For farm insurers, “nuisance suits” are like storm clouds on an open horizon.
More often than not, the storm will pass them by, but you never know when one will touch down and do some damage.
“Nuisance suits” are actions brought by individuals seeking to reduce or eliminate powerful odors, swarms of insects, and other unpleasant effects that overflow from modern farming operations onto neighboring properties.
A recent ruling in one such suit has made farmers and insurers take notice.
In August, the Iowa Supreme Court ruled in favor of the neighbors of a grain operation who claimed that the dust and particles generated by the operation diminished their enjoyment of their own property and forced them to incur cleanup costs.
There were several things striking about the ruling.
First, the operation was determined to be a nuisance even though it had existed before the neighbors had acquired their properties. It was located within a town, however, and had expanded and intensified over the time its neighbors lived in the vicinity.
Secondly, the operation did not involve livestock, the most common target of a nuisance lawsuit.
“It’s the first Iowa Supreme Court case where crop production activities were found to be a nuisance,” says Eldon McAfee, a Des Moines attorney in private practice who serves as legal counsel for the Iowa Pork Producers Association.
Finally, McAfee says that the Iowa Supreme Court ruled that the noise of the operation was a contributing factor to the nuisance.
All in all, “the ruling surprised a lot of us,” says Lloyd Sandbulte, insurance product director for Farm Bureau Financial Services.
While the Iowa ruling may have expanded the exposure of Iowa farmers and agribusinesses to nuisance suits, it does not appear to have expanded the exposure of their liability insurers, at least not directly.
That’s because the claimants, like most of those filing farm nuisance suits, sought an injunction against certain activities of the grain operation, plus recovery of their cleanup costs and for loss of use and enjoyment of their homes.
They did not claim bodily injury and physical damage, so the ruling does not directly address the requirement of farm liability insurers to provide coverage for defense and damages.
Still, the ruling is one more reason for farm writers to monitor the progress of nuisance suits.
“We see nuisance suits as an exposure with growing frequency,” says Kelli Kulkulka, a vice president and agriculture specialist in the Chicago office of Munich Reinsurance America (formerly American Re). “One of our reinsured companies has indeed paid an odor nuisance claim.”
“Currently these suits tend to be relatively small,” Kulkulka says, “but if the frequency trend continues to grow, odor litigation could eat into the insurer’s bottom line, especially given the tight profit margin of most farm business.”
Observers cite several reasons for the growing number of suits against farmers by their neighbors.
For one, more and more people are moving beyond the suburbs into “exurban” communities in previously rural areas. Rural counties ringing metropolitan areas are among the fastest growing areas in the U.S.
At the same time, farm operations have grown in size and intensity.
Livestock confinement operations, which can generate powerful odors and swarms of insects, are the most commonly cited example, but no type of agriculture is untouched by the trend.
People who moved into a bucolic area with picturesque barns are often shocked and dismayed to see them replaced by industrial-looking steel and/or cinder block buildings serviced by a steady stream of trucks. Yet, farmers feel compelled to transform their operations to stay viable.
As the transformation of agriculture proceeds, the sentimental regard for it diminishes. Modern agribusiness operators find that even their family farm neighbors are often ill-disposed to their innovations, and prepared to sue to limit them.
A waning regard for agriculture could have an impact on the strength of “right to farm” laws, the farmer’s first line of defense against nuisance suits.
Every state has some statute providing farmers with some degree of protection from lawsuits.
Generally, these laws provide broad protection to farming operations that existed before their neighbors moved in. But, for farms that modify their operations while neighbors are living close by, the level of protection varies from state to state, and shifts back and forth within states.
In 1998 and again in 2004, the Iowa Supreme Court became the first to declare right-to-farm laws unconstitutional, affirming the right of neighboring property owners to sue in certain circumstances. (Iowa has a third right-to-farm law that remains in effect, and is less restrictive on plaintiffs than the two that were overturned.)
“Iowa livestock producers currently have nuisance protection only if their operations existed before anyone who files a lawsuit moved to their properties,” McAfee writes in the May 2006 edition of Pork Producer.
Even under accepted right-to-farm laws, says McAfee, it is not clear that farmers are protected from nuisance suits by people who rent neighboring properties, or by property owners who acquired their properties shortly before an offending farm operation was started or intensified.
