Foot and Mouth Disease - How would your insurance policy respond?
You may be curious about how insurance policies might respond to Foot and Mouth disease (FMD) should it be found in Australia.
FMD is a serious and highly contagious disease which affects cloven hoofed animals (sheep, cattle, goats, camelids (camels, alpacas, deer & pigs and that sort of thing). It’s well documented that an outbreak of FMD will have severe consequences for the animal health and trade and you are right to be concerned.
Your concerns might relate to:
- The infection of livestock and the possible compulsory destruction of your herd.
- How the Liability section of your policy might respond to an outbreak or a transmission on or from an insured farm.
Unfortunately the news is not great when it comes to available insurance protection.
Farm Property Cover (Livestock)
Generally, stand-alone cover for the disease of livestock is difficult to obtain and perhaps impossible now, given the proximity of the disease to Australia. It’s extremely unlikely underwriters will want to be exposed to FMD which has the potential to cause widespread loss and damage and of course, expose them to substantial losses.
A standard farm policy generally provides a defined events (or a very limited) cover for livestock and an outbreak of disease will not be an insured event. Sub limits (or even Farm Interruption cover) for the humane destruction of livestock will generally be dependent on a claim being paid so unless the livestock is affected by a defined event (and FMD or any disease will not be an insured event) it is very unlikely that cover will be provided should livestock be required to be slaughtered (for instance).
Some underwriters may have additional benefits for the prevention of the spread of an exotic disease (one originating outside of Australia) but there are a number of conditions that may prevent a claim for FMD (i.e. it may have to originate very close to the farm, not originate from the farm, and be sudden, unforeseen, and identifiable) from being accepted. In any event the sub limit will be relatively low.
There are stories about studs “protecting” their valuable bloodlines by freezing semen and embryos. Please make sure that the farm contents definition in your chosen product includes cover for these.
The Liability section of a farm policy is extremely important in that it generally provides cover for your liability for property damage or personal injury relating to your farming activity. Farming activity is defined within the policy and it is very important that your occupation is described in full and that it is accurate.
There could be an exposure if there is an outbreak of FMD on or from a farm either directly or from a product produced by you, and that outbreak results in personal injury or property damage (which may include infection of a third parties livestock).
Whilst most policies do not contain general or specific liability exclusions that relate to disease, all policies contain a “catch all” general exclusion or condition that require the insured to comply with all statutory obligations (including regulations, laws and by-laws) and to take all reasonable care to prevent a loss or exposure to liability. Simply, the first thing farmers must do is follow the instructions provided by relevant authorities. If they do not, then it’s highly possible that their policy will not respond.
Those instructions may relate to farm access, the movement of livestock, the destruction of livestock and you should follow the advice of the relevant authorities to the letter and to (also) do everything possible to prevent or contain an outbreak of FMD.