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Agribusiness Risks – Part One: Inherent Special Hazards

January 28, 2013

Agribusiness InspectionsAs every underwriter and loss prevention/control person knows, there are endless questions to be asked regarding every insured risk.  Every business is unique, requiring a fundamental understanding of the exposures and special hazards inherent to the particular class of business that one is underwriting and/or reporting on.

Agribusiness is certainly one of those specialized classes of business requiring particular attention to reporting details – of not only the property exposures and hazards but also the casualty exposures and hazards inherent to the business’s Construction, Occupancy, Protection features, and Exposures (COPE).

For this discussion, exposures will include “special hazards.”  Special hazard concerns like the handling, storing, and transporting of large volumes of petroleum products (liquid, solid, and/or compressed gases, refrigerants, lubricants, solvents, etc.); the handling, storing, and transporting of any types of chemicals, including herbicides, pesticides, fertilizers (dry, liquid, and/or compressed gas), and commodities; or the need for specialized vehicles and operators all require a detailed narrative reporting style beyond the simple check-box approach to loss prevention/control reports.

Commercial agribusiness losses typically result in high value with low frequency. The nature of inputs (seeds, fertilizers, fuels, water, feeds, etc.) and the resulting raw and/or finished food/feed products often make the casualty losses larger as compared to pure property, business income, extra expense, or inland marine type losses. Casualty for this discussion includes General Liability, Umbrella, and/or Excess Liability coverage including Business Automobile.

For example, foodborne illnesses and diseases ( e-coli, listeria, campylobacter, hep A, botulism, salmonella, BSE, etc.) may result in a covered loss when traced back to the insured grower, processing facility, distributing facility, or distributor themselves. Any business in the chain of commerce will most likely be named in any claim.

All stakeholders in the process of owning, insuring, or reporting on commercial agribusiness risks should consider the following:

  • Provide a detailed description of the location and occupancy with an accompanying diagram.
  • Describe the electrical details present (wiring, motors, phase, bonding, surge, etc.).
  • What type(s) of heating devices are present (electric, gas, other)?
  • What types of local fire extinguishers are present (A, B, C, D, or K)?
  • Details of the fire departments (paid public, volunteer, location of
    hydrants, distance to station, etc.).
  • Describe the automatic sprinkler systems (what type – wet/dry/both, servicing dates, alarms, monitoring, etc.).
  • Describe the Extra Special Hazards (type of manufacturing, installation, and contracting performed and any hot work including welding and cutting, the presence of boilers, driers, chemicals and fuels, railroad spur lines, attractive nuisances, etc.).
  • Describe the types of maintenance programs (preventive, routine, and scheduled).
  • Describe the interior and exterior housekeeping .
  • What is the attitude of both the management and employees (positive, negative, or indifferent)?
  • Describe the safety and fire programs (are they documented daily, weekly, or monthly).
  • In required reports, address the workers compensation exposures (guards, covers, ladders, floors, aisles, steps, etc.).
  • Describe the general liability exposures (access to public, what commodities/products are handled, stored, or warehoused, etc.).
  • Description of the product liability exposures (how products are stored/handled, if samples are retained, what, if any, drugs are used, etc.).
  • Description of the business automobile exposures (what types of vehicles, who operates them, where are they garaged, documented maintenance, operator training, safety, radius,
    condition of vehicles, etc.).
  • Provide your closing remarks and document from insurance company loss runs. What has been the past loss experience—broken down by insured line of coverage (i.e. Property/Inland Maine/General Liability/Business Automobile/Umbrella) with a five (5) year minimum–distinguishing between Reserved and Paid?

By reporting on the above areas individually, in a narrative style format, one is able to better understand the COPE, including the special hazards of any risk. Remember it is significantly easier “to adjust a loss before it happens than after it occurs!”

 

Article by: Mark A. Wogsland, Field Representative

 

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