Living with Liability

Proper equine insurance may help you in unexpected situations that strain your financial resources.
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Proper equine insurance may help you in unexpected situations that strain your financial resources.

Jane had been boarding her horse at her friend Betsy's place for a couple of years when she got the phone call every horse owner dreads: Her beloved gelding had gotten loose, run into the road and been killed by a passing motorist. The car was damaged and the couple in it had been taken to the emergency room complaining of neck and back pain. The two friends were mortified, and to add to their distress, the couple driving the car sued Jane, even though she didn't own the farm.

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The friends settled the issue of the horse's death between themselves. Betsy offered to help Jane buy another horse when she was ready. However, Jane had no insurance protection to cover the costs of the lawsuit the couple driving the car brought against her. They sued her for damage to their car and the costs of their hospital bills.

Owning a horse brings liability in the case of an accident. But you needn't let that scare you into selling your horses. You can take steps that will reduce your chances of your horse causing an accident. Also, knowing the proper kind of insurance to carry for your particular situation will help keep you covered in case the unthinkable does happen.

Many regular insurance companies don't have the expertise to write policies that protect you from specialized exposures-insurance-speak for being vulnerable to loss because of a hazard-that owning horses on private property present. Even a homeowner's policy with additional umbrella coverage (which increases the limits on your policy) may not cover horse-related accidents.

Reduce Your Risk

  • Maintain your fences and gates so that horses cannot get loose.
  • Be sure your tack is in good, safe condition.
  • Have a properly worded liability release that complies with your state's equine liability law.
  • Childproof your property.
  • Carry the proper insurance for your particular situation.

What about equine liability laws? Aren't they supposed to protect you from getting sued when someone falls off a horse on your property and is injured? Horse owners sometimes mistakenly believe that equine liability laws will protected them. In general, these laws state that participants in equestrian activities acknowledge the risks and will not hold the farm owner liable for injuries associated with equestrian activities. Equine liability laws exist in 44 states, but each one differs slightly.

In addition, the presence of a posted equine liability law sign and the participant's signature on an equine liability release (sometimes called a "hold-harmless" release) may not protect you from the costliest part of such an event: paying the legal fees associated with defending yourself. Equine liability laws sometimes protect you once you get to court, but in between there are thousands of dollars in costs.

Attorney Julie Fershtman, a Michigan-based equine law specialist, explains that equine liability laws were never designed to eliminate all liability. Many of the laws become quite specific about what people can and cannot sue for. For example, they cover accidents caused by the unpredictability of the horse or an accident caused by bad road or trail conditions, but they won't protect you from negligence, such as providing tack you knew was unsafe, or knowingly putting a beginner rider on an unsafe horse.

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The laws have certainly reduced the number of liability judgments against horse owners. But you still need to be diligent about your safety precautions, have a well-written liability release and hold a specific insurance policy that will kick in to cover astronomical legal costs.

"It's a serious misconception," said Fershtman, "that if a horse owner uses a liability release, nobody is going to make a claim. Sometimes the liability release is poorly worded, outdated or doesn't follow state law. It is only enforceable if it is in compliance with state law. The second point is that even people who sign releases sometimes bring lawsuits." Often, says Fershtman, lawyers are hired simply to enforce that liability release, but you still have to pay legal fees.

Some horse supply stores carry pre-made liability releases. Still, Fershtman says it's important to have an attorney who's knowledgeable about equine liability laws look the release over.

Make a List
The first step in protecting yourself from legal risks associated with horses is to take a careful and thorough inventory of your property, your horses and what activities you engage in with your horses, both on and off your farm. Inadequate fencing, poorly maintained tack or other equipment and gate latches too easily opened by curious and agile horse lips can leave you vulnerable to negligence claims. Insurance will cover some of the costs of defending yourself and any judgment brought against you, but nonetheless it could bankrupt you if you are found to be knowingly negligent in an accident.

