AVRECO - Your Specialty Risk Professionals

Surely Products Liability Is Adequate?

No! Seedsmens E&O should be carried in addition to Products Liability as they are entirely different coverages and complement each other.

Seedsmens E&O covers claims against the seedsmen which may result from failure of the seed sold to conform to the variety or other specified qualities, or to be suitable for the purpose specified, resulting from any error, negligent act or omission by the company or its employees.

Sometimes a Products Liability Policy is enhanced to cover misdelivery, but that is not an adequate substitute for Seedsmens E&O.

What Sort Of Claims Do Seedsmen Attract?

There are 6 main categories of claims as outlined below. In most cases the key factors are the adequacy of the seedsmen’s quality control and seed testing procedures, including the sampling procedures, and the depth of the plaintiff’s distress at having lost all or part of his harvest and subsequent profit, (sometimes blaming the seedsmen, instead of his own farming techniques).

1. MECHANICAL ERROR: Such as errors in labeling, mixture of the wrong kinds or varieties of seed, inadequate labeling or inadequate laboratory testing for germination.
2. OVERZEALOUS DISTRIBUTION: Including verbal warranties as a result of a salesman over-representing the seed product, and catalogue warranties, again by overzealous parties perhaps beyond the control of the seed producer. The American Seed Trade Association recommends the use of a Standard Disclaimer of Warranty and Limitation of Liability, which is a protection against some of these claims.
3. DISEASE CONTROL PROBLEMS: Susceptibility to disease varies on the susceptibility or genetic resistance of the type of seed planted. Seedlings or plants may become infected with disease due to seed borne organisms, or be infected by disease organisms in the soil or on plant residue. Damage can be reduced by disease control treatments and by not planting in areas known to be infected with disease.
4. GERMINATION DEFICIENCIES: This type of loss can be controlled by careful grow-out testing and strenuous policing by official state and federal seed testing laboratories. Although claims may be less frequent, they tend to be particularly severe when they do occur.
5. MISAPPLICATION: Claims resulting from seed failing to perform in a given area.
6. MISCELLANEOUS PROBLEMS: Improper and inadequate pollination can produce substandard seed and consequential losses. Claims also arise from failure to carefully rogue undesired types, kinds or varieties from the seed field and, in particular, apparent carelessness in harvesting the seed production fields.

Examples Of Seedsmens E&O Claims:

Claims may arise anytime a grower is unhappy with a crop, and feels the seedsmen may be the nearest ‘deep-pocket’. Some are frivolous, some have merit, but all need to be defended at a cost to the seedsmen.

The following allegations have all caused substantial claims and/or costs on seedsmen’s policies (from $20,000 to $2,000,000);

1. The wrong rice variety was supplied by an insured, resulting in a claim for the difference between the value of the crop that was produced and the crop that should have been produced.
2. A grower maintained that the insured’s salesman made representations concerning resistance of a sorghum variety to a soil borne fungus, which damaged his crop.
3. The Insured distributed seed which should have been re-tested within 5 months of sale, and it was alleged that had the tests been done correctly such poorly germinating seed would not have been sold to the claimant.
4. D) Failure to test seed resulted in onions being of poor quality (double headed), and unsuitable for the claimant’s supermarket customer who had to buy from others which caused a particularly large claim against the Insured.
5. The wrong variety of tomato seed was supplied to a claimant who needed plum tomatoes, not round ones which the Insured supplied, for canning

What Are The Key Features Of Seedsmens E&O?

The Insured under the London policy means the individual, firm or corporation named in the schedule and includes the partners, and any executive officers and directors if the insured is a corporation. Additionally “Seed(s)” are defined as including “seeds, bulbs, plants roots, tubers or other similar means of plant propagation”, and it should be noted that the policy covers worldwide sales.

There is a Deductible (minimum $2,500) which applies to each claim including costs. In this context a claim means all claims resulting from a single sale to one customer of one kind or variety of seed. With the Multiple Claims Clause, Underwriters have addressed the point that many claims could result from a single lot of seed by limiting the number of deductibles to 3, for an additional premium.

The Sum Insured is an annual aggregate limit inclusive of defense costs and there is enough capacity in London to respond to the current needs of any seedsmen looking for coverage.

As in all such policies there are some Exclusions:

Dishonest, fraudulent, criminal or malicious acts or omissions of the insured or his employees are not covered.

Also excluded is the purchase price of defective seed. Under the standard Limitation of Liability used by seedsmen replacement seed is offered by the seedsmen if the original is found to be defective.

Claims arising from the sale of seed not harvested during the most recent season of such seed are not covered. However, this does not apply to losses arising from seeds which by custom of the trade are carried over to the following seasons, if before such sale a purity and germination test is performed within the specific statutory period.

As mentioned above, the policy excludes bodily injury including death, of any person and damage to or destruction of any property including farm animals.

Claim for damage to plants because of disease, rust, wilt, fungus, insects or larvae are excluded unless the plants are those grown from seed sold by the insured.

There is no cover for any liability assumed under written or oral contractual agreement between the insured and any other third party.

Punitive and exemplary damages are excluded, although the underwriters may afford a defense to a claim for both compensatory and punitive or exemplary damages. Claims and claims expenses arising from the Racketeer Influenced and Corrupt Organizations Act are also excluded.

All policies contain a Retroactive Date which is the date of the first continuously-held London policy. The policy covers claims made during the policy period arising from sales of seed after the applicable retroactive date.

There is a Limited Extended Discovery clause which is only available to the insured if underwriters cancel the policy. It covers claims made within one year of termination provided the sale of such seeds was made before the termination date.

What Other Advantages Are Offered By A London Policy?

There are important reasons for a Seedsmen to buy a London policy, the only consistent market for this specialized class of business.

A London policy gives an insured immediate access to Lord, Bissell & Brook, underwriter’s attorneys to whom all claims have to be reported. LB & B have been handling claims ever since they worked with Underwriters and the ASTA, when first putting this program together, over 30 years ago. Their contribution has included establishing case law for this industry, and of course they are second to none as regards experience in handling Seedsmens Errors and Omissions claims.

To download a Seedsmen's E&O Application, click HERE

Interested in learning more? Contact Linda Deiss at (312) 294-5475 or .