FB 00 01–ISO FARM PROGRAM UMBRELLA LIABILITY POLICY FORM ANALYSIS

(April 2020)

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This analysis is based on the 04 16 edition of these coverage forms. Changes from the 10 06 edition are highlights in bold.

FB DS 01–ADVISORY FARM UMBRELLA LIABILITY COVERAGE FORM

General Information

The policy number, insurance company name and address, insured name and mailing address and policy period must be entered in this section. The mailing address is particularly important because it is used to mail any notice of cancellation. The policy period starts and ends at 12:01 a.m. at the mailing address.

Limits of Insurance

The form has three defined limit boxes in addition to extra spaces for listing additional limits. The first is the Occurrence limit for all liability coverages. The second is the Personal and Advertising Injury limit for each person or organization.

The third is the aggregate limit for all losses, except auto liability claims.

The other spaces may be used to indicate employers' liability, aircraft, watercraft, or any underlying coverage that applies for different amounts or on different bases.

Form of Farm Enterprise

The form of business must be selected. This affects the definition of insured and the entry is important. Multiple named insureds could require multiple forms of business. Space is provided to describe the type of farm.

Insured Location

This section is used to identify the premises and location. It should be described as completely and accurately as possible because there can be coverage consequences based on errors in completing this information.

Premium Payable

The final premium on an umbrella policy may change because of adjustments to the underlying coverages and their premiums. The final policy premium should be the same as the premium quoted. If the figures do not agree, the issue should be addressed with the insurance company and resolved promptly, since the premium is due and payable immediately.

Endorsements

This section reflects all endorsements attached to the policy. Endorsements can alter or affect coverage and they should be reviewed to determine if the coverage requested and quoted matches the coverage provided on the policy.

Retained Limit

Self-Insured Retention

Umbrella policies usually include a self-insured retention. This is similar to a deductible that applies to coverage provided by the umbrella but not covered by underlying liability policies. The self-insured retention amount or percentage is shown in this area.

Example: Gary has a $25,000 self-insured retention on his umbrella policy. One day a freak accident occurred which was not covered by his underlying insurance but was covered by his umbrella. The total claim settled for $100,000. The good news for Gary was that his umbrella carrier paid $75,000 and also paid all the extensive defense costs.

Schedule of Underlying Insurance

All underlying insurance policies must be listed in this section. The insuring company, policy number, policy period, and limits must be entered carefully and accurately. This is a very important point because item 8 of the umbrella’s Loss Conditions section requires that underlying coverage is maintained as indicated on this schedule. If it is not maintained the umbrella will still pay BUT only as though there was underlying coverage and will not drop down.

Example: Bill has a farm umbrella policy that specifies underlying limits of $500,000 for the primary Farm Liability coverage. Bill had those limits, but he reduced them to $300,000 when that policy last renewed; he neglected to inform the umbrella carrier. One day, his bull escaped, making its way to the small town near the farm. The bull came upon several children and it gored two of them. Their injuries were significant, and the final settlement exceeded $1,000,000. Because of the reduction in limits and his oversight in informing the umbrella carrier, $200,000 of the loss was not covered by the umbrella and Bill was personally responsible for that amount.

FB 00 01–ISO FARM PROGRAM UMBRELLA LIABILITY POLICY FORM

INTRODUCTION

The Farm Umbrella liability policy is designed to coordinate and work in conjunction with FL 00 20–Farm Liability Coverage Form. The policy also contains elements of a true umbrella. The predominant feature is its tracking with the provisions of the underlying coverage. However, it also provides some excess coverage over a self-insured retention, resulting in providing some insurance protection that is not found in the primary policies.

The entire form must be reviewed in order to understand how coverage applies. The terms you and yours in the form means named insured. Us, we, and ours refer to the insurance company. The other definitions that apply to this coverage form can be found in Section IV-Definitions.

Note: Under Coverage Extension – Coverages H, I, and J, the named insured is broadened to be not only the person named on the declarations but also that person’s spouse if living in the same household.

SECTION I–COVERAGES

COVERAGE H–BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement (04 16 change)

The insurance company is obligated to pay a loss, after recoveries and salvage, which is in excess of the underlying limits or the self-insured retention. The loss must involve a situation where the insured is legally obligated to pay because of bodily injury or property damage. Further, the given loss must be the type that qualifies for protection under this policy. The company has both the duty and the right to defend the insured in any situation where the underlying limits are exhausted or where no underlying coverage exists. No legal defense is provided if insurance coverage for the loss does not apply.

Example: Madison owns a vegetable farm insured by an underlying farm liability policy and a farm umbrella policy. Madison is sued by an acquaintance who was seriously injured while on her property. Madison files a claim with both of her insurers. The umbrella insurance company notifies Madison that it will not pay any loss nor provide any legal coverage in this case. This is because the insurer discovers that the plaintiff was hurt while getting out of Madison’s two-seater plane and the umbrella excludes aviation-related losses.

When the company has the duty to defend, it decides the timing and scope of any investigation. The company also decides whether to settle or not. If payment is made, the maximum amount paid is the applicable policy coverage limit. Once a payment is made, or the policy limit is used up by payments, the company’s obligation to defend ends.

Even if the insurance company does not have a specific duty to defend, it still retains the right to either defend or participate in any defense of a claim or suit because that insurer may want to protect its financial interest by becoming involved in a given matter.

Refer to Supplementary Payments – Coverages H and I for a list of services payments the insurance company will pay. These are the only paid services under this policy.

Bodily injury or property damage coverage applies only over the retained limit of underlying insurance specifically shown on the declarations. There are two types of retained limits. The first is the each occurrence limit for the underlying insurance. The second is an exposure retained limit. Such a sublimit would occur when the underlying policy provides a small amount of coverage for a specific exposure that would otherwise be excluded. If that exposure limit is shown on the declarations, the umbrella drops down to the retained limit and pays in excess of it. If the exposure limit is not entered, not only does the umbrella NOT drop down to that sublimit, it does not respond to any bodily injury or property damage arising out of that exposure.

Example: Prissy Farms’ underlying policy provides a $25,000 sublimit limit for bodily injury or property damage related to its small honey operation. The umbrella carrier does not list the honey operation sublimit on its declarations. When a family sues Prissy Farm due to an injury, the umbrella will not respond regardless of the amount of the claim.

A number of obstacles must be overcome in order for the farm umbrella policy to respond to a loss. In any given situation:

The loss has to involve bodily injury or property damage
A loss must arise out of an accidental occurrence (this occurrence could happen prior to the policy period)
The bodily injury or property damage must occur during the policy period

Example: Hiram Splurgisome bought a farm umbrella policy covering the period July 10, 2018 to July 10, 2019. On August 8, he received notification that he was being sued. He sent a copy of the legal papers to his umbrella insurer. The insurance company denied the claim when it found out the suit came about because of bodily injury that occurred on April 9, 2018.

There is no coverage for bodily injury or property damage that occurs before the policy period begins, if the insured is aware of the injury or damage. Coverage does not apply to these (known) losses even if additional damage takes place after the policy period begins.

Example: Jimz Veggie Farmz is insured under a Farm Umbrella policy that was written effective April 12, 2018 to 2019. On May 23^rd, he receives notice that he is being sued for damaging some machinery belonging to a grocery supplier’s warehouse. The incident occurred in January ’15 and he settled with the supplier using his own funds. However, the latest claim alleges that a different machine is unusable because of property damage to other machinery and it demands additional compensation. The machine is critical but is only used seasonally and that explained the late notice. He submits this new claim to his current company and is told that it is not covered since the property damage that caused this loss of use occurred before the policy period and because he knew, but didn’t report, the original event.

When a bodily injury or property damage occurs during a policy year, any continuation of that bodily injury or property into subsequent years is considered to be part of the initial bodily injury or property damage.

Known Occurrence - An incident is considered to be known when any party identified by the policy as an insured (including persons that an insured delegates/assigns authority to):

Notifies any insurer of an incident involving either BI or PD
Becomes aware of any third party requests (either written of verbal) involving BI or PD
Learns from any credible source of an incident involving BI or PD

Bodily injury is not limited to damages for the injured person. It also includes claims for care, loss of services or death that results from the bodily injury.

2. Exclusions

Coverage does not apply to any of the following:

a. Expected or Intended Injury

If the insured expects or deliberately causes bodily injury or property damage, there is no coverage. This exclusion takes effect even when the results are different from what was intended or the person injured or entity damaged was not the intended victim.

