Liability risk flows through every aspect of an agriculture operation—across people, vehicles, contracts, and third parties.
During the second installment of our Risk Intelligence Webinar Series, insurance experts Wayne Luebbe and Brad Willadsen of Gallagher Insurance discuss where liability flows further than you may expect and how insurance should be structured to prevent costly oversights and gaps, particularly in the area of contracts.
This article summarizes key lessons from the webinar, including replacement-cost challenges, business interruption coverage, deductible strategies, and risk management practices that can help protect your farm or ranch.
Key takeaways
Insurance should evolve alongside your operation to ensure coverage aligns with today's risks, costs, and business realities.
A partial loss can be just as disruptive as a total loss, especially when new construction must be integrated with existing facilities.
Higher deductibles may lower premiums, but they can also shift more financial risk to your operation than you realize.
Supply chain and business partner disruptions can impact operations just as significantly as damage to your own facilities.
How liability moves through farms and agriculture businesses
Liability is not contained by property lines, job duties or even who appears to be “doing the work.” Risk moves through your entire operation, from employees and vehicles to contracts, entity structures, and contractors.
Liability coverage may look sufficient on paper, but once you follow liability risk as it moves through an operation, the exposure can expand quickly.
Takeaways: Today, liability risk is interconnected. Understanding those relationships is key to closing gaps and preventing liability from coming back to your operation.
Contracts can transfer risk—if they hold
Contracts are part of an operation's risk structure. If the contractual agreement breaks, liability can move back to you.
A producer lost the contractual chain of command when the hauler he hired subcontracted the work, and liability was not properly transferred to the subcontractor. The producer's product fell off the subcontractor's trailer, causing a double-fatality crash. The farm was held liable.
Minimum liability limits also create risk. A swine production operation hired a contractor to do some work that included welding. After the contractors left, heat from the welding started a fire and burned the entire $13 million facility. Because the contractor's liability limits were insufficient, the producer became responsible for damages that exceeded available coverage.
Takeaways: Ensure you have contracts in place, and they transfer as much risk as possible to the appropriate person or company. Ask:
Do we have written contracts with key haulers, growers, contractors, and vendors?
Do the contracts address indemnification and hold-harmless obligations?
What happens if the contractor subcontracts work?
Are insurance requirements clearly stated and enforced?
Certificates of insurance need more than a quick file check
Producers need to determine if contractors' coverage is active, adequate, and structured to protect their operation. This starts with certificates of insurance, gathered before any work begins.
When an employee of a manure pumper died in a four-wheeler crash on a farm, the contractor's workers' compensation covered the claim in full because the producer had a contract and certificate of insurance.
But even with a certificate of insurance, additional due diligence is needed. An operation hired a group to do some work, which lasted about six months. The operation had the contractor's certificate of insurance, and all work went smoothly.
A follow-up audit of workers' compensation revealed that the contractor lost coverage for failing to pay premiums. The operation did not ask for a 30-day notice of workers' comp cancellation and was unaware of the coverage lapse. It paid about $100,000 in additional payroll for the contractor's employees because it could not produce an updated, valid certificate of insurance from the contractor.
Takeaways: Certificates of insurance are the starting point, not the finish line. Review:
Current certificates
Minimum required limits
Additional insured status
Waiver of subrogation
Notice of cancellation
Annual or project-based follow-up
Auto liability is expanding
In casualty risk, the question is not only who owns the vehicle. Liability also involves who is benefiting from the trip, whose equipment is involved, and how the risk was structured before the accident happened.
Generally, liability follows the vehicle, regardless of who is driving. This makes it important to monitor the use of company vehicles. There can also be liability exposure when an employee uses a personal vehicle for company business. Even routine tasks such as driving to the bank or post office on behalf of the farm can create liability for the farm.
Trailers can create additional complexity. Depending on the circumstances of an accident, liability may involve the truck owner, trailer owner, operator, or business benefiting from the transportation activity. Producers should understand how trailers are titled, insured, and used across entities.
Takeaways: Vehicle exposure extends beyond company-owned trucks. Liability may follow the trailer, business purpose, employee activity, or relationship between entities.
Large claims are getting larger
In today's casualty environment, a once-manageable claim can escalate quickly, especially when vehicles, fatalities, and sympathetic facts are involved.
So-called nuclear verdicts totaled $31.3 billion in 2024, a 116% increase compared to 2023; The median nuclear verdict was $51 million, while 49 cases ended with "thermonuclear verdicts,” or awards exceeding $100 million.
Insurance carriers are concerned and, in some cases, limiting coverage to reduce their exposure. Some businesses buy multiple policies to reach the protection they need.
Takeaways: The cost of liability is being shaped not only by operational risk, but also by litigation trends, jury sentiment, and carrier capacity. Producers may need multiple policies from different companies to reach their desired liability limits.
Umbrella coverage must be structured correctly
Umbrella policies extend liability limits. Say you have an auto policy with a $1 million liability limit, then buy an additional $5 million in umbrella coverage. That brings your liability limit to $6 million per occurrence.
But umbrella policies only work if the underlying policies are properly scheduled and aligned. A producer needed multiple drivers, including some who a carrier would not insure because they were considered too risky. The producer purchased multiple policies to increase the operation's liability limit, and assumed the umbrella went over the top of the policies.
A later review found that the progressive policies were not properly aligned, and the highest-risk driver was covered under the lowest coverage level.
Takeaways: The existence of an umbrella policy is not enough. The operation needs to know what it sits over and what it does not. Ask:
Are all auto policies scheduled under the umbrella?
Are all entities included correctly?
Are leased, hired and non-owned vehicles addressed?
Are high-risk drivers creating gaps in the excess structure?
Does the umbrella follow the actual liability exposures of the business?
Technology and documentation are becoming essential
While important to operational efficiencies, technology increasingly plays a role in casualty risk. In-vehicle cameras, driver monitoring, speed tracking, harsh braking alerts, motor vehicle record (MVR) checks, maintenance tracking, and DOT compliance tools can improve fleet safety, support underwriting, and provide evidence after a claim.
When a feed truck was T-boned at a rural Iowa intersection, a forward-facing camera showed the feed truck was operating properly, while the other driver sped through the stop sign. Footage from the feed truck's camera helped to clarify fault.
Takeaways: In a disputed accident, telematics and camera footage can provide the facts needed to defend the operation or help resolve a claim quickly when the operation is at fault.
Questions to ask before the next claim
Where could liability come back to us even when a contractor, hauler or vendor is doing the work?
Do our contracts clearly define responsibility, indemnification, and insurance requirements?
Are subcontractors allowed—and if so, are they held to the same requirements?
Are our certificates of insurance current, complete and reviewed for additional insured status?
Are all owned, hired, and non-owned vehicles properly addressed?
Do we know who is driving on company business and whether their MVRs are acceptable?
Does our umbrella policy sit over every policy and entity we assume it does?
Are we prepared for a large claim in today’s legal environment?
Would telematics, cameras, or driver monitoring improve our risk profile?
Is cyber liability part of our broader casualty risk review?
As agricultural operations grow and become more complex, liability exposures can extend across entities, vehicles, contractors, and business relationships. Taking time to review these exposures with trusted advisors can help identify potential gaps before a claim occurs.
If your operation has expanded, added entities, increased vehicle use, or relies on contractors and vendors, consider discussing your broader risk mitigation strategy with your financial officer.
