Legal Aspects of Horse Management
Lesson
Three
Insuring Against Liability
In
Lesson One, we learned about some of the common situations that can result in
liability for equine professionals, and in Lesson Two, we learned what to do to
prevent liability. However, despite the
most careful planning, accidents can happen, which is why you, as an equine
professional, need insurance.
Types
of Insurance Designed for Equine Professionals
The
array of insurance options can be intimidating, and of the many different types
of coverage available, only some choices may be appropriate for you. When
evaluating insurance products, consider what risks you have for liability and
loss, and then match those risks against the types of coverage available.
The
following are the most common types of insurance available for equine
professionals:
Care, Custody and Control
Target audience: Boarding
stables, breeding farms, trainers and other commercial equine operations which
take on the responsibility of caring for others’ horses.
Typically
covered: Risk of loss or injury to another
person’s horse in your care.
Not typically covered: Risk of
loss or injury caused by horses in your care, loss or injury to your own
horses.
Example: Clara Clueless, the owner of Clueless
Arabians, is always looking for ways to make her ranch profitable. She decided to take in outside mares for
foaling out, figuring that she has to be up all night with her own mares, so it
is really no extra trouble to have a few more.
Clara posted ads at the feed store and on the local Internet bulletin
board. Before she knows it, she has 20
mares coming in, and she is delighted!
Clueless Arabians already had care, custody and control insurance to
cover her boarding business, so Clara called up her agent and expanded the
coverage to include this new sideline.
The
foaling went well, and during January and February, Clara helped deliver 15
foals, including five out of her own mares.
By late March, Clara is exhausted from all of the late nights and hard
work. Impressively Expensive is one of
the mares yet to foal and she has been living the good life in a huge foaling
stall deep with shavings. Clara is so
tired from staying up all night with the mares that she forgets to check Expensive’s waterer. The waterer
malfunctions and Expensive spends a day without water, causing her to colic and
die. If Clara is held responsible for Expensive’s death and the death of her foal, Clara’s care,
custody and control insurance will most likely cover the claim, minus Clara’s
deductible.
Commercial Equine Liability
Target audience:
Horse-related businesses, including boarding stables, breeding farms, trainers
and sales barns.
Typically
covered: General liability relating to
operating your equine business.
Not typically covered: Risk of
loss or injury to another person’s horse in your care.
Example: After coming to see their poor horse,
Impressively Expensive’s owners storm out to their
truck in a huff and roar off down the driveway, but they don’t get far. Unfortunately, Clara’s son, Cliff Clueless,
had been fixing the shavings shed the day before and left a bunch of nails in
the driveway. Oops! Expensive’s owners
now have six flat tires on their truck (it’s a dually) and they are raging mad.
Fortunately, Clara’s general commercial liability insurance will
probably cover the loss, but she will have to pay the deductible.
Farm and Ranch Policies
Target
audience: Farm and ranch owners
.
Typically covered: Loss to
real and personal property.
Not
typically covered: Loss of livestock, general liability.
Example: Big Thang now has a huge training barn. While he is showing at the Quarter Horse
Congress, thieves steal the entire contents of his tack room as well as the hot
walker (they had plenty of time to dismantle it) and even some pipe
panels. They also steal Thang’s senior stallion, BT Wild. Fortunately, Thang’s
farm and ranch policy will most likely cover the tack, hot walker and pipe
panels, minus the deductible. However,
the ranch policy will not cover the loss of BT Wild.
Workers’ Compensation
Typically covered:
Injuries to employees incurred as part of their job.
Not
typically covered: Losses caused by your employees.
Example: Because
Big Thang’s hotwalker was
stolen, his assistant trainers, including Wanna Bee,
are now cooling out their own horses. Wanna Bee’s mount, BT Running Wild, spooked at a leaf and
promptly dumped Wanna Bee, leaving her with a broken arm. Wanna Bee’s
injury would most likely be covered by workers’ compensation
insurance.