Exception - Coverage does apply to any intentional action causing bodily injury that is needed to protect persons or property.

b. Contractual Liability

Contractually assumed liability is excluded. The only exceptions are liability that would exist without the contract being in place or liability assumed under an insured contract. Liability under an insured contract exists only if the contract was made prior to a loss. Coverage found under an insured contract provides defense coverage if the contract states that defense is a required part of the assumed liability. The defense coverage can be within or outside coverage limits, depending on certain situations that are explained in the Supplementary Payments section of the policy.

c. Pollution (04 16 change)

Bodily injury or property damage due to pollutants is not covered:

· At any premises that is or was owned or occupied by or rented to an insured. An exception applies for injury or damage in a building caused by heating equipment or any injury or damage caused by hostile fire, which are covered.

· At any place where waste was or is disposed of or treated.

· For any waste transported, handled, or processed by or for the insured (or by or for any entity that an insured holds legal responsibility).

· At a premises or location of the insured where contractors are working on the insured’s behalf and where pollutants are brought on the location or premises. Three exceptions apply. The first is when pollutants escape from the part of a vehicle that is designed to hold fluids for the use of the vehicle. This exception does not apply if the escape was intentional. The second is for injury or damage in a building caused by vapor released from materials brought to the premises the named insured or those working on its behalf. The third is for injury or damage caused by hostile fire, which is covered.

· At any premises where testing, monitoring, cleanup and other pollutant-related activities are being conducted by the insured or on the insured’s behalf.

o When pollutants are transported, or are in the course of transit, being stored, disposed of, treated, or processed in or on a covered auto. This includes any pollutants contained in any property.

o Prior to any physical movement of the pollutants, or any property containing the pollutants, to the point or place where they are accepted to be moved into or on the covered auto; or

o Following the transport of the pollutants or any property containing the pollutants at the point of final delivery.

Note: The last three exclusions above only apply if there are similar exclusions in the underlying coverage. When those exclusions do not apply, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

In addition, loss, costs, or expenses to meet statutory demands for pollutant-related activities are not covered, unless coverage applies even without the statutory demand.

d. Release or Discharge from Aircraft

There is no coverage if a substance released from an aircraft causes bodily injury or property damage, unless the aircraft is a either a hobby or model craft and is not capable of carrying cargo or passengers.

e. Aircraft

Bodily injury and property damage due to aircraft, owned, used, maintained, or entrusted to others is not covered if owned or operated by, or rented or loaned to an insured. Coverage does not apply when the aircraft is stationary, moving, being loaded or unloaded. There is no coverage for vicarious liability due to the actions of a child. In addition, there is no coverage because the occurrence is due to poor supervision, training, or monitoring on the part of any insured.

This exclusion does not apply if coverage is provided in the underlying policy. The coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Example: Priscilla started up her dad’s plane to take a joy ride, even though she knew her father would be extremely upset. The flight attempt ended almost before it began because she could not get the plane’s nose up. She lost control of the plane and smashed into a car on the road by her house, seriously injuring the occupants of the car. Because she was a minor and had no assets, her father was held vicariously liable for her actions and the resulting damages. The underlying and the umbrella insurers both denied coverage. The aircraft carrier also declined coverage because Priscilla was not a listed pilot on their coverage form.

f. Watercraft

Bodily injury or property damage due to any watercraft owned, used, maintained, or entrusted to others is not covered if owned or operated by, or rented or loaned to an insured. Coverage does not apply when the watercraft is stationary, moving, being loaded or unloaded. There is no coverage for vicarious liability due to the actions of a child. In addition, there is no coverage because the occurrence is due to poor supervision, training, or monitoring on the part of any insured. This exclusion does not apply if coverage is provided in the underlying policy. The coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Example: Sara has both an underlying and an umbrella policy for her family farm. She owns a speedboat endorsed and covered on her underlying policy. The boat is so fast that her insurer placed a restricted driver amendment on the policy that permits only Sara and her husband to operate it. A friend of Sara's begged to drive the boat and she turned the controls over to him. He crashed into the docks and seriously injured a number of people and other boats. The underlying carrier declined the claim submitted by Sara because of the amendment. The claim was also denied by the umbrella insurer for the same reason.

g. Autos

The only autos covered are those listed in the underlying coverage. All other bodily injury or property damage caused by owning, maintaining, or using an auto is excluded. No coverage applies to first party loss situations, such as no-fault, physical damage, uninsured motorists, or medical payments.

Example: Ralph was crossing an intersection when a car suddenly came out of nowhere and hit him. The car sped away and was never found. After a number of surgeries, Ralph's medical expenses were near $900,000. His underlying auto policy included uninsured motorists coverage with a limit of $500,000 but he did not endorse excess uninsured motorists coverage on his umbrella liability policy. The umbrella portion of his claim for uninsured motorists coverage was denied, and he had to handle the rest of the medical bills from his own funds.

h. Recreational Motor Vehicle

Bodily injury or property damage due to the use of a recreational motor vehicle, including ownership, maintenance, entrustment, loading or unloading is excluded. There is no coverage for vicarious liability due to the actions of a child. In addition, there is no coverage because the occurrence is due to poor supervision, training, or monitoring on the part of any insured. However, this exclusion does not apply if coverage is provided on the underlying policy. The coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Example: Mark used a snowmobile because it was the easiest way to get around his ranch in the winter. His son Evan thought it would be fun to take it out on the road and visit a friend. However, he did not anticipate the oncoming tractor-trailer. He jumped off the snowmobile before it slammed into the vehicle and destroyed its front tires. The vehicle then veered off the road, overturned and both the tractor-trailer and its full load of electronic components were destroyed. When Mark turned in the claim, the underlying carrier denied coverage because the snowmobile was being operated off premises and therefore not eligible for coverage. The umbrella denied coverage because there was no coverage available in the underlying.

i. Use of Livestock or Other Animals (04 16 change)

Coverage does not apply to any bodily injury or property damage caused by livestock that is part of any prearranged racing, speed, or strength competition. Similarly, no coverage exists for bodily injury or property damage resulting from a prearranged stunting activity including the preparation for the event. This exclusion applies only to such activities taking place where the event is being held. There is also no coverage when livestock are used to provide rides for a fee or in connection with a fair or charitable event wherever it may occur.

Note: Under prior editions, coverage would apply when animal rides were provided at any event as long as no fee was charged. Under this edition, all rides are excluded unless covered in the underlying policy.

Example: The Helpersons decided to help their children’s school fundraiser. During an event to raise money for a new school playground, the Helpersons lent a horse and carriage and the school charged $5 for rides. The school principal stopped the carriage ride when a young girl fell off the carriage and was seriously injured. The Helpersons’ umbrella insurer denied the claim filed by the girl’s parents because the injuries were related to the fundraiser.

j. Racing Activities

Bodily injury or property damage arising out of racing autos, recreational vehicles, mobile equipment, or watercraft is not covered. This exclusion also applies during practice, preparation for and during a pre-arranged contest, stunt, or similar situations.

The reference to “pre-arranged” means that bodily injury or property damage resulting from spontaneous racing, competitions, or stunts is eligible for coverage.

k. Business Pursuits

Bodily injury or property damage related to any business of the insured that does not involve farming is excluded.

The exception to this exclusion is that it does not apply to a part-time business conducted by a member of the household who is younger than the age of 21 provided that activity has no employees. Property damage coverage provided under this exception applies only to property of non-insureds. This exclusion does not apply if coverage is provided in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Example: Miriam sold her produce from a stand on her property for years. The stand’s huge success prompted her to open a stand in the nearby town. Her agent informed her that this new stand was not covered under the policy because it was away from the insured location. The agent spoke with the insurance company and convinced them to add an endorsement to the policy to cover this new stand. An employee at the new stand tripped and fell against the stand’s large, heavy cash register. While the employee was unharmed, the register fell off the stand’s counter and landed on top of two toddlers. The toddlers' mother sued Miriam for the children's serious cuts and broken bones. The underlying policy responded to this claim. Because the underlying policy was endorsed and covered the business pursuit, the umbrella liability policy also responded to the loss.

l. Custom Farming

There is no coverage for bodily injury or property damage due to the insured’s performing or failure to perform any custom farming operations (such as assisting another farmer with processing crops, providing paid storage, etc.). This exclusion does not apply if coverage is provided in the underlying policy. If coverage is provided in the underlying policy, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Note: FL 00 20- Farm Liability Coverage Form covers custom farming operations that generate less than $5,000 in any 12-month period prior to a loss. An umbrella liability policy that accompanies that policy automatically covers the liability associated with that custom farming exposure. If receipts exceed $5,000, an endorsement is needed on the underlying policy in order for coverage to apply on the umbrella.

