Horse and Farm Insurance
- May 1, 2009
Everyone is feeling the effects of the struggling economy, and many of us are trying to trim expenses. One place you might look to trim--or cut entirely--is insurance. It is one of those complicated, often misunderstood topics that most people would prefer to avoid. Does it make sense to trim or cut it out? That depends upon your ability to assume risk and pay out of your pocket if something untoward happens. A solid understanding of how insurance relates to you as a horse owner will help you make better decisions about your insurance needs.
What is Insurance?
Investorwords.com describes insurance as "a promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company, or other entity in the case of unexpected loss."
Basically, you pay a premium to an insurance company in case something happens that's too expensive for you to handle. The company, of course, is betting that the odds are in their favor and that nothing will happen.
Sounds simple, right? Not exactly.
There is a host of insurance options available, and insurance is definitely a case in which you need to understand the fine print. Rarely are policies "cookie-cutter," and you must customize them to cover your unique situation.
Insurance is all about what is covered and what is not. Insurers who cater specifically to horse-owning clients are going to know what risks horses and equestrian activities involve and can ask questions to make sure all activities, equipment, and properties are covered to your satisfaction. There are many companies throughout the United States that offer equine insurance. That means you can shop around and make sure you are getting the best price and coverage for your specific situation.
Joe Browne Nicholson of Nicholson Insurance Agency Inc., in Lexington, Ky., notes, "We have been noticing property insurance inquiries about increasing deductibles in order to lower premiums." He said people are looking for the best ways to spend their limited funds effectively. "Agents are responding to inquiries and meeting with clients more often to make sure their coverage meets their needs."
General Liability Insurance
Unfortunately, our society today has become litigious, meaning folks are prone to engage in lawsuits. Owners need to protect themselves in the event someone decides to sue them for something they allege a horse has done or a mishap that happens on the horse property.
Private horse owner policy An individual horse owner might be covered by a homeowner's policy for equine liability. Many policies limit the coverage offered, or it might not be included at all. Anytime your horse comes in contact with other people or their property, you are at risk. An advantage of having a private horse owner policy is that it covers you on or off your property, so if you are at a horse show and your horse kicks someone or gets loose and causes an injury, you are covered. This policy would also cover you in the event your horse gets loose and causes an accident on a roadway.
Markel Insurance, in the "Horse Sense" section of its Web site, highlighted the need for insurance: "Between your property and an outlying roadway is a fence that supposedly confines your horse. Even if the fence is electrified, would you still consider this a 100% guarantee that your horse or passersby will always be protected?"
Commercial general liability insurance This insurance is a must for anyone who boards, trains, gives lessons, races, or breeds horses. It protects the insured in the event someone sues for bodily injury or property damage.
A good policy will also cover defense costs, which can be hefty even if you win your case. Most will cover the defense costs and still pay the maximum coverage levels per incident if you are found liable. Experts warn that one of the biggest mistakes that horse people make when buying coverage is not listing everything that they do in the context of doing business. The problem is if the activity is not listed--for example, you board horses primarily, but you give an occasional lesson and don't state that you do it--accidents that happen while you give lessons might not be covered.
In addition to your liability policy, there are several additional endorsements that are available, such as care, custody, and control; excess or umbrella liability; and international liability.
Care, custody, and control and the Equine/Farm Animal Liability Acts Many people mistakenly think that because there is an Equine or Farm Activity Liability Act in place in their state that they can't be sued and they don't have to carry insurance. This is not the case. In his article, "Equine Activity Liability Act, Do I Still Need Insurance?" (available at www.HorseInsurance.com), Robert A Hoffa, Esq., an attorney based in Williamsport, Pa., warns that liability coverage is a must, and if you care for other people's horses, care, custody, and control insurance is also strongly encouraged. Anyone can sue you, no matter how frivolous the claim. You are legally required to respond to the claim. This means you either have to defend yourself or hire an attorney, which can be very costly.
Equine or Farm Activity Liability Acts (EALA) help establish a pattern of responsibility to possibly have your case dismissed as a matter of law. Be careful to make sure you are in compliance with your state's rules. Many states require that you post warning signs with the specific verbiage of the law. Others require waivers to be given to participants. Waivers are a good idea anyway, showing that you have made a good faith effort to inform the individual of the risks.
"Like most things in law," said Hoffa in his article, "there are exceptions to EALA protection. Exceptions from immunity to liability may include an allegation that you provided the person with a horse that was not suitable for his or her riding ability, provided faulty tack, were grossly negligent, or the person suing you might have been a spectator."
In the case of liability it is better to be safe than sorry. Other overages, such as umbrella liability, which extends the limits of coverage if you are working with high-dollar animals, and international liability if you travel outside the country, are available, depending upon your needs.
A farm owner needs to protect the assets on the farm as well. Property insurance will cover the physical property on your farm, such as your home, barns sheds, equipment, etc. For the small farm owner, you might be able to cover this under your homeowner's policy. For commercial operations you will probably want to purchase a commercial property policy. Some companies allow you to purchase packages that cover your liability and personal property.
Again, it is important that you fully disclose all that you want to insure. In most cases if it is not listed, it is not covered! You will want to make sure your policy covers fire, wind, lightning, and theft. Be sure to complete an inventory of your possessions so they will be covered. Please note that if you are running a commercial business, you will need commercial auto insurance on vehicles used conducting business.
Now you have covered your legal risks and your facility. What about the horses? Often the horses represent a major investment. "Mortality insurance covers that investment in the event a horse dies or is stolen," says Nicholson. "This is a parallel to human life insurance. The premise behind mortality insurance is to insure the horse for its current market value. We have recently undergone a shift in the marketplace, so agents are now trying to review with clients the current value of their horses so as to not overinsure."
Julie Fershtman, Esq., an attorney based in Farmington Hills, Mich., notes that not all companies are the same and not all policies are the same in her article, "Important Aspects of Equine Mortality Insurance," found online at equispec.com. Even if you are "shopping around," you might not be comparing apples to apples. She recommends looking at the company that backs the insurance policy. Most often this is not the company with which you are applying. Make sure it is well-rated through a group like A.M. Best Company (www3.ambest.com/ratings). You want to be sure the company pays like it promises.
Read the policy carefully and understand your duties under the policy, including things such as timely notification of the horse's illness, injury, or death. It is important that you comply with your side of the contract in order to be paid.
Companies sell mortality insurance with a variety of endorsements, such as major medical and surgical, surgical only, full loss of use, external injury loss of use, stallion infertility (against accident, sickness, and disease), territorial limits (including international transit), third-party liability, and more. The options can be dizzying, and some are cost-prohibitive for the average horse owner.
Major medical coverage is the most popular insurance addition available. With advances in medical technology have come increasing prices for care. A hospital stay for a horse can cost thousands of dollars. The major medical endorsement kicks in at this time to cover expenses such as surgery or hospital stays, much like our own health care coverage. It will not cover routine preventive care, but it can keep you from a financial crisis in the event of a major medical problem.
Nicholson notes, "We have seen more people considering major medical endorsements because they are generally a good investment compared to costs incurred." However, he adds, "major medical is generally not offered for racehorses, as it is cost-prohibitive."
The options for equine insurance are diverse and can be complicated. Choose a knowledgeable agent with a company that understands horses and the industry. You and your agent can decide what your risks are and what you are comfortable "self-insuring."
It's a balancing act and somewhat of a gamble, but it can help you be prepared for the unimaginable events and emergencies that can arise.
About the Author
Liza Holland is a freelance writer and voice talent based in Lexington, Ky.
POLL: University Equine Hospitals