PF&M at a Glance
Covering the farm
Few sectors of the U.S. economy have undergone the level of change experienced by agriculture during the past 100 years. A little over a century ago, farming and ranching were largely a way of life rather than a way of making a living. However, the impact of industrialization and technology changed things immensely. Today, the nation’s food needs are handled primarily by a small number of extremely large, specialized producers. However, there are still many smaller farm and ranch operations that are a critical part of the agricultural scene.
Smaller farms and ranches differ from most commercial operations because the owner both conducts his business and lives with his entire family on the same premises. Such entities have a combination of commercial and personal exposures that must be managed, with insurance merely being one tool to accomplish this goal. Depending upon the particular farm or ranch operation, it is possible to use commercial lines policies to meet the business needs and personal lines policies to meet the personal needs. However this method could be unwieldy, less cost efficient and dangerous. This method may result in coverage gaps and overlaps that create confusion as well as coverage problems.
The differences and degrees of variety in various farm and ranch operations add to the complexity of the issue. While there are always elements common to all farm and ranch operations, farmers and ranchers must be good at diversifying in order to maximize their chance of survival. A farmer not open to new opportunities is a farmer susceptible to bankruptcy. The best approach may be to find an option that satisfies all potential coverage needs in a single policy, and such a policy must be flexible.
The Insurance Services Office (ISO) Farm Program uses a cafeteria approach for its insurance offerings. For instance, one operation may choose to have only Farm Property and Farm Inland Marine forms to address its property coverages but protect itself against liability exposures by using commercial general liability (CGL) forms. Another operation that desires excess protection may choose to use the farm umbrella or a commercial umbrella with a farm endorsement. While, yet another operation may opt for a homeowners policy to handle their residence but a farm property coverage form on all other farm-related structures.
ISO’s Farm Program includes four types of farm policies and each may be used either separately or on a combined basis. The program includes the Farm Property Policy, the Farm Inland Marine Policy, the Farm Liability Policy and the Farm Umbrella Policy.
The Farm Property Policy is made up of a variety of forms including the same general policy conditions form used by all commercial line forms. It also includes a policy Declarations, a Farm Conditions Form, one or more Farm Property Coverage Forms, a Farm Dwellings, Appurtenant Structures and Household Personal Property Form, a Farm Personal Property Coverage Form, and a coverage form for Barns, Outbuildings and Other Farm Structures. Further, the Farm Policy includes a Causes of Loss Form, which describes the perils for which the policy provides protection.
The Farm Inland Marine Policy is made up of a General Conditions Form, a Farm Inland Marine Declarations, one or more Farm Inland Marine Coverage Forms such as a Mobile Agricultural Machinery and Equipment Coverage Form and a Livestock Coverage Form.
The Farm Liability Policy is composed of a Common Policy Conditions Form, a Farm Liability Declarations, a Farm General Liability Coverage Form, a separate exclusion for nuclear activities and an exclusion that addresses violations of the Migrant and Seasonal Agricultural Worker Protection Act Endorsement.
The Farm Umbrella Policy is an excess coverage form that contains general conditions forms, a Farm Umbrella Declarations, a Farm Umbrella Coverage Form and a comprehensive exclusion for nuclear activities.
Please note that this is only an overview of this coverage. A thorough discussion of the program may be found in the PF&M Analysis from The Rough Notes Company. Producer Online subscribers, please refer to PF&M Section 471.4-2, ISO Farm Program Property Coverage Forms Analysis for more details on this topic. *