Types
of Insurance Specifically for Horses
Mortality and Theft
Target
audience: Owners of valuable horses.
Typically
covered: Theft and death not caused by the
owner’s negligence or willful misconduct.
Not typically covered: Death
caused by the owner’s negligence or willful misconduct.
Example:
Fortunately for Big Thang, he had taken out a mortality and theft policy on BT Wild before BT was
stolen. However, BT apparently proved to
be too much for his captors to handle.
Under cover of darkness, BT’s captors left him tied to a tree in the
parking lot of the local highway patrol outpost. The tree was really a sapling, and BT, who
had always had a bad habit of pulling back, uprooted the tree and wandered
around the parking lot dragging a tree from his lead rope until a surprised
patrolman found him the next morning.
Big
Thang had filed a police report of the theft, so BT
and Big were quickly reunited. After
hearing about the tree, Big decided that it was time to cure BT’s pulling
problem once and for all.
He fitted BT with a “necktie,” then tied the
rope to a stout post sunk in concrete. A
mare in season walked by and BT pitched a fit, bellowing and pawing. He pulled back violently against the necktie
and nothing broke, which really sent him into a frenzy. The rope around his neck drew tight and he
choked to death!
Big
Thang was stunned.
He called his insurance company, which refused to pay the claim, noting
that Big’s negligence was responsible for BT’s death.
Major Medical and Surgical
Target
audience: Owners of valuable horses.
Typically
covered: Certain types of surgery and other
expensive medical procedures.
Not
typically covered: Routine medical procedures.
Example: Clara
Clueless was very pleased with the foal crop from her stallion Fire. She chose to keep several of the foals as
show prospects, so she decided to take out mortality and major medical policies
on them, knowing how accident-prone young horses can be.
One
young colt, Hell Fire, managed to get his front leg stuck in the pipe corral
fencing, opening up a huge gash that required stitches. Clara was relieved that her vet bill would be
covered by her major medical insurance.
While the vet was treating Hell Fire, he mentioned that Clara should
vaccinate all of her horses against Strangles.
She called her insurance company to ask whether that would be covered
under her major medical policy (it sure sounded like a major expense to her!),
but they declined, noting that vaccinations are a routine medical procedure.
Loss
of Use
Target audience: Owners
of valuable, money-earning performance horses.
Typically covered:
Permanent disability.
Not typically covered:
Temporary disability, death.
Example:
Big Thang entered one of
BT Wild’s colts, BT Sliding Wild, in the NRHA futurity. The colt has already made BT $5500 in total
earnings at regional futurities, so BT is excited about his prospects at the
nationals, and decides to take out mortality and theft insurance on the colt.
While BT was on the phone with the
insurance agency, they also sold him loss of use insurance. Two weeks before the nationals, Sliding Wild
bowed a tendon. BT is disappointed, but
then remembered his loss of use insurance.
He called his insurance agent to file a claim. BT pointed out that the colt can’t compete in
the futurity, which will affect his marketability as a sire, and it is also too
late to apply for a refund of the several hundred dollars BT has paid in entry
fees.
The insurance company denied BT’s claim,
noting that a bowed tendon, regardless of the unfortunate timing, is a
temporary disability.
Stallion Infertility
Target
audience: Breeding stallion owners.
Typically covered: Permanent
loss of fertility/breeding ability.
Not
typically covered: Death.
Example: Clara
Clueless had a very successful breeding season with her stallion Fire. She had been using live cover, but because
Fire had suffered a few kicks and bites as a result of his lack of bedside
manner, she decided to try A.I. for the next breeding season. Clara read some articles on the Internet
about phantom training and ordered a breeding phantom for Fire. Three weeks later, the breeding phantom
arrived in several boxes.
After some effort and a few choice words, Clara assembled it and led
Fire out to the breeding shed.
