Getting liability insurance right could avoid catastrophe
Simple, low-cost solution avoids concerns over inadequate cover amid escalating court awards
The consequences of receiving a liability claim that exceeds your insurance policy indemnity limit could be catastrophic, warns farming and rural insurance advisor Acres Insurance Brokers, amid escalating personal injury awards over the last decade.
“Probably the most important insurance cover that any farmer should have is liability insurance,” explains Nigel Wellings, director of Acres Insurance Brokers, “Getting the right advice on indemnity level, from an adviser that understands your faming business is crucial if you are to have a fit for purpose policy.”
Public and Products Liability (PL) will cover the farming business against any injury or illness caused to persons and damage to property owned by others, while Employers Liability (EL) cover is provided for injury or illness caused to persons performing work for the farm business. This includes cover for self-employed persons, casual labour, non-paid labour as well as persons under contract of employment.
The majority of the farm insurance market has a £10 million indemnity limit for both PL and EL respectively, but Mr Wellings warns that farm businesses must thoroughly review current farm liability insurances with a competent advisor, fully conversant with the farm operation, to ensure adequate cover is in place.
“The problem we have seen progressively over the last decade is that personal injury awards from the courts have been getting higher,” says Mr Wellings.
“One of the major factors driving this is that when a court awards a lump sum to a person who has been seriously injured and requires lifetime care, then an allowance was previously made for investment income on the lump sum award,” he adds.
“With interest rates at an historic low, coupled with low investment returns, courts under government guidance have increased the levels of lump sum awards made.”
There are a number of cases going through the courts now where the personal injury awards are likely to be between £10 million and £20 million. The record UK award is in the region of £37 million.
Many of the record awards involve medical negligence or road traffic accidents, but while they have not taken place on farm, the risk is very much there.
Claims could arise from scenarios such as a walker on a footpath knocked over by a cow (Public Liability for injury), a tree coming down and damaging a car on road (Public Liability for property damage), milk sold with antibiotics in contaminating a tanker load (Products Liability for property damage), or food from a farm shop sold contaminated with E. coli making persons ill (Products Liability for illness/injury).
Mr Wellings says, “It is very difficult to quantify the exact numbers of claims in excess of £10 million that have taken place on farms. We would estimate the numbers are running well into double figures.
“The consequences of having a PL or EL claim that exceeds your insurance policy indemnity limit are devastating. Any court award over the indemnity limit can be enforced against personal assets, if trading as a sole trader or partnership, or against company assets if trading as a limited company. Such an award against many farming businesses would be catastrophic,” he adds.
Acres Insurance Brokers has introduced a simple, low-cost solution, adding a second policy for another £10 million over and above existing insurance cover. This can be bought as a stand-alone at a cost of between £280-£500.
“While not all farm businesses require the extra EL cover, if for example the farm is run by two or three partners with one outside employee, £10 million cover may be enough, but in the majority of circumstances farmers will need the extra £10 million of PL cover,” advises Mr Wellings.
“For too long there has been an almost blasé approach from some agents and brokers. We commonly see farms with between 10-100 plus employees, with £10 million EL indemnity limit, this is woefully inadequate.”
Farms can buy excess PL only in isolation, but if excess EL is required, the business will need to cover both EL and PL.
“Our advisors would work with the farm business to evaluate and identify factors that will influence requirements. This could include proximity to main roads or railway lines, vicinity of urban areas, public access to the farm, trees bordering roads, or whether the business is supplying food products directly to the consumer,” adds Mr Wellings.
“With a full and thorough review, the farm business can safe-guard against potential eventualities with a low-cost, simple solution, giving peace of mind to the farmer to concentrate on core farm activities,” he concludes.