Related Article: Farm Liability Coverage Form

m. Professional Services (04 16 change)

There is no bodily injury or property damage coverage for professional services. This means that neither

allegations of negligence supervision, hiring, employment, training or monitoring of others in their professional actions are also not covered.

n. Rental of Premises and Ownership Or Control Of Premises

Coverage does not apply to bodily injury or property damage for two types of premises. In one case, no coverage applies to an act or omission at a location that is not an insured location and that is owned by, rented to, or occupied by an insured. The only exception is for any injury sustained by a residence employee. In the other case, there is no coverage for bodily injury or property damage at an insured location rented or being held for rent. This exclusion does not apply if coverage is provided in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Note: The Farm Liability Policy has several exceptions to this exclusion where coverage is provided. If the Umbrella Liability policy accompanies the Farm Liability policy, the same exceptions to the exclusion and coverage provided apply to the umbrella.

o. Workers Compensation or Similar Law

Coverage under this policy does not apply to any loss to which workers compensation or similar laws apply.

Example: Let’s re-visit the previous situation with Miriam who, again, had opened an additional produce stand due to the huge success of the stand she had operated from her premises for years. The new stand is located in a nearby town. Her agent informed her that this new stand was not covered under the policy because it was away from the insured location. The agent spoke with the insurance company and convinced them to add an endorsement to the policy that listed this new stand. An employee at that stand tripped and fell against the stand’s large, heavy cash register. The employee suffered several severe injuries that required surgery and she now suffers from post-concussion migraine headaches. Miriam files a claim with her umbrella insurer, but she is told that there’s no coverage for the employee’s injuries because protection should be sought under Workers Compensation.

p. Employers’ Liability

Coverage does not apply to bodily injury to any employee, or to a family member of an employee, as a result of an employee bodily injury that occurs during the course of employment. Coverage also does not apply to bodily injury to a residence employee unless the claim is made within 36 months after the end of the policy period.

This entire exclusion does not apply if liability for the loss has been assumed under an insured contract.

When the bodily injury to a residence employee results from a covered auto accident, coverage applies as long as the residence employee is not eligible for workers compensation.

This exclusion does not apply if coverage is provided in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this. When the bodily injury to a residence employee results from a covered auto accident, coverage applies as long as the residence employee is not eligible for workers compensation.

Note: Workers Compensation requirements for Agricultural workers differ greatly from state to state. In monopolistic states, in particular, there are opportunities for severe losses that may become employers’ liability cases. A stopgap liability policy should be considered.

Related Article: Stop-Gap Employers Liability Insurance

q. Employment-Related Practices (04 16 change)

Coverage is excluded for any bodily injury that arises out of any refusal to employ, termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, malicious prosecution, discrimination or similar employment-related practices, policies, acts or omissions or any consequences as a result of any of these actions.

This exclusion applies whenever the event occurs. It could be before hiring, during employment or following termination.

Example: Kyle fired Kendra because she simply was not doing the work he thought she should do. He was very surprised when she sued him and stated the firing was because she complained about comments he made around the workplace. She blamed the stress caused by the working conditions there and the subsequent firing for the outbreak of shingles on her face, which prevented her from working. There was no coverage in the umbrella liability policy in this case, even though coverage does appear with the underlying policy.

r. Building or Structure Under Construction

There is no coverage for bodily injury when it arises from a premises upon which a building or structure is being constructed.

Note: This wording is very expansive. It refers to the premises which could be quite significant while the building being constructed could be quite small. The exclusion doesn’t say that the construction of the building or structure must contribute to the loss, only that there must be construction taking place on the premises. The exception to the exclusion refers specifically to the construction but not the exclusion itself. The ambiguity of this exclusion could make it difficult to enforce.

Example: Jeremy was visiting Lyla’s farm, walking around the site where Lyla was having a new barn built. While there, Jeremy falls into a ditch that was dug for laying utility line. His spine strikes a large stone and he is paralyzed. This serious loss will not be handled by Lyla’s umbrella policy because of the construction exclusion.

Note: This appears to be the intent of this exclusion.

This exclusion does not apply only for coverage related to liability due to building or structures while under construction that exists in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Note: The Farm Liability policy provides some coverage if a building is being built at the insured location. Another possible solution is CG 00 09–Owners and Contractors Protective Liability Coverage Form–Coverage For Operations Of Designated Contractor.

s. Bodily Injury to an Insured

There is no coverage for bodily injury to any insured. The exclusion also applies to a claim or suit brought against any insured to reimburse or participate in paying damages with another party that is obligated to pay for bodily injury suffered by an insured.

Note: Situations exist with Employers Liability where an insured assumes the liability for a third party and becomes responsible for injuries to insureds, particularly employees. The Workers Compensation/Employer’s Liability policy may provide underlying coverage for these situations, but that coverage does not extend to the umbrella unless specifically endorsed.

t. Damage to Property (04 16 change)

Coverage does not apply to property damage for six different types of property:

· Property that is owned by the named insured. In addition, no coverage applies for any loss prevention measures taken to improve the property.

· Rented or occupied property. However, there is coverage for property damage loss due to fire, smoke, or explosion. There is no coverage when the insured has a contractual obligation to insure the property.

· Property that is being transported by the insured when the damage is caused by the use, ownership, or maintenance of a covered vehicle.

· A premises that has been sold, given away, or abandoned by the named insured. This exclusion applies only when property damage arises from the premises.

· Any property that is on loan to the named insured. However, there is coverage for property damage loss due to fire, smoke, or explosion. There is no coverage when the insured has a contractual obligation to insure the property except for a sidetrack agreement.

· Personal property in the care, custody, or control of any insured. However, there is coverage for property damage loss due to fire, smoke, or explosion. There is no coverage when the insured has a contractual obligation to insure the property except for a sidetrack agreement.

This exclusion does not apply to custom farming if coverage for it is provided in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

u. Damage to Your Product

Property damage to the named insured’s product because of a problem with the product or a part of the product is not covered.

v. Damage to Your Work

Property damage coverage does not apply to loss or damage to the named insured’s work because of a part of that work or a part of that work that must be repaired or replaced because the work was done incorrectly. This exclusion does not apply to custom farming if coverage is provided for it in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

w. Damage to Impaired Property or Property Not Physically Injured

There is no coverage for loss of use of property caused by a problem with the named insured’s product or work. The problem must be due to either a defect or deficiency in the named insured’s product or work or because of the failure of the named insured to comply with a contract.

This exclusion does not apply to custom farming if coverage is provided for that exposure in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this. Coverage also applies if any loss of use of other property occurs after the named insured’s product has been put into service and a sudden and accidental event occurs.

x. Recall of Products, Work or Impaired Property

There is no coverage for damages, cost, or expenses that occur as a result of a product recall.

Example: A child became very ill after drinking some milk. The local health department traced the contaminant back to Bill’s dairy. They ordered an immediate recall and Bill had to close down his operations while he disposed of his tainted inventory and then sanitized his equipment. The cost of the recall was near $100,000 but no coverage was available from either his underlying or umbrella policies.

y. Communicable Disease

Bodily injury and property damage caused by or resulting from the transmission of a communicable disease are not covered.

Example: Tom and his wife traveled to China and her hometown of Beijing. When they returned home, Tom became very ill. He resisted any treatment and continued working until his wife finally had him hospitalized after he collapsed. He was hospitalized for several weeks, recovering from SARS. Tom infected a number of people in the community, including most of his farm co-op. The infected persons brought a class action suit against Tom, alleging deliberate disregard for the safety of others. This policy does not provide coverage and will not defend against the suit.

z. Sexual Molestation, Corporal Punishment or Physical or Mental Abuse

There is no coverage for bodily injury or property damage caused by or resulting from sexual molestation, corporal punishment or physical or mental abuse. This exclusion is not limited to the acts of any one particular person but is absolute and any claim arising from any such act is denied.

aa. Controlled Substances

There is no coverage for bodily injury or property damage arising from any controlled substances. The exclusion defines controlled substance and clarifies that legitimately prescribed drugs are not part of this exclusion as long as the person using the drugs obtained them lawfully and is following the directions of his or her health care professional.

This exclusion refers to a Federal Law, so any modification to that law (particularly additions to the list of controlled substances) automatically alters the application of this exclusion.

bb. Association Liability

Coverage does not apply to any loss assessments levied against an insured by a property owners' organization.

Example: Josie belongs to Veggietown’s Farmers Coop. She just received a bill for $3,800 which is her share to repair a coop silo that was destroyed in a windstorm. The silo is jointly owned by all members of the Coop and, per Coop membership, she bears partial responsibility for loss or damage to such property. Her umbrella will not respond to reimburse for such levies.

cc. Migrant and Seasonal Agricultural Worker Protection Act

There is no coverage for any damages awarded because of any violation involving the Migrant and Seasonal Agricultural Worker Protection Act (M.S.A.W.P.A.) or to any violation of a regulation that comes out of the Act.

dd. War

The term is not defined in the policy. It is considered to be actions between governments or actions against a governmental entity such as insurrection or civil warfare. Terrorism involves random acts of violence without declared intentions and is not considered war. Any discharge of nuclear weapons is considered war and is not covered.

ee. Employees’ Retirement Income Security Act

This policy does not cover against any damages or obligations under the Employees’ Retirement Income Security Act (E.R.I.S.A.) and any of its federal, state, or local amendments.

