilers Association works with landowners who allow snowmobile trails on their property through a “Landowner Trail Permit” system. Local snowmobile clubs maintain the trails and provide signage, and only registered snowmobilers may use the trails. State law protects the landowners from liability for trail use.
Before the snow flies next year, maybe we can develop these and other new ideas to address the old problem of snowmobile trespassing in Ohio.
The Ohio General Assembly is off and running in its new session. Many bills that affect agriculture in Ohio are already on the move. Here’s a summary of those that are gaining the most momentum or attention.
Tax Conformity Bill – S.B. 18 and H.B. 48. The Senate has already passed its version of this bill, which conforms our state tax code with recent changes to the Internal Revenue Code made in the latest COVID-19 stimulus provisions of the Consolidated Appropriations Act. Both the Senate and the House will also exempt forgiven Paycheck Protection Program second-draw loan proceeds from the Commercial Activity Tax. The Senate version additionally exempts Bureau of Workers Compensation dividend rebates from the Commercial Activity Tax beginning in 2020, but the House bill does not. Both bills include “emergency” language that would make the provisions effective in time for 2020 tax returns.
Beginning farmers tax credits – H.B. 95. A slightly different version of this bill is returning after not passing in the last legislative session. The bi-partisan bill aims to assist beginning farmers through several temporary income tax credits:
- Businesses that sell or rent agricultural assets such as land, animals, facilities or equipment to certified beginning farmers can receive a 5% income tax credit for sales, a 10% of gross rental income credit for cash rents, and 15% of gross rental income for share rents.
- Certified beginning farmers can receive an income tax credit equal to the cost of participating in a certified financial management program.
Beginning farmers, among other requirements, are those in or seeking entry into farming in Ohio within the last ten years who are not a partner, member or shareholder with the owner of the agricultural assets and who have a net worth of less than $800,000 in 2021, which adjusts for inflation in subsequent years. Beginning farmers must be certified by the Ohio Department of Agriculture or a land grant institution. The House Agriculture and Conservation Committee will discuss the bill at its meeting on February 16.
Wind and solar facilities – S.B. 52. In addition to revising setback and safety specifications for wind turbines, this proposal would amend Ohio township zoning law to establish a referendum process for large wind and solar facility certificates. The bill would require a person applying for a certificate for a large wind or solar facility to notify the township trustees and share details of the proposed facility. That notification sets up opportunities for the township trustees or residents of the township to object to the application and submit the proposed application to a vote of township residents. A certificate would not take effect unless approved by a majority of the voters. A first hearing on S.B. 52 will be held on Tuesday, February 16 before the Senate Energy and Public Utilities Committee.
Grants for broadband services – H.B. 2 and S.B. 8. The Senate passed its version of this bill last week, which sets up a $20 million competitive grant program for broadband providers to extend broadband services throughout the state. The proposal would also allow broadband providers to use electric cooperative easements and poles, subject to procedures and restrictions. The bill had its second hearing before the House Finance Committee last week.
Eminent domain – H.B. 63. Based on a similar bill that didn’t pass last session, this bill changes eminent domain law in regard to property taken for the use of recreational trails, which include public trails used for hiking, bicycling, horseback riding, ski touring, canoeing and other non-motorized recreational travel. H.B. 63 would allow a landowner to submit a written request asking a municipality or township to veto the use of eminent domain for a recreational trail within its borders. The bill would also allow a landowner to object to a use of eminent domain for any purpose at any time prior to a court order for the taking, rather than limiting that time period to ten days as in current law. The bill had its first hearing before the House Civil Justice Committee last week.
Minimum wage increases. S. B. 51 and H.B. 69. Bills on each side of the General Assembly propose gradually increasing the state minimum wage to $15, but have different paths for reaching that amount. S.B. 51 proposes increasing the wage to $12/hour in 2022, followed by $1/hour increases each year and reaching $15 by 2025, which is when a federal bill proposes to establish the $15 minimum wage. H.B. 69 begins at $10/hour in 2022 with $1/hour increases annually, reaching $15 in 2027. S.B. 51 was referred last week to the Workforce and Higher Education Committee and H.B. 69 was referred to the Commerce and Labor Committee.
