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ombudsman news

issue 124

March/April 2015

farming and insurance

Each year we receive a number of complaints from people working in rural and agricultural communities. Many of these complaints involve specialist insurance policies that are designed to cover the machinery, produce and livestock - activities and liabilities that relate to agricultural businesses.

Insurance disputes can be stressful and upsetting - whatever the claim is for. Where businesses are concerned - in these cases, farming businesses - significant amounts of money can be involved. And unsettled claims can have a big impact on the business’s ability to take stock and move on from what’s happened.

As with other specialist insurance policies, the often long and detailed documentation relating to policies held by agricultural businesses can cause particular confusion. But our approach to resolving complaints is the same as for any other type of insurance - which we explain in detail in our online technical resource.

index of case studies

  • 124/1 - consumer complains that insurer has rejected claim after combine harvester engine freezes over winter
  • 124/2 - consumer complains after insurer rejects claim for stolen pick-up truck under “keys in car” exclusion
  • 124/3 - consumer complains that insurer has rejected claim for cattle stolen from farm
  • 124/4 - consumer complains that insurance policy he took out for his work as a potato harvester didn’t provide the cover he thought it would
  • 124/5 - consumer complains after insurer disputes damage to tractor after an accident
  • 124/6 - consumer complains that his policy didn't cover him for putting down dangerous livestock
  • 124/7 - consumer complains after insurer rejects claim for damaged harvester - on grounds that damage is due to wear and tear

consumer complains that insurer has rejected claim after combine harvester engine freezes over winter

Ms L, a farmer, had recently replaced her combine harvester with a new one. Before the winter, she drained it of water and stored it in one of her farm buildings with the rest of her machinery.

When Ms L tried to use the combine harvester again, she found the engine had been damaged. She called out an engineer- who said the damage had been caused by freezing. The engineer showed Ms L a second compartment for water, which Ms L hadn’t known about. The engineer explained that this should also have been drained before the combine harvester was stored away.

Ms L thought that her specialist insurance policy covered damage caused by freezing, so she contacted her insurer to tell them what had happened. The insurer then sent out their own engineer. But this engineer didn’t think that the damage hadbeen caused by freezing. Instead, they said that the combine must have been damaged before Ms L stored it away.

The insurer’s engineer also said that it appeared the combine harvester had previously been using up to a litre of water a day - which usually indicated a fault with the cooling system.

Based on what their engineer found, Ms L’s insurer refused to cover the damage. They told her that she should have added anti-freeze to the combine harvester’s water compartments - and by not doing so, she’d breached the policy condition about taking:

“reasonable precautions to prevent loss, destruction or damage … and to maintain … machinery, plant and equipment in a satisfactory state of repair”

Ms L complained about the insurer’s decision. She said she hadn’t had any issues with the combine harvester during the previous harvest season. She also pointed out that the manufacturer’s manual advised topping up the water every ten hours - and she had followed these instructions. She said that if she’d known about the second water compartment - or about adding anti-freeze - she would have done everything she needed to.

However, the insurer wouldn’t change their position - so Ms L asked us to step in.

complaint upheld

We asked the insurer for their engineer’s report following their inspection of Ms L’s combine harvester. But it turned out that their engineer hadn’t carried out a full inspection because the engine hadn’t been “stripped” (taken apart). So they couldn’t provide any detailed information.

Ms L sent us the notes made by the engineer she’d called out herself. She also sent us some pictures of the damage. From these, we could see that four “core plugs” - sealing holes in parts of the engine - had been forced out.

From our experience of dealing with motor insurance complaints, we knew this could happen when water expanded - and was a strong indication that freezing had taken place. And damage caused by freezing was clearly covered by Ms L’s policy - unless the insurer could prove that she’d “failed to take reasonable precautions”.

Ms L sent us a copy of the manual that came with her combine harvester. We found that there was no mention of the second water compartment - or of the need to use anti-freeze after draining. We didn’t think it was reasonable to expect Ms L to know any more about the combine harvester than the information that was included in the manual.

Ms L had been able to complete her previous harvest. We thought it was unlikely that she would have been able to do so if the combine harvester’s engine had been that badly damaged at the time.

In light of this evidence, we decided that the insurer had unfairly rejected Ms L’s claim - and told them to pay it, adding 8% interest.

consumer complains after insurer rejects claim for stolen pick-up truck under "keys in car" exclusion

Mr G ran a farming business - and was also a volunteer gardener for his village church. While he was cutting the church green one day, his pick-up truck was stolen.

