Farm contracting professional indemnity insurance is not often seen within most farm contractors insurance policies. However, it is a risk that should be considered for all farm contractors.
Professional Indemnity Insurance is common within the agricultural sector for farm consultants and agronomists in terms of advice provided to farms. However, there is a significant gap in cover for most farm contractors and it is a risk that should be considered within their insurance program.
What Is Farm Professional Indemnity Insurance
Professional Indemnity insurance provides cover for claims that may arise from a third party in relation to a professional service where a fee is received. A farm consultant or agronomist would generally have professional indemnity insurance to cover claims that may arise from incorrect or negligent advice. A customer could look to recover financial loss in the event that there was incorrect or negligent advice provided by the farm consultant.
Although farm contractors would generally not provide advice, they do however make contracting decisions as part of their profession that could result in an error. While most contractors would have cover for public liability in terms of claims arising from personal injury or property damage, they also need to consider for these potential errors when undertaking their farm contracting.
Claim Examples- Farm Contracting Professional Indemnity Insurance
Claim Example 1
A contractor was employed by a farm to sow a maize crop. The contractor made an error in setting the seed depth and this resulted in a 30% crop strike. The farm lodged a claim against the contractor for the error, which resulted in a reduced crop yield of 5.4 tonne/ha vs the average crop yield of 18 tonne/ha. Based on 100ha, the loss was calculated at 12.6 tonne/ha @ $250 per tonne of dry matter- $315,000 claim.
Claim Example 2
A contractor was employed to spray a maize crop and the employee made an error in applying the spray rate. The error resulted in crop burn and a loss or yield by an average of 5t per ha. The farm lodged a claim against the contractor for the error which resulted in $250,000 claim – 200ha @ $250 per tonne of dry matter.
In relation to claim 2, it’s important to note that property damage claims that are a result of an error, when providing a professional service for fee are generally excluded under most public liability insurance policies. This highlights the importance of a professional indemnity insurance policy for farm contractors.
It’s also important that the farm involves an agronomist when reviewing crop strategies such as sowing rates, depth and spraying programs, as this can also help to minimise the risk to the farm and farm contractor.
Insurance Checklist For Farm Contractors
- Public liability insurance
- Professional Indemnity Insurance
- Management Liability insurance including Statutory Liability cover
- Workcover insurance
- Comprehensive insurance for machinery, trucks and implements
- Transit cover for any transported goods such as fodder
- Property insurance for any sheds/stock and tools
- General property cover for mobile tools, generators and air compressors
There are many risks associated with farm contracting and it’s important that you deal with an insurance broker who is not only experienced in farm insurance but also have a full understanding on contracting equipment and the associated risks with farm contracting.