There’s an old saying that legislation either lives or dies in committee. Committees and their chairpersons play a critical role in determining whether an idea makes it through the legislative process and becomes a law. So let’s take a look at the new members and chairs of our agriculture committees, recently appointed for the new two-year session of the 134th Ohio General Assembly.
After announcing a change in the committee’s name from “Agriculture and Rural Development” to “Agriculture and Conservation Committee,” House Speaker Bob Cupp (R-Lima) finalized his committee appointments. The new committee will include:
- Rep. Kyle Koehler (R-Springfield) will return as Committee Chair. Now in his fourth term in the Ohio House, Rep. Koehler has a background as a software engineer and working for his family’s tool company but has raised livestock and refers to himself as a hobby farmer. Rep. Koehler recently received the “Friend of Agriculture” endorsement from Ohio Farm Bureau.
- Rep. Rodney Creech (R-West Alexandria) will serve as the new Committee Vice Chair during his first term in the House. Rep. Creech farms in Preble County, owns a lawn care business, and has served as a township trustee and county commissioner.
- Rep. Juanita Brent (D-Cleveland) will also return to the committee as its Ranking Member. Rep. Brent is in her second term in the House, with a background in non-profit and community engagement work.
- Rep. Brian Baldridge (R-Winchester)
- Rep. Adam C. Bird (R-New Richmond)
- Rep. Sarah Fowler Arthur (R-Geneva-on-the-Lake)
- Rep. Paula Hicks-Hudson (D-Toledo)
- Rep. Don Jones (R-Freeport)
- Rep. Darrell Kick (R-Loudonville)
- Rep. Joseph A. Miller (D-Amherst)
- Rep. Michael J. O’Brien (D-Warren)
- Rep. Jena Powell (R-Arcanum)
- Rep. Michael Sheehy (D-Oregon)
On the Senate side, Senate President Matt Huffman (R-Lima) announced the members of the Agriculture and Natural Resources Committee, which will include:
- Sen. Tim Schaffer (R-Lancaster) as the new Committee Chair. Sen. Shaffer is in his third term in the Senate and was also elected to the Ohio House for four terms. He is also an association executive in the private sector, and has earned the “Friend of Agriculture” award from Ohio Farm Bureau along with over a dozen other awards for his legislative service.
- Sen. Stephen A. Huffman (R-Tipp City) will serve as the Committee Vice Chair. Following two terms in the House, Sen. Huffman is in his first term as a Senator. Sen. Huffman is a practicing physician and will also chair the Senate’s Health Committee.
- Sen. Teresa Fedor (D-Toledo) is the committee’s Ranking Minority Member. A two-term Senator also elected to three terms in the House, Sen. Fedor is a veteran of the U.S. Air Force and Ohio Air National Guard and a retired teacher for Toledo Public Schools.
- Sen. Bob Hackett (R-London)
- Sen. Tina Maharath (D-Columbus)
- Sen. Sandra O’Brien (R-Ashtabula)
- Sen. Bob Peterson (R-Washington Court House)
The House Agriculture and Conservation Committee holds its first meeting next Tuesday, February 16. Follow the committee through its website, which includes meeting agendas and minutes, bills under consideration, and video of committee meetings.
The Senate Agriculture and Natural Resources Committee began its work last week with consideration of a bill authorizing the use of owls in the sport of falconry. Meeting agendas and bills under consideration are available on the committee’s website
Stay tuned to the Ohio Ag Law Blog for updateson legislative proposals and what bills live or die in our agriculture committees.
Wondering what's happening with CFAP, the Paycheck Protection Program, and Executive Orders? So is the Farm Office team, and we're ready to provide you with updates. Join us this month for Farm Office Live on Wednesday, February 10 from 7--8:30 p.m. and again on Friday, February 12 from 10--11:30 a.m., when we'll cover economic and legal issues affecting Ohio agriculture, including:
- Status of the Coranivirus Food Assistance Program (CFAP)
- Update on the Paycheck Protection Program (PPP).
