The best insurance against food safety problems is … insurance - The Packer

The best insurance against food safety problems is … insurance

05/21/2013 04:58:00 PM
Tom Karst

National Editor Tom KarstAre Good Agricultural Practices the best insurance against food safety market place issues? Or, perhaps, a competent public relations team and expert legal counsel is the key piece.

What if the best insurance against food safety issues was, simply, insurance?

Language in the Senate farm bill asks the USDA to study the possibility of food safety insurance for specialty crop growers. Here is the text:

Section 522(c) of the Federal Crop Insurance Act (719 U.S.C. 1522(c)) (as amended by section 11018) is amended by adding at the end the following: 21 ‘‘(19) STUDY OF FOOD SAFETY INSURANCE.—

‘‘(A) IN GENERAL.—The Corporation shall offer to enter into a contract with 1 or more qualified entities to conduct a study to determine whether offering policies that provide coverage for specialty crops from food safety and contamination issues would benefit agricultural producers.

4 ‘‘(B) SUBJECT.—The study described in subparagraph (A) shall evaluate policies and plans of insurance coverage that provide protection for production or revenue impacted by food safety concerns including, at a minimum, government, retail, or national consumer group announcements of a health advisory, removal, or recall related to a contamination concern.

12 ‘‘(C) REPORT.—Not later than 1 year after the date of enactment of this paragraph,14 the Corporation shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study….

 

The topic of food safety insurance has attracted some attention in recent years in the run-up to the next farm bill.

A 2010 paper from the Portland-based Community Food Security Coalition speaks to the issue as well, evaluating “emerging issues” in food safety and liability insurance.

At the time, the farmers interviewed for the survey indicated they were no strangers to liability insurance. From the report:

Seventy two percent of the farmers indicated that they had product liability insurance. Sixty four percent indicated that they have customers who require this kind of coverage. Customers that require product liability insurance included grocery stores, wholesale distributors, retailers, farmers markets, property owner, and certain CSA customers. Of the farmers who carried product liability insurance, 50% indicated that they had options, 19% indicated that they didn’t have options, and 31% said that they did not look into options other than the one they signed up for. Sixty seven percent of these farmers indicated that they did not have any difficulties in finding out information about product liability insurance coverage or in securing this coverage.

 

Most recently, the United Fresh Produce Association is offering a “Recall Ready” program that members can purchase from a cost of $5,000 to $15,000 per year.

This topic of food safety insurance will be interesting to follow. Just how broad could “food safety insurance” be? Should the insurance product be designed to cover costs to a grower/shipper if he must perform a recall, or offered only to those not implicated but were “collateral damage” victims?

What kind of growers/farmers would be eligible? Would “means-testing” be used so only smaller or mid-size growers could benefit? If a grower wants food safety insurance, what kind of preconditions (i.e., food safety audits, GAP compliance) must he subscribe to in order to be covered?

Check out this coverage from the United Fresh show of last year that defined the issue

 

From that story:

Fresh produce marketers looking for insurance against market losses caused by food recalls and food safety scares caused by other companies don’t have a solution.

But David Durkin, principal with Olsson Frank Weeda Terman Matz PC, Washington, D.C., said that the farm bill might address the issue.

Durkin was part of a May 1 panel discussion at a United Fresh 2012 grower-shipper workshop.

Durkin said food recalls can effect a large swath of producers because of public uncertainty over the scope of the recalls. Consumers may just decide not to buy a certain food item from any source, even if they hear a problem is limited to a region or company.

The permanence of information and stories on the Internet also broadens the effect of food recalls, he said.

In response to these risks, Durkin said some are looking at policies that would allow growers be protected from risks that cannot be controlled by the producer, including food recalls by competitors.

Federal crop insurance provides against low crop yields or declines in price or both. Durkin said some lawmakers are interested in greater options for producers.

Durkin said there is language floating around Capitol Hill that would direct the Risk Management Agency to conduct a feasibility study related to food safety events. Lawmakers seek to determine whether or not producers who are not at fault can insure themselves against losses from food safety events, he said.

The challenge to expanding crop insurance options for specialty crops is the trend to reduce federal budget expenditures. Another probability is that any insurance product would not likely include processors. Other difficulties include the uncertainties of measuring the risks of specialty crops. Yet another problem is defining the “trigger” where an insurance product would begin to apply, Durkin said.

“If you are a tomato producer and some (other) tomato producer has a recall and the bottom drops out of the tomato market, if people just stop buying tomatoes — can that be a definable event for insurance purchases for insurance purposes, a loss that could trigger coverage?” he said.

Though likely beset with limitations, USDA getting food safety insurance on the books has the potential to be one of the most effective drivers of Good Agricultural Practice compliance among growers of any size. I can’t imagine the USDA offering the one without demanding the other.



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Rick VanVranken    
Rutgers Co-op Extension, NJ  |  May, 22, 2013 at 09:34 AM

Every producer knows the need for product liability insurance, but insurance does not prevent food contamination any more than applying all the GAPs, audits and tracability in the world will insure a product is always 100% free of contamination. What producers need are fair prices from all levels of buyers (and regulators) who are demanding added costly practices of their suppliers which only protect the bottom line and liability of those buyers and/or give them some marketing advantage to crow about their produce being better than the next guys. If insurance is mandated/demanded and GAPs are a requirement to obtain the insurance, who's paying for it? Farmers/growers are price takers, not price makers, so unlike a hard goods manufacturer, there's no passing on the cost to the customer, and margins get ever thinner.

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