In the first article of this series, I discussed how joining the Farmer To Consumer Legal Defense Fund (FTCLDF) can really lower the fiscal risk to your operation from unforeseen legal fees.
A second major risk we have as producers who direct market our goods is from that of a consumer litigation lawsuit. One legal battle could put you out of business ten times over, so please carefully consider your position on this before dismissing it as just another cost and waste of your hard earned money.
If you are direct marketing your products to the end user, then having some insurance in place to protect yourself is an absolute must from my perspective. And much like the FTCLDF, this coverage is probably way more affordable than you might imagine. What’s more, if you are selling at a local area farmers market of any size chances are you’ll be required to have coverage in order to sell there to begin with. For us, that is the case at two of the three markets we attend. In addition to requiring coverage for our farm, the markets also require that we provide them with additional coverage as well that I’ll discuss below. This is simply a cost of doing business, and is an expense that your tax consultant may be able to write off (consult with your tax professional).
If you already have a farm insurance policy in place, chances are this is a product that your agent can potentially add, though many insurers do not offer it. If you don’t have a farm policy in place, then you need to investigate getting one as soon as possible! We are currently insured with Indiana Farmers, and they have done a great job getting us not only this coverage, but other coverage as well that just make sense. The additional liability policy we have in place gives us $2M of annual protection (two instances per year, up to $1M per each instance) for consumer protection. And I want to clarify, this is a very broad-based policy and covers just about anything you could possibly sell from a farm including meats, eggs, vegetables, fruits, etc. While we currently only sell meats and eggs, we have some other things in the works and most of those will be covered by this policy without any additional costs. But do the research and make certain any policy you purchase covers items you are currently selling or intend to sell. Many of the farm insurance companies out there have a product along these lines, just read it carefully and speak with your agent prior to buying it to make sure your niche is covered and you are protected!
This brings me to a point I often hear from folks just looking into starting a farm: What do I need in a farm policy? Before you can get a policy in place that will meet your needs, you’ll have to know what you are going sell and where you are going to sell it. That means making an enterprise selection(s) and doing a market analysis for your farm. I’ve included some links on those subjects for you to watch to get an understanding of why that is so important. If you haven’t gone thru that process yet, you need to or your insurance agent won’t be able to write you an appropriate policy. If you are ready to begin selling, be certain that anything you intend to offer for sale is covered by your policy.
So how does this policy work? In short, if someone improperly prepares a product they bought from us, makes themselves ill and in turn blames us, we’re covered. If there is a defect in one of our products that makes someone ill, we’re also covered. Once a claim is filed, our policy will step in and use the funds provided ($1M per instance) to settle the claim on our behalf. In ten years of having this policy, we’ve never had to use it but knowing it is there certainly allows us to sleep better at night.
From a cost standpoint, there may be a less expensive option out there so do your own research. But for just under $30/month (about $350/year), to me it’s worthwhile to have $2M in coverage at my disposal. Adding an additional “rider” to specifically cover our farmer’s markets isn’t very expensive either. Each market we do requiring additional insurance does not cost us anything, but on an older policy they charge us a fee of $50/year for each additional insured (read: each farmer’s market requiring coverage). This cost is per market, which is named as a separate legal entity on the policy. In one case at a former farmer’s market we used to attend, we also had to provide a rider for an Indy area high school that allows our market to operate on it’s premises. Be certain you know who needs what coverage when working with your agent!
Even if you are not selling direct or attending a farmers market requiring this type of coverage, I still believe it’s a wise decision to have this protection in place.
If you are farming for profit, then someone is buying your products. Should litigation arise concerning your products, you’ll be very happy to have spent the money on this policy!
Just like I discussed in the previous article, two billed hours by a decent low-cost attorney will blow past $350 and you are left holding the bag to cover any financial settlement, legal fees, court costs, etc. Please be certain you are willing and able to do that before disregarding this advice.