Planning Ahead for Disasters Can Help Dairy Farmers Recover Faster

Dairy farms run on a strict timetable and when there is a disruption to the delicate ecosystem, economic havoc can erupt.  Being prepared for any type of interruption can ensure the dairy operation can recover quickly with minimal impact to the financial wellbeing of the business.  Being nimble to identify the loss, correct the issue and return to full production are key to mitigating damages.

Insurance policies are custom designed to fit the individual needs of each farmer.  Working with your agent to secure a mutual agreement on coverage that works best for your dairy operation is an evolving partnership and should be reviewed at minimum annually.  Equipment and buildings depreciate.  Changes in the number and age of your livestock will shift.  Milk production and potential shifts in transportation of goods to market are all variables impacting the type and amount of insurance coverage you may wish to secure to protect your investment.  It’s not if a loss occurs, but when it does, being well informed on the coverage you have on your dairy operation will help navigate to the road of recovery.

When electing to report damages to an insurance carrier, they will determine if the damage is “covered property” and if the loss was caused by a “covered cause of loss”.   As the insured, you may also be contractually required to see that certain steps are taken in the event of loss or damage to “covered property” are taken.  Be prepared to:

• Notify the police if a law has been broken.  If theft, vandalism, trespassing or any possibility of an intentional act which violates the law occurs, contact local law enforcement and make a report.

• Give the insurance carrier prompt notice of the loss or damage, description of how, when and where the loss occurred so they can provide immediate guidance throughout the claim process.
• Take all reasonable steps to mitigate your loss by protecting your property from further loss. When possible, secure images to document damage or secure the damage property for future examination.
• When expenses are incurred for emergency or temporary repairs, retain all records for consideration in the settlement of your loss.

Determining the cause and origin of the loss validates if the damage is a covered cause of loss as described in the policy while also determining if there is a right to recover damages from a responsible third party, or subrogation of damages.  It is vital the damage property is retained, preserved and the chain of custody is maintained to explore potential liability and recovery of damages, including applicable deductibles.  If a third party is found to be liable for damages, the insurance company will seek recovery of the damages paid out, include any deductible incurred by the policyholder.

Being well informed on the value of property, goods, services and equipment utilized in your dairy operation can offer alternatives when determining your insurance needs and the premium associated with those coverages.  Insurance policies may include specific limits of insurance for covered property, offer a variety of covered causes of loss, allow specified dollar amounts for named property and a menu of coverage options tailored to secure desired coverage and a premium within a specific budget.  Consideration to self-insure property through higher deductibles, coinsurance with the carrier or exclude certain property from your policy are all viable options to help manage insurance costs.  Reviewing those options with your insurance agent to gain an understanding of the financial impact to your bottom-line premium investment and the understanding of your out of pocket expenses when a loss occurs, will result in an optimal financial decision for your dairy operation.

Regardless of your decision to self-insure or secure insurance for your dairy operation, the bottom line is to keep your operation running.  Loss of electricity can be one of the most traumatic events to impact a dairy operation.  Even a small dairy parlor with 1,100 – 1,200

cows will operate 21 – 22 hours per day with another 1 – 2 hours of cleaning requiring adherence to a rigid 24-hour per day schedule to maintain production.  Investing in an alternative power source such as a generator, solar or wind turbine power can safeguard against lost production and maintain revenue streams.

Dairy farmers will continue to face challenges with the variable cost of crops, shifts in local and national buyers, tariffs and pandemics all impacting the overall profitability of the business.  Being proactive in identifying ways to mitigate losses may save thousands of dollars in loss avoidance.  Reviewing your insurance coverage annually with your agent to determine  a plan specific to your farming operation will keep you informed on how to proceed should your dairy operation experience a loss.  A blend of well- planned insurance coverage, self-insurance through higher deductibles and coinsurance may offer lower rates while still providing peace of mind when faced with providing coverage your dairy farm needs.

Editor’s note: The author is Vice President at Property Damage Appraisers, Inc., nationwide leading independent damage appraisal firm headquartered in Fort Worth, TX. For more information, go to https://www.pdacorporation.com/