Business Clinic: What insurance is needed when contracting?

Whether it’s a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help.

Rory Gibson, regional director, Scotland, A-Plan Rural Insurance, highlights the importance of getting the insurance detail right for contract work.

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Q. My neighbour is retiring from day-to-day farming and I’ve recently started doing contract work for him. The farm is a mixed livestock and arable unit. While most of the equipment I use will be mine, I will also be using some of his. How do my insurance requirements differ than if I were simply farming for myself on land that I control?

A. Nine out of 10 farmers use a contractor, according to the National Association of Agricultural Contractors (NAAC). 

It can help keep capital expenditure and ongoing machinery maintenance costs down.

However, providing these services can entail different risks and liabilities to working your own land, so questions about insurance requirements are common.

Responsibility for insurance

There are different types of contracting work, some will have agreements or terms of business which may specify particular insurance requirements.

First, if you start providing contracting services, you need to establish who will be responsible in the event of a loss and so who needs what insurance.

If you don’t agree on each party’s responsibilities from the start, there is a risk that problems could lead to disputes over liability.

It is important to be clear with your broker and insurer exactly what work you are carrying out so that the right cover can be put in place.

Other considerations include:

• If you are a contractor, but using your customer’s equipment, do they have any conditions for how it is used or stored – for example when machinery is not in use – if yes, this could affect their insurance cover so you need to comply with these  
• Are tools being stored safely and in accordance with any insurance conditions?
• If you are livestock contracting – for example, rearing or caring for stock belonging to others, what belongs to the farm and what belongs to you, as the contractor? Are any insurance requirements set out in any agreement?
• Which of you is covered against transit risks for crops, stock or other goods?

Circumstances vary, so there is no straightforward answer. However, insurance cover you may need as a contractor include:

• Public liability This covers you for third-party injuries and property damage
• Employers’ liability Usually a legal requirement if you have hired anybody
• Tools/equipment If you are supplying your own tools, this will cover against loss, theft or damage
• Vehicles For trucks, tractors or other machinery
• Business interruption and/or loss of income cover Providing compensation for loss of earnings and related expenses
• Legal protection Cover for unrecoverable legal costs
• Professional indemnity To protect you against a customer’s claim that you have not done work to the required standard, or that you were negligent in carrying out the work
• Personal accident/injury insurance In case a work-related injury means you cannot earn for a period.

On the other side of the equation are your farmer customers – expect them to check that you have the correct insurance cover in place.

They may request to see it, and in a good business relationship, there should be no issue with a request from you as the contractor to see evidence of their cover, especially any special conditions which may affect how you work.

Anyone entering a business arrangement such as this should speak to their broker to ensure they have the right cover.

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