- Tax credits information
- Executive Orders that may impact agriculture
- Legal update on small refinery exemptions
- Farm Business Analysis program results
- Legislative update
- Your questions
To register for the free event, visit this link: go.osu.edu/farmofficelive.
Tags: Farm Office Live
As disruptive as 2020 was, the Ohio General Assembly persisted in working for Ohio citizens. On our blog we have been providing you with some in-depth analysis on key legislation passed by the previous General Assembly. Below you will find brief summaries on additional pieces of legislation passed by the Ohio Legislature in 2020.
House Bill 24 – Revising Humane Society Law
H.B. 24 seeks to improve accountability for humane societies and other organizations throughout the state – this includes: (1) requiring each county humane society to submit an annual report of enforcement activities to the county sheriff; (2) making records of an enforcement activity by a humane society agent a public record; (3) prohibiting a humane society from entering into an agreement not to prosecute unless a judge has reviewed and approved the agreement; (4) specifying the removal procedures of a humane society agent from office; and (5) asserting that a humane society agent is a public servant for the purposes of bribery law and therefore a humane society agent is subject to criminal prosecution for bribery.
H.B. 24 also expands the current law governing the seizure and impoundment of companion animals. Under H.B. 24, any animal can be seized and impounded when related to a violation of an animal cruelty law. However, written notice is required within 24 hours after the animal is seized and impounded.
Governor DeWine signed H.B. 24 into law on December 29, 2020 and it becomes effective on March 31, 2021.
House Bill 33 – Establishing Animal Abuse Reporting Requirements
H.B. 33 adds dog wardens, deputy dog wardens, or other persons appointed to act as an animal control officer to the list of professionals who must immediately report child abuse to a public services agency or peace officer.
H.B. 33 requires veterinarians and specified social service or counseling professionals to report abuse of a companion animal to a law enforcement officer, humane society agent, or other animal control-type professional. Law enforcement, humane society agents, and animal control-type professionals must report abuse of a companion animal, under certain circumstances, to the appropriate social service professional. Lastly, H.B. 33 grants immunity to those required to make an animal abuse report, from criminal or civil actions, so long as the report was made in good faith.
H.B. 33 goes into effect on April 12, 2021.
House Bill 67 – Veterinarian Student Debt Assistance Program
H.B. 67 creates a Veterinarian Student Debt Assistance Program which allows the State Veterinary Medical Licensing Board to agree to repay all or part of any educational loans taken out by a veterinarian while in veterinary college. Veterinarians must apply for the program and perform 12 or more hours of charitable veterinary services to be eligible. H.B. 67 goes into effect on April 12, 2021.
Senate Bill 21 – Benefit Corporations
S.B. 21 allows certain corporations to become benefit corporations. A benefit corporation is a corporation that includes a beneficial purpose in the corporation’s articles of incorporation. Under the new law, a beneficial purpose is defined as a “purpose to have a bona fide positive effect, or to reduce one or more bona fide negative effects, of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological nature for the benefit of persons, entities, communities, or interests aside from shareholders.” A benefit corporation is still allowed to operate for other purposes that help make the corporation profitable and neither the beneficial purpose nor any other purpose of the corporation has priority over the other. Under the law, once a benefit corporation is established, the corporation is allowed to use “benefit” or “b-“ as a prefix. Examples of popular benefit corporations include Patagonia, Seventh Generation, TOMS, and Ben & Jerry’s.
S.B. 21 goes into effect March 24, 2021.
Senate Bill 276 – Updated Limited Liability Company Laws
S.B. 276 enacts the Ohio Revised Limited Liability Company Act (ORLLCA) and makes some major updates to Ohio’s LLC laws. While the Bill is expansive, the following are two major highlights from the legislation.
Under current law, an Ohio LLC may be managed by its members or by a manager. In different scenarios, the authority to bind the LLC by a member or manager may vary. The ORLLCA does away with the member/manager distinction and provides that a person’s authority to bind the LLC must be determined by referencing the operating agreement, decisions of the members in accordance with the operating agreement, or by the default rules laid out in the ORLLCA.
