City folk are heading back to the farm--if
only for a few hours on the weekend--and it’s changing how some
farmers operate.
Many farms, particularly those that ring
metropolitan areas, are capitalizing on the allure of rural life
by inviting the public onto their land for tours, petting zoos,
corn mazes, and other farm marketing activities known as “agritainment”
or “agritourism.”
“It’s grown exponentially,” says Chris
Leliaert, a vice president and agriculture specialist in the
Chicago office of Towers Perrin, an international reinsurance and
consulting firm.
“In the past, public access to farms was
directly related to agriculture, like apple picking,” Leliaert
says. “Now it is more of a business structured to expand upon
the rural lifestyle and farm experience.”
Many state departments of agriculture are
encouraging farmers to offer agritainment activities and promoting
agritourism among urban and suburban residents.
“It is becoming increasingly popular for
Virginia farmers to open up their farms to visitors,” says
Darlene Wells, director of underwriting and market research and
development for Virginia Farm Bureau Insurance Services, Richmond.
“Farmers are identifying creative ways to
attract consumers to the farm to sell their products,” she says,
adding that events range up to “large festivals attracting
thousands of people.”
“They’re ringing the cash registers from a
lot of different directions,” says Leliaert.
“For many farm families, [agritainment] is
vitally important. It’s truly the difference between keeping or
selling the family farm,” adds Jane Eckert, CEO of Eckert
Agrimarketing, St. Louis, Mo., and a member of a farm family that
has converted its orchards into a year-round “pick your own”
enterprise.
According to Eckert, many farmers on the urban
periphery want to maintain farms their families have held for
generations, but are torn between the low returns made from
agriculture and the lure of the windfalls they can reap by selling
land for real estate development.
“It’s not like they’re looking to be
millionaires,” Eckert says. Agritainment marketing is seen as a
way to bridge the gap between farming and selling out, but often
comes to overshadow agricultural production as a source of
revenue.
“Once farmers get started in agritainment,
it often grows from a supplemental form of income to a primary
form of income,” says Eckert.
Eckert sees modern commercial agritainment as
distinct from older forms of direct farm marketing, which focused
on providing buyers with less expensive produce.
“It’s not priced as a bargain [today],”
she says. “It’s priced as entertainment.”
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“Agritainment” exposures were not a
principal concern when the current AAIS Farmowners and Farm
Umbrella programs were designed and developed.
But, it turns out those programs are
well-suited to help insurers define their exposure to
situations where farmers invite the public onto their land.
AAIS provides two farm liability forms
with its Farmowners Program.
A farm personal liability form (GL-2)
explicitly excludes business activities other than farming,
but can be endorsed to add coverage for specified incidental
business pursuits.
A Farmowners policy that includes form
GL-2 can also be endorsed to include coverage for a
scheduled home-based business. Home-based business coverage
is subject to annual aggregate limits and other
restrictions.
A farm commercial liability form
(GL-610) uses a “premises and operations” approach that
covers damage arising from the ownership, maintenance, or
use of premises for farming, and for operations that are
necessary or incidental to those premises.
The GL-610 excludes liability for
damages arising from the use of premises for purposes other
than farming, but exceptions to that exclusion can be
introduced by endorsement
Under each form, “farming” is
defined to include (as covered activities) operations of
road side stands and farm markets principally for the sale
of the insured’s own products. Other retail activities are
explicitly not included under the forms’ definition of
farming.
The GL-2 and GL-610 each has a Farm
Umbrella form (UM 0002 and UM 0610, respectively) designed
to provide “follow form” excess coverage over the
underlying liability form.
The application of liability coverage to
agritainment activities will be further refined in upcoming
revisions of AAIS farm forms, says Deborah Summerlin, AAIS
vice president of insurance lines and principal developer of
its farm programs.
“Companies that use AAIS farm programs
agree that there is an increasing use of farm premises for
public entertainment purposes,” Summerlin says. “Some
ask that we consider excluding liability arising from use of
the farm premises for such purposes and develop ‘buy-back’
options.
“Such options could include redefining
the products/completed work hazard to include on-premises
consumption of the insured’s products, plus coverage for
liquor liability and special events.” |
While Eckert carefully distinguishes between
farming and commercial agritainment operations, many farmers may
not, leaving farm insurers with potential exposures they perhaps
never intended to cover.
Says Leliaert: “When you bring people out
[to a farm] who don’t know what they’re looking at--whether it’s
equipment, livestock, or an electric fence--it could be a recipe
for disaster.”
He adds that “farmers are not as aggressive
with loss control measures as commercial businesses, and there’s
not a lot of public regulation” of agritainment activities.
Animal bites and falls from machinery, rides,
and attractions are among the high frequency sources of claims
associated with agritainment, according to Kelli Kukulka, a vice
president and agriculture specialist in the Chicago office of
American Re-Insurance.
Carriers and reinsurers have been hit by
severe bodily injury claims arising from E coli outbreaks at
petting zoos and salmonella outbreaks caused by improper food
handling and storage, she adds.
