1. . www.InsuranceCommunityUniversity.com Livestock Insurance

2. . www.InsuranceCommunityUniversity.com Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state jurisdiction. The instructional materials provided by The Insurance Community Center and its authors is intended as a general guideline and any interpretations provided by The Community do not modify or revise insurance policy language. Information which is copyrighted and proprietary to Insurance Services Office, Inc. (“ISO Material”) is included in this publication. Use of the ISO Material is limited to ISO Participating Insurers and their Authorized Representatives. Use by ISO Participating Insurers is limited to use in those jurisdictions for which the insurer has an appropriate participation with ISO. Use of the ISO Material by Authorized Representatives is limited to use solely on behalf of one or more ISO Participating Insurers. The authors of these materials, Insight Insurance Consulting and The Insurance Community Center assumes neither liability nor responsibility to any person or business with respect to any loss that is alleged to be caused directly or indirectly as a result of the instructional materials provided. Insight Insurance Consulting 714 803-5830 laurie@insightinsuranceconsulting.com www.insightinsuranceconsulting.com www.theinsurancecommunity.com Copyright 2010 All Rights Reserved 2

3. . www.InsuranceCommunityUniversity.com Topics covered  Background on Livestock Insurance  Specific types of Livestock Insurance  Mortality Insurance  Pasture Insurance  Feedlot Insurance  Dairy Herd Insurance  Auction Market Insurance  Transit or Cargo Insurance  Import/Export Insurance 3

4. . www.InsuranceCommunityUniversity.com Exposures to Loss  At “scheduled” locations  At “un-scheduled” locations  On pastures or grazing land  At an auction yard  While in transit  During loading or unloading 4

5. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance 5

6. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance  Livestock is available under most Farm Package Policies  Livestock may be scheduled or included under “property” in the form  Caution:  Review values carefully  Farm Policies have limited values which may not cover the Livestock owner’s exposures 6

7. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance—Definition of Terms  Purebred/Registered  The animal is registered with a Breeed Association and its bloodlines are recorded  Stocker  A non-registered animal used for breeding or dairy purposes  Feeder  A non-registered animal being fed for eventual slaughter intended to enter the food chain 7

8. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance—Definition of Terms  Feedlot  A lot or combination of buildings intended for confined feeding and raising of livestock using supplemental feed sources  Pasture  A confinement area where grass or crop residue is used for livestock grazing 8

9. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance—Definition of Terms  Current Market Value  The average market value for Feeder or Stocker livestock as determined at the nearest applicable market or as published by the USDA price reporting service 9

10. . www.InsuranceCommunityUniversity.com Background on Livestock Insurance—Definition of Terms  USDA  The United States Department of Agriculture which is the governing authority over all Agricultural related affairs within the US 10

11. . www.InsuranceCommunityUniversity.com Mortality Insurance 11

12. . www.InsuranceCommunityUniversity.com Mortality Insurance  This type of insurance is basically a type of Term Live type of coverage for Horses, Cattle and Dogs  The animal is insured against Death (or Destruction for humane purposes) which may occur during the policy period.  Covered causes of Death include “accident”, “Illness” and “disease”. 12

13. . www.InsuranceCommunityUniversity.com Mortality Insurance  Additionally the policy contains the “hazards of transportation” anywhere in the U.S. and Canada.  Particular attention should be given to insurance company definitions of these coverage terms. 13

14. . www.InsuranceCommunityUniversity.com Mortality Insurance  Rates for Mortality Insurance vary depending based on the use, age and value of the animal being insured.  A veterinarian exam is usually required by the insuring company prior to accepting the risk. 14

15. . www.InsuranceCommunityUniversity.com Mortality Insurance  Most insurance carriers will accept a “Statement of Health” which is completed by the owner of the animal provided that the animal has been under the owner’s care for more than 30 days.  Livestock insured on a Mortality Policy are usually higher value “Registered or Purebred” animals whose loss would cause economic hardship to their owner 15

16. . www.InsuranceCommunityUniversity.com Mortality Insurance  There are several endorsements available on a Mortality Policy offered for an additional premium. They may include:  Surgical Coverage;  Major Medical Coverage;  Loss of Use:  Limited Loss of Use;  Emergency Colic Surgery and Breeding Soundness Coverage. 16

17. . www.InsuranceCommunityUniversity.com Pasture Insurance 17

18. . www.InsuranceCommunityUniversity.com Pasture Insurance  This coverage provides protection to livestock (usually cattle) that are put on large expanses of pasture land to graze prior to being moved to a feedlot.  In the west, pasture land can consist of several thousand acres and usually involve leases of BLM (Bureau of Land Management) land.  In other areas pastures may consist of less than 20 acres. 18

19. . www.InsuranceCommunityUniversity.com Pasture Insurance  Coverage under this type of insurance is available for one of three policy periods:  Annual 12 month policy,  Winter Policy ( Oct. 1 through April 30 th )  Summer Policy (May 1 st through Sept. 30 th ). 19

