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Tuesday, October 02, 2012

Ensure That You Know A Field Fire Is Not Insured


If you are harvesting soybeans, do you have fire extinguishers on your combine, and a tillage tool parked in the corner of the field?  There is a reason that National Fire Prevention Week begins next Sunday, and by the way, don’t count on your crop insurance policy to help out with a field fire.


Crop insurance will only cover a crop lost to fire if there is a lightning strike that sets the blaze or the popular volcanic eruption, which will likely cause future farming problems in that field.  Some farmers are unaware of the lack of crop insurance coverage for fire damage to a field, which is likely in the federal crop insurance handbook under moral hazard issues.  Crop insurance does not want to indemnify a crop loss, which could have been set afire because of a yield that was low, but now low enough to trigger a crop insurance payment.


Kansas State University economist and crop insurance specialist Art Barnaby, says you probably received a note from your insurance agent that fire loss is not covered, because that would have been another opportunity for him or her to sell another policy.  He says fire policies are not expensive and the insurance company has more tools to use in pursuing reimbursement from someone else who can be blamed for the fire, if it was not the fault of the farm operator.


One reason to have a tillage tool in the field, in case the fire was attributed to your combine, is the fact that the loss of an entire field would subsequently show up as a zero yield in your APH history, says Barnaby.   That means your zero yield for the field will slowly float through your APH for the next 10 years pulling it down.  Saving part of the field that is undamaged by the fire will be a good reason to fuss with moving the tillage tool from field to field as they are harvested.  It may also spark a conversation with your insurance agent about a fire policy for the coming year.


Photo Credit: Brian Korthals/Daily Globe, Rushmore, Washington.

Barnaby reminds farmers they can replace a zero yield with a “plug” yield, which is 60% of your county’s T- yield, but only if the low yield is an insurable loss, (and fire is not.) Therefore, if a field averaged 25 bushels with the fire damaging a portion, that shortfall can be raised with the plug yield, but a zero yield from complete fire damage cannot be changed. That is the same rule that would be applied if someone had planted without filling the seed box, or had applied glyphosate to a non-gmo soybean field.


Barnaby says the reason the Risk Management Agency has the moral hazard issue in place is that a field with a half of a crop is better off than with a zero yield. Since it may be difficult to determine just how a field may have caught fire, he says the issue is resolved by not providing coverage for a field lost by fire.  And he adds that a lightning strike is about the only sure way for a loss to be covered.


He says farm operators are better off to extinguish the fire themselves or get the help of a rural fire department than to let the crop burn and suffer with the lower APH.  He says if the damage is small enough then the yield for the unit will be larger than the plug yield, so substitution in the APH will not be an issue. 


Interestingly, Barnaby uses the fire loss as an example to make his frequent point that farmers with crop insurance losses are seldom made whole, in spite of the national press articles about excessive payments from crop insurance.  He says few farmers would be better off without a crop.



A crop lost to fire is not covered by crop insurance, but only by a fire policy.  The loss of a crop insurance unit to fire will be entered as zero in the APH; however a field with only a portion lost can be eligible for a “plug” yield.  Fire is not covered because of the moral hazard issue.



Posted by Stu Ellis on 10/02 at 01:51 AM | Permalink

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