Fortunately for Clara, Fire had already been trained to the phantom, so he
knew what to do. However, Clara had
apparently not assembled the phantom properly, and it collapsed, injuring Fire.
The
vet informed Clara that Fire will recover, but instructed her not to breed him
for the rest of the breeding season to allow a full recovery.
Clara’s insurance company denied her claim for stallion infertility,
pointing out that the infertility or loss of breeding ability must be
permanent.
Named Perils Coverage
Target audience: Horse
owners who don’t want (or can’t get) coverage under mortality or major medical
coverage.
Typically covered: Death
from certain causes, e.g., fire.
Not
typically covered: Death from illness.
Example: While at
the Congress, a horse that Big Thang was exhibiting
tested positive for fluphenazine. After an inquiry, Thang
was suspended from the AQHA and could therefore no longer exhibit horses at
AQHA approved events.
As
a result, Big Thang’s business dropped off
precipitously. Looking for ways to
economize, Big Thang decided to drop mortality and
theft insurance on most of his horses and insure them against death by fire and
flood instead. Big Thang’s
ranch was located in a flood zone, and as a result of his AQHA suspension, he’d
received a number of threats along the lines of “I’ll burn yer
barn down, ya cheatin’
crook!”.
Although Thang had been suspended from the
AQHA, his membership in the APHA was still in good standing (at least for the
time being), so he took several clients’ Paint horses to a winter circuit in
Because the deaths were not related to the specific causes covered by
Big Thang’s named perils policy, his insurance did
not cover his loss.
Short-term Transit Coverage
Target audience: Horse owners
hauling their horses on a short-term basis who don’t have mortality or major
medical coverage.
Typically
covered: Death during transit.
Not
typically covered: Injuries during transit.
Example: Even
though his trip to the winter Paint circuit yielded some big wins and some new
clients, Big Thang was still strapped for cash, so he decided to reduce his herd to help pay some of his
bills. BT Sliding Wild’s bowed tendon
has completely healed, and he is now back in training. Big Thang
reluctantly advertised him for sale on the Internet.
Milton Megabucks, now recovered from his concussion, has developed a
keen interest in reining. He saw the ad
for BT Sliding Wild and bought him sight unseen, thrilled at the prospect of
owning a colt trained by a big-time trainer like Big Thang. He made all of the arrangements for
transportation and noticed that the hauler’s contract limited the hauler’s
liability to the amount of the transport fee, which was $1500.
Milty had just forked over $50,000 for BT Sliding Wild, so
he decided to insure the colt. His
insurance agent asked for documentation of the colt’s purchase price and show
record, which Milty didn’t have. The hauler was picking up the colt the very
next day and Milty knew it would be impossible to
round up all of the documentation by then, so the insurance agent offered Milty short-term transit coverage for the colt.
At
Megabucks Acres, Milty’s new ranch, BT Sliding Wild
stepped off the trailer, just as advertised.
Milty put him out in a paddock to stretch his
legs. While Milty
was signing the receipt for the hauler, BT Sliding Wild, a little stir crazy
from his long trailer ride, jumped the paddock fence and ran out onto the road,
where a speeding pickup truck ran into him.
Because the death occurred after the horse arrived at his destination, Milty’s short-term transit insurance would not cover the
loss.
Types
of Insurance for Horse Owners
Horse Owner Liability
Target audience:
Individual horse owners concerned about being liable for their horse’s actions.
Typically
covered: Injuries or property damage caused by
your horse
.
Not
typically covered: Business activities relating to your
horse.
Example: Clueless
Arabians had grown to 15 horses and
Clara decided that she needed help training them, so she hired Willy Showman, a
well-known (some would say notorious) local trainer.
Willy talked Clara into letting him board his horses at Clueless
Arabians. At his last barn, Willy was a
named insured on the barn’s care, custody and control policy, so the only
insurance he kept was a horse owner liability policy on Unpredictable, his
stallion, who has a nasty biting habit, and Old Reliable, his lesson horse, who
has no bad habits at all.
