A livestock legal update

There have been several important court cases in the past year or two involving Iowa livestock producers. This column will focus on a few of those situations and, hopefully, shed some light on how livestock producers can avoid similar legal issues and subsequent litigation.

Court looks at language in liability insurance policy. A recent case involved the death of hogs due to the release of carbon monoxide fumes in a hog confinement facility. In recent years, Iowa courts have been faced with the issue of whether a general farm liability insurance policy containing a “pollution exclusion” clause excludes coverage for death of animals or humans caused by release of carbon monoxide fumes inside a confinement facility.

To date, the majority of courts have said carbon monoxide is a pollutant covered by such an exclusionary clause. Here, the plaintiff entered into a contract feeding agreement with a hog supplier. Though the hog building was equipped with a ventilation system to allow manure gases to escape when pits were pumped, nearly 800 hogs were killed when the ventilation system malfunctioned.

The plaintiff properly notified his liability insurance provider of the loss. However, the insurer denied coverage. When the hog supplier sued the plaintiff to recover damages for the dead hogs, the plaintiff sued the insurer, asking the court to order the insurer to defend them under the policy and indemnify them for the loss.

The trial court looked at the policy and found that carbon monoxide poisoning was a “pollutant” within the scope of the pollution exclusion clause. The insurer had also claimed that even if the pollution exclusion did not apply, the “business pursuits” clause contained in the policy would have barred coverage. But that point was moot once the trial court determined that the pollution exclusion clause applied.

On appeal, the court examined the “business pursuits” exclusion and did not even address the pollution exclusion clause.

The insurer argued based on the policy that said a “business” does not include “custom farming performed by an insured, where the gross annual receipts for all such activities do not exceed $3,000,” and where “custom farming” was defined as “any farming operation performed by you for others for a charge under any contract or agreement, written or oral.”

The policy defined “farming” as “the process of investment, management or labor to produce agricultural products.” Based on that policy language, the appellate court agreed that the insurance company was not obligated to defend and indemnify the plaintiff.

What’s the moral of this story? Always read and discuss the terms of your farm liability insurance policy with your agent. It is important to understand the terms. Depending on the policy, you may need to purchase additional coverage to fully protect your farming operation from liability.

Defective cow waterer leads to litigation. In another case, a dairy farmer decided to expand his operation and contacted a contractor who designed a customized system for water storage. After installation of the water system, the farmer consistently experienced problems.

Apparently, the water storage system had contamination problems allowing organisms to build up in the system. The farmer noticed a steady decline in the herd’s health and milk production, and testified that he ended up having to bypass the entire system and immediately saw a positive change in the health of the heard.

The farmer sued for negligence and breach of implied warranty of fitness for a particular purpose for the damages he sustained. The trial court awarded him nearly $440,000 in damages. The contractor appealed, arguing that the farmer never established a causal link between the water storage system and his losses.

The appellate court first addressed the issue of whether the storage tanks and contamination led to the farmer’s damages, and the court found it was “reasonably probable” the water storage system was the direct cause of the farmer’s problems. The court also addressed the issue of whether the system was “fit” for the particular purpose of use on a dairy farm. In Iowa, a buyer of goods may recover damages if the goods are not fit for the particular purpose that the buyer needs.

To recover under this type of action, the buyer must show the seller knew or should have known the buyer’s particular purpose, and the seller knew the buyer was relying on their good skill or judgment to furnish suitable goods. Here, the appellate court found that the contractor knew or should have known that the system was to provide safe and “potable” water for the herd.

What can we learn from this case? When a livestock owner hires a contractor and safety of the herd is at issue, communication is important. Make sure your expectations are clear and keep good written records of the work to be performed.

Herbold-Swalwell is an attorney with Beving, Swanson and Forrest in Des Moines. Reach her at eherbold@
bevinglaw.com
.

Column continues


Erin Herbold-Swalwell has written this Legal Issues column in Wallaces Farmer starting in 2009. She began the column as staff attorney for Iowa State University’s Center for Agricultural Law and Taxation.

This past summer she left CALT to join the law firm of Beving, Swanson and Forrest. She continues to write this column each month in Wallaces Farmer and suggests those interested in keeping up with legal issues in agriculture regularly visit the CALT website at www.calt.iastate.edu.


This article published in the December, 2011 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.