1. Forms
2. FL
3. FL-04-69

What the Form Is

The FL 04 69 Custom Farming Liability Coverage endorsement is designed to address the liability exposures of farmers who engage in farming operations for others on a contractual basis, commonly known as custom farming. Standard farm liability policies often include a limitation on the amount of gross receipts a farmer can earn from custom farming before coverage for those activities is excluded or significantly reduced (e.g., $5,000 or $10,000). This endorsement extends liability coverage for bodily injury or property damage arising out of these custom farming operations when the insured's receipts from such activities exceed the amount stated in the base policy. It can typically be attached to either a Farm Liability Coverage form or a Commercial General Liability coverage form.

Classes of Business It Applies To

This endorsement is specifically for agricultural businesses or individual farmers who provide custom farming services to other farms. Examples of custom farming operations include, but are not limited to:

• Plowing, tilling, or cultivating land for others
• Planting or seeding crops for other farm owners
• Harvesting crops (e.g., combining, baling hay) for a fee
• Spraying or applying fertilizers/pesticides for other agricultural operations (though specific endorsements for chemical application may also be needed depending on the nature of the work)

Real-world example: A farmer owns specialized harvesting equipment. After completing their own harvest, they contract with several neighboring farms to harvest their crops for a fee. If the total income from these custom harvesting services is expected to exceed the limit in their standard farm policy (e.g., $5,000), the FL 04 69 endorsement would be necessary to ensure liability coverage for these operations.

Special Considerations

• Receipts Threshold: The primary trigger for needing this endorsement is when the insured's gross annual receipts from custom farming operations exceed the threshold specified in their unendorsed farm liability or CGL policy. It's crucial to accurately estimate these receipts.
• Scope of Coverage: While this endorsement provides liability coverage, it's important to understand any specific limitations or exclusions within the endorsement itself or the underlying policy. For instance, pollution liability related to chemical application might require separate coverage.
• NAIC Compliance: A revision around 2001 (FL 04 69 12 01) was made to comply with the National Association of Insurance Commissioners (NAIC) Statement of Statutory Accounting Principle No. 6. This principle required that the due date for either audit or retrospective premiums must be referenced in a policy form. The form was amended to state that any advance premium is a deposit, which will be verified by auditing at the end of each policy period, and if additional premium is owed, the due date on any bill is the due date for paying audit premiums.

Key Information for Agents and Underwriters

• Accurate Assessment of Exposure: Agents must thoroughly question clients about any custom farming activities, including the types of operations performed, equipment used, and, critically, the annual gross receipts generated. This ensures the client is adequately covered and avoids potential uninsured claims.
• Pricing and Underwriting: Underwriters will assess the increased exposure presented by custom farming. Factors influencing premium may include the scale of custom farming operations, types of machinery used, geographic area covered, and the insured's experience. The endorsement allows the insurer to charge an appropriate premium for this additional risk.
• Potential for Coverage Gaps: Failure to add this endorsement when custom farming receipts exceed the base policy threshold can result in a significant coverage gap for liability arising from those operations. This is a critical point for agents to communicate to their farm clients.
• Interaction with Other Coverages: Consider how this endorsement interacts with other coverages the insured may have, such as commercial auto for vehicles used in custom farming, or specific pollution liability policies if extensive chemical application is involved.
• Audit Provisions: Due to the 2001 revision, be aware of the policy conditions regarding audits and premium adjustments based on actual custom farming receipts.