Nightmares or Sweet Dreams?
How long has it been since you evaluated your commercial equine insurance coverage? Having adequate insurance for your horse business is vital, especially in today’s litigious environment. Debi DeTurk has been an agent with AQHA Corporate Partner Markel Insurance Company for 22 years, specializing in the types of insurance professional horsemen need to protect their businesses.
“You have to ask yourself, ‘I’m buying insurance, theoretically, to give myself a good night’s sleep. So, how much insurance is going to give me a good night’s sleep?’ she said.
“Are your only assets an old truck and a sweet dog?” she continued. “Or would a lawyer for an injured party perceive you as a deep pocket? Those are the kinds of things you have to think about when you’re looking at protecting your business.”
If it’s been awhile since you’ve looked at your commercial coverage, the Journal gathered some information to get you thinking. There’s no time like the present to dig out those policies and make sure they’re giving you sweet dreams, not nightmares.
The Basic Insurance Types
Here are the basic insurance policies that can protect your equine business. Take a look and compare them against your policies. Call your agent if you have questions.
Your worst nightmare could come from assuming your insurance is adequate; read your policies and know what they say.
- Commercial General Liability Insurance
- Commercial Umbrella Liability Insurance
- Property Insurance & Commercial Auto Insurance Care,
- Custody & Control Insurance
- Worker's Compensation Insurance
- Mortality and/or Major Medical
Commercial General Liability Insurance
What it does: Protects a named insured in the event the entity is sued for bodily injury and/or property damage.
How it is sold: In per occurrence limits, typically $500,000 or $1 million per occurrence. Policies are written to cover declared business operations within a specific policy territory.
“A professional horseman – trainer, breeder, riding instructor – should never operate without commercial general liability insurance,” DeTurk said.
One of the most important benefits of this kind of policy is payment of defense costs. “If you’re sued alleging you caused someone’s accident,” DeTurk explained, “doing the investigation and defending the case is a key part of your insurance protection.
“All good general liability policies pay defense outside the limit,” she added. “If you have a $500,000 limit, and it costs us $200,000 to investigate and defend you, you still have $500,000 to pay any judgment that might be rendered against you.”
One of the biggest mistakes horsemen make with a general liability policy is failing to adequately declare in the application the specific actions they perform in conducting their businesses.
“For example,” DeTurk explained, “a general liability policy typically covers the named insured anywhere in the United States or Canada, as long as they are operating as declared in the application.
“Say you have a horseman who trains horses and clearly identifies that he travels with boarded horses to horse shows and trains at those horse shows. “If, all of a sudden, he also decides to take one of his horses to a mall to give pony rides, the insurance company can deny coverage for any claim arising from the pony rides. Why? Because that activity was not declared in the application. “It has nothing to do with whether he’s home or away. It has to do with him doing operations that were not declared.”
Similarly, if a trainer decides to give lessons at a clinic in Germany and has not stated in the application that he or she gives lessons internationally, again the company can deny coverage because the lessons are outside the policy territory.
It’s just a matter of knowing the stated terms of your policy and making sure it covers exactly what you need.
FYI: In DeTurk’s opinion, the biggest mistake horse businesses make in purchasing commercial equine insurance is not shopping around.
Commercial Umbrella Liability Insurance
What it does: Provides the same coverage as a commercial general liability policy but increases the limits.
How it is sold: In increments of $1 million, over the primary $1 million, from $2 million typically up to $10 million per occurrence.
Property Insurance & Commercial Auto Insurance
What it does: Protects the named insured’s property and/or vehicles, from buildings to machinery and tack.
How it is sold: Property insurance can be packaged with a commercial general liability policy. Commercial auto policies are typically purchased on a stand-alone basis.
Once you’ve protected your business against liability claims, the next important type of insurance to consider is protection against loss of your business property. “You’ll want to include insurance against fire, lightning, wind and theft,” DeTurk added.
Again, you need to specify the property covered on the application. A policy might cover the barn if it burns down, but not the tractor and/or tack inside it that burns with it, if they’re not declared on the policy.
In addition, DeTurk continued, “If you own a business auto, you’ll need business auto insurance. A personal auto insurance policy might not cover a vehicle used for business.”
Care Custody & Control Insurance
What it does: Protects the named insured in the event the owner of a horse under their care sues, alleging that the horse was harmed or died as a result of their negligence.
How it is sold: By number of horses, with per-horse limits. For example, you could purchase coverage for 10 boarded horses, and choose a $5,000, $10,000 or $25,000, etc. limit per horse. The cost changes based on the number of horses and the chosen limits.
“It’s an elective coverage,” DeTurk said. “Here’s a scenario: a boarded horse gets loose on the road and causes an automobile accident. It’s typically a serious accident. The car hits the horse and the animal comes through the windshield. The people in the car are badly injured, and the horse is killed.
“General liability insurance is what protects the boarding facility owner against lawsuits for bodily injury (to the people in the car) and property damage (to the car),” she explained. “Care custody and control adds coverage protection for the boarding facility in the event the owner of the boarded horse sues the facility alleging negligence in the care of the horse.”
She emphasized that, “The general liability coverage is the base of it. I wouldn’t recommend buying care custody and control without the general liability piece already there.”
Worker’s Compensation Insurance
What it does: Covers the medical expenses and/or lost wages for an employee injured on the job.
How it is sold: Varies, depending on the state.
“If you have employees,” DeTurk said, “you’re probably going to want worker’s compensation, although it can be expensive. Worker’s compensation is a system of law that states that the employer is obligated to pay when an employee sustains a work-related injury.
“It’s a long and varied subject because state laws really are different. Some states are what they call ‘monopolistic.’ In other words, you must purchase your coverage from your state worker’s compensation fund; conversely, some are ‘open market’ states.”
Contact your insurance agent and research your state’s worker’s compensation laws to find out what you are legally bound to do. Here are some online sources to get you started:
U.S. Department of Labor, Employment Standards Administration www.dol.gov/esa (For a specific listing of state regulations and requirements, visit: www.dol.gov/esa/regs/statutes/owcp/stwclaw/stwclaw.htm.)
Worker’s Compensation Administrator’s Directory – www.comp.state.nc.us/ncic/pages/all50.htm#co (This page is a comprehensive list of official federal and state worker’s compensation agencies’ online pages. It was compiled by Robert W. McDowell of the NC Industrial Commission, 4340 Mail Service Center, Raleigh, NC 27699-4340.)
Mortality and/or Major Medical
What it does: Protects the named insured’s investment in a horse, reimbursing the owner for its value in the event of death or theft and covering major medical expenses it incurs.
How it is sold: Major medical is an endorsement on a mortality policy. Mortality coverage and payment depends on the agreed value of the horse, as stated in the policy. Medical coverage has an aggregate limit, along with per occurrence deductibles.
