There are many different kinds of insurance that farms, agri-business and food entrepreneurs should consider. The most common types of insurance for food and agriculture operations are as follows:
1. Farmers Comprehensive Personal Liability (“FCPL”) Policy (a/k/a farmowner’s insurance): Most farms use a farmowner’s insurance policy to cover the ordinary risks of a farming operation. This type of policy normally only covers activities ancillary to farming (i.e., not agri-tourism or cottage food operations). Farmers should pay special attention to the exclusions section in this policy to see what is not covered. To illustrate, sale of processed vegetables or meat products at a farmers’ market or roadside stand may not be covered. Furthermore, injuries to the policyholder or family member of the policyholder are normally excluded. Finally, the policy likely excludes property damage by the insured him/herself.
2. Commercial Insurance Policy: A commercial insurance policy or endorsement is appropriate for operations engaging in business outside the scope of the basic farmowners insurance policy. For example, most farmowners policies cover products liability for the sale of raw food products, whereas the commercial insurance policy may cover personal injuries (such as slip and falls and other types of injuries not related to defective products) resulting from the sale of processed food products (e.g., slicing vegetables, cutting meat products, making beef jerky). Additionally, a commercial insurance policy should be purchased if a business is being run out of a home, has agri-tourism activities, or engages in on-farm poultry slaughter.
3. Products Liability Policy: Products liability policies help provide coverage for liability resulting from an illness or death due to contaminated food products sold by the purchaser. It is highly suggested that farms involved with the direct marketing of food products to consumers, schools or restaurants have products liability insurance. Farms selling raw milk should also consider a products liability policy.
4.Homeowner’s Insurance: Homeowner’s insurance usually does not cover business activities. Therefore, you should consider a commercial policy if you have a home business office, cottage food operation, a rooftop garden, offer in-home cooking classes, or sell produce from your home.
This is an excerpt from my book that I co-authored with Pat Dillon, an Iowa food and agriculture lawyer and author of this Iowa agriculture law book. You can purchase a copy of the book “Field Guide: Legal Guide for New York Farmers and Food Entrepreneurs” on Amazon.com. A new (more user-friendly) Kindle version of my book has been recently uploaded (only $9.99 or $2.99, if you own the hard copy of the book).