This presentation was given on October 24, 2013 to Lawline. It is Part 1 or a 2 Part series on "Counseling the Local Food Movement." It gives and overview and background of direct farm marketing, cottage food operations, liability and insurance. You can listen to the presentation and get a FREE CLE from Lawline here: http://bit.ly/15609Rj
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Lawline: Counseling the Local Food Movement Part 1
1. Part 1: Counseling the Local Food
Movement
Lawline
October 24, 2013
By Cari B. Rincker, Esq.
2. My Background
• Grew up on a beef cattle
farm in Central Illinois
• Education
– A.S. in Agriculture from
Lake Land College
– B.S. in Animal Science from
Texas A & M
– M.S. in Ruminant (Beef
Cattle) Nutrition from
University of Illinois
3. My Background
• J.D. from Pace Law School
(2007)
– Certificates in Environmental
Law & International Law
• Associate at Budd-Falen
Law Offices in Cheyenne,
Wyoming (2008-2009)
– Environmental Law, Property
Law, Land Use & Federal
Lands
– Worked with “cowboys”
Cattle branding in
Casper, Wyoming
4. My Background
• Have my own food and
agriculture law practice in New
York City
• Chair of the American Bar
Association, General
Practice, Solo & Small Firm
Division’s Agriculture Law
Committee
• My food and agriculture client
base
– Farmers to ranchers
– Small to mid-size agri-business
– Food entrepreneurs
7. What is Direct Farm Marketing?
• Direct farm marketing refers to a method of
marketing when a farmer sells his/her farmgrown food product directly to the consumer
instead of a wholesaler or retailer.
• Types:
–
–
–
–
Farmers’ markets
Roadside stands
On farm stands
Community Supported Agriculture (“CSA”)
• Subscribers for a fruit, vegetable, dairy, meat, egg, and/or
homemade product share (e.g., pies)
(C) Cari Rincker, 2013
7
8. Advantages of Direct Farm Marketing
• It allows farmers to sell the food they raise directly to
consumers eliminating the middle man (thus, giving
the farmer a greater portion of the revenue);
• It offers consumers a way to buy fresh local farm
products directly from the producer;
• It keeps dollars spent on farm products in the local
community;
• It helps facilitate consumer education in local
agriculture industries; and
• It helps a consumer build a relationship directly with
the agricultural producer.
(C) Cari Rincker, 2013
8
9. Overview of Direct Farm Marketing
Sarah A. Low and Stephen Vogel, “Direct and
Intermediated Marketing of Local Foods in the
United States,” USDA Economic Research Service
Report 128 (November 2011).
• Based on a 2008 Agriculture Resource
Management Survey
(C) Cari Rincker, 2013
9
10. So What Exactly is “Local Food?”
• In the ERS study, directto-consumer and
intermediated marketed
channels (e.g., farm-torestaurant, school,
grocery store) were
considered “local foods.”
• Please note that there is
not legal definition for a
“local food.”
(C) Cari Rincker, 2013
10
11. Historical Trends in Direct Farm Marketing
• Between 1978 to 2007, 5.5% of farm sold food
direct to the consumer
– 0.3% of total farm sales
– Peak in 1982 due to the 1976 Farmer-to-Consumer
Direct Marketing Act
• Fostered direct marketing
• Provided technical assistance to farmers via agriculture
extension
• Between 1992 and 2007, the number of farmers
selling direct to consumer increased by 58%
– $1.2 billion (77% increase)
ERS article at 2
(C) Cari Rincker, 2013
11
12. Direct-to-Consumer Outlets
• Types:
–
–
–
–
Farmers’ markets
Roadside stands
On- farm stand
Community Supported
Agriculture (“CSA”)
• 2008 Study
– 71,200 farms
• 81% small local farms (less than
$50K gross sales)
• 14% medium-sized farms ($50K$249,999)
• 5% large farms ($250K +)
– $877 million in sales
ERS article at 3-4
(C) Cari Rincker, 2013
12
13. Intermediated Outlets
• Types:
– Farm-to-restaurant
– Farm-to-grocery store
– Farm-to-institution
(school or government)
• Data:
– 13, 400 farms
– $2.7 billion in sales
(compare to direct-toconsumer - $877 mil)
ERS article at 3
(C) Cari Rincker, 2013
13
14. Table 1 Summary
Item
Medium Farms
($50K-$249,999 gross
sales)
Large Farms
($250K + gross sales)
Number of Farms with 86, 726
Local Food Sales
15,202
5,301
Ave. Ratio of Local
Food Sales to Total
Sales
68.8%
67.2%
57.5%
Direct-to-Consumer
Only
72.1%
46.5%
31.0%
Intermediated
Channels Only
11.3%
10.4%
37.1%
Average dollars
marketed through
either direct or
intermediate per farm
$9,768
$72,312
$352,375
ERS article at 5
Small Farms (less
than $50K gross
sales)
(C) Cari Rincker, 2013
14
15. Summary Points
• Small farms are more likely to market
direct-to-consumer because it is more
difficult to generate enough volume for
distributors and institutions that
demand higher volumes of food
• Intermediated outlets require less
labor
• Roadside stands and farmers’ markets
accounted for about 80% of the direct
to consumer outlets
• On average, farmers traveled 30.7
miles to the farmers’ market
• Consumers acquaint the public face of
“local foods” with farmers using directto-consumer outlets
– But 60% of local food passes through
intermediate channels
(C) Cari Rincker, 2013
ERS article at 4-7
15
16. Table 2 : Marketing Channels
Item
Small Farms (less
Medium Farms ($50K- Large Farms
than $50K gross sales) $249,999 gross sales) ($250K + gross sales)
Roadside Stands
34.1%
24.9%
23.7%
Farmers Markets
34.6%
24.9%
23.7%
On Farm Stores
8.3%
17.4%
15.7%
CSAs
1.1%
2.5%
1.4%
Intermediated Outlets
22.0%
29.3%
45.0%
ERS article at 6
(C) Cari Rincker, 2013
16
17. What Commodities are
Being Produced?
Sales
Vegetable, Fruit and
Nuts
Livestock and Field
Crops
Other
(C) Cari Rincker, 2013
ERS article at 7
17
18. Vegetable, Fruit and Nut Farms
• Operate fewer acres
while generating
higher gross sales per
acre than field crop or
livestock farms
– Average of 149 acres
yielding $590 per acre
– Average U.S. farm is
349 acres yielding $304
per acre
• East vs. West
• Soil Type
(C) Cari Rincker, 2013
18
19. Table 3: Farms with Local Food
Sales vs. Non- Local Food Sales
Item
Farms with Local Food Sales
Farms with No Local Food
Sales
Ages of Primary Operator
57.2
57.8
Beginning Farmers (less than
10 yrs of experience)
25.4%
23.3%
Years of Experience*
23.4
25.9
Years of Education*
14.0
13.2
Internet Use*
69.9%
63.4%
*Statistically Significant (P < 10% or less)
ERS article at 8
(C) Cari Rincker, 2013
19
20. Table 3: Farms with Local Food
Sales vs. Non- Local Food Sales
Item
Farms with Local Food Sales
Farms with No Local Food
Sales
Farming as Primary
Occupation*
58.3%
44.6%
Full-time equivalent operator 1.3
jobs per farm*
.9
One or both spouses work
off-farm job
57.3%
61.4%
Average off-farm labor
income*
36,739
44,196
*Statistically Significant (P < 10% or less)
ERS article at 8
(C) Cari Rincker, 2013
20
21. Local Food Operators
• 30% more likely to list
his/her primary occupation
as farming
• Household members devote
more time to farming
– 40% more operator work to
farming = 1.3 full-time
equivalent
• Full-time equivalent is 2,000
hours annually
– Earn 17% percentage less in
off-farm income
• Less time to work an off-farm
job
ERS article at 8-9
(C) Cari Rincker, 2013
22. Location of Farms Selling Local Food
• Regionally
– Highest in Northeast, West Coast, and around
selected metropolitan areas
– Neighborhood effect
– More popular in regions that produce fruits and
vegetables
• West Coast, for example, produces 56% of U.S.