Note: The ERISA requirements are best met by purchasing a Fidelity policy with the ERISA endorsements since this is more a fiduciary responsibility than a liability.

Related Article: Satisfying ERISA Bond Requirements

ff. Personal Injury

Bodily injury arising out of personal injury is not covered. Any consequential bodily injury due to personal injury is covered in the Personal and Advertising Injury Liability Section. This eliminates the possibility of duplicate coverage.

gg. Recording and Distribution of Material or Information in Violation of Law (04 16 change)

Either bodily injury or property damage that is connected to activities that break privacy-related laws such as the Telephone Consumer Protection Act, the 2003 Can-Spam Act, Fair Credit Reporting Act, Fair and Accurate Credit Transaction Act and/or any similar law. In other words, there is no coverage for loss should the insured be accused of recording, using or transmitting material that third parties claim are in violation of these laws.

hh. Agritainment (04 16 addition)

There is no coverage for bodily injury or property damage related to agritainment – a term that is defined in the Definitions Section. This exclusion is far reaching and applies if the injury is directly or is indirectly related to the agritainment. One example provided is that agritainment acts or omissions that involve a service, a promise, a service or a duty even if only implied are excluded. This exclusion does not apply if coverage is provided in the underlying policy. In that case, the coverage provisions of this policy follow the coverage provisions of that underlying coverage unless a specific directive in this policy amends this.

Related Article: Agritainment Endorsements

COVERAGE I–PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE

1. Insuring Agreement (04 16 change)

The insurance company pays losses, after recoveries and salvage, that exceed either an insured’s underlying policy coverage limits or the self-insured retention. The loss must be due to an obligation to pay because of a covered personal injury or advertising injury incident in the primary policy that also qualifies for coverage under the umbrella. The company has the right and duty to both defend the insured and to control the legal defense in any situation where the underlying limits have been depleted by loss payments or where there is no underlying coverage. There is no defense if insurance coverage does not apply.

Refer to Supplementary Payments – Coverages H and I for a list of services payments the insurance company will pay. These are the only paid services under this policy.

Personal and advertising injury coverage applies only over the retained limit of underlying insurance specifically shown on the declarations. There are two types of retained limits. The first is the each personal and advertising limit for the underlying insurance. The second is an exposure retained limit. Such a sublimit would occur when the underlying policy provides a small amount of coverage for a specific exposure that would otherwise be excluded. If that exposure limit is shown on the declarations, the umbrella drops down to the retained limit and pays in excess of it. If the exposure limit is not entered, not only does the umbrella NOT drop down to that sublimit, it does not respond to any bodily injury or property damage arising out of that exposure.

Coverage only applies when a personal injury or advertising injury claim arises due to an offense that occurs during the policy period. A personal injury offense must be directly related to an insured’s personal activities or farming operations. An advertising injury offense must also be committed during the insurance policy term for coverage to apply.

Example: Mary attended a school meeting of students' parents and became enraged over statements made by Susan. Mary accused Susan of lying, gambling and having a questionable character. Susan is very upset because she had shared her past history of gambling addiction in strict confidence. Susan hires a lawyer and sues Mary the very next week. Mary has a Farm Liability policy and a Farm Umbrella Liability policy with coverage for personal activities. The insurance company will respond.

2. Exclusions

a. This group of exclusions applies to personal injury or advertising injury.

(1) Knowing Violation of Rights of Another

There is no coverage if the insured violates the rights of another with knowledge of the violation or knowingly directs someone else to violate another’s rights.

Example: Let’s continue with the Mary vs. Susan situation above. A few days after receiving the suit papers, Mary looks in her rearview mirror while driving and sees Susan in the car behind her. Mary abruptly hits the brakes, turns her car sideways, and effectively traps Susan behind her for ten minutes. Mary then straightens out her car and continues home. Susan amends her lawsuit, adding an allegation that Mary violated her right of free passage. Mary’s insurer denies coverage and defense for this allegation.

(2) Material Published with Knowledge of Falsity (04 16 change)

Coverage does not apply to any distribution of information, regardless of the manner of distribution, when it is known by the insured to be untrue, whether oral or written, published by the insured or by others at the direction of the insured.

(3) Material Published Prior to the Policy Period (04 16 change)

There is no coverage for loss or damage because of publication of material, regardless of the manner of distribution, that took place for the first time prior to the inception date of the policy.

Example: Continuing with the example above, if the statements made by Mary against Susan had been made prior to the policy effective date, the current policy would not cover or apply to them.

(4) Criminal Acts

Coverage does not apply if the insured commits or directs others to commit a criminal act that results in personal injury or advertising injury. However, the insurance company must defend the insured until the act committed is proven to be criminal through the legal process.

Example: More on Mary and Susan. Mary is determined to prove that Susan is of questionable character and breaks into Susan's house to gather evidence. She gives the information she found to the local newspapers who use it to publish a story. Susan contacts the police to inform them that her house was burglarized. Suspecting that Mary had something to do with it, she suggests the police investigate Mary. Mary’s insurance company defends her until their investigation confirms the criminal activity.

(5) Contractual Liability

There is no coverage for personal injury or advertising injury arising from any assumption of liability under a contract. Coverage does apply if liability would have existed without the contract. In addition, coverage does apply to false arrest, detention, or imprisonment offenses when liability for such actions had been assumed in a written contract.

Example: Tim’s “Fresh Vegetable Farms” decides to do some advertising on several area radio stations. Tim contracts with Josie to write several ads and, per the contract, Tim agrees to take responsibility for the ad content. Later, Tim is sued by several farmers who are upset by the ads which state that Tim’s farm is the only area farm that is 100% organic (even though Josie knew that the statement was not true). Tim’s insurer does not respond to the suit involving Josie’s actions since the liability was assumed under contract.

Agreements which involve taking on another party’s obligations can lead to complex situations.

(6) Pollution

There is no coverage for any act involving pollution in any manner. There are no exceptions.

Related Court Case: Absolute Pollution Exclusion Rules

(7) Employment-related Practices (04 16 change)

Coverage does not apply to any refusal to employ, termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or similar employment-related practices, policies, acts or omissions or consequences resulting from any of these practices.

This exclusion applies whenever the event occurs. It could be before hiring, during employment or following termination.

(8) Professional Services (04 16 change)

No coverage applies to injury arising out of the providing or failure to provide any professional services.

Allegations of negligence supervision, hiring, employment, training or monitoring of other in their professional actions are also not covered.

(9) Recording and Distribution of Material or Information in Violation of Statutes

Injury that is, in any way, connected to activities that break privacy-related laws such as the Telephone Consumer Protection Act, the 2003 Can-Spam Act, Fair Credit Reporting Act, Fair and Accurate Credit Transaction Act and/or any similar law. In other words, there is no coverage for loss should the insured be accused of recording, using or transmitting material that third parties claim are in violation of these laws.

(10) War

There is no protection available for injury claims that are related to war or similar military activity.

(11) Infringement of Copyright, Patent, Trademark or Trade Secret (04 16 addition)

Coverage does not apply to personal and advertising injury that arises out of any infringement of copyright, patent, trademark, trade secret, or any other intellectual property rights.

Note: There is no requirement that the named insured, an insured, or even someone acting on behalf of either does the infringing. All infringement is excluded.

There are two exceptions. This part of the exclusion does not apply:

· When the named insured's advertisement infringes on copyright, trade dress, or slogan

· When use of another’s advertising idea in the named insured’s advertisement is considered infringement of intellectual property rights

(12) Electronic Chatrooms or Bulletin Boards (04 16 addition)

Personal and advertising injury that arises out of an electronic chatroom or bulletin board the insured owns, hosts, or controls is excluded.

Note: It is important to note that coverage applies for personal and advertising injury related to posting on chatrooms and bulletin boards as long as the insured did not control, host, or own them.

(13) Unauthorized Use of Another’s Name or Product (04 16 addition)

The insurance company does not pay for personal and advertising injury that arises when the named insured uses the Internet to try to mislead another’s customers or potential customers. This exclusion applies when the misleading is caused by unauthorized use of the name or product of another party in the named insured's email address, domain, or metatag.

b. This group of exclusions applies only to personal injury

(1) Business Pursuits

Any personal injury offense arising from a business of the insured not related to farming is not covered. The exception to this exclusion is for a part-time business conducted by a member of the household under the age of 21 and having no employees.

