Are You Insured?

This article originally appeared in The Equine Chronicle EC May/June, 2011

In the last issue of The Equine Chronicle, we shared “What Horse Owners Need to Know About Insurance.” In the article, we shared advice on the types of insurance horse owners should consider including mortality, major medical, loss of use, care custody and control, stallion accident, sickness and disease, and farm and commercial liability. In this issue, we’ve asked farm owners from various backgrounds to share their experiences about their property and liability insurance.

If you own a few acres with a house and a barn and a horse or two, you really need more than the basic homeowners policy – you need a properly-written farm owners policy that can insure your home, barn, outbuildings or other structures, farm equipment and tack – as well as provide personal liability coverage both on and off the premises.

“For most people, your biggest investment in your life is your house, barns, tack and equipment,” said Tim Folck of Folck Insurance (affiliated with Marnitz & Associates), from Lexington, KY. “A recent survey by Equine Law & Business found that more than 60 percent of farms have inadequate insurance. So it’s important to really be proactive and take the time to completely evaluate your assets (all locations) and exposures, then review your coverage with a knowledgeable equine insurance agent.”

A farm owner’s insurance package typically includes their home, household property (contents), farm personal property (equipment, miscellaneous tools, tack) as well as farm barns, outbuildings and other structures. “You want to be sure that your policy includes an endorsement that covers your property on and off the premises and get that in writing,” said Jackie Starnes, owner of Starnes Insurance Agency, Summerton, SC.

DO YOU REALLY NEED IT? For horse and property owner Frances Green, and professional horseman Vickie Tanner of Scottsdale, AZ, insurance isn’t an option – it’s an essential part of operating the business. “Insurance is really important to us,” said Tanner, who operates a training business on Green’s ranch. “You really need to be able to cover the replacement value if something should happen. It’s scary to think how much people may be underinsured. That’s why we consider our coverage on an annual basis, to make sure we’re keeping up with changing values.”

Champion Halter Horse Exhibitor John Rose of Meredith, NH, agrees. “I believe insurance is absolutely critical,” he said. “On our farm, we have a wide variety of structures, including a large house, an enormous garage with an apartment, and our sawdust/manure barn. There are so many risks that can affect your property, from weather, fire and accidents. You have to be able to replace what you have.”

Like Tanner, Rose also conducts an annual property analysis with his insurance agent. “The value of your property does change – and you absolutely need to be sure you’re insured to the point that you can replace the property should there be a full loss.”

DOES YOUR CARRIER COVER FARMS? Elizabeth Gorski, of Bowling Green, OH, just wanted to bundle her car insurance with a farm policy. However, she learned that her national carrier was unable to underwrite a farm policy.

“I found out that because I show horses and raise and sell a few of them. Even though I show as an amateur and have horses as a hobby, my insurance company wasn’t able to write a farm owners policy or offer any liability insurance,” she said. “It was quite a shock, and we had to look at other companies who could insure us.”

“If other horse owners are being honest with their insurance agent about their horse activities, chances are there are other national insurance companies that don’t offer the coverage a horse owner really needs,” Gorski said. “This is a huge implication for someone who has horses on their property.”

ARE YOU INSURED FOR LIABILITY? Liability on and off a horse farm is a serious concern. “We live in a litigious society, and horses are big animals that can cause harm or property damage to someone else, and not just on the farm,” Folck said. “Even though most states have an equine liability statute, most laws were designed and written to protect equine professionals and businesses, not individual horse owners. So both small and large horse owners still need to protect themselves and be very vigilant.”

Tanner provides training and lessons in Halter, Reining, Roping, Western Pleasure and Working Cow Horse, and considers her liability coverage another mandatory part of her business expenses. “I have to be sure I have adequate coverage just in case someone gets hurt while at the farm for a lesson, or if one of our horses somehow causes damage or injury while we’re on the road. You can’t afford to operate without it.”

Although he doesn’t provide training or boarding services, Rose echoes the sentiment. “We have up to 24 head of horses on our farm at one time,” he said. “We do have a lot of people on our farm who come to look at bloodlines when they’re considering breeding and at the horses we have for sale. Plus, we have vendors and suppliers like our sawdust supplier, the farrier and our vet. Even though we aren’t a public training or boarding facility, liability is still a big issue and we make sure we are adequately covered.”

If you train, give lessons or board horses, your insurance coverage can be written on a farm owners or commercial equine liability policy. Even having more than two or three horses might take you into a commercial farm policy pending companies’ underwriting rules, even if you don’t operate a horse business, Folck said.