vegetables, fruits, nuts and specialty crops
• West coast has long standing farmers’ markets dating back
to 1970’s
• 85% of West Coast local sales were through intermediated
channels
– Concentration of young farmers in the West Coast
ERS article at 10-11
(C) Cari Rincker, 2013
22
23. Location of Local Food Sales
• Highest in Urban areas
– 50% local food sales in metropolitan
counties (e.g., NYC)
– 30% local food sales adjunct to
metropolitan counties (e.g., Long
Island)
• Why
– Population
– Dense farmers’ markets
– Access to labor/ transportation
networks
– Infrastructure
• Larger local food farms are more
likely to be located in remote, rural
areas (50.1%)
ERS article at 12
(C) Cari Rincker, 2013
23
24. Summary Stats
• Marketing of local foods grossed $4.8 billion in 2008
– Mostly intermediated channels
• Small farms with $50K or less in annual sales accounted
for 81% of local food sales
– More likely to use direct farm marketing methods
– 10% exclusively used direct marketing methods
• Large farms represented 5% of all local food sales
– Averaging $770K in local food sales per farm
– 93% of the value of local food sales marked through
intermediate channels
(C) Cari Rincker, 2013
24
25. Direct Farm Marketing of Food Products
• Contract Law
• What can be sold in New
York via Direct
Marketing
• Sanitation requirements
• Community Supported
Agriculture
• Farmers’ Markets
(C) Cari Rincker, 2013
25
26. Contract Law
• Typically, direct marketing
transactions take place with oral
agreements
– Agriculture is a handshake culture
• However, Article 2 of the Uniform
Commercial Codes applies to the
Sale of Goods
– Section 2-201 of UCC requires to
be in writing for the sale of goods
over $500 in order to be
enforceable
– Food lawyers can (and should) be
hired to write simple,
straightforward contracts for
direct marketing transactions
(C) Cari Rincker, 2013
26
27. What Can be Sold via Direct Marketing?
• This is a state law issue. Differences from state to state.
• In New York, farms are permitted to sell the following
products direct-to-consumer so long as they are not
considered a “retail food store” under Article 17 of NY Agric.
& Mkts Law:
–
–
–
–
–
–
Unprocessed fruits and vegetables,
Eggs (if clean and refrigerated at 45° F),
Grains,
Legumes,
Honey, and
Maple Syrup.
See New York State Department of Agriculture, “Sanitary Regulations
for Direct Marketing,” available at
http://www.agriculture.ny.gov/FS/industry/sanitary.html.
(C) Cari Rincker, 2013
27
28. What Can be Sold via Direct Marketing?
• Additionally, NYSDAM permits direct
marketing farm businesses to sell
certain highly perishable products like
meat and dairy products (including
hard and soft cheeses), if the products
are:
– Processed at an approved food
processing facility;
– Prepackaged and properly labeled; and
– Kept at required cold temperatures to
prevent spoilage or contamination.
See New York State Department of Agriculture, “Sanitary
Regulations for Direct Marketing,” available at
http://www.agriculture.ny.gov/FS/industry/sanitary.html.
(C) Cari Rincker, 2013
28
29. What Cannot Be Sold via Direct Farm Marketing?
• Home-canned or jarred fruits and vegetables, pickled
products, sauces, relishes and other low-acid foods (unless
manufactured "under an approved processing method at an
inspected facility);
• Cream, custard, pumpkin, meat or other single-crust pies or
cream or cheese-filled baked goods (unless prepared in an
approved, inspected baking facility, packaged and properly
refrigerated); and
• Any other prepared foods made with highly perishable
ingredients for immediate consumption or reheating (unless
manufactured and vended under proper food processing and
vending licenses).
See New York State Department of Agriculture, “Sanitary Regulations for Direct
Marketing,” available at http://www.agriculture.ny.gov/FS/industry/sanitary.html.
We will talk about cottage
food operation law in a little
bit.
(C) Cari Rincker, 2013
29
30. NYSDAM Inspections
• Even though farmers selling
directly to consumers are
subject to a food safety
inspection from NYSDAM, if
the producer is only selling
raw fruits/veggies, eggs,
grains, legumes, honey and/or
maple syrup, then NYSDAM
typically will only inspect
these products if it receives a
consumer complaint.
• Farmers selling more highly
perishable products are
inspected more often by
NYSDAM.
(C) Cari Rincker, 2013
30
31. Processing
Roadside stands, on-farm
outlets and farmers’ markets
may not use packaging,
cutting, slicing or portioning
of fruits and vegetables,
meat, dairy products or
ready-to-eat food unless the
proper sanitary conditions are
met for “retail food stores”
under Circular 962 “Rules and
Regulations Relating to Retail
Food Stores”
(C) Cari Rincker, 2013
31
33. The Definition of a Farmers’ Markets
• According to Prof. Neil
Hamilton, a farmers’ market is:
– Farmers selling produce and food
they raise or create,
– To individual customers,
– At a temporary location, often
on public property (e.g., street or
parking lot),
– On a periodic basis (typically
once or twice a week),
– For a set period of time (typically
3 to 4 hours),
– During the local growing season
(usually 5 or 6 months), and
– Operated by a government or
non-profit organization.
(C) Cari Rincker, 2013
33
34. Market Rules
• Farmer-Vendors usually receive a copy
of the Market Rules (or “Statement of
Rules” for the Farmers’ Market)
– It is the contract between the farmer
and farmers’ market
• Discusses all the key terms
–
–
–
–
–
Application process
Rent/Fees
Approval of vendors and products
Carrying crafts
Whether farmers can sell products
raised by other farms
– Category of products allowed
– Transfer/Change in ownership
(C) Cari Rincker, 2013
34
35. Market Rules
• Market Rules (Cont.)
– Enforcement Process
– Farm Visit/Inspection
– Special food sanitation/safety
requirements
– Whether sampling is allowed
– Indemnification Clause
– Length of the market (typically a 5-6
mo. Span)
– Location of the farmers’ markets
– Who is the Market Manager?
– Market operational procedures
– Organizational structure
– Necessary permits/documentation
– Whether peddlers are allowed
(reselling food purchased at
wholesale)
(C) Cari Rincker, 2013
35
36. Market Rules
• Market Rules (Cont.)
– Proof of Insurance
– Farmers’ list of products that will be
sold
– Whether prepared or processed food
may be sold
– Logo use of the Sponsor
– Criteria for selecting vendors
– Nutrition programs (e.g., SNAP, WIC)
– Alternative Dispute Resolution
– Payment
– Choice of Law
(C) Cari Rincker, 2013
36
37. Questions for Vendors to Consider
Before Joining a Farmers Market
• Who sponsors the farmers’
market?
• How long has the farmers’
market been established?
• What is the expected crowd for
the farmers’ market (quantity
of people and geographic
reach)?
• What is the application fee
and/or procedures?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and
Opportunities” (June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT
FARM MARKETING (1999).
(C) Cari Rincker, 2013
37
38. Questions for Vendors to Consider
Before Joining a Farmers Market
• Do vendors pay seasonally,
monthly or weekly flat fees
and/or a percentage of gross
sales?
• Who owns/rents the land on
which the farmers’ market is
located?
• Who is responsible in case of slipand-fall accidents or injuries to
shoppers?
• Which areas of the farmers’
market get the most traffic?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and
Opportunities” (June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT
FARM MARKETING (1999).
(C) Cari Rincker, 2013
38
39. Questions for Vendors to Consider
Before Joining a Farmers Market
• Who has the authority to
decide which farm sets up in
which location? Is there an
additional fee for preference?
• Is the market a “producer only”
market or does the market
allow for wholesale peddlers or
sale of food raised by other
farmers?
• Can vendors provide free
samples to consumers?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and
Opportunities” (June 2002) and NEIL HAMILTON, THE LEGAL GUIDE (C) Cari Rincker, 2013
FOR DIRECT FARM MARKETING (1999).
39
40. Questions for Vendors to Consider
Before Joining a Farmers Market
• What is the penalty (if any) for violating
a market rule?
• What is the penalty, if any, for missing a
market day?
• If a vendor is forced to leave the
market or is unable to continue to
participate, is any portion of the
fee/rent refundable?
• What are the dispute resolution
procedures, if any? In other
words, what are the procedures if there
is an alleged violation of the market
rules?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and
Opportunities” (June 2002) and NEIL HAMILTON, THE LEGAL GUIDE (C) Cari Rincker, 2013
FOR DIRECT FARM MARKETING (1999).
