Guest Post by Russell Cawyer: Does Your Farm Need to Purchase Worker's Compensation Insurance?

Russell D. Cawyer, a lawyer in my firm who publishes the Texas Employment Law Update, offers the following insights on the decision many horse farms are faced with...do you need to buy worker's compensation insurance?

"Most farm, ranch and horse owners are employers to some extent or another. Whether employing stable workers, trainers, or other labor, most of these relationships would be legally classified as employment (rather than independent contractor) relationships–even if the services are on a short-term or infrequent basis. The purpose of this post is to discuss the differences between employers that are worker’s compensation subscribers and those that are nonsubscribers.

Worker’s compensation is a form of insurance purchased by employer to provide coverage for medical expenses, partial income and disability benefits for an employee suffering an injury or illness arising in the course and scope of his or her employment. In Texas, employers are permitted to opt-out of the state worker’s compensation. These employers are called nonsubscribers. There are advantages and disadvantages

The primary advantage of worker’s compensation coverage is that workers compensation subscribers (i.e., employers having workers compensation insurance coverage) cannot be held liable in court for employee injuries or illnesses that occurred in the course and scope of the employee’s employment. This protection does not apply to individuals who are independent contractors of an employer. The primary disadvantage to worker’s compensation coverage is its cost. Another disadvantage is that worker’s compensation subscribers cannot discriminate or retaliate against employees who report or have workplace injuries, and employees can sue employers if they experience an adverse employment action shortly after reporting or having a worker’s compensation claim.

Nonsubscribers, on the other hand, cannot be sued for discrimination or retaliation for taking adverse action against an employee that has been injured on the job.  They can, however, be sued by the employees for negligence and gross negligence when they are injured at work. The law is written to encourage employers to purchase workers compensation insurance. Consequently, nonsubscribers have few defenses to these claims such as claims for contributory or comparative negligence (aka “proportionate liability”) where liability is apportioned between the employer and employee based on percentages of relative fault. The only defenses a nonsubscriber has is that the employee was the sole cause of the injury or was intoxicated at the time. 

Understand that your general liability, homeowners or umbrella insurance policies alone do not provide coverage employee injuries or illnesses. Most such policies have exclusions that do not cover claims made by employees or those otherwise providing services for the employer (i.e., independent contractors). Whether to purchase worker’s compensation insurance is an important business decisions and the pros and cons of that decision should be weighed carefully."

International Horse Sales Part II: Terms to Include in Your Purchase & Sale Agreement

In addition to the terms usually included in a contract to buy a horse, a Purchase and Sale Agreement involving the shipment of a horse to another country should include the following terms:

1)                  Applicable Law: Will your country’s law, or the law of the other party’s country apply to the contract? This is important, considering that certain German-speaking countries have “minimum warranty” statutes applicable to horse sales (die Gewährsmängel). These minimum warranty statutes may make it virtually impossible for a buyer to resell a horse if it has any of the problems (such as cribbing) that do not meet the “minimum warranties” in those countries.

2)                  Terms for Delivery of Horse & Money: Your agreement should set for a specific protocol for when and where the horse, the bill of sale, registration papers and health certificates, and sales proceeds should be delivered.

3)                  Commissions: Your should specify which parties are receiving a commission (buyer’s agent, seller’s agent, or both?), the amount of the commission, and the protocol for the delivery of the commissions.

4)                  Disputes. How will disputes, if any, be decided?  Having to bring suit in another country in the case of a horse sale gone bad is time-consuming, expensive, and may be impossible. I recommend including a provision for alternative dispute resolution in international horse sales contracts, naming a reputable mediation or arbitration forum such as Equestes to settle or decide disputes.

Top 4 Things to Have When Buying or Selling a Horse Internationally

Before you buy a horse from someone in another country or sell a horse internationally, you must have the following four items in place to help avoid disputes and headaches:

1)         Written Purchase and Sale Agreement.  An international sale is typically not one where a buyer can show up with a trailer, hand the seller a check, and load up the horse.  In addition to the usual points typically covered in ordinary sales contracts (description of horse, price, warranties or lack thereof, pre-purchase exam conditions, et cetera), your international sales contract needs to address the logistics of how and when the horse, its papers, and the money will be delivered. Stay tuned, as I will do a post next week on the items your international sales contract should include.

2)         Escrow Service. The use of an escrow service to hold sales proceeds and commissions until certain terms of your Purchase and Sale Agreement have been carried out is a huge help in avoiding disputes and confusion. 

3)         Written Bill of Sale. Your bill of sale, and not the registration papers or health certificate, is the instrument that transfers title to the horse. Your Purchase and Sale Agreement should make clear when the bill of sale should be delivered to the buyer (usually, it is delivered with the horse together with registration papers and health certificates after the escrow account is funded).

