Conference sessions discuss
workers compensation/employers liability and agritainment
By Christopher W. Cook
It’s that time of year again. Harvest time. Disclaimer: I know we’re all in a hurry, but please give farmers room on the road.
As I mentioned in my first installment, I got hooked on a Farm Simulator game during the COVID lockdown. I was incredibly confused by the almost immediate turnaround time in the game between planting and harvesting crops. Long story short (too late), I had many fields of dead crops because I didn’t realize harvesting took place only days after planting.
But in the real world, this isn’t how farming works, even though the agriculture world continues to change and advance.
In this second installment inspired by sessions from this year’s Big “I” Indiana Farm Ag Conference, we’re going to discuss workers comp and employers liability for agribusinesses and the business segment known as agritainment or agritourism.
Comp vs. employers liability
Kurt Kluempers, CPCU, vice president of workers compensation and brokerage at Arlington/Roe, led a session discussing the difference between workers compensation and employers liability for farming entities in a changing agribusiness environment. “[Today], there are some super-sophisticated, even, family farms and they can get into millions of dollars of equipment and payroll,” he said.
But will these sophisticated farms need to provide workers compensation or obtain an employers liability policy?
In general, when it comes to workers compensation, the basic concept is a pledge that the employer will take care of the employee for any working injuries; in return, the employee waives rights to pursue a lawsuit and hold the employer liable.
“Some people call it the ‘grand bargain.’ Basically, an employee gives up his right to sue his employer in return for being taken care of,” Kluempers said. “[The employer] pays all medical; indemnity, which is lost wages; for loss of use of a body part; burial costs; occupational disease; rehab and vocational; prosthetics; and all legal expenses.”
Under employers liability, awards can be unlimited, similar to a general liability policy. “Work comp is relatively clearly defined as a benefit structure and also what’s [considered] a loss, [whereas] employers liability is kind of like an umbrella,” Kluempers says. “If you don’t buy a work comp policy on your ag exposure, and you have an employers liability [policy], which is broader than comp, it’s an exposure that maybe the insurer didn’t contemplate.”
When it comes to workers comp, some states, Indiana for one, may have exemptions. For example:
- When does “agriculture” become more like a commercial business enterprise?
- Casual labor. This is for non-recurring employment activity (e.g., hiring an individual to shovel periodically during the winter season).
- Domestic helpers at the residence might not be included.
As previously mentioned, employers liability offers a broader range of coverage. For example, it would protect against third-party lawsuits. Let’s say an employee sues because they were injured while using a dangerous tool on the farm, but the tool’s manufacturer defends the scenario by saying the tool was either modified by the owner or not well maintained.
“The expense of claims is so much higher than the norm in work comp and it’s driven by having an aging workforce. Older people, when they get injured, take longer to heal and it’s more expensive.”
—Kurt Kluempers, CPCU
Vice President, Workers Compensation and Brokerage
Arlington/Roe
It would also cover loss of consortium (e.g., an employee’s spouse sues due to loss of daily duties, obligations or companionship). Another protection would be against dual capacity. For example, a farmer manufactures or supplies a product that causes an injury. In this situation, the plaintiff would have two reasons to sue: the farmer being the manufacturer and being the employer.
Consequential bodily injury is another one. Let’s say that a severe accident or death of an employee causes one of their family members to have a heart attack or stress event. Employers liability would cover the legal defense, potential settlements, judgments or court awarded damages.
Regarding employers liability and agriculture, there’s also a concept of a farm exemption. This is still around because many farms were “family farms” and most of the labor was done by family and relatives. “I’m not saying relatives don’t sue each other, but the idea behind it was that everybody’s benefiting the communal farm,” Kluempers said. “[Everyone working on the farm is] getting some benefit from the money from when you sell the crops. It’s not the case as much [now] when you have big corporate farms.
“The exemption is being tested more, so don’t make the automatic assumption that [it’s there because] it’s a farm.”
As more corporate farms pop up, the exemption is becoming less clear. Some states have eliminated it, and some farms are choosing to purchase workers comp.
If a farmer chooses not to purchase workers comp, their farm should be covered by an employers liability policy. Without workers comp, and with a general liability policy—which can exclude agriculture exposures—there may not be coverage.
One thing to keep in mind regarding workers comp and employers liability in agribusinesses is the recent trend of an increase in claims due to labor shortages. “The expense of claims is so much higher than the norm in work comp and it’s driven by having an aging workforce,” Kluempers said. “Older people, when they get injured, take longer to heal and it’s more expensive.
“People who used to die [in accidents] are now kept alive. There might be a million dollars a month [in expenses while they’re] in intensive care, [and with employers liability] it is not capped.”
Whether you sell your farm clients workers compensation or employers liability, if they decline both, make sure it’s documented. “A lot of farmers don’t want to buy comp; [to them] it is a really radical concept,” Kluempers concluded.
Agritourism
Richard Pitts, vice president and general counsel at Arlington/Roe, delivered a session regarding insurance and risk management best practices for agritourism.
According to the National Ag Law Center, agritainment—or agritourism—can be described as “the crossroads of tourism and agriculture.” Think along the lines of pumpkin patches and corn mazes, pick your own fruit and vegetable operations, hayrides, dude ranches, demonstration farms, and winery tours.