In 2000, more than 20 children became infected
with the E coli bacteria during a visit to a Pennsylvania farm
where they were allowed to touch animals. Two of the children
suffered severe kidney damage from the infection and required
dialysis.
The dangers of animals and E coli broke into
national prominence in succeeding years as scores of people
contracted E coli infections at petting zoos at state and county
fairs in Ohio, Wisconsin, Oregon, North Carolina, and Florida.
In light of these and other hazards, Kukulka
cautions against overestimating the benefits of agritainment for
the farm economy.
“While growing, I would still not classify
agritainment as a standard source of farm income,” she says. “According
to recent Agricultural Service Extension publications, many of the
exposures that we would classify as ‘agritainment’ do not in
fact turn a profit for the family farm.”
Whether certain activities are profitable in
themselves goes to the heart of farm insurance underwriting, as
the growth of agribusiness tests the distinction between farming,
covered by standard farm forms, and other business activities,
which are generally excluded.
“The Farmowners product provides coverage
for what we call traditional farming, the raising of crops and
livestock,” says Wells at Virginia Farm Bureau. “It also
includes the operation of roadside stands and farm markets, but
excludes coverage for [other] business activities.
“This presents a delicate situation,” she
adds. “Farmers view some of these [agritainment] activities as
part of their farm operation, and thus should be considered
farming in regards to coverage.
“We explain that an unendorsed Farmowners
policy does not contemplate these activities, either through its
coverages or pricing.”
To address the exposure, Virginia Farm Bureau
has developed farmowners endorsements for providing limited
coverage, for additional premium, for specified agritainment
activities.
North Carolina Farm Bureau Insurance takes the
position that it will cover agritainment exposures automatically
under a farmowners policy if the insured is not charging for the
activities, but will insist that a farmer that is charging for
public access events purchase a general liability policy to cover
that exposure.
Nationwide Agribusiness, Des Moines, Ia.,
takes a similar approach., according to Jerry Hillard, exclusive
agency sales officer.
“We use a farmowners product to cover the
farm operation and a GL policy to insure the agritainment part,”
he says. “We then have a separate reinsurance program for the
GL.
“The approach we take presumes the
agritainment is excluded as a business exposure,” he adds.
Hillard adds that Nationwide believes
agritainment activities provided free of charge are automatically
covered under a standard farmowners policy.
“We’ve always said we don’t mind if you
take the Sunday school for a hayride,” he says.
“There has not been uniform treatment [of
agritainment] among farm carriers,” says Kukulka at American Re.
“Some [carriers] have chosen to avoid the
exposure entirely by using exclusions or declining accounts with
these exposures,”she says. “When agritainment risks are
accepted they are typically included in the basic farm liability
premium if deemed incidental.
“When [agritainment exposures] exceed a
predetermined threshold, they are generally charged a premium
based on the gross receipts or number of exposure units reported.
“Another approach, at least by one carrier,
has been to establish a separate surplus lines policy with
separate rates and separate underwriting questions and guidelines
to address these commercial exposures on the farm.”
Eckert of Eckert Agrimarketing says that
insurance coverage is becoming a growing concern for farmers that
want to establish commercial agritainment operations.
“The biggest hang-up we hear is ‘I can’t
find anyone to write the insurance’ or ‘I can’t afford it,’”
she says.
Whether agritainment activities are incidental
or not, Leliaert believes farmowners insurers will find it
difficult to deny a liability claim arising from an injury related
to agritainment.
He adds that insurers are frequently surprised
at the agritainment exposures they encounter during underwriting
audits of farm accounts.
Agritainment, then, provides a new series of
complications for farm underwriting operations that are already
strained to keep up with diverse exposures.
As a safety principle, Eckert recommends that
agritainment activities be conducted in areas separate from market
agriculture operations.
In her view, the public should stay away from
working farm machinery, equipment, livestock, and supplies.
With that established, Eckert says
agritainment operators and their insurers should pay special
attention to three types of hazards:
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Animals: The risks of e coli and bites are
well-established, and human contact with animals should be
avoided, a consideration that might stop many agritainment
operations before they start.
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Ladders: Don’t allow members of the
public to use ladders for picking, Eckert says. Let them pick
what they can from the ground, and have farm staff pick
produce that is out of reach.
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Transport: Transport hazards are
frequently overlooked, according to Eckert. A common cause of
falls on farms involves members of the public getting on and
off hay wagons and other forms of transport by themselves.
Customers should always be helped onto and off of vehicles,
she says.
Given that insurers are often unaware when
farm accounts venture into agritainment activities, “it is
critical that claims adjusters report unusual exposures to
underwriters,” Kukulka says. “I recall one claim that had a
description that read: “Broken arm, child fell from zip line”
(A zip line is a cable that stretches between poles, structures,
or hills for thrill-seekers to ride across on a pulley.)
“It took two years before the account
underwriter realized that a zip line was something far different
from an ordinary farm exposure and non-renewed the account.”
Farm underwriters will increasingly find that
agritainment presents them with exposures “far different from
ordinary farm exposures,” with unpredictable implications for
farm insurance products.
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Insuring “Agritainment”