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Begin by making sure you maintain the highest safety standards around your property and horses. Take an inventory of all your gates: Are they secure? Is your fencing strong and horse-proof, even if the horse is in the throes of a panic? How close are your pastures to busy roads? Are your fences childproof? Could a young child slip under or through your fence?

Although one widely accepted legal principle is that you are not responsible for injuries to those who trespass on your property, that doesn't necessarily hold true for children, who don't understand the risks and can't read "no trespassing" or equine liability law signs.

Some states recognize an "attractive nuisance"-something created by someone (i.e., not a pond but a swimming pool) that could cause harm. The attractive nuisance law resulted from the number of children who drowned in swimming pools that weren't properly secured against curious youngsters. Horses, too, can be considered an "attractive nuisance." The onus is on the horse owner to childproof his pastures and stall areas to keep errant children from wandering in and getting injured.

You are also held liable for injuries caused accidentally by your horse even if you are not present at the time of the accident or the injuries take place off your property. Good fences not only make for good neighbors, but they're crucial to protect your horse from hurting others and causing you great financial harm.

Before choosing an insurer ask the following questions:

  • Do they understand horses and the horse business?
  • Are they licensed to do business in my state? State laws vary, and each state has an insurance board that licenses agents and brokers. A license in your state means they understand your state's laws regarding liability.
  • Who is doing the underwriting? Do they have an independent rating of A- or better? The ratings mean they have financial strength to back you if there is a big claim against you. The largest ratings agency is A.M. Best. They can give you an insurer's rating.
  • Is my agent available to answer my questions?
  • Do they offer the right limits for my risk?

Also, take a complete inventory of your horse activities. For example, if you have just a couple of horses, no one else ever rides them and you have no employees who work on your property, not even a neighbor kid who comes to clean the stalls, you would need a different type of insurance from someone who has nearly the same setup, but occasionally lets little Fred next door clean stalls in exchange for riding his quiet old gelding. And you'd need yet another type of insurance altogether if you decided to turn that extra stall into a money-maker and bring in a boarder. Perhaps you host an occasional clinic and people trailer in for it, or you have an instructor who comes to teach you in your arena a few times a month.

When you apply for insurance to cover your horse activities, the application form contains very detailed questions, from how big your horses are to what kind of fencing you have. Many of these applications are downloadable from the Internet. You can use them as your own personal checklist to see exactly what insurers are looking for and what areas they consider important to investigate prior to issuing a policy.

Homeowner's May Not Be Enough
Many homeowners who keep horses on their property assume that a general homeowner's policy will protect them. The classic homeowner's policy protects you if someone slips and falls in your driveway, or if your home is robbed and your television stolen. However, it is important to ask your agent if it will cover accidents caused by horses.

Many homeowner's policies specifically exclude horses, farm buildings and agricultural activity. If your agent is knowledgeable about horses and liability, you may be able to add an endorsement to your homeowner's policy (an addition to your policy) for accidents related to your horse activities.

Fershtman recommends talking to your agent about horse activities.If your agent says you're covered, "ask the agent point-blank, 'Show me on the policy where it says I am covered for horse activities.' Then write a letter and confirm that the agent has told you that your existing insurance will cover you." That way, in the event that something goes wrong, the letter protects you from being denied coverage, she says.

An umbrella policy may cover the costs of liability, provided your homeowner's policy is going to cover liability associated with horses. But the minute you start accepting something of value in exchange for use of your horses, you need different insurance.

Some horse owners who keep their animals on larger operations may have farm and ranch coverage. However, farm and ranch coverage may actually exclude horses and the use of horses as a personal activity. Farm and ranch coverage, unless written specifically for the casual, backyard horse keeper, may not be enough either. This coverage won't protect you from the cost of injuries caused by your horse, but it may cover your tack and equipment. Again, it is important to see in writing that your farm and ranch policy covers activities having to do with your horses.

Consider Liability Insurance
In addition to homeowner's insurance, anyone engaged with horses should consider additional liability insurance. If your horses are strictly a hobby and you accept no money or anything of value (insurers don't care if you don't make a profit) in exchange for services, a personal horse-owners liability package may be appropriate. This insurance is written specifically for individuals who own horses but who do not engage in commercial activities.

