Has your backyard horse hobby turned into a horse related business? If you are not sure, you may be exposed to risks that could jeopardize your home and other personal assets. By taking in a few boarders, many stable owners take on substantial liability in exchange for modest financial gain. Most homeowner's insurance policies do not protect owners against claims associated with a business activity, which boarding, training, and riding lessons are viewed as from a liability insurer's perspective. A business insurance policy written specifically for equine activities is necessary to protect the farm owner's personal assets from equine-related claims.

The first step in addressing the problem is discovering whether you need protection or not. To determine if you are exposing your assets to uninsured risks, ask yourself the following questions:

1. Are equine activities, such as boarding, training, or lessons, a source of income for me or another party on my premises?
2. Do I give riding lessons on my own horses?
3. Do I provide tack or other equipment for individuals taking lessons on my horses or premises?
4. Do outside parties teach or train on my premises?
5. Have the participants in these activities signed hold-harmless agreements informing them of the potential risks associated with equine activities and assigning them responsibility for their actions?
6. Do boarders insure their horses and personal property, such as tack and equipment, against loss, theft, or damage?
7. Do outside instructors or trainers carry liability insurance specific to the services they provide?
8. Am I a named insured on their policies?
9. Is my homeowner's insurance carrier aware of these facts?

The implications of these questions are important. If you answered yes to any or a combination of questions 1 through 4, in the eyes of your insurer you are operating a farm business. If you answered no to any of questions 5 through 9, you may be exposed to risks that exceed your present liability coverage. Following are some important steps to take in managing and protecting yourself from the risks associated with equine activities.

The Main Components of Equine Risk Management

The major components of a risk management program for your farm include:

• A functional safety program for you, your boarders, and trainers/instructors.
• A boarding/training agreement that defines the responsibilities of each party.
• A hold-harmless agreement coordinated with the equine activity statutes of the states you work in.
• Coordinated liability insurance policies for the farm, boarders and trainers/instructors involved in your facility.

Is this complicated? In practice it is simpler than it appears and a worthwhile endeavor. Fortunately, the internet is a rich source of information about equine risk management. The key words "equine insurance" instantly direct the user to dozens of websites that can quickly provide information about:

• Basic insurance terminology.
• Basic types of liability coverage for various equine activities.
• Case studies of liability situations to help the farm owner identify his or her main insurance gaps.
• On-line estimates of premiums for coverage.
• Equine activity statutes for states that have them.
• Legal publications and resources to educate farm owners and horse owners.

A hold-harmless agreement is a written acknowledgement by equine participants that they understand the risks inherent in equine activities and release the farm owner from responsibility for injuries attributable to the named risks. This provides a farm owner a necessary, yet limited, measure of defense against frivolous lawsuits. It does not, however, protect you from the costs of defending yourself in a lawsuit, which can be substantial.

Karen Guthrie, an insurance professional with Equine World Insurance in Ann Arbor, Michigan, advises farm and ranch owners against succumbing to the "waiver fantasy." "Waivers are not bullet-proof," she said. "They demonstrate the participant's understanding of the risks inherent in equine activities, but they don't release the farm owner from acts of negligence. And, they don't relinquish the participant's right to sue." Therefore, they are not a replacement for liability insurance.

Basic Terms and Types of Equine Insurance

Before researching equine insurance, it is important to understand some basic insurance terminology. The basic terms include:

• Insured: You, the individual purchasing the insurance. This can be the owner or a non-owner user of the horse.
• Insurer: The company providing the insurance policy and related services.
• Premium: The fee paid by you, the insured, to the insurer to maintain coverage.
• Deductible: A pre-determined sum that is excluded from an insurance settlement. You can lower your premiums by agreeing to higher deductible amounts.
• Exclusions: Circumstances leading to losses that are not covered by your policy.