During a lesson at Clueless, Old Reliable stumbled and went down to his
knees, unseating his young rider, I.B. Whiny, who suffered a broken leg.
A
veterinary examination revealed that Old Reliable only has about 20% of his
normal eyesight, and I.B. Whiny’s parents, being the
litigious sort that they are, sued Willy for the hospital bills and pain and
suffering. Willy’s horse owner liability
insurer would not pay the claim, noting that Willy was using the horse in a
commercial transaction.
Race Horse Owner Liability
Target
audience: Race horse owners.
Typically covered: General
liabilities associated with race horse ownership.
Not typically covered: Injury/loss
of the horse, liability associated with activities that are more than mere
ownership.
Example: Milty Megabucks,
fresh from his misfortune in the reining world, decided that he should invest
his money in racehorses, where he’d heard “the real money in horses is.”
After shopping around with some help from Dewey Cheatham, the local
racehorse broker, he settles upon a partial interest in Ripsnorter, an unproven
two-year-old stallion.
Milty has learned the value of insurance, so he took out
major medical and mortality policies as well as a racehorse owner’s liability
policy. During the colt’s maiden race,
he jumped into the grandstand and injures several spectators. Fortunately for Milty,
his policy covered the damages.
Riding Clubs and Other Groups
Target audience: 4-H
clubs, pony clubs and other horse-oriented clubs that host mounted activities
Typically covered:
Injuries, losses and property damage that occurs during club activities.
Not typically covered:
Contractual and other disputes relating to club events.
Example: Milty
Megabucks’ daughter, Millie, has developed an interest in horses. Delighted, Milty
finds a suitable mount with help from Pricey Ponies, and enrolls Millie in Pony
Club.
Not
one to be an absentee parent, Milty attends all of
the Pony Club meetings with his daughter.
Upon learning that the Pony Club planned to have a rally, Milty expounded at great length upon the value of insurance
(much to the boredom of the Pony Club members), and persuaded them to take out
a group policy for the club. At the
rally, several riders go off course and right through a neighboring farmer’s
tomato crop.
Fortunately, the group insurance policy covered the property damage
caused by the off course riders.
Shows and Events
Target
audience: Operators of horse shows, clinics and
other events.
Typically covered: Injuries,
losses and property damage resulting from club activities.
Not typically covered:
Contractual and other disputes relating to events.
Example: Clara
Clueless is an active supporter of her local Arabian horse club, and she offers
to host the spring show at Clueless Arabians. Delighted at the opportunity to
have their show at such a world-class facility, the club eagerly accepts
Clara’s offer.
Now
a little paranoid, Clara consults with her insurance agent, who points out that
horse shows are specifically excluded from Clueless Arabians’ commercial
liability policy. Of course, he is only
too happy to sell her coverage for the horse show, and she names the Arabian
horse club as an additional insured.
Much to Clara’s embarrassment, her stallion, Fire, somehow manages to
escape from his stall during the show and runs loose through the show grounds,
trampling two small children.
Fortunately, the additional coverage that Clara had just purchased will cover
the hospital bills for the children.
Shopping
for Equine Insurance
Comparing
Different Policies and Coverage
Just like shopping for car insurance, it pays to shop around for equine
insurance.
Once you have determined what coverage you need, identify several insurance
agencies offering that coverage. Make sure the insurance agencies and agents
you choose are licensed to do business in your home state and have no
disciplinary history.
Ask
your insurance agent what company will be underwriting your policy and look for
insurers rated A- or better for financial strength by an independent ratings
agency.
You
can check agencies’ licensing status and disciplinary history through your
state’s insurance commissioner, and many states, including
To
check an insurance underwriter’s ratings, refer to a ratings agency such as A.M. Best Company (www.ambest.com).
