Managing Legal Liability in

Agritourism and Direct Marketing

Not legal advice . . .Contact your legal counsel

  • This presentation is based on research of the presenter and is intended for educational purposes only.
  • You are encouraged to seek the advice of your tax or legal advisor, or other authoritative sources, regarding the application of these general tax principles to your individual circumstances.

Resources

  • Developing an Operational Plan to comply with Good Agricultural and Handling Practices contact VDACS, 804.786.3548 (ask the office to mail you a copy).
  • Virginia Business Legal Structures, Virginia Foundation for Agriculture, Innovation & Rural Sustainability. Contact Chris Cook at 804-290-1160.
  • Agricultural Marketing Resource Center Insurance and Liability Issue for Agritourism Operators

References & Resources

Code of Virginia

DeNoon, S., Richardson, J., & Walker, M. (2012). Managing Legal Liability Series: Workers’ compensation & vendor liability for farmers’ market owners and operators. VCE publication CV-24NP

Richardson, J. (2006, 2007). Liability and Risk Management Presentations.

Richardson, J. (2012). Managing liability: Legal liability in agritourism and direct marketing operations. VCE publication.

Richardson, J. (2012). Managing Legal Liability Series: How much liability insurance coverage show I have. VCE publication CV-17NP

Richardson, J. (2012). Managing Legal Liability Series: Conducting the liability assessment. VCE publication CV-18NP

Richardson, J., Walker, M. & Plourde-Rogers, H. (2012). Managing Legal Liability Series: questions to ask when comparing insurance coverage. VCE publication CV-19NP

Richardson, J. & Walker, M. (2012). Managing Legal Liability Series: Virginia attorneys: Members of the American Agricultural Law Association. VCE publication CV-20NP

Whitus, L., Richardson, J. & Walker, M. (2012). Managing Legal Liability Series: Insurance factsheet. VCE publication CV-16NP

Resources

MANAGING LEGAL LIABILITY SERIES:

Questions to Ask: When comparing insurance coverage

  • What types of products are covered by my product liability insurance? What types of products are not covered?
  • What types of incidents are covered by my general liability insurance? What types of incidents are not covered?
  • Does my liability coverage extend to only one market, or to all of the markets that I attend?
  • Does my coverage extend to my employees & representatives and their actions?
  • Is there a deductible? How much is it?
  • How much does the premium cost?
  • How much does the insurance cover per occurrence?
  • What is the aggregate limit of the insurance policy?
  • Does the insurance apply to:
  • Your premises and operations liability.
  • Your products and operations liability
  • Your contractual liability to others
  • Your personal injury liability to others (libel, slander, invasion or privacy).
  • Your advertising injury to others?
  • Your property liability damage to others?
  • Incidental medical malpractice liability resulting from aiding an injured person?
  • Non-owned watercraft liability?
  • Host liquor liability?
  • Court costs for defense (above limit or included in liability policy limit)?
  • Are employees added as additional insureds?
  • Are there additional charges for adding public land management agencies, such as the U.S. Forest Service or others?
  • Is the premium a set fee, based on a percentage of gross sales, or client days?
  • Do you have to join an association to get insurance?
  • Are there representations in the policy that the guest or operators must adhere to for a claim to be honored?
  • Does the insurance agent understand your proposed agritourism, fee-recreation, food, and/or farm business?

Source:

  • North American Farmers’ Direct Marketing Association
  • Agri-Business Council of Oregon
  • Farmers’ Market Coalition
  • Nonprofit Risk Management Center
  • The New Agritourism (2008) by Barbara Berst Adams


MANAGING LEGAL LIABILITY SERIES:

Insurance Checkpoints

Lisa Whitus, CIC, Virginia Farm Bureau

Jesse Richardson, Associate Professor, School of Public & Internal Affairs

Martha A. Walker, Ph.D., Community Viability Specialist

In life, everything you do has liability exposures from driving to the store to inviting friends to your home for a cookout. The level of exposure represents your venerability to legal action. For automobile liability protection you purchase Auto insurance. For homeowner liability protection you purchase Homeowner insurance. For agricultural entrepreneurs, the exposure to legal risks increases with each step taken to grow your agricultural business. Therefore, it is critical to think about, talk about liability insurance, and purchase the right liability insurance protection.

