Liability Issues for the Value-Added Dairy Foods Processor

- So welcome everyone who has joined us this afternoon.

Our webinar today is Liability Issues for the Value-Added Dairy Food processor.

This is the first webinar of our spring 2022 Webinar series.

As noted here on the screen, this webinar is being recorded.

The recording will be posted to the extension website in a few days.

On the webinar this afternoon, I'll introduce myself, I'm Sarah Cornelisse, a Senior Extension Associate in the Department of Agricultural Economics, Sociology and Education.

Also joining me today is Ginger Fenton, a dairy educator with the Dairy Extension Team, located in Mercer County and Kerry Kaylegian, a Research Associate Professor in, I'm sorry, if I messed up your title Carrie, in the Department of Food Science.

Questions, you can enter questions if you have them throughout the webinar, in either the Q&A pod or the chat box and we will get to those questions at the end of the webinar.

We will also open up microphone rights to attendees at the end so that if there is anyone who is called in, they can ask questions verbally and with issues such as liability, those questions are sometimes more easily described if done verbally than through text.

There will also be an evaluation survey that will open in your browser at the end today's webinar.

We would really appreciate if you would just take a minute to complete that evaluation survey, just a couple of short questions, it shouldn't take more than a minute of your time.

And so with that, I'd like to introduce Brook Duer to our webinar this afternoon.

Brook is a Staff Attorney with the Penn State Center for Agricultural and Shale Law.

So I'll turn it over to you, Brook.

Thank you for joining us.

- Okay and by the way, here is the Penn State statement of equal access to programs and now I will go back to my title slide for one second.

Good morning everybody or good afternoon, I guess.

Again, I'm Brook Duer and I've been with the Penn State Center for Agricultural and Shale Law for a couple years now, I came over in 2019.

Prior to that, I was at the Department of Agriculture for 12 years as an attorney.

I was the Chief Counsel to the agency for eight of those 12 years and of course, food safety and all things related to, you know, milk and cheese making, et cetera, you know, falling under the Bureau Food Safety, ultimately would come to my office, as the attorneys for the Bureau of Food Safety.

So dealt with these issues very intimately over the years, going back to about 2007 when I first came to the Department of Agriculture as an attorney or as the Chief Counsel back then and then prior to that, I was in Lancaster County as a private practice attorney for almost, you know, about 18 years and a lot of farm clientele and, you know, and to see in a small town and medium-size town practice there in Lancaster.

So I also represented in those days, you know, my share of people that were selling raw milk, either pursuant to a proper permit or not, sometimes.

So I've had a little bit of experience in those areas too.

A lot of experience in those areas, of course, while I was with the PDA, but that's a story for another time.

So we're gonna talk about liability issues and geared towards you, value-added dairy food processors, or potentials value-added processors, and, you know, my presentation is kind of general and then it starts to focus in a little bit.

So I assume maybe some of you have cows, some of you have goats, some of you don't have either and simply making some other product maybe.

And I understand we have people from Pennsylvania and people from New York.

So I have a little bit of New York here and there, just mentioned, but we're gonna start with some real general things.

Let me do one thing before we do that.

I'm gonna tell you what the Center for Agricultural and Shale Law is.

Part of the law school, as you can see up here, it's part of Penn State's law school, the main campus law school and we have a whole bunch of things on our website that you can go and explore.

Our website's very easy to remember, it's just aglaw.psu.edu and we have like sort of a banner across the top that organizes what's on our website.

We get publications on all kinds of different issues.

We have events that we do like this.

We have topical areas where you can research.

We have webinars that we do and podcasts under this Watch or Listen tab.

We actually run a mediation program which is for resolving disputes that involve USDA programs and non-USDA issues.

This has been expanded recently, USDA gives us a grant to run this, but we also are able to do non-USDA mediations too.

So if you have some type of, you know, neighbor dispute or something else that you might think might be a good candidate for mediation, we do that through our center and our attorney who does that is Jackie Schweichler and her information is right here.

This PowerPoint is actually available to anybody who would want it.

You'd probably just send me an email or send one to any of our Extension staff here involved and get a copy of that.

The Ag Law Center gets a little bit of funding from the National Agricultural Library, part of USDA, as well as a thing called the National Agricultural Law center, which is actually in Fayetteville, Arkansas.

All right, we're gonna talk about various liability issues and I'm gonna start by talking about, some real rudimentary liability principles and issues to give you orientation.

So just put your student hat on for a second and you know, maybe we'll do a little bit of civics class here.

So when we talk about liability, when the attorneys are talking anyway, when I'm talking today, sort of there's three kinds.

There's civil liability, criminal liability, and then there's regulatory liability.

Civil liability is two people sue each other in court.

You know, a private lawsuit that is brought by a private party based on some legal claim that they feel they possess.

Usually it's based on a contract or a tort liability issue and I'll explain torts in a minute.

And their remedies are usually, it's money, to pay the injured party, whoever says they possess the claim.

Sometimes there might be an injunction involved, if there's some certain conduct that can't be dealt with by money, you know, such as maybe a property line issue or something so that's what civil liability is.

Private lawsuits filed in court.

Criminal liability, that's what the state does when it has things like the DA or a US Attorney or, you know, for the federal government and yeah, so that's brought by the government on behalf of the people.

That's why it's always called Commonwealth V somebody, because it's the Commonwealth government versus whoever the defendant may be who is accused of having committed some type of criminal act.

And, you know, the idea is that a public wrong that's been made a crime by the legislature is being addressed in that kind of liability.

And the remedy could be jail, pay a fine, et cetera.

So that's what criminal liability is.

Then you get regulatory liability is basically the fair to follow regulations from the government, regarding a property like your farm or the operation of a business, for example, like your dairy business, perhaps, and you know, what could be an issue there would be maybe fines, maybe correct the conduct, injunctive relief, could be involved like cease and desist orders.

That's what injunctive relief kind of means, which is okay, it's not about a fine, it's about stopping, you know, stop doing this particular thing and that's what a cease and desist order is, when the government tells you to stop operating your business 'cause you don't have the right permit or whatever it may be.

Okay, so that's what we're talking about here.

And then, okay, so what's a tort?

'Cause we talk about civil liabilities being based upon contract or tort.

