Guest Post: Sixth Circuit Affirms $65 Million Plaintiffs' Judgment in Case Involving Fraudulent Mare-Leasing Scheme

The latest case featuring ClassicStar and GeoStar’s mare-leasing scheme featured the defendants leasing out mares they didn’t own and leasing less-valuable quarter horses and misrepresenting them to be Thoroughbred mares. On July 18, 2013, the Sixth Circuit Court of Appeals affirmed a $65 million award to victims of the scheme. In re ClassicStar Mare Lease Litig., --- F.3d ---, 2013 WL 3476220 (6thCir. July 18, 2013). Guest blogger B. Paul Husband wrote about ClassicStar’s litigation with the IRS in 2011.

In the recent case, a group of investors sued the ClassicStar defendants in federal district court in Kentucky. They alleged that the defendants had violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by persuading them to invest in the mare-leasing program in order to profit from various tax deductions. They also asserted common-law fraud and breach-of-contract claims.

The basic tax concept was that investors would lease a breeding mare for a single season. The mare would be paired with a stallion for breeding purposes, and investors could keep any resulting foals. If investors kept their foals for at least two years before selling them, the sale would be taxed at the lower capital-gains tax rate.

The district court granted summary judgment for the plaintiffs, ruling that the undisputed facts established violations of the RICO statute, as well as fraud and breach of contract. The Sixth Circuit affirmed, noting that the investors did not know “that the assets which formed the basis of the touted tax deductions were dramatically undervalued and, in some cases, wholly fictitious.” 

The appellate court made the critical point that, “[a]lthough investors were repeatedly told that they were leasing actual horses, ClassicStar never owned anywhere near the number of horses purportedly being leased.” In other words, the defendants leased out horses they didn’t own or that didn’t exist. 

The court continued, “[t]o disguise the shortfall and convince investors that they were purchasing interests in actual horses, Defendants substituted less valuable quarter-horses for the Thoroughbreds that were supposed to be part of the packages, and in many cases, simply did not name the horses that investors believed they were purchasing.”

The Sixth Circuit affirmed the award of $49.4 million plus $15.6 million in prejudgment interest. The damages were three times the amount of the plaintiffs’ investments, as treble damages are available under the RICO statute. Collecting the judgment, however, may be complicated by ClassicStar’s bankruptcy and extensive other litigation against ClassicStar.

About the Author:   Toby Galloway is a partner in the Fort Worth office of Kelly Hart & Hallman LLP.  Before joining Kelly Hart, he served as an attorney for the United States Securities and Exchange Commission (the "SEC") for over 11 years.  Find Toby's full biography here.

Petition For Review Denied in Hilz v. Riedel

Today, the Supreme Court of Texas denied review in Hilz v. Riedel, a Fort Worth Court of Appeals decision reversing a summary judgment granted pursuant to Chapter 87 of the Texas Civil Practice & Remedies Code. 

As such, the Fort Worth Court of Appeals' opinion will stand and the case will proceed to trial on remand to the trial court.

A detailed discussion of the Fort Worth Court of Appeals' opinion is contained in this prior post.

Kelly Hart to Host Free Equine Law Webinar

On December 6, 2012, we will be putting on a free equine law webinar for clients and potential clients involved in the horse industry. Details are below.

Title: Top Three Things That Cause Equine Litigation & How to Avoid Them

Date: Thursday, December 6, 2012

Time: 12:00PM to 1:00PM CST

Those who wish to participate should click on this link to pre-register: Pre-Register for Webinar

 

Photo:  My husband Rick and I at Santa Anita for Breeders' Cup 2012

Honky Tonk Prevails in Mechanical Bull Injury Case

Are your liability release contracts sufficient to sustain a successful motion for summary judgment? Texas courts generally hold releases of liability to fairly high standards. Release cases are very fact specific, and often come down to extremely technical points about the contents of the release document. As such, the proper drafting of these contracts is a must. A recent case gives us a glimpse into how Texas courts interpret liability releases.

A man by the name of Revel Thom decided to ride the mechanical bull while he was hanging out at Rebel’s Honky Tonk, a country bar on 5th Street in Austin. Before riding the bull, Mr. Thom signed a document entitled “PARTICIPANT AGREEMENT, RELEASE AND ASSUMPTION OF RISK.” The release had Thom acknowledge the risks of riding the mechanical bull, disclose any pre-existing health conditions, and release and indemnify Rebel’s and related parties. 

Unless you're Ty Murray, don't expect to stay on one of these things...especially if you've been drinking!

However, Mr. Thom failed to inform the mechanical bull operator that he had suffered from chronic back pain for four to five years requiring him to receive annual epidurals to numb the pain. Mr. Thom fractured his T-12 and L-1 vertebrae in his back as a result of being bucked off the mechanical bull. Thom subsequently sued Rebel’s Honky Tonk for his injuries. 

The honky tonk filed a motion for traditional summary judgment, arguing that they conclusively established the affirmative defenses of release and assumption of the risk. The honky tonk also sought a no-evidence summary judgment on Thom’s claims of negligence and negligent supervision. The trial court granted the honky tonk’s motion for summary judgment without stating the basis for its ruling.

Overruling all of Thom’s points of error, the Austin Court of Appeals affirmed the trial court’s dismissal of Thom’s case on summary judgment. 