Farmowner Policy Definition

A farmowner policy includes several key definitions. You should review your own farmowner policy for the definitions that apply to your specific contract. They may read as follows:

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  • "Farming" means the ownership, maintenance, or use of premises for the production of crops or the raising or care of livestock, including all necessary operations.
  • Crops and livestock are the key words. When you engage in activities that are outside of these parameters, your farm will need another type of insurance.
  • "Farming" also includes the operations of roadside stands and farm markets maintained principally for the sale of the "insured's" own farm products, but it typically does not include other retail activities.
  • On your farm policy you may have a statement that allows your farm stand to be included on your farmowner policy.
  • "Business" means a trade, a profession, or an occupation, all whether full or part time. (Basically anything you’re doing other than farming.)
  • "Business" includes services regularly provided by an "insured" … for which an "insured" is compensated. (A mutual exchange of like services is not considered compensation.)

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Liability Insuring Agreement

All liability insurance policies have an Insuring Agreement. You should read your own liability policy for its specific Insuring Agreement wording. It may read, in part, as follows:

"We" (your insurance company) will defend a suit seeking damages if the suit resulted from "bodily injury" or "property damage" not excluded under this coverage.

The insurance company is on your side against any attorney or individual issuing a complaint.

Farmowner Policy Coverage

A typical base farmowner policy provides certain coverage. You should review your own policy declarations page of your specific policy & coverage. You can expect to see something like the following:

  • Premises and operations liability protection
  • Products liability coverage. Products liability provides coverage for “raw” products only.
  • If the raw product is altered by you (a value-added product), there is no products coverage under the base farmowner policy. For example,
  • The base farmowner policy will cover the production of apple. But the policy will not the production of apple cider/juice or any other product made from the apples.
  • When a farmer combines multiple types of lettuce into a salad mix, it is considered a value added product and would not be covered under the base farmowner policy.
  • Coverage can be obtained by adding an endorsement to the Farmowner or writing a separate policy.

Farmowner Liability Exclusions

All liability insurance policies have exclusions. You should review your own policy for specific wording. Typical exclusions might read as:

  • "Bodily injury" or "property damage" which results from activities related to the "business" of an "insured”.
  • On a standard Farmowner policy, business is considered anything other than farming (i.e. agritourism activities)
  • Sometimes “incidental” business pursuits within a certain receipts limit are covered (or can be endorsed) to the policy - such as roadside stands or custom farming activities.

Obtainability will depend on the wording in the policy & your insurance carrier’s available endorsements

Activities/Exposures and Insurance Solution Possibilities

Farm activities should be discussed with your insurance agent and include a tour of the property allowing the agent to actually see what and how the activity is being done.

Activity/Exposure / Insurance Solution
Farming -crops or livestock / Farmowner policy or Homeowner policy with a Farm endorsement (depends on the insurance company that carries your policy).
General Liability Policy
Agribusiness or agritourism – ordinarily conducted on your premises or on another premises by you other than crop or livestock farming. / General Liability policy; or other specialty liability policy (like Equine)
A General Liability Insuring Agreement may read as follows:
“We (your insurance company) will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies.”
Special event - such as a fair, carnival, exhibition, fundraising activity, Halloween maze or other event of short duration. / Special Event Policy
Agribusiness or agritourism – ordinarily conducted on your premises or on another premises by you other than crop or livestock farming. / General Liability policy; or other specialty liability policy (like Equine)
Farming -crops or livestock / Farmowner policy or Homeowner policy with a Farm endorsement (depends on the insurance company that carries your policy)
You have a website and sell produce from your farm over the web. You take on-line orders and accept credit card payments over the internet through a third party payment service (i.e. PayPal®). / Cyber Liability policy; or endorsement on General Liability or Farmowner policy if available
Common causes for lawsuits are copyright infringement, invasion of privacy or other types of issues that arise when operating on the web. Particularly if you have others responsible for the content on your site, you are open to some of these claims.¹
**Includes Websites, Facebook, Twitter, Email, Text messages, etc.
Excerpt from
You have farm employees and/or use H2A Guest workers. / Workers’ Compensation policy; or Employers’ Liability endorsement on the Farmowner policy (if available)