40
41. Questions for Vendors to Consider
Before Joining a Farmers Market
• Does the market have all the
necessary local business
permits and/or licenses?
• Can the vendor ask for copies
of said permit and/or licenses?
• Is the farmers’ market
approved to participate in the
WIC Farmers’ Market
Nutrition Program (“FMNP”)?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and Opportunities”
(June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT FARM MARKETING (1999).
(C) Cari Rincker, 2013
41
42. Questions for Vendors to Consider
Before Joining a Farmers Market
• What food products may be sold
at the farmers’ market (e.g.,
meat, poultry, eggs, homemade
processed foods)?
• Does the farmers’ market itself
carry its own insurance in case
of accidents?
• What type of insurance does the
farmers’ market expect vendors
to have (e.g., 1 mil. face value of
commercial insurance) and what
proof of insurance must be
provided to the market?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and Opportunities”
(June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT FARM MARKETING (1999).
(C) Cari Rincker, 2013
42
43. Questions for Vendors to Consider
Before Joining a Farmers Market
• Are there special food labeling
requirements other than what is
already required under New York
and federal law (if applicable)?
• How quickly are Electronic Benefit
Transfer (“EBT”) payments
received?
• What does the farmers’ market do
to help promote both the farmers’
market and its vendors? For
example, will the vendors be listed
on its website?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and Opportunities”
(June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT FARM MARKETING (1999).
(C) Cari Rincker, 2013
43
44. Questions for Vendors to Consider
Before Joining a Farmers Market
• Do the market rules require the
farmer to actually attend the market
or can vendors send
employees/independent contractors to
do the selling?
• Does the farmers’ market require the
farmer/vendor to submit a plan before
the market season begins listing what
produce will be sold and in what
approximate volume?
• Can the market officials visit a vendor’s
farm to inspect the operation and/or
its records?
See Neil Hamilton, “Farmers’ Markets Rules, Regulations and Opportunities”
(June 2002) and NEIL HAMILTON, THE LEGAL GUIDE FOR DIRECT FARM MARKETING (1999).
(C) Cari Rincker, 2013
44
46. CSA Agreements
• Rarely Used (Should be used more
often)
• Contract between the farmer and
the subscriber
• It should state
–
–
–
–
–
–
How long is the growing season
Types of share(s)
How is a share defined
Price/ Payment Methods
Delivery or pick-up
Subscriber’s sharing both risk and
reward of harvest
– Forfeited products
– Communication
– Volunteer Requirements
(C) Cari Rincker, 2013
46
48. Interaction Between Article 20-C Licenses and
Cottage Food Operations in New York
New York applies an
“exemption approach” to
cottage food operations by
exempting home-processed
food from the typical
requirements of a
commercial kitchen under
Article 20-C of the NYS
Agric. & Mkts § 251-z-1 et
sec.
(C) Cari Rincker, 2013
48
49. Regulation of Food Establishments
• States have the
primary authority over
the health and wellbeing of their
residents
– Thus, state and local
governments establish
laws addressing the
production of food at
“food establishments”
(C) Cari Rincker, 2013
49
50. What is a “Food Processing Establishment”
in New York?
• “*A+ny place which receives food or food products for the purposes
of processing or otherwise adding to the value of the product for
commercial sale…” See NY Agric. & Mkts § 251-z-2[1].
– Exemptions:
• Establishments that process/manufacture food that are sold
exclusively at retail for consumption on the premises;
• Bottled water facilities;
• Establishment which are covered by Article 4 (Dairy
Products), Article 4-A (Frozen Desserts), Article 5-B (Sale of
Meat), Article 5-D (Sale of Poultry and Poultry Products), Article
17-B (Licensing of Food Salvagers) and Article 21 (Milk Control);
• Establishments under federal meat, poultry or egg product
inspection;
• Establishments that are engaged solely in the
harvesting, storage or distribution of one or more raw
agricultural commodity;
• Home-based processed food if certain conditions are satisfied.
(C) Cari Rincker, 2013
50
51. Applying for an Article 20-C License
• If a food entrepreneur does not fit under the cottage
food operation exemption in New York and must
obtain an Article 20-C license, section 251-z-3 sets
forth application requirements which include proof of
the following:
– That he/she has good character;
– That he/she has adequate experience or competency;
– That the establishment has adequate facilities and
equipment for the business conducted; and
– That the establishment can maintain cleanliness so that
the product will not be adulterated.
• The applicant must also pay $400 every 24 months.
• The license period varies according to the applicants
last name as set forth in the statute.
(C) Cari Rincker, 2013
51
52. Suspending or Revoking Licenses
• Under Section 251-z-5, NYSDAM may decline to grant a new
license or renewal, suspend or revoke an Article 20-C license
based on one of the following reasons:
– False or misleading statement in the application;
– Insufficient facilities or equipment to maintain adequate
sanitation for activities;
– Establishment is not maintained in a clean and sanitary
condition;
– Maintenance of the establishment is such where the food
(product) may be adulterated;
– Establishment has failed or refused to produce requisite records
or other information sought;
– The applicant/licensee or any officer, director, partner or owner
of 10% or more shares, or any other person in
management, has failed to comply with the statute; or
– The
applicant/licensee, officer, director, partners, stockholder, or
any other person in management has been convicted of a
felony.
(C) Cari Rincker, 2013
52
53. Requirements of 20-C Licensees
• Record Keeping: Under Section 251-z7, licensees are required to keep such
records as required by NYSDAM.
• Inspections: Under Section 251-z-8,
NYSDAM must have access to inspect
the premises during all reasonable
hours “where food or food products are
being manufactured, packaged,
processed or stored, or where food or
food products are being bought, sold or
handled.”
• Education: Licensees are required to
complete an approved food safety
education program under Article 20-C.
(C) Cari Rincker, 2013
53
54. Cottage Food Operation Law
CARI B. RINCKER AND PAT B.
DILLON, “FIELD MANUAL: LEGAL
GUIDE FOR NEW YORK FARMERS
AND FOOD ENTREPRENEURS”
(2013). (Chapter 22).
Harvard Food Law and Policy
Clinic, “Cottage Food Laws in
the United States” (August
2013).
(C) Cari Rincker, 2013
54
55. Cottage Food Operation Law
• Growth in small-scale food
production, including
individuals producing nonpotentially hazardous
foods made in their home
kitchen outside of
expensive permitting and
licensing procedures
– Many states have
exemptions for cottage
food operations
(C) Cari Rincker, 2013
55
56. Cottage Food Operation Law
• Advantages
– Provides community residents
with locally produced food
– Encourages food production if
creating cost-effective outlets
to create value-added products
from excess fruits and
vegetables
– Increases money that stays in
the local economy
(C) Cari Rincker, 2013
56
57. West:
• Alaska
• Arizona
• California
• Colorado
• Montana
• Nevada
• New Mexico
• Oregon
• Utah
• Washington
• Wyoming
East:
• Delaware
• Maine
• Maryland
• Massachusetts
• New Hampshire
• New York
• North Carolina
• Pennsylvania
• Rhode Island
• South Carolina
• Vermont
• Virginia
Allow Cottage
Food Operations
South:
• Alabama
• Arkansas
• Florida
• Georgia
• Kentucky
• Louisiana
• Mississippi
• Texas
Midwest:
• Illinois
• Indiana
• Iowa
• Michigan
• Minnesota
• Missouri
• Nebraska
• Ohio
• Tennessee
• Wisconsin
57
58. States that Don’t Allow for Cottage
Food Operations
•
•
•
•
•
•
•
•
•
Connecticut
District of Columbia
Hawaii
Idaho
Kansas
New Jersey
North Dakota
Oklahoma
West Virginia
Harvard at 5
(C) Cari Rincker, 2013
58
59. Survey of U.S. Cottage Food Operation Law
• Although 2/3rds of the states have
cottage food operation law, there is
little uniformity among the laws
• Some states restrict home-based food
processing activities to a very narrow
category of processors, such as onfarm only
– Delaware, see Del. Code Tit § 3 100.
– Kentucky, see Ky. Rev. Stat. §§ 217.13637.
– New Hampshire, see N.H. Rev. Stat. §
143A:12
– Rhode Island, see R.I. Gen Laws § 2127-6.1
Harvard at 6
(C) Cari Rincker, 2013
59
60. Rhode Island
…“farm home food manufacture and the sale of
products of farm home food manufacture at
farmers’ markets, farmstands, and other
markets and stores operated by farmers for the
purpose of the retail sale of the products of
Rhode Island farms” provided that “the farm
home food products [are] produced in a
kitchen that is on the premises of a farm.”