Most of what we're gonna talk about here today is gonna be tort liability.

Now what's a tort, the general definition is, "An act or omission that results in injury or harm "to a person, their property or, "there can be reputational injuries." And there is such a thing as you know, business torts where you are, you know, maligning, disparaging somebody's business, there are such things and in fact, there are torts in the personal context that involve, you know, slander and libel is a sort of reputational injury, so anyway, that's what a tort is.

Now the example of a tort in context that you can relate to more is let's assume that Farmer A is operating a pick your own strawberry operation.

There's a chronically leaking manure pit that discharges into the soil, into the strawberry fields and customers are getting it on their feet, et cetera, as well as it being potentially on the produce, products, and several customers become ill.

Okay, so that's an example of a potential tort claim.

You know, creative lawyering, you can turn almost anything into a civil action unfortunately, all you gotta do is walk around and look at the bill boards that, you know, line our highways and you see what creative lawyering is all about.

So in any event, this is the kind of thing that you know, we're talking about.

Now, could there be a criminal action related to this that would be criminal liability, actually it's possible, but it's exceedingly, exceedingly rare.

The case that everybody kind of knows now, is this Peanut Corporation of America case that happened a couple years ago, when the Peanut Corporation of America, several of the key employees, CEO, et cetera, were actually sentenced to jail for continuing to process contaminated batches of peanuts, even though they knew that their factory was, and I believe it was salmonella if I'm not mistaken, maybe it was E. coli, but in any event, they just continued to produce their products, regardless of the contamination that was fairly well proven in their factory and it was not going away, upon, you know, continuing and continuing testing.

And the federal government actually stepped in and charged them with a crime.

Very rare, almost never happens.

It was so notable because it was so rare, but you know, it is possible.

Okay, in a civil case, the burden of proof is by a preponderance of evidence.

And the reason why I'm sort of talking about this is to distinguish that from a criminal case, which is it's beyond a reasonable doubt.

So the idea is that it's harder to prove a criminal case, easier to prove a civil case.

All you have to do is tip the scales and this idea of the scales of justice is actually the image that directly applies, you tip the scales, just ever so slightly to one side, then that is proving something by a preponderance of the evidence.

Preponderance just means 51% or more.

It can be only by 1% more, but that's a preponderance.

So it's easier to prove a civil case.

Now, these are usually filed in the local county court system.

That that's the examples that I'm using and that's where the kind of things that you would deal with would arise.

Lawsuits between two people, let's say a customer who got a food-borne illness from a product that you sold.

That's the classic thing that we're gonna use all throughout today's discussion, because that's the most obvious one.

We'll talk a little bit about things that happen on your property too if you're inviting the public on your property.

Now that's state court because you're residents of the same state and that's where you go to court.

Now the federal courts do exist and they can hear civil cases too, but it's for citizens of different states.

In other words, if you live in the same state, the two parties can't sue each other in federal court.

It has to be, diversity of citizenship is the word.

So if you had a New Jersey customer that came to your property and somehow maybe purchased product that made them ill and is pursuing a claim, theoretically possible, that could end up in federal court.

The other reason something could be in a federal court in a civil context is because there may be federal laws at issue.

Now in this context, that's not gonna be there, or in a customer context, that's not gonna be the case, but let's, you know, some federal discrimination laws, for example, can end up in federal court.

So you can have two residents of the same state being in federal court because it's a federal discrimination law or anti-discrimination law, but in any event, so we're talking about state court cases, things that happen in your county courthouse.

And most people are aware that there is a lower level of court at the local district justices offices, or they call district magistrate judges.

And that's for small claims everything up to, and I think the jurisdictional limit these days is $12,000, used to be 8,000 when I was a regular attorney down in the trenches but it's been raised since.

So now relief, what kind of relief is possible in a civil case?

We talked about this before but I'm gonna sub-divide it up.

In a food poisoning case for example, we'll just keep using that example, compensatory damages, meaning medical care expenses, as well as this idea of pain and suffering.

This idea of non-economic damages, compensation for what you went through.

You obviously an adult being ill with, you know, a salmonella E. Coli is one thing, a child, that may be a completely different thing.

Somebody who has, you know, as we all know the word now, comorbidities, somebody who has some type of susceptibility that an E. coli or a salmonella type of problem becomes magnified and becoming much more serious than it otherwise might be.

You know, then you're looking at, you know, somebody who's claiming a significant pain and suffering portion to their claim.

Now, there is such a thing as punitive damages in civil cases also, that's for outrageous or egregious conduct and it's intended to punish the defendant for something.

Now this is not something that you are generally going to be concerned with in the kinds of businesses that you operate.

This is something that may come up in very extreme circle circumstances.

For example, we had the Peanut Corporation of America case, in a civil case and there probably were many of those.

You know, maybe the fact that they had never rid their factory of the contamination and they continued and continued for years to essentially distribute contaminated product that they knew was not clean.

You know, they weren't testing every single product that went out the door, but they knew that the conditions were such that it was highly likely that it was contaminated.

That's the kind of outrageous stuff that does lead to punitive damages in a civil case.

Also sometimes there can be injunctive relief, we talked about that before.

Some type of cease this activity type of order from a court.

So again, this is all background kind of a civics lesson, but it's important 'cause hopefully we get to Q&A and this will give you all the foundation.

Now types of torts, negligence is the big one that everybody knows of, you have negligence in the operation of a motor vehicle or negligence in the maintenance of your real estate, such as somebody got injured on the real estate.

There are intentional torts also, things like assault and battery, those are actually torts.

One person hits another person, you know, that's a battery.

And it can be sued on in civil court for money damages.

You don't see people putting up billboards around, asking for, you know, clients to come to them for intentional torts but it is possible and it does happen.

Strict liability is a very specific and narrow thing that has to do with handling or being engaged in ultra hazardous activities like the handling of, you know, explosives, et cetera.

Some we don't really need to talk about too much or maybe highly volatile chemicals products.

Products liability is exactly what you are involved in, which is different than negligence.

Products liability is selling a product that injured somebody and we're in the food context, obviously we're talking about food-borne illness.

So the two that, you know, I want you to understand here, is the negligence concept and products liability.

