When does the landowner’s insurance responsibilities end and the contract farmer’s begin?
With many farming systems evolving, in part brought about by the changing face of funding schemes and incentives, potential grey areas can exist around insurance responsibilities for those working on and owning the land, experts are warning.
It can make sense for landowners to contract part or whole-farm operations, perhaps while concentrating on Sustainable Farming Incentive (SFI) scheme activities on other parts of the land, while conversely farmers are taking on additional contract work to maximise their investment in machinery and technology.
But at what point does the insurance liability pass from landowner to contract farmer, and how can both parties be sure the other is fulfilling their responsibilities?
“In simple terms, there is no real defined boundary between the responsibility of the landowner and contract farmer,” explains Nigel Wellings, director of Acres Insurance Brokers.
“Potentially a landowner may be able to lose or at least reduce machinery cover, but having a contract farm is not a recipe for reducing your insurance bill,” he continues.
Key to any successful relationship is a clear and transparent Contract Farming Agreement (CFA). It is essential that both parties agree everything in writing, from who is responsible for health and safety regulations, to ensuring adequate public and employers’ liability insurance is in place.
“Even when a good, transparent CFA is agreed, this does not absolve landowners from their responsibilities,” advises Mr Wellings.
“The contract farmer is effectively a tenant on the landowners’ property, and accordingly the landowner must ensure all health and safety policies are agreed and adhered to, and that both the contractor and landowner have adequate cover for all on-farm activities.
“It may well be that the Health and Safety Executive will hold both parties responsible in the case of an incident, and this is why a clear CFA, combined with tailored insurance products is so important. Unfortunately, too often this is overlooked, or not given enough attention to detail,” he adds.
Choosing an insurance broker with an understanding of the farming industry and the complexities which arise out of a farming operation is critical to the safe and successful running of any agricultural business.
It also helps when both landowner and contractor use the same broker, to ensure there are no anomalies or voids in policies.
Mr Wellings says, “It is vital that the person dealing with your company’s insurance policy has a detailed understanding of your business and any potential changes that could happen over the next year.”
Advising never to simply accept a reviewed premium and policy, he urges that a full and thorough review is completed, considering what is, and perhaps more importantly, what is not covered, and that this is made clear to both parties.
“You wouldn’t buy a new piece of machinery without doing your research. Don’t do it with your insurance policy,” he says.
Although all insurers and policies will differ, Mr Wellings explained that largely, different risk ratings are allocated to farmers and contractors. Traditionally, contractors’ ratings are higher, sometimes as much as double, than that of a farmer, which can have a significant impact on premium prices. However, whole farm contractors should ensure their rating is reflective of the risk associated with their activities.
“On-farm advisers should visit the farm to review insurance requirements on behalf of either the landowner, contract farmer or preferably both parties, to ascertain the accuracy of sums insured on all relevant insurable items,” he says.
“The broker can then determine the cover requirements, in conjunction with the client, and arrange insurance policies accordingly.”
