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Are you liable?

Do you have insurance coverage if you are helping neighbours with their harvest and your combine catches fire and burns the field? What if your newly purchased high clearance sprayer is sitting idle and you hire yourself out to do some custom herbicide application and you spray the wrong field? Are you covered?

With more farmers doing some form of custom application off the farm, liability and sufficient insurance coverage issues are becoming more important. The costs of misapplication, in particular, are not just the loss of the crop. If the application was performed by a licensed custom applicator, they will have liability insurance to cover the cost of the loss. But, what if you are a neighbour who is earning a few extra dollars spraying fields for others? Do you have liability insurance to cover misapplication? According to the insurance industry, most farm policies do not cover your foray into custom work.

“As soon as money starts changing hands, you should check your coverage with your agent or broker,” says Doug Lyall of Shackleton Agencies in Olds, Alberta. “Growers need to be sure they know the difference between doing something for money or charging for the service and helping a friend get the work done.”

Since all policies differ, it is worthwhile determining what coverage you have before undertaking custom work of any type. Certainly, if the neighbour has a heart attack and several friends band together to finish seeding or harvesting until he can return to work, that is normally not viewed as custom work, according to Lyall. Similarly, if the neighbour offsets the cost of the fuel to get the work done out of gratitude, it is unlikely that would be viewed as custom work and your insurance policy would likely cover any small mishaps. But, if you start charging by the hour and hiring your sprayer out to anyone who wants to hire you to custom apply product to their fields, you are now in the custom business and your farm policy will not likely cover any problems.

“This is a fairly new issue that has arisen within the last few years,” says Cam Scheelar of KenMex Insurance in Red Deer, Alberta. “There are good used high clearance sprayers coming on the market that are affordable for farmers to purchase to do their own work. But, these sprayers can do more than the average farmer needs and, rather than leave them sit idle, they are hiring themselves out to do custom work.” Scheelar says there are more acres being sprayed this way, and due to the higher chance of problems compared to custom combining or seeding, liability is a bigger concern.

Lyall suggests that farmers sit down with their agent or broker and check what is covered by their farm policy. “Clarify the wording in your farm policy,” he advises. “If you plan to do work other than your own farm work, then consider purchasing liability insurance. It isn’t an expensive policy to buy and you will be covered for drift, misapplication and other problems.”

It only takes one claim to cause a bigger problem, says Scheelar. “Insurance companies will cover a certain amount of liability because it’s no big deal if you are just helping out a neighbour.” However, if during the investigation it is proved that you have been doing work for several neighbours, the company may not be so lenient.

Scheelar says the current estimate for the amount of growers doing custom work is about 50 percent of the total custom work being done. While cynics may argue Scheelar’s suggestion that farmers should have liability coverage to protect their custom operation is a ploy to sell more insurance, the reality is that most farmers could not absorb the cost of a liability claim if their current policy does not cover it. The question, therefore, is how many growers getting into the custom business can afford not to have some liability coverage?

Most farm policies cover drift from the policy holder’s farm to the neighbour’s field, explains Lyall. But, they do not cover drift from the neighbour’s field into another neighbour’s field if you are doing the spraying off your own farm. “Custom applicators have stringent rules on how to operate and what is covered,” he adds.

Scheelar suggests that even though government regulations are in place to protect and direct all the parties involved in all varieties of custom application, what is missing is enforcement. “It’s okay to help
neighbours, but if it goes beyond this, perhaps the rules need to be enforced.”

Lyall believes farmers just need to talk to their insurance representative and be clear on what coverage they have and buy more if needed. “We need to know what you are doing or else we can’t be expected to have your exposures covered,” he says. “If we know, we can help you prepare for potential risks.”

While doing a little custom work may help your bottom line, it could also destroy it. Therefore, by reading the fine print of your policy and, perhaps, getting a little extra coverage to protect you ‘just in case’, you can help out your bottom line confident that you are not exposed financially if the worst happens. At some point, all growers need to determine if they are being neighbourly, which is a good and noble thing, or if they are in business to make some money off the farmer next door. One action may carry insurance coverage under your existing policy, the other may not. n