Okay, now negligence, what is it?

"Failure to act as a reasonable person "would act under similar circumstances." People use words like carelessness, thoughtlessness, oversight, et cetera.

That's what negligence is and generally, to distinguish it from a criminal case, in a criminal case, it's required that you had an intent to do the act, in a negligence type of context, you simply have to have not appreciating the risk of injury that you were creating by the things that you either failed to do or that you did.

So you don't have to be aware consciously, that somebody could get hurt, you simply have to have done something that a reasonable person would've realized was potentially going to get somebody hurt.

So it doesn't have that intent that criminal law does.

Now there's four parts to negligence cases and again, a food-borne illness, whereas they bought some, you know, some dairy product from you and they were made ill by it, that's gonna be a standard negligence case and it's gonna have these four elements.

A duty, that means a duty on your part, not to have put out the product or have distributed the product that may be contaminated.

A breach of that duty or I should say a duty, the general duty is not to put out contaminated products for human consumption.

Breach of that duty is putting one out that in fact will was contaminated and then you have to have approximate cause, which means that the contamination was in fact the cause of the injury.

And that can actually be an issue in some foodborne illness cases where the complications arise and you say, you know, actually was the foodborne illness salmonella, then they go in the hospital, then they go into, you know, some type of procedure and all of a sudden they, you know, have a heart attack due to a bad reaction to a procedure or something along those lines, you get into some issues about causation.

Sorry, my phone is ringing, I'll make sure I mute that.

So sometimes you actually have causation.

Standard, you know, E. coli type of case, you don't really have much, it's very clear E. coli caused this.

Okay and then the damages.

Sometimes a food-borne illness case can be a big nothing and I use that as technical legal term, I'm joking, of course, but you know somebody can be injured in a transitory way.

Two or three days later, they're better.

And you hope of course, that all food-borne illness cases are that way, so sometimes, you have very little in the way of damages, which means that there's very little of in the way of a case.

Now, so that's what a negligence case is all about.

Now, when is there a duty?

Well, it's obvious that you have a duty not to distribute food that's gonna make people ill.

So that's not really one that requires a lot of thought.

Duty though is something worth thinking about when you're talking about your real estate, in other words your farm or any property that you possess or own, you don't have to be the owner to have a duty to prevent people from getting injured on the property.

You could just be a renter but it's under your control and you are possessing it, so you just have the same duties as an owner would with regard to these third parties, visitors, customers who come in.

So, you know, for example, here's an example, the farmer is moving a piece of equipment on a road, they have a duty to do it in a way so as not to injure anybody else.

In a contract circumstance, farmer has a contract with the farm man to take care of the cows.

Oh, I see what this is.

Okay, so this is where does the duty arise from?

So somebody could have a duty pursuant to a contract.

This is not my slide, so I just had to read that for a second to make sure I got that.

It's one of the other attorneys who did this one.

And then there is such a thing as you know, voluntarily assuming a duty, it's rare, but you know, this whole good Samaritan concern where, well if I jump in to help somebody, you know, then I may end up having assumed a duty to make sure they don't get further injured by the help that I'm rendering.

So that sort of is a little discussion of when do duties arise, either it's by law, you are out on a public roadway or it's by some contract, where there's actually a contract to prevent, you know, something bad from occurring or an injury from occurring.

For example, in this one, you know, cow from, let's say escaping and you know, causing a car accident on the roadway, where you have an assumption by some action that's done.

So anyway, now in the care and custody of real estate, your farm, these are the three categories that the law considers to exist with regard to third parties that might enter your farm.

There are flat out trespassers who you did not authorize to be there and they've entered essentially without your consent.

There are licensees who you permit to enter, but you aren't specifically inviting them to enter.

Excuse me, I have a tendency to do this a lot.

I end up moving around on my chair and I advance my slides by mistake.

Licensees is like a mailman, he's coming up the drive.

You don't know when he is gonna show up or anything and you're not, you know, giving him specific authorization.

It's just they have a license to come up your drive at least, and, you know, deliver their mail to finish out their duty.

And then invitees, that's your customers.

You want them to come, you're inviting them to come.

You want them to come so you can do business with them.

Okay, now there are different duties, different extensive duties with regard to those three categories of people, in terms of how much care you have to exercise in protecting them from injury.

A trespasser, you don't have any duty to protect them from injury except don't maliciously injure them.

And the law developed up around this with regard to these infamous sort of booby trap cases or spring gun cases where people would put up, you know, a spring gun contraption and actually attempt to try to, you know, get at a trespasser by shooting them or some type of a trip wire that then did something nasty.

Those things are what's been categorized in the law as maliciously causing injury, you're not allowed to do that, even with regard to a trespasser.

Now as to licensees, you have a duty to warn them of a dangerous condition, but that's it.

In other words, you don't have to go about, looking for things that are unknown to you in terms of potential risks, just warn them of dangerous conditions.

And signage is a wonderful thing, because you can put up signs that say things like, this is a farm, be careful, you know, be careful where you walk as the ground may be unstable.

You know, things like that, you've warned them in a blanket way of, you know, dangerous conditions.

You know, if you have an electric fence, you know, do not approach the fence.

Stay away from the fence.

You know, it is electric, it could injure you.

Things of that nature, you know, you're warning them and signage is sufficient.

Okay, now for invitees, the people that you want to come to your property to do business with you, you have a duty to essentially keep a safe premise and warn of the conditions that can't be repaired and to essentially keep the premises safe.

In other words, you gotta go out and make sure that they're safe.

So that's the duty that you owe and you could be negligent for not fulfilling that duty if inviting people onto your land and you have not made some reasonable effort, equivalent to what a reasonable person would do, to protect them from injury when they're coming onto your property, that you control for the purpose of doing business with you.

Okay, again, a lot of this is in the context of agritourism and agritainment activities, because that's one of the biggest areas where you're gonna potentially be having people entering your property under these circumstances.

Now, one of the things that comes up in this area is this concept of child trespassers that don't know any better and, you know, there's this concept of a active nuisance.

So you have to take a little extra care.

Like if you have a swimming hole or a creek where you know kids love to go play, yeah, you know, then that old pile of, you know, a barbed wire that you have, you know, you probably shouldn't be just throwing that in the creek, right where the kids enter the creek because that's sort of bordering on the type of malicious conduct.