The court of appeals found Thom’s argument that he did not read the release to be unconvincing, stating,

It is well established that one is presumed to know the contents of the contract that they are signing and are bound by its legal effects.

The court of appeals also found that the release language was sufficiently conspicuous, because the release was contained in a stand-alone document, was not written in minuscule font, and contained bolded and underlined warnings.

The language listing Rebel’s Honky Tonk and its “owners” as released parties was upheld by the court of appeals to be specific enough to release additional defendants Rainbow Cattle Company, Inc. (the honky tonk’s owner) and Zack Truesdell (Rainbow’s president). The court found the the case cited by Thom inapplicable, as the release at issue in that matter purported to release an “unlimited, general class of potential defendants.”

Hat tip to Nick Farr over at Abnormal Use for the heads up on this case.

Case Information:

Thom v. Rebel’s Honky Tonk, No. 03-11-00700-CV, 2012 WL 3793181 (Tex. App.—Austin, Aug. 30, 2012, no pet. h.)

Supreme Court of Texas Denies Petition for Review in Young v. McKim

Last Friday, the Supreme Court of Texas denied Brenda Young’s petition for review. The 14th Court of Appeals’ holding that Chapter 87 can immunize defendants against suits brought by independent contractors will stand. 

The Court’s notice regarding the denial of the petition for review can be downloaded here.

The Supreme Court did not give a reason for denying the petition. One reason could have been that the Court found no reversible error in the 14th Court’s opinion. As such, the denial may be yet another indication that the Supreme Court agrees with me and other practitioners who believe Chapter 87 applies to suits brought by workers (both independent contractors and employees), subject to its exceptions.

As far as I know, no court of last resort in any state has ever taken up the issue of whether an equine or farm animal immunity statute applies to suits brought by workers.

Related Posts:

Young v. McKim Appealed to Supreme Court of Texas

Texas Supreme Court May Be Inclined to Grant Chapter 87 Immunity to Employers

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

Young v. McKim Appealed to Supreme Court of Texas

Yesterday, counsel for Brenda Young filed a petition for review of the 14th Court of Appeals’ decision discussed in this prior post.  This will be the first time the high court has ever been given the opportunity to decide whether or not Chapter 87 immunity applies to claims brought by workers.

A copy of Young’s petition can be downloaded here.

In her petition, Young contends that the 14th Court of Appeals committed error in holding that:

1.  non-consumers of equine activities (i.e. people who are paid to work around horses) qualify as participants under Chapter 87; and

2.  the posting of warning signs under Chapter 87 was a defense and not an element of proof (i.e. Young asserts that the McKims had the burden of proving that they had posted the Chapter 87 warning signs in order to be afforded immunity under Chapter 87, and that they did not meet that burden).

While I agree with the 14th Court of Appeals’ decision and do not wish to see it reversed, I am pleased that the Supreme Court now has an opportunity to review whether or not Chapter 87 applies to claims brought by employees or other workers.  This issue is currently somewhat “murky” under Texas law.  Clarification is needed because there seems to be a conflict of authority on this issue among the intermediate courts of appeals.  In that respect, I am pleased that Young requested review of the first issue discussed above.

Related posts:

Update on Young v. McKim

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

Texas Supreme Court May Be Inclined to Grant Chapter 87 Immunity to Employers

Texas Supreme Court May be Inclined to Grant Chapter 87 Immunity to Employers

If the Texas Workers' Compensation Act and the Texas Farm Animal Limitation of Liability Act got into a fight, who would win?  The Supreme Court of Texas might have just metaphorically placed its money on the farm animals.

The Court held last week in Texas West Oaks Hosp. v. Williams, that an employee of a nonsubscriber hospital employer must comply with the procedures set forth in the Texas Medical Liability Act (i.e. the progeny of the 2003 tort reform movement), and barred the employee's claims against his employer.

If I haven’t already lost you, you are probably thinking,

Wait a minute, what is a “nonsubscriber”, and what does a case about a hospital employee have to do with the horse industry? 

Bear with me, this material is sort of complicated, but I hope the point of this post will be clear to you by the time you get to the end (if you in fact make it that far!)

Nonsubscriber Status. Are you a nonsubscriber?  Most Texas horse industry employers are “nonsubscribers”, at least for some of their employees.  If you have employees or so-called “independent contractors” who might really be employees under the true legal definition, you should be aware if you are or are not a nonsubscriber. 

Why does it matter? The Texas Workers’ Compensation Act allows employers to elect whether or not they will subscribe to worker’s compensation insurance.  If an employer does subscribe and an employee is hurt during the scope of their employment, the employee is generally precluded from filing suit, and must instead pursue administrative remedies for benefits under the Workers’ Compensation Act. 

But if an employer elects to forego workers’ compensation coverage, it is subject to suits at common law for injuries suffered by employees on the job. Not only that, nonsubscribers are generally not able to avail themselves of many common-law defenses to negligence claims in suits brought by employees. See this prior post for more details. 

That said, I should note as an aside that some “farm or ranch employees” are excluded from the provisions of the Workers’ Compensation Act altogether (did I mention before that this is complex stuff?).

So here’s the question that remains unsettled: What if a nonsubscriber employer is sued by an employee, and the employee’s injuries arose from dangers inherent in an equine activity? Can the employer invoke the immunity from liability granted to virtually all people in the Farm Animal (formerly Equine) Limitation of Liability Act (um...we'll just call it Chapter 87)? 