Example: Fran, a 20-year old college student, lives with her parents. Her parents’ farm is protected by a farm liability and a farm umbrella policy. Fran, while home during summer vacation, starts up a resume writing and editing service that is so successful that she hires three other students to help. Losses related to this business, even though all the workers are younger than 21, would be ineligible for coverage.

(2) Civic or Public Activities for Pay

Coverage does not apply to any personal injury claimed to arise from any paid civic or public activity. This exclusion is important because rural areas need as much assistance as they can get, and farmers are a vital part of their communities. Farmers often occupy positions on the school board, the fire department, the hospital board and the township or village councils. These activities represent substantial liability exposures and coverage is best provided by the applicable organization if any compensation for services is involved.

(3) Personal Injury to an Insured

Coverage does not apply to any personal injury experienced by a person who qualifies as an insured under the Farm umbrella policy. The exclusion also extends to any requests for repaying or sharing financial responsibility with third parties concerning personal injury suffered by an insured.

(4) Agritainment (04 16 addition)

c. This group of exclusions applies to advertising injury:

(1) Breach of Contract

No coverage is provided for advertising injury arising from breaking a contract. The only exception is due to the insured breaching an implied (not written) contract related to the use of another party’s advertising ideas in the named insured’s own advertisement.

(2) Quality or Performance of Goods-Failure to Conform to Statements

Advertising injury due to statements made in advertisements concerning how well a product works or the quality of a service provided by the named insured is not covered.

(3) Wrong Quotation or Description of Prices

Coverage does not apply to advertising injury caused by a pricing discrepancy in an advertisement of the named insured.

(4) Insureds in Media and Internet Type Businesses (04 16 name change and coverage change)

An offense committed by an insured that is in the businesses of advertising, broadcasting, publishing, or telecasting. There is also no coverage if the insured’s business designs or determines website content for others, or provides Internet search, access, content, or service.

There is an exception. This exclusion does not apply to the sections of the definition of personal and advertising injury that address false arrest, detention or imprisonment, malicious prosecution, or wrongful eviction, entry, or invasion of private occupancy.

This coverage form explains that placing frames, borders or links, or advertising on the Internet is not considered being in the business of advertising, broadcasting, publishing, or telecasting, even if the placement is provided to others.

Example: Larry has such good help from his brother-in-law that he turns over much of his farm’s daily operations to him and devotes more time to his part-time job as a local radio farm show host. Larry learns he is being sued by a popular agricultural expert because he apparently misread some advertising copy and kept telling listeners the wrong date for the expert’s seminar at the convention center. The expert blames Larry for poor ticket sales at-the-door. The farm umbrella policy does not cover and will not defend this suit.

d. There is no coverage for any loss, cost, or expense related to pollution.

The exclusion applies both to any such damages as well as to any associated expenses (such as testing, monitoring, remediating, assessing, etc.)

Example: Local authorities discover several dozen wells contaminated with E-coli bacteria. They trace the problems to run-off from Harry’s Hog Farm. After the problem is corrected, Harry is ordered to pay the costs for testing the wells for the next six months. The expense for testing is not covered by the Umbrella Liability policy.

SUPPLEMENTARY PAYMENTS–COVERAGE H AND I (04 16 change)

1. The policy pays for supplementary payments under bodily injury, property damage, personal injury, and advertising injury liability for the following expenses, when the insurance company defends a case brought against the insured:

Costs incurred by the insurance company
The cost of bonds to release attachments. However, the cost of only bond limits up to the available limit of insurance is covered. The cost of excess bond amounts is the insured’s responsibility. The insurance company is not required to furnish these bonds.
The insured’s expenses for assisting the insurance company are covered only if the assistance is requested by the insurance company. These expenses include the loss of earnings incurred by the insured limited to no more than $250 per day.

Example: Paula knows that a relative of a person injured on her farm witnessed the accident. Since Paula thinks the person could help her case, she makes an overnight trip to that person’s town, questions her, and gives the statement to her insurance company. The company is upset that she interfered with the claim investigation but has the satisfaction of telling Paula that her gas, motel, meals, and other expenses are her responsibility and are not reimbursable by the insurance company.

Costs taxed against the insured due to the lawsuit. These court costs do not include attorney fees or expenses that are taxed by the court against the insured.
Prejudgment interest but once the insurance company makes an offer to settle, no further prejudgment interest will be paid.
Interest that accumulates on the entire judgment amount. Once the insurance company pays its portion of the judgment, offers to pay, or deposits the amount it owes with the court, it is no longer responsible the interest that accumulates on any the remaining amount owed, if any. Coverage for all of the above expenses is available in addition to the Limits of Insurance.

All the above expenses are paid separately from the insurance limit. A payment does not reduce the amount of insurance available for the actual claim. This is an important point to consider when purchasing Umbrella coverage. Proprietary umbrella policies of some insurance companies place these expenses within the insurance limit. This different approach can considerably reduce the amount of available limits.

2. Company’s Defense Rights

When the umbrella carrier gets involved with the defense of a claim, it pays for any expenses it incurs. However, the Umbrella carrier does not contribute to the expenses of the underlying carrier under any circumstances because that is the obligation of the underlying carrier.

Example: Both Primaree Fire & Casualty and X-S Unlimited cover Thrifty Acres farms. Several families sue Thrifty for an accident involving their children and Thrifty’s farm machinery. A claims supervisor at X-S is nervous because Primaree provides a limit of only $500,000 of underlying coverage. The supervisor decides to open a separate investigation to determine the chances of X-S having to respond to the losses. X-S spends $23,000 and handles it as a business expense that does not affect any coverage it may provide for the claim. Primaree notices how interested X-S is in this case so decides to share the information it has gathered and sends a bill for ½ of its costs. X-S declines to pay because it has no obligation to pay any defense costs incurred by the underlying.

3. Indemnitees

This part of the Supplementary Payments applies to any indemnitee named in the suit. The company defends such persons under certain circumstances. The contract between the insured and the indemnitee must require defense; the defense must be related to an item in the contract; the insurance must apply to the liability assumed in the contract; there must be no conflict between the insured and the indemnitee in the action; and the same legal counsel must represent both the insured and indemnitee. The indemnitee must assist in the defense as requested just like any other insured.

If all these conditions are met, the indemnitee is defended using Supplementary Payments and the payment does not affect the Limits of Insurance. If the conditions are not met, all supplementary payments are treated as within the insurance limits and the amount of insurance available for settling claims is reduced.

Example: Mark entered into a lease agreement with Peter. Under the terms of the lease, Mark agreed to cover Peter’s liability for the premises and to provide a defense if Peter is named in a suit. A serious loss occurs, and the insurance company agrees to defend both Mark and Peter. Peter is uncomfortable with the lawyers used by Mark’s company, argues with them and Mark, and refuses to cooperate. In the end, he refuses to assist with the defense. Mark’s insurer continued with the suit’s defense, but all legal costs related to Peter reduce the insurance limit available to Mark. Mark’s defense costs continue to be handled as additional coverage, but he suffers because of Peter’s lack of cooperation. Later, with his policy limit exhausted, Mark is faced with serious out of pocket costs. Further, Peter files a separate suit to force satisfaction with the contract.

COVERAGE EXTENSION–COVERAGE H AND I (04 16 change)

This one extension can be a very important one. Whenever the words “you” or “your” are used in the policy, it means the named insured and also the named insured's spouse, if the spouse lives in the same household as the named insured. This extension applies to any endorsement attached to the policy.

Example: Paul Miller owns Miller Farms. He marries Paula but does not specifically add her to the policy because she becomes a named insured as a spouse. Paula decides to leave Paul and moves to town. She rents an apartment and buys a dog for protection. On a day she is away, the dog gets loose and seriously injures a child. The claim is submitted to Miller Farms’ insurance carrier. The claim is denied because Paula is not living in the household.

SECTION II–LIMITS OF INSURANCE

1. The umbrella is a policy purchased for its limits as a critical supplement to an adequate program of primary insurance. Understanding exactly how the limits work helps to determine the amount of insurance needed. The limits shown on the Declarations are the most the insurance company will pay.

The number of insureds or the number of claims does not affect the limits. The limits do not change in response to the number of vehicles involved in a loss or by the number of resulting lawsuits. It does not matter how many different people or groups file claims or suits. The policy pays only the limits stated in the declarations.