And certainly it's bordering on, you know, violating the duty that you might owe at least to a licensee, so the idea is that you'd have a little bit of a higher duty with regard to children because they don't have the ability to always to appreciate the danger that could befall them by proceeding, even if an adult would see it and understand not to do it.

So you gotta think about that because obviously, these agritainment and agritourism activities do involve a lot of children and you may end up with, you know, No Trespassing signs around, but you've got kids who can slip through the cracks, so to speak and maybe, you know, you need to be very careful of this idea that, you know, okay, you tried to tell, you know, the kids not to be going here or there, but you gotta put your head in their head and realize that they're not always going to be responding like an adult to things.

So you've gotta be extra careful.

Now, to determine if there was a breach of the duty that was owed to somebody who comes onto the property, again, you just say, what would a reasonable person do under these circumstances?

And that is obviously always a fluid question and that is in fact what juries are for, because in the end, if a case doesn't settle, it goes to a jury and a jury decides the question of, what was the standard of care and was it breached?

Did you not take care of your property in the way that a reasonable person would have done to prevent injuries?

So again, this is all right on point with the whole agritourism and agritainment supplementation of your income, you're engaging in those activities, you're bringing third parties onto your property who are maybe not used to being on a farm and they aren't used to walking around, you know, in unlevel conditions and they're wearing inappropriate shoes and you know many other things that I'm sure you've all encountered in those kinds of activities.

Okay, now, there's another way that a duty can be established for a negligence claim.

Not just that it's you failed to do something or you did something that a reasonable person wouldn't have done or would've done.

I don't know if I said that in the right order, but in any event you get the idea.

There's a reasonable person standard.

Well, there's also a standard that arises from laws.

So if other words, if you're doing something on the property that is in violation of a law or a regulation of some kind, and that ends up being the instrumentality, the mechanism of the injury, you can have a very significant negligence case on your hands because the idea is, well, this was illegal, you know, what you had going on here.

And so, a classic example, raw milk.

An unpermitted sale of raw milk without all the proper permits in Pennsylvania, someone would be essentially negligent, per se.

In other words, you got no defense, you were violating the law.

The law establishes that you have a duty not to do this thing and you did it anyway.

And so, you know, anytime you're violating a law, you are almost guilty as charged or shall we say, you know, guilty without the necessity of a trial of negligence because you simply violated the law.

Now, the law has to be something that is designed to prevent that type of injury from occurring, but for example, I use that raw milk example.

It's exactly the reason why raw milk sales are, or at least a permit is required in Pennsylvania, is because it's potentially hazardous to people's health.

And so somebody gets sick from raw milk and you don't have a permit, there's the negligence case.

Bingo, the law that you were violating was clearly designed to prevent the harm that actually befell this person.

All right, so that's another way negligence can be proven is by this idea of violating regulations or laws.

Causation is a thing in negligence, I'm gonna skip this one, just 'cause we've got a lot of slides to cover.

Most of the time it comes up when you're dealing with what are the injuries.

Somebody might be claiming some extreme injuries that maybe were not caused by the incident in question.

Okay, we'll skip this thing about damages too, 'cause I think you've gotten the flavor and I do want to get through all my slides.

Okay, there is such a thing as contributory negligence, which is okay, you may have gotten hurt on my farm, you know, in whatever way it occurred.

However, you should have appreciated that and you were also negligent in your own regard with regard to your own safety.

And then you have this issue about comparative negligence.

You take each size negligence and figure out whether in fact, and there's, you know, I want to get into the equations that occur, but the bottom line is yes, that is part of a defense to a negligence case and it, you know, clearly can come up many times.

It's a very legit thing and many times, you know, if you've ever had an accident on your farm, you've probably had a situation where somebody was very contributorily negligent.

Okay, there's also a thing called assumption of the risk.

That's another legal principle in the liability world, which is somebody knew full well what the risk of doing the thing they were doing was that they did it anyway.

And so the classic example would be, you know, you're participating in some kind of athletic activity, you know what the risks may be, you do it anyway.

Now sometimes assumption of the risk comes up in the context of signing waivers.

Like you go skiing somewhere and they make you sign this stuff saying that you're assuming the risk of injury through downhill skiing or whatever, or you go scuba diving and you do the same thing.

So those connect their limitations in court however, because they only protect against the obvious known risks.

So you know, scuba diving is probably a good one, which is you're assuming the risk that you aren't gonna be able to use the breathing apparatus, you know, properly and that you may have some complications from that.

The fact that the boat might run over you, you know, because the driver was drunk, well, you're not assuming that risk.

So there can be differences with regard to whether the assumption of the risk applies even when you sign a waiver type of document.

Okay, now, so intentional torts, I'm gonna skip those 'cause, again, I wanna have enough time to do a Q&A and talk about some of these other things.

We can always come back, there are intentional torts that exist, trespass, nuisance.

There's a strict liability.

Vicarious liability, that's not an intentional tort, but that's an important concept to understand which is in a negligence context, if you employ another individual, you are equally liable for the negligence that that employee may have committed.

So in other words, you know, your hired help for example, since they work for you and there are your employee, if they do something that causes injury through negligence, then you are responsible for it as the employer.

We'll get to some of the issues of how you protect yourself from that in a minute, but that's a cardinal principle.

That's how, you know, the entire liability picture of our society as we know it today is structured.

That's why people fight so hard sometimes about whether somebody's actually an employee or whether they're an independent contractor for this exact reason.

Like you're not responsible for the torts or the negligence of your independent contractors.

Okay, what kind of protections do you have against all this?

Signage, signage, signage, signage.

Signs of the greatest thing in the world and your insurance company will love you.

They will exponentially love you for every, you know, sign that you have, two signs.

They're gonna love you twice as much.

10 signs, they're gonna love you 10 times as much.

And you know, potentially your financial, you know, picture is going to be greatly improved by having lots of signs, so signage that warns people of what to do, where not to go, what can be dangerous, et cetera on your farm, when you have third parties coming on is absolutely essential.

Liability insurance, that's another one of the big protections, we'll talk about that.

