Factors Influencing Product Liability Insurance Adoption Among Tennessee Fruit and Vegetable Farmers

Foodborne illness outbreaks linked to the consumption of fresh produce expose fruit and vegetable growers to uncertain legal and compensatory costs associated with product liability actions. Product liability insurance protects farmers against the risk of financial loss from product liability actions and may create opportunities for market expansion, but insights from recent focus groups suggest that Tennessee farmers may perceive this insurance coverage as cost prohibitive. This study evaluates the factors influencing adoption of product liability insurance among Tennessee fruit and vegetable producers. Using data from a 2013 survey of Tennessee fruit and vegetable farmers, factors influencing the adoption decision are first evaluated using a single-equation probit regression. Results from the first regression approach suggest that perceptions of product liability risk and acres in fruit and vegetable production are positive determinants of adoption. The model was then expanded to a two-stage probit regression approach to account for simultaneity between adoption of product liability insurance and product liability risk perceptions. Findings from the two-stage regression approach suggest that perception of product liability risk is not a significant determinant of the insurance adoption decision.