Sample Checkpoint Review

As you plan your review of your insurance coverage, the following table may help you in discussing your needs with your insurance company. For each activity, you may need a separate policy or an endorsement on your current policy.

The candid discussion you have with your insurance agent along with the available endorsements or programs of the insurance company will guide your decision.

Farm Activity List / Insurance Policy List
You have 400 acres, 6 pleasure horses, corn & wheat crops & various farm animals / Farmowner policy
You have the above, plus have decided to stock & sell horse feed and horse care products. (You do not re-package or re-label the products.) / General Liability policy
You have the above and are now boarding 10 horses for others and giving horseback riding lessons. / Equine Liability policy
You have the above plus have a Halloween corn maze the last two weeks of October. / Special Event policy or an additional classification on the General Liability policy
You have the above and now have your own website. You advertise your farm, your horse products, horse boarding, horseback riding lessons & the corn maze on it. You also advertise on your Facebook® page. / Cyber Liability policy
You feel you need some additional liability protection. / Commercial Umbrella policy

Insurance Resources

  • liabilityinsurancefacts.com provides liability information
  • offers guidelines on Workers Compensation insurance
  • list insurance terminology with definitions

MANAGING LEGAL LIABILITY SERIES:

Sources of Insurance

Jesse Richardson, Associate Professor, School of Public & Internal Affairs

Martha A. Walker, Ph.D., Community Viability Specialist

Responses received to the 2012 Virginia Liability Listening Sessions

  • American Tree Farmers Association
  • Brown’s Insurance
  • Caswell Insurance
  • Direct Agents
  • Erie
  • Farm Credit
  • Independent agents including Manry Rawls Insurance in Suffolk, Virginia, and Westland Insurance Services in Reedsburg, Wisconsin.
  • Nationwide – Agribusiness
  • State Farm
  • The Rockingham Group
  • United Farm & Family in Maryland
  • Virginia Farm Bureau

Recommendations from the

  • Networking Association for Farm Direct Marketing and Agritourism.
  • Agricultural Marketing Resource Center

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  • Gillingham & Associates, A division of Philadelphia Insurance Companies,
  • Outdoor Insurance.Com, Wheeling, West Virginia.
  • Outdoor Insurance Group, Wichita, Kansas.

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Managing the Liability Page 1


MANAGING LEGAL LIABILITY SERIES:

Conducting the Liability Assessment

Jesse Richardson, Associate Professor, School of Public & International Affairs

The best way to minimize legal liability is to constantly monitor the conditions of your operation to ensure that the operation is safe. A liability assessment is an important part of this monitoring program. A liability assessment systematically reviews the operation to ensure that exposure to liability is minimized, safety is maximized and that steps are in place to respond to accidents.

A liability assessment consists of the four main components:

1)The operator should review the present liability insurance policies with the insurance agent and attorney for the operation;

2)A standard operating procedure should be in place in case an accident occurs;

3)An attorney should be retained and familiarized with the operation before any problems occur so that action can be taken quickly if needed;; and,

4)The physical layout of the operation should be periodically inspected for safety concerns. Pictures should be taken to document the condition of the property and to note any issues that have been corrected. The operator or a third party may perform the physical inspection. Your liability insurance company or attorney are the most common third-party inspectors.

