liablity ins. for thing you sell

Discussion in 'Homesteading Questions' started by countrygurl, Oct 10, 2006.

  1. countrygurl

    countrygurl Well-Known Member

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    was wondering if people on this board have insurance to protect themselves for the things they sell from their farm. Like if you made homemade food, jams, honey, even yard eggs, products that you sell locally at farmer market or from your farm, and someone said they got sick do you have insurance to proctect yourself.

    thanks
     
  2. fin29

    fin29 Well-Known Member

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    I have liability insurance for the food I sell. The premium amount is based on gross sales--the more you sell, the more expensive the insurance is as your exposure is higher. I have a state-licensed kitchen.
     

  3. anniew

    anniew keep it simple and honest Supporter

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    I have a rider on my homeowner's policy to cover if someone is hurt such as by falling, plus product liability for my veggies, fruits, eggs, but I don't process any food.
    I also encouraged my farmers' market vendors to get it also, and now it is a requirement.
    My rider covers when I sell at the farmers' market also, and only costs about $30 a year, so it is well worth it. However, if I sell in nearby New York State, I need more insurance, like $1 million, and that would need to be a farm policy which would cover everything, but would double the total cost of my insurance from about $250 to $500 a year.
    Ann
     
  4. homebirtha

    homebirtha Well-Known Member

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    Yes, we have it with our farm insurance. It was not that much more then regular homeowners insurance, and well worth it. IMHO.
     
  5. kesoaps

    kesoaps Well-Known Member

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    Talk with your insurance agent to see if you're covered. Different states vary with what is legal or not to sell (I'm sure you already know this), and that will obviously play into your insurance. My agent blew me off when I asked about insurance for my soap business. A friend has a Christmas tree farm and they pay an outrageous sum just for December.

    I think the best advice is getting a business license in the form of an LLC (as opposed to sole proprietor), as if someone does try to sue you, they can't take your house/property.
     
  6. electronrider

    electronrider Well-Known Member

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    Either that, or mark in big bold letters on your labels: NOT FOR HUMAN CONSUMPTION, then tell your customers it due to liability. It's the same principal as people who sell milk in states where you can't, unless your a fully inspected dairy facility.
     
  7. LagoVistaFarm

    LagoVistaFarm Well-Known Member

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    Putting a sticker on a product that is obviously and intentionally designed, made, and sold for the purpose of consumption by people that says " NOT FOR HUMAN CONSUMPTION" isn't going to provide any significant degree of protection at all. This is especially true when it's all too obvious what the true intent is. Further, remember that in product liability law the people who participate in making and selling the product are liable not only for injuries resulting from the product's use, but also liable for injuries resulting from its foreseeable misuse. Sorry, but this idea isn't gonna fly.

    In fact, what the sign would do is prove to a jury that the seller did know they were selling a product with the intent of not providing reasonable safeguards and proper insurance. The cowshare idea is the best example of an impending case to make my argument. Who buys $8/gallon milk for their dog.

    It's also exactly why, in the business world, companies that make and sell products that could injure people carry massive amounts of insurance and are also incorporated.
     
  8. Tracy

    Tracy Well-Known Member

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    As a person that does sell pet food [raw diet] I can tell you that your labeling needs to state not only for human consumption but also a gauranteed analysis, what the food is intended for, i.e. for dogs and cats. Also whether the food is intended as a complete food and has meant AFCO standards and testing or if you are selling as a food for intermentent use only.
    You also need safe handling instructions on each package.
     
  9. fin29

    fin29 Well-Known Member

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    Well said. You can't contract your way out of laws.
     
  10. LagoVistaFarm

    LagoVistaFarm Well-Known Member

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    I was speaking with my attorney today about liability issues and our farming. He referred me to the Bear v Buckeye Egg Farm case to see how they were able to attach real property that was separated from the LLC. Pretty fowl stuff.

    The short version is: the court determined that the LP and LLC were set up to run the operation illegally. They were a huge egg farm producing something like 2.5 billion eggs annually from 15 million birds. Lots of pollution and problems with the neighbors.

    Sure its a huge farm and a big case, but its a big precident.
     
  11. fin29

    fin29 Well-Known Member

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    Lots of people set up "shell LLCs," which are basically LLCs in theory, but the people continue to operate as they would without one, comingling personal and business funds, etc. The problem with that is that when it comes time to get sued, the plaintiff's lawyer can argue, "defendant comingled assets during the course of business operation, therefore we can argue for the inclusion of personal assets in any judgements rendered against him/her..." and there goes your house and your savings. The only way to ssure that your personal assets are better covered (remember that personal assets are always fair game, just less so if it can be proven that you ran the business legitimately) is to obtain separate checking accounts, credit accounts, liability insurance etc. and keep scrupulously detailed records of business transactions.