As we have discussed at length, the Supreme Court has not yet decided this issue. Two appellate courts have indicated a willingness to apply Chapter 87 to bar suits brought by horse industry independent contractors, but one court of appeals refused to apply Chapter 87 to bar a suit brought by a horse industry employee. 

Plaintiffs’ lawyers who represent injured employees generally assert the argument that Chapter 87 was intended to apply to tourists or consumers, and not workers. They further assert that Chapter 87 cannot bar employees’ suits because it would abrogate employer duties under the Workers’ Compensation Act.  The employee's lawyers in Williams made similar arguments about the Medical Liability Act.

The Williams DecisionWilliams is significant to the equine industry, at least in my mind, because it shows a willingness on the part of the Supreme Court to allow “tort reform” type statutes to bar an employee’s claim against a nonsubscriber. Not unlike the Medical Liability Act, Chapter 87 is another law that was passed to limit liability for certain types of claims. Furthermore, the plain language of Chapter 87 itself does not exclude suits brought against nonsubscriber employers (though it does expressly carve out other stuff, such as activities regulated by the Texas Racing Commission).  As such, I predict that if the Supreme Court of Texas ultimately takes up the issue, it is inclined to rule that Chapter 87’s immunity provisions apply to employees and other workers (subject to its exceptions, of course) .

Related posts:

Are Employers Immune from Liability for Employees’ Horse-Related Injuries in Texas?

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

Update on Young v. McKim

Fort Worth Court of Appeals Reverses Summary Judgment Based on Chapter 87 Immunity Act

Yesterday, the Fort Worth Court of Appeals handed down an opinion in a case styled Hilz v. Riedel, reversing the trail court’s summary judgment granted in favor of a defendant based on Chapter 87 of the Texas Civil Practice & Remedies Code (the “Act”).

Case Background: Thirteen-year-old Ciarra Hilz was injured at her friend Steven’s house while riding a “five-year-old male quarter horse” by the name of “Logan.” Logan belonged to Steven’s dad, Richard Riedel. 

Ciarra’s father, Greg, claimed that he told Richard not to allow Ciarra to ride outside of the round-pen located on Richard’s property. Richard claimed that Greg never said anything about where he wanted Ciarra to ride horses.

Ciarra started her ride in the round pen, but then rode out into the pasture afterwards. While Ciarra was riding in the pasture, Logan “bolted” and ran Ciarra into a tree, causing a tree limb to impale Ciarra’s side. Ciarra was hospitalized for a week and had multiple surgeries.

Greg sued Richard Hilz on his own behalf and on behalf of Ciarra. Richard filed a motion for summary judgment under Section 87.003 of the Act, which, prior to its amendment in 2011 stated,

 

[e]xcept as provided by Section 87.004, any person…is not liable for…damages arising from the personal injury or death of a participant in an equine activity…if the…injury results from the dangers or conditions that are an inherent risk of an equine activity.

Richard’s motion further addressed the reasons why he was not liable under the exceptions to the Act provided in Section 87.004(2) [failure to make a reasonable and prudent effort to determine the ability of the participant to engage safely in the equine activity] and 87.004(3) [dangerous latent condition of the land].

However, Greg had amended his petition to add an allegation that the exception provided in Section 87.004(4) [commission of an act or omission with willful or wanton disregard for the safety of the participant] before filing his summary judgment response.

The Appeal: The Fort Worth Court of Appeals reversed the trial court’s summary judgment in favor of Richard, holding that:

1) a fact issue precluding summary judgment existed as to the exception found in Section 87.004(2) because Greg claimed that he told Richard not to let Ciarra ride outside the round pen; and

2) Because Richard did not amend his motion for summary judgment to include the exception found in Section 87.004(4), summary judgment was improper on that claim.

Take Aways: Defendants relying upon the Act in a motion for summary judgment should 1) include arguments as to why each and every pleaded exception to the Act does not apply; and 2) have parents and minors sign carefully-drafted liability waivers prior to allowing guests to ride; and 3) have parents put all specific instructions regarding their child’s participation in equine activities in writing.

Case Information: Hilz v. Riedel, No. 02-11-00288-CV, 2012 WL 2135648 (Tex. App.—Fort Worth Jun. 14, 2012, no pet h.)

Photo:  In celebration of Father's Day this Sunday, today's photo is of my dad, Chuck McCormack, and me riding at Bardwell Lake.  Have a great Father's Day everyone!

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

As we discussed in this prior post, the Supreme Court of Texas has not yet addressed the issue of whether Chapter 87 of the Texas Civil Practice & Remedies Code (the “Act”) shields defendants from liability in suits where employees or independent contractors are injured while engaging in an equine activities. Up until last week, we only had two opinions—both from intermediate appellate courts—addressing this issue. 

In the first case—Johnson v. Smith (Corpus Christi 2002)—the court held that independent contractors were participants under the Act, and therefore the Act shielded defendants in suits brought by independent contractors from liability. In the second case—Dodge v. Durdin (Houston [1st] 2005)—the court held that employees are not participants under the Act, and therefore defendants in suits brought by employees are not immune from liability.

As of last Thursday, we now have a third appellate case that sheds light on this issue. The Fourteenth Court of Appeals in Houston recently held that the Act immunizes defendants from liability for claims brought by independent contractors.

The case, styled Young v. McKim, represents the first equine employee negligence suit addressed by a Texas court of appeals since Loftin v. Lee was handed down by the Texas Supreme Court in April of 2011. 