Once these are clear, farm and horse owners need to be aware of two basic categories of equine insurance. The first step on the path to protection is insuring your own horses. Types of insurance for your own horses include:

• Mortality and Theft. This is essentially life insurance for your horse. If your horse dies or is stolen, you are reimbursed up to the limits of your policy, minus the deductible.
• Loss of use insurance reimburses you when your horse is injured and can no longer be used for the purpose stated in your policy. Options include settling for half of the horse's stated value or relinquishing ownership to the insured in exchange for a higher settlement (up to 75%).
• Equine medical reimburses you for veterinary expenses incurred, up to the stated limit per year.
• Equine surgical reimburses you for expenses incurred when your horse requires surgery.

Other types of insurance related to transporting your horse, infertility, and other types of coverage can be tailored for special circumstances. These types of insurance essentially define the horse as a unit of personal property with definite economic value. Because horses have become significantly more valuable over the last twenty years, the insurance industry has responded with insurance products to meet consumer demand.

The second major category of insurance for horse and stable owners is liability. Liability insurance reimburses you for fees and damages related to lawsuits for negligence related to equine activities. Personal and professional liability insurance products are now widely available. Basic types include:

Personal Equine Liability. Whether you are a professional or amateur, boarder or stable owner, as a horse owner you are responsible for damage your horses cause, on or off your premises. A personal equine liability policy can provide this coverage.

Commercial Equine Liability (CGL). Equine professionals are especially prone to lawsuits because, as professionals, the public expects them to maintain a higher standard of care than the amateur enthusiast. A commercial general liability policy written for equine activities provides on- or off-premises coverage, including boarding, training, clinics, showing, transporting, or other activities in which payment is exchanged for services. The coverage must be tailored to the specific activities of the professional. Care, custody, and control (CCC) is an especially important form of CEL for farms stabling non-owned horses. Farm and ranch packages can be developed to cover multiple risks in affordable ways.

To make liability coverage affordable, Karen Guthrie (Equine World Insurance) advises working with an insurance professional whose products can be tailored to meet your individual needs. "Insurers are now able to be more flexible in tailoring policies than they used to be. Clients do, however, need to keep their agents informed about changes in their operations and assets, even if they seem minor. To do our job well, we need two-way communication to keep policies current."

Why Insurance? Why Now?

Taking risks is a natural part of training and caring for large animals. Not long ago, the risks inherent in the horse business were better understood because more people depended on horses for daily needs. Today, however, there are many individuals participating in equine activities who lack the skills and knowledge to avoid dangerous situations with horses. If they do sustain an injury or loss, they tend to assign blame to a third party. Additional factors driving the need for equine insurance include:

• There are more horses and riders in closer quarters, resulting in crowding. The likelihood of an injury or loss is substantially greater.
• Many riders pay others to take care of their horses and they spend less time in the saddle than they used to, resulting in diminishing skills and knowledge in the population of equine participants.
• The value of horses, personal property, and equine-related services has risen exponentially in the last 25 years. Because they represent a substantial investment of resources, loss or damage to them far more significant than it used to be.
• The cost of litigation is skyrocketing and more claims are made every year, following a general social tendency to assign blame to others following an injury or damage.

Choosing an Agent

To learn how to protect your farm from over-exposure to equine liability risks, consult a licensed equine insurance specialist. What characteristics are desirable in an equine insurance agent? When possible, choose an agent who:

• Is recommended by other horse and farm owners.
• Educates you on the fundamentals of equine risk and protection.
• Is close enough to visit you and your farm in person.
• Owns and understands horses.
• Is an active participant in insurance organizations and keeps up with changes in the business.
• Recommends solutions to problems you may have in obtaining adequate coverage.
• Offers ways to minimize your exposure to risks and lower premium costs.
• Practices sound business principles, such as prompt return of phone calls, attends appointments promptly, follows up with current information and documents.

Most of the major equine associations, like USAE (formerly AHSA), USDF, and USET, can refer you to an insurance carrier that specializes in farm and equestrian-related insurance. You can do your own research and learn the fundamental issues by searching the internet, using the key words "equine insurance." Then contact an insurance professional whose experience and advice can help protect your equine assets.

David J. Wyatt is a lifetime horse owner, rider and trainer. He and his wife, dressage trainer/competitor Connie LaSalle Wyatt, own and operate a horse farm in Hinckley, Ohio. A professional freelance writer, David has published articles in literary, professional and sporting journals for more than 20 years.