Liability insurance covers personal injury or property damage claims against the insured. Generally, the types of liability insurance available in the equine industry include farm liability coverage, general commercial liability, boarders’ liability coverage and stallion liability coverage.
If you own a farm or stable, commercial general liability is a policy to consider. Farm liability coverage, however, may contain exclusions denying coverage for loss of or damage to the property of others. In a recent case, an insurance company denied coverage for injuries sustained by a visitor struck by a bale of hay thrown from a hayloft. Even though the stable had purchased a “farm owner’s policy,” the policy had a horse exclusion endorsement, which excluded “any liability for personal injury or property damage arising out of the ownership, care, boarding or use of horses, donkeys, mules or any similar animal.” The court upheld the exclusion, thereby denying insurance coverage and rendering the stable owner personally responsible for the $95,000 personal injury award.
A boarders’ liability policy may serve to cover the property of others in a farm owner’s control and possession that is excluded under the farm liability coverage. For farm owners who may have boarders, the insurer should verify that any accidents at the barn or stable are covered under his or her homeowner’s policy, or a commercial liability policy should be purchased. A court recently ruled that a stable owner’s homeowner’s policy did not cover the operations of a boarding stable, as it constituted a “business pursuit” that was excluded under the homeowner’s insurance policy. If you board horses owned by others, it would be prudent to inquire whether another’s horse, saddles, equipment, etc., are covered under your current policy.
A stallion liability policy provides protection from personal injury or property-loss claims against a stallion owner for damages caused by the stallion named in the liability policy. If you own or run a breeding facility, this is a specific type of insurance you may wish to consider as coverage for employees who handle stallions as well as for visitors to the farm.
Mortality insurance compensates the horse owner for loss incurred as a result of the death or humane destruction of his or her horse. Many policies require certain types of notice regarding the condition and/or the declared use of the insured horse. Failure to comply with policy requirements could result in a complete denial of coverage for the horse owner. Accordingly, you should require boarders to provide you with copies of insurance policies covering their horses. Then, if the horse becomes ill, injured or dies, you can refer to the insurance policy to verify that you have done everything the policy required. Additionally, your boarding or training contract should include a provision that you have the authority to contact the insurance company directly if you are unable to contact the horse’s owner in emergencies.
Loss of Use
Insurance policies vary as to what qualifies as a loss of use. Generally, a loss of use policy compensates a horse owner for the decreased value of the insured horse if that horse becomes ill or injured and is unable to perform its declared use. Typically, a loss-of-use policy is supplemental to mortality insurance.
Stable owners and operators should always remember that loss-of-use policies usually contain very specific notice requirements. These requirements mandate that the owner notify the insurance company of any disease, injury or illness that the insured horse incurs or sustains. Courts and insurance companies interpret the notice requirements differently. Some insurers require notification of even minor injuries or illnesses, while others only ask to be notified of long-term, serious diseases, injuries or illnesses. Again, a stable owner should know what the notice requirements are and always provide the appropriate information to the owner should the horse suffer an injury or illness.
A recent court decision upheld an insurance company’s denial of a $40,000 loss-of-use claim of a show jumper that was diagnosed with a serious and debilitating lung disease because the owner had not reported a tendon injury that occurred two years prior to the lung disease diagnosis. Even though the show jumper had recovered from the prior tendon injury and returned to the show ring, the owner was denied coverage for the loss of use due to the lung ailment. To avoid this kind of claim denial, horse owners must have a thorough understanding of the policy’s notice requirements and act accordingly. Stable owners and operators should clearly communicate with their boarders and customers about how injuries and illnesses will be handled and reported.
Infertility insurance and insurance against barrenness insures the fertility of stallions or mares. These kinds of policies vary in terms or breeding seasons, depending upon the individual needs of the owner or breeder. Infertility insurance serves as a guarantee that an insured stallion will achieve a certain conception percentage rate. Because the percentage of fertility terms and coverage offered under this type of policy vary widely, business owners should take extra time and precautions in evaluating and understanding the extent to which they are covered.
Many farm and/or horse owners may not realize that they can purchase a relatively inexpensive umbrella policy to cover liabilities that are not covered under their other policies. This is an option available to stable owners and operators for areas in which they may not have adequate coverage. Talk to your insurance agent to find out what options are available.
Other Policy Considerations
1) Riders for Property Loss. Carefully evaluate the total amount of property (including tack, office equipment, barn equipment, etc.) you own or have in your custody and compare that amount to the applicable policy limits. You may be surprised at the lack of coverage you currently have and may need to purchase a rider or umbrella policy to increase your coverage limits to adequately cover the value of property in your possession.