Case Background: Brenda Young had posted a flyer at Ravensway Stables advertising her ability to assist owners in the care of their horses. Tisa McKim and her daughter, Jackie, hired Young to care for their horses—Jasper and Butch—at Ravensway. 

About two months after Young started caring for Jasper (a rescue horse), Jasper kicked Young and injured her. The injury occurred while Young was talking to another boarder at Ravensway while Jasper grazed beside her.

Young sued the McKims for negligence, and the McKims moved for summary judgment under the version of the Act in existence in 2010 (i.e. before the Act was amended in 2011). The trial court granted the McKims’ motion for summary judgment. 

The Appeal: The Fourteenth Court of Appeals affirmed the trial court’s summary judgment in favor of the McKims. On appeal, Young alleged that the Act did not shield the McKims from liability.  Among the reasons Young gave were 1) only “tourists and other consumers of equine activities” qualify as participants under the Act; and 2) Young was an employee of the McKims, not an independent contractor.  Young relied heavily on the First Court of Appeals’ opinion in Dodge on appeal.

The Fourteenth Court of Appeals determined that Young was an independent contractor, not an employee.  The court did not reach the issue of whether the Act would have applied had Young been an employee. The Fourteenth Court disagreed with the discussion in Dodge suggesting that the Act only applied to “tourists and other consumers of equine activities.”

Citing Loftin, the Fourteenth Court held,

“The Equine Act is a comprehensive limitation of liability for equine activities of all kinds…The Equine Act applies to all ‘participants’”. [Emphasis supplied].

It remains to be seen whether Young will be appealed to the Supreme Court of Texas. Given the Supreme Court’s expansive view of the Act set forth in Loftin, the Supreme Court might disagree with Dodge’s holding that the Act does not apply to employees.

Case Information:  Young v. McKim, No. 14-11-00376-CV, 2012 WL 1951099 (Tex. App.—Houston [14th] May 31, 2012, no pet h.).

Related Posts:

Are Employers Immune from Liability for Employees’ Horse-Related Injuries in Texas?

Victory for Horse Industry in Texas Supreme Court

Does Your Farm Need to Purchase Worker’s Compensation Insurance?

Time to Get New Warning Signs: Equine Activity Act Amended in 2011

Property of Convict's Ex-Wife Not Subject to Execution on Andalusian Breeder's Judgment

Are you thinking about buying a ranch through an informal seller finance deal? If so, beware.  Andalusian breeder Rancho Mi Hacienda and owner Gilda Arana learned the hard way the pitfalls of doing this type of deal “on the fly”.

Rancho thought it had an enforceable written agreement whereby Coy Lynn Owens and his wife Linda agreed to sell Rancho 126 acres of land in Hopkins County, Texas. After all, Rancho did have a letter signed by Coy Lynn memorializing the parties’ verbal agreement concerning the ranch sale. 

In reliance, Rancho transported its seventy-three Andalusian horses from California to Texas and moved them onto the property. Further, Rancho paid Coy Lynn $25,000 and gave the Owenses’ daughter an Andalusian horse of her choosing. Rancho also expended substantial sums on a log cabin, shelter for the horses, and utilities for the premises. It was Rancho’s understanding that the $25k and the horse constituted the down payment, and that an additional $200,000 was to be paid to the Owenses at the end of a five year term.

Photo:  a very majestic Andalusian mare

Around the time Rancho took possession of the property, Coy Lynn Owens went to federal prison for mail fraud. Linda filed for divorce soon after Coy Lynn was incarcerated. In an agreed divorce decree entered by the divorce court, Linda was awarded the realty in question and Coy Lynn was divested of any title to it. 

Shortly after the divorce decree was entered, Rancho sued Coy Lynn, Linda, and L&L Investments (a holding company) seeking, among other things, specific performance of the ranch sale agreement, and damages related to the horses such as vet bills, the cost of five horses who died, and lost earnings for one year’s breeding season.

Rancho had Coy Lynn served with the lawsuit at the prison. When Coy Lynn did not file an answer, Rancho took a default judgment against Coy Lynn and nonsuited Linda and L&L Investments.  After the jump, you'll see why this was a costly mistake.

Rancho (apparently still in possession of the property) later tried to levy execution on the 126-acre tract to satisfy its judgment against Coy Lynn. In response, Linda obtained a judgment from a JP Court ordering Rancho evicted from the property.

Linda also filed suit in district court against Rancho seeking a declaratory judgment that, among other things, Linda was the sole owner of the property and that it was not subject to execution. The trial court and the Texarkana Court of Appeals agreed with Linda on these points.  The Court of Appeals held that because Rancho’s suit was filed after the divorce decree divested Coy Lynn of all interest in the property, it was no longer community property subject to execution on a judgment against Coy Lynn alone. 

In hindsight, Rancho probably realized that nonsuiting Linda was a terrible idea.  According to the Court:

Although Rancho’s suit originally included [Linda] as a defendant, it made the choice not to pursue an action against [Linda] and filed a nonsuit as it pertained to her, electing to pursue judgment only against [Coy Lynn], who was apparently perceived to be the low-hanging fruit.

Case informationRancho Mi Hacienda v. Bryant, 2012 WL 952853, No. 06-11-00080-CV (Tex. App.—Texarkana, Mar. 22, 2012). The full text of the opinion can be found here.