Example: Wynsome Willow is sued for a horrible vehicle-related loss that easily exceeds the primary farm liability policy limit. Wynsome’s Farm Umbrella policy has a limit of one million dollars and that entire limit is available. Here is an example of how a claims settlement could be affected by several different scenarios:
Claim Elements	Scenario One	Scenario Two	Scenario Three	Scenario Four
No. of Insureds	One	Four	Three	Two
No. of lawsuits	Three	Two	Four	One
No. of claimants	Six	Eight	Three	Four
No. of vehicles	Four	Three	Two	One
Damage Amount	$1,214,000	$2,146,000	$859,000	$1,089,000
Total Payment	$1,000,000	$1,000,000	$859,000	$1,000,000

2. Aggregate Limit

The Aggregate Limit is the most important policy limit. Once it is exhausted by claim payments, all coverage ends, and all policy supplementary payments end as well. An important note is that this limit does not apply to losses due to bodily injury or property damage that result from ownership, maintenance or use of covered autos. No aggregate applies to covered auto losses, just as no aggregate limit applies to covered autos in the ISO auto coverage forms.

3. Occurrence Limit

The Occurrence Limit applies to all Coverage H–Bodily Injury and Property Damage exposures. This is the most paid in any single covered occurrence that results in bodily injury or property damage. Except for losses involving autos, this limit is subject to the policy Aggregate Limit. While the stated occurrence limit may be sufficient for a loss, if the aggregate is exhausted or reduced, the stated occurrence amount becomes a moot point.

4. Personal and Advertising Injury Limit

This limit applies only to Coverage I losses. This is the limit available for all personal injury or advertising injury to a particular person or organization. If a number of offenses are committed against a single person or organization, this limit is the most available for responding to all offenses against that person or organization. This limit is also subject to the policy Aggregate limit.

5. Non-concurrency

Coverage under this policy does not start until the primary policy limits are exhausted by covered losses. If the policy period does not match this umbrella policy period, only the losses that occur or offenses that are sustained during the period of this umbrella can contribute to the exhaustion of limits. This is very important because a significant coverage gap for the insured can be created.

Example:

Underlying policy period: 01/01/18 to 01/01/19. Limits: $500,000 occurrence/$500,000 aggregate

Umbrella policy period: 06/01/18 to 06/01/19. Limits: $5,000,000 occurrence/$5,000,000 aggregate

Date Of Loss	Amount Of Loss	Underlying Aggregate Available After Payment	Umbrella Retained Limit	Umbrella Payment
02/01/19	$50,000	$450,000	N/A	None
03/01/19	$100,000	$350,000	N/A	None
04/01/19	$200,000	$150,000	N/A	None
05/01/19	$50,000	$100,000	N/A	None
06/01/19	$100,000	$0	$100,000	None
07/01/19	$200,000	$0	$300,000	None
08/01/19	$300,000	$0	$500,000	$100,000
09/01/19	$200,000	$0	$500,000	$200,000
10/01/19	$300,000	$0	$500,000	$300,000

The umbrella does not begin to pay until the underlying payments satisfy the retained limits. In this non-concurrent policy, $400,000 in aggregate losses occurred prior the umbrella policy period. This means that the underlying aggregate will be exhausted by $400,000 before the retained limit is met and the umbrella starts paying. This $400,000 gap in limits is the insured's responsibility. The umbrella begins to pay once the retained limit is met.

If the Aggregate is depleted because of other loss payments, the amount available for payment could be less than the limit. When a new policy period begins, the policy limits are also refreshed. If the policy period is extended, the aggregate is also extended out for the applicable number of months. However, if a short-term policy is issued, the aggregate is refreshed and available for that short term.

Example: The insurance company informs the insurance agent that her client’s umbrella is being non-renewed because of the claims history. Even though the insured changed and improved her operations, the losses continued. The agent asks for time to find replacement coverage. The company offers to extend the policy, but the agent is thinking ahead for his client and requests a three-month short-term policy instead. The rating supervisor tells the underwriter that it is easier to write a short-term policy than to extend the expiring one, so the request for the short-term policy is approved. The company exposure is increased considerably by granting this simple request. The agent has a happy client, refreshed limits, and breathing room to find a new company to write the risk.

SECTION III–CONDITIONS

Loss Conditions

1. Bankruptcy

Even if the insured becomes insolvent, the insurance company is required to respond as though there was no bankruptcy.
If the underlying insurance carrier becomes insolvent, the umbrella continues to operate as though it is still solvent. As a result, the underlying insurer’s ability or inability to pay the primary limit does not affect how the umbrella responds. Coverage is triggered only when the stated underlying limit of insurance is exceeded. In other words, the umbrella would respond on an excess basis to the insured’s substantial out-of-pocket payments rather than an underlying policy limit.

2. Duties in the Event of Occurrence, Offense, Claim or Suit

The named insured has a number of requirements to complete in order for a claim to be paid. If the insured chooses to not comply with the requirements and that failure prejudices (harms) the insurer’s rights, the claim can be denied. The requirements are:

· The named insured must inform the insurance company about a situation that could result in a claim as soon as practicable, as opposed to as soon as possible. The notice must include information concerning how, when, where, who, and any witnesses to the event. A complete description of the incident is important and should be included. The sooner the company is aware of and can react to a situation, the better for all parties.

· Once the claim or suit is brought against any insured, all details of the notice must be recorded. Initial notification to the company should be done as soon as practicable and written notice of the suit or claim should then follow, again as soon as practicable.

· The named insured and any other insured involved must notify the police or the appropriate law enforcement agency if a crime is suspected or has actually occurred. The insured must immediately send copies of all legal papers to the insurance company to permit them to obtain records, cooperate with them and assist them in the enforcement of any applicable rights.

· No insured may assume any obligations, except for first aid expenses. If the insured wishes to pay or reimburse with personal funds, the payment does not create an obligation for the insurance company to reimburse the expense paid by the insured. This brings up a potentially more important consideration. If an insured decides to pay another party for injuries or damages, doing so could hurt the insurance company's legal position. Voluntary payments are frequently interpreted as an admission of guilt. An insured making such payments could face potentially serious consequences, such as breaching the cooperation provision of the policy.

3. Legal Action Against Us

This coverage is being provided on behalf of the named insured so the insurance company cannot be joined in any suit that involves any insured.

The insurance company can be sued but only after all conditions and terms of the coverage form have been met.

This provision also states that when the insurance company is sued, the policy’s limit remains the maximum that is available and that the coverage form, terms, and conditions dictate what circumstances the insurance company is responsible for paying. This provision forces insureds to exhaust all other means to resolve possible problems before resorting to the courts.

4. Other Insurance

This insurance is obligated to only respond to losses when all other sources of coverage have been utilized. This coverage is intended to operate independently of any other coverage. However, this condition does not apply if the other existing insurance is written to be excess over this policy.

Because this is an excess policy, there is no responsibility on the part of the insurance company to provide a defense in the place of another insurance company or responsible party. However, if no other party takes on the defense, the umbrella insurer may choose to do so. If appropriate, the insurer also assumes the insured’s rights under the other policies.

When other umbrella or excess coverage is available to respond to a loss, this policy pays only its share of the ultimate net loss.

This insurance pays only an amount in excess of the sum of the amount available under other insurance had this policy not been available plus deductibles and self-insurance.

5. Transfer of Rights of Recovery Against Others to Us

The insured must transfer all rights to recover from third parties to the insurance company. The insured must not impair those rights and must agree to help exercise those rights through lawsuits if necessary. However, the rights apply only to the amount of the loss that the insurance company paid.

Additional Conditions

1. Liberalization

Any positive change in the carrier’s form that benefits the insured automatically becomes a part of the policy if the change is made without an additional premium charge and if the change takes effect within 45 days prior to or during the policy period.

2. Appeals (04 16 change)

When either the insured or an underlying carrier decides not to appeal a judgment that affects this insurance, the insurance company can decide to do so at its own expense. The insurance carrier is responsible for taxable courts costs and other legal expenses that are associated with the appeal in addition to the pre- and post judgment interest.

Example: Randy has had enough of courtrooms. An award in the amount of $2,000,000 was upheld in an appeal. Randy and the underlying carrier agree that now is the time to stop. The umbrella carrier disagrees and wants to move ahead to the state supreme court. Even though Randy does not want to continue, he must proceed or risk losing the umbrella policy protection.

3. Representations

The named insured agrees that all statements in the policy are accurate and based on representations made by the named insured. This provision acts as a basis for an insurer to take appropriate action if it discovers any significant or material discrepancies.

4. Fraud

Coverage does not apply for an insured that acts in a fraudulent manner or makes fraudulent statements regarding any occurrence or offense covered by the umbrella liability policy.

5. Separation of Insureds

All insureds named on the policy are treated equally except for specific responsibilities assigned to the first named insured. When a claim is brought against more than one insured, each insured is treated separately. The only restriction on each named insured and insured being treated separately is the limits of insurance. The limits apply to the policy, not to a particular insured.

