Despite Low Claims, Issuer Reluctant to Renew Liability Coverage : Farmers Markets Are Facing Insurance Crisis

Like local government agencies, farmers markets in California suddenly find themselves facing a liability-insurance crisis.

The California Direct Marketing Assn. had a group policy with Fireman’s Fund to cover 70 of its members’ markets scattered throughout the state.

But that policy lapsed Dec. 31, and Fireman’s Fund was “hesitant to renew even though we had an excellent safety record,” association President Marc Leinwand said

The association began looking for other insurers but found companies reluctant to insure a type of business that is not operated by the same people in the same place all the time. Farmers markets often operate once or twice a week in a parking lot with a variety of farmers offering wares at various times, depending on what crops are ripe.

“We tried every company, but we’re such a different kind of thing no one has something like this on their books,” Leinwand of Healdsburg, Calif., said in a telephone interview.

Finally, the association went back to Fireman’s Fund “and tried to convince them that the markets are safe,” Leinwand said. The group pointed out that there were only $500 in claims in two years.

That tactic may work as association and insurance company officials plan to meet late this week to work out a new policy.

The policy will cost more than double the $250 to $300 each farmers market paid for liability insurance last year, but “that’s not going to throw any markets out of business,” Leinwand said. “Some have found other policies and they’ve averaged $1,600 to $2,000 per year.”

Markets covered by the umbrella policy at Paso Robles and Merced went out of business temporarily for lack of insurance.

Leinwand said some markets were able to keep operating by obtaining temporary riders on policies held by cities or counties if they were located on city- or county-owned property.

Cities and counties themselves have faced huge increases in liability-policy costs from insurance companies worried about the state’s “deep-pocket” rule.

That rule allows a person who wins a damage suit in which a government agency is partly at fault to collect the entire amount of damages from that agency if others found more liable cannot pay their shares. A petition is circulating now to get a proposition on the state ballot to end the rule.

Farmers markets don’t have “deep pockets” and their problem springs from the unique nature of their enterprise coupled with changes in insurance earnings, Leinwand said.

“What I’ve been told by insurance companies is that when interest rates were high in the 1970s, they locked up high investments,” he said. “Now interest rates are not so high, so (insurance) rates are up.”