20. . www.InsuranceCommunityUniversity.com Pasture Insurance  Coverage is usually written as Specified Perils wherein the policy insures the livestock for “Death Only” when caused by a Specific Peril. 20

21. . www.InsuranceCommunityUniversity.com Pasture Insurance Most policies provide perils including  Fire, Lightning,  Drowning,  Attack by Wild Dogs or Animals,  Electrocution by Artificial Means,  Vandalism or Malicious Mischief,  Theft (Excluding Mysterious Disappearance),  Animal Collision  Smothering Directly caused by a blizzard or snowstorm. 21

22. . www.InsuranceCommunityUniversity.com Feedlot Insurance 22

23. . www.InsuranceCommunityUniversity.com Feedlot Insurance  Feedlot Insurance is similar in nature to Pasture Insurance.  The coverage protects Livestock which is in a confined area which are being fed grains and supplements.  This type of operation is usually a situation where the cattle are being fattened and will be sent to slaughter to become steaks and hamburger at the local supermarket. 23

24. . www.InsuranceCommunityUniversity.com Feedlot Insurance Most policies provide perils including  Fire, Lightning,  Drowning,  Attack by Wild Dogs or Animals,  Electrocution by Artificial Means,  Vandalism or Malicious Mischief,  Theft (Excluding Mysterious Disappearance),  Animal Collision  Smothering Directly caused by a blizzard or snowstorm. 24

25. . www.InsuranceCommunityUniversity.com Feedlot Insurance  Typical perils NOT insured on the policy  Grazing  Lagoon, stagnant or flood water  Contamination from sources other than feed or water  Errors in mixing of feed 25

26. . www.InsuranceCommunityUniversity.com Feedlot Insurance  Limits of insurance will usually be written at “Current Market Value” and may have a Maximum Limit per Occurrence.  Feedlot operations are spread throughout the United States but the larger ones are concentrated in the states of Texas, Kansas, Oklahoma and Nebraska. These are prime areas where weather conditions can pose a serious threat to Livestock. 26

27. . www.InsuranceCommunityUniversity.com Dairy Herd Insurance 27

28. . www.InsuranceCommunityUniversity.com Dairy Herd Insurance  Dairies are similar to feedlots since they usually consist of cattle that are in a confined area and fed grains and supplements.  The difference is that in some areas, Dairy cattle are housed in enclosed structures while in the Southwest and warmer climates the cattle are kept in pole barns with fans and misters to keep them cool and comfortable 28

29. . www.InsuranceCommunityUniversity.com Dairy Herd Insurance  In this situation insurance coverage is for ordinary Dairy cattle and can include Milking Cows and Heifers as well as dry cows. 29

30. . www.InsuranceCommunityUniversity.com Dairy Herd Insurance Most policies provide perils including  Insurance protection is against Death or Destruction for humane purposes following a Specified Peril.  In addition coverage is provided for the Specified Perils including: Fire, Lightning, Drowning, Attack by Wild Dogs or Animals, Electrocution by Artificial Means, Vandalism or Malicious Mischief, Theft (excluding mysterious disappearance) Animal Collision and Smothering Directly caused by a blizzard or snowstorm. 30

31. . www.InsuranceCommunityUniversity.com Dairy Herd Insurance  Dairy cattle values tend to fluctuate with the price of milk, however, keep in mind that the average Dairy Cow has a life span of 5-7 years and depending on the butter fat content of her milk, she can be difficult and expensive to replace should a loss occur. 31

32. . www.InsuranceCommunityUniversity.com “Contaminated Feed & Water” Endorsement  An endorsement for Feedlot and Dairy Herd Insurance  What this additional coverage form offers is protection for Death of the Livestock when caused by a Contaminant in the food and water supplied to the cattle.  It is a Death Only coverage and can be purchased with a choice of Limits and Deductibles to fit each individual situation that Feedlot and Dairy owners may require. 32

33. . www.InsuranceCommunityUniversity.com “Contaminated Feed & Water” Endorsement  This endorsement has been an important addition to coverage’s in the West and is spreading throughout the United States.  This insurance is rapidly becoming a Bank Loan requirement for larger facilities. 33

34. . www.InsuranceCommunityUniversity.com Auction Market Insurance 34

35. . www.InsuranceCommunityUniversity.com Auction Market Insurance  Prior livestock forms death with cattle that was being raised either on a pasture near a farm or ranch or in a confined area such as a feedlot or dairy 35

36. . www.InsuranceCommunityUniversity.com Auction Market Insurance  This coverage is usually written for the owner or owners of a Livestock Auction Facility.  In most cases these types of operations include buildings and pens which hold the livestock prior to and after the sale along with a Sale Ring where the animals are bid on by interested buyers. 36

37. . www.InsuranceCommunityUniversity.com Auction Yard Coverage  Typical “premises” forms do not include auction yard locations  Transit forms cease when the transportation of livestock ends 37

38. . www.InsuranceCommunityUniversity.com Auction Market Insurance  Auction Market owners are responsible for the Care, Custody and Control of the livestock when on their premises.  With Auction Market Insurance there is usually no deductible and livestock are insured for their “Current Market Value”. 38

