1. Forms
2. FL
3. FL-01-63

What the form is

The FL 01 63 Amendatory Endorsement is a mandatory addition to the Farm Liability Coverage Form (FL 00 20), unless a broader pollution endorsement like FL 04 03 or FL 04 30 is used. Its primary purpose is to modify the standard pollution exclusion found in the farm liability policy. Specifically, this endorsement adds back a measure of coverage for certain pollution-related incidents common in farming operations. It provides an exception to the pollution exclusion for bodily injury or property damage caused by heat, smoke, or fumes resulting from a fire intentionally set by the insured on their property to burn off crop stubble or other vegetation, provided this is a normal agricultural practice and not in violation of any laws. Additionally, the endorsement introduces limited liability coverage, typically with a $25,000 annual aggregate limit (which can often be increased), for 'chemical drift'. This pertains to physical injury to crops or animals belonging to others that arises from the discharge, dispersal, release, or escape of chemicals, liquids, or gases used by the insured in their normal and usual agricultural operations, subject to specific exclusions.

Classes of business it applies to

This endorsement is designed for agricultural businesses, specifically farms and ranches that are insured under the ISO Farm Program and utilize the Farm Liability Coverage Form (FL 00 20). Real-world examples include:

• Farms that engage in the controlled burning of fields after harvest (e.g., sugarcane, wheat, or rice farms) to clear stubble and prepare for the next planting season.
• Agricultural operations that apply pesticides, herbicides, or fertilizers via ground-based spraying equipment, where there is a risk of these substances unintentionally drifting onto adjacent properties and damaging a neighbor's crops or harming their livestock.

Special considerations

• Mandatory Attachment: This endorsement is generally required when the FL 00 20 is part of the policy, unless a more comprehensive pollution liability endorsement, such as FL 04 03 (Limited Farm Pollution Liability Coverage) or FL 04 30 (Limited Farm Pollution Liability Extension), is already included.
• Chemical Drift Limit: The standard $25,000 aggregate limit for chemical drift liability may be insufficient for farms with significant exposures, such as those located near high-value specialty crops or sensitive environmental areas. It's crucial to assess this exposure and consider increasing the limit if necessary.
• Aircraft Exclusion: A significant exclusion in the chemical drift coverage is that it does not apply if the chemicals are dispersed or released from an aircraft, including drones. Farms using aerial application methods will need separate, specialized coverage for this exposure.
• Scope of Burning Coverage: The coverage for burning crop stubble is contingent on it being a normal and usual agricultural practice and not violating any applicable laws or ordinances.
• No Coverage for Loss of Market/Use: The chemical drift coverage typically addresses direct physical injury to crops or animals; it does not extend to cover economic losses like loss of market or loss of use of the affected soil or crops.

Key information for agents and underwriters

• Risk Assessment: Underwriters and agents should carefully evaluate the insured farm's practices concerning both controlled burns and chemical applications. This includes understanding the types of chemicals used, methods of application, proximity to neighboring properties (especially sensitive ones like organic farms, schools, or residential areas), and prevailing wind patterns.
• Adequacy of Limits: The $25,000 default limit for chemical drift is a key point of discussion. Agents should help clients understand their potential liability and the implications of an inadequate limit, recommending higher limits where appropriate.
• Identify Coverage Gaps: The aircraft exclusion for chemical drift is a critical gap for farms utilizing aerial spraying. Agents must identify this and advise clients on the need for separate aviation liability or specialized pollution policies.
• Alternative Endorsements: Be familiar with the provisions of alternative pollution endorsements like FL 04 03 and FL 04 30 to determine if they offer more suitable coverage for a particular farm's needs.
• Documentation: It's good practice to document discussions with the insured regarding pollution exposures and the limits and exclusions of this endorsement, particularly if the insured declines higher chemical drift limits.