LAPEER TOWNSHIP, Mich. — State officials announced last week they were going to pay on at least 122 claims that have been made to a state insurance fund against the failure of Lapeer Grain Co.

The announcement was made Thursday morning at Lapeer Township Hall, about 35 miles north of Detroit. Officials said they will pay out approximately $3.9 million, the largest ever payout for the 12-year-old Farm Produce Insurance Authority (FPIA). So far, there have been 132 claims for reimbursement from the FPIA in this case.

The Michigan Department of Agriculture and Rural Development (MDARD) summarily suspended Lapeer Grain’s grain dealer’s license on Oct. 31, 2014, after the department received a telephone call Oct. 23 from a farmer who had a grain liability with the company. The farmer told MDARD Lapeer Grain had posted notices at its facilities stating it would not be able to pay for farm produce delivered until it received payment for the goods.

On Oct. 24, MDARD started an audit of the company as required under state law. The suspension was based on the imminent threat of financial loss to producers and the company’s inability to pay farmers.

As of the date of the suspension, Lapeer Grain has not been able to receive or direct-ship farm produce, but it can continue to fill contracts with the remaining grain under MDARD’s direction during the term of the suspension. MDARD placed seizure notices at all five locations, in Lapeer, Imlay City, Jeddo, Palms and Capac.

Meanwhile, the company continues to make payments to producers in the order the farm produce was settled.

“We will continue to monitor the payment process,” said an MDARD notice posted on the department’s website. “For producers who have not received payments in a reasonable time on settled delivered produce, they may make a claim to the Farm Produce Insurance Fund.”

It went on to say proceeds that a farmer receives from the company after making a claim will be reduced from the original claim. The FPIA sent out a letter dated Dec. 19 to potential claimants, asking them to file a claim within the following 30 days. However, the Farm Produce Insurance Act requires a claimant to file a claim within two years of the transfer of title of the farm produce to the licensee.

Another issue that came up as things evolved was what a farmer could do for farm produce that wasn’t delivered or direct-shipped. Jeff Haarer explained grain elevators like Lapeer Grain sometimes arrange contracts for a producer without physically handling the producer’s commodity.

The producer could have a contract through the grain elevator but ship produce directly to another entity, such as The Andersons.

Late last year Lapeer Grain and other elevators reached an agreement as to the assignability and/or sale of many of these contracts. Haarer said those with more questions should contact Lapeer Grain for more information.

The Grain Dealers Act does not deal with grain that has not been delivered, Haarer added. He recommended questions regarding the validity of forward and undelivered contracts or ways to mitigate losses should be directed to an attorney.

“Cooperative Elevator still has the lease in Imlay City, Jeddo and Palms,” he stated last week. “They have been very helpful. This could have been a really big mess, but it wasn’t.”

The purpose of the FPIA is to provide reimbursement to a participating producer for losses suffered when a grain dealer declares insolvency, or is otherwise unable to pay its claimants for grain delivered and sold but not paid for. Covered commodities include corn, soybeans, dry beans, small grains and cereal.

The FPIA currently has a balance of $6.3 million. If the balance ever goes below $3 million, premiums and assessments can be reinstated until the balance goes above $5 million.

A producer can get a refund of premiums they pay into the fund, but if they do, they can’t get reimbursement in the event of a grain elevator failure. Haarer said he doesn’t think anybody who put in a claim had ever asked for a refund.

Prior to the Lapeer Grain failure, the FPIA had paid more than $930,000 in claims to 92 farmers since the fund’s inception, and recovered $600,000 from bankruptcy and probate proceedings.