Unseen gaps in insurance coverage can lead to costly problems for custom harvesters. Good communication with an insurance agent can uncover those gaps, suggests Duane Hilber of Insurance Marketing Concepts in Green Bay, WI. Hilber has researched insurance needs of custom harvesters and can point to several areas that may need a second look.
“Don't conceal things from your agent,” Hilber says. “Go out of the way to make sure the agent knows what you are doing.”
Coverage gaps may be found in general liability insurance, which can be purchased through a comprehensive farm policy or a commercial general liability policy.
Which route to choose depends first on the custom harvester's gross receipts and what an individual insurance company will allow.
“It's usually less expensive to insure a custom operation under a farm policy, if that's possible,” Hilber says.
Insurance companies limit custom harvesting coverage under farm policies based on the operation's sales. That can vary from $2,000 to $75,000, depending on the agency. Coverage and policies may vary from state to state.
The real issue, he says, is knowing what the insurance company defines as a business, as compared to farming, which is generally considered a personal liability exposure.
If you're insured under a farm policy, make sure it covers work for others as well as coverage for work outside a certain radius.
“They were never intended to cover businesses and have an exclusion for businesses,” explains Hilber.
Many farm insurers have developed endorsements to their policies that provide coverage for some incidental business exposures such as limited custom farming, Hilber says. “If you exceed those limits you need to look for a commercial policy.”
Hilber says custom harvesters should consider insurance gaps in the following areas:
Pollution: “Commercial auto and liability policies exclude pollution,” he says. “If a vehicle's tank gets punctured and fuel escapes, that's covered. But if you haul a fuel drum to a job site and you spill the fuel, there is no coverage for the cost to clean it up.”
An endorsement called broad farm pollution coverage can be added to an auto policy.
“It really boils down to whether the insurance company will be willing to provide that endorsement,” Hilber says. “Many won't, but a few will. If you're transporting farm chemicals or fuel, you should be concerned.”
Equipment: To cover equipment, harvesters have two choices: They can buy commercial inland marine insurance or insure it under a farm policy.
Commercial inland marine policies provide coverage unless an exposure is specifically excluded.
“The policy should include mechanical breakdown,” Hilber notes, but if that breakdown was caused by a foreign object, like a rock, it may not be covered.
Under a farm policy, events (or perils) covered are specifically named, and losses such as fire, wind, hail and theft are covered. Rock damage to a harvesting machine doesn't fall into that category.
Rock damage has come under debate, he says. “Some farm policies have added an endorsement that they will provide coverage for that with an additional premium.”
Rental of equipment is another potential gap.
“If you rent equipment to a farmer, you need to make sure that your policy doesn't have an exclusion for equipment rented to others.” Coverage isn't normally provided for equipment rental, but it can be purchased.
There is also limited or no coverage for damage to equipment leased by a custom harvester, unless that exposure has specifically been added to a policy.
Injured employees: Laws vary by state on workers' compensation, which provides coverage for employees injured on the job. “You may not be required by state law to have a workers' comp policy,” says Hilber. Farm employees are usually covered under a farm liability policy, but you should check to see if custom harvesting is defined as “farming” in your state.
Vehicle use: If an employee uses his own vehicle to run a business errand and has an accident where someone else is injured, you could be held liable because the employee is acting for your business. If the employee has auto insurance, that would provide some protection, but would have limits. Hired and non-owned auto liability would cover these situations, Hilber says, and is normally only found under a business auto policy. Custom harvesters may want to avoid this scenario by reconsidering who runs errands, he notes.