“Most people start out with one horse, build a barn, maybe show the horse and keep it with a trainer. But over time they might buy more horses, breed a mare or two, and before they know it they’re selling horses and showing more competitively,” Folck said. “Most companies view that as a business pursuit and will exclude all homeowners and farm owners policies unless declared on the application.”

Starnes adds that even with state liability laws, horse businesses often don’t follow the letter of the law to avoid liability. “A lot of times the state liability law requires the horse business to have a contract, which they often don’t. Or they don’t have their customers sign a liability release form, like they’re required to,” he said. “It’s important to do all of the things the law says are required in your state.”

PERSONAL LIABILITY INSURANCE

What if you own a horse but don’t have a farm to keep it at? Or if you are an instructor on a farm but don’t own it? Individual horse owner’s liability or commercial stable liability insurance is a way that you can protect yourself from liability claims when you don’t own the property.

“Legal liability insurance is essential in protecting your investment,” said Folck. “The insurance attorney first must defend you and pick up the legal costs incurred and judgment up to the limits written into the policy. Obviously it still doesn’t protect you from gross negligence, but in today’s litigious society, it can protect you from a life-changing experience if you are held legally liable for property damage or bodily injury to others.”

“Personal liability insurance is very reasonable in cost, and I have many clients who get it. It gives you some additional peace of mind,” said Starnes.

HAVE YOU COVERED YOUR EQUIPMENT?

Folck suggests scheduling all major tack items ($1000 or more) so you have specific identification in the event of a claim. Western show saddles, for example, can be rather expensive, so retain the bill of sale or an appraisal within three years. “I’ve seen policies with a $10,000 blanket endorsement for tack, which, when the owner actually had to replace it all, did not nearly cover the loss from theft, fire, etc. You should also request replacement cost on newer equipment.”

Folck also noted that horse owners often underestimate the replacement cost of their dwellings and farm barns. “A responsible agent will conduct a cost estimation to determine the replacement cost of the building,” he said. “Agents that don’t do this are really doing their customers a disservice, because it might cost twice what they have in coverage to actually rebuild their house or barn, especially on structures with advanced building features such as an office or lounge, apartment, bathroom, tack room or wash rack.”

WHAT HAPPENS WHEN YOU HAVE A CLAIM?

“You really never know how good your insurance coverage is until you have to use it,” said Gord Wadds, a professional trainer and equine appraiser from Ovid, MI. “Last October we had 70 mph winds and ended up with a lot of roof damage and then secondary damage to our show barn due to water damage. We had full replacement insurance, and were really glad we did. We would not have been able to make substantial repairs if our insurance had only covered a percentage of the damage.”

Wadds and his wife Debbie ended up with a claim in excess of $100,000. “We had to do work on six different buildings on our property,” he said. “Because we worked with an agent with a horse background, he helped us expedite the claim and get our damage repaired. There was no argument whatsoever with our claim. We were concerned that the repairs might be delayed and with show horses in the barn and looking at going into the breeding season, it could have been a mess. But our insurance company, the adjuster and our contractor worked really hard to put it back together quickly.”

“You know, everyone thinks ‘it won’t happen to me,’ but considering the weather in North America – and I don’t care if you’re in Texas or Michigan – you want to be covered,” Wadds said.”You don’t want to have that feeling that you’ve lost everything that you’ve worked so hard to build.”

For professional horseman Dan Trein of Seville, OH, wind damage to his indoor arena and outbuildings resulted in a claim on his farm insurance. “I was glad to have an agent who had an equine background because he really helped expedite the claims process for us,” he said. “We have an annual analysis that helps us keep the property value up-to-date. Having proper insurance is paramount to our training business. It’s one of those things that you just can’t expect to go without.”

ARE YOU TAKING PRECAUTIONS?

Rose suggests farm owners can take some precautions of their own to protect their property. “Our farm is in an area that gets a lot of lightning. As a result, I’ve put in lightning remediation around our buildings,” he said. Rose also suggests that proper fire alarms, smoke and heat detectors and fire extinguishers are an important addition to the farm.

“I’m fortunate that my son is captain of the fire department and lives on our farm,” he said. “He does periodic checks to make sure we use fire prevention measures. We go to great lengths to have adequate fire extinguishers throughout our barn and arena, and we have a company that tests each of the extinguishers annually. No one wants to be in a fire situation and have to wrestle with hoses to get where you need them. At least when you have working fire extinguishers, you have a greater chance of being able to put out a small fire quickly before it gets out of control.”

The bottom line, Folck noted, is to be smart and proactive about your horse business. “Educate yourself about the levels of coverage that are available to you and ask your agent specific questions. Don’t assume you’re covered – get confirmation in writing. Remember that the right insurance should serve as a safety net for you. It’s all about managing risk.”