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Liability Is Key Risk-Management Strategy

Tight margins are driving a growing number of producers to earn income from a custom business. Maximizing use of a semitrailer truck during the off-season to haul products for the ethanol plant, feed for the co-op, or rock for home builders makes solid financial sense. It also raises your risk profile. Before you hire out, contact your agent. 

“Farmers are very entrepreneurial,” says Steve Simmons, vice president of agribusiness risk management at Nationwide Agribusiness, Des Moines, Iowa. “If they go beyond transporting their own products to haul for others, they may need to add on to their base policy.”

Farmers who truck for hire become commercial carriers under Department of Transportation (DOT) regulations, and their insurance carrier may require DOT compliance. A farm truck is defined as a truck controlled and operated by a farmer and used to transport the following.

  • Products of the farm either to or from the farm for a distance of no more than 150 miles. This includes livestock, livestock products, poultry, poultry products, and floricultural and horticultural products.
  • Supplies to the farm from a distance of no more than 150 miles. This includes tile, fence, and every other thing or commodity used in agricultural, floricultural, horticultural, livestock, and poultry production. It also includes livestock, poultry, and other animals and things used for breeding, feeding, or other purposes connected with the operation of the farm.

The owner of a farm truck may not transport for hire but may exchange services with other farmers.

Federal rules allow states to exempt some farm employees and family members from CDL (commercial driver’s license) regulations, as long as their vehicles aren’t used for hire. Even if a liability policy has a provision for limited commercial hauling, be prepared to lose the exemption. If an accident triggers a lawsuit, the plaintiff’s attorney will argue that your driver lacked a CDL.

“Though in certain situations farmers are exempt, I suggest requiring drivers to be CDL-licensed,” says Bill Field, Purdue University. “Along with random drug testing, it’s a good screening tool.”

Be aware of gray areas in the law. The truck must be operated by a “farmer.” Citations may be issued to a family member or employee. (Carry proof of liability insurance.)

“Local enforcement practices play a role,” Field says. “But a $250 ticket for speeding or going through a stop sign pales in comparison with a $1.5 million lawsuit if a serious accident results.” 

tips for lowering your rates

Liability insurance is a key risk-management strategy. Here are a few tips for lowering your costs. 

  • Get several quotes and provide your driving and vehicle histories. “Sharing your claims over the past three years can show you’re doing a good job of managing,” Simmon says.
  • Request a three-year policy to fix your premium.
  • Increase your deductibles if you can afford to pay in case of an accident. “The best way to lower rates is taking on more risk,” Simmons says. “That’s only if you do a good job driving, maintaining, training, and keeping records.”
  • Pay your insurance up front at the beginning of the year.
  • Insure all your vehicles with one company to gain a discount or incentive.
  • Offer a safety program. Ask your insurer for advice. “It needs to be actively managed,” Simmons says. “A safety program may be the price of admission, along with a CDL, to make your business attractive to insurers, with the option of better rates.”
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