Business entity formation, we'll talk about that.

State immunity legislation, we'll talk about that.

Okay, liability insurance.

Obviously everybody buys, you know, their property insurance 'cause your mortgage company requires you to have it and the big item that's on it is the fire coverage.

'cause your mortgage company wants to make sure that the place burns down, you know, that that the buildings are gonna get rebuilt so that their collateral for their loan remains intact so to speak.

But in addition to the casualty coverage, that's the same fire or you know other things that are covered by casualty insurance, but the important part or one of the most important parts of your insurance is the liability coverage, which is the coverage that you get under the same policy that where your fire and your casualty, you know, coverage is all contained, also you got liability provisions that that cover you for claims, just like the ones we've been talking about.

People get hurt when they're on your property.

Somebody consumes one of your products and gets ill.

So this note here about insurance may be required by municipality.

That can be with regard to like, let's say you went through zoning approval to get your agritainment approved and there may be insurance requirements in there.

Now, but the problem with that is a standard farm policy, doesn't cover everything that a lot of people are engaged in on their farms to in today's world.

And now, the example used here is about a pumpkin cannon, which is like an explosive device.

Anything that compresses gas or by any other method ends up releasing gas in a sudden way, even if it's just compressed air, that's an explosive under an insurance policy and every insurance policy excludes explosives.

So it's just, you know, there's a lot of things like that, that are exclusions from your standard liability coverage that is supposed to protect you from claims and you have to be very aware of that.

Okay, now, so how do you deal with this?

Well, first of all, you've gotta notify your insurance agency and your insurance company, immediately of any injury that occurs and you make sure that, you know, you document everything through the entire process.

Take photographs of everything, preserve evidence and whatever it may be, it might be, you know, a piece of equipment.

It might be whatever, the fence post that had, you know, a big jagged piece of barbed wire sticking out of it that somebody, you know, cut their arm open on or something.

All of those things should be preserved in a safe place, undisturbed by aging or anyone's ability to tamper with it.

Protections in terms of forming business entities.

That is why corporations limited liability companies, LLCs, that is why those things exist because they protect you and your personal assets from liabilities that would be the businesses.

So in other words, if you create an LLC to run your pick your own strawberry operation, the LLCs assets are at stake, whatever they may be, and they might may not be all that much.

Insurance policies purchased by the LLC will cover the LLC, but they won't get to your personal assets and your personal finances if you follow the corporate formalities and make sure you do it correctly, so that your personal assets are going to be segregated and immune from the debts of the business.

Now you have to be very careful you can't use your pocket like your bank account, you have to follow the proper corporate formalities.

We could do a whole, you know, hours on that.

Okay, I've got a lot to cover, so I'm gonna really start talking fast now.

There's various considerations when you're talking about forming an entity like a corporation or an LLC.

The liability is one of them, there's other reasons to do it.

I will just proceed because we've got a lot to cover.

Now there are state immunity laws that also provide some relief from negligence claims.

For example, PA has this Equine Activity Immunity Act, which essentially has a provision that can give you relief from negligence cases with regard to various equine activities.

We won't go into all the specifics now.

There's also a thing called the Recreational Use of Land and Water Act which is when you open your land for free, that's what that's all about, and people use it for different things.

There are some liability protections.

The one that people are more familiar with today, because it just happened last summer, the summer of 2021, was Pennsylvania passed this Agritourism Activity Protection Act, which essentially provides for if you put certain signs up on an agritourism activity, you know, localation, and you are doing certain other things on the property, you have to be doing some type of normal ag operation, not just agritourism, it needs to be a farm.

And then you either have a signed waiver or you have a ticket that has a certain language on the back of it and then Farm Bureau sells wristbands that has the language on it, that acts perfectly fine as the ticket.

If you do all these things, then a standard negligence case from an adult plaintiff is precluded.

In other words, they cannot make a claim against you for standard negligence.

It would have to be something worse than that.

People use the word gross negligence.

Gross negligence, it's pretty tough to put your finger on what that means, but it has to be one of these cases of extreme egregious disregard for the fact that somebody could have been injured by a certain activity that you had on your property.

So it's a lot of protection, standard negligence is what you generally see, and now, it doesn't apply to food and beverage.

So don't get any ideas about your products, in other words, dairy products, getting this kind of, you know, immunity under state law.

That's not for consumables, not for, you know, anything made for human consumption, but in any event.

So there are protections that way.

Now let's talk about your products.

This is the important stuff.

Foodborne illnesses generally take the form of what's called products liability.

And products liability is more of a 20th century invention.

A lot of its other stuff came over from England, you know, way back centuries ago, but products liability is sort of, you know, a product of the industrial age where essentially, because manufactured products are put together by so many different bits and pieces of things, and there are so many people in the chain of distribution, that essentially, if in fact, here's essentially what products liability requires.

Somebody sells a product that is used in a certain way that causes an injury and the finding is that the product was defective and that that defect caused the injury then that's the case.

There's no need for resorting to negligence principles.

Now what makes a product defective?

Well, sometimes it's almost a self-fulfilling prophecy.

Well, it's defected because it injured somebody.

That's not really true it's defected because there was a failure of the product in some way, shape or form either from in the manufacturing process, there was, you know, the structural steel wasn't manufactured properly and the product failed or there's a design problem where, you know, the person's finger is not protected from this certain pinch point and it could have been designed differently, but wasn't or it's a marketing problem, which is it did didn't have warnings or the proper labeling on it with regard to, and of course we've all seen that on all kinds of, sort of, you know, things that make you laugh, the kind of warnings but that they come up because of some lawsuit and so, you know, you could have a product being defective 'cause it wasn't warning in a proper way.

Now in a food-borne illness case, contamination is the product defect.

And so that's essentially a form of manufacturing defect that it left your possession as the food manufacturer, let's just call you, with this contaminant in it.

That is a defective product.

So that's the theory that generally gets pursued for liability purposes when someone is ill and everybody in the chain technically, can be named as a defendant in the case.

So if you have a retail store of your own, great, then that's you, but if you are supplying to, you know, Kimberton Foods or you're supplying to, some other, you know, smaller retailers for example, they all can be sued too because it came off of their shelf.

