Navigating the Insurance Maze

Many businesses within the agricultural sector are thriving, despite the recent trials of the UK's farming sector including foot and mouth. An emerging trend is that many executives are escaping the City 'desk job' and starting up their own businesses in the countryside, which is being achieved with a great deal of success. Local farm shops, guest houses, garden nurseries and specialist organic foods are just some of the blossoming private businesses being developed and trading successfully across the UK.

However, managing your own business can be fraught with difficulty. Legislation, health and safety regulations and red tape are just some of the hurdles to be overcome. As Thomas Courtauld of Cliverton Insurance Brokers explains, insurance is yet another important consideration that must not be overlooked.

The number of insurance issues to be considered when running your own business can be quite overwhelming. For smallholders in particular, the unique nature of the companies and wide range of business interests mean that it can be difficult to gain good impartial advice from professionals who properly understand your business. While every smallholding is quite different, there are a number of basic and statutory insurance requirements that must be considered if you are to remain the right side of the law.

Liability Insurances: During the last 12 months, many businesses will have seen liability insurance premiums increase across the board, almost without exception.

One of the important current issues forcing public liability premiums higher is that of accessibility. Allowing access to members of the public brings with it a new insurance challenge. However, even those who do not actively encourage members of the public onto their land also find themselves increasingly exposed to risk of litigation. As the law stands someone who is trespassing can sue if they injure themselves while on your property. Smallholdings and farms can be very dangerous places, hence the need for vigilance. Animals, machinery, chemicals, farm waste and uneven surfaces are just some of the hazards to which the public is exposing itself. The key issue in all compensation claims, is that of negligence. It has to be proved that the landowner was negligent for a claim to proceed.

Importantly, this form of insurance also provides cover in the event of livestock escaping from your land. While it is a legal requirement to have third party insurance for your car, having adequate public liability cover for any damage caused by your dog, horse or pet python is not compulsory.

In the past, the common assumption has been that, providing owners take all due care in the enclosure and safekeeping of their animals, they will not be found liable in the event of an accident. This is no longer the case.

A recent decision made by the House of Lords has changed the situation. In the case of Mirvahedy v Henley, three horses panicked, stampeded and escaped from a well-fenced paddock, eventually ending up running along a main road. One horse eventually collided with a car causing major injuries to the occupant. It was held that the owners were liable even though it was agreed that the fencing was more than adequate and they were therefore not negligent.

Although sheep, llama and many other cattle owners need to consider the damage their animals can do, cat owners are still exempt. While dogs are controlled by a raft of legislation, cats are deemed by the law to be like wild animals which cannot be controlled and whose owners, therefore, should not usually be liable.

Almost every business in the UK is required by law to have employers' liability insurance to comply with the Employers' Liability (Compulsory Insurance) Act 1969. In addition, the Management of Health and Safety at Work Regulations 1999 (MHSWR) also stipulates employers must have adequate arrangements in place to deal with health and safety.

It is essential that businesses take steps to reduce their risk if they are to become more attractive to insurers and obtain competitive rates of cover. Businesses need to focus on risk management to a greater level than purely Health and Safety Executive compliance.

In addition to providing documentary evidence that the basic legal obligations have been complied with, insurers increasingly expect businesses to demonstrate where they have extended health and safety programmes to improve the safety of both the business and employees.

Property Insurance: There is a disturbing new trend for workshop break-ins, particularly in rural areas. Although the contents of workshops are covered by insurance, in some cases, the damage to the building is not.

In many cases where only locks are forced, the cost of repairs is minimal. However, some cases have recently arisen where tiles have been removed and access has been gained to the workshop through the roof. The damage can be expensive to repair and may not be covered under existing insurance policies. It is important to ensure that the policy wording extends to include damage to the structure in the event of an attempted break in. Those buildings most at risk are workshops and isolated traditional buildings where tiles or architectural features may have some value.

Most property on smallholdings is insured for certain specified perils only such as fire, storm, flooding, falling trees, vehicle impact and earthquakes. However, it may be worth considering separating vulnerable buildings from the main policy and insuring them on a wider basis. It may also be worth considering insuring your main residence together with any land and buildings under a single smallholding scheme, even if the land is not adjacent, as it could give some benefit in premium rates.

Cover for Livestock: While public liability insurance provides cover for any consequences arising should livestock escape, it is also important to ensure the animals themselves are covered particularly if they are valuable stock, such as a prize ram or pedigree pigs.

Standard farm insurance schemes will provide adequate cover for the loss or death of livestock, or for the subsequent slaughter of animals, arising from a number of areas including fire, falling trees, aircraft or by vehicle impact for vehicles other than those you own or control.

It may also be worth considering extensions to the policy for circumstances including: Impact caused by your own vehicles Theft or mysterious disappearance Electrocution Sheep worrying by both your own or others' dogs

Motor Insurance: Most small holders will insure a number of vehicles on their household motor policy, with some insured for 'business use'. However, if a vehicle is used by someone in the family who is conducting their own business, this must be declared to the insurer. It is unlikely that this will increase the premium but not doing so could be considered as failure to disclose a material fact.

Financial Prosperity: Finally, it may also be worthwhile considering personal accident insurance or critical illness cover combined with a comprehensive financial review. It is important that when planning for your future and the future of your family, that due consideration is given to issues such as inheritance tax, capital gains tax and ensuring that the necessary health cover is available in case of any unforeseen accidents.