|
PF&M at a Glance Farm and ranch insurance
Farms and ranches are different from most other business operations because the owner conducts business and lives on the same premises. A farm or ranch has a combination of commercial and personal risk exposures that must be addressed and resolved. While it is possible to use commercial lines policies to meet the business needs and personal lines policies to meet the personal requirements, this practice can lead to coverage gaps and overlaps that create confusion and cause coverage problems. The best approach is to find a coordinated policy form that satisfies all of these potential coverage needs in a single policy. Both the American Association of Insurance Services (AAIS) and Insurance Services Office (ISO) offer standardized farm/ranch policies. These farm programs need to be very flexible because one size does not fit all. Some risks may use farm property and farm inland marine forms for the property exposures and use commercial general liability forms for the liability exposures. One uses the farm umbrella and the other the commercial umbrella with a farm endorsement. Still another uses a homeowners policy on the dwelling and farm property coverage forms on everything else. The size of a farm or ranch operation usually determines whether the exposures are more commercial or personal in nature. The differences and degrees of variety in these operations add to the complexity of the issue. While there are always elements common to all such operations, farmers and ranchers must be good at diversifying in order to maximize their chances of survival. If not, they are highly susceptible to failure and bankruptcy. Some operations involve multiple names due to differences in ownership and the variety of operations conducted on the same premises. In others, the parents still own the farm but have moved to town and the children are running the show. Then there are situations with hired hands, custom farming and absentee owners who work and live in town during the non-growing season. Eligibility involves a number of factors. The named insured must be an owner or a tenant with an insurable interest in the farm or ranch. This includes absentee landlords, tenant farmers and co-owners of the operation if the co-owner has an equal or controlling financial interest in the venture and is primarily responsible for the operations. Some operations are not eligible at all or must be referred for underwriting. Examples are corporate operations, those where other, ineligible businesses are conducted on the same premises, vacant or unoccupied locations, horse raising and boarding, operations that supply agricultural commodities for manufacturing and processing, and farms with substantial retail sale of products or “U-Pick” operations. Some insurance companies require photos of each covered structure and a detailed diagram of the main farm premises as a prerequisite for eligibility, underwriting or providing coverage. The farm/ranch policy includes the following list of available property coverages: Coverage A—Residence, for the main dwelling and attached structures Coverage B—Related Private Structures, for other structures related to residential use Coverage C—Personal Property of the insured and of guests or domestic employees Coverage D—Additional Living Costs and Loss of Rent resulting from a covered loss to covered property Coverage E—Farm Structures, such as barns, silos and other permanent or portable structures Coverage F—Scheduled Farm Personal Property, including machinery, equipment, livestock and farm products, supplies and commodities Coverage G—Unscheduled Farm Personal Property, such as property in the open and property away from the premises Liability coverage must then be selected: Farm Personal Liability covers bodily injury, property damage, personal and advertising injury, and medical payments to others for covered occurrences. Commercial General Liability provides the same coverages for operations having commercial or business operations or other exposures beyond the scope of the Farm Personal Liability form. The Farm Umbrella Liability Policy provides additional limits as needed or desired, or the Commercial Umbrella Liability Policy can be used instead. Numerous endorsements are available for use with all of these policies to customize the policy to meet the requirements of each individual situation. Please note that this is only a brief overview of the coverages available in these programs. The PF&M Analysis from The Rough Notes Company contains broader and more thorough discussions of these and other related subjects. Agency OnLine subscribers can refer to PF&M Sections 470.4-2, AAIS Farm Coverage Form Analysis, and 471.4-2, ISO Farm Program Coverage Form Analysis, for more detailed discussions and additional information on these and other related subjects. * |
|
|
