Despite the volatility around the world, one of the things you can count on is that owning farmland or a farm business is rewarding, and the ability farmers have to share that lifestyle with others is important. As with all rewards, there is also a certain amount of risk that accompanies the day-to-day activities of farming. One of the most frustrating aspects is dealing with the liability exposure that comes along with that work. Like it or not, exposure to legal liability continues to be a major concern among Iowa’s farm families. While farmers know they can’t completely eliminate all risk, they can take proactive steps to avoid a significant financial impact to the operation.
The risks of a potential lawsuit may come from property or contractual disputes, farm accidents, negligence by employees, agritourism or recreational uses of the property, environmental or regulatory compliance, or other events completely beyond our control such as the weather or other natural disasters. Rather than getting overwhelmed by these issues, develop a reasoned approach to minimize your risk exposure. The key to protecting your farm operation, farm assets and family is to educate yourself on the liability risks specific to your operation. Understanding key regulations and new requirements is important and this information can be easily gleaned through several resources, including Iowa State University Extension.
Planning for the unknown
How do you plan when there is so much uncertainty, and the rules and regulations are ever-changing? Some of the best steps for avoiding or protecting your livelihood in the event of a possible lawsuit are actually just good farming practices, including good record-keeping and good communication patterns with employees, family members and neighbors. For instance, keep a log or calendar notations of soil tests, dates of application of fertilizer or chemical, planting dates and harvest dates. If you do custom work, this logbook can become very important. Maintain those records in a safe place, and back them up electronically. In today’s world, email correspondence has become increasingly important, and technology affords us helpful ways to track our day-to-day activities.
What do the courts say?
A few years ago, we discussed these issues in depth when the Iowa Supreme Court decided a few prominent cases. You may remember the court case where a woman chaperoning a school visit to a dairy farm was injured in a fall out of a haymow. The court ruled that Iowa law did not protect the owners of a dairy farm from liability. The farmers argued that they had immunity from the injured chaperone’s claims under Iowa’s Recreational Use law — enacted to protect landowners when they invite visitors onto their property for recreational purposes. After that decision, the Iowa Legislature amended Iowa’s statute to broaden the definition of “recreational purpose” and provide more protection for landowners allowing visitors onto their land. There have been many cases interpreting the laws in Iowa regarding farm liability. The important take away is to inform yourself of the risks and use resources at your fingertips to prevent issues that lead to litigation.
Review your protection level
Court cases remind us that farm families should carefully review their overall strategy for farm liability protection on an annual basis, including their farm liability insurance policy and the liability risks presented by their specific operation. In other words, make sure your farm liability insurance covers your unique situation, as that evolves over the years. An insurance policy is a contract between the policyholder and the insurance company. The coverage provided depends upon the terms of the insurance policy. Read and understand the policy, and have an adviser review the policy carefully. In doing this review, be sure to explain to the agent or other adviser, as much as possible, what your operation looks like. You may also consider getting an individual written coverage opinion from the insurance company if you have special circumstances, such as regularly hosting farm tours.
Ask the critical questions of your insurance team, such as what activities are covered under your policy. Or maybe the more important question is, what is not covered under your policy. A standard farm liability coverage policy will contain a list of items that are not covered. For instance, custom farming might not be covered, or other nonfarm activities such as excavation. Your policy might also include a “pollution exclusion clause,” which could include a discharge of manure, fertilizer or other chemicals. Again, ask yourself, what unique risks are present in my farming operation? Who is covered under your policy? A major question to ask is whether coverage extends to all of your family members, employees, their representatives, or affiliated entities.
It takes a team
What coverage amount should I have? What is the aggregate limit of the policy? Some insurance experts state that with increased land values and increased risk, it may be necessary to investigate more coverage. Look at your balance sheet with your insurance agent and other trusted professionals, and ask whether your current coverage limit would protect the current value of your farm or covers the risks you face on a daily basis. While we cannot predict what the future holds for the farming operation, we can manage risk by looking at farm liability policies as risk management tools. You may want to run some hypothetical situations by your insurance agent and see what coverage would or would not apply.
Herbold-Swalwell is with Parker & Geadelmann PLLC. Email her at [email protected].