Insuring Your Agritainment Operation
The continuing evolution of farm insurance in the 21st Century.
by Reuben Dourte
Agritainment activities are becoming an increasingly popular pastime for rural, suburban and urban families alike. Farmers, looking to increase revenue streams, meet families searching for wholesome and down to earth entertainment for their children and thus, Agritainment is born. Because of the novelty of the family farm and the growing scarcity of them in high population density areas, some of the largest Agritainment risks operate their businesses in suburban-urban areas where high profile injury lawyers happen to be readily available. Proper liability insurance is no longer optional.
Petting zoos, bounce pillows, hay rides, pumpkin cannons, corn mazes, horse drawn carriage and pony rides all provide a unique challenge to insurance companies because of the inherent liability risks they pose. While each of the aforementioned exposures could warrant their own blog posts, we are going to focus on some general insurance considerations to be made when contemplating whether or not adding Agritainment activities makes sense for your operations.
The addition of many Agritainment activities can create several problems for insurance companies, one of which is an increase in Medical Payment claims. Medical Payments are written as part of the liability portion of a farm or business insurance policy, although they are not a “true” liability coverage.
The reason for this is that you, the premises owner, do not have to be negligent in order for the Medical Payments portion of your policy to cover a visitor’s emergency room bill for an injury. Uneven ground, playground activities, cut stalks in corn mazes, and even horse play can cause injuries which will be covered by Medical Payments on what is, for the most part, a no-questions-asked basis.
Because of these risks, and the fact that it is difficult to regulate and control many of the “at-your-leisure” activities at Agritainment farms, many insurance companies will not write a policy for a property that has a large Agritainment exposure. Because many Agritainment businesses are located on a farm property, you may have already been limited to just a few farm insurance companies who would write your policy to begin with.
The presence of a corn maze, bounce pad, or wagon rides on your premises could further reduce your options and create the need for you to look outside of the standard market into more expensive excess and surplus lines coverages.
Stringent Underwriting Requirements
Even the insurance companies who will insure Agritainment exposures may require certain risk management criteria to be put in place. Observation decks that oversee corn mazes, for example, may need to be put in place to make your operation eligible for a specific carrier’s program. Manning the station may increase your employee payroll in addition to the cost of constructing of the observation deck.
Most companies will require a risk control inspection prior to writing coverage for accounts with a large amount of Agritainment activities. Any time an inspection occurs, there is a good chance that additional loss control measures will be required to be put in place to protect against both property and liability losses. These loss control requirements are ultimately for the good of both the insured and the insurance company, as they help to protect against claims; however, they can and do create additional expenditures for the business owner and these need to be taken into account when determining the profitability of certain activities within the Agritainment operation.
Similarly, the implementation of first aid stations, while always a good idea when dealing with the public, may become a requirement once certain Agritainment activities become a part of your operations. These requirements are not universal, and they may not be deal breakers, but it is important to note that they could create extra expenses for your business. Going into the process with the expectation that certain things will be asked of you can help to curb some of the frustration ahead of time.
Challenges of dealing with multiple companies
Some agritainment operations are too far outside of the proverbial “box” that they are just not insurable through standard markets. Others have property that is best insured under a farm policy, while the liability exposures presented by the Agritainment exposures are too much for standard carriers to assume.
In this scenario, it may become necessary to place the liability coverage for the Agritainment operations elsewhere, while still providing farm property and farm/personal liability coverage through a standard Farmowners Insurance product. Specialty markets outside of the excess and surplus lines market may be able to affordably provide your business with the liability coverage it needs by grouping your operations with other risks in order to keep costs lower.
While this can be a great option when placing the business with a standard carrier fails, it should be considered as a last resort. Providing coverage on the same premises, to the same named insured, with multiple policies can prove problematic at claim time. Almost all insurance companies will have “Other Insurance” clauses within their policy language, which states that their coverage is secondary to other applicable coverage in the event of a loss. The last thing you want to have happen in the event of a liability loss is your two insurance companies trying to decide which one is obligated to pay the claim.
A prudent exercise is to consult a lawyer about separating your real property assets from your business operations by setting up an LLC. Having a separate business entity that conducts the Agritainment portion of the operations can provide some clarity at claim time. For example, if Joe Smith owns Farm A, Joe may purchase a Farmowners Insurance policy, which provides him property coverage for his house, barns and both farm and personal liability. Joe may create a company, ABC Agritainment LLC for which he purchases a stand-alone Liability Insurance policy through a specialty market. ABC’s Liability policy can list Joe Smith as an additional insured, thus providing Joe with coverage in the event he is named as a co-defendant in a lawsuit against ABC, which alleges ABC’s negligence in their Agritainment operations. An experienced lawyer should always be consulted when you are looking at setting up your business under different names and multiple entities to ensure you are appropriately protecting your personal assets from any business related liability claims.
Agritainment exposures continue to both challenge and test the insurance industry. Because of their complexities, the amount of public interaction that is present, and the current legal climate, they can prove to be difficult exposures to insure. It is important to consult with an insurance agency that has experience with providing complete coverage for Agritainment risks so that every aspect of your growing and changing business remains properly insured.
Reuben Dourte is an Account Executive at Ruhl Insurance specializing in Farm and Agribusiness Insurance. He can be reached through https://www.iruhl.com/.