See R.I. Gen Laws § 21-27-6.1 (Emphasis added)
Harvard at 8
(C) Cari Rincker, 2013
60
61. Survey of U.S. Cottage Food Operation Law
• Some states cap the
allowable sales at a low
amount, such that inhome processing
activities can only be a
hobby and not a viable
launching pad for a
traditional food
processing business
– See Minn. Stat.
28A.15(10)(a)
(restricting sales to $5K)
(C) Cari Rincker, 2013
61
62. Survey of U.S. Cottage Food Operation Law
• Some states are relatively
easy to find with clear
requirements while other
states’ cottage food laws
are hidden with no clear
direction
– New York’s cottage food
operation law is found
online at the NYS
Department of
Agriculture & Markets’
website
(C) Cari Rincker, 2013
Harvard at 6
62
63. How Cottage Food Operation Laws
Are Passed
• Usually, it starts with legislation. Then the statute directs a state
government agency to enact regulations
– Example: Maryland passed a cottage food operation law in 2012
• Maryland Department of Health was directed to adopted regulations.
See Md. Code § 21-220.1.
• However, some states establish cottage food rules through regulations
only
– Example: Georgia’s regulations were adopted by the Georgia Department
of Agriculture. See Ga. Comp. R & Regs § 40-7-19-.01-.10
• Sometimes cottage food law is implemented through an agreement
between a state department of agriculture and state department of
health and then posted on the website
– Example: North Carolina, New York
Harvard at 7
(C) Cari Rincker, 2013
63
64. FDA Model Food Code
• FDA has established a “model food code” that
may be adopted by the states
– Does not allow for any processing to take place
outside of commercial kitchens. See FDA Food Code §
1-201.10
– States that have adopted this FDA Food Code in its
entirety did not have an exemption for cottage food
operations, unless it adopted one
• Example: Missouri said that local government may allow for
home-based food processing. See Mo. Cod Regs. Title 19
§ 20-1.025(1)(B)(5).
(C) Cari Rincker, 2013
64
65. FDA Model Food Code
• Usually states that all locations where food is
produced or sold for pay are “food
establishments”
– Subject to licenses, permits, sanitation
requirements, inspections, and commercial kitchen
requirements
– There are a few important exemptions to this
definition of “food establishments”
• Charity bake sales and religious events
– Required, by law, to inform the consumer that the products
were made in an unregulated and uninspected home kitchen
– Allows for the production of non-potentially hazardous goods
(e.g., baked goods, jams, jellies, granola, popcorn, coffee, and
tea)
Harvard at 9
(C) Cari Rincker, 2013
65
66. 5 Typical Restrictions for Cottage Food Operations
Types of Cottage Food Products Allowed
Limits on Where Cottage Food Products Can Be Sold
Required Registration, Licenses and/or Permits
Limits on Total Sales
Food Labeling Requirements
(C) Cari Rincker, 2013
66
67. Types of Food Products Allowed
• Typically restricted to foods that are “not
potentially hazardous.”
– Some states just say “not potentially hazardous”
– Most states enumerated these foods
Example (Arkansas)
“…non potentially hazardous foods, including without
limitation: (A) Bakery products, (B) Candy, (C) Fruit
butter, (D) Jams, (E) Jellies, and (F) Similar products
specified in rules adopted by the [Arkansas] Department
of Health.” See Ark. Code § 20-57-201(1)
Harvard at 10
(C) Cari Rincker, 2013
67
68. Types of Foods Allowed
California also enumerates allowed goods:
– Baked goods without cream, custard, or meat fillings, such as
breads, biscuits, churros, cookies, pastries, and tortillas;
– Candy, such as brittle and toffee;
– Chocolate‐covered nonperishable foods, such as nuts and dried fruit;
– Dried fruit;
– Dried pasta;
– Dry baking mixes;
– Fruit pies, fruit empanadas, and fruit tamales;
– Granola, cereals, and trail mixes;
– Herb blends and dried mole paste;
– Honey and sweet sorghum syrup;
– Jams, jellies, preservers, and fruit butter that comply with federal standards for fruit
butter;
– Nut mixes and nut butters;
– Popcorn;
– Vinegar and mustard;
– Roasted coffee and dried tea;
Cal. Health & Safety Code § 114365.5
– Waffle Codes and pizelles.
Harvard at 10-11
(C) Cari Rincker, 2013
68
69. Types of Foods Allowed
• Some states have more specific
allowances or restrictions
– Wisconsin’s “pickle bill” only allows
for processed fruits and vegetables
that meet a certain pH value, such as
pickled fruits and
vegetables, sauerkraut, salsas, chutn
eys, jams, jellies, and applesauce.
• See Wis. Stat. § 97.29(2)(b)(2).
– Vermont only allows for baked
goods, breads, cakes, pies or other
food products made from flour.
• See Vt. Stat. § Title 18 4451.
Harvard at 11
(C) Cari Rincker, 2013
69
70. FDA Code Definition of “Potentially Hazardous”
• FDA Model Code has a detailed and technical definition, referring to
the acidity in the food
– Focus is whether the food supports “pathogenic microorganism growth
or toxic formation.”
– If food has potential to cause harm when not kept under proper
temperature and storage conditions
– Examples:
•
•
•
•
•
•
•
•
•
•
•
•
Meat
Dairy products
Shellfish
Mushrooms
Low-sugar jams and jellies
Cooked vegetables
Low-acidity pickles and salsa
Cut melons
Cut tomatoes
Untreated garlic-in-oil mixtures
Baked goods subject to spoilage (e.g., cream-filled pastries)
Raw seed sprouts
(C) Cari Rincker, 2013
70
71. New York Cottage Food Law
Under NYS Agric. & Mkts Regulations Section
276.3(a)*3+, a “*h+ome processed food” includes “any
food processed in a private home or residence using
only the ordinary kitchen facilities of that home or
residence which are also used to prepare food for the
owner thereof, his family, nonpaying guests and
household and farm employees who reside therein,
but shall exclude potentially hazardous foods [as
defined in the regulation] or thermally processed lowacid foods packaged in hermetically sealed containers
[under Part 277] and acidified food packed in closed
containers including but not limited to pickles and
relishes prepared from low-acid fruits, vegetables,
poultry, meat, meat products, fish or seafood.”
(Emphasis added).
No commercial kitchen equipment can be used
(C) Cari Rincker, 2013
71
72. New York Cottage Food Law
•
Restricted to the following goods
– Bakery products
(e.g., bread, rolls, cookies, cakes, brownies, fudg
e, and double-crust fruit pies) for wholesale
marketing or retail agricultural venues such as
farms, farm stands, farmers markets, green
markets, craft fairs and flea markets;
– Traditional jams, jellies, and marmalades made
with high acid/low pH fruits;
– Repacking/blending dried spices or herbs;
– Snack items such as popcorn, caramel corn and
peanut brittle; and,
– Candy (excluding chocolate).
See NFSI-898d, “Home Processing” Fact Sheet.
(C) Cari Rincker, 2013
72
73. New York Cottage Food Law
• If the product requires refrigeration then it is not allowed to be
produced under the home processor exemption. New York views
food products that may require refrigeration as potentially
hazardous. Examples of prohibited items include the following:
–
–
–
–
–
–
–
–
–
–
Fruit/ Vegetable Breads,
Pickled or Fermented Foods,
Cheesecake, Cream Filled Pastries,
Meat, Fish, or Poultry Products,
Vegetable Oils, Blended Oils,
Garlic and/or Herb in Oil Mixtures,
Wine Jellies, Chutneys, Fruit Butters,
Cooked or Canned Fruits or Vegetables,
Cheese, Yogurt, Fluid Dairy Products, and,
Sauces, Salsas, Marinades.
See NFSI-898d, “Home Processing”
Fact Sheet.