Even though it came to them in exactly the same condition it was in when it left your place and hopefully, they didn't add anything to it or cause the contamination by breaking seals, et cetera.

If they did, then they have independent liability, but they can be named in the lawsuit and be liable.

So what they're gonna look for, to see what I'm getting at is they're gonna look for some type of commitment from you that you or your insurance company are gonna cover it, if a product is put on their shelf, in its factory sealed conditions, so to speak, from you and it was contaminated.

Now and this is a form of strict liability.

In other words, you don't worry about whether there is an exercise of proper care in a negligence context.

In fact, it's not even necessary to prove, let's say you sold yogurt under your brand name.

It's not even necessary for the plaintiffs to prove how the salmonella got in there or how the E. coli got in there, that's not their job.

Their job is I bought this product, it was for human consumption and it had something in it that clearly was not appropriate for human consumption and made me ill.

End of discussion, the product was defective.

That's all they have to prove.

So you obviously will rack your brain, because you must as to where did this come from and how did my product get contaminated?

But that's not technically a defense to the claim, unless it was tampering by somebody else.

You know, tampering is a different story.

Okay, now, that's a defective product.

I won't go any further with detail, 'cause we do have a lot to cover and also, there are things that are inherently dangerous.

A knife for example is sold in a way that, you know, of course a knife can do harm to someone.

It's inherently dangerous.

So know it's not considered defective simply because it has a sharp edge.

It may be considered defective and the reason is, because the utility of it outweighs the risk, it's sold to be used for its sharp edge.

However, if it doesn't have a warning on it, perhaps then there might be another story.

Now everybody knows a knife is gonna cut you.

So, you know, warnings on a knife is a little silly, but of course all you have to do is go out and buy one and you'll see that they exist and there'll be a warning on knife.

Then we all chuckle up about it, but the bottom line is, you know, that's because of all these things that I'm talking to you about right now.

Now the one that in the food context, that is interesting to think about for a couple seconds is raw, ground beef.

Okay, raw ground beef is inherently dangerous, depending on whether in fact, you know, some contaminant E. coli, salmonella, whatever, you know, has made its way into it and that is common enough that we all understand that ground beef is not sold to be consumed raw.

And so, you know, even though it is inherently dangerous to consume it raw, it's permitted to be sold that way because the consumer expectation would be that, well, yeah, that's not a defective product because you have to cook it.

So, you know, my example before about the yogurt with the contamination, keep in mind that cooking, if it's food that is made to be cooked, then you have a slightly different dynamic with the defective nature of a product that might have a contaminant in it that is an anticipated contaminant, it is why you cook it.

Now E. coli and salmonella in the beef distribution chain is a bit more controversial than I'm making it sound there but you get the idea.

There are, you know, different gradients of the way these cases play out depending on what the food substance is.

But raw ground beef is a good one, 'cause it really does illustrate, you know, some interesting points about this.

Now products liability and insurance, this is really important and I wanna make sure I cover all of this.

And I think what I'm gonna do is jettison my ending is a little bit about raw milk in Pennsylvania.

We'll leave that and see if anybody really wants to talk about it.

Products liability and insurance.

The most important thing to understand is that, most liability and insurance provisions of a standard farm policy exclude products liability claims.

That that is really, really important to understand.

You're getting this insurance and you're, oh yeah, I got a standard farm policy and I've been bottling milk and making yogurt and making cheese and et cetera.

Well, unless you've been with your insurance agent and you've done the due diligence to make sure that your policy is covering that, it probably is not covering that and that those are not insurable claims should they arise from a product that you sold.

And this is because the insurance industry's forms were all developed in an era before direct sales and value-added and, you know, producer processing.

These insurance policies, a standard farm policy, was written in the days when, you know, you were producing a wholesale or producing for wholesale sale, a raw agricultural commodity that was gonna be further processed by somebody else.

In fact, these policies, you know, are basically written for people that are growing one crop, corn or whatever it may be.

They weren't conceived of when we talk about diversified, you know, farming as we know it today and farming that involves all sorts of direct sales and value-added processing.

That's just not what farm policies.

They came of age in the middle of the 20th century before the industry transformed the way it is today.

So what that means is you need to make sure you buy what's called products and completed operations coverage and to get this, you know, you have to make sure that you go to your agent and that you specifically tell them everything that you're doing.

Your agent must know what you are doing in your business in order to provide the right insurance.

So you need to make sure they understand these things.

I can't tell you how many people are probably operating out there without insurance to cover their value-added processed products that they're selling.

And there's just this assumption, well, I got a policy.

Well, yeah, but do you have the right coverage?

Because most standard farm policies do not cover products that you sell.

They are policies that are geared towards what happens on your farm and people getting injured on your farm.

Not somebody buying a product from you, taking it home, having it in their refrigerator for two months, and even going to a retail store in the middle somewhere, somebody else had handles it and then months down the road, an injury occurs, i.e, someone gets ill from the product.

That's just not what standard insurance was all about.

It was tied to the real estate.

Now you're talking about, that's why it's called completed product, it means you completed something and shipped it off site and now it's being used way out there in the world somewhere.

And directly by a consumer, not with any further processing, it wasn't just corn or, you know, barley or whatever it might have been that would be sold to a mill and then be dealt with by a processor was gonna make it into something.

So that's important, that's the most important thing you could ever hear in this entire webinar is what I just told you there about checking your coverage.

Now there's another thing that you need to make sure too, which is if you're selling your products wholesale for resale by some type of third party like a store, your insurance policy must have what's called a vendor's endorsement that names resellers of your product, that you have distributed them to, for resale, as an additional insured under your policy.

In other words, it says, the way it's worded is, you know, anyone who purchases your product, for the purpose of resale, you know, becomes an additional insured with regard to any liability that arose from the product in the condition that it was in when it left your possession.

Hopefully I said that in a way that you could follow.

In other words, we'll use contamination as an example, again, if the contamination was present when the product left your site, your farm, then the store can be sued but they're entitled to be essentially covered by your insurance policy because they did nothing but put it on a shelf.

They didn't contaminate it further.

They didn't alter it anyway, they didn't compromise the seals.

You know, they're just simply in this thing because of the way that modern tort law works.

So you are what's called the named insured and then they become what's called an additional insured.

