The rapid evolution of farm technology is adding new insurance exposures for dealers, but there are ways to avoid potential claims from customers.
Farm equipment dealers are accustomed to protecting their businesses from liabilities such as property damage and bodily injury with the necessary insurance coverage. But are dealerships’ existing policies adequate when it comes to insulation from precision ag liability?
Not always, says Michael Russell, senior account executive with Federated Mutual Insurance Co. Precision farming has created new liability exposures for dealers that didn’t exist even a few years ago, he says, and many are still in the early stages of determining what additional layers of protection are needed to avoid a potential claim from a customer.
This is a challenge, given that precision farming technology is evolving at a rapid rate and new products, such as Unmanned Aerial Vehicles, are introducing additional liability considerations for dealers.
As Russell explains, a typical Commercial General Liability (CGL) policy is “triggered” when the insured party becomes legally obligated to pay for “bodily injury” or “property damage” caused by an “occurrence.” But for most precision farming liability cases, there is no property damage or bodily injury.
“For example, an equipment dealer sold a sprayer to a customers and the precision specialist incorrectly calibrated a third of the nozzles during setup,” Russell says. “When the customer used the machine on his fields, a third of the rows on each pass didn’t receive a full application.
Best Practices to Minimize Precision Ag Liability
Understand Professional Liability — Individuals who provide opinions and make decisions can expose themselves to what is commonly referred to as professional liability. Errors may result in financial harm to others.
Employee Roles — Identify your employees who are authorized to provide precision farming advice and direct your customers to them.
Know Your Expertise — Keep precision knowledge and skills current. Where appropriate, get and maintain professional certifications and registrations.
Clarify Expectations — Open communication with your customers and careful attention to detail from the beginning can help you avoid misunderstandings and mistakes.
Put It in Writing — An easily understood written agreement or contract outlining roles and expectations benefits everyone invested in the relationship. An attorney should be consulted.
Record Keeping — Detailed records can help clarify expectations and provide proof of completing those expectations. Be thorough and committed to your record keeping.Risk Transfer — Specialized precision farming insurance coverage is a feasible option to protect against professional liability claims and help protect beyond a standard commercial general liability policy.
The error was apparent a month later when those crops didn’t emerge as well as the others. The farmer notified the dealership, which notified its insurance company, and were told its current policy didn’t cover a claim of this type.”
A crop that isn’t flourishing is not considered “property damage” under a dealership’s CGL policy, Russell says.
In many cases, dealers are also setting expectations for customers with the technology or precision service they provide and there is a potential risk if those expectations aren’t met.
“We’re seeing more dealers have agronomists on staff suggesting that customers use this level of fertilizer, or plant different in this part of the country, or space the rows this close,” Russell says. “If the farmer is not happy with the results of those recommendations, there’s going to be an allegation that ‘Hey, I took your advice and that didn’t work out for me.’
“It’s so different than anything else we see out there and we don’t want dealers to be surprised when they submit that claim to their carrier and the carrier says, ‘Sorry, there’s no coverage for that. You have to defend this on your own.’”
To minimize risk, Russell advises that dealers work with insurance companies that specialize in endorsements and risk management tools, because as precision farming continues to evolve, so too will liability exposures and necessary solutions.
Federated Insurance developed an endorsement for equipment dealers to add to their GCL coverage. This endorsement extends coverage for damages due to a negligent act, error or omission by the dealership, such as loss of crop yield or farm data.
“A lot of times, data is stored on a piece of farm equipment. If it’s brought into the dealership and a technician cycles through that data and it somehow gets lost, the customer is going to be upset,” Russell says. “Who pays to recover that data? This is a situation we see as a potential problem down the road. As precision farming evolves, so will the exposures and necessary solutions.”