Are Employers Immune from Liability for Employees' Horse-Related Injuries in Texas?

In general, a defendant can only be immune from suit in a Texas horse-related injury case if the plaintiff was a “participant in a farm animal activity or livestock show” when the injuries occurred.

Chapter 87 of the Texas Civil Practice & Remedies Code (the “Act”) was amended in 2011 to, among other things, include farm animals other than equines. However, the “participant” requirement did not change in 2011.  Neither the former nor the current version of the Act specifically states whether or not employees of equine activity sponsors are considered “participants in a farm animal activity or livestock show” under the Act.

The 1st Court of Appeals in Houston is the only Texas court to have taken up this issue (Dodge v. Durdin, 2005).  In that case, Deborah Dodge sued her employers, Magestic Moments Stables, et al, after a horse kicked her in the abdomen as she was administering paste-wormer at the direction of her employer. Dodge claimed that she incurred $4,000 in medical bills as a result of her injuries, and that her employers’ negligence was the proximate cause of her damages. 

Majestic Moments claimed that Dodge's suit was barred by the Act.  The trial court agreed, and dismissed the case.  On appeal, the 1st Court of Appeals disagreed that the Act applied to an employer / employee relationship.

This warning sign should not be a "news flash" to anyone.

Citing its review of legislative intent, together with the duties assigned to Texas employers under the Texas Labor Code, the 1st Court of Appeals held that, “the Equine Act applies to consumers and not to employees and that Dodge is therefore not a ‘participant’ under the Equine Act.” 

Workers’ compensation did not cover Dodge’s alleged injures. Unlike employers in many states, Texas employers are able to opt out of the workers’ compensation system. For more information, see this post.

In Dodge, the 1st Court of Appeals noted that the only other Texas court to have addressed the definition of “participant” was the Corpus Christi Court of Appeals in Johnson v. Smith (2002). In that case, the Corpus Christi court acknowledged that an independent contractor—not an employee—in charge of breeding and handling stallions was a participant under the Act.  The 1st Court of Appeals distinguished the Johnson case from the Dodge case on its facts.

Neither the Dodge nor the Johnson case were appealed to the Supreme Court. 

The Texas Supreme Court has not yet addressed whether or not an employee or independent contractor who is injured while working with horses on their employer’s premises is a “participant” for purposes of the Act.  Until the Supreme Court takes up this issue or the Legislature clarifies it, this issue continues to be somewhat unsettled in Texas. Texas equine businesses should therefore not rely upon the Act to provide immunity from suits brought by employees or independent contractors. 

Businesses can take several steps to minimize liability risk in this area, including 1) procuring insurance to cover employee or independent contractor injuries; 2) having employees or independent contractors sign liability releases; and 3) forming limited liability entities through which employees and independent contractors are retained.

A special thank you to reader Lois Mermelstein, Esq. of Austin, Texas for submitting this topic suggestion.

Judge Judy Awards Zero Damages in Horse Injury Case

On Friday, February 3, 2012, CBS aired the trial of horse owner Deborah Dobbs vs. horse trainer Sharon Jeffco on the show Judge Judy, in a case involving alleged injury to a horse at the hands of a trainer.  This case has caused quite a stir in the horse community, possibly because of the unique nature of the alleged injuries to the horse.

Dobbs sued Jeffco for $5,000 (the jurisdictional limit on Judge Judy), alleging that her 5-year-old mare, “Misty”, sustained severe tongue lacerations due to Jeffco’s training methods. Dobbs specifically complained that Jeffco used an “ill-fitting bit”. Dobbs posted this photo of the alleged injuries on Facebook  [CAUTION: photo is graphic].  Dobbs admitted that she was present during the entire training session in question. 

During the trial on Judge Judy, Jeffco alleged that Misty had the cuts on her tongue before Jeffco started training her, but Jeffco was unaware of the wounds until they were reopened and started bleeding during the course of Jeffco’s final training session. Jeffco brought a counterclaim against Dobbs for defamation and business disparagement. Jeffco did not get to put on her full case during the trial on Judge Judy, but she posted this statement with supporting documents on her website. 

The bit was not shown during the trial.  As far as I know, Jeffco has not posted a photo anywhere of the bit she used on Misty during the incident in question. But a vet report included in Jeffco’s statement about what happened indicated that it was a “solid shank bit.”

This case left me wondering, “can any bit really cause this much damage during a short period of time?” I asked professional horseman Liz Payne of Unity Equestrian Arts, LLC what she thought about the evidence revealed in the trial itself. According to Payne,

There is no excuse for a tongue to be cut, ever.  The amount of damage to this tongue is hard to believe.  In over 40 years of training horses I have never seen anything like this, in fact I have never seen a cut tongue.  I have unanswered questions.  Someone is responsible for the damage to the horse.  The sorting out who caused this horrific damage seems to be the difficult challenge.  There is never an excuse for damaging a horse, physically or mentally.”

Without opining on who was liable for the horse's injuries, the judge awarded zero damages to both parties on their claims. Below are some of the reasons (potential litigants, take note!):

1) Neither party brought a veterinarian with them to the trial. Only Dobbs had a report from a veterinarian who actually treated the horse. The judge seemed to lend little credence to the reports from Jeffco's vets who had not seen or treated the injuries.  Parties to horse injury suits should always bring a vet with them to testify, and preferably one who saw the horse as opposed to someone who drew conclusions from documents, photographs, radiographs, etc.