Another major change includes the creation of the series LLC. A series LLC consists of a “parent” LLC and separate subdivisions (or series). Under the ORLLCA, a “parent” LLC’s operating agreement may provide for the establishment of one or more designated series that has at least one member associated with each series and either (or both) of the following: (1) separate rights, powers, or duties with respect to each series; and/or (2) a separate purpose or investment objective.
Under the ORLLCA, the debts, obligations, liabilities of a series do not jeopardize the assets held by the “parent” LLC or any other series. However, this limitation only applies if: (1) the records maintained for that series account for the assets of that series separately from any other assets of the “parent” LLC or other series; (2) the “parent” LLC’s operating agreement contains a statement to the effect of the limitation; and (3) the “parent” LLC’s articles of organization contain a statement that the LLC may have one or more series of assets subject to this limitation. So long as the records of the series are maintained in a manner that the assets of the series can be reasonably identified, the protection is likely to apply.
The ORLLCA is set to take effect January 1, 2022.
Not long after its 10th anniversary, the Great Lakes Restoration Initiative (GLRI) received a hefty package celebrating its success. Congress passed the Great Lakes Restoration Initiative Act of 2019 last month, not only reauthorizing the GLRI for another five years but also significantly increasing its funding levels. The annual funds for GLRI will grow from $300 to $330 million in 2021, to $375 million in 2022, and up another $25 million per year until reaching $475 million in 2026. The GLRI had been set to expire at the end of 2021 and faced funding threats in recent years. The boost in funding with solid bi-partisan support, however, suggests long term viability for the GLRI.
The GLRI began in 2010 with the goals of making water safe to drink and fish safe to eat, reducing harmful algal blooms, protecting native habitat and species and prohibiting invasive species in the Great Lakes basin. It does so by awarding grants for projects that aim to restore and protect the chemical, physical and biological integrity of the Great Lakes basin. In its ten-year history, GLRI has funneled $2.7 billion into over 5,000 projects in the eight states that comprise the Great Lakes ecosystem.
In Ohio, GLRI has funded projects for the removal of dams, agricultural best management practices, stream restoration, coastal wetlands, management of invasive species, and clean-up of contaminated sediments in Ohio’s four targeted “areas of concern,” which include the Ashtabula, Black, Cuyahoga, and Maumee Rivers. Ohioans can expect to see more of these and other projects in the coming years.
For more on the GLRI, visit this link.
In our final part of our blog series analyzing the Ohio Supreme Court's recent decisions on mineral rights, we analyze the Court's decision in West v. Bode regarding the relationship between the Dormant Mineral Act and Ohio’s Marketable Title Act.
West v. Bode
Timeline of Events:
1902: George and Charlotte Parks sold 1/2 of the royalty interest in the oil and gas under their 66 acres of land located in Monroe County (the “severed royalty interest”) to C.J. Bode and George Nally; the transfer was recorded.
1916: Bode and Nally transferred the severed royalty interest to E.J. Wichterman, Clara Thompson, and M.M. Mann; the transfer was recorded.
1929: Parks transferred to Lettie West the 66 acres, but retained their 1/2 royalty interest in the oil and gas under the property and mentioned the severed royalty interest; the transfer was recorded.
1959: The surface land was transferred to George West; the transfer was recorded but did not mention the severed royalty interest (the “root title”).
1996: George West transferred property to Wayne West; the transfer was recorded but did not mention the severed royalty interest.
2002: Wayne West transferred a portion of the 66 acres to Rusty West; the transfer was recorded but did not mention the severed royalty interest.
Wayne and Rusty West (the “Wests”) filed an action in Monroe County Court of Common Pleas asking for a declaratory judgment that Ohio’s Marketable Title Act extinguished the severed royalty interest, and that the severed royalty interest had vested in the Wests. The remaining interested parties filed a counterclaim arguing they were owners of a portion of the severed royalty interest (the “interested parties”).
The interested parties claimed that the Wests failed to state a valid claim under the Marketable Title Act because the more specific provisions of Ohio’s Dormant Mineral Act displace the general provisions of the Marketable Title Act. The Wests argued that since neither the transfer from Lettie West to George West nor any recorded document since mentioned the severed royalty interest, the severed mineral interest vested back to the Wests under Ohio’s Marketable Title Act.
