Farmers have specialized insurance needs, experts say
WEST LAFAYETTE, Ind. Most farmers probably don't have enough insurance or the necessary coverage for a modern farm, say two Purdue University experts.
The increased use of farm chemicals combined with the complexity of environmental regulations mean that many farmers aren't well-protected in the event of a disaster, say Fred Whitford, coordinator of Purdue Pesticide Programs, and Stephen Lovejoy, professor of agricultural economics.
"Over the past 20 years the insurance companies have put in an exclusion for environmental matters," Lovejoy says. "If you have a barn blown over by wind, the insurance company will pay to rebuild the barn. But most insurance companies exclude replacing the chemicals stored in the barn or more specifically the damage that they do. If you have a couple of minibulk tanks, you might have some considerable environmental costs to worry about, but your insurance doesn't cover that. Hazardous material cleanup teams can charge up to $1,000 an hour. It doesn't take too many hours at that rate to add up to real damage to your operation."
In addition to the cost of cleanup, environmental fines can be thousands of dollars a day, Lovejoy says, and if there is a fish-kill in nearby streams, some states require the person causing the damage to pay to restock the streams.
Many farm insurance policies contain "pollution exclusions," and they are common in boilerplate farm policies, according to Whitford. "We've asked dozens of farmers about their insurance coverage, and we found that many people didn't know that they actually weren't covered for these environmental problems," he says. "Most policies won't cover the actual costs of a transportation accident, for example. If one of your vehicles is in an accident, most policies will fix the truck, but they won't cover the cost of any chemical cleanup."
Whitford says that fires on farms can put farmers in a real Catch-22 situation as far as insurance is concerned. "If there is a fire on your farm and the fire department uses water on the fire and causes chemical runoff, almost no insurance policies will pay for the environmental cleanup," he says. "On the other hand, if you tell the fire chief not to put water on the building because it contains chemicals and you don't want to risk chemical runoff, there's a good chance that your insurance won't pay your claim on the building, because the building and equipment could have been saved."
One way to avoid this problem is to place all chemicals in an older building that can be locked. "Don't store chemicals with your best tractor," Whitford says. "Put them in an older building so that if it catches fire you can let it burn and you're not out that much."
The best way to avoid conflicts is to have a better understanding of the insurance you've bought. Here are some questions Whitford and Lovejoy suggest that a farmer should ask his or her insurance agent:
What is the extent of coverage for environmental cleanup?
How much environmental cleanup coverage do I have?
Am I covered for spills resulting from off-the-farm transportation accidents?
What actions are required on my part if there is a chemical spill?
Are there any actions I might take (such as instructing a fire crew not to put water on a chemical fire) that might void my policy?
Am I covered for chemical spills resulting from temporary storage accidents? "If you don't have chemical storage facilities on your farm because you use custom applications, that won't matter. You're still liable for damages that might occur," Lovejoy says. "If a tanker of anhydrous ammonia is on your property and it springs a leak, you'd better be prepared to contain it, report it, clean it up, and pay for the damages. It's possible that the dealer might carry insurance that covers the temporary storage, since the dealer technically owns that tank. But someone who doesn't have technical legal storage might want to ask the dealer if they're insured."
Whitford suggests writing down the questions you might have and the coverage you need, and asking your insurance agent to respond in writing. "Unfortunately, some of this coverage is so specialized that even some insurance agents aren't aware of the ins and outs. The insurance agent will need to call the company issuing the policy to find out what is covered and what additional coverage is available," he says. "You can't buy a boilerplate insurance policy that will cover you from head to toe."
Instead, farmers should buy a basic policy and then buy additional riders. "These are separate, specialty policies," Lovejoy says. "My impression is that few agents mention them to farmers, but many of the companies have them."
"Today's farmer's ought to purchase insurance from folks who know farming," Whitford adds. "Farming should be viewed as a business, and you ought to seek advice from people who understand your business."
Sources: Stephen Lovejoy, (765) 494-4245; firstname.lastname@example.org
Fred Whitford, (765) 494-1284; email@example.com
Writer: Steve Tally, (765) 494-9809; firstname.lastname@example.org
Purdue News Service: (765) 494-2096; email@example.com