2)  Dobbs witnessed the incident in question, but she did not leave the premises with her horse as soon as she allegedly believed that Jeffco was using abusive methods. This admission detracted from Ms. Dobbs’s credibility with the judge, especially with respect to Dobbs's allegations that Jeffco tied the mare's head down and used a longe whip on the horse.

3)  Jeffco paid Dobbs $953.50 in restitution in a related criminal animal cruelty proceeding. Judge Judy ruled that Jeffco waived her defamation claim when she paid the restitution to the plaintiff.  The judge further ruled that Dobbs had been fully compensated by the restitution check in the criminal case, and therefore awarded her $0 damages.  The effects on a civil case of actions taken in a related criminal case is something clients should discuss with their counsel before taking action.

4)  Jeffco and Dobbs repeatedly make comments to one-another during the trial.  This agitated the judge (as it is considered unacceptable behavior in any courtroom).  As such, the parties' conduct at trial may have made the judge more inclined to give both parties nothing.  

I in no way condone the use of training methods that might cause these types of injuries to a horse.  But it should be noted that trainers might protect themselves from unfounded claims of horse injury or abuse by having all training clients sign a written training agreement, whereby the client releases the trainer of liability should the horse be injured in training and/or if the training does not achieve the desired results.

Follow me on Twitter @alisonmrowe

Parker County Jury Finds for Vet in Welk v. Foland

As I’ve previously stated in this prior post, negligence and malpractice lawsuits against veterinarians are generally “tough sleddin’” for plaintiffs in Texas. Would-be plaintiffs who wish to sue their veterinarians often face major obstacles such as: 1) proving damages; 2) obtaining effective expert testimony; 3) paying litigation expenses where there is a low likelihood of recovery; and 4) finding a lawyer experienced in representing plaintiffs in veterinary malpractice suits.

Last year’s defense verdict in the lawsuit brought by Larry and Lynn Welk against Dr. Jeffrey A. Foland and Weatherford Equine Medical Center, P.C. illustrates some of these difficulties.

If Larry Welk’s name sounds familiar to you, it may be because his father was the famous bandleader Lawrence Welk, host of the long-lived Lawrence Welk Show. Larry and Lynn Welk’s Champagne Ranch, based in Malibu, California, is in fact named after the “champagne music” made famous by Larry’s father.   

The Welks’ lawsuit, filed in the 415th District Court of Parker County, Texas (Judge Graham Quisenberry, presiding), centered around the alleged stifle injuries sustained by their young stallion, Juan Bad Cat. The Welks alleged that Dr. Foland had injected the horse’s stifles and performed a surgery without first consulting with the Welks or the horse’s previous veterinarian. The horse's prior veterinarian was the late Dr. Van E. Snow of Santa Ynez, California.  According to the Welks’ suit, they lost the opportunity to compete and syndicate Juan Bad Cat due to Dr. Foland’s alleged negligence and malpractice. The Welks sought damages of approximately $3 million against Dr. Foland and his clinic.

Dr. Foland and his clinic filed counterclaims against the Welks, seeking damages for an unpaid veterinary bill, attorneys’ fees, and court costs. 

The Welks were represented by Robert Talaska and Theodore G. Skarbowski, both based in Houston, Texas. Talaska’s firm, according to its website, specializes in human birth injuries. Skarbowski’s firm assists clients with such matters as National Firearms Act gun trusts, commercial litigation, contracts, and estate planning-- per its website

Dr. Foland and his veterinary clinic were represented by Dr. Donald A. Ferrill of Brown, Pruitt, Peterson & Wambsganss, P.C. in Fort Worth, Texas. Dr. Ferrill is both a licensed veterinarian and an attorney who regularly represents veterinarians.

After a jury trial in September 2011 that lasted about 9 days, the jury returned a verdict in favor of Dr. Foland and his clinic for approximately $192,000 for an unpaid vet bill and attorneys’ fees. The jury awarded zero damages to the Welks.

I recently got the opportunity to catch up with Don Ferrill, the lawyer who represented Dr. Foland and his clinic, to talk about the evidence revealed in the case. According to Ferrill, “Dr. Snow diagnosed and had been treating the horse for what he believed was a congenital condition in its right stifle since it was approximately one year of age.  The colt was not any worse off after Dr. Foland treated him than he was before the treatment.” 

The plaintiffs’ expert witnesses, when pressed for details on cross examination, gave testimony that helped the defense, according to Ferrill. 

“The evidence showed that Dr. Foland did consult with Dr. Snow’s office prior to performing surgery on the horse, and that Dr. Snow advised Dr. Foland to do the surgery at issue,” said Ferrill. Darren Simpkins, the Welks’ horse trainer who was boarding and training Juan Bad Cat in Texas at the time, testified that he gave Dr. Foland permission to perform the stifle injections, according to Ferrill. “These injections [Vetalog and hyaluronic acid] did not numb pain in the horse’s limbs, did not contribute to lameness, and were the type that performance horses typically receive for routine maintenance,” said Ferrill.   The Welks also had Dr. Foland perform a colic surgery on one of their other horses after the lawsuit was filed, according to Ferrill.