2) Fall of the Hammer Endorsement. Secondly, a “fall of the hammer” endorsement may be an attractive and useful addition to your farm owner’s policy if you frequently purchase horses at auction. This type of endorsement will cover a horse purchased at an auction for a period of several days, so long as the owner properly notifies the insurance company by the required deadline.
3) Shipping Insurance. If a portion of your business includes hauling or shipping horses, you should review your policy to see if horses in your care, custody or control are covered for loss. If not, you should purchase coverage to insure against the injury or death of a horse in a trailer accident.
Suggestions to the Business Owner
Read your insurance policy. Better yet, have an equine attorney review your policy for you. An attorney familiar with the equine industry can examine your policy to ensure you have the coverage you think you do and summarize it into a more understandable form. Insurance policies can be difficult to understand. Paying an equine attorney for two or three hours of work now may be of substantial value to you later on.
Understand and follow the notice requirements and procedures in your policy. This is where a brief, easy-to-follow summary of your policy will benefit you. Failure to comply with these requirements can result in complete denial of coverage. Establish a good relationship with your agent—he or she can help you better understand your obligations.
Find out what the claims-adjusting policy is for your insurance company. If you submit a claim to your insurance company, will it be handled by your agent or will it be sent to an independent insurance adjuster? Talk to your agent about how your claim will be handled and what the typical time frame is for the processing of claims. This may determine if and how quickly you have an attorney assist you in pursuing a claim. While you may have a good relationship with your agent, a claims adjuster may not give you the benefit of the doubt if your coverage is questioned. Contact an equine attorney if your claim is denied to fully ensure that your rights have not been violated.
What you don’t know about your insurance may hurt you and your business. With a little time, a little money and a lot of questions, you can become knowledgeable about your insurance coverage and certain that your equine industry investments are adequately protected.
Tonna Tharp Farrar is an attorney of equine law and commercial litigation with Dunn Keller Gillespie Johnston & Latz, L.C., Kansas City, Mo. This article is not intended to constitute legal advice.
Farm Insurance Overview
Confused about the different types of insurance available to farm owners and stable operators? Stable Management took a quick poll of a few well-known companies. They told us that SM readers would be most interested in three categories: farm/property coverage; commercial liability coverage; and care, custody and control coverage.
Farm/property coverage is similar to a homeowner’s policy: It insures against damage to structures (barns, arenas and other buildings) and to farm-owned equipment (tractors, tools, tack, etc.), says Dr. Lance Allen, who co-owns the Kiki Ward Platt Insurance Co. in Shawnee Mission, Kan. As with all insurance policies, limitations, deductibles and exclusions may apply.
A trainer who leases stalls at a facility owned by someone else would not need to purchase property coverage, but he or she should invest in a commercial liability policy to insure against clients’ claims of bodily injury or property damage, says Barbara Peterson, owner of Best Insurance Services, Summerfield, Fla. A farm owner also would want to hold a commercial liability policy; it’s also common that farm owners ask resident equine professionals to list the owners as additional insureds on liability policies to obtain additional protection, says Dr. Allen.
The third major category of equine-operation-related insurance, care, custody and control, is perhaps the most overlooked yet the most important, according to Kathy Kane, equine farm agent for Fallon Insurance Agency, Inc., Conn., a company that writes policies primarily in New England. “Most big barns have it, but smaller operations may not—and yet [the areas a “three Cs” policy covers] are where your losses are likely to be.” This form of coverage protects the policyholder in the event that a horse in his or her care is injured or dies as a result of possible caretaker negligence. This type of insurance is advisable for anyone who handles, cares for or transports a horse not belonging to him or her.
So many factors—from the number of horses and buildings on the property to the types of activities held on the farm—influence the premiums for the various types of policies that it’s impossible to make generalized statements regarding “average” insurance costs, say our experts. A few tips:
• Provide detailed—and honest—information about the scope of your horse business: number of horses, animals’ value, acreage, activities (boarding, lessons, shows, trail rides, breeding, etc.), boarding and training fees and so on. If you fail to mention an activity, your policy may not cover it; if you try to minimize your premiums by telling your agent that your farm has 50 horses when it actually houses 250, your claim may be denied.
• Even the smallest operations may face liability issues. If you board a friend’s horse at your “hobby farm,” you’re now running a commercial boarding operation and should be insured as such. Your agent (and your attorney) can advise you as to how the law regards your equine activities.
• Protect yourself. Purchase appropriate insurance, secure signed boarding and training agreements and releases, post safety rules—in short, develop a well-used paper trail that can help protect you should you ever find yourself in court.
—Jennifer O. Bryant