(C) Cari Rincker, 2013
73
74. 3 Generally Types of Cottage Food
Products Allowed
Broad List of
Allowed Foods
Limited List of
Allowed Foods
Other (More
Restrictive)
• “non-potentially
hazardous foods,
including” …
• “non-potentially
hazardous foods,
limited to …”
• No home canned
goods made
using pressure
cooker
• Primary
ingredients must
be grown by
microprocessor
• Pickled products
only
Harvard at 11
(C) Cari Rincker, 2013
74
75. Broad List of Allowed Foods
• Alabama
• Alaska
• Arizona
• California
• Delaware
• Florida
• Georgia
• Iowa
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• New Hampshire
• New Mexico
• New York
• North Carolina
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Virginia
• Washington
• Wyoming
Harvard at 11
Limited List of Allowed Foods
• Arkansas
• Colorado
• Illinois
• Montana
• Nevada
• New Hampshire
• Ohio
(C) Cari Rincker, 2013
Other (More Restrictive)
• Indiana
• Kentucky
• Louisiana
• Maine
• Maryland
• Minnesota
• Oregon
• Vermont
• Wisconsin
75
76. Limits on Where Cottage Food
Products Can Be Sold
• Most states restrict the sale to be direct to
consumers
– Don’t permit sales to restaurants or other retail food
establishments
– Restricted to sales at:
•
•
•
•
•
Farmers’ markets
County fairs
Roadside stands
On-farm stands/ Producers’ premises
Community Supported Agriculture
Illinois State Fair
Harvard at 12
(C) Cari Rincker, 2013
76
77. Limits on Where Cottage Food
Products Can Be Sold
• Tennessee:
– “may be sold at that person’s personal residence, a
community or social event, including church bazaars
and festivals, flea markets, or at farmers’ markets
located in this state.” Tenn. Code Ann. § 53-8-117(b)
– California has two levels of cottage food operations
• Class A operations – direct to consumer only
• Class B operations – may also sell to restaurants and other
retail food establishments
See Cal Health & Safety Code § 113758(a).
Harvard at 12
(C) Cari Rincker, 2013
77
78. Limits on Where Cottage Food
Products are Sold
Direct to Consumer Only
•Alabama, Alaska
•Arizona, Arkansas
•Colorado, Delaware
•Florida, Georgia
•Illinois, Indiana
•Iowa, Kentucky
•Maryland, Michigan
•Minnesota, Mississippi
•Missouri, Nebraska
•Nevada, New Mexico
•Oregon, Rhode Island
•South Carolina
•South Dakota
•Tennessee, Texas
•Vermont, Virginia
•Washington, Wisconsin
•Wyoming
Harvard at 12
Indirect Sales Allowed
Law is Silent (no
(e.g., restaurants, retail food information/requirements)
establishments, wholesale) • Louisiana
• California
• Maine
• New Hampshire
• Ohio
• Pennsylvania
(C) Cari Rincker, 2013
• Massachusetts
• New York
• North Carolina
• Utah
78
79. Additional Common Prohibitions
Internet Sales Prohibited
• Arkansas
• Florida
• Kentucky
• Michigan
• Nevada
• New Mexico
• New York
• Texas
• Washington
Farmers’ Markets or Producer’s Premises
• Alabama
• Arkansas
• Colorado
• Delaware
• Illinois
• Indiana
• Kentucky
• Maryland
• Minnesota
• Nebraska
• Nevada
• New Hampshire
• New Mexico
• Pennsylvania
• Rhode Island
• Texas
• Vermont
• Virginia
• Washington
• Wisconsin
• Wyoming
(C) Cari Rincker, 2013
Harvard at 12 79
80. New York Cottage Food Law
• Prohibits Internet
sales, but farms can use
the Internet for
communications and
marketing
– See NFSI-898d, “Home
Processing” Fact Sheet.
(C) Cari Rincker, 2013
80
81. Why Would Some States Prohibit
Internet or Mail-Order Sales?
• If the product crosses
interstate
commerce, then it
becomes subject to
federal regulations
– Restricting Internet sales
reduces likelihood that
the cottage food will
cross state lines
• Some states like Georgia
specifically allow Internet
Sales if purchased by
someone in that state.
(C) Cari Rincker, 2013
81
82. Required Registration, Licenses,
and/or Permits
• States vary on
whether any license
or permit is required
– Also vary on what is
required on the
license or permit
application itself
(C) Cari Rincker, 2013
82
83. Required Registration, License, and/or Permits
States that Have Requirements
States with No Requirements
• Alaska, Arizona
• California, Colorado
• Delaware, Georgia
• Illinois, Kentucky
• Maine, Massachusetts
• Nevada, New Mexico
• Oregon, Pennsylvania
• Rhode Island, Tennessee
• Utah, Washington
• New York
• Alabama, Arkansas
• Florida, Indiana
• Iowa, Louisiana
• Maryland, Michigan
• Minnesota, Mississippi
• Missouri, Montana
• Nebraska, New Hampshire
• North Carolina
• Ohio, South Carolina
• South Dakota, Texas
• Vermont, Virginia
• Wisconsin, Wyoming
Harvard at 13
(C) Cari Rincker, 2013
83
84. Example of Registration, Permit or
License Requirements
• Alaska requires cottage food operators
obtain a business license. See Alaska
Admin. Code Tit. 18 § 31.012(a)(4).
• Colorado requires a certificate in safe food
handling and processing. See Colo. Rev.
Stat. § 25-4-1614(1)(c).
• Washington requires a food and beverage
service worker’s permit. See Wash. Rev.
Code § 69.22.030(2).
Harvard at 13-14
(C) Cari Rincker, 2013
84
85. Example of Registration, Permit or
License Requirements
• Utah requires a food
handler’s permit. See
Utah Code § 4-59.5(4)(a).
• Pennsylvania requires
inspection of homebased food kitchens.
Harvard at 13-14
(C) Cari Rincker, 2013
85
86. New York Requires Registration of
Home-Based Kitchens
• Cottage food operations must be registered with
NYSDAM, Division of Food Safety and Inspection by
completing FSI-989c available at
http://www.agriculture.ny.gov/FS/consumer/FSI898c.pdf
(last visited March 4, 2013).
– No Fee
• The cottage food operation must disclose to NYSDAM
whether the water supply is municipal or a private well.
– If the home-based processor is on a private water/well
system, then he/she must have a water test analysis performed
for Coliform registering with NYSDAM (no more than 3 months
old).
(C) Cari Rincker, 2013
86
87. New York Cottage Food Law
• Even though some
cottage food
operations are exempt
from Article 20-C
licensing requirements,
it is still subject to
NYSDAM inspection
requirements and food
labeling. regulations.
– From a practical
standpoint, this is only
if there is a problem.
(C) Cari Rincker, 2013
87
88. Fees Associated with Permits
and Licenses
• Usually very cheap, if
not free
– New York – free
– Maine - $20
• Can vary depending on
the type of fee
– Washington
• Inspection fee- $125
• Public health review fee
- $75
• Processing fee - $30
(C) Cari Rincker, 2013
Harvard at 14
88
89. Limits on Total Sales
• Approximately 50% of the
states that allow cottage food
operations have a limitation on
gross sales per year
– Typically between $5K and $50K
• Low end ($5K limit)
– Louisiana, see Law. Rev. Stat. §
4:9(B).
– Minnesota, see Minn. Stat. §
28A.15(10)(a)
– Wisconsin, see Wis. Stat. §
97.29(2)(b)(2)(c)
• High end ($50K limit)
– Texas, see Tex. Health & Safety Code
437.0001(2-b)
(C) Cari Rincker, 2013
Harvard at 14
89
90. Limits on Total Sales
• Some states’ statutes allow for
a gradual increase in sales caps
– Michigan, see Mich. Comp. Laws
§ 289.4102(5)
• 2017 - $20K
• After 2017- $25K
– California, see Cal. Health &
Safety Code § 1137558(a).
• 2013- $35K
• 2014 - $45K
• 2015 and thereafter - $50K
(C) Cari Rincker, 2013
Harvard at 14
90
91. Limits on Total Sales
• Some states place
limits on each eligible
food item
– Colorado has a $5K limit
on each item, see Colo.
Rev. Stat. § 25-4-161614(2)(e)
• $5K for each flavor of
jam
• $5K for each type of cake
• $5K for each type of
cookie
(C) Cari Rincker, 2013
Harvard at 14
91
92. Limits on Sales
• A few states frame their sales restriction
based on weekly sales (in terms of dollars
or units)
– Tennessee limits sales to 100 units per
week, see Tenn Comp. R. & Regs. § 0080-0411-0.20
• Unit defined as 1 package of good
– Vermont restricts food sales to $125/week
(=$6500/year), see VT Stat. Title 18 § 4451.