“Prior to the depositions of Darren Simpkins and his wife, Kelly Simpkins, Ted Skarbowski warned Kelly Simpkins that the Welks would sue them if they testified that they gave Dr. Foland permission to perform the injections”, according to Ferrill. “Darren Simpkins nonetheless testified in his deposition that he gave Dr. Foland permission to inject the horse, and the Welks sued the Simpkinses in federal court for breach of fiduciary duty”, Ferrill said. The federal case against the Simpkinses was later dismissed because the statute of limitations on the Welks’ claims against the Simpkinses had already run. 

As an aside, I briefly discussed the Simpkins case and its significance in this prior post

In Judge McBryde's Memorandum Opinion and Order of March 10, 2010 in the federal case, Judge McBryde stated on page 20, “To put the matter mildly, the testimony given by plaintiffs on February 10, 2010, is suspect.”  He then goes on to explain how the Welks' deposition testimony in the case against Dr. Foland directly contradicts their depositions in the federal court case.

According to the Champagne Ranch website, Juan Bad Cat stood at stud in 2011 at ESMS in Weatherford, Texas for a fee of $1,500 plus chute fee.

In December 2011, Judge Quisenberry reduced the amount of attorney’s fees awarded to Dr. Foland by the jury as a result of a JNOV (judgment notwithstanding the verdict) motion filed by the Welks’ lawyers. Nonetheless, the final judgment still ordered the Welks to pay damages to Dr. Foland and his clinic, and the Welks took nothing on their claims. According to Ferrill, the Welks also had to pay their own attorneys’ fees pursuant to their fee agreements with their lawyers.

Case Information: Larry and Lynn Welk v. Dr. Jeffrey A. Foland and Weatherford Equine Medical Center P.C., Cause No. CV-07-1322 in the 415th District Court of Parker County, Texas; Lynn Welk, et al. v. Darren Simpkins, et al.; Case 4:09-CV-00456-A in the United States District Court for the Northern District of Texas (Fort Worth Division).

**Note: Thank you to the readers who requested that I cover this case on the Equine Law Blog last fall after the jury reached its verdict. Generally, my policy is to not comment on a case until after its full and final disposition, which in this case happened in late December, 2011. Thank you for reading and for submitting topic suggestions!**

Texas Farm Animal Limitation of Liability Act Warning Signs

As discussed in this prior post, Chapter 87 of the Texas Civil Practice & Remedies Code now includes as “Farm Animal Professionals” the following categories of service providers, provided that their services are provided for compensation:

1)      A person who rents to a participant a farm animal for the purpose of riding, driving, or being a passenger on the farm animal;

2)      A person who rents equipment or tack to a participant;

3)      A person who examines or administers medical treatment to a farm animal as a veterinarian; and 

4)      A person who provides veterinarian or farrier services.

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The Act now requires Farm Animal Professionals to post and maintain a sign containing the following warning language in a clearly visible location if the professional manages or controls a stable, corral, or arena where the professional conducts a farm animal activity:

WARNING

UNDER TEXAS LAW (CHAPTER 87, CIVIL PRACTICE AND REMEDIES CODE), A FARM ANIMAL PROFESSIONAL IS NOT LIABLE FOR AN INJURY TO OR THE DEATH OF A PARTICIPANT IN FARM ANIMAL ACTIVITIES RESULTING FROM THE INHERENT RISKS OF FARM ANIMAL ACTIVITIES.

The Act also requires all Farm Animal Professionals to include the above warning language in every written contract that the professional enters into with a participant for professional services, instruction, the rental of equipment or tack, or the rental of a farm animal. The warning must be included without regard to whether the contract involves farm animal activities on or off the location or site of the business of the farm animal professional, and the warning must be clearly readable.

I am currently unaware of any sign manufacturer that is mass-producing these new signs for purchase by the general public. This is probably because the Act just recently took effect on June 17, 2011. Farm Animal Professionals to whom the Act applies and who wish to avail themselves of the new immunities can have signs containing the specific language custom made. It is highly advisable for all Farm Animal Professionals to have participants/customers sign a written agreement for services that contains the warning language. There is nothing in the Act that prohibits Farm Animal Professionals from including additional warning, release, or indemnity language in their written agreements.

Edited to add:  As a member service, the TVMA has ordered a limited number of warning signs on weatherproof corrugated plastic and has them for sale. The signs are 8.5" by 11" and are available to members for $12 and non-members for $15. If you would like to purchase a sign, you can call the TVMA or send an e-mail to info at tvma dot org.

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In a Nutshell: Texas Recreational Use Statute

September will bring the opening of Texas bird hunting season and (hopefully) the onset of cooler weather. This means that many Texans may soon be emerging from air-conditioned vehicles and buildings to enjoy outdoor activities. Texas land owners who allow others to use their land for trail riding, hunting, or other recreational uses should be aware of when Texas law says they may be held liable for injuries arising from the use of their property. 