6. Loss Payable (04 16 change)

The policy does not respond until both of the following occur:

Either the insured or the insured’s underlying carrier is obligated to pay the retained limit
A final judgment or settlement is determined, or a written agreement is reached between the insured, the claimant, and the insurance company that obligates the insured to pay in excess of its retained limits

Note: The prior wording mentioned that an actual trial had to take place. That has been removed.

7. Transfer of Defense

When the underlying policy limits are used up because settlements or judgments have been paid out, this policy becomes responsible and has the right and duty to defend the insured. The insurance companies agree to fully cooperate with one another in the transfer because it benefits all parties.

Example: A barn explosion was devastating. Three people were killed and 14 injured. Company A is the underlying carrier, has a limit of $500,000, and likes to settle claims as quickly as possible. They were able to stay out of court in this case and paid out their policy limit. They notified the umbrella carrier and turned over their information on the open cases and the lawyers’ conference on the open issues. The settlement hearings continued, and the claimants didn’t even notice the change of carriers.

Note: This provision would be more helpful if it also addressed the possible transfer of defense from the umbrella's insurer to the insured, as it is done by some professional liability policies.

8. Maintenance Of/Changes to Underlying Insurance (04 16 change)

The underlying carriers and their limits are shown on the declarations. These coverage amounts must be maintained except for reductions in limits due to loss payments. If the insurance and limits are not maintained, the umbrella coverage is unchanged but acts as though the underlying limits are still intact. If a broadened coverage feature is added to the underlying policy during the policy period, the broader protection is not recognized by the umbrella policy during the policy period.

The insured is obligated to notify the umbrella carrier of any changes in the underlying primary coverage in terms of scope of coverage, limits or changes in carrier, including cancellation, non-renewal or any other type of termination or replacement.

Example: Sam's underlying policy recently had a new endorsement added that dramatically amended the liability coverage. Sam paid the endorsement premium, but no one informed the umbrella carrier of the change. A substantial loss covered by the endorsed policy occurred and Sam was shocked when he discovered that the umbrella did not follow the coverage of the primary policy for the broadened coverage.

9. Coverage Territory

The coverage territory is anywhere in the world. If the suit is brought in a jurisdiction where the insurance company cannot represent the insured, they will reimburse the insured for the expenses the company would normally incur to defend a claim. If the jurisdiction involved does not permit the insurance company to pay money on behalf of the insured, the company will reimburse the insured for the settlement. All reimbursements for settlements are made in United States currency and are valued as of the date of the insured’s legal obligation. All supplementary payments are also paid in United States currency but are valued as of the date the expenses were incurred.

If there is any dispute between the insured and the insurance company, it must be filed in a court in the United States or its territories, Puerto Rico, or Canada.

Example: Mitch was in Argentina and struck a pedestrian. The injury was significant, and he was sued. The case was tried in Argentina and a judgment against Mitch was levied on July 1. Because the underlying carrier did not provide coverage in Argentina, Mitch was responsible for the self-insured retention. He then went to the umbrella liability policy carrier for payment. Mitch paid his portion of the loss on July 15 and was reimbursed on August 1. The amount of reimbursement was based on the currency exchange rate of July 1.

SECTION IV–DEFINITIONS

1. Advertisement (04 16 change)

Any public notice involving the named insured’s farm-related products (as well as its goods or services) published for the purpose of gaining business. Internet placed information is also considered advertisement including the part of the named insured’s website designed to attract customers or supporters. Other parts of the website are not considered advertisement.

2. Advertising Injury (04 16 change)

Any injury that takes place due to any of the following:

Slander or libel regarding an organization, person, or anything associated with the products or services of that person or organization. This applies regardless of the manner in which the information is communicated.
Violation of any rights of privacy through an oral or a written publication. This applies regardless of the manner in which the information is communicated.
Using someone else’s idea in the named insured’s advertisement.
Infringing on the copyrights, slogans, etc., of others when advertising.

3. Agritainment (04 16 addition)

Any activity that meets all of the following criteria:

Agricultural or aquacultural related

Operated primarily on the insured location

Note: The term “primarily” is used so the activity may also take place off the insured location as long as it is “primarily” taking place on the insured location. As an example, a hayride may be primarily on the insured location but may leave the insured location by crossing a road and then continue on the insured location on the other side of the road. This could be still considered on the insured location.

Tourism or entertainment purpose
Monetary or other compensation is the reason the activity is taking place

Note: This is a new term and will require court interpretations before it is fully refined. Many terms are open ended. The last item states that monetary or other compensation is required but doesn’t state who is required to receive such compensation. This would mean that if the named insured is permitting the activity to take place so that a charitable organization can conduct a fundraiser but receives no compensation, it is still considered agritainment because the charitable organization is receiving compensation.

4. Auto

Any vehicle designed for use on public roads that is motorized or is a trailer or a semi-trailer. Mobile equipment is not considered an auto. However, any vehicle that is referenced by a financial responsibility, vehicle registration, or similar law is also considered an “auto” under this policy.

5. Bodily Injury

All sickness, disease, and bodily injury, including death. Mental anguish or mental injury is also bodily injury but only when resulting from a bodily injury.

6. Business (04 16 change)

Activities that are not agritainment, not part of the farming or custom farming operation and that generate monetary or other compensation. The business activity could be a trade, a profession, or a service.

7. Covered Auto

Any auto covered by and defined in the underlying insurance coverage.

8. Custom Farming

A service provided to other farmers, such as planting, cultivating or harvesting performed under the direction of the farmer owning the location where the service is being performed. It does not include operations at a location controlled by the insured, a neighborly exchange of services, or a free service provided.

9. Farm Employee (04 16 change)

Any employee of the insured whose duties are primarily in connection with the maintenance or use of the insured location as a farm. Duties include the maintenance or use of the insured's farm equipment. Employees that also work in the non-farm business of the insured or in agritainment are not included in this definition while working in those areas.

10. Farming (04 16 change)

Any agriculture or aquaculture operation, including roadside stands on the farm premises used to sell farm products principally produced by the named insured. Farming does not include any other retail activity, any mechanized processing operations or any agritainment on the premises or agritainment related retail activity or mechanized processing.

11. Hostile Fire

Any fire that goes out of control leaves its intended place and breaks out to places where it is not supposed to be.

Examples:

- Fire burning within a brick barbecue on the insured premises – Friendly fire

- Flaming charcoals that fall outside of a brick barbecue on the insured premises – Hostile fire

12. Impaired Property

Property that cannot be used because of a problem with either the named insured’s product making up part of the property or because the named insured has not delivered on a service required by contract. Until the named insured repairs their product or completes the requirements of the contract and the property can become useful again, the property is considered impaired. The impaired property cannot be a product or work of the named insured.

13. Indemnitee

A party whose liability for payment of covered damages has been assumed by an insured under an insured contract or agreement.

14. Insured (04 16 change)

The named insured is an insured.

a. For coverage not related to covered autos:

(1) Based on the type of entity on the declarations:

· Individual - Members of the household who are relatives and others who are under the age of 21 and in an insured’s care. An enrolled student living out of the household is an insured if under the age of 24 and away at college but was a member of the household before going to school.

Note: Prior editions limited insured status to non-relative students at school to 21 but in this edition, the age is raised to 24.

· Partnership or joint venture - All partners and members and their spouses, but only for their activities in the farming operations.

· Limited liability company - All members for the conduct of the farm. All managers when carrying out duties as managers.

· Any other organization - Executives and directors for their duties as such and stockholders, but only as relates to their interest as stockholders.

(2) Employees are insureds for actions that cause injury to parties other than the named insured, partners, members or other employees but only if the actions are within the scope of their duties. Executive officers and limited liability managers are not employees. Employees are not insureds for any consequential injuries to family members of injured employees nor for obligations to third parties due to any injuries which are not covered elsewhere in this paragraph.

(3) Any party acting as a real estate manager. This can be either a person or an organization but cannot be an employee.

(4) Any person responsible for owned animals or watercraft, but only with respect to such property owned by either an individual named insured or another defined insured in paragraph a. in this definition. These parties are insureds only when the animals or watercraft are eligible for coverage, the property is not part of a business or agritainment and the animals or watercraft are in the possession of the party with the insured's permission. This last qualification can easily work against the insured’s best interest.

(5) A person or organization that has possession of the named insured’s property when that named insured dies but before a legal representative is appointed. The status applies only to liability arising out of the use or maintenance of that property.

(6) The legal representative of an individual named insured if that named insured dies.

b. For liability coverage arising out of covered autos:

(1) All resident members of the household, relatives and any person under the age of 21 who is in the care of any person resident member of the household.

(2) Anyone using a covered vehicle with the named insured’s permission is an insured except for the following:

· The owner of a hired vehicle, unless it is a trailer connected to an owned covered auto.