Right-to-farm laws provide another line of defense, however, in that they generally require plaintiffs to submit disputes to mediation before moving on to court, effectively forcing parties to seek a practical compromise.
When nuisance suits do end up in court, “farmers are often surprised to find that they don’t have coverage” under their farmowners policies, says McAfee.
That’s because most nuisance suits seek an injunction on a farm’s operation rather than claiming bodily injury, physical damage, or complete loss of use of property.
“To trigger defense or indemnity coverage under a typical farmowners form, it is necessary to identify some form of bodily injury, property damage, or loss of use that has occurred,” says Deborah Summerlin, AAIS vice president for insurance lines.
“If there’s no bodily injury or property damage, the insurer will quite possibly have no duty to defend,” says Sandbulte.
If carriers are not called on to defend more nuisance suits, it’s not for lack of trying, according to McAfee.
“We routinely submit each claim to a carrier for a determination of coverage,” he says. “If the evidence suggests there is any type of damage or injury, we try to get the carrier involved.”
For example, McAfee notes that fly “specks” (droppings) can leave marks on buildings. Given that “flies are almost always alleged to be a nuisance along with odor,” their presence and impact could, on rare occasions, have the effect of making a nuisance suit a covered claim under a farmowners policy.
Farm insurers can be drawn into nuisance suits, however, when they offer coverage for personal injury on a farm liability policy.
“A personal injury claim is not pegged to injury, it’s pegged to acts, to certain enumerated offenses,” explains Zacarias Chacon, an attorney and insurance claims expert with the Chicago firm Lewis Brisbois Bisgaard & Smith.
Interference with the private enjoyment is one such offense commonly alleged in farm nuisance suits, and one that would trigger defense and indemnity coverage under a farm liability policy.
To limit their exposure to such claims, some farm insurers include a pollution exclusion in their personal injury coverage provisions; AAIS has one in its Farmowners personal injury endorsement.
These exclusions are designed to eliminate carriers’ exposure to odor-related nuisance claims, and they are apparently effective.
“The main problem I’ve run into [getting carriers to contribute to defense costs] is the pollution exclusion,” McAfee says.
“Pollutants are defined in our policy forms to mean any solid, liquid, gaseous, thermal, or radioactive irritant or contaminant,” says Summerlin at AAIS. “To avoid having pollution coverage sneak in under personal injury coverage, AAIS has long had exclusions in its forms that provide personal injury coverage.”
Summerlin adds that, while pollution exclusions that apply to bodily injury and property damage are subject to several conditions and exceptions, there are no exceptions to the pollution exclusions in AAIS personal injury coverage.
While pollution exclusions are generally effective in helping farm insurers avoid liability for nuisance suits, they, too, are under constant challenge in the courts.
Iowa courts have split over the question whether pollution exclusions apply to nuisance claims, says McAfee, with at least one district court ruling that a pollution exclusion did not apply in an odor-related nuisance suit because “odor” was not expressly listed as a pollutant.
In response, he says, one major national agriculture writer amended its pollution exclusion to list “odors” among the excluded pollutants.
Even that step may not work in all cases, according to Chacon, who says some courts will not accept that something is a pollutant simply because an insurance form lists it as one.
“With respect to odors as a pollutant, there are opinions back and forth,” he says. “Some [court] jurisdictions have adopted a definition of ‘pollutant’ that is limited to traditional environmental pollutants, the release of hazardous substances.”
Animal odors can be scientifically identified as consisting of certain substances, including ammonia and hydrogen sulfide, which are clearly hazardous to humans in certain concentrations.
Whether courts will accept that these naturally occurring substances are “pollutants” remains to be seen.
“Odor is a very complex mixture of gases, chemicals, dust, biological debris, and living organisms,” writes W.E. Morgan Morrow, a professor of animal science at North Carolina Stats University. “In fact, about 600 chemicals are known to be involved in swine odor.”
The tension between farmers and insurers could be relieved if more carriers offered legal defense coverage for nuisance claims, says McAfee.
He detects a slightly growing number of insurers offering such coverage, and adds that “I hope on behalf of producers that we will see more farm insurers offering it.”
Trouble in the air 
