Farm Liability Insurance

It is imperative that you acknowledge all activities that the farm operation participates in. The insurance company calls these activities "exposures" and you need to be protected against the possibility of a significant financial burden.

Today's farm businesses are not isolated from the public. Visitors to the farm, the products you produce and activities you undertake away from the farm may result in a "third party" (someone outside of the contract between your farm operation and the insurance company) alleging that through your negligence you have caused them to suffer Bodily Injury or Property Damage. Claims of this sort are on the rise in Ontario. Hence liability insurance is extremely important.

It is common for the liability policy to cover the farm operator, spouse, their children (while living in their household) and employees (while doing the farm business' work).

Coverage is normally provided for your legal liability for:

• occurrences arising out of your personal actions
• occurrences arising out of your premises
• occurrences arising out of your farming activities

Typical sections of coverage in a Farm Liability wording include:

• public liability, tenants' legal liability for damage to residential property rented or under the custody care or control of the insured caused by named perils (fire, explosion, smoke or water escape), voluntary medical payments subject to capped amount, voluntary payment for damage to property of others subject to capped amount.

The insuring company will defend the insured against civil actions and assumes the right to make negotiations and settlements, as it deems expedient.

Liability Exclusion/Endorsements

A number of activities that some might consider normal farm business activities such as regular custom work, custom spraying, pick your own activities or horse riding lessons may require a special endorsement.

Here are some areas of coverage that may be excluded. You will need to review the exclusions with your insurance agent or broker:

• recreational vehicles (owned and not owned), watercraft (owned and not owned), trailers (farm and residential), damage to a neighbours crop caused by own spray drifting off, leakage of fuel oil, pesticides, herbicides, manure onto neighbouring property, your custom farming operation, your "value added" business, your spouse's "non farm" business, riding lessons and trail rides.

Umbrella Liability Insurance

Some farm policies may have a basic farm liability limit of $1,000,000. This may be too low for larger operations. It is possible to buy umbrella liability insurance that is on top of the basic automobile and farm or other liability coverage. The umbrella not only increases total coverage but may also provide an insurance response to a third party allegation of personal injury or property damage that would not be covered under the basic farm liability policy.

Pollution Liability

The basic farm liability policy will exclude third party Bodily Injury and Property Damage that occurs as a result of a pollution incident. Consider a separate Farmers' Limited Pollution Liability coverage to be added.

With newer legislation, it has become common for companies with farm policies to provide pollution liability. The increasing number of farms with concentrations of livestock and crop input storage has increased the potential for significant pollution incidents. Typical coverage includes bodily injury, property damage and clean up costs.

The standard policy may include capped limits, such as $200,000 or $500,000. It may be possible to vary the limits with special endorsements. Like other parts of the farm insurance package, note the exclusions. One includes failure to report a pollution incident and start remedial action. The policy will state that only pollution incidents that occur during the time period that the policy is in force will be covered. Thus pre-existing conditions are not covered.

Pollution Endorsement for Insured's Property

You will need a special endorsement if you want coverage for clean up costs on your property. The list of exclusions for pollution liability normally includes an exclusion for property that is owned, rented, borrowed, controlled, sold, given away, or abandoned by the insured.

Value Added and Non-Farm Enterprises

It is becoming more common to have a value added operation on the farm. Upon reaching a certain size they may no longer be a farming activity. Examples include:

• processing of farm products, operating a retail sales outlet that may even include non farm items for sale, providing entertainment, operating a bed and breakfast.

These farm-related activities might require special insurance. Other commercial activities, like a welding shop or a construction business operated on the farm, will require commercial insurance.