It’s not uncommon for farmers to subsidise their income by offering their services to other farmers on a contract basis.
Known as farm contracting, this may include activities such as using their harvester to harvest another farmer’s crops, supplying a sprayer and crop spraying services to another farm, or shearing another farmer’s sheep, mustering their cattle or transporting their grain or livestock.
But what happens if a loss is suffered when a farmer is offering these services? Does their ARGIS Farm Extra Insurance cover them?
As ARGIS underwriting manager Peter Morsley explains, whether this type of service is covered under an ARGIS policy depends on how often the farmer is undertaking these activities.
“We don't insure contracting businesses as such, so the question of whether or not they’d be covered depends on how frequently they are contracting their services to other farmers. We do cover occasional farm contracting, but it really must only be occasional, as defined by our policy.”
Peter Morsley says that to fall into the category of occasional contracting, as opposed to operating a contracting business, a farmer can only generate a maximum of $100,000 or 20% of their combined annual turnover (whichever is the lesser) from contracting activities in a financial year.
In addition, under the ARGIS policy, occasional farm contracting activities must be consistent with a farmer’s own farming operations as listed in the insurance Certificate. So, a sheep farmer offering shearing services to others on a limited basis may be covered, but a grape grower offering a sheep shearing service would not be.
Providing Insureds meet the definition and limits of occasional farm contracting, cover is extended for liability as well as property damage, and damage to the farmer’s vehicles or equipment used to complete the job, Peter Morsley explains.
For example, a grain grower providing contracted harvesting services on another farm hits a stump that damages their harvester, would be covered for the cost of repairs to the harvester. Likewise, if that farmer’s harvester caught fire and destroyed a field on another farm, cover would be extended to both the harvester and the field.
Peter Morsely says that despite cover applying automatically, brokers should ask their farming clients if they do any contracting work, to ensure it is covered by the policy.
“We ask if they are doing any contracting work on our proposal form, but it’s worth brokers checking with their farming clients annually, as it’s something they could begin doing at any time,” Peter Morsley says. “By pointing out what’s covered and the income limitations and the contracting requirement that the contracting is to be consistent with their core business, they can ensure their clients don’t have a gap in their cover.”
He says brokers should also discuss the potential risk to their farming clients core business, from any contracting work they may do.
“For example, if a key piece of machinery does get damaged doing a job on someone else’s farm, it could be out of action for some time, which could affect their own farming operations.”
Peter Morsely says that if a farmer is running a farm contracting business, rather than t performing occasional contracting, they should have the adequate insurance in place for that business.
“Likewise, if they are close to those maximum financial thresholds, we may advise the broker to arrange separate cover for the contracting activities because if they exceed those limits even slightly, cover would be excluded under our ARGIS Farm Extra Insurance policy.”
For more information about our cover for occasional farm contracting or for general enquiries about ARGIS Farm Extra Insurance, you can visit our ARGIS Farm Extra Insurance product page or contact us on 1300 794 364.
This document is intended for insurance intermediaries only. This product is issued by SGUAS Pty Ltd t/as ARGIS Insurance (ABN 15 096 726 895, AFSL 234437) ('ARGIS') acting under a binder agreement with HDI Global Specialty SE - Australia (ABN 58 129 395 544, AFSL 458776) ('HDI Global Specialty') the insurer of this product. Any advice contained in this document is general advice only and does not take into account your client’s objectives, financial situation or needs. Before making a decision to purchase the product we recommend your client consider whether it is appropriate for their circumstances and read the Product Disclosure Statement ('PDS') and the Target Market Determination ('TMD') which can be obtained by contacting ARGIS or visiting www.argis.com.au