After identifying suitable insurance agencies, obtain price quotes for
each type of coverage. Obtaining quotes from two or more insurance agencies
allows you to compare costs and coverage. Make sure that you have a chance to
evaluate the coverage offered before committing to buy a certain policy – some
companies require you to provide credit card information to obtain a quote.
Once you have the quotes, how do you evaluate the coverage? Cheaper is not necessarily better – you may
save on premiums, but you will lose if the insurance doesn’t provide coverage
when you need it.
You
may find that it is more economical to have more coverage, but with a higher
deductible. Read the terms of your
coverage very carefully, especially the exclusions.
Care,
Custody and Control
Preliminary Consideration: Does the policy cover claims brought against
you and your facility for negligence? If
not, cross that policy off of your list!
Coverage Limits: Consider how many horses you have at your
facility, and how much each of them is worth.
Your per occurrence coverage limit should be at least as much as the
amount that the most expensive horse on the property is worth (Murphy’s Law
dictates that the $100 pony will never be injured, but the $50,000 reining
horse will find the one nail on your 100 acres, and step on it).
Your total coverage limit should be at least as much as the total of
what all of the horses on your property are worth.
Commercial
Equine Liability
Preliminary Consideration: Does the policy cover claims brought against
you and your facility for negligence? If
not, cross that policy off of your list!
Coverage Limits: In this litigious era, you should have
coverage of at least $1M per occurrence and $3M in the aggregate. Anything less will not likely cover a
catastrophic injury on your property.
Note that the coverage limit is not dependent upon the size of your
facility, or the type of activities you are conducting. Even if you have a small backyard boarding
operation, it is still quite possible for someone to be seriously injured on
your property, and you should assume that anyone, even your oldest and dearest
friends, will sue you for everything you own.
Farm
and Ranch Policies
Preliminary Consideration: Think about where you live – what types of
natural disasters have occurred there in the past 100 years? It may be cheaper not to get flood insurance
or earthquake insurance, but how will you value that insurance after the flood
or earthquake? Consider having a policy
with broader coverage limits and a higher deductible.
Coverage Limits: Add up what it would cost you to replace
everything on your farm – structures, livestock and equipment. Your policy limits should be no less than
that amount.
Workers’
Compensation Insurance
In
general, the amount of workers’ compensation coverage that you need is a matter
of state law – call your state’s department of labor for more information. Most states have this information posted on
their websites, and if not, it should be readily available by phone.
Equine
Mortality and Theft Policies
Coverage Limits: Determine what it would realistically cost
you to replace the horse(s) you want to insure.
Your coverage limits should be at least that amount. If your $50,000 show jumper dies of colic,
you will be glad that you went through the hassle of obtaining an appraisal and
vet check. Most insurance companies do
not require an appraisal or vet check for horses worth less than $20,000.
Major
Medical and Surgical Policies
General Considerations: Many
insurance companies are currently offering a certain amount of colic surgery
coverage or major medical coverage included in their mortality policies. However, it is worth your while to find out
what the average colic surgery in your area costs – it may be much more than
the amount of the “free” surgery insurance included in your mortality policy.
Coverage Limits: As noted, find out what the average surgical
stay costs at your area equine hospital.
Assume the worst, and budget for it.
As with other types of coverage, it is usually better to have broader
coverage and a higher deductible – that $1,000 deductible may be painful when
you have a major expense, but if your horse has surgery and a hospital stay
that costs $20,000, you will be happy to have that coverage.
Loss
of Use Policies
General Considerations: Read your policy – most loss of use policies
pay out only a portion of the horse’s value.
The definition of loss of use varies, and your insurance company may
require you to give up possession of your horse in order to receive payment on
a loss of use claim. In light of these
facts, consider whether the cost of this type of policy is justified for your
horses.
Coverage Limits: As noted, loss of use policies do not
typically pay out the entire value of your horse. Therefore, in evaluating whether this type of
insurance is appropriate for your horse, balance the potential payout against
the true economic loss that you would suffer and the cost of the premiums.
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