2015 16 in insurance - purdue university copyright/2013/farm/commons,/inc. 24 thank/you!//questions?...

12/16/13

Copyright 2013 Farm Commons, Inc. 1

Insurance for the Farm: Policies and Principles to Efficiently Manage Risk

Rachel Armstrongwww.farmcommons.org

Farm Commons provides the proactive legal resources sustainable farmers need to be the stable, resilient foundation of

a community-‐based food system.

Introduction• Farm Commons and me• Disclaimer• Questions and personal perspective welcome

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Introduction

• The Law in Action: Insurance, Liability and Risk Management

Introduction• Meet Farmer Penny and her husband Charles

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Introduction• Let’s talk:

§ Property damage§ Injuries to people: • Customers or guests• Employees

§ Injuries to the farmer(s)§ Crop damage and livestock loss

Introduction• Insurance basics:

§ It’s a contract, not a charity§ There are trends across different contracts, but also much variation, too

§ As with all contracts, documentation and evidence are very important

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Introduction• How (most) insurance works:

§ You enter into an agreement, • for covered risks, covered property, and a specific coverage limit.

§ When covered risks materialize to covered people/property, you make a claim,• the insurance company handles it and makes any covered payments, up to the policy limit.

Property• Penny’s barn burns down, packing shed destroyed by tornado§ Property damage, generally

• Insurance can provide money to repair, rebuild, replace buildings, equipment

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Property• If you own:

§ You generally get a basic farm policy, called “farm property and casualty,” “farm liability” etc.

§ Covers your property• … up to limits… when listed… noting exceptions…

Property• Not that simple?

§ Equipment stored on others’ property? Buildings built on others’ property?

§ Ask: Might need renters, commercial, or other farm liability policy, etc

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Property• How it works:

§ List covered items on declarations page§ If something bad happens, file a claim:• Insurance company then verifies damage resulted from covered risk to covered property• Then pays out on policy up to covered value

Property• Penny:

§ Are the barn and pack shed both listed on the declarations page?

§ Are their covered values up-‐to-‐date?§ Fire from a covered risk?

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• Customer injured while purchasing lamb at the farm. § Injury to guests on the farm, from farm-‐related purposes.

• Insurance can pay for the person’s injuries.

Injuries to Farm Customers/Guests

• Which policy provides this?§ Generally the same as for property§ “Property and casualty”, “farm liability”, etc policy


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• How it works§ Customer goes to hospital…


• If your insurance company requests you fix something or refuses to renew…§ It means you’re taking too much risk for them.


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Non-‐farm Injuries• Penny hosts canning classes, guest is injured. Penny opens a corn maze, guest is injured

• Insurance can cover person’s injuries§ Don’t assume the farm policy covers these! Ask.

Non-‐farm Injuries• Venture not related to production and marketing of crops or livestock? Options may include:§ Event endorsement§ Incidental business endorsement§ Commercial line

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Off-‐farm Injuries• Penny’s customer trips at her farmers’ market stand. Or CSA drop site.§ Don’t assume the farm policy covers these either! Ask.

Off-‐farm Injuries• I see some farm liability policies that cover FM, others that don’t without an endorsement.

• CSA drop sites can be difficult to cover• Ask, ask, ask, and ask for the source in the policy.

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Quick PollWhich of these reflects your thoughts now, although you’ll get exact information from your own agent soon (right?)?• I do occasional off-‐farm or non-‐farm activities. I’ll ask if an

endorsement is available or another lower cost option.• I see myself really diversifying into events, education, and

commercial production. I’ll ask about a commercial line that might give me some flexibility.

• Neither. I don’t do off farm or non farm things.

Umbrella Policies• Penny has an umbrella policy, so she doesn’t need any of these endorsements or extra policies, right?

• Not necessarily.

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Property and Liability• Penny’s Conclusion:

§ Starts with farm policy• Checks that her farmers’ market sales (and other off-‐farm activities) are covered

§ Asks about non-‐farm activities, too: lambing event, herbalist classes. • Insurance agent may recommend endorsements, commercial policy, etc• Katie grows worried… but keeps in mind that efficiency may be getting the most for you money, not necessarily spending the least.

