1. Forms
2. FL
3. FL-04-03

What the form is

The FL 04 03 Limited Farm Pollution Liability Coverage is an endorsement to a farm insurance policy. Its primary purpose is to provide a measure of coverage for pollution incidents that are sudden, accidental, and involve chemicals commonly used in farming operations. This coverage is contingent upon the dispersal or release not being in contravention of any applicable laws or ordinances. A key feature of this endorsement is that the insured can select a specific sublimit of liability that applies to this particular coverage. This endorsement can be used as an alternative to the mandatory FP 01 63 Amendatory Endorsement.

Classes of business it applies to

This endorsement is specifically designed for agricultural businesses and farming operations. Examples of where this form would be used include:

• Farms utilizing pesticides, herbicides, or fertilizers where an accidental spill or unintended dispersal could occur during storage, transport on the farm, or application.
• Livestock operations where accidental discharge of waste products containing chemicals might happen suddenly.

For instance, if a farmer is applying liquid fertilizer and a hose suddenly bursts, causing a rapid release of the chemical onto a covered part of their property or an adjacent property leading to third-party claims, this endorsement could provide coverage up to the selected sublimit, assuming all conditions are met.

Special considerations

• Sudden and Accidental: Coverage is typically restricted to pollution events that are clearly sudden and accidental, not gradual seepage or intentional acts.
• Compliance with Law: A critical condition is that the dispersal or release must not be in violation of any law or ordinance. Activities that are illegal or non-compliant would likely void coverage under this endorsement.
• Selected Sublimit: The amount of coverage is capped at the sublimit chosen by the insured and shown on the endorsement schedule. This may be significantly lower than the main policy liability limits.
• Alternative to FP 01 63: This form may be used in place of the mandatory FP 01 63 Amendatory Endorsement, offering a different approach to pollution coverage for the farm.

For example, if a farm has a known, ongoing leak from a fuel tank, this endorsement would likely not apply as the event is not sudden and accidental.

Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully assess the types and quantities of chemicals used, storage and handling procedures, and the farm's history of spills or environmental citations. The proximity to water sources or sensitive environmental areas is also a key consideration.
• Sublimit Adequacy: Agents should counsel clients on selecting an appropriate sublimit, considering potential cleanup costs and third-party liability, while also explaining the limitations of the coverage.
• Coverage Gaps: It's crucial for agents to explain that this is limited pollution coverage. It will not cover all pollution scenarios, such as gradual pollution, pollution from aircraft application (often specifically excluded or limited elsewhere), or pollution from substances not considered normal to farming operations.
• Documentation: Maintaining records of chemical inventories, safety data sheets (SDS), and spill prevention/response plans can be beneficial for both the insured in managing their risk and for underwriters in assessing it.
• Pricing: The premium for this endorsement will depend on the selected sublimit, the nature and scale of the farming operations, and the underwriter's assessment of the risk.