The Monroe County Court of Common Pleas agreed with the interested parties and declared them owners of the severed royalty interest. The Seventh District Court of Appeals reversed and asked the Common Pleas Court to adjudicate the case under the Marketable Title Act. The interested parties then appealed to the Ohio Supreme Court.
Does the Dormant Mineral Act Supersede the Marketable Title Act?
The Ohio Supreme Court was tasked with determining whether Ohio’s Marketable Title Act applies to severed interests in oil and gas because of the enactment of the newer Dormant Mineral Act.
The Dormant Mineral Act (R.C. §5301.56) is part of a series of laws known as the Ohio Marketable Title Act (§R.C. 5301.47 et seq.) Under Ohio law, courts should interpret potentially conflicting statutes in a way that gives effect to both laws. However, if there is an irreconcilable conflict between two laws, a more specific law will prevail over a more general one. Therefore, the Ohio Supreme Court determined that the issue in this case was whether there existed an irreconcilable conflict between the Marketable Title Act and the Dormant Mineral Act.
First, the Court looked at the intent of each act. The Court found that the Ohio General Assembly enacted the Marketable Title Act to extinguish interests and claims in land that existed prior to the root title so as to simplify and facilitate land transactions by allowing individuals to rely on a record chain of title. Similarly, the Ohio Supreme Court found that the Ohio Legislature enacted the Dormant Mineral Act to provide a method to terminate dormant mineral interests and reunify the abandoned mineral interest with the surface interests in order to promote the use of the minerals under the land.
But how do the two operate together? The Ohio Supreme Court analyzed that under the 1961 Marketable Title Act, property interests are extinguished after 40 years from the effective date of the “root title” unless some saving event has occurred. Once an interest has been extinguished under the Marketable Title act, it cannot be revived. An event that would save an interest from being extinguished under the Marketable Title Act include: (1) the interest being identified in the documents that form the record chain of title; (2) the interest holder recording a notice claiming the interest; or (3) the interest arose out of a transaction that was recorded subsequent to the effective date of the root title.
The Court also explained that the Dormant Mineral Act was enacted in 1989 (and amended in 2006) to supplement the Marketable Title Act. In order for mineral interests to be deemed abandoned the surface landowner must either send notice to holders of the mineral interest or publish the notice if the holders cannot be located. If a holder does not respond, a surface landowner can file with the county recorder an affidavit showing that notice was sent and published, and no saving event occurred within the 20 years prior to the notice. A saving event under the Dormant Minerals Act include: (1) existence of title transactions; (2) use of the minerals; (3) use of the interest for underground gas storage; (4) issuance of a permit to use the interest; (5) claims of preservation; and (6) issuance of separate tax parcel number for the interest.
The Ohio Supreme Court held that the Dormant Mineral Act operates differently than the Marketable Title Act thus no irreconcilable conflict exists. The Marketable Title Act extinguishes interests by operation of law, whereas the Dormant Mineral Act deems interests abandoned and vested in the owner of the surface. Essentially, the Court found that the two acts work in conjunction with one another, not against each other. The Court reasoned that the Dormant Mineral Act is not self-executing like the Marketable Title Act, but rather provides evidence that a surface owner may use in a quiet-title action to eliminate the abandoned mineral interest.
The Court stated that a surface owner may use the Dormant Mineral Act to reunify the surface and mineral interests prior to the 40-year time limit prescribed in the Marketable Title Act, thus making the Dormant Mineral Act a more abrupt way to reunify the two interest. This, the Court rationalized is why the Dormant Mineral Act works in parallel to the Marketable Title Act rather than against it. The Court found that the Dormant Mineral Act provides an additional mechanism to surface owners to reunify surface and mineral interests.
The Court ultimately held that a mineral interest holder’s interest may be extinguished by the Marketable Title Act or deemed abandoned by the Dormant Mineral Act, depending on the surrounding circumstances.
Takeaways from Part I and Part II
Make sure your interests are recorded! With any transaction, recording transfer of title (or mineral interests) can be crucial to protecting your assets. If you have any questions about whether your interests have been recorded, please contact a local attorney, it could be what saves your legacy.
