The Rural Voice, 1993-01, Page 21Professionally Speaking
Are you adequately protected in the
event of a law suit?
BY GLEN JOHNSON
Liability insurance, simply
described, is insurance which provides
protection to an insured in the event of
a law suit alleging that an insured
caused bodily injury or property
damage to another person (the third
party). Liability insurance should be,
and normally is, part of any package
policy — home or commercial.
Insurance companies specializing in
farm insurance products will be able to
provide a "farm liability coverage"
which has been specially designed for
the farm situation. This coverage will
take into account personal and business
liability needs in one package.
Persons insured under farm liability
policies include the named insured, the
spouse and relatives of either while liv-
ing with the insured and anyone under
21 in the care of the insured. Farm
employees, while doing their farm
work, are also considered to be insured.
If there are others who should be cov-
ered under your farm liability policy,
make sure your agent or broker knows.
The typical farm operation involves
many exposures which could give rise
to a claim. It is extremely important
that adequate liability insurance be
maintained.
Data available from the Farm Mutu-
al Reinsurance Plan (which was formed
by Ontario's farm mutual companies in
1959) clearly illustrates the relative
dollar payouts of various types of farm
liability claims (see illustration).
Claims caused by "machinery on the
road" is perennially the largest category
of farm liability claims. Claims
resulting from falls on the insured's
property, lack of supervision and dog
bites are also major categories.
While we are able to categorize lia-
bility claims to some extent, law suits
against farm insureds come in many
shapes and sizes. In many cases,
sizeable settlements result where the
insured person believed he or she was
taking reasonable care. Here are some
examples of how sizeable claims have
occurred:
• An insured's son holds a field
party (without the knowledge or
consent of his parents). He invites 20
or 30 classmates but a large number of
uninvited individuals show up. Two
uninvited guests get into a fight. One is
seriously injured when he falls and
strikes his head. The owner of the farm
is sued for several hundred thousand
dollars.
• A farmer allows a class of elem-
entary school children to tour his dairy
farm. He allows them to sample milk
Causes of Liability Claims
Machinery on Road
Slip or Fall
Other Farm Related
Lack of Supervision
Dog Bite
Miscellaneous
Horseplay
Products Liability
Firearms
Animal Escape
Fire Legal Liability
Duty to Defend
Pollution
Boating
Fairs & Shows ` '
Drainage/Erosion IZA
Host Liability
Explosion EU
Crop Spraying 0
No Coverage'
Custom Farm Work
and cheese and three children develop
serious E -coli bacterial infections and
are hospitalized for several months.
• The farmer's elderly mother,
while crossing the road to get the mail,
walks in front of an oncoming car,
causing it to swerve off the road
resulting in serious injuries to the
occupants.
• The insured farmer takes guests
for a ride in his motor boat. The water
is rough. The boat goes over a wave
and one of the passengers is tossed
from the seat to the floor. At first she
complains of a sore back. Ultimately,
the back injury proves to be more
serious and a law suit is initiated.
• The insured farmer has a PTO in
operation when a neighbour arrives
with his small child. While the men are
talking, the child gets caught in the
PTO and loses a limb. The claim is for
several hundred thousand dollars.
Without liability insurance protect-
ion, the individuals who were subject to
the foregoing law suits could have
suffered serious financial setbacks.
Liability insurance policies also
cover the defense costs of court actions
covered by the policy — even if the
suit alleging negligence against an
insured is unfounded. Defense costs
for law suits not covered by the policy
will not be paid — for example,
causing injury or property damage
intentionally is not covered, and,
therefore, defense costs would not be
covered either.
It is important to carry adequate
farm liability coverage limits. The
farm mutuals base limits start at
$200,000. (Farmers Limited Pollution
Liability with a limit of $500,000 is
included in the base premium.) It is
relatively inexpensive to raise the farm
liability coverage limits. For example,
an additional $100,000 of coverage can
be purchased for under $20. The policy
limits can be increased to $1 million for
under $60 of premium. Limits in
excess of $1 million can be obtained.
There is no substitute for exercising
the utmost degree of care to prevent
accidents from happening. However, if
you are faced with a law suit you will
certainly want to have adequate farm
liability insurance coverage!O
Professionally Speaking is a monthly
column featuring a different expert
each month. Glen Johnson is Presi-
dent of the Ontario Mutual Insurance
Association which is the trade associ-
ation for the policyholder -owned farm
mutual companies in Ontario.
ANUAHY 1993 17