Small Farm Product Liability: Coverage for Your Farm Products

This article was featured in the Summer 2017 Quarterly.
by Reuben Dourte
If farming was to be broken down to its most simple definition, one could describe it as the supply side of a complex ‘manufacturing’ assembly line.  Agricultural products raised or produced by farmers find their way into an expansive array of goods.  As with any type of manufacturing, a products liability exposure inherently exists.  Additionally, the alteration of farm produce can create different liability exposures, and in a time where farmers are looking for additional revenue streams, the insurance conversation quickly lends itself to new, and more nuanced, questions.
If you have begun to engage in farming operations, hopefully you have already realized the need and benefit to insuring your operations via a Farmowners policy.  A typical, unendorsed Farmowners policy will provide you with liability coverage for your premises and your operations, including the farm products that you produce.  The definition of exactly what qualifies as “farm products” may vary greatly between insurance companies.  It is important to verify that your operations fall within the definition of farming and the items you are selling are not outside of the scope of farm products.
For example, Insurance Company A may consider the apples you sell at a roadside stand on your premises as farm products and thus covered for product liability on an unendorsed Farmowners policy, while Company B may consider the roadside stand and the gross receipts you make from this enterprise as a commercial exposure.  This may mean you will be compelled to purchase an agribusiness policy to receive the Products Liability coverage you need, or endorse your Farmowners policy to provide coverage for “Incidental Business Pursuits”.
In other situations, Farmowners policies may not provide product liability when a product is sold directly to the public vs. being sold to a contractor or wholesaler.  For example, if you raise organic chickens and sell directly to a large integrator, a typical Farmowners policy will be able to provide you with coverage.  However, if you sell those same eggs directly to the consumer, many agricultural insurers will require that you declare this as a Business Pursuit on your Farmowners policy, and pay additional premium as consideration for the company providing coverage for the heightened liability exposure inherent with sales to the public.  Likewise, products you buy for resale, even if they are the same products you raise on your farm, are not considered farm products.  This means if you have a bad tomato crop and need to supplement your supply with some of your neighbor’s tomatoes, the sale of the products bought for resale will (likely) be considered, by your insurance company, as a commercial business pursuit, and as such the products exposure would need to be covered through a Farmowners policy endorsement or a commercial Agribusiness policy…
Read the rest of the article here.