Mr G had to walk the three miles home, and as soon as he got back he phoned his insurer. When the insurer asked for more detail about what had happened, he explained that he’d driven as close to the church as possible and parked just outside the vestry door, as usual. And he’d left his keys inside the truck - underneath a jacket.

The insurer told Mr G that they wouldn’t pay his claim - as the policy excluded claims where keys had been left “in or around the vehicle”. Mr G told the insurer he hadn’t known about this exclusion - and that if he had, he would have taken his keys with him.

But the insurer wouldn’t change their mind - saying that Mr G should have read all the policy terms and conditions. Frustrated, Mr G contacted us.

complaint upheld

We asked the insurer for a copy of their policy documentation - so we could see how the exclusion about leaving keys in vehicles was presented.

The exclusion wasn’t mentioned at all in the “key facts” documents - which just referred the policyholder to the terms and conditions. Mr G’s policy was a specialist farming policy, which covered the buildings and machinery at his farm, his livestock and his truck. We eventually found the exclusion - 130 pages into the 150-page policy document.

We told the insurer we didn’t think it was reasonable for them to expect people to read such a long document to find such a significant exclusion. So we didn’t think that it was fair for the insurer to rely on that exclusion to reject Mr G’s claim.

The insurer then told us they felt that Mr G had been “reckless” in leaving his keys in the truck. We accepted that, in covering his keys, it seemed that Mr G had realised there would be a risk in leaving them on show. But to decide whether he’d been reckless, we’d have to consider whether he’d taken adequate steps to avoid that risk.

Mr G told us he’d only left the keys in his truck in case they fell out of his pocket when he was mowing the grass. He’d parked the truck right by the vestry door week in week out -without ever having seen anybody else around. And he’d taken the step of covering the keys with his jacket - so they hadn’t been on show.

Looking at the bigger picture, we disagreed that Mr G had been reckless. And in our view - given he hadn’t been made aware of the exclusion about leaving his keys inside his truck - the insurer’s decision to reject the claim was unfair. So we told the insurer to pay the claim, adding 8% interest.

consumer complains that insurer has rejected claim for cattle stolen from farm

Mr K kept a herd of cattle on his small family farm. One morning, he discovered that the cattle shed had been broken into - and that several cows had gone missing.

Mr K had recently changed his insurer. Immediately after speaking to the police, he contacted this new insurer to make a claim for the lost cattle. The insurer told Mr K that they’d look into the claim.

When Mr K heard back from the insurer two days later, they told him they wouldn’t pay out, because he hadn’t told them about an ongoing claim he had with his previous insurer.

Mr K was very surprised by this. He explained that he’d taken out his new policy through an insurance adviser - who he’d told about the other claim, both over the phone and by email. Mr K said he’d told the adviser he’d made the claim six months before his old policy expired - after one of his calves had died while being transported from one farm site to another.

However, the insurer maintained that they hadn’t known about Mr K’s previous claim - and so would be “voiding his policy from inception”. Frustrated, Mr K contacted us.

complaint upheld

It looked to us that something could have gone wrong when Mr K took out the new policy. We needed to know what questions he’d been asked about his previous claims.

We asked Mr K to tell us about the meeting he’d had with the insurance adviser - who had been acting on the new insurer’s behalf. We also asked the new insurer for their records. We established that Mr K had been asked to fill out a short questionnaire. One of the questions asked whether “any losses had occurred in the last three years” - and Mr K had answered “no”.

Mr K told us he remembered filling in the form. He said that at the time, the death of the calf had slipped his mind. But he told us that he’d discussed it with the adviser shortly afterwards - and sent us emails showing the conversations he’d had.

We could see from the emails that Mr K had clearly told the adviser about the previous claim once he’d remembered it. And the emails indicated that it had been discussed in a phone call as well.

We explained that as the adviser was acting for the insurer, it was their adviser’s responsibility to pass on any relevant information to the insurer alongside Mr K’s questionnaire.

From the evidence we’d seen, we didn’t think that Mr K had intentionally withheld information. It looked like he’d quickly cleared up the position with the adviser. And it was reasonable for him to think that the insurer would be aware of his previous claim.