And that's how this whole system works, is that this kind of coverage is in place to cover those people who participate in the distribution chain but you know, they're essentially dealing with a sealed product that came from you, okay.

Those are some of the most important things we can talk about.

A couple more points to understand.

The coverage that you get for your completed products, has to be or it needs to be occurrence coverage, which means any incident that occurred, you know, a case of food-borne illness, during the policy period is covered by that policy.

But if it was a sale of a product that happened previous to that policy period but you're only hearing about the claim occurring in the policy period, that's what's called a claims made policy and that is not the kind of coverage that you need to have in these circumstances to cover those resellers of your product in a retail context.

Again, if you're gonna sell on the farm yourself, you don't have these additional complications with additional insureds, but if you're reselling through anybody else, you do have these additional insured complications.

So it needs to be an occurrence policy and there's this idea of issuing additional insured certificates.

You'll get asked sometimes by a retailer, that they want to have an additional insured certificate, showing your evidence, the evidence of your insurance and that they're an additional insured on your policy to carry your product in their store.

Then you have to go through getting these additional insurance certificates.

Most insurance companies have the agents issue them.

Sometimes they let you, if you're big enough, issue them yourself if you had like a risk management person but that's for large operations.

I'm assuming that's not quite what we have you year on this webinar.

Okay, now, I talked a little bit about the alteration of the product in distribution, which again, if that occurs, then all bets are off with regard to, you know, who's gonna be responsible for what, 'cause you gotta unpack the whole thing and figure out, well, if the product was somehow contaminated or altered in the distribution that's a totally different story.

It did not leave your possession in the same state that the consumer encountered it when they had their, and again, we'll use the foodborne illness example.

Okay, now, do we have anything in the Q&A or the chat in terms of questions?

'Cause I can take a little break here and we can call it today or answer those questions.

Sarah, is there anything?

I guess we have what, one thing in the Q&A?

- [Sarah] Yeah, there's one question in the Q&A, but if you wanna finish up these last couple of slides, then we'll go with that, that would-- - I can answer that question.

I do not know, the question is, how can and I find out if the agritourism protection is also available in New Jersey?

I don't know, but you can email me and just, you know what?

Go to our website at aglaw.psu.edu, then look under the staff, email me.

My email address is in there and I will look up for Jackie Schweichler, one of our other attorneys.

She probably knows this answer off top of her head, whether New Jersey has an agritourism immunity section or law like Pennsylvania does.

I just don't know that one off the top of my head.

We do have a chart, we have like a database of a bunch of different state laws on our website on that issue.

Okay, now let me see what else I wanna cover and we're at right at one, Sarah, this is up to you.

Can I spill over or do you want to adjourn?

- [Sarah] Why don't we take a moment?

See if people have any questions and you know, if they happen to pertain to any of your last slides, you can skip to those slides.

- Okay, All right.

- [Sarah] Folks may have someplace else that they need to get to, so why don't we give them an opportunity to ask any questions?

And you can put questions in either the Q&A pod or the chat box or raise your hand if you'd like to ask the question verbally.

- Yeah, please, you know, hit me with questions.

I mean, that's the best way to, you know, to sort of use some of these principles and make sure that you understand them, you know, is by sort of applying them to some facts and that's sort of the best way to do it.

Well, if we're waiting up, we got one.

Oh here, I'll put my email address in here, a person wanted that, I think that's, hang on.

Okay, and there's my email address.

Now, one more thing and I'll just sort of wrap up by saying, most of the rest of my slides here and again, this is available for you, if you want the PowerPoint.

Most of the rest of my slides are geared toward the following issue which is, when you get right down to expanding into other dairy products and value-added products, keep in mind that the regulations on how to make those dairy products and what standards, the standard of identity and what they have to conform to, et cetera, keep in mind that those things, not only do, well, I'll put it this way, they serve several functions.

One is that they keep you legal and proper with the state authorities that you're dealing with, but they also provide the basic standard of care, that if you're not following them, that's negligence.

And they also, you know, or I'll put it this way.

They also establish depending on the circumstances, well, I'll tell you what, I'll leave it at that.

'Cause it's easier, I'm gonna get to go down a road that'll be hard to explain, so the bottom line is, you're protected by following all those things from claims of negligence.

It helps you in negligence context by doing all those things and more importantly, when you don't do all of the things that the state regulations say that you're to do when you're making yogurt or you're doing, you know, whatever it may be, if that comes up, when a food-borne illness arises, you're gonna have problems, not just with the products liability claims, which would exist anyway, but then the negligence claims are gonna get, you know, in there and if you're really, you know, deviating from what this law requires you to be doing and making these products, then you start to cross into some areas like the Peanut Corporation of America, you know, got into, which is, you know, they were of course, blatantly ignoring regulatory standards.

So there's more problems for you than just the state regulatory authorities if you're not following the proper standards for making all of these value-added products.

You know, it's also potentially lining up claimants who might have let a foodborne illness pass, but then when they find out some of this other stuff, it's kind of gins them up a little bit.

And you know, so that's how horrendous scenarios occur, you know, like the Peanut Corporation of America case, or, you know, I'm just amazed.

I'll show you, I have some raw of milk stuff in here.

You know, obviously if you're selling raw milk without a permit, you're negligent per se, you've got no defense, you're done.

I mean, that's clear liability for any injuries clause because that law as we talked about before.

Now, if you're selling with a PA permit and you have a raw milk permit and you're selling, you know, fluid raw milk with that permit, unfortunately that does not give you a full pass.

In other words, that doesn't give you immunity from suit, that, oh my product's safe and you know, you can't.

No, unfortunately, just because you had the permit, that doesn't mean you're off the hook in a product's liability claim because, you know, your milk was contaminated with something.

You know, it doesn't cut those both ways.

And there's been a lot of attention paid towards these alternative creative ways that people want to use to get around the raw milk permit.

And, you know, oh, this is a private sale or this is a buyer's club, or my customers sign these waivers and all the, okay.

First of all, there's no such thing as a private sale.

I mean, yeah, Ford Motor Company is a private company and I'm a private citizen, so what, when I bought my car from Ford, that was a private sale, I mean, you know, it's a fiction, it's silly and there's no such thing.

