Farm Umbrella Liability Policy Form (FB 00 01)
The Farm Umbrella Liability Policy Form, FB 00 01, is designed to provide an additional layer of liability protection over and above the limits of underlying farm liability policies. Its primary purpose is to safeguard farming operations against catastrophic liability claims that could otherwise jeopardize the financial stability of the farm. This form typically offers higher liability limits and can sometimes provide broader coverage than the primary policies it sits above. It generally functions in three key ways: providing excess limits coverage when underlying policy limits are exhausted, offering "drop-down" coverage for exposures not covered by underlying policies but not excluded by the umbrella (subject to a self-insured retention or SIR), and covering claims when an underlying policy's aggregate limit has been depleted.
Classes of Business It Applies To
The FB 00 01 is specifically tailored for agricultural and farming enterprises. This includes a wide array of farming operations, such as:
- Traditional Crop and Livestock Farms: Farms raising crops like corn, soybeans, wheat, or cotton, and those raising livestock such as cattle, poultry, hogs, or sheep. For example, a large dairy farm with significant public interaction or a large-scale grain operation with trucking exposures would benefit from this coverage.
- Family Farms and Ranches: Operations that are owned and operated by families, which often combine personal and business liability exposures on the same premises. For instance, a family ranch that hosts occasional community events or allows recreational activities on its land.
- Farms with Incidental Business Pursuits: Operations that may have small, related businesses on-site, provided these are not excluded and may require specific underlying coverage. An example could be a farm that also operates a small, seasonal roadside stand selling its own produce.
- Custom Farming Operations: Farmers who perform work for others on a contractual basis, such as planting, harvesting, or spraying. The umbrella policy may provide follow-form coverage for custom farming if the underlying insurance also covers this exposure.
It's important to note that the definition of "farming" within the policy is crucial, and activities like "agritainment" (e.g., corn mazes, petting zoos for tourism) may be excluded or require specific endorsements and underlying coverage.
Special Considerations
Several factors must be carefully considered when utilizing the FB 00 01:
- Underlying Coverage Requirements: The Farm Umbrella policy mandates that specific types and limits of underlying insurance (e.g., farm liability, auto liability, employers' liability) be in place and maintained. Failure to maintain the required underlying limits can result in the insured being responsible for the amount of coverage the primary policy would have provided, effectively increasing their retained limit. The declarations page (often FB DS 01, Advisory Farm Umbrella Liability Coverage Form Declarations) is critical for listing these underlying policies and their limits.
- "Follow Form" vs. Broader Coverage: While an umbrella policy can provide broader coverage, it often "follows form" with the underlying policies, meaning it adopts the terms and conditions of the primary coverage, especially for certain exposures like custom farming. However, discrepancies in wording between the umbrella and underlying policies can lead to coverage gaps.
- Self-Insured Retention (SIR): A SIR will apply when the umbrella policy "drops down" to cover a loss not covered by an underlying policy but not excluded by the umbrella. This is an amount the insured must pay before the umbrella policy responds.
- Excluded Exposures: The FB 00 01 contains its own set of exclusions. For example, it typically distinguishes between farming and non-farming business activities, and may exclude coverage for damage to the insured's own work or products (with some exceptions like custom farming). Pollution is another common exclusion, though there might be exceptions for certain farming-related incidents. Agritainment activities are often excluded unless specifically endorsed and covered by underlying policies.
- Policy Period Non-Concurrency: If the umbrella policy period does not align with the underlying policy periods, it can affect how the retained limit is applied or exhausted.
For instance, if a farmer hosts a large public event that isn't typically covered under their standard farm liability policy (an "agritainment" exposure), the FB 00 01 might not provide coverage unless this specific activity is declared, underwritten, and covered by an endorsement to both the underlying policy and the umbrella, or if the umbrella specifically offers broader coverage for such an event subject to an SIR.
Key Information for Agents and Underwriters
Agents and underwriters play a crucial role in correctly placing and pricing the FB 00 01:
- Thorough Risk Assessment: Understanding the full scope of the farming operation is essential. This includes all activities, on and off-premises exposures, contractual obligations (like custom farming), and any non-farming or agritainment ventures. The form of the farm enterprise (individual, partnership, corporation) also impacts the definition of an insured and must be accurately identified.
- Verification of Underlying Policies: It is critical to obtain and review copies of all underlying policy declarations pages to ensure they meet the umbrella's requirements for types of coverage and limits. Any sublimits in underlying policies must be carefully considered, as the umbrella may not cover losses related to an exposure if its sublimit isn't scheduled on the umbrella declarations.
- Identifying Coverage Gaps: Agents should carefully compare the terms, conditions, and exclusions of the FB 00 01 with those of the underlying policies to identify potential gaps. For example, if an underlying policy has a specific exclusion for a certain type of pollution, and the umbrella doesn't explicitly provide broader coverage, a gap could exist.
- Pricing Considerations: Pricing will depend on the limits provided, the nature and scale of the farming operation, loss history, and the quality of the underlying coverage. Exposures like custom farming, significant non-farming activities, or a large number of employees can increase the premium. Some insurers have specific rating methodologies based on acreage, number of locations, or types of farm vehicles.
- Endorsements: Numerous endorsements can modify the FB 00 01. Agents and underwriters must be familiar with available endorsements to tailor coverage appropriately, such as those adding or excluding coverage for specific activities (e.g., custom farming, agritainment, specific types of personal injury). The FB DS 01, the declarations page, will list all endorsements attached to the policy.
- Claims Handling: The umbrella insurer typically has the right and duty to defend the insured if underlying limits are exhausted or if the umbrella provides "drop-down" coverage. However, this duty ends once the umbrella's limit of insurance is exhausted.
An underwriter, for example, would scrutinize an application for a farm that engages in extensive custom harvesting for others. They would verify that the underlying farm liability policy specifically covers custom farming and that the limits are adequate before pricing the FB 00 01, ensuring the umbrella either follows form or clearly defines its response to such exposures. Similarly, if a farm has a swimming pool or employs several workers, the underwriter will confirm adequate underlying homeowners/farmowners liability and employers' liability coverage is in place.