For example, personal horse-owners liability would have helped Jane with the costs of the lawsuit the couple involved in the accident filed against her because it is meant to protect an individual from liability associated with the actions of the horse, no matter where that horse is or what has happened. If the horse gets loose and causes a car accident, or if Aunt Clara gets accidentally kicked while in your barn, personal horse-owners liability would help cover the costs of the liability.

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Such a policy also follows the horse. You're protected, even if your horse injures someone while you are at a horse show, on a trail ride or boarding at a big barn. These policies often limit the number of horses you can have and still be protected. Most stop at 10 horses.

Once you begin taking something of value for your services (even trading or bartering), you should again think about adding endorsements to your current policies or simply getting more robust coverage specifically designed for commercial activities. If you do accept money for services, such as breeding and then selling young stock, training, teaching riding lessons, taking out trail rides, boarding or selling more than a horse or two each year, you'll need Commercial General Liability (CGL) insurance. In the event of an accident or damage to property in the course of your commercial horse activities, CGL will cover you. If neighbor boy Fred decides to pay to take lessons, falls off and his parents sue you for the hospital costs, your CGL policy would cover your legal expenses.

If trainers come to your property to teach lessons or give clinics, or you go to other farms to teach, look into professional liability insurance. Slightly different from commercial, professional policies are written by companies that specialize in horse insurance. These policies are designed specifically for horse trainers, clinicians and those who need their policy to follow them from farm to client to horse show.

If you have clinicians or trainers teaching on your property, it is important to ask them if they have professional liability insurance. Fershtman recommends discussing insurance issues carefully with any instructor that teaches on your property. "If that professional doesn't name you (on her policy), you have to purchase your own insurance," Fershtman said. Some CGL policies for roving trainers prefer them to include the names of every client they visit on their policy.

In addition to a CGL policy, horse farm owners who take in boarders need to add care, custody and control (CCC) coverage. These are designed to cover the costs of a horse injured in your care. Commercial policies may only cover up to a certain amount of the value of a horse. CCC, however, is a subset of the commercial policy and can be added to other horse-owners policies without needing a full commercial liability policy. If you take in a boarder but that's the only activity you engage in for money, a CCC policy can be added to your farm and ranch or other insurance.

Written specifically for boarding stables, CCC policies kick in when a horse in your care is seriously injured or killed, and you are deemed liable. These policies generally pay veterinary expenses or reimburse the owner for the value of a horse that died from an accident while in your care. However, many of these policies have low limits, so if you are sued in a negligence case concerning a very expensive horse, the policy may only pay part of his value.

If you have any employees whom you pay a regular wage, most states require you to contribute to worker's compensation insurance. Every commercial enterprise, no matter how big or small, carries worker's comp to protect themselves should an employee be injured during the course of his work duties.

Many stables and farms have casual employees who trade work for lessons or come a couple of times a week to clean stalls for $20. No matter: Someone injured in the course of doing work for which they receive compensation could ask to be compensated for lost work time and medical bills. Some states, however, have exclusions in worker's comp policies for agricultural workers. On the other hand, in some states, the minute you have an employee, you are obligated to pay into the state policy.

In some cases, worker's comp can be added as an endorsement on a commercial liability policy. But sometimes you'll need a whole separate policy. It's best to check with an insurance agent familiar with horses and your state's laws, and carefully explain to that agent what your employees do for you. Worker's compensation is expensive, but paying for an injured employee's hospital and rehabilitation costs can be more so.

One final thought: No policy is worth the premiums if it has low limits or not enough coverage. Although we'd all like to think Aunt Clara would never sue us, you can never be sure. And when accidents do happen, they tend to be big ones. Plenty of companies now specialize in horse-related insurance. The agents are horse people themselves, so they understand the risks involved and know what questions to ask to ensure you're purchasing the right insurance. PH*