4)         Identification of Quarantine Requirements. Identify quarantine and health certificate requirements, and find a reputable quarantine facility and shipper to handle your transaction. 

The last thing anybody wants is an international lawsuit on their hands.  Having the above items in place will greatly diminish the chances that you'll ever be involved in one.

It's About to Get Western--Increased Export of Quarter Horses

If you have exported a horse internationally, you probably already know about the international demand for nice American Quarter Horses bred in the US. If you have not yet sold a horse to an international buyer, you might start looking to the international market for sales possibilities. The AQHA’s international department reported to me today that the total dollar amount in bloodstock exported internationally has increased over the past few years, even in this depressed horse market. The AQHA is also looking to position someone in China to manage AQHA’s affairs in that country.

NRHA Reiner Online announced today that a “big money” reining event, the NRHA European Affiliate Championships is happening next week in Switzerland. The venue for the show is the CS Ranch in Givrins, Switzerland. If you don’t believe the Europeans are “getting Western”, check out the CS Ranch’s show and training facility in Switzerland.  Looks like they’re open for serious business. 

In other international news, the Americana, billed as “Europe’s #1 Western Horse Show” will take place in Augsburg, Germany beginning on August 31. I will be attending the Americana, so contact me if you’re going and I’ll meet you there!  The Americana will feature the European Championships for cutting and working cow horse. These international markets are moving into disciplines that involve working cattle in addition to reining and Western pleasure-type events.  

Stay tuned for a discussion of legal issues arising in international horse sales.

Update on Texas Equine Dentistry Bill

The new law passed by the Texas Legislature affecting equine densitry (see post) was signed into law by Governor Rick Perry on Friday, June 17, 2011.  A complete history of the bill can be found here.

Open Range Counties in Texas

As of today, I have received evidence that 23 Texas counties, in their entirety, are open range. These counties have sent me a letter stating that, as of the date of the letter, they are unaware of any stock law having been passed in their county. These counties include:

Andrews, Callahan, Camp, Childress, Collin, Cottle, Ector, Hemphill, Jeff Davis, Kenedy, King, La Salle, Loving, Midland, Navarro, Oldham, Palo Pinto, Reagan, Schleicher, Shackleford, Stephens, Sterling, and Throckmorton.

We have evidence that other counties have enacted stock laws for part of the county, but not the whole county. Therefore, some other counties are partially open range. Some counties are closed range as to some types of livestock, but open range as to others. 

There may be more open range or partially-open range counties than the ones I’ve mentioned. We are still collecting stock law evidence. As of today, we have evidence from 234 of the 254 counties in Texas. For more information, see my post entitled Compilation of Texas Stock Laws. If you would like a copy of an open range confirmation letter or a stock law that we have on file, please call 979-229-9718 or send an email to Rick Rowe. Please do not contact Alison Rowe or Kelly Hart & Hallman LLP with respect to stock law copies, as these requests are not being processed through our office.

**Even though most stock laws were enacted at the turn of the 20th century, a county’s stock law or open range status could change at any time. Therefore, please contact the county to confirm that our evidence is still current before relying upon it.**

Victory for Horse Industry in Texas Supreme Court

The horse industry scored big on April 29, 2011, when the Supreme Court of Texas issued their first-ever opinion addressing the scope of the Texas Equine Activity Limitation of Liability Act. 

The Act (Sections 87.001-005 of the Texas Civil Practice & Remedies Code) limits the liability of equine activity sponsors and other persons for damages resulting from inherent risks of an equine activity. It is the same law referred to on the warning signs posted by horse show sponsors, boarding stables, race tracks, and training facilities.

The Texas Supreme Court case, entitled Loftin v. Lee, involved a woman who fell off a horse and fractured a vertebra when the horse she was riding spooked at a patch of mud and a vine hanging from a tree during a trail ride. The injured woman (Janice Lee) had raised horses for years, but had not ridden much. Lee sued her friend, Terri Loftin, who had invited Lee to ride her daughter’s horse “Smash”, a twelve-year-old gelding. Loftin also accompanied Lee on the ride.

I filed an amicus brief in the case on behalf of the Texas Quarter Horse Association, in support of Terri Loftin’s position. A link to the Court’s opinion can be found here.

The Court addressed two issues in its opinion:

1)      Are risks “inherent in an equine activity” only if they relate to animal behavior or are otherwise unavoidable? 

Court’s finding: No.  An inherent risk is one that, in its general character, is associated with activities involving equine animals.

2)      Is a person immune from liability under the Act for failing to fully asses a person’s ability to participate in an equine activity if that failure did not cause the injury?

Court’s finding: Yes.

