By Leif Erickson

HUB International

Manure spills are more than just an accident – they pose a major liability for farmers, truckers, and landowners alike, more than you might realize. Ruptured pipes, spills during roadway transportation, and leaks from manure lagoons are all common.

The issue arises when these accidents cause manure to seep into local waterways, contaminating the water supply. Such accidents have led to wildlife death and serious human illness.

State and local governments and Departments of Natural Resources (DNRs) have issued notices and fines, filed lawsuits, and even passed new edicts to minimize and prevent common pollution accidents. The most notable case law on the subject is Wilson Mutual Insurance Co. v. Falk Farms. This 2014 case is significant because it established manure as a pollutant, not a nutrient.

Before this verdict, farms relied on a modified pollution liability endorsement to their General Liability (GL) policy to cover up to $1 million in pollution costs. While this sounds adequate, farms are learning the hard way that it isn’t.

The pollution endorsement on a GL policy is actually quite restrictive, mostly covering site cleanup and excluding nitrate-related losses and non-owned disposal sites, allocating only a small amount of coverage – up to $25,000 – for third-party liability costs. As a result, farmers face significant insurance coverage gaps for the handling and transporting of their manure.

In some estimates, as many as 75 percent of farms or agribusinesses are underinsured for their pollution risk. Even when farms and larger agribusinesses take care to follow proper pollutant management and institute appropriate controls, when accidents do happen they quickly gain widespread public exposure.

Fortunately, there are insurance options with more comprehensive protection for your farm then a low-limit pollution endorsement to your GL policy. Consider the following standalone and endorsement pollution coverage options for farm and agribusiness operations:

•Commercial Pollution Liability Insurance: This standalone policy covers a farm or agribusiness’ third-party liability, which includes third-party property damage and bodily harm (i.e., a manure spill that affects local well water). This will also cover a farmer’s owned and non-owned disposal sites where manure is applied, and can include Prior Acts Coverage, as needed.

The Prior Acts clause will defend your farm/agribusiness for past activity (say you rented a field for manure disposal and then years later a lawsuit surfaces, naming you as a previous renter who polluted the soil).

•Pollution Liability Insurance: This standalone policy covers a farm’s first-party liability (an onsite farm spill), including sudden and accidental coverage (there was a leak in the hose while transferring manure from one lagoon to another) as well as seepage coverage (a small leak that wasn’t caught for years, and now the farm’s waterways are contaminated).

•Transportation Pollution Liability Insurance: A TPL endorsement can be added to both pollution liability and commercial pollution liability policies to cover the transportation of your farm’s manure to off-site disposal. Whether using your farm’s vehicles or rented trucks to drive manure across country dirt or state roads and federal highways, a TPL endorsement is necessary to cover spills on the way to off-site disposal locations.

•Contractor’s Pollution Liability Insurance: Some farms outsource their manure transportation and field allocation to a third party. Third-party operators will need a separate Contractor’s Pollution Liability policy to haul someone else’s manure and apply it elsewhere.

When farms and agribusinesses procure a standalone pollution policy, it’s possible to obtain better pricing on the farm’s other liability coverage. When the pollution exposure is off-loaded to another policy completely, either with the same or a different carrier, the general liability, property, and umbrella policies can include a pollution exclusion, and therefore, lower those policies’ premium rates.

When determining appropriate limits for your pollution liability policy, ask the following:

•What potential pollution exposures does the business face?

•What is the likelihood that these exposures will turn into real risk? Consider all potential scenarios.

•Don’t just build upon legacy pollution policy limits. Ask: Has the business been underinsured previously?

As a Farm & Agribusiness leader at global agribusiness insurance brokerage HUB International, Leif Erickson works directly with farm and business owners to help structure insurance solutions and risk management programs to protect their operations and mitigate their exposure to potential risks.