Legal Risk in Agriculture
Farmers and agribusinesses face legal liability on several fronts. For example, if a farmer fails to adhere to a contract, whether written or oral, civil liability may attach. State and federal laws impose duties on farmers. If the farmer doesn’t comply, the farmer may be liable for damages. In the case of environmental laws, criminal liability may also apply.
A lawsuit against a farmer may result when customers, employees, or other persons on the farm property, either with or without permission, are injured. If products produced or sold by the farmer make someone sick, the injured person may sue the farmer. Finally, if farm activities, either on or off the farm, injure a third party or neighbor, the farmer may be liable for the injuries.
This paper focuses mainly upon civil liability for “torts”. Civil liability refers to private rights and remedies, contrasted with criminal liability. The term “tort”, a Latin word, refers to a private or civil wrong other than a breach of contract. An automobile accident caused by a careless driver is an example of a tort. On the farm, torts include a customer falling and injuring themselves, a cow getting loose and damaging a car and a customer getting sick from eating a contaminated peach.
The paper on human resources risk examines employment issues and the paper on environmental risk explores environmental issues. Therefore, this paper does not examine those issues in any depth.
The law differs from state to state, so each person should investigate the particular laws in his/her state. In addition, this paper should not be considered a substitute for legal advice. Always consult an attorney licensed in your state if you have legal questions.
Civil liability generally results when a farmer acts wrongfully or fails to perform a legal duty if the conduct invades another’s legal rights. Liability may be based on negligent acts, intentional acts or strict liability. Negligence occurs when a farmer does something that a reasonable person would not do or fails to do something that a reasonable person would do. Negligent torts occur most frequently. Most commonly, someone drives carelessly and crashes into another driver. A farmer may fail to adequately maintain a driveway, resulting in a negligent tort when a customer slips and falls on a rut.
Intentional acts involve purposeful conduct, such as the intentional tearing down of a fence. A farmer also commits an intentional tort when the farm operation is conducted so as to unreasonably interfere with the use of the neighbor’s property.
Finally, the law considers some activities so dangerous that it imposes liability on the person engaging in the activity regardless of how careful the person. In agriculture, some states consider blasting, aerial application of pesticides and trespass by farm animals as strict liability. In addition, sale of a defective product, like contaminated fruit or beef, results in liability without fault in almost all states. In many states, therefore, if a farmer takes every precaution while blasting, for example, and a neighbor is injured by the blasting, the farmermust pay for those injuries, regardless of whether he/she was negligent.
If an accident occurs, a lawsuit often follows closely behind. Anyone may file a lawsuit for any reason, good or bad. In today’s society, the filing of lawsuits seems to be increasing. Many of the law suits have little or no basis. However, the farmer must defend any lawsuit filed against him/her, which may be very costly.
For a successful civil lawsuit, four elements must exist: (1) a duty; (2) a breach of that duty; (3) causation; AND (4) damages. In other words, if a farmer fails to live up to an obligation placed on him/her by the law and that failure causes injury to someone else, the farmer is must pay for those injuries. The duty may come from a law passed by the state or federal legislature or from common law. Common law consists of rules laid down by court decisions over time.
Given that today’s world involves a high risk of being sued, farmers must determine how to deal with this risk. Generally, risk may be approached in four ways: avoid it, reduce it, accept it, or transfer it to another party. This paper discusses ways to reduce or transfer risk.
Each person must make their own decision as to whether a particular activity presents so much risk that the activity should not be undertaken. For example, if a farmer knows that he/she could make a large amount of money operating a rifle shooting range, the farmer may opt not to start that business based on excessive risk. On the other hand, few people accept most risks without at least trying to minimize it.
Short of avoidance, the best way to approach risk is to minimize the risk. In short, farmers should engage in a proactive safety program to prevent accidents that may injure employees, customers and others. The program should be in writing and conveyed to all employees.
Farmers should also transfer some risk. Purchasing a liability insurance policy transfers some risk to the insurance company, for a fee. Liability insurance is a must in today’s legal environment.
Take great care in ensuring that you transfer risks that you wish to transfer. Traditional agriculture involved production of crops and livestock and, perhaps, sale of products raised on the farm through road side stands. The basic farm liability insurance policy reflects this traditional view of agriculture. The basic farm liability policy often fails to cover marketing, such as at road-side stands, and other activities not related to production. Coverage for environmental hazards, such as chemical spills, generally involves extra coverage and extra cost.
Adding to the complexity, many farm operations have expanded to include pick-your-own, corn mazes, haunted houses, farm markets selling a wide variety of products from suppliers all around the country, and more. The increased use of these agri-tourism and agri-tainment activities brings members of the public onto farm property and raises the risk and consequences of accidents.
If these activities are to be covered, the farmer must discuss them with his/her insurance agent and make sure that the policy will cover the activities. In addition, the farmer must determine the level of coverage. Everyone should ask the agent to provide price quotes for various levels of coverage. The difference between $1 million and $2 million in coverage, for example, is generally not that great. The farmer can determine which level best suits his/her needs.
