Business | Winter 2009
Put your liability insurance to the test.
By Joy Gregory
With an increase in the number of liability claims filed and the greater risk of exposure that goes along with a trend to fewer and larger farms, it’s time to review your insurance coverage
A few years ago, a dry growing season left a lot of farmland along Alberta’s major north-south highway corridor unusually susceptible to grass fires. By the time the smoke cleared, area farmers weren’t only talking fire damage and drought. “The smoke was a contributing factor in some highway collisions and they were concerned about whether they were carrying enough liability insurance,” says Mary McLennan, property and casualty insurance manager for Wawanesa in northern Alberta.
People in the insurance business soon learned that some of those landowners already had $5 million in liability insurance. It turned out their brokers helped them recognize the inherent risks involved farming alongside one of Alberta’s busiest highways. It wasn’t about over-selling, says McLennan. “Those brokers were just doing their job.”
Assets attract lawsuits
Don Reddekopp is a Calgary insurance broker with Mennonite Mutual Insurance Co. (Alberta) Ltd. He used to farm in Saskatchewan where his first business meeting was with his insurance agent. Now sitting on the other side of the broker desk he says, “I am surprised at how few people do that.”
Reddekopp admits it’s tough to say how much insurance a farmer should carry. But one thing’s for sure, “most farmers probably should increase their liability coverage,” he says. “Our society is becoming more litigious. There are many more claims than there used to be and that’s an issue to look at. Plus, farm operations are becoming fewer and larger in scope, so their exposure is greater.”
While you may not immediately see a link between the value of your assets and your exposure to lawsuits, reality tells a different story, says Reddekopp. Farms and farmers are part of a society “where as soon as a serious event happens, you look for somebody to blame and so you look for money to help improve your circumstances.”
And don’t expect your version of what’s “reasonable” to hold sway in a court of law, warns McLennan. She recalls a case where a long-time employee sued his employer after he was injured when kicked by a cow. With no way to show the employee knew that was a risk factor, the employer was considered negligent.
Even though there haven’t been a lot of farm-related headline-grabbing liability lawsuits in western Canada, as individual farms get bigger and commodity prices remain relatively strong, the conventional $1 million of liability insurance definitely isn’t enough, adds McLennan.
She figures that a lot of farmers are already carrying $2 million. Indeed, even some farm fairs require that amount of coverage before an agricultural producer can rent a stall. But every situation is different and you should look closely at what amount of liability insurance best suits your needs.
What is liability insurance?
Liability insurance covers you and your family in case of legal claims that result from unintentional property damage, bodily injury or death. In other words, it protects you or your farm business from being sued if someone is injured on your property, regardless of whether they’re working or visiting. It usually covers damages awarded after a lawsuit, plus legal costs.
And here’s where it gets complicated. To sue, the injured party need not prove criminal intent or an intent to injure. Moreover, an injured party can take you to court on an actionable negligence claim even if the injury occurred while trespassing on your land, explains McLennan.
Similarly, the fact that a building is obviously vacant --— and woefully derelict — does not absolve you of legal responsibility if someone enters that building and suffers a mishap, notes Reddekopp.
The legal definition of what constitutes “your land” also plays an unexpected role. Farmers leasing land may be legally exposed if someone is injured on that property. Here, the law looks at whether a leasee “is acting as the owner,” says McLennan.
Worse still, liability policy coverage is typically based on the number of acres you own. So if your broker doesn’t know that rented land doubles or triples your land base, your liability coverage could be based on grossly underestimated risk.
With farm liability insurance based on so many factors, brokers say it’s impossible to quote prices without a close look at a client’s unique circumstances. But they are adamant about its value. Liability insurance “is cheap compared to what you have to lose,” says McLennan. FF
