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Illinois Farm Bureau expelled from national association

Soybean grow at Seidenstricker Farms, owned by Robert and Cathy Seidenstricker, in De Valls Bluff, Arkansas, on June 25, 2019.
Lance Cheung
/
USDA
The Illinois Farm Bureau is suing the American Farm Bureau Federation.

The American Farm Bureau Federation [AFBF] has kicked the Illinois Farm Bureau out of the federation in a dispute over member dues, with the Illinois organization responding by challenging the move in its backyard circuit court in McLean County.

A letter from AFBF President Zippy Duvall to state farm bureau presidents said the action comes after a failed mediation session on Monday. The move is in retaliation for a decision by the Illinois Farm Bureau’s affiliate, Country Financial, to drop a Farm Bureau membership eligibility requirement for non-farm insurance policy holders in Illinois.

“The membership decision is expected to cause the loss of hundreds of thousands of farm bureau members to the detriment of Illinois Farmers, Illinois County Farm Bureau organizations, IFB [Illinois Farm Bureau] and the entire Farm Bureau organization,” wrote Duvall, a third-generation dairy farmer from Georgia who has headed the AFBF since 2016.

The decision is effective Dec. 20. It follows weeks of talks, in addition to the mediation, said Duvall.

The Illinois Farm Bureau and Country Financial have the same individuals on both boards of directors, though they have different fiduciary duties. There are three other states where Country does business where farm clients are required to be members of their state farm bureau, but none except Illinois where non-farm clients had to buy a farm bureau membership as well. In January, Illinois will have the same alignment as the other three states.

Some other states do have insurance companies that have requirements like the one County Financial is abandoning.

The membership requirement has been a longtime sore spot with customers, according to Country spokesperson Jennifer McDade.

“We have for the last decade, or more, been getting feedback from non-ag clients about the challenges of this requirement,” said McDade.

She said, for instance, a non-ag policy holder who overlooked farm bureau membership could end up with a canceled insurance policy on something they thought was in good standing. She said the company took a variety of steps over a period of years to "reduce friction" on this issue, but there were still a "multitude of challenges."

Farm Bureau response

In a statement Wednesday, Illinois Farm Bureau President Brian Duncan said the AFBF "is choosing to abandon our more than 70,000 Illinois farmer members because our affiliate insurance company does not want to force non-farmers to join."

Duncan said the bureau filed a lawsuit in McLean County court on Wednesday "to hold AFBF accountable and protect our members."

"We believe AFBF is choosing to put our farms, our families and our communities at risk at a time when we need support through federal policy. In short, we believe AFBF has chosen to break its promises to Illinois farmers," Duncan said. "We have no desire to leave AFBF and we will fight to stay."

Country Financial told customers in September it would no longer require Farm Bureau membership for non-farm policies. Duncan said that decision was made "after great reflection and for sound business reasons."

"The decision to change the underwriting requirement to allow clients with non-farm insurance products to choose if they join IFB was based on feedback from Country clients and sales representatives as well as competitive pressures Country faces in the marketplace," said Duncan.

"The Country Financial board vetted this decision for months and supports it. This decision is not only the right one for its policyholders, but it’s good for Illinois Farm Bureau and county Farm Bureaus because as Country Financial succeeds, so do we — and vice versa."

Impact on IFB

The Illinois Farm Bureau has about 400,000 members. More than 70,000 are farmers, farmland owners, and agriculture industry professionals, according to the IFB website. Its farm membership comprises about 75% of all Illinois farmers.

Membership costs about $20 per year. AFBF receives $5 of those dues. Country said it has about 250,000 non-farm policies in Illinois, though the number fluctuates. Using that figure, the negative financial impact to the AFBF, if all those policy holders ditch their farm bureau memberships, would be about $1.25 million.

The impact on the Illinois Farm Bureau would be greater — about $3.75 million. The move still requires farm bureau memberships for roughly 100,000 farm-related policy holders, said Country, which has offered to make up at least part of the revenue that could be lost to any prospective drop in Farm Bureau memberships.

The IFB board approved “a significant financial mitigation grant program to secure county Farm Bureau financing amidst these changes. Our organization had similar discussions with AFBF on behalf of IFB and Country about ways we could strategically partner and support them with additional financial resources, but those offers were repeatedly rebuffed,” wrote Duncan.

The expulsion also would end Illinois Farm Bureau input into AFBF policymaking and lobbying. The Illinois Farm Bureau does have its own lobbying arm to manage relationships with Illinois congressional representatives.

The lawsuit

Duncan said AFBF is "breaking its own agreements with" the Illinois Farm Bureau.

"Those rules were set by a 1990 agreement for a trademark lawsuit between AFBF and IFB, one that clearly states AFBF '... will not seek to limit or terminate IAA’s membership rights in AFBF by reason of the business activities of IAA’s affiliates,'" Duncan wrote. "AFBF is clearly ignoring this agreement by claiming that IFB must be held accountable for the actions of Country Financial, one of IFB’s affiliates."

The 1990 settlement agreement included in the court filing requires mediation if there is a dispute between AFBF and IFB and if there is no resolution, then binding arbitration. Arbitration has not happened.

In one of the exhibits to the lawsuit, IFB also claims AFBFs membership agreement prevents such a precipitous action and that there has been no violation of the membership agreement.

The Illinois Farm Bureau alleges that revocation of its membership would mean it could no longer use the words "farm bureau," which would irreparably harm its operations and reputation. It also cost a lot of money to change materials, signs, and marketing.

"AFBF’s termination therefore does exactly what AFBF promised not to do in the Settlement Agreement — that is, based on the business activities of Illinois Farm Bureau’s affiliates, AFBF is removing Illinois Farm Bureau’s contractual right to use the 'Farm Bureau' name and depriving Illinois Farm Bureau of other important AFBF membership rights and benefits, including a voice in national farm policy issues. At the same time, AFBF seeks to maintain all of the benefits it received as part of the negotiated and agreed-to settlement," claims the lawsuit.

The lawsuit also alleges a number of the AFBF statements made to Illinois Farm Bureau members in the run-up to mediation were false and defamatory.

History

Country Financial operates in 19 states. It is the largest farm insurer in Illinois. The Illinois Farm Bureau has its roots in the DeKalb County-based Illinois Agricultural Association that formed in 1912 ,and became the Illinois Farm Bureau in 1916, three years before formation of the American Farm Bureau Federation.

Country Financial was formed in 1925 as Country Insurance which became Country Companies and then Country Financial.

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