(C) Cari Rincker, 2013
92
93. States with Sales Limits for
Cottage Food Operations
$500 to $15K $15K to $25K $25K plus
Other
• Florida
• Louisiana
• Minnesota
• New
Hampshire
• Vermont
• Washington
• Wisconsin
• Colorado
• Iowa
• Maryland
• South Carolina
• Tennessee
• Indiana
• Michigan
• Mississippi
• Oregon
• Alaska
• California
• Delaware
• Illinois
• Nevada
• Texas
Harvard at 15
(C) Cari Rincker, 2013
93
94. States with No Sales Limits
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Alabama
Arizona
Arkansas
Georgia
Indiana
Maine
Massachusetts
Missouri
Montana
Nebraska
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Rhode Island
South Dakota
Utah
Virginia
Wyoming
(C) Cari Rincker, 2013
Harvard at 15
94
95. Food Labeling Requirements
• Almost all states with cottage food laws have labeling
requirements of some kind
• Typical requirements include:
– Name and address of the producer
– Common or usual name or product
– Ingredients of product in descending order of
predominance by weight
– Food allergens
– Net weight and volume of the food product by standard
measure or numerical count
– Date on which the food was processed
– Statement similar to the following: “Made in a home
kitchen that has not been inspected by the [state]
department of agriculture/health.”
(C) Cari Rincker, 2013
95
96. Who Does Not Have Food Labeling
Requirements?
• States with no food
labeling requirements
for cottage food
– Louisiana
– Montana
– Vermont
I took this picture while
living in Montana
Harvard at 16
(C) Cari Rincker, 2013
96
97. New York Cottage Food Law
• In New York, products made in a home-based
kitchen should include the following on the label:
– name and address of the home processor;
– common or usual name of the food;
– if the food is fabricated from two or more
ingredients, the common or usual name of each
ingredient in their order of predominance (except
that spices, flavorings and colorings may be
designated as spices, flavorings and colorings without
naming each, and spices and flavorings may be
designated together as flavorings); and
– the net weight, standard measure or numerical
count.
(C) Cari Rincker, 2013
Rincker at 334
97
98. Other Legal Considerations for Cottage
Food Operations
• May conflict with residential leases
• Local zoning code may prohibit commercial activity in residential
zones
– Variances or special use permits should be sought
• Insurance
– Typically not covered under homeowner’s or rental insurance
– Commercial insurance policy will cover general commercial liability
(e.g., slip and fall)
– Recall insurance insurance/ or products liability insurance can be
obtained to cover food safety risk
• Are they a sole proprietor? Should they form a LLC or limited
partnership? Think about risk management for client.
• Food entrepreneurs should always think about protecting their
intellectual property.
Rincker at 335
(C) Cari Rincker, 2013
98
102. Premises Liability
• Let’s Think Back to Law
School Days
• Different Standards of
Care
– Trespassers
– Children
– Licensees
– Invitees
• This is what we’ll focus on
103. Premises Liability: Invitees
• Landowners owe the highest
duty of care to an invitee, or
members of the public that
enter the land for the purpose
of business dealings.
• Examples include the following:
(1) farmstands, (2) pick-yourown produce, (3) cooking
classes, (4) on-farm horse or
livestock sales, (5) corn
mazes, (6) hay rides, (7) petting
zoos, and (8) farm tours.
104. Premises Liability: Invitees
• Landowner will be subject to liability for
physical harm caused by invitees by a
condition on the land if he/she failed to
exercise reasonable care and he/she knew or
should have known about the harmful
condition and it would be expected that the
public would not discover the dangerous
condition.
– Landowners have the duty to warn invitees of
potentially dangerous conditions.
105. Premises Liability: Invitees
• Landowners who have members
of the public come on their
property should use barriers to
prevent the public from entering
areas of the property that may
be potentially hazardous. There
should be signs warning invitees
of potential hazards.
My dog, Taylor
• Landowners with pets should be
particularly mindful of potential
injuries (e.g., dog bites).
106. Products Liability
• Products liability is the legal
responsibility for personal injuries
and property damage caused by
defective products.
– Potential liability attaches to
every set of hands that touch a
food product until it gets to the
consumer.
• Farms and food entrepreneurs
selling food directly to the
consumer increase their likelihood
for potential products liability
issues.
107. Products Liability
• States differ in the
products liability theory
they employ – New York is
a strict liability state.
– To illustrate, if a consumer at a
pick-your-own farm picks and
then consumes berries and
becomes ill because the
berries were contaminated, a
New York court will likely hold
the producer strictly liable for
the consumer’s injuries.
Some products like meat and dairy,
have more products liability risk.
108. Common Risk Management Methods
• Business Organizations
– Limited Partnerships
– Limited Liability
Companies
– Corporations
• Insurance
– We’ll talk more about this
next
• Food safety/sanitation
110. Insurance is a Contract
• Drafted in favor of the
insurance company
• Not all insurance products
are the same
– Food and agriculture lawyers
should review insurance
policies for the client to
ensure there are not any
concerns
– Pay attention to the duties of
the client under the insurance
policy
111. Insurance is a Contract
• Insurance Company
– Duty to indemnify the
insured
– Duty to defend the
farmer/food entrepreneur in
a law suit for a covered risk
• Insured
– Duty to pay the premium
– Duty to cooperate
– Duty to disclose toe the
insurance company relevant
information
112. Duty to Defend
• The insurance company’s duty
to defend is carried out by
hiring an attorney chosen by
the company and controlling
that attorney’s right to settle.
• If the farmer or food
entrepreneur is dead set
against settling, the insurance
company has the right to do so
anyway.
• Once the insurance company
pays out its policy limits, it has
no further duty to defend the
farmer or food entrepreneur.
113. Insurance is a Risk Management Tool
• Put simply, the purpose of an
insurance policy is to shift
the financial risk of the food
and agriculture operation to
the insurance company.
• The insurance company will
pay any covered claim (up to
the limit) and defense costs
in a lawsuit (including
attorneys’ fees and court
costs).
114. Insurance is a Risk Management Tool
Clients might be tempted to
save money on insurance
premiums (the cost of the
insurance) by hand-selecting
only limited coverages that they
think they are likely to need
with high deductibles (the outof-pocket amount they’re
responsible for if a loss occurs).
115. Insurance is a Risk Management Tool
Inadequate amounts of
insurance that won’t pay
out what the farmer or
food entrepreneur will
need to stay up and
running if a loss occurs.
116. Claims-Made vs. Occurrence Based
Claims-Made
Occurrence-Based
• Will only cover the insured for
claims made within the
window of time the insurance
policy is in effect so long as
the claim is made within the
specified time
• Covers anything that happens
within a certain window of
time and will “pay out”
regardless of when the claim
is made to the insurance
company
Educate your client on the type of policy they have
117. Pay Attention to Exclusions
• An insurance contract almost
always carves out exclusions
from coverage.
– intentional acts, such as theft
by employees
– assaults,
– alcohol-related events
• Other exclusions may relate
more specifically to the type of
insurance involved.
– For example, a typical
farmowners policy might not
be adequate to insure against
losses suffered from the
flooding of a nearby creek
118. Know the Type of Coverage
Basic
Coverage
Broad Form
Coverage
Special
Coverage
• intended to compensate for losses from causes like fire,
lightning, explosion, windstorm, hail, riot or civil commotion,
aircraft or vehicle, vandalism, theft, sinkhole collapse, and
volcanic action.
• include all of the above and adds additional coverage for
damage from causes like the weight of ice, snow, or sleet,
falling objects and accidental discharges of water.
• Includes the same protections in basic and broad coverage
• Also offers open peril coverage under which other causes of
damage are covered unless they are specifically excluded
under the farm policy (e.g., flood loss).
119. Types of Insurance
Farmers
Comprehensive
Personal Liability
Policy
Commercial
Insurance Policy
Home Owners/
Renters Insurance
Products Liability
Insurance
Auto Insurance
Cyber Liability
Insurance
Environmental
Insurance
Pollution
Insurance
Crop Insurance
Livestock
Insurance
Equine Insurance
Special Riders (or
Endorsements)
The insurance puzzle
120. Farmers Comprehensive Personal
Liability (“FCPL”) Policy
• A/k/a “Farmowner’s Insurance”
• Most farms use a farmowner’s insurance policy to cover the
ordinary risks of a farming operation.
