A North Dakota grain elevator was stiffing farmers on grain purchases long before it went broke, and its bonding company should have to pay double its declared coverage as a result, an attorney says.

Sarah Vogel asked the North Dakota Supreme Court on Monday to rule that Hartford Fire Insurance Co. be required to pay $200,000 to cover its bond obligations for Minnesota Grain Inc.'s elevator in Rhame, in southwestern North Dakota.

The elevator was declared insolvent in April 2007 after it could not meet a Bowman farmer's demand that he be paid for grain he had sold to the business. Minnesota Grain operated grain facilities in Rhame and East Grand Forks, Minn.

North Dakota law requires grain elevators to carry bonds, which are available to pay claims from creditors if the business goes broke. Minnesota Grain had a $100,000 bond on its Rhame elevator, court records say.

During Supreme Court arguments Monday, Vogel contended that state law requires Hartford to put up $200,000 to pay creditors' claims, rather than $100,000. The bond is renewed each year, and Public Service Commission records show Minnesota Grain was not paying farmers for grain deliveries for at least two years, Vogel said.

"Minnesota Grain was insolvent and not paying people for a long time. They were trying to make deals … flagrant, flagrant violations of North Dakota laws," Vogel said. "When they did that in multiple years, I think the (law) says, there is bond coverage for multiple years."

John McDonald, an attorney for Hartford, said North Dakota law clearly limits the bond company's obligation to $100,000. An interpretation otherwise will drive up bonding costs and make it more difficult for grain elevators to obtain coverage, McDonald told the justices.

"If you take (Vogel's) position, then that will increase … the exposure, thereby increasing significantly the amount of the premiums," he said.

In court filings, the Public Service Commission and the North Dakota Grain Dealers Association say they believe the proper bond maximum is $100,000.

Neither figure would have been enough to cover claims against the elevator. The commission recommended dividing the money among five farmers who filed more than $300,000 in claims.

Vogel is representing a Barnes County family farming operation whose claim for $336,911 against Minnesota Grain was denied. Jim Broten, his son, Eric, and Broten Farms, of rural Dazey, sold barley to the company.

The commission denied the claim because the barley was delivered to Minnesota Grain's East Grand Forks, Minn., facility. William Binek, a PSC attorney, said the Rhame elevator was the only facility that had a North Dakota bond.

Vogel argues the claim should have been allowed because Minnesota Grain did business in North Dakota.