Where can I find information about product liability for my eggs, broilers, and beef?
D.D. NebraskaAnswer: From Dr. Neil Hamilton’s The Legal Guide for Direct Farm Marketing, the section on products liability coverage:
The issue of whether products liability insurance is commonly available in the context of direct farm marketing is somewhat confusing. Many farmers believe that their typical farm liability insurance policy will provide them with “products liability coverage.” In most situations this is probably not true. Farm liability coverage applies in situations when people are injured while on the farm premises. This is a different issue than someone being injured by a product which was purchased on the farm. The classic form of products liability insurance is the type of coverage a manufacturer acquires to apply when a person was injured using a product purchased from the manufacturer. The insurance policy is written on an individual basis and the cost of the insurance is a function of the type of product being sold, the process under which it is manufactured, and the type of risks associated with using it.As it relates to the sale of food such as fresh produce and meat, the main concern about product liability is what happens if someone becomes ill from eating the food. Would a farm liability policy apply in this situation? The best answer is that it probably would not because it was not the type of activity or injury which the insurer was covering. This injury is not connected to the use of the farm premises. If the farm operation has an additional “excess liability policy” sometimes referred to as an umbrella policy, the answer could be different. It will all depend on the language of the policy and whether the injury involved can be shown to have been within the parties’ expectations about the coverage. If you have concerns about this issue, the best advice is to ask your insurance agent how your current liability policy would apply in such a situation. If the answer is no, then you should ask whether such “products liability” insurance is even available for the products you sell.
See Resources (below) for links to Liability Concerns for Farmers Involved in Direct Marketing of Farm Products, the publication Food Product Liability Insurance, and the article “How much insurance is enough?” These provide information on many aspects of liability insurance.Before 2001, the North American Farmers’ Direct Marketing Association offered liability insurance for their members. They no longer provide this service, but they have a list (exclusively for their members) of insurance companies providing liability insurance policies for direct marketing operationsA part of the publication Risky Business? answers the common question: “What if a customer gets hurt while on my farm or gets sick from eating my farm products?” It discusses insurance, but also suggests organizing your farm business as a corporation to limit liability. The Midwest Plan Service Catalog page lists several publications that discuss farm corporations and planning financial organization structure for farms.Your local Extension should be able to put you in touch with the Nebraska Farm Management Extension Specialist in your area. They could help you decide if a corporation or limited liability corporation (LLC) would fit your situation.You should contact insurance agents working with business insurance. These agents should be able to help you find a policy to cover your value-added business.
ResourcesThe Legal Guide for Direct Farm Marketing. 1999. By Neil D. Hamilton. 240 p. $20 plus $3 shipping.Order from:Drake University Law School Agricultural Law Center2507 University Avenue Des Moines , IA 50311-4505 515-271-2947Anon. No date. Risky business? New England Small Farm Institute, Belchertown, MA. p. 1-2. 6-7. www.smallfarm.org/nesfi_library/virtual/riskybusiness.htmHolland, Rob. 1998. Food product liability insurance. Agricultural Development Center – University of Tennessee. ADC Info# 11. Sept. 2 p. http://cpa.utk.edu/pdffiles/adc11.pdfMidwest Plan Service. 2005. Farm business management. Catalog. 4 p.www.mwpshq.org/North American Farmers’ Direct Marketing Association. 2005. Liability insurance and NAFDMA services. 5 p.www.nafdma.com/Public/Pugh, Carolyn J. 2003. Liability concerns for farmers involved in direct marketing of farm products. Agricultural Law Research and Education Center – Pennsylvania State University. August. 10 p.www.dsl.psu.edu/centers/aglawpubs/Directfarmmarketing2.pdf