Do the terms “abandoned mineral rights” mean anything to you? Do you currently own land that you don’t have the mineral rights to? Do you own mineral rights, but haven’t really done anything to make sure your rights are still protected?
Mineral rights are valuable asset in our personal portfolios that can allow us to build our legacy and provide for future generations. However, sometimes what we once thought as part of our legacy, is in fact now the legacy of another. The Ohio Supreme Court recently decided two cases dealing with abandoned mineral rights and the procedure in which a surface landowner can reunify the mineral rights with the surface rights.
This two-part blog series will first analyze the Ohio Supreme Court’s opinion regarding the notice requirements under Ohio’s Dormant Mineral Act and the second part will analyze how the Dormant Mineral Act and Ohio's Marketable Title Act work together.
Gerrity v. Chervenak
The Ohio Supreme Court addressed and clarified the notice requirements under the Ohio Dormant Mineral Act, Ohio Revised Code §5301.56.
John Chervenak is a trustee of the Chervenak Family Trust (“Chervenak”) which owns approximately 108 acres in Guernsey County. The rights to the minerals under the Chervenak property were retained by T.D. Farwell, the individual who transferred the 108 acres to the Chervenak family.
In 2012, a title search for the Chervenak property identified Jane Richards, daughter of T.D. Farwell, as the owner of the mineral rights under the property. The records listed a Cleveland address for Ms. Richards. Unfortunately, Ms. Richards passed away in 1997. At the time of her passing, Ms. Richards was a resident of Florida and had one son, Timothy Gerrity.
In 2012, Chervenak sought to reunite the severed mineral interest with the surface estate interest pursuant to Ohio’s Dormant Mineral Act. Chervenak recorded with the Guernsey County Recorder an affidavit of abandonment of the severed mineral interest. The affidavit stated that Chervenak sent notice by certified mail to Ms. Richards at her last known address – the Cleveland address – but the notice had been returned and marked undeliverable. The affidavit also stated that Ms. Richards’ heirs, devisees, executors, administrators, next of kin, and assigns had been served notice of the abandonment by publication in a Guernsey County newspaper.
In 2017, Gerrity filed an action in the Guernsey County Court of Common Pleas seeking to quiet title to the mineral rights under the Chervenak property and for a declaratory judgment that Gerrity was the exclusive owner of the mineral rights. Gerrity claimed that he was the rightful owner to the mineral rights under the Chervenak property as a result of the probate of his mother’s estate in Florida. The Guernsey county records, however, revealed no evidence of Ms. Richard’s death or of Gerrity’s inheritance of the mineral interest.
Further, Gerrity claimed that Chervenak did not comply with Ohio’s Dormant Mineral Act in two ways: (1) Gerrity argued that under the Dormant Mineral Act Chervenak must identify all holders of the mineral interest and notify them by certified mail; and (2) Chervenak did not employ reasonable search methods to locate all holders of the mineral interest before serving notice by publication.
Both the Guernsey County Court of Common Pleas and the Fifth District Court of Appeals declared Chervenak the owner of the mineral rights under the Dormant Mineral Act. Gerrity then sought the Ohio Supreme Court’s review.
The Dormant Mineral Act
Under current Ohio law, unless a severed mineral interest is in coal or is coal related, held by a political body, or a savings event has occurred within the 20 preceding years, a mineral interest will be considered abandoned and vested in the owner of the surface lands, so long as the surface landowner complies with Ohio Revised Code §5301.56(E).
R.C. §5301.56(E) states:
Before a mineral interest becomes vested in the surface landowner, the landowner shall do both of the following:
- Serve notice by certified mail to each holder or each holder’s successors or assignees, at the last known address of each, of the landowner’s intent to declare the mineral interest abandoned. If service of the notice cannot be completed, then the landowner shall publish notice of the landowner’s intent to declare the mineral interest abandoned in a newspaper of general circulation in each county in which the land is located.
- 30 days after serving notice, the landowner must file an affidavit of abandonment in the County Recorder’s office in each county that the land is located in.
