Farm Labor: Insurance & Liability
Article by Evan Lentz
With the new growing season approaching, now’s a good time to review the risk management plans for any operation. Farms without risk management plans in place may take this time to review their risks and determine if there is a new approach which may help to prevent or mediate challenges they’ve faced in the past. One component of any strong risk management plan is insurance. There are many types of insurance, and often a lack of understanding about insurance, liability, and the laws surrounding them can make proper utilization an arduous task. To shed some light on the world of insurance and liability as it pertains to farming, below you will find a chart detailing the different types of insurance available to agricultural stakeholders. The table is followed by a few suggestions on ways to reduce your liability. The following is borrowed from the Cornell Small Farm Program’s Guide to Farming:
The primary goal of risk management as it pertains to farm liability insurance is to protect your assets from claims and lawsuits that may result from injury to persons or damage to property from accidents that are associated with your business. Effective risk management depends on combined efforts and close communication between yourself and your insurance company. Look for an agent with whom you are comfortable, who is well known and respected, who understands agriculture and businesses, and who will work with you to reduce your potential for risk.
When considering your risks, be sure to review the list below and describe your risks completely to your agent. You will not need all of the types of protection listed below, but it is important to know your options when shopping for insurance. Match your coverage to your needs for risk management.
General Liability Insurance
Covers injuries to people and property for which your farm is judged liable and mitigates your losses from lawsuits
Covers vehicle damage while in your vehicle or to another vehicle while traveling
Home Owners Insurance
Typically covers fire, theft, personal property, lightning, riot, aircraft, explosion, vandalism, smoke, theft, windstorm or hail, falling objects, volcanic eruption, snow, sleet, and weight of ice. Usually flood and earthquake need to be purchased separately
Covers barns, rental housing, equipment, animals, and other farm assets
Workers’ Compensation Insurance
Required if you have employees or interns
Product Liability Insurance
For damages that may arise from the consumption, handling, use of or condition of products manufactured, sold, handled, or distributed by your business
Contract Liability Insurance
Covers the assumption of the liability of another party through a contract or facility use agreement. For example, you may be required to provide a certificate of insurance to buyers that includes $1 million in product liability and additional insurance
Environmental Pollution Insurance
Covers clean-up of manure, or pesticide spills
Can protect against annual production losses due to weather, pests and other insurable causes of loss. Federally subsidized coverage can be purchased from a certified crop insurance agent. Disaster programs provide up to 65% coverage for crops where crop insurance is unavailable and is provided by county USDA Farm Service Agencies
To help your family in case something happens to the bread winner
For yourself and family in case you need medical care
Business Interruption Insurance
Will provide living expenses if you are hurt and cannot work
Will cover your liabilities if you are selling at a farmers’ market or trade show
Umbrella Liability Coverage
A liability insurance policy. It provides extra insurance protection over and above your existing policies and typically carries a high deductible
Ways to Reduce Your Liability:
- If you have people coming to your farm, keep your property in good repair.
- Minimize or eliminate dangerous situations. This might include: aggressive animals, manure pits, moving vehicles or equipment parts, etc. Fence off hazards wherever possible.
- Bio-security is recommended. Provide booties and hand wipes for visitors who enter barn areas.
- When selling or serving foods, make sure all regulations are met and carry product liability insurance.
- All workers on your farm are required to be covered by workers compensation, even if they work for free! So if you have interns, apprentices, or employees, you are required to carry insurance for them (The only exception is if your farm is set up as a 501(c)3 non-profit).
- Test your water supply annually for bacteria if your water is being used for washing produce or processing.
- Negligence is when you fail to take normal steps to eliminate hazards or you create a hazardous situation and fail to address it.
- Avoid making false statements or publishing incorrect information that may damage a person’s reputation as this can result in libel suits. Be careful of advertising claims or comparing your operation to others in a negative way.
- Manage your production techniques according to recommended best management practices.
Crop Insurance – The Farm Safety Net
“Agriculture is an inherently risky business. Farmers and ranchers need to regularly manage for adverse weather and financial, marketing, production, human -resource, and legal risks.
Federal crop insurance is the pre-eminent risk management solution for farmers and ranchers, providing effective coverage that helps them recover after severe weather and bad years of production. For some farming and ranching operations, crop insurance is the difference between staying in business or going out of business after a disaster. For the next generation, crop insurance provides the stability that will allow them to begin farming.”