A physical inspection by a third party often proves to be useful. However, for legal reasons, this inspection should be done by an attorney or at the direction of your attorney. A third party inspection not coordinated through your attorney may be required to be disclosed to parties that file suit against the operation. These issues should be discussed with your attorney PRIOR to having any third party inspection done.

The following checklist includes important items to consider when conducting a liability assessment for your operation. The checklist should be treated as a starting point and modified to fit your operation. You know your business better than anyone, so you should think of all the possible ways that problems could arise and ensure that the risk of accidents is minimized. Making your operation safe not only minimizes exposure to legal liability but also makes the operation more welcoming to the public. Customers that feel safe are more likely to enjoy the visit, come back again and spread the word to their friends. A safe business is likely to be a successful business.

Two key elements of a liability assessment should be kept in mind. First, a liability audit is an ongoing, never-ending activity. An operator should always be alert to the conditions on the property and constantly updating the assessment. Second, documentation is essential, particularly if an accident occurs and a lawsuit is filed. Employees should periodically inspect wagons for hay rides, corn mazes, hay castles, and all areas where customers will be entering. These inspections should be documented on a check sheet and initialed by the employee(s). These records should be kept for at least five years. In a recent lawsuit in Virginia, a corn maze operator was sued by a former customer. The customer claimed that pesticides on the cornstalks made her ill. Primarily due to good record-keeping, the lawsuit was dismissed and the operator absolved of any liability.

References

Blacka, Aaron, et. al, AgriTourism, Virginia Cooperative Extension, Publication 310-003:

National Children’s Center for Rural Agriculture Health and Safety, Marshfield Clinic, Agritourism Health and Safety Guidelines for Children:

Walker, Martha A., “Building a Risk Management Plan,” Virginia Cooperative Extension.

Walker, Martha A., “Evaluating Your Company: Observations of a Visitor,” Virginia Cooperative Extension.

Walker, Martha A., “Observations of a Visitor: Agritourism Operations,” Virginia Cooperative Extension.

Liability Assessment Checklist

Issue / Results of Inspection / Date Inspected
Are liability insurance policies up-to-date and have sufficient limits of liability for your operation?
Have you reviewed your liability insurance policies with your insurance agent and attorney within the past 12 months?
Have you added any new activities or projects that have not been discussed with your attorney and insurance agent?
Are the aisles, pathways and other areas that customers will walk through level, clear of obstructions and clearly marked?
Are vehicle pathways clearly marked and separated from walkways?
Have you posted speed limit signs and other reminders for drivers to be careful and drive slowly?
Are parking areas level, well-maintained, well-lit, clear of obstructions and properly drained in case of inclement weather?
Are sufficient hand-washing stations provided, particularly if food will be served, contact with animals is allowed or children’s play areas are provided?
Is sufficient drinking water available for hot weather?
Is appropriate signage in place to guide customers around the site and to prevent customers from entering areas of the site that are off-limits?
Are sufficient numbers of restrooms available?
Are keys out of tractors, ATVs and other vehicles?
Are pesticides, chemicals, gasoline and other harmful substances out of sight and locked away?
Are barriers in place for ponds, water sources and manure pits?
Are animals that will be in contact with customers clean and properly vaccinated?
Is an emergency response plan in place and are the employees prepared to implement the plan?
Are all areas of the operation accessible to persons with disabilities?
If an accident occurs, can you quickly access ice, blankets and a first aid kit, and can medical care be summoned quickly?
Have you posted “no smoking” signs and otherwise prohibited smoking?
Are sufficient numbers of fire extinguishers present?
If food is being served, have all food safety measures been followed?
Are you constantly monitoring weather reports for severe weather warnings?
Are there sufficient areas for customers to take shelter in case of a severe weather event?
Do you inspect equipment at the beginning of each day and periodically throughout the day? Are inspections documented on checklists initialed by the employee(s) making the inspections?
Do you inspect the premises at the beginning of each day (e.g., inspect corn mazes for obstructions, etc.) and periodically throughout the day? Are inspections documented on checklists initialed by the employee(s) making the inspections?