Who needs farm insurance?  While this sounds like a simple question, we find that many folks who need farm insurance have no idea that this is something that they need, and more importantly – do not already have.  This creates a tremendous gap in their insurance coverage…

If you raise crops, vegetables, trees, or animals used for food – you need farm insurance.

If you live on a farm and rent the land to a farmer or get a farmland tax assessment on your property – you need farm insurance.

If you have children who raise animals for a hobby or as a lifestyle choice – you may need farm insurance.

If you live on a property that once was used as a farm and have outbuildings that were originally used for or designed for farming – you may need farm insurance.

The Coverage Gap

Most homeowner insurance policies exclude from liability coverage any business activities or pursuits.  By definition and in common law (court precedent), farming is a business activity.  This holds even if farming is not your primary source of income and even if you lose money or make very little money at it.  Here is a common situation:

The Smiths live in a renovated farmhouse situated on twelve acres.  Most of the land is wooded, but there is a five-acre field that they arrange to be farmed by a neighbor.  The farmer gives them a small amount of the hay that they use for their children’s pet goat.  The Smiths get a farmland assessment on their property tax statement every year.

The Smiths post their land with ‘No Hunting’ signs and do not give anyone other than a handful of family and friends permission to hunt on their property.  On the back end of their land, there are trails that the local teens sometimes use to ride their quads (of course without the Smith’s permission).

In this situation, The Smiths have a farm exposure which qualifies as a business that is excluded from coverage on most regular Homeowners Policies.  You may argue that they are not really farmers since they do not do the actual farming, but each year they receive a benefit from the farming of their land which is a business activity.  By getting a farmland assessment they are establishing that they have a business operation on their property.

Without special farm liability coverage added to their policy (if that coverage is available), the Smiths are vulnerable to a declination of coverage arising from any liability claim that arises from their business operations.  In this case, this could be from anything that happens on their property!

One of the local teens hits a rock on the trail and is badly injured when she falls from her quad.  The parents bring a suit against the Smiths for not properly maintain the trail.

While cutting hay, the local farmer brings up a rock that hits a car passing by on the road adjoining the property.  The owner of the car sues the farmer and the Smiths for the damage to the vehicle and the mental anguish and pain and suffering suffered in the event.

One of the Smith’s pet goats escapes the pen and eats the neighbor’s prized rose plants.  The damage to the flower bed is extensive.

In all these claim scenarios, the insurance carrier could decline liability coverage because of the business (farm) exposure and the policy’s exclusion for business operations and pursuits.  We are not saying that the Smiths would necessarily lose these cases, but if their insurance company declines to cover them, they will certainly have to spend their own money to hire attorneys, etc. to defend themselves from the allegations.

Property Insurance Issues Too

Up to this point, we have focused solely on liability insurance issues, but the farm situation may also cause property insurance gaps in coverage.  Many standard Homeowners Policies also have a business and/or farm exclusion for property.

This could apply to any other structure on the property that was originally designed for or is currently used for farming.  In the Smith Family example we have been using, this could mean that the old carriage house that is now used as a game room or two-car garage may not be automatically covered by the policy since it was originally designed as a farm building.

The same may be true of the small barn that is now used to house the pet goats and to store the hay that is cut from their property as this building could be considered to be used in the farming operations.

What is the Fix?

An experienced farm insurance agent (like us) has many tools to properly cover everything from a sophisticated farm operation to the smallest hobby farm.  We use specialized policies or endorsements that are designed to cover both your personal and farm liability and property exposures.

Contact us if you have questions on Farm Insurance.