Claims Occurring vs Claims Made
Farm Liability Insurance can be complex for any farming operation. There are differing levels of cover provided within the Australian farm insurance market. It’s important that farms are made aware of these differences, as they can pose a significant risk for any farming operation.
Historically, most farm insurance providers would cover public and products liability insurance on a “claims occurring” basis. There are now some providers in the market that are providing farm liability insurance on a “claims made” basis. It’s important that farms understand the difference in cover and the associated risks when reviewing their farm insurance requirements.
Farm Liability Claims Occurring
A “claims occurring” farm liability insurance policy means that the farm is covered for legal liability for personal injury or property damage that was caused by an occurrence during the period of insurance.
With a farm liability “claims occurring” policy, the claim falls on the original insurer from when the incident occurred – regardless of when the claim occurred. This provides comfort for the farm as any future claims that may arise from a past incident will have cover provided by the insurer who held the liability insurance at the time of the incident.
Advantages of Claims Occurring
- Cover is provided by the insurer who was on risk at the time of the incident
- Does not restrict the farm in terms of changing insurance providers
- Generally, no run off cover is required
Disadvantages of Claims Occurring
- The liability cover is limited to the sum insured at the time of the incident, not at the time of the claim
Farm Liability Claims Made
A “claims made” farm liability insurance policy provides cover for the farm for claims arising from personal injury or property damage made against them during the current period of insurance.
There is an onus on the insured to report any claims, potential claims or events that could arise to a claim within the current period of insurance prior to any renewal or entering into any new insurance contract.
Advantages of Claims Made
- Liability sum insured is based on when the claim is received not when the incident occurred
- The initial premium cost can sometimes be lower than a Claims Occurring policy wording
Disadvantages of Claims Made
- Requires strict reporting of any claims, potential claims or events that could arise to a claim- which can be difficult to monitor and implement on larger farm operations
- Potential for denial based on non-disclosure of claims/incidents
- Exposes a gap in cover should the farm wish to switch insurance providers- unless run off cover is provided by the previous insurer
Farm Liability Insurance Claim Example
A stock feed company was delivering stock feed to a farm when the truck driver slipped over at the property. The farmer witnessed the event and checked on the driver who seemed fine at the time and they continued to deliver feed. 6 months later (into the next insurance policy period) the farm received a claim from WorkCover for $1M for loss of income and medical expenses.
Cover Under A Claims Occurring Farm Policy
The claim was received 6 months after the incident, and therefore cover would be provided by the insurer who was providing liability insurance at the time of the incident – regardless of if the farm had changed insurer in the following policy period. The farms liability limit is based on the limit provided by the insurer at the time of the incident, not at the time of the claim.
Cover Under A Claims Made Farm Policy
The claim was made 6 months after the incident which happened to be in the next policy period. The farm didn’t declare this incident as a potential claim as it was assumed the driver was fine at the time of the incident. The insurance policy required all claims, potential claims or events that could arise to a claim to be reported. The farm did not meet the policy reporting requirements and the claim was declined due to non-disclosure.
For large farm operations it can be difficult to implement potential claims reporting procedures. There is also an issue around who is responsible for reporting to the insurer. Is it the director, farm managers or employees who are defined as “You” as the insured within policy wording? It’s important to ensure that this is made very clear with any farm that has, or is looking to consider, a “claims made” liability insurance policy.
25% of insurer declines under a “claims made” insurance policy are due to non-disclosure within reporting. For any farm operation considering their liability cover, it’s important that the farm deals with an experienced insurance broker who understands the liability risks of agricultural operations, in order to provide the most appropriate farm liability insurance for your business.
See more about Poultry Farm Liability Insurance Cover