It’s important that farms consider their farm contracting liability insurance policy, before undertaking any incidental contracting activities. Farm machinery is a large capital cost for any farming operation. To help offset this cost, a number of farms are now looking to produce external income through farm contracting.
It’s important that farms are aware of liability limitations within general farm insurance policies and how these can impact their farm insurance cover.
What are some liability risks associated with contracting;
- Farm Property Damage
- Farm Personal Injury
Farm Contracting Liability- Insurance Claim Examples
Farm Insurance Example Claim 1
A contractors bailer catches fire and the fire spreads into the customers and neighbouring properties causing damage to farm sheds, fencing and domestic homes.
Farm Insurance Example Claim 2
A farm employee from the customers farm assists with hay/silage on the farm and is injured from a piece of machinery owned by the contractor. The contractor receives a claim from the customers Workcover and furthermore a personal claim from the employee.
Farm Insurance Example Claim 3
Hay that is stored within a farm machinery/hay shed catches fire. The hay was bailed by the contractor too early and the high moisture content resulted in spontaneous combustion of the customers hay. The contractor receives a claim from the customers farm insurance company for the loss of the sheds and associated machinery lost in the fire.
Farm Contracting Professional Indemnity Insurance
There are also other liability exposures such as errors in formulas or designs that need to be considered under a Farm Professional indemnity Insurance policy. An example of this particular risk would be where a contractor hasn’t used the correct seeding rate/depth that has resulted in failed strike resulting in financial loss to their customer.
See our article about farm contracting professional indemnity insurance
Farm Liability Insurance Policy Coverage
Most farm policies will provide a level of cover under a farm public/products liability cover, so long as the farm contracting activities are deemed to be “incidental” and that the activities relate to the “farm business”. Both of these terms are usually defined within the policy wording and it’s important that if your farm undertakes any farm contracting, that these activities fall within the policy definition.
Some policies will limit the cover based on a percentage of the whole farm income while other insurers will place a specific dollar amount on the farm contracting income the farm is able to receive.
It’s vital that if any farm exceeds the policy conditions that an alternative farm contracting insurance cover is sourced. On a number of occasions a policy can be extended with an additional premium to ensure appropriate cover. For large contracting operations a specific farm contracting business insurance policy would be required.
Farm Insured Entity
Like any liability insurance policy, it’s important that the companies, trusts and associated entities are listed correctly on the policy to ensure cover in the event of an insured claim.
Should the farm undertake contracting activities under a separate company to the “farm business” this could void the farm insurance policy. A review of the insured entities on a farm policy is always recommended to ensure any company changes don’t impact the farm policy coverage.
It’s important that you deal with a farm insurance broker who is experienced in farm contracting insurance and who is able tailor an insurance policy specific to your farming and contracting requirements.