The liability of raising livestock for others

Contract wean/grow/finish barns are a positive addition to many farms, but contract growers should review their production contract and farm insurance policy to ensure full coverage if there is a catastrophic loss of livestock.

A large percentage of U.S. market hogs are raised by contract growers. These growers have contractual arrangements with the pig owner (contractor) to provide housing and daily care of the animals. Every contract between the pig owner and contract grower is different and establishes different guidelines and requirements for each party within the agreement. With recent surge in the market value of livestock, there is a sizable liability accepted by the grower under some contracts. For example, the pigs in a 1,000 head contract finishing barn nearing market weight at today’s market are valued at over $200,000. If there is a catastrophic loss of animals, depending on the reason for the loss and the contract language, the contract grower may be responsible for that loss.

There are two factors that need to be considered:

First is the contract language. Some contracts hold the contracted grower liable for accidental death loss under the contract grower’s control. These losses may have resulted from loss of electricity, manure handling accident or other unidentified circumstances. The important point is to understand the contract and know who is responsible under what circumstances.

The second concern is the insurance policy. Many general farm policies contain a Tenants and Consignee Endorsement. This endorsement will cover the grower’s responsibility for the accidental loss of livestock that is identified in the contract. The concern is the level of coverage. Unless the grower has specifically discussed this endorsement with his or her insurance agent, the level of coverage may be significantly below the value of the animals, leaving the contract grower to cover the remaining financial obligation if there were a catastrophic loss.

Michigan State University Extension recommends that contract growers take three steps to assure they are fully covered in the case of a large death loss within the livestock under their care. First, the grower should review the contract with the pig owner, establishing under what circumstances the owner has determined the grower will be liable. The owner should be able to point out within the contract where this liability is established. Second, the grower should have the contract reviewed by a knowledgeable lawyer to ensure that owner’s description of the contract language is indeed what is documented. Finally, after fully determining the liability established in the contract, the grower should visit with their own farm insurance provider to review the policy. This review should aim to ensure the contract grower is adequately covered for the value of the animals under his or her care.

Contract hog production has been a positive enterprise for many farms but the increased market prices and specific language within the production contract language may make the grower liable for significant losses if there is an accidental loss of livestock. A review of the contract and farm’s insurance policy may be necessary to insure the financial health of the farm.

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