Direct Marketing and Liability for Farmers
June 30, 2014
Direct marketing is an efficient way for farmers to interact with consumers and capture the full value of their harvests without depending on an intermediary. Examples of direct marketing opportunities include farmers markets, roadside stands, pick-your-own, agricultural tourism and direct sales to restaurants and stores. While both consumers and growers profit from these increasingly popular venues, farmers must consider the increased liability they could be facing by cutting out wholesalers and processors.
Consumers affected by foodborne illness outbreaks can take legal action against growers, and regulators can issue product recalls that cause catastrophic drops in sales and damage the farm’s or product’s reputation. Being prepared for claims of foodborne illness and food recalls, as well as purchasing sufficient insurance against liability exposures, is an integral part of any successful farmer’s business plan.
Raw vs. Processed
One aspect of food products liability to consider is the difference between processed and raw foods: adding value to your food products by processing them generally subjects you to various laws that are not applicable to the sale of raw products. Safety and liability risks are much greater for processed or cooked food products than for those sold raw because, for example, consumers are expected to know to cook raw meat to a certain temperature to avoid illness.
One of the best ways you can protect your farm against liability exposures is to prevent losses by making a commitment to product quality and safety. Most of what can be done to protect against a product incident is done (or not done) in the area of product quality assurance and control. The logic is simple: If a food product is free of contaminants when it leaves the farm, the odds of experiencing a major incident are considerably reduced.
Public Liability Insurance Policy
Public liability insurance typically protects against claims for bodily injury and property damage that occur on the farm premises or as a result of farm operations and covers accidents that affect farmers, employees, guests and customers. It may also cover raw and unprocessed produce.
Commercial Business Liability Insurance
Adding business liability insurance to general farm liability cover might be necessary for farmers who undertake activities that are not strictly agricultural, such as fresh-produce processing or selling products in farmers markets or selling more than a certain percentage of products that originate off-farm.
Product Liability Insurance Policy
A common misconception is that a general farm liability policy will protect against claims of injury from contaminated fresh produce. However, since the injury generally occurs off the premises, this is usually not the case. Product liability insurance is appropriate for this exposure, as it protects against consumer claims of injury caused by a defective or hazardous product such as contaminated fresh produce. For this cover, you will generally be required to submit a detailed description of product and business operations to the underwriter.
Environmental Liability Policy
Growing crops can also be a major source of pollution due to the use of nitrates in fertilizers. Nitrates in fertilizers can gradually pollute the land and surrounding areas, and is typically not covered under a farmers combined policy. If this is a concern, you should consider an environmental liability policy as well.
Risk Management Plan
In addition to transferring risk, thorough risk management practices are essential to minimise the exposure and the cost of a recall event. The farming and agricultural insurance marketplace is highly specialised. Our team of experts can help you secure the cover you need and collaborate with you to develop a risk management plan that meets your specific needs. Contact us today.