Horses and the Law
Insurance Matters

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Part 1 of a 2 part Series: Mortality Insurance and Related Coverage

“Armor is best. The reptiles had that straight” – Loren Eisley, All the Night Wings (1979)

Mortality insurance on horses has been around for awhile but is relatively new to draft horse owners. Only recently have more and more draft horse owners considered mortality insurance for their horses. The great breeding stallion, superior hitch gelding, and exceptional brood mare have great financial value causing more owners to consider purchasing insurance on the lives of their animals.

Is equine mortality insurance the armor a horse owner needs to protect his investment? The answer to this question requires thoughtful analysis. For example, are the horses your business? If so, how financially stable is the business? What is the cost of the insurance and how does that compare to the value of the horse? How dangerous is the activity that the horse performs? What is the risk of experiencing a covered loss during the policy? Can you afford the insurance? And, most importantly, can you afford the loss? These are questions only the horse owner can answer, however, for purposes of this article, let us assume a thoughtful analysis has been made and the horse owner decides it is prudent to insure his animal.

Horse mortality insurance is nothing more than a form of term insurance on the life of your horse. This insurance can be purchased in many types and varieties, and all policies have strict notice requirements, exclusion provisions, and valuation clauses which must be closely read and understood.

The most comprehensive type of mortality insurance is generally referred to as “all risk mortality” coverage. “All risk” insurance covers the death of the horse caused by an accident, injury, disease and even covers the loss when a horse is stolen. “All risk” policies also cover cases where a horse is put down if keeping the horse alive would be inhumane and cruel to the animal.

Be sure to read the cause of death definition carefully. I can recall a case where the coverage only applied to accidental death, such as fire or accident in transportation. The policy did not cover death by natural causes. The policy owner thought the insurance was an “all risk” policy when, in fact, it only covered accidental death.

As a condition to insuring a horse, the insurance company will require an examination and signed document from a veterinarian certifying that the horse is free from any disability, injury or disease at the time the application for insurance is made.

Now, you have decided to purchase insurance, your veterinarian has given the horse a clean bill of health, and you paid the premium. The next day your horse colics and the vet must put the horse down. You call your insurance company. Under the above example, you may not be covered even with an “all risk” policy.

All mortality insurance policies contain “timely notice” provisions which generally state that the insurance company must be notified when you first had knowledge that the horse was sick, lame, disabled, injured, etc. Do not operate on a horse or put a horse down without first notifying the insurance company. Most policies have a toll free number or a person designated to be notified twenty-four hours a day, seven days a week. Read the notice provisions in your policy very carefully and follow them exactly in the event of a problem. I have seen many claim denials based on lack of timely notice.

Now let us assume the death of the horse is covered and timely notice has been given to the insurance company. No exclusion applies, thus the company must pay. How much must the company pay? That depends on what kind of policy you bought. Two methods are generally used in most mortality policies.

The first method is called an “agreed value” policy. The agreed value policy simply means that the insurance company and horse owner have agreed to a definitive value in the event of the death of the horse. For example, if the agreed value policy defines that value is $15,000 then, upon the death of the horse the insurance company is contractually obligated to pay the owner $15,000.

The other method, and one commonly used in many policies is the “actual cash value” of the horse at or about the time of its death. Let us assume that the horse in question is a performance hitch gelding, and at the time of application was undefeated in the cart class and worth $25,000. However, since the application, the horse has developed a stifle problem, has been performing poorly, and has not been shown due to this condition at the time of his death. The insurance company would more than likely take the position that the actual cash value of the horse at the time of his death was far less than the value of the horse at the time the application was made. Thus the horse owner could receive less than 50% of the value of the horse at time of application. The valuation clause in the policy is critical, and you must read and understand this clause before buying insurance.

Many mortality insurance policies have endorsements or add on protection which can be purchased for an additional fee. One of the major endorsements available is a “major medical and surgical” endorsement. This provides insurance coverage for the cost of medical and surgical procedures, including diagnostic procedures as a result of an accident, illness or disease. Major medical and surgical policies are typically limited in value and generally cover between $5,000 and $7,500 for medical and surgical costs. It is important to read the endorsement as to the age that is covered by medical and surgical endorsements. Many policies do have an age limit and typically cover horses between 30 days and 15 years of age.

Another endorsement commonly used with mortality policies is referred to as a “loss of use” endorsement. This coverage provides that in the event your horse suffers an illness or injury and can no longer perform its insured function, and the cost of surgical or medical support will either not help or is economically not feasible, you will be paid a percentage of the amount of the mortality insurance due under the policy. Generally, the percentage paid is between 60 and 75% of the amount of mortality insurance. Again, refer to the age limitations for loss of use coverage as that may be helpful in deciding whether or not you will need this endorsement. Typically, loss of use coverage is available for horses between the ages of 2 through 15 years of age.

Another endorsement used by stallion owners is known as “stallion infertility” insurance. This coverage provides that in the event a proven breeding stallion becomes permanently incapable of settling mares, the horse owner will be paid up to 100% of the amount due under the mortality policy. Before payment can be made, a veterinarian must state that the stallion is permanently incapable of settling mares and must sign a certificate of diagnosis and prognosis. Breeding stallion infertility coverage is generally available to proven stallions, age 3 through 15 years.

In conclusion, if you have decided that your horse or horses have the value to justify mortality insurance coverage, then you must read and understand the policy you are buying. The cause of death definition for payment is extremely critical. An all risk insurance policy is the most comprehensive and covers not only accidental death, but also death from disease and other natural causes. In addition, be aware of the notice requirements, and be sure your helpers and employees are also aware of them. Establish a protocol based upon the requirements of the policy. The phone call to the insurance company is critical and must be made in a timely fashion. Finally, be certain you understand the amount that will be paid to you in the event of the death of an insured horse. The agreed value policy leaves no question of doubt but is typically more expensive than the actual value policy. However, the actual value policy could greatly reduce the amount the insurance company will have to pay in the event of the death of your horse. If in doubt, call your lawyer!

Enough legal talk–it’s time to hitch horses!

Ken is a practicing attorney in Myerstown, Pennsylvania, where a good bit of hispracticein-volves negligence cases. Ken and his wife, Karen, own Sunny Hill Farm Belgians, and they have been exhibiting their six-horse hitch for the past few years at most major shows in the east.