In these circumstances, we decided that it was unfair for the insurer to “void” Mr K’s policy. We told the insurer to reinstate his policy - and deal with the claim as they usually would, adding 8% interest to the settlement.

consumer complains that insurance policy he took out for his work as a potato harvester didn’t provide the cover he thought it would

Mr B ran a potato farming business. One year, while he was helping to harvest potatoes on a neighbouring farm, he noticed that his machinery wasn’t working properly.

When Mr B got down from the machinery to find out what was wrong, he found that most of the potatoes he had already harvested had been damaged. His neighbour’s potato crop was now worth far less - and the neighbour claimed compensation from Mr B.

Mr B tried to claim this money back under the “liability” section of his farm insurance policy. However, his insurer said that the cost of replacing his neighbour’s potatoes wasn’t covered.

Mr B didn’t think this could be right - and complained to the insurer. He told them that, harvesting other farmers’ fields made up a significant part of his work - so he wouldn’t have knowingly taken out insurance that didn’t cover this.

When the insurer refused to change their position, Mr B brought a complaint to us on behalf of his business.

complaint upheld

Mr B explained the kinds of activities involved in his business. He sent us evidence that around half his income from the previous year had come from harvesting other farmers’ fields.

We asked the insurance company for a copy of the terms and conditions of Mr B’s insurance policy - so we could see what was covered and what wasn’t.

We found that the “product liability” section of the policy said that Mr B was “indemnified” for:

“ all sums which you are legally liable to pay … for damage to property … not arising from products other than products remaining in your custody or control.

The insurer told us that part of the reason they’d turned down Mr B’s claim was that he wasn’t claiming for damages he’d paid out for damaging his neighbour’s “property” - but for damaging his neighbour’s “products”.

Looking at the policy definitions, we noted that “products” were defined as “any commodities or goods” that the policyholder sold, processed or transported. “Property” was simply defined as “material property”.

When we asked the insurer what they meant by “property”, they told us that they meant buildings. We explained that this wasn’t obvious - and that we didn’t think the definition in the policy was clear enough.

In our view, by the current definition, Mr B’s neighbours’ potatoes could be defined both as “products” and “property”. And because the wording was so unclear, we didn’t think it was fair for the insurer to apply that exclusion.

However, there were other exclusions in the policy document that affected Mr B’s claim. These said that the insurer wouldn’t pay for:

  • “damage to property … which is in your custody or control …
  • the costs of … or making a refund for the price paid of any products
  • damage to any property on which you have been working where the damage is the direct result of such work.”

We pointed out to the insurer that these exclusions cancelled out any cover that Mr B might otherwise have had when he was working for other farmers. From the evidence Mr B had provided, it was clear that this contract work accounted for a large proportion of his business. So in our view, the policy didn’t meet his needs.

The insurer didn’t dispute that Mr B had accurately described the nature of his business when he took out the policy. But they couldn’t provide any evidence that they had brought the exclusions to his attention. We thought that if Mr B had known about the exclusions, it was very unlikely that he would have taken the policy out.

In all the circumstances, we decided that the insurer had unfairly rejected Mr B’s claim - and told them to pay it in line with the policy terms. Mr B said he would be approaching an insurance broker to help him find him another, appropriate policy.

consumer complains after insurer disputes damage to tractor after an accident

Mr W, a tractor driver, was involved in an accident with a speeding car while towing a load of fertiliser. Although he swerved and avoided a head-on collision, the tractor ended up getting stuck in a ditch.

Mr W claimed on his insurance for the damage to the tractor’s bodywork and engine - and the insurer sent out an independent engineer to inspect the damage. But the engineer reported that only the bodywork damage was related to the accident - whereas the engine damage was down to long-term wear and tear.

Based on this report, the insurer only offered to pay for repairs to the bodywork. But Mr W disagreed. He complained, telling the insurer that he hadn’t been able to turn off the engine when he was stuck in the ditch. The engine had run dry of oil - which he thought had caused the damage to the braking system.

The independent engineer responded that if this had happened, then other parts of the tractor would also have been damaged - not only the braking system. When the insurer sent a second independent engineer to inspect the damage, they came to the same conclusion.

But Mr W maintained that the engineers were wrong - and brought his complaint to us.

complaint not upheld

We asked the insurer for the two engineers’ reports. It was apparent from these that both engineers had carried out very detailed inspections of Mr W’s tractor. We also noted that, unlike some cases we see, the engineers involved were independent of the insurer. And these two independent engineers had reached the same conclusion about the damage.