• This type of policy normally only covers activities ancillary
to farming (i.e., not agri-tourism or cottage food
operations).
• Pay special attention to the exclusions section in this policy
to see what is not covered.
– Sale of processed vegetables or meat products at a farmers’
market or roadside stand
– Injuries to the policyholder or family member
– Property damage by the insured him/herself.
121. Homeowner’s/ Renters Insurance
• Homeowner’s insurance
usually does not cover
business activities.
• Therefore, clients should
consider a commercial policy
if they have a home business
office, cottage food
operation, a rooftop
garden, offer in-home cooking
classes, or sell produce from
their home.
122. Commercial Insurance
• A commercial insurance policy or endorsement is
appropriate for operations engaging in business
outside the scope of the basic farmowners’ insurance
policy.
– For example, most farmowners’ policies cover products
liability for the sale of raw food products, whereas the
commercial insurance policy may cover personal injuries
(such as slip and falls and other types of injuries not
related to defective products) resulting from the sale of
processed food products (e.g., slicing vegetables, cutting
meat products, making beef jerky).
• A commercial insurance policy should be purchased if a
business is being run out of a home, has agri-tourism
activities, or engages in on-farm poultry slaughter.
123. Products Liability Policy
• Products liability policies help provide coverage
for liability resulting from an illness or death due
to contaminated food products sold by the
purchaser.
• It is highly suggested that farms involved with the
direct marketing of food products to
consumers, schools or restaurants have products
liability insurance.
• Farms selling raw milk should also consider a
products liability policy.
124. Crop Insurance
• Federal crop insurance is
subsidized by the U.S.
Department of Agriculture
(“USDA”) Risk Management
Agency (“RMA”).
• It protects the producer against
crop losses due to natural
disasters such as drought or
flood.
• It is available for nearly every
type of commodity ranging from
sweet corn to raisins.
125. Livestock Insurance
• There are two types of
livestock insurance:
– RMA reinsured livestock
insurance (similar to the
federal crop insurance
program)
• Natural causes only
– private livestock insurance
• Wider coverage, including theft
• Common with horses
126. Cyber Insurance
• This is a fairly new type of
insurance, relatively speaking, and it
addresses risks associated with
doing business over the Internet (or
e-Commerce).
• Covered risks can include privacy
issues, infringement of intellectual
property (trademark or copyright
infringement), stolen credit card
information (from PayPal, Google
Checkout or other online credit card
processor) or computer viruses.
127. Motor Vehicle Insurance
• Food and agriculture
operations should pay
special attention to their
auto insurance policies if
vehicles are used to
transport goods, livestock
or special equipment.
• A commercial automobile
policy or special rider
might be needed.
128. Special Riders/ Endorsements
• There are many special activities on
agriculture or food operations that
require amendments to the
underlying policies.
• Examples of these special activities
may include agri-tourism/agritainment, petting zoos or other
activities where the public is in
direct contact with animals, equine,
custom farm work, on-farm poultry
slaughter, production of processed
foods, use of ATV’s, and the
transportation of frozen genetics
(e.g., embryos, semen).
129. Umbrella Insurance
• The name “umbrella” improperly infers that
umbrella insurance adds coverage in the “holes”
of existing insurance policies; instead, umbrella
insurance should be viewed as a “top hat.”
– It essentially raises your already existing limits and
existing coverage.
– For example, if you have a $1 million farmowner’s
insurance policy with the $2 million umbrella, the
umbrella policy would protect the farm against a $2
million court judgment.
• Umbrella insurance does not “fill in holes” in your
existing insurance policies – it simply increases
the limits.
130. How Much Insurance Coverage Does a
Farm or Food Entrepreneur Need?
• Depends on budget and risk appetite
• Most operations should have at least $1 million
– Rule of thumb: should be more than the amount of
assets that you have
• Depends on
– Type of operation
– Assets to protect
– Other risk management techniques
132. Background the the Food Safety
Modernization Act
• Pew estimates that the U.S. spends about $152
billion on food-borne illness per year
– One in six Americans (48 million people) become sick
from contaminated food.
– Number of outbreaks have been on the rise
– Most prominent causes of foodborne outbreaks
•
•
•
•
•
Poultry
Leafy greens
Beef
Dairy
Fruit-Nuts
“Food Safety Issues for the 113th Congress” at 1, 3.
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132
133. Background the the Food Safety
Modernization Act
• Congress heard the outcry from many groups on food
safety
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Parents of sick children
Children of sick elderly
Consumer protection groups
Farmers
Doctors
State departments of agriculture
Various segments of the food industry
• Was a bipartisan issue in the 111th Congress
– Yet, controversial
(C) Cari Rincker, 2013
133
134. Policy Reasons for the Food Safety
Modernization Act
• The risk of getting sick or dying from
food contaminated with food
pathogens (e.g., E. coli) is largely
preventable by preventative measure
applied at each stage of the food
supply chain
– Different segments of the food chain
have different risks
• Post 9/11, the United States has a
bioterrorism risk
• In 2009, Obama Administration
created an inter-agency Food Safety
Working Group to look at various
food safety proposals
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134
135. Food Safety Modernization Act
• Food Safety Modernization Act
(“FSMA – pronounced Fiz-ma”)
was signed into law by
President Obama on January
4, 2011
– Shifts the focus from
responding to contamination
to preventing it
• Reactive system to a proactive
system
– First major update to food
safety law in 70 years
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135
136. Food Safety Modernization Act
• FDA released proposed
rules on January 2013
– Comment period ended
on September 16, 2013
– We’ll be talking about
the proposed rules –
subject to change
• Awaiting final rules
(C) Cari Rincker, 2013
136
137. Overview of the Food Safety
Modernization Act
• Requires each owner, operator or agent in
charge of a food facility to identify and
implement preventative controls to
significantly minimize or prevent hazards that
could affect food
manufactured, processed, packed or held by
such facility
• Requires FDA to allocate resources to inspect
facilities by 2018 according to the known
safety risks of the facilities or food
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137
138. Overview of the Food Safety
Modernization Act
• Increase detection and of the
response to food safety
problems
– FDA and USDA are required to
coordinate under FSMA
– Must revisit and resubmit plan
every 4 years
– Requires enhancement of
foodborne illness surveillance
systems to improve the
collection, analysis, reporting
and usefulness of data on
foodborne illness
(C) Cari Rincker, 2013
138
139. Overview of the Food Safety
Modernization Act
• FSMA enhances a traceability
system
– FSMA requires the inspection
of facilities and imported food
to the known safety risks of
the facilities for food
– Establish a product tracing
system to track and trace food
that is in the United States or
offered for import into the
United States
(C) Cari Rincker, 2013
139
140. Overview of the Food Safety
Modernization Act
• Improves the safety of imported
foods
– Requires importers to perform
risk-based foreign supplier
verification activities to verify that
imported food is produced in
compliance with applicable
requirements related to hazard
analysis and standards for produce
safety and is not adulterated or
misbranded
– Resources allocated to inspect
facilities by 2018 and imported
food according to the known safety
risks of the facilities or food
(C) Cari Rincker, 2013
140
141. Overview of the Food Safety
Modernization Act
• Scale appropriate regulations: rejecting the “one size
fits all” approach, FSMA includes options for
small, mid-sized and direct market agricultural
operations
• Conservation practices: FSMA aims to not
undermined existing on-farm conservation and
wildlife practices in food production
• Organic production: FSMA aims to complement, not
contradict, the National Organic Program
National Sustainable Agriculture Coalition
(C) Cari Rincker, 2013
141
142. Overview of the Food Safety
Modernization Act
• Value-Added Processing: FSMA reduces
regulations on low-risk processing
• Paperwork reduction: FSMA aims to help smaller
operations by reducing unnecessary paperwork
• Farm identity-preserved: FSMA allows farm
identity-preserved marketing as an option in place
of government trace-back control
• Training: FSMA authorizes a new competitive
grants program to train farmers and processors on
food safety
National Sustainable Agriculture Coalition
(C) Cari Rincker, 2013
142
143. Overview of the Food Safety
Modernization Act
• New FDA Powers
– Order a recall of food
– Detain food based only on a “reason to believe” the
food is adulterated or misbranded
– Suspend the registration thereby suspending the
operation of any food facility
• If the FDA determines that the food
manufactured, processed, packed or held has a reasonable
probably of causing serious adverse health consequences or
death to humans or animals
– Expands FDA authority over imported food
(C) Cari Rincker, 2013
143
144. Overview of the Food Safety
Modernization Act
• New FDA Responsibilities
– FDA is required to review
health data every two years
and issues guidance
documents or regulations
setting contaminant-specific
performance standards for
the the most problematic
foodborne contaminants
– FDA is required to establish a
product tracing system within
the FDA to effectively and
rapidly track and trace food
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144
145. Food Safety Modernization Act
• The proposed rule
mandates the
establishment of two
primary regulations:
– Standards for produce
production (The “Produce
Rule”)
– Food safety measures for
facilities that process food
for human consumption
(the “Preventative
Controls Rule”)
(C) Cari Rincker, 2013
145
146. Proposed Produce Safety Rule
• Establishes science-based
minimum standards for the safe
growing, harvesting, packing and
holding of produce on farms
• Proposed new standards regulate
the following areas:
– Worker training, health & hygiene
– Agricultural water
– Biological soil amendments of animal
origin
– Domesticated and wild animals
– Equipment, tools and buildings
(C) Cari Rincker, 2013
FDA – FAQ’s
146
147. Proposed Produced Safety Rules
The proposed rule has specific requirements for
growing sprouts
– treating seed before sprouting
– testing sprout irrigation water for pathogens
– monitoring the growing environment for Listeria
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147
148. Proposed Produce Safety Rule
• Farm fall into one
of three categories:
– Exempt
– Modified
requirements
– Full requirements
National Sustainable Agriculture Coalition
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148
149. Proposed Produce Safety Rule
• What kind of produce?