• Let’s talk about what else we might want covered to get more for our money…

Employee Injury• Penny’s employee injured while harvesting

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Employee Injury• Workers’ Compensation

§ May be required by state law§ More efficient than liability insurance

Employee Injury• Commercial Policy

§ May cover seasonal, temporary employees• Farm liability?

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Employee Injury• Penny’s Decision:

§ She doesn’t have to buy WC in her state§ A commercial policy will cover her one employee• Looks like a good deal as it also covers herbalist classes, CSA drop site, and lambing festival, offers flexibility for future.

Penny’s Injury• Penny throws out her back in the field. Can’t work, can’t keep income coming in.

• Insurance can cover injury and provide for lost income

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Penny’s Injury• Options:

§ Personal health insurance§ Disability§ Workers’ Comp

Penny’s Injury• Personal Health Insurance

§ Required under ACA§ May NOT cover farm-‐related injuries

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Penny’s Injury• Workers’ Comp:

§ Business owners may elect to cover themselves§ Coverage for lost income, permanent disability, or even death

• Disability insurance might be more cost-‐competitive, especially as Katie doesn’t have to cover employees yet.

• May be limited coverage in existing farm liability policy.• ASK for your options.

Penny’s Injury• Penny Decides:• Workers’ comp not needed yet• This year, she could choose a commercial policy to cover her employees, and a personal policy to cover herself at work. Consider a disability policy.

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Crop and Livestock• An early summer storm strikes. Penny loses lambs and veggies destroyed.

• Insurance could provide for lost revenue from lamb and veggie sales

Quick PollDo you currently carry any crop or livestock revenue insurance?• Yes• No• Not sure

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Crop and Livestock• Whole Farm Revenue Protection (WFRP): What?§ Get up to 85% of insured revenue, up to $8.5 Mil§ Includes crops, livestock, greenhouse production

Crop and Livestock• WFRP: How?

§ Give notice of a loss within 72 hours of discovery§ Submit a claim within 60 days of filing your taxes§ Submit paperwork evidencing expenses, which may scale payment downward.

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Crop and Livestock• WFRP: Who can buy it?

§ Diversified farms: Must grow 2 or more crops. 3 or more, and you’re eligible for 85% coverage.

§ Farmers with 5 or more years of experience§ Now available in all states

Crop and Livestock• WFRP: Is it affordable?

§ Premium is subsidized by federal government

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Crop and Livestock• WFRP: Example

§ Penny’s revenue is $50,000. She earns 20K from veggies, 15K each from herbs and lamb.

§ Penny’s premium estimate: $2,057 annually.• (Federal government pays additional $2,618)

Crop and Livestock• WFRP: How to buy?

§ Find an agent at: www3.rma.usda.gov/apps/agents/

§ Submit paperwork:• Application (Deadline passed.)• Whole farm history report• Farm operation report• Revised farm operation report

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Crop and Livestock• WFRP: Complications for CSA Farms

§ Each crop’s volume§ Each crop’s value§ Are you even at risk?

Crop and Livestock• For more on WFRP, see RMA website.• Other crop/livestock policies?

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Crop and Livestock• Multi-‐peril crop insurance available in limited areas, per commodity§ Examples: pumpkins for 11 IL counties

• Livestock Gross Margin and Livestock Risk Protection policies§ Protect against price declines.

Crop and Livestock• Noninsured Crop Disaster Assistance Program (NAP)§ Loss must exceed 50%§ Covers 55% of average market price§ Apply through Farm Services Agency (not RMA).

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Crop and Livestock• Penny’s Conclusion

§ Doesn’t have 5 years of experience for WFRP. Needs better paperwork, too.

§ Will take NAP for this year, apply for waiver

Food Safety Injuries?• See our food safety webinar

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Thank You! Questions?

2015 16 in insurance - purdue university copyright/2013/farm/commons,/inc. 24 thank/you!//questions?...

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