· An employee, if the vehicle is owned by the employee or by an individual living in the employee’s house

· Anyone loading or unloading a covered auto, except residence employees, farm employees, partners, members.

· Anyone leasing or borrowing a covered auto

· Any partner or member when using a vehicle they own or owned by a member of their household.

· Any employee for bodily injury to a fellow employee resulting from farming operations.

· Family members of family members of a fellow employee but only when bodily injury is a consequence of that employee’s injury.

(3) Anyone using a covered auto in the auto business, such as repair, parking, or storage unless that business is owned by the named insured.

c. Anyone responsible for the conduct of an insured but only to the extent of that particular liability.

In the case of an additional insured named on an underlying policy, that interest is also an additional insured under the umbrella liability policy. At times the contract (not required to be written) with an additional insured requires certain coverage limits. In such case, subject to the limits of insurance in this policy, the umbrella will pay no more than the lesser of the amount required in the contract minus the underlying coverage and the limit of insurance on the declarations.

Coverage for the additional insured is not permitted to be any broader than the coverage provided for that additional insured in the underlying coverage.

Coverage under this policy is for the current named insured and the current business ventures of that named insured. Coverage does not apply to any current or past business associations not named as an insured.

15. Insured Contract

All of the following are considered insured contracts:

A lease contract except that any agreement regarding indemnification because of fire at rented premises is not.
Any sidetrack agreements
License and easement agreements but not when related to construction or destruction activities within 50 feet of a railroad.
Any municipal obligation due to an ordinance. The one exception is when the obligation is for work for the municipality.
Any contract for the rental or leasing of an auto, as long as it relates to the farming operations. However, it does not cover damage to the rental vehicle and applies only if similar coverage is available in the underlying. It also does not include any part of an agreement that applies to construction or demolition activities within 50 feet of railroad property that affect the infrastructure of that railroad.
Any agreement or contract that pertains to farming operation in which the named insured assumes tort liability of another for bodily injury or property damage. It does not include any part of an agreement that applies to construction or demolition activities within 50 feet of railroad property that affect the infrastructure of that railroad.

16. Insured Location (04 16 change)

Insured location is the following:

The farm premises, private approaches, the grounds and the residence premises
Parts of other locations, structures, and grounds used as a residence and acquired during the year as a residence or listed on the declarations
Any premises used with any of the premises indicated above
A non-owned location used as a temporary residence by an insured
Insured owned or rented vacant land
Insured owned or rented land where a residence to be occupied by an insured, farm employees or residence employees is being built or a building to be used by an insured in farming operations is under construction
Cemetery plots or burial vaults belonging to an insured
Premises occasionally rented to an insured but not if rented for business or agritainment purposes
Any newly acquired farm premises acquired by the named insured or spouse during the policy period

17. Loading and Unloading

The moving of property that begins when property moves from the point where movement starts, continues during transport, and ends when placed at the point of delivery or the destination where it is accepted. Movement by a mechanical device that is not part of an aircraft, recreational motor vehicle, or watercraft is not part of loading and unloading but the use of a hand truck may qualify as unloading/loading.

18. Mobile Equipment

The following types of land vehicles and their attached equipment are mobile equipment:

Farm machinery, tractors, forklifts and bulldozers used primarily off public roads
Any vehicle when kept on or next to named insured’s owned or rented premises for the purpose of being used only on that premises
Vehicles using crawler treads are mobile equipment, but snowmobiles are mobile equipment only when at an insured location or on locations the named insured owns or rents
Any vehicle not described above having large equipment permanently installed on or in it, whether self-propelled or not. There is no reference or limitation concerning use on public roads. Power cranes, drills, diggers, loaders, shovels are the types of equipment that qualify as is road construction equipment.
Any vehicle that is not described above and is not self-propelled but is designed to give mobility to air compressors, generators, and pumps, as well as to any type of spraying, welding, lighting, well servicing or building cleaning equipment, items that move equipment and people up and down such as a cherry picker.
Any vehicle not described above in the first four items and not intended for moving people or property. This is modified by listing what types of self-propelled vehicles are NOT mobile equipment. Any self-propelled vehicle with attached equipment that is used for road maintenance, street cleaning, snow removal, moving people up and down, or spraying, welding, building cleaning, lighting and well servicing are considered motor vehicles and not mobile equipment.

19. Occurrence

Single accidents, as well as either continuous or repeated exposure to the same general harmful conditions, is an occurrence.

20. Personal Injury (04 16 change)

Any injury from any of the following activities, including any resulting or consequential bodily injury:

False arrest, detention, or imprisonment. This is more than just when civil authorities take these actions. If any person is not permitted to move about freely because of physical or verbal restraint, charges of detention or false imprisonment are possible.
Malicious prosecution includes false reports to law enforcement authorities that encourage investigation and cause the person subject to the reports pain and expense in defending themselves. It is similar to using civil government for harassment.
Landlords using their rights of eviction and entry in a wrongful manner and in such a way that a tenant loses their rights of private occupancy. This applies to the landlord or to someone acting on behalf of the landlord.
Slander or libel of a person or organization resulting from an oral or written publication regarding that person's or organization’s products or services. The publication can occur in any manner.
Violation of the rights of privacy of a person through an oral or written publication. The publication can occur in any manner.

21. Pollutants

Most of the unpleasant by-products of a farming operation or a residence. Irritants or contaminants that are solid, liquid, gaseous or thermal in nature such as, but not limited to, smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Recycled, reconditioned or reclaimed materials are included as waste.

22. Pollution Cost or Expense

All possible loss, costs, and expenses associated with monitoring, clean up, removal, containment, treatment, detoxification, or neutralizing pollutants that are required by a statutory authority. It also includes any suits brought by such agencies related to any of the activities indicated above.

23. Property Damage (04 16 change)

The actual damage to tangible property and loss of use of that damaged property. Loss of use of property that is not physically damaged is also property. All loss of use begins at the time of the physical incident that causes the loss of use.

Property damage for covered autos includes pollution cost or expense but only if also covered under the underlying.

Electronic data, as used in this coverage form, is not tangible property. Electronic data is used with electronically controlled equipment and consists of information, facts, or programs. The data is created and transported using software and is stored on various types of media.

Note: This means that damage to electronic data is not covered because electronic data is not tangible property.

24. Recreational Motor Vehicles

These are grown-up toys that can also be very useful in farm operations such as dune buggies, golf carts, off-premises snowmobiles, and all-terrain vehicles. It also includes any vehicle not listed or described above whose design is for recreational activities. Any vehicle towed by any of the vehicles described above is also included in this definition.

25. Residence Employee (04 16 change)

Any employee of the insured who performs duties in connection with the maintenance or use of the residence premises or elsewhere, including household and domestic services. This definition does not apply to any person working in conjunction with any business or agritainment of an insured.

26. Residence Premises (04 16 change)

This is the named insured’s principal residence and the surrounding grounds and structures but excluding any portion of any building or structure used for business or agritainment purposes.

27. Retained Limits

These are the primary policy limits that underlie the umbrella liability policy. They consist of either the limits of the underlying coverage or the named insured's self-insured retention.

28. Self-Insured Retention

The amount of the self-insured retention is shown on the declarations and represents the amount to be satisfied or paid by the insured before the umbrella liability policy pays. It does not apply to any coverage available and provided by the underlying carrier.

Example: Mary has a $10,000,000 umbrella policy. It was written as an excess layer of coverage for her primary underlying policies that carry a $1,000,000 limit. The self-insured retention is $10,000.

A major explosion occurs on the insured premises. The limits of the primary policy are quickly exhausted, and the umbrella is now called to respond. The umbrella carrier does not require the insured to pay the self-insured retention because the explosion was covered by the underlying policy.

29. Suit

Any civil proceeding where damages for bodily injury, property damage, personal injury, or advertising injury covered by the policy are alleged. It can also include arbitration and other alternative dispute resolution proceedings but only if the insurance company agrees to such proceeding.

30. Ultimate Net Loss

This is the total amount of loss paid by the umbrella policy, after recoveries and salvage. It includes all amounts paid through settlements, arbitration, and judgments, but only if the insurance company agreed to such activity.

31. Underlying Insurance

All insurance policies listed on the declarations within the underlying insurance schedule.

32. Underlying Insurer

The insurance company that is providing the coverage under the policies listed in the declarations or the schedule of underlying insurance.

33. Your Product

Goods or products that are sold, manufactured or distributed by the named insured and by others using the named insured’s name. The definition includes the containers used and the warranties and instructions provided with the products. It does not include any product not actually sold.

34. Your Work

Operations and services performed by the named insured or by those doing work for the named insured. The definition includes all materials and equipment considered as part of the operation or service and all warranties and instructions provided with the operation.