The Loftin case is a great victory and great relief for Texas horsemen, for if a muddy patch or a hanging vine on a trail ride is not an inherent risk, what is? The Texas case incidentally comes on the heels of a 2010 Michigan Supreme Court case, Beattie v. Mickalich, where the Michigan Supreme Court found that defendants are not immune from general negligence actions under Michigan’s version of the Act. The Beattie opinion practically nullifies the main benefit of the Michigan Act for defendants—the ability to have a negligence case involving an inherent equine risk dismissed summarily before trial. Hopefully other states will follow Texas’s lead on this extremely important issue.

Texas VLT (Slots) Update

Virtually everyone involved in the Texas horse industry is hoping that a bill will finally pass in the 82nd Texas Legislature legalizing Video Lottery Terminals (VLTs) at Texas race tracks. After several failed attempts in past legislative sessions to get a VLT bill passed, the detriment to the Texas horse industry due to the lack of VLTs has gotten so bad in 2011, some say, that the Texas horse industry will be “dead” if VLTs do not pass this year. 

Two bills proposing the legalization of VLTs--SB 1118 and HB 2111--were introduced this legislative session. The regular legislative session ended on May 30, 2011 with the passage of neither VLT bill. Governor Rick Perry issued a proclamation on May 30 calling all legislators back the next day, May 31, for a 30-day special session.
 

The two original agenda items for the special session, as set by the Governor, were 1) measures that will allow school districts to operate more efficiently; and 2) healthcare cost containment, access to services through managed care, and the creation of economic and structural incentives to improve the quality of Medicaid services. Both of these items concerned HB 1 (the “Budget Bill”).

Governor Perry has since added Congressional redistricting as a third item to be addressed during the special session. The Governor can add more items to the agenda, but House and Senate members cannot bring up bills unrelated to the items on the call. According to Dave Hooper, Executive Director of the Texas Thoroughbred Association’s June 3 update, “to date, there is no indication that any new items would include consideration of major new funding sources, which were never looked at during the regular session even though the state was faced with an immense budget shortfall.”

The Texas HORSE coalition’s home page bears the following statement today:

“Although we were not successful in getting legislation passed in the 82nd Legislative Session to help the Texas horse industry, your voices were heard in Austin!  Please continue to communicate with your personal Representative and Senator and let them know how vital VLT legislation is for the future of the Texas horse agri-industry.”

Unless the Governor adds to the special session agenda the issue of new funding sources to include in the Budget Bill, it appears unlikely that VLTs will pass in Texas this year.

Equine Dentistry Bill Passes Texas House and Senate

On May 30, 2011, the Texas House of Representatives and the Texas Senate both signed House Bill 414, which affects the practice of equine dentistry in Texas.  Absent a veto by Governor Perry, the bill will become law, effective September 1, 2011. The law, if approved by the Governor, will be codified in Section 801 of the Texas Occupations Code.

The new law will create licensing requirements for non-veterinarian equine dentists practicing in Texas. The law will carve out specific areas of equine dentistry that may be practiced by licensed non-veterinarians, and will give the Texas Board of Veterinary Medical Examiners authority to regulate non-veterinarian equine dentists.

Once the law takes effect, a person may not perform equine dentistry or offer or attempt to act as an equine dental provider unless the person is either a veterinarian or a “licensed equine dental provider” who is active and in good standing, performing under the supervision of a veterinarian who is active and in good standing.

 

Individuals will be prohibited from representing to the public that they are authorized to perform equine dentistry and may not use the title “dentist.” Licensed Equine Dental Providers may use the title “CEDP” upon licensure or “EDP” if they are licensed under the Grandfather clause before September 2013.

 

Under the new law, a licensed equine dental provider may legally provide only the following services, under the general supervision of a licensed veterinarian:

 

(1) removing sharp enamel points;

(2) removing small dental overgrowths;

(3) rostral profiling of the first cheek teeth;

(4) reducing incisors;

(5) extracting loose, deciduous teeth;

(6) removing supragingival calculus;

(7) extracting loose, mobile, or diseased teeth or dental fragments with minimal periodontal attachments by hand and without the use of an elevator; and

(8) removing erupted, non-displaced wolf teeth.

 

When providing the sanctioned activities described above, licensed equine dental providers will be held to the same standard of care as a veterinarian under the new law.

 

This new law will create, for the first time, a detailed definition of what constitutes “equine dentistry” in Texas.

 

The new law will not change any of the current laws related to the use of prescription drugs, such as the sedatives commonly used in teeth floating procedures. HB 414 has no impact on any other procedures that are often carried out by non-veterinarians, such as chiropractic care, farriery, acupuncture and reproduction-related practices.

 

For more information, see the press release issued today by the Texas Veterinary Medical Association and the summary of HB 414 issued by the American Association of Equine Practitioners.