Dairy farmers today face unique property and liability exposures including costly buildings and sophisticated equipment as well as risks associated with equipment
breakdown, milk contamination, and disposal of manure among other things. Understanding the risks they face is critical to ensuring proper insurance
coverage.
FARM BARNS AND OUTBUILDINGS
Buildings on a dairy farm are particularly susceptible to fire due to the number of ignition sources and flammable material such as hay, bedding, and fuel stored on the farm. Weather related losses are also common for dairy farms. Evaluating the appropriate limits for farm buildings including all permanently attached equipment is important. Coinsurance requirements must be considered in determining the appropriate limits.
Depending on the quality and use of a building, coverage may be provided on a named perils or special perils basis and valuation may be based on the replacement cost or actual cash value.
FARM MACHINERY
Modern dairies are automated to include numerous machines in their daily operations. In addition to machinery specific to the dairy operations, many farmers raise their own grain to turn into feed for their livestock. Whether as scheduled property or on a blanket basis, dairy farmers require coverage for this farm machinery.
Coverage options to consider include special perils, replacement cost and foreign object inhalation.
Other Farm Personal Property
Livestock, hay and grain, and a multitude of other types of farm personal property that are used in dairy operations require coverage. Property may be individually scheduled or are included as a part of a blanket depending on the property and the coverage needs. For instance, property away from the insured premises including property in transit may be subject to certain limitations. Providing adequate coverage for livestock is critical to dairy operations. While livestock can be included in blanket coverage, high value cattle should be scheduled.
Additional coverage considerations may include the need for added perils including winter perils for the livestock. Coverage for hay and grain must be evaluated based on whether the products are stored in a barn or are in the open. As with other types of farm personal property, coverage can be provided on a blanket or scheduled basis. The need for peak season coverage should be considered.
Milk Contamination Coverage provides coverage if a contaminant is introduced during the processing phase or if by chance medication of a sick cow gets into your milk supply.
5 Questions to Ask When Considering Milk Contamination Coverage
How many steps are being taken to prevent milk contamination?
How many times are you testing?
Have you ever had any milk contamination claims in the past?
Is the overall farm clean?
Do you have any employees? If so, what kind of training do they have?
EQUIPMENT BREAKDOWN
Equipment breakdown coverage covers loss caused by a mechanical or electrical breakdown. For dairies, this exposure can be high especially when automated milking and processing equipment is damaged. Examples of covered losses include loss of perishable goods (milk and milk products) as well as consequential loss to livestock.
FARM INCOME AND EXTRA EXPENSE
For dairy operations, loss of business income and extra expense may be high. It may be difficult to locate the availability of backup facilities. Farm Income Coverage provides coverage for loss of earnings and coverage for ongoing expenses that result from an interruption of farming operations caused by a covered cause of loss. Extra Expense Coverage is available to assist in paying for additional costs, such as moving a herd to a milking facility in order to resume normal farming operations.
LIABILITY EXPOSURES
Premises liability exposures for dairy operations include livestock roaming onto a roadway causing an accident and pollutant exposures such as application of chemicals and pesticides and disposal of animal waste. Limited pollution liability coverage and farm chemical overspray coverage options should be considered.
As with any farming operation, a premises liability exposure exists when the public is regularly allowed on the dairy farm. It is important to understand who, other than those involved in the farming activities, will be on the farm premises. School class trips, petting farms, etc. pose significant liability exposures.
Products liability exposures also exist due to the potential for contamination, spoilage, and foreign objects in the milk. Raw milk is particularly susceptible to contamination. Procedures and controls, including meeting FDA specifications, must be in place to prevent contamination.
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