Consumer Protection Act increases farmers’ exposure to risk

Farmers need to be aware of increased exposure to risk as a result of the new Consumer Protection Act (CPA). Under the Act, introduced in April this year, anyone in the value chain can be held individually or jointly accountable for any loss a consumer may suffer. Farmers could potentially face crippling costs if they do not have appropriate cover, warns Mutual & Federal, a member of the Old Mutual Group.

Andries Wiese, Group Manager for Agriculture and Crop at Mutual & Federal, explains, “If consumers of agricultural produce fell ill, anyone in the farming production line could be sued.”

For example, in May this year several deaths occurred in Germany following consumption of cucumbers contaminated by E. coli, leading to a farming crisis across Europe. This incident could have resulted in unforeseen legal claims against farmers, if they were found to be responsible.

“Farmers often don’t realise they could have to pay out billions of Rands to compensate for unforeseen events,” adds Wiese. “An individual can claim between R5 million and R10 million for food poisoning, but this could add up dramatically if hundreds of people fell ill. Most farmers do not have adequate insurance to cover such cases. The costs would be devastating for most farmers, whose reputations would also suffer.”

Under the CPA, farmers can also be held liable if they claim that their produce is organic but is actually treated or processed.

“Similarly, if a retailer places an organic label on a farmer’s goods and they have not been organically produced, someone in the production line needs to be held accountable under the Act,” adds Wiese.

Even in the case of farmers who sell directly to the end user, it is important that they also understand the process holistically so that they know how to avoid additional insurance risks. “If farmers have liability policies limited to damage incurred on their properties, their policies won’t provide the necessary cover as soon as their produce is delivered into the value chain,” says Wiese.

With the CPA in full force, farmers have to consider the impact of the way they do business with the end user or consumer, from the fertilisers and insect repellents used for crops, to the pedigree livestock they own, to the vehicles they sell to other farmers. Pedigree livestock have to be pedigree, especially if used for mating and competitions and vehicles or tractors can no longer be sold ‘voetstoots’ (as is, with all its defects, latent and otherwise).

“Farmers need to be business people. They must identify all the risks to which they are exposed to within the full production line – from farmer, to wholesaler, to retailer and consumer. If they choose to ignore this, it’s at their own peril.”

“Farmers should ensure their broker or insurance company understands these issues and provides them with relevant comprehensive cover that will ensure peace of mind and help them avoid unnecessary and devastating legal costs,” concludes Wiese.

This is some of the advice the agricultural community will be able to receive from Mutual & Federal at Agri Mega Week, an agricultural show that takes place at Agri Mega Park, Swellendam Road, Bredasdorp, Western Cape from Wednesday, 14 September 2011 to Friday, 16 September 2011. Agri Mega Week strives to create a platform where producer, input supplier, service agent and the public, with interest in agriculture and specifically the small grain trade, can participate interactively, do business and learn.

Here, Mutual & Federal staff will assist clients and farmers with insurance-related queries in an obligation-free environment.

Mutual & Federal is one of the leading short-term insurers in southern Africa.