    In addition, there are countless other forms of red tape associated with the retail sales of food- and farm-related items, including the collection of sales tax on some value-added products, kitchen licensing, the usage of state- or federally-inspected facilities for the processing of animals, HAACP concerns re. food-production, storage, etc. Canning recipes for retail sale (generally excluding jams, jellies, and pickled items) often require testing by an accredited facility such as a state extension service or independent lab, and regulation exclusions regarding the non-licensed production of food products by farmers are usually limited to the less-perishable items (read nothing that requires immediate refrigeration like custards and meats).

    Course, I'm only an expert in Maine food law, but most states have adopted the USDA food code to govern their food manufacture/sale laws, so you can get an understanding of the ins and outs if you check out the code online. Anyone who has questions about this particular subject can feel free to ask me here or in pms.
     
  12. jnap31

    jnap31 garden guy

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    Nope no insurance just for the van now.
     
  13. homebirtha

    homebirtha Well-Known Member

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    Fowl... lol...

    Anyway, I'm curious... what real property did they attach? Was it the farm that was producing the eggs? Then I can see the point. I mean, you can't have some of your property exempted as an LLC, then use it in the business and expect to have it hold, KWIM? At least, I think that makes sense.
     
  14. fin29

    fin29 Well-Known Member

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    I'm familiar with that case, and the issue was that the owner of the egg farm had put the title to the barns, etc. in his own name instead of the company's name...a dumb mistake that could have been avoided with a $200.00 lawyer bill.
    But dumb as it is, it illustrates the problems with comingling personal and business assets, and it's as relevant to a lawsuit over a bad can of chicken stew as it is a multi-million dollar egg operation.

    The way to get around using your own personal property as business property is to have the business pay rent to you, the property owner (in this case, you). So, you, Joe Smith, form an LLC, "Jams LLC", and Jams LLC writes a business check to Joe Smith every month for the rent. The rent, though, would have to be a reasonable amount for the property used, not just a "$1 a month just to make it legit" amount, which would again suggest that the LLC is a shell and not a legit corp. Sure, it's just you writing a check to yourself in actuality, but it's an important part of the paper trail.
     
  15. homebirtha

    homebirtha Well-Known Member

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    This is interesting. So, even if it is on your personal property, but it is used in for the business, as long as you rent it to the business, they can't take it in a lawsuit? I mean, it gets much muddier when it's a farm where you live vs. some kind of retail business with its own location, etc. I haven't really thought through this all the way, as we haven't done an LLC. We just DBA "farm name". So I guess we're not very protected, other then with our liability insurance. I didn't think an LLC would work that well for us, since our business is part of the property that our home is on. KWIM?
     
  16. fin29

    fin29 Well-Known Member

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    LLCs are to prevent suits against you personally, but they're not bomb proof. Let's say you sell a tomato that turns out to test positive for e.coli and makes the customer sick (also assume that lab testing has been done to prove the above). The customer decides to sue. If you don't have an LLC, the customer will sue you personally, and any judgements they're awarded civilly can ruin your personal finances, since your personal assets are game. If you have an LLC, then the customer is likely to sue the corporation. They can, however, put your name on the court papers and sue you and the corporation "jointly and severally," which basically means that in the event of a judgement, your personal assets can be attached for whatever your business assets don't cover. Lawyers frequently try to get their clients' a better chance of collecting a settlement by trying to argue in some way or form that the corp. owner mismanaged the LLC in such a way as to make the LLC a fraud. This is what's referred to as "piercing the corporate veil," which you may have heard of before. That's why scrupulous bookkeeping is essential, so a person can argue that they did everything within reason to operate the LLC legitimately.

    Your farm should be incorporated regardless. I don't know the ins and outs of farm law, though an LLC takes about an hour to do yourself and about $100 to file with your Secretary of State.
     
  17. kesoaps

    kesoaps Well-Known Member

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    Here in WA it costs $175 unless you want a rush on it, then it's $195.
     
  18. fin29

    fin29 Well-Known Member

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    Well, then maybe I shouldn't complain so much about how much all my state fees cost...
     
  19. Jen H

    Jen H Well-Known Member

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    The hard cidery we're setting up is on land owned by our farm. The cidery leases the land the building sits on. Just like if the cidery was leasing space in an industrial park or an office building. If anything should happen with our cider, the cidery itself - the building and everything in it - is potentially lost, but not the land the cidery sits on. Does that make sense?

    In addition, our cidery buys apples from our farm and pays a percentage of the electric bill every month. Husband and I draw a monthly paycheck from the cidery. The farm is a simple partnership.

    In reality, this is all just me sitting at the desk writing checks back and forth, but the cidery and farm are very much separate businesses with seperate assets. Our personal bank accounts are kept separate from both businesses. It can be a hassle, but it's the only way to maintain the protections offered by the LLC.

    It really is worth a couple hundred dollars to sit down with an attorney and get this stuff figured out. It can save a farm from some very expensive hassles down the road.