Gerrity claimed that under the Dormant Mineral Act, his mineral interest cannot be deemed abandoned and vested in Chervenak because under R.C. §5301.56(E)(1) Chervenak is required to identify Gerrity and serve him Chervenak’s notice of intent to declare the mineral rights abandoned. The Ohio Supreme Court disagreed. While the Ohio Supreme Court agreed that Gerrity was considered a “holder” under the Dormant Mineral Act, Chervenak was not required to identify every possible holder and serve them notice, especially holders that do not appear on public record.
The Ohio Supreme Court found that such a stringent requirement would undo the intent behind the Dormant Mineral Act. The Court analyzed the text of the Dormant Mineral Act and found that because the Ohio General Assembly allows for a surface landowner to publish its notice of intent to declare the mineral rights abandoned in §5301.56(E)(1), the surface landowner is not required to identify and serve notice to each and every potential mineral interest holder.
The Court reasoned that no surface owner, no matter how much effort put forth, will ever really be certain that he or she has identified every successor or assignee of every mineral interest owner who appears on public record. This is why, the Court articulated, that the General Assembly allows for publication of a landowner’s intent to declare the mineral rights abandoned, because there will be instances when a holder may be unidentifiable or unlocatable.
Second, Gerrity argued that Chervenak must employ reasonable search methods to identify and locate all mineral interest holders – which include not only searching public records but also internet searches and searches of genealogy databases before publishing the notice in a newspaper. The Court agreed that a surface landowner must use reasonable diligence to try and identify mineral interest holders but disagreed with Gerrity to the extent in which a surface owner must go in order to have exercised reasonable diligence. The Ohio Supreme Court found that determining whether or not a surface landowner has exercised reasonable diligence to identify mineral interest holders will have to be determined on a case-by-case basis.
In this case, the Ohio Supreme Court found that Chervenak did exercise due diligence in trying to locate all holders. The Court determined that by searching through Guernsey County records and Cuyahoga County records (the county in which Cleveland is located), Chervenak fulfilled their due diligence requirement. The Court declined to impose a requirement that every surface landowner search the internet, especially due to the inconsistent reliability of such searches, or consult with any subscription-based service to identify a potential mineral interest holder. The Court held that a search of county property records and county court records will usually establish a baseline of due diligence by the surface landowner.
Ohio State Extension will host a virtual three part "Planning for the Future of your Farm" webinar series. The webinar series will span over three Monday evenings from 6:30 to 8:30 p.m. starting on February 15, 2021 and concluding on March 1, 2021. This workshop is designed to help farm families learn strategies and tools to successfully create a succession and estate plan that helps transfer the farm's ownership, management, and assets to the next generation.
Topics discussed during this series include:
- Developing Goals for Estate and Succession;
- Planning for the Transition of Control;
- Planning for the Unexpected;
- Communication and Conflict Management During Farm Transfer;
- Legal Tools and Strategies;
- Developing Your Team;
- Getting Your Affairs in Order; and
- Selecting an Attorney
This workshop will be taught by members of the OSU Farm Office Team featuring Peggy Hall & Jeffrey Lewis, Attorneys from the OSU Agricultural & Resource Law Program and David Marrison, Extension Educator for Coshocton County.
Because the workshop is online, you can invite your parents, children, and/or grandchildren to join you as you develop a plan for the future of your family farm, regardless of where they live in Ohio or across the United States.
Pre-registration is required. One hard-copy of program materials will be mailed to participating farm families. Electronic copies of the program materials will also be available to all participants. The registration fee is $40 per farm family. The deadline to register for the webinar series is February 10, 2021. You can register online at the "Planning for the Future of Your Farm" webinar registration page.
A three part "Planning for the Future of Your Farm" webinar series.
Monday, February 15, 2021 from 6:30 to 8:30 p.m.
Monday, February 22, 2021 from 6:30 to 8:30 p.m.
Monday, March 1, 2021 from 6:30 to 8:30 p.m.
$40 per farm family.
Registration deadline is February 10, 2021.
You can find more information about the webinar series by visiting the "Planning for the Future of Your Farm" webinar registration page. If you have any questions or concerns, please contact David Marrison by phone at (740) 622-2265 or email at firstname.lastname@example.org.
We look forward to seeing you there!