Most dairy farmers don’t realize there is a hole in their farm liability insurance coverage that is so big they could drive a manure tanker through it.
Farmers in the Yakima Valley in Washington discovered that inadequacy throughout the past few years as they have been sued over nitrate contamination of neighbors’ wells. Be
assured every environmental and anti-dairy activist has taken notice—and more lawsuits will almost certainly follow.
Until just recently, farmers were left totally liable for clean-up and mitigation costs and fines that could run from $2,500 up to $50,000 per day, depending on the offense and the law being violated.
This past summer, insurance companies have begun stepping up to the plate offering specific riders that provide coverage. Environmental Impairment Liability insurance is not cheap, often costing more than a farm’s general liability coverage. But when compared to mitigation costs, attorney fees and possible fines, it quickly becomes a bargain.
Even if your state has a “Right to Farm” law, you won’t have immunity from manure-based pollution. “Federal environmental protection laws will prevail over ‘right to farm’ laws every time,” says Harrison Scheider, with the American Risk Management Resource Network (ARMRN).
Dairy farms are vulnerable under both the Clean Water Act (CWA) and the Resource Conservation and Recovery Act (RCRA).
Under the CWA, cropland can become a source of non-point water pollution. “Very little manure is treated before land spreading and, by default, reaching a waterway is runoff,” Scheider says.
Under RCRA, manure can become a “solid waste” even in a liquid state if manure nutrients or bacteria reach groundwater. In the Yakima Valley case, the court ruled manure was “knowingly abandoned” into groundwater from leaky lagoons and therefore subject to RCRA rules.
The three Yakima Valley farmers who have settled their cases must upgrade lagoons, pay for well monitoring and cover water replacement costs for nearby residents for at least five years. Attorney fees are approaching
$1 million as well.
So how do you manage this risk? David Dybdahl, also with ARMRN, offers these bullet points:
- First and foremost, implement safeguards against pollution release.
- Work with credentialed crop advisors and keep your nutrient management plan updated. Then, follow the plan.
- Insure the pollution risk with Environmental Impairment Liability insurance specifically designed for dairy farms. It should specifically define covered pollutants such as odors, manure, nitrates and bacteria. It should also offer coverage for pre-existing, low-level nitrate contamination events; losses arising from application, hauling and manure storage; and gradual, sudden and accidental pollution events.
- In addition, require all custom applicators and haulers you hire to carry their own liability insurance and make sure it does not exclude pollution.
So what does this coverage cost? “Premiums can be as low as $1,500 per year for $500,000 worth of coverage,” Dybdahl says. “Premiums per cow decrease drastically as herd size increases.”
So no, it’s not cheap for insurance you might not ever need. But then again, what if you do?