Farmers expect weather, pests, disease and family issues to affect their farm’s profitability. What they often do not expect is a lawsuit. Rachel Armstrong, executive director of Farm Commons, recently presented “Farm Liability and Insurance Basics,” hosted by Food Animal Concerns Trust. A Duluth, MN-based attorney, Armstrong has a farming background. These experiences mesh at Farm Commons, a nonprofit that provides farmers with resources to better understand legal matters and meet the liability challenges facing their operations.
Understanding farm liability “is essential for you being successful in your business and being able to live out your values,” Armstrong said.
She offered a hypothetical scenario involving “Farmer May,” a dairy farmer who hosts a farm tour and pasture walk for local farmers. About 20 attend, including some families with children.
“One kid made a bad decision to scare another kid, the kids tumbled and a man named Bob fell into a pen,” Armstrong said. “They take Bob to the ER where he could receive treatment. It looked like a broken collar bone.”
Even though Bob is a nice guy who has no plans to sue Farmer May, someone needs to pay for his care, so he turns to his health insurance company. Even if Bob is still friendly with May, the health insurance company may decide to sue the farmer once they learn that he was hurt while visiting her farm.
Even though it would seem like nothing could happen, Bob’s insurance company could seek money from Farmer May because they want to get back what they are paying for Bob’s care.
“When we get health insurance, we sign over the rights for the company to sue in our name,” Armstrong explained. “Bob is a nice guy and is not litigious. He’s not driving this bus. The health insurance company working with nice people is not legal protection. Being a good person is not legal protection.”
Armstrong said that Farmer May could be liable if the insurance company can prove she was negligent. And negligence is not what many people think.
“According to the law, Farmer May will be negligent if she acted less reasonably than other farmers under the same circumstances,” Armstrong said. “What’s weird is it’s not measured against specific standards. What anyone else does is the standard.”
Because it’s so objective, both sides must show evidence related to how other farmers offer farm tours. The insurance company may argue May’s tour was too large, or that the presence of children was a liability, or that most farmers would not allow people near cow pens. Those representing May would likely indicate the number of farm tours that occur nationally with no incident.
“We will only know when the judge or jury decides or, more often, when the sides both settle,” Armstrong said. “She needs an attorney to show why she wasn’t negligent, collect the data and present it in the right way to prove she did what other farmers do. That’s expensive. That’s where liability insurance comes in. Most people think ‘I’m insured for $500,000 or a million given to the aggrieved person.’ They don’t think about what will happen before that. That’s the attorney. An insurance company will appoint an attorney to defend you.”
Although many farmers view liability insurance premiums as a waste since they are careful, Armstrong sees premiums as a retainer on an expert attorney.
“Insurance is the single best risk management strategy for injury liability, and it is necessary for even the safest of farms,” she said. “Many farms do not have liability insurance that addresses the risks they experience.”
Simply working carefully and with people the farmer trusts does not equal risk management. Having farm visitors sign a waiver may seem like a bulletproof protection; however, Armstrong said farmers still must prove the waiver’s merit. Was it properly drafted? Were those signing able to understand it? Were waiver signs posted on the farm in places people could see them? Was the font on the signs large enough?
“Having a waiver does not negate the need for an insurance policy,” Armstrong said. “It may even increase it. It doesn’t mean waivers are bad, as long as you have your ducks in a row and you’re willing to defend it and that it will waive the type of injury that will happen.”
She encouraged farmers to identify the appropriate insurance coverage, which can be difficult for farms offering agritourism, on-site poultry processing, value-added production and CSA programs. Farms can also be liable for food safety and farmers market sales.
Armstrong wants farmers to describe their activities, how often they do them, what events they host and how many people come. “Do you charge for access? You have to get into details on all this good stuff. You may have to buy an event endorsement. The underlying policy won’t cover it,” she said. “You’ve got to know that. You’re in the best position when you know what is and what isn’t covered. You don’t get coverage for it if you don’t mention it.”
Finding the right coverage can be tricky; however, asking friends and neighbors who farm can help uncover the right company and agent.
Property insurance is also vital for protecting a farm’s viability. Farmers should decide what buildings they want covered, along with equipment and inventory.
“Perhaps you’ve heard of someone who thought they had property insured, but when the time came, it didn’t work out,” Armstrong said. “It’s only insurance for the property declared.”
Farmers should tell their insurance agent about upgrading equipment, stocking up on supplies or accruing a high inventory so they can adjust the level of their coverage.
“Acts of God are usually covered,” Armstrong said. Loss by theft varies. If crops or equipment are not locked up, the insurance company may not cover them. Damage from flooding will not likely be covered unless the farmer has flood insurance.
“Update your property declarations annually,” Armstrong said. “Understand how all that works.”
Insurance is a contract. “In insurance, nothing matters but the words in the insurance policy,” Armstrong said. “Find an insurance agent who communicates with you and whom you can trust. We need to build that trust by asking for details.”
Crop and livestock insurance may be warranted as well; however, these are specialty products not widely available through most insurance agents.
Armstrong encouraged farmers to find an agent they trust and to thoroughly understand and update their insurance policies.
by Deborah Jeanne Sergeant