DO YOU REALLY UNDERSTAND YOUR EQUINE INSURANCE?

Part One of a Two Part Series

When it comes to equine-related insurance, misconceptions have plagued the horse industry for years. Most people do not understand what they bought, what they need, whether they have the coverage they think they do, and how to keep their coverage intact. Insurance is a very important purchase. With so much at stake, can you really afford to relay on misunderstandings?

Parts one and two of this series will explore some of the most commonly-held misconceptions regarding equine-related insurance. The series will also conclude with practical suggestions for avoiding misunderstandings and disputes in the future.

What Is Equine-Related Insurance?
Liability Insurance
Liability insurance generally covers certain unintentional situations in which someone is injured either on your property, from an act that occurs around your horse (such as a bite, kick, or fall), or in some cases from an injury that arises under your supervision (such as a riding lesson). Some examples of liability insurance are: homeowner's insurance, commercial general equine liability, professional liability, individual horse owner's liability, and even insurance.

Mortality Insurance
Mortality insurance is designed to pay you a sum of money after your horse has died from illness, injury, disease, or accident. Mortality policies may also provide coverage if your horse is stolen. As a condition to their issuance, these policies usually require that the insured horse is in good health and free from any injury, disease, or disability at the time the application is made. Other types of equine-related insurance, which can be purchased with a policy of mortality insurance, include major medical and surgical insurance and loss of use insurance.

Other types of insurance, which are not discussed in this series, include stallion and mare infertility insurance, and prospective foal insurance.

"I no longer need liability insurance since my state not has an equine activity liability law."
Liabilities in the horse industry have changed a great deal in the 90's. 41 states have passed laws designed to, in some way, limit or control liabilities in horse activities. These states are: Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming. All of the laws differ, but many share common characteristics. The fact is, none of these laws is a "zero-liability" law. Liability remains with us and the need for insurance remains strong.

"I need no insurance because I make everyone sign a waiver of liability."
Having a waiver or release of liability does not eliminate the need for proper insurance. People who sign releases can, and sometimes do, sue. The success or failure of their lawsuits depends on several factors: whether the applicable state's law enforces releases, how well the release was drafted (one-size-fits-all form releases run a risk of being unenforceable)k who signed the release (the validity may be challenged if the signer is not of legal age or the parent or legal guardian of a minor), and the circumstances under which the release was signed.

When a lawsuit is brought, those without insurance are typically responsible for paying their own legal fees. By comparison, when a matter is covered by insurance, the insurance company will handle the legal defense and pay, up to a specific dollar amount, the demand, claim, or judgment.

"My homeowners insurance policy covers all liabilities arising from my horse-related business activities."
A homeowner's insurance policy might very well protect you if a social visitor slipped and fell on your property or near your barn. However, the standard homeowner's insurance policy, by its terms, almost always excludes coverage (and therefore will not protect you) if an injury or loss occurs in connection with a "business pursuit."

Numerous activities in the horse industry, when done in exchange for money or something of value, can qualify as "business pursuits." such as riding lessons, horse boarding, training, or breeding. For these activities, it is important to buy commercial general equine liability insurance or insurance that directly covers your business activities.

"I just bought an umbrella policy from my homeowner's insurance agent. Now I am covered for my horse-related business activities, such as riding lessons."
Not necessarily. If your existing insurance policy does not cover "business pursuits," your umbrella policy may not cover them, either. An umbrella insurance policy is generally designed to increase your policy limits on some or all of your existing insurance. For example, if your original homeowner's liability insurance policy had limits of $500,000, the umbrella policy (depending on how much umbrella liability insurance your bought) could add another $500,000 beyond that limit. If you believe that your umbrella policy offers coverage for risks beyond your homeowner's insurance, be sure to confirm this in writing with your agent or the insurance company.

"I am accused of negligently caring for a horse that I board in my barn, but my equine business liability insurance should cover this."
Not always. The standard equine commercial liability policy only covers accidents and injuries affecting humans and not affecting horses. Horses are considered personal property. However, if the stable bought extra insurance, commonly known as "care, custody, and control" insurance, the stable's policy would likely cover this scenario.

"I need no worker's compensation insurance because my equine business liability insurance covers the same thing."
Unlikely. Commercial general liability insurance policies almost always exclude injuries to employees on the job. Worker's compensation insurance covers this.

"The insurance policy our association bought to cover our horse show insures us against claims by spectators and participants."
Event liability insurance, which clubs and organizations often buy for shows, races, clinic, or expositions, very often only applies to claims for injury, death, or damage brought by spectators. Unless coverage is specifically provided in the event insurance policy, the insurance might not cover claims brought by injured competitors.

"The cheaper insurance premium is better."
While comparing prices on insurance policies, keep in mind that the cheaper premium might reflect cheaper coverage. Make sure that the policies you are comparing have identical coverage and that the insurance companies are financially sound and reputable.

This article is not intended to provide legal advice. Direct your specific questions to a knowledgeable lawyer or insurance agent.

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