We explained to Mr W that we couldn’t say for sure what had happened - and we appreciated how upsetting the accident had been. But in light of the two expert views about the cause of the damage, we thought the insurer’s offer was fair.

consumer complains that his policy didn't cover him for putting down dangerous livestock

Mr and Mrs M owned and managed a large dairy farm. In late November, they began the yearly process of moving their 200 cows from the fields to their special housing for the winter.

As in previous years, some of the herd were at first reluctant to leave the fields. So Mr and Mrs M left them for a few more days. But one cow still refused to move into the winter housing - and was uncharacteristically aggressive.

A well-used public footpath ran through the field where the cows grazed. Worried about the possibility of the distressed cow causing someone harm, Mr and Mrs M sought the advice of their vet - and it was decided that it was safest to put the cow down.

Mr and Mrs M then made a claim for the vet’s fees under the liability section of their livestock insurance policy. But the insurer told them that the policy didn’t include cover for action taken to prevent liabilities arising in the first place - and refused to pay out.

Mr and Mrs M complained - saying they thought they’d done the responsible thing, and felt they’d lost out because of it. When the insurer wouldn’t change their position, Mr and Mrs M asked for our view.

complaint not upheld

We needed to establish what cover Mr and Mrs M’s policy provided - and whether the insurer had considered the claim fairly.

We asked the insurer for a copy of the policy terms and conditions. In our view, it was clear that only actual liabilities were covered - rather than any sort of action to stop liabilities arising in the first place.

When we explained this to Mr and Mrs M - and pointed out the relevant part of the policy - they said they understood. But they told us that they’d now looked through all their paperwork again. And they thought that their recently-renewed policy included cover for animals “straying”, which they might be able to use.

We asked the insurer about this. They confirmed that the claim would fall under their cover for “straying” - but Mr and Mrs M didn’t actually have this optional cover.

The insurer explained that they’d recently changed their “straying” cover to include more situations. And they’d used their renewal letters to make people aware of this. They said they’d sent the same letter to all customers - whether or not those customers had “straying” cover.

When we looked at the letter in question, we found that it mostly referred to the policy renewal. But there was also a highlighted section - clarifying that the wording of the “straying” had been updated.

So we understood why Mr and Mrs M might have remembered reading something about “straying”. In our view the letter - and the accompanying policy documents - made it clear that they hadn’t chosen to pay for this extra cover.

In light of everything we’d seen - and although we were sorry that Mr and Mrs M had lost their cow - we decided that the insurer had acted fairly. Mr and Mrs M were disappointed, but told us that they would add “straying” cover to their policy from now on.

consumer complains after insurer rejects claim for damaged harvester - on grounds that damage is due to wear and tear

Mr A ran a small business that used special machinery to harvest “forage” - mainly grass and other plants - to be used as food for farm animals. When he damaged the cutting blades of his machine, he made a claim on his business’s insurance policy.

The insurer sent an engineer to look at the damage. And a couple of days later, they phoned Mr A to tell him that they weren’t willing to pay his claim. According to the insurer, their engineer thought that the damage had been caused by “general wear and tear” - which Mr A’s policy didn’t cover.

Unhappy with this answer, Mr A complained - and called out a local engineer. Mr A told the insurer that this engineer thought that the damage could have been caused by a rock or stone.

The insurer then asked a second engineer to take a look. This engineer’s report backed up their first engineer’s findings - that the damage was due to wear and tear. At this point, we were asked us to step in to the dispute.

complaint not upheld

We asked Mr A and the insurer for copies of the three engineers’ reports.

According to the report of the first engineer sent by the insurer, there wasn’t any evidence that a solid object had got into the machine. So they’d concluded that the damage was caused by a worn metal blade coming loose within the harvester.
Turning to the second report the insurer had sent us, we noted that this time they had instructed a forensic specialist. This specialist engineer had also said that they couldn’t see any signs that a “foreign object” had got into the harvester.

But they had found that some parts of the machine were very worn out - and concluded that the damage was very likely caused by “metal fatigue cracking”.

We then considered the report of the engineer called out by Mr A. This engineer had said that it “couldn’t be ruled out” that the damage had been caused by a rock or stone. But they’d also found considerable wear to the harvester’s metal blades.

We appreciated that Mr A’s engineer thought that a stone could have caused the damage. But all three engineers - including a specialist - had found evidence of significant wear and tear. So we thought that wear and tear was the more likely cause.

We explained to Mr A that, in the circumstances, we didn’t think the insurer had acted unfairly in turning down his claim.

image: ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.