The Space between Barns Affects Long-Term Insurance Costs

January 25, 2018

The greater the separation between your layer houses, the better your long-term insurance costs will be.  Not only will your long-term insurance costs improve, but overall insurance rates and insurability of egg production operations improve.

Certain carriers have refused coverage for operations whose buildings are less than 50 feet apart. Given recent claims, we’ve seen that these standards are vital. When buildings are close together, there’s a greater chance for multi-barn fires. When there are multi-barn fires, insurers pick up their coverage and go home.

In other words, when space issues exacerbate claims, the whole industry feels the burn. Likewise, as we ferret out these issues, address them for future construction projects, and account for them in long-term capital planning, the whole industry will benefit over time.

Why It’s Important

While it’s impossible to physically move a barn from one spot to another, it is vital for egg producers to keep separation as a primary variable when considering any changes to current buildings or plans for future construction.  In addition to other risk management efforts, separation will be a key component for improving attractiveness to underwriters over the long term.It’s not uncommon for businesses to neglect certain risk management standards to increase productivity or save on other costs.  For instance, retrofitting layer barns with side manure dryers allows for greater per barn production. But this same practice can drop separation from the 50 feet standard to below 30 feet. A brisk wind is all that is needed for flames to hop from one barn to another.

What Can Be Done to Get Out Ahead of Insurers

What can you do to begin improving your position in this area?  As stated above, you can’t take existing buildings and move them. But, you can immediately begin to incorporate better separation standards for the future – and do so in a way to improve your status with insurers.

  1. Prioritize separation: When you engage a contractor, make sure that separation, and not only maximizing real estate, is a priority.
  2. The bigger the building, the greater the distance: While 50 feet has been the standard, the influx of new massive barns housing upwards of 600,000 layers is the equivalent of moving four or five old-style barns under one roof. These barns need even further separation. Underwriters are encouraging 75 feet, or even 100 feet, separation between these huge structures. It’s best to anticipate changes in insurers’ standards. One underwriter said they have not yet developed standards for large, mega-barns. It shouldn’t be a surprise if 75 feet, or 100 feet becomes the benchmark for barns with over 150,000 layers.
  3. Capital Planning: Given the changes in the industry as a whole – the uncertain move from caged to cage-free production, for instance – most producers have short and long-term plans already written up. When insurers are underwriting your risk, some detail around future construction would be helpful. At the very least, including clear intentionality around spatial separation will build relational capital with carriers.
  4. Improve construction: Improve construction from frame to steel. Consider the long-term costs versus the short-term savings of frame construction.
  5. Where separation is an issue, overcompensate: Find ways to double down on fire prevention when you have barns and processing areas that do not meet current standards. Plan for the future, but for now, how can you improve fire protection? What housekeeping measures can you implement? What employee training can you provide? Where can you improve fire separation or install improved notification systems?

Current Suggestions

What is the preferred distance between layer houses? Fifty feet is the bare minimum, but the UEP property program underwriters have suggested the following:

Non-Combustible Houses (<150K layers)  -   minimum of 50 feet separation

Non-Combustible Houses (>150K layers) -    minimum of 75 feet separation

Combustible Frame Houses (<150K layers) - minimum of 50 feet separation

Combustible Frame Houses (>150K layers) - minimum of 100 feet separation

We’ll continue to work with underwriters, our loss control contractor, and general contractors to develop best practices.   The long and the short of it is to find a way to err on the side of greater distances. Besides being a safeguard for your own operation, it can also create a better position for the egg industry overall.

To discuss these and other insurance issues further, please reach out to the UEP Team at Palomar Insurance Corporation, the endorsed provider for UEP for over 30 years.

Des Yawn or  770-709-7704

Carolyn Grubaugh 770-709-7713

Brett Cohrs or 770-709-7712