Now, a buyer's club, can there be a legitimate buyer's club that is somehow not regulated by state, you know, depending on what the product is, et cetera?

The basic answer is no because almost all state regulatory laws don't limit themselves to sales.

They're about sales and distribution of, for example, in Pennsylvania, the raw milk provisions.

So, you know, it's more or you can't try to say, I am not selling it for some reason.

You're distributing it, you're in the soup.

You're doing exactly what the law applies to, you know, and so most laws, now there are laws that mistakenly don't use the word and distribute after using and sale and then it comes down to, what in that particular state is considered to be a sale and sale can sometimes, you know, exclude the exchange of money and say, you know, sale can be broadly interpreted depending on individual state law.

So now, last thing, these waivers of liability that, you know, people want to have their customers sign to get around the raw milk permitting process.

It's theoretically possible that you could catch a bolt of lightning and be protected from a claim from an adult person that signs one of these waivers of liability, depending on how well it's written and you know, all the circumstances relating to it, just like the ski lodge or you know, or the scuba diving people, you know, try to get these waivers signed.

But if this person doesn't understand that it's illegal to be distributing this raw milk in this fashion then they're not assuming the risk of an illegal raw milk sale.

So there's some holes that could be poked in that and also keep in mind that a signed waiver, at least in Pennsylvania and I don't know New Jersey or New York law on this point.

A signed waiver in Pennsylvania is never good in court to waive a claim of a minor.

So while every athletic, you know, endeavor that your children participate in asks you to sign on their behalf and you go to the, you know, whatever amusement park or the snow tubing place or whatever and they want you to sign as the adult, as the parent on behalf of your child, none of that technically stands up in court should your child be injured.

You know, the law presumes that no one can waive a child's claim even their parents cannot waive their claim.

Now the parents can waive their own claim, maybe for medical bills, but the actual pain and suffering claim of the child cannot be waived through a waiver signed by a parent.

So, you know, the raw milk dilemma, in all my years at the Department of Ag, you know, the dilemma was that the adult customers who may be knowing what they're getting into are one thing, but the children who don't know what their parents are bringing in and the neighbor's children who happen to, you know, come into the kitchen and look in the refrigerator, you know, the kids involved is where the whole logic breaks down.

You know, that somehow how there can be an educated customer who, you know, it's safe to sell them raw milk because they know what they're buying.

So just keep that in mind and I'm trying not to advocate one way or the other.

I mean, obviously legal and illegal conduct, you know, is clear in this case, it is illegal, you know, to be using any of these instruments, to try to sell raw milk or distribute raw milk without the required permit.

Okay, one more thing since we are hanging in there, all of our participants are hanging in here.

I'm gonna tell you one more thing that is a good piece of information to know.

By the way, I am completely mystified and I remain completely mystified, why any insurance company in Pennsylvania would underwrite raw milk sales whether they're with a permit or without a permit.

I mean, even with a permit I'm stunned that insurance companies will write liability insurance, because that's just not the insurance industry's way of doing things, they are so overly cautious and so protective of, you know, the bottom line.

I am very skeptical when people say, oh yeah, I have products coverage for my raw milk sales 'cause I have a permit.

I don't know whether their insurance companies really know what they're doing or not.

But I would say one thing, do not ever hide what you're doing from your insurance company in terms of what you're selling through, let's say, you're on-farm store, because that's when you get dropped by insurance companies is they find out you're doing what here?

You're selling what, and then all of a sudden you're getting canceled and you gotta go get another insurance carrier and that insurance carrier's gonna know you were dropped and they're gonna find out why, because that stuff is all exchanged among the insurance companies.

It's legal for them to do that.

And so I remain mystified by why the insurance industry, even with permits why they take on raw milk, if they even know that they're taking it on.

Sometimes they have no idea you what's going on on the farm.

Oh wait, there's one more thing I'm gonna tell you.

I have to go backwards, okay.

Pennsylvania has a set, I'm just looking to see whether, okay, this is the right slide.

Pennsylvania's Milk Regulations are in what's called Chapter 59a, that's all of the Milk Sanitation Regulations for the entire state and that's covering, you know, milk for manufacturing as well as, you know, fluid milk.

And there's some extra cheese-making provisions, but this is the portion that deals with handling the milk, you know, up to the cheese-making process.

That's chapter 59a, sub-chapter F of chapter 59a is where the Raw Milk Provisions are.

I basically, myself and Dwight Smith and the Bureau of Food Safety wrote this raw milk section and have intimate experience with it, all of the ups and downs, but, what I want to tell you is right now, keep our fingers crossed, PDA has in the works, a new 59a that will revise all of the milk sanitation regulations.

Hopefully it will be published sometime this year as the beginning of a new regulatory propagation process.

And we will see a bit of a change, I believe coming, with regard to a few of the products that could be made with unpasteurized milk.

I can't say more about that, it's just, understand that there is a revision of the Milk Sanitation Regulations coming in Pennsylvania.

The last time they were revised was in 2011, when I was the Chief Counsel and my office did all the work on that and this is certainly more prompt than the last time, because the last time they hadn't been a revise since I think it was the 70s, this time it's since 2011 and there's gonna be some changes that I think those who are in favor of more product diversity, we'll say, are going to be happy with those changes.

But again, I can't really go into any more detail than that.

I would've thought based on the way this project was going, that they would've been published by now, but they are not quite published yet.

So hang on, we might see some something on that front in the calendar year 2022.

So with that said and I know you're all saying like, oh, and I'm sure PDA will hate me for even saying this much, but you know, just stay tuned.

There will be something coming.

Let's keep our fingers crossed, sooner rather than later.

Okay, with that, Sarah, I will sign off.

People can contact me at my email address, ask me specific questions.

You know, that's what I do in my job and thanks everybody for attending.

Do you have another question by the way?

- [Sarah] Nope, I put your email into the chat box for everybody that wanted that.

- I see, I typed it in there and didn't send it to everybody, I only sent it to you guys, okay good.

All right, so now it's in there, okay great.

- [Sarah] We'll hang on for just a minute.

If anybody does have a question, feel free to, you know, put in the chat box or the Q&A, otherwise you are welcome to leave.

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