– Most fruits and vegetables in
the raw / unprocessed state
– Exemptions: Doesn’t apply to
raw agricultural commodities
that are:
• rarely consumed raw
– E.g., potatoes
• Produced for personal or onfarm consumption
• Destined for commercial
processing (with
documentation)
– E.g., canning, bagged salads and
leafy greens
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149
150. Proposed Produce Safety Rule
• Another Exemption: A
farm is exempt if the
average annual sales
during the previous 3year period is no more
than $25K
– This is sales not profit
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150
151. Modified Requirements
• If the produce will
undergo additional
commercial processing
that kills harmful
microorganisms, then
the produce is not
covered
– However, the farm will
be subject to
recordkeeping
requirements and the
compliance and
enforcement
requirements of the
Produce Rule
(C) Cari Rincker, 2013
National Sustainable Agriculture Coalition
151
152. Modified Requirements
• If the farm on average over the previous
3 years has less than $500K in gross
annual sales and the majority of the food
is sold directly to a “qualified end-user”
(e.g., consumer, restaurant or retail food
establishment) then the farmer must:
– Provide the name and complete address
of the farm where the produce was
grown on either a food packaging label
or on a sign at the point of purchase
– Comply with the compliance and
enforcement requirements of the
Produce Rule; and
– Be subject to the provisions regarding
the withdrawal of the farm’s status as a
partially covered (“qualified exempt”)
operation.
National Sustainable Agriculture Coalition
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152
153. Proposed Produce Safety Rule
• FDA anticipates that the
Produce Safety Rule will cover
40,496 domestic farms and
14,927 foreign farms
• FDA estimates that it will cost
$460 million annually for
domestic farms and $170
million annually for foreign
farms
• FDA estimates that there will
be $1.04 billion dollars in
annual benefits
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153
154. Proposed Preventative Controls
Rule
•
•
A “facility” is a location that manufactures, processes, packs or holds food
for consumption in the United States
FDA will look at whether there are any manufacturing or processing
activities
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Irradiation
Cutting/coring/chopping/slicing
Canning
Coating with things other than wax/oil/resin
Drying that creates a distinct commodity
Artificial ripening
Cooking
Pasteurizing/homogenizing
Infusing
Distilling
Salting
Smoking
Grinding/milling
National Sustainable Agriculture Coalition
Freezing
Slaughtering animals or post-slaughter operations
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154
155. Proposed Preventative Controls Rule
• FDA looks at the type
manufacturing and
processing activities
– Whether the farm is
conducting the activities on
its own agricultural
products
• Reduced requirements
– Whether the facility is
manufacturing and
processing someone else’s
agricultural products
National Sustainable Agriculture Coalition
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155
156. Proposed Preventative Controls Rule
• Proposed rule has two
main points:
– Requirements for hazard
analysis and risk-based
preventative controls;
and
– Revisions to existing
Current Good
Manufacturing Practice
(“GMP”) requirements
• Some facilities are
subject to only one and
not the other- important
to see them as two
different requirements
National Sustainable Agriculture Coalition
(C) Cari Rincker, 2013
156
157. Proposed Preventative Controls Rule
• Who is subject to the
Hazard Analysis and
Risk-Based Preventive
Controls (“HARPC”)?
• 3 categories
– Exemptions
– Modified requirements
– Full requirements
National Sustainable Agriculture Coalition
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157
158. Exemptions from Hazard Analysis and RiskBased Preventative Controls
• Following products are exempt
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Juice
Seafood
Dietary Supplements
Alcoholic beverages
Low-acid canned foods
• Grain elevators and warehouses that are solely engaged in storing
agricultural commodities or packaged food
• Small or very small on-farm businesses that conduct certain lowrisk manufacturing and processing, packing or holding activities
– Making jams and jellies
– Manufacturing honey and maple syrup
National Sustainable Agriculture Coalition
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158
159. Facilities Subject to Modified HARPC
Requirements
• Very small businesses
– FDA still debating what is deciding what is considered
a “very small business”
• FDA proposing that if the business is less than
$250K, $500K or 1 mil. must maintain records and
certify that it
• qualifies for the modified requirements; and
• Implementing and monitoring preventative controls or
complying with applicable non-Federal food safety law and
must display a label or sign with the complete business
address of the facility at the point of sale
National Sustainable Agriculture Coalition
(C) Cari Rincker, 2013
159
160. Facilities Subject to Modified HARPC
Requirements
• If the facility on average over the previous 3 years has
less than $500K in gross annual sales and the majority
of the food is sold directly to a “qualified end-user”
(e.g., consumer, restaurant or retail food
establishment) then the facility must maintain certain
records and must certify that:
– It qualifies for modified requirements; and
– It is implementing and monitoring preventive or complying
with applicable non-federal food safety law and must
display a label or sign with the complete business address
of the facility at the point of sale
National Sustainable Agriculture Coalition
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161. Proposed Preventative Controls Rule
• Who must comply with the
current Good Manufacturing
Practices (“GMPs”)?
– Only facilities that are
exempt are warehouses and
grain elevators that store raw
agricultural commodities
(including fruits and
vegetables) intended for
further processing
National Sustainable Agriculture Coalition
(C) Cari Rincker, 2013
161
162. Other Legal Issues Affecting Direct
Farm Marketing
Endres, A. Bryan et al., “New York Direct Farm
Business: A Legal Guide to Market Access” (2013).
(C) Cari Rincker, 2013
162
163. Questions on Being an Agriculture Lawyer
• Fridays with Cari
Skype Calls
– First Friday of the
month at 2pm ET
– RSVP to
cari@rinckerlaw.com
– No charge
164. Oh, P.S. – I Just Wrote a Book
Cari B. Rincker & Patrick B.
Dillon, “Field Manual: Legal
Guide for New York Farmers
& Food Entrepreneurs”
(2013)
Available at
http://www.amazon.com/Fi
eld-Manual-Legal-FarmersEntrepreneurs/dp/1484965
191
165. Please Stay in Touch
• Send Me Snail Mail: 535 Fifth Avenue, 4th
Floor,
New York, NY 10017
• Call Me: (212) 427-2049 (office)
• Email Me: cari@rinckerlaw.com
• Visit My Website: www.rinckerlaw.com
• Read My Food & Ag Law Blog: www.rinckerlaw.com/blog
• Tweet Me: @CariRincker @RinckerLaw
• Facebook Me: www.facebook.com/rinckerlaw
• Link to Me: http://www.linkedin.com/in/caririncker
• Skype Me: Cari.Rincker