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Risk Management and Insurance Considerations for Farmers Selling Direct

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Risk Management

Try to identify how and where risks might exist. By doing so a farmer can consider how any risks can be eliminated or reduced and contingency plans can be prepared in case something does go wrong. There are many ways direct farm marketers can get into legal trouble. Here are the eight common pitfalls according to the Drake Law Center:
a. conducting a “commercial” business in an area not zoned for such use
b. not carrying sufficient liability insurance
c. allowing unsafe conditions to exist on the property when customers are allowed to visit
d. selling processed foods which have been produced at an unlicensed facility
e. failing to observe rules designed to protect food safety and quality
f. selling more products at your stand which were produced by others, and not raised yourself
g. failing to comply with labor rules
h. failing to comply with record keeping and paperwork rules for tax or labor laws

Drake also recommends making SIX PHONE CALLS BEFORE BEGINING DIRECT FARM MARKETING
• The local land use planning authorities
• Your insurance agent
• The state food inspection and licensing officials
• The state labor commissioner
• The state department of agriculture and marketing
• Your attorney

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Insurance

There are at least two types of insurance a farmer should carry. In addition, there other policies or riders to consider such as the Frozen Foods Rider just in case the electricity goes out!

General Liability Insurance

Commercial General Liability covers four types of injuries:
 bodily injury that results in actual physical damage or loss
 property damage or loss
 personal injury (slander or damage to reputation)
 advertising injury (charges of negligence that result from the promotion of your own goods or services)

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Product Liability Insurance

The basic premise of product liability is that companies have a duty to protect consumers from potential hazards, even if the damage is primarily caused by consumer negligence or deliberate misuse. Courts have held that manufacturers generally have more innate knowledge about their products, so it falls on them to assume financial responsibility for injuries and property damage.

Product liability cases generally fall along three separate lines. The first consideration is a design flaw. The second consideration is manufacturing liability. The third line of reasoning is called “failure to warn”. Modern product liability laws enacted in the 1960s work on the principle of “strict liability”, which means manufacturers bear much more responsibility for the safety of their products, even if some consumers use the product irresponsibly.

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