39. . www.InsuranceCommunityUniversity.com Auction Market Insurance  There are three broad categories of exposures/coverage  Yard Coverage  This insures the animals received on the premises and protects against loss to the Livestock while kept in the Yards resulting from Specified Perils such as Fire, Windstorm or Tornado, Electrocution, Hail & Theft while on the premises up to a period of 10 days.  39

40. . www.InsuranceCommunityUniversity.com Auction Market Insurance  Accidental Death & Crippling while in the Yards  This protects the animals from the hazards of crippling or even death while being moved through the alleys, pens, sheds & barns of the Auction Market facility. 40

41. . www.InsuranceCommunityUniversity.com Auction Market Insurance  Mortgage & Theft Coverage  This is a protective measure for the Auction Market business  It is written to protect the Auction Market itself from being held responsible for selling cattle that have a Mortgage on them and are sold through the Market but the Lender never receives payment for their monetary interest or mortgage that they hold on the livestock. 41

42. . www.InsuranceCommunityUniversity.com Auction Market Insurance  The coverage’s are usually written as a monthly reporting type of Policy. The Auction market reports monthly gross sales and pays a percentage of those sales as premium for all three of the protective coverage’s offered. 42

43. . www.InsuranceCommunityUniversity.com Livestock Transportation 43

44. . www.InsuranceCommunityUniversity.com Transportation  Perhaps one of the greatest exposures that cattle have to loss and one which occurs on a daily basis throughout the U.S. is exposure to Death or Injury while being transported.  The usual mode of transportation is a specially designed livestock trailer which can be partitioned to separate large and small animals. 44

45. . www.InsuranceCommunityUniversity.com Transportation  A Farm Auto Policy may be written to include Livestock which is owned by the insured and transported via a gooseneck trailer or Farm truck.  Caution: be sure to read the Farm Auto Policy to be sure that coverage under this form is not limited to only Dead livestock which is involved in an accident.  Check that limits per head follow the changing livestock market values. 45

46. . www.InsuranceCommunityUniversity.com Transportation  There is Transit/Cargo Insurance specifically written to cover livestock which is being transported either by the Farmer or Rancher himself or by a Commercial Livestock Hauler who makes his living moving cattle across the country. 46

47. . www.InsuranceCommunityUniversity.com Transportation  Two forms of stand alone Livestock Cargo Insurance are currently on the market.  Transit Limited Coverage  this type of insurance is Limited to the Specific Perils of Fire, Lightning, Collapse of Bridges or Culverts and Collision or Upset. 47

48. . www.InsuranceCommunityUniversity.com Transportation  What is unique to the coverage is that should a loss occur due to a covered specified peril  The insurance is expanded when compared to a Farm Auto Policy to include Dead and Crippled Livestock.  In some cases it also will pay for Round up fees to gather the cattle following a Specified loss and will purchase the entire load of Livestock should the shipper deny the balance of the load of cattle. 48

49. . www.InsuranceCommunityUniversity.com Transportation  Transit/Cargo Insurance is a Broad Form Transit Policy.  This form is expanded to include not only the perils of Fire, lightning, Collapse of Bridges and Culverts and Collision or upset but it also provides coverage for livestock which is basically being transported down a road and suddenly is jostled and gets down in the trailer and is killed or crippled. 49

50. . www.InsuranceCommunityUniversity.com Transportation  The policy states in essence that “if the Livestock is loaded in good condition it will be unloaded in the same, like condition”.  Premium for this type of coverage can be expensive but it does provide the most extensive coverage for the Livestock hauler. 50

51. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance 51

52. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance  Import and Export Insurance for Livestock is an ever broadening opportunity in today’s Agricultural World.  There are some businesses dedicated to providing services to assist in the Import or Export of Livestock known as “Freight Forwarders”.  There are also individual Livestock breeders who wish to improve their current stock of breeding animals and actually travel to European Countries to contract for Bulls and Cows to add to their herd.  52

53. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance  When writing this type of Insurance it is recommended that as much information as possible be gathered at least 3 to 6 months prior to shipping of the Livestock.  Information to be noted are:  Where are the Animals being shipped from?  Where are they being Shipped to? 53

54. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance  How are the animals being shipped? (the most common way is via air but there are still shipments of livestock that cross the oceans on a weekly basis)  Are the animals being shipped bred ?  If they are bred how close to full term are they? 54

55. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance  Is there a quarantine period required either prior to shipping or when they arrive at their destination?  Is transportation from the airport or dock also needed to get the cattle safely to their final destination? 55

56. . www.InsuranceCommunityUniversity.com Import/Export Livestock Insurance  Types of coverage offered with Import/Export Insurance includes:  Death and Crippling of the livestock while in transit, be it via ship or plane.  Protection for the Livestock while in Quarantine prior to shipment.  Protection for the Livestock while in Quarantine after arrival at its destination  Transit/Cargo coverage for trucking to the final destination if needed. 56