“You know if you’ve got somebody involved in agritainment, but I think the real challenge is when you have someone who starts to slide over from more traditional farming activities into agritainment,” Pitts said.
And, chances are, some of your farm clients may have already taken a step in that direction. According to the Census of Agriculture, nearly 28,575 farms in the United States are involved with some type of agritourism activity. And while the extra income for your clients may seem nice—Grandview Research forecasts agritourism revenue in the U.S. to reach over $15 billion a year by 2030—there are a number of legal issues to be aware of when shifting away from traditional agricultural farming.
For example, in some areas, zoning ordinances might prohibit agritourism activities where regular farm operations are allowed, possibly requiring event permits. Employment law obligations can also shift, since agritourism is considered a commercial activity instead of an agricultural one. With this shift, farmers would have to pay employees at least minimum wage and provide workers comp.
“You know if you’ve got somebody involved in agritainment, but I think the real challenge is when you have someone who starts to slide over from more traditional farming activities into agritainment.”
—Richard Pitts
Vice President and General Counsel
Arlington/Roe
“Some of the legal issues that [your farm clients are] going to encounter, [they] never thought of before,” Pitts said. “[Agritourism] can be a fundamental change in your obligations with workers compensation, and even beyond workers compensation, it can change employment law issues in general. If [their employee is] standing at a cash register saying, ‘That’ll be $31.85 for the apple butter, please,’ I don’t think they’re tending crops or livestock. That employee is not agricultural at all.”
Pitts also noted that, regarding federal taxes, agritourism activities are handled differently from traditional “production” agriculture ones, and that some farms might report various activities in a variety of ways.
“We start to create more complex legal structures if we’ve got somebody who’s serious about putting agritainment into one business organization and keeping the classic farm in another, even if they occupy the same space,” he said. “You need to make sure that the correct entities are named in the collection of policies, and your insured, if they’re being prudent about this, needs to be careful about making sure that employees are assigned to the correct company.”
Another thing to consider if your farm clients are inviting the public to their location for events is the Americans with Disabilities Act. Failure to provide accessible accommodations for those with mobile or other disabilities may result in lawsuits and fines.
And what if someone gets injured on your client’s farm, in a slip and fall perhaps? Pitts stressed the importance of having a “contents of warning” notice on the premises. This sign, that should be visible to all visitors on the property, should state that the “agritourism provider is not liable for an injury to, or the death of, a participant in agritourism activities at this location if the death or injury results from the inherent risks of agritourism activity.”
“The visitors are assuming all the risk of the activity being provided,” Pitts said. “The idea behind this immunity is wonderful, but it is not a substitute for insurance. Do not let your insured tell you that agritourism immunity means I don’t need any [extra insurance], or that ‘I insured my farm; my farm is insured.’ It’s just not accurate.”
Accidents happen, but even with posted disclaimers, jury verdicts can rule for or against farms or agritainment entities.
In one particular case, Stephanie Heidish, et al. v. Dehn’s Pumpkins LLC, a seven-year-old girl encountered E. coli by touching animals and their manure at a farm’s petting zoo. The child was diagnosed with hemolytic uremic syndrome, which led to potential life-long health issues. A negligence claim was filed, claiming that the farm failed to provide hand washing stations. The farm owners settled for $415,000, but the other defendant (the agritainment operator) went to trial and was found negligent. Total damages were $7.55 million.
Pitts explained that the plaintiff (the seven-year-old) would only receive one award for the trial, and that all future medical expenses needed to be considered. “I don’t think the verdict was necessarily disproportionate,” he said. “We have a seven-year-old who is going to undergo dialysis for the rest of their life and is likely going to need a [new] kidney [in the future]. How much is a kidney transplant going to cost in the year 2045?”
To make sure your farm clients have the appropriate coverage, it helps to know as much as you can about the agritainment ventures they are pursuing. Ask questions like:
- What is the legal business name? (Is it different from the farm operation?)
- What type of entity is it (e.g., corporation, partnership, etc.)?
- Are there subsidiaries or joint ventures?
- When did business operations begin?
- How many years of experience do you have?
- Who is involved (primary and secondary)?
- Do you use any third-party vendors?
- What are your business hours (e.g., days of week, open seasonally, etc.)?
- What safety programs and disaster plans are used (if available)?
- What operations are performed on the premises?
- Is food handled on the premises and is proper hygiene conducted?
Also, “from an underwriting perspective, they’ll want to know [your client’s] revenues from … [agritainment] activities,” Pitts said. “Get your folks to start thinking about [their agritainment operations] as truly a retail exposure.”
And while your clients are thinking about their exposures, you can consider the best way to cover them. “In 2016, ISO came out with new forms that were connected to agribusiness and agritainment, because they recognized the new developments,” Pitts added. “The crucial thing is that ISO has defined agritainment and it spans across all ISO form, so that we have a consistent definition.
“No matter what forms you use, or your companies use, there is a substantial question as to whether a farm liability (FL) is going to cover any of this connected to agritainment. You’re probably going to be looking at a stand-alone BOP if not a commercial general liability form,” Pitts said.
Two endorsements, the FP 05 05 – Agritainment – Property, and the FL 05 01 – Agritainment – Liability are also available.