Liability insurance gives the extra benefit of paying attorneys’ fees for covered risks. Attorneys’ fee may easily amount to $10,000 or more in a simple case. In a complex case, the fees may reach hundreds of thousands of dollars. Without liability insurance, many operations could not continue.
Finally, operating the farm business in different legal entities and careful titling of property provide ways to avoid risk to certain assets. However, the land in the farm operation generally remains subject to liabilities arising from the business. Titling and business entities therefore fail to substitute for liability insurance and a diligent safety program. Instead, titling and appropriate choice of business entities should provide additional protection.
The government offers many tax incentives for farmers to encourage them to remain in farming. The government offers property tax exemptions for farm equipment, and sales tax exemptions may be possible on purchased and sold items. It is important to keep records of purchases and sales. For further information consult a tax professional.
The Business Structure you choose for your farm is very important. It should correlate with the needs of your farm and before choosing the business structure you want, consult a lawyer and a tax professional. There are five different types of business structures that a farmer may choose:
1. Sole Proprietorship
2. General Partnership
3. Limited Partnership
5. Limited Liability Companies
Toby Treem FARM SENSE- Maryland Department of AgricultureStandards
When hiring people to work on your farm there are rules and guidelines you must follows. There are minimum age requirements, with restrictions that apply when a worker is under the age of 18. There are also additional requirements that must be met when the farmer hires a migrant worker:
www.nj.gov/labor/lsse/lspbosh.html or Division of Wage and Hour Compliance (609) 292-2305 www.nj.gov.labor/lsse/lscrwapp.html; or your state Department of Labor.
Proper training is extremely important to protect farmers from risk of liability. Farmers are expected to train workers when the worker will be expected to work with hazardous materials or will work in a hazardous occupation. Hazardous materials may consist of, but are not limited to pesticides, fertilizers, and other chemicals that may be determined to be harmful. Some examples of hazardous occupations are operating tractors, forklifts and power driven tools, driving to transport passengers, handling or applying chemicals, operating hay balers, corn pickers and etc. Hazards on the farm must be acknowledged through posted signs with pictures in both English and Spanish.
US Department of Labor Wage & Hour Division Agricultural Regulations. Department of Labor.
Finally, the H2A Program is a program that helps to ensure that employers “wishing to hire nonimmigrant aliens as temporary agricultural worker is to assure employers an adequate work force and to protect the jobs of US workers.” (H2A Program Employer Info Booklet)
To see a checklist of compliance standards that must be met wdealing with migrant workers go tohttp://www.dol.gov/dol/esa/public/regs/compliance/whd/H2A.htm.
Persons on Property- Liability
A farmer owes a duty to people who come upon the farmer’s land. It is the responsibility of the farmer to ensure that any person on the farm is warned of any unreasonable risk of harm. To avoid a lawsuit, a farmer must not willingly or wantonly cause injury to a trespasser and must have signs posted that warn of a danger not open and obvious. When dealing with a licensee (one who enters the premises of another for his own convenience, benefit, or pleasure, w/ the knowledge and express or implied consent of the occupant); the farmer must warn of unsafe conditions, warn of any unreasonable risk of harm, and give knowledge of any unsafe risk or harm. When dealing with an invitee (one who visits the premises lawfully at the express or implied invitation of the occupant, other than for a social purpose or for his own convenience) the farmer must warn of unsafe conditions, have premises in a reasonably safe condition, and use ordinary care to avoid injuries to the invitee. Finally a farmer has a duty to children. The farmer has a duty to use ordinary care for the safety of those children from the dangerous objects on a farm, even if the child is a trespasser.
Toby Treem FARM SENSE Maryland Department of Agriculture
Nuisance claims such as noise complaints and odor complaints are common in the modern day farming industry. New Jersey farmers are protected by the Right to Farm Act. The Right to Farm Act was developed with the intent to keep disputes between farmers and conflicting parties at a minimum. “If we want to keep New Jersey green, we’ve got to keep a balance between reasonable, necessary development and preservation of good farmland” (NJ Senate Bill No. 854, Press Release, 1983). The act was developed to protect farmers from nuisance suits which arise from standard farm agricultural practices (odor complaints, noise complaints, etc).
The Impact of the Right to Farm Act on Farmer-to-Consumer Direct Marketing in New Jersey. Department of Agricultural Economics and Marketing, Rutgers Cooperative Extension, 1995.
See the Right to Farm Act:http://www.state.nj.us/agriculture/sadc/righttofarmact.htm
Proactive Safety management
To protect from negligence liability and lawsuits, proactive safety measurements should be taken. The farmer needs to develop a safety routine, check latches and locks and remove keys from tractors and other equipment. Use release of liability forms when necessary. Post warning signs with pictures in close proximity with any area or machine that poses a risk of bodily harm. If someone is injured never say you are sorry, but treat accident victims kindly. Finally, the most important thing a farmer must do is to obtain liability insurance adequate enough to cover his operation.
Toby Treem FARM SENSE Maryland Department of Agriculture