1. Forms
2. FP
3. FP-04-23

What the form is

The FP 04 23, titled "Farm Equipment Borrowed or Rented Without a Written Contract," is an endorsement to a farm insurance policy. Its primary purpose is to provide insurance coverage for farm machinery, vehicles, and equipment that the insured has borrowed or rented from others when there is no written contractual agreement in place outlining insurance responsibilities. This endorsement typically provides a blanket limit of insurance (e.g., up to $50,000) for such property for a specified period (e.g., 30 days). It acts as an additional coverage under the farm property policy, often linked to Coverage E (Scheduled Farm Personal Property) or Coverage F (Unscheduled Farm Personal Property).

Classes of business it applies to

This endorsement is specifically designed for agricultural businesses, such as:

• Commercial farms
• Ranching operations

It is particularly relevant for farming operations where it's common practice to informally borrow or rent equipment from neighbors or other parties without executing a detailed written lease or rental agreement that specifies insurance requirements. For example, a farmer might borrow a specialized planter from a neighboring farm for a short period during planting season. If that planter is damaged while in the insured's care and there's no written contract, this endorsement could provide coverage, subject to its terms and limits.

Special considerations

There are several important points to consider regarding this endorsement:

• No Written Contract: The coverage specifically applies when there is an absence of a written contract concerning the borrowed or rented equipment. If a written contract exists and stipulates insurance responsibilities, the terms of that contract would likely take precedence.
• Coverage Limit: The endorsement provides a specific maximum limit of liability, for instance, $50,000. This limit is the most the insurer will pay for loss or damage to all borrowed or rented farm equipment from any one occurrence.
• Time Limitation: Coverage for any single item of borrowed or rented equipment is often limited to a specific duration, such as 30 consecutive days.
• Policy Integration: It functions as an extension of existing coverages within the farm policy, such as Coverage E or F. The underlying policy's terms, conditions, and exclusions will still apply unless modified by this endorsement.
• Deductible: Losses payable under this endorsement are typically subject to the policy's deductible.

For example, if a farmer borrows a tractor and it's damaged in a covered peril after 15 days, and there was no written agreement, this endorsement could apply up to the specified limit. However, if the tractor was borrowed for 45 days, coverage might not apply after the initial 30-day period, depending on the specific wording of the endorsement.

Key information for agents and underwriters

Agents and underwriters should be aware of the following when dealing with the FP 04 23 endorsement:

• Identifies a Need: This endorsement addresses a common informal practice in farming communities and provides a solution for a potential coverage gap. Agents should discuss borrowing and renting habits with farm clients to determine if this coverage is appropriate.
• Risk Assessment: Underwriters should consider the frequency and type of equipment the insured is likely to borrow or rent. While the endorsement provides a limit, frequent borrowing of high-value equipment might indicate a need for a more comprehensive insurance solution or a review of the insured's operational practices.
• Complements Existing Coverage: It's crucial to understand how this endorsement interacts with other parts of the farm policy, particularly the definitions and coverage provisions for farm personal property and mobile agricultural machinery.
• Not a Substitute for Written Agreements: While this endorsement provides coverage in the absence of a written contract, it's generally advisable for insureds to have clear written agreements when borrowing or renting valuable equipment to outline responsibilities, including insurance.
• Pricing: The premium for this endorsement will reflect the additional risk exposure being assumed by the insurer.