The applicable legal standard is found in the Texas Recreational Use Statute (RUS) (Chapter 75 of the Texas Civil Practice & Remedies Code). A link to the full language of the statute can be found here

The RUS was originally enacted in 1965 to limit the liability of Texas land owners who allow others to use their land for hunting, fishing or camping. The RUS has been amended many times over the years to expand the immunity and to broaden the scope of the law. The current law is summarized below:

  •  Limits liability of land owners, lessees, and occupants of agricultural land and other real property. All references to “land owners” below includes also lessees and other occupants;
  • Provides that if land owners give permission to others to use the land for recreational purposes, the land owner is not liable to the invitee unless the land owner was grossly negligent, acted with malicious intent, or acted in bad faith;
  • Provides that a land owner is not liable for any injury to a trespasser except for willful or wanton acts or gross negligence by the land owner;
  • Covers any activity associated with enjoying nature or the outdoors;
  • Covers a land owner who meets one of the following tests: (1) does not charge for entry to the premises; (2) charges for entry to the premises, but the total charges collected in the previous calendar year were not more than 20 times the total amount of ad valorem taxes imposed on the premises; or (3) has premises liability insurance coverage in effect that meets the statutory requirements($1 million for each occurrence of bodily injury or death and $100,000 for each occurrence of property damage or destruction);
  • The following damages caps apply to claims against owners of agricultural land if they are covered by premises liability insurance that meets the statutory requirements:1) $500,000 in damages per person; 2) $1 million for each occurrence of bodily injury or death; and 3) $100,000 for each occurrence of damage to or destruction of property.

Tips to avoid liability: Post “No Trespassing” signs in conspicuous areas around your property. Do not charge invitees for using the land. Get premises liability insurance that meets the statute’s guidelines if you believe you will be allowing visitors to use your land for recreational purposes. Lastly, it never hurts to have invitees sign a liability release.

All 50 states have some form of Recreational Use Statute, and the law varies greatly from state to state.  To locate recreational use statutes in other states, see this site.  For more information on the Texas RUS, see this article from the Texas A&M Real Estate Center.

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How to Avoid Liability in a Heat Wave

Nearly half of the United States is battling extreme temperatures. Surprisingly, the occurrence of a simple heat wave can expose boarding facilities and trainers to complaints and even lawsuits should a customer’s horse become ill due to extreme heat.

The Horse.com has published some good advice from veterinarians on caring for horses in extreme heat. The full articles can be found here and here, and a bullet point summary is below.

Those of you in Texas and elsewhere in the South already know this information. I am reposting it here because if a complaint or allegation ever arises over a horse that got sick due to heat at your barn, you should be able to ward off any potential liability if you have followed the guidelines generally accepted by veterinarians. 

Summary of guidelines from equine veterinarian Nancy Loving, DVM, via The Horse:

  • (Obviously) the most important thing to do is provide access to plenty of clean water
  • Add an electrolyte supplement to horses’ diets or put out salt blocks to promote drinking and restore the electrolyte balances disrupted by sweating
  • If a horse doesn’t drink well, provide a watery gruel of feed pellets vs. feeding them dry
  • Take measures to repel insects (fly sheets, fly spray, stall fans, fly strips, etc.) or encourage customers to do so if this is not a service you provide
  • If possible, keep horses in the pasture / turn out area vs. the barn during the hottest part of the day as long as there is access to shade and plenty of fresh water in the pasture / turn out
  • To avoid heat stress in horses being worked vigorously in hot weather, walk the horse periodically for 5 to 10 minutes during workouts
  • If you work a horse in the heat and think he might be susceptible to heat stress, cool him down gradually by hosing him down with cool water and scraping it away continuously until his chest feels cool to the touch and/or his temperature drops below 103.5 degrees

Horse operations that employ workers should also check out Russell Cawyer’s post on recommendations for employers who have employees working in extreme heat conditions.

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Is My Horse Case Worth Pursuing?

Anybody can file a lawsuit; the question is whether you can win the lawsuit and collect the judgment. I am writing this post for the benefit of all potential plaintiffs in horse cases who would like some guidance to determine whether a horse case is worth pursuing. To be worth pursuing, a horse case must satisfy five elements: (1) Money, (2) Damages, (3) Liability, (4) Causation, and (5) Credibility.

1)         Money. Our civil justice system is not about revenge or even justice…it’s about money, because money is virtually the only way a civil court can compensate a plaintiff. Potential plaintiffs need to consider how much money it would take to pursue the case versus the potential amount they can actually recover from the defendant. As a general rule of thumb, the amount in controversy needs to be at least $25,000 to make it worth engaging counsel to prosecute a civil case. In many cases, plaintiffs will not be awarded their attorneys’ fees even if they win the case. The potential defendant needs to either have an insurance policy that would apply to the potential claims or otherwise have assets that are not exempt from attachment on a judgment.

2)         Damages. In a good horse case, a plaintiff can prove the defendant damaged them and can put a dollar amount on the damages. If the plaintiff cannot quantify their damages, the lawyer usually cannot either. Expert witnesses can sometimes be hired (usually at the client’s expense) to figure out what the damages are. But sometimes, after spending money on an expert, clients don’t like the answer the expert comes up with. Therefore, the best cases are those where the amount of damages is fairly simple to quantify.

3)         Liability.         A good horse case is one where it can be proven that the defendant is liable for the damages that the plaintiff incurred. For a defendant to be liable, a plaintiff needs to be able to prove that the defendant either breached the terms of an agreement with the plaintiff, or was liable in tort to plaintiff (common torts in horse cases include negligence, fraud, and breach of fiduciary duty).

4)         Causation.      The plaintiff must be able to prove that the defendant's actionable conduct caused the money damages identified by the plaintiff. The plaintiff must be able to prove that the defendants’ actions, and not some other person or event, caused the damages complained of. In the best cases, the plaintiff can pinpoint the person or entity that damaged them, and can explain what the defendant did or failed to do that ultimately caused the damages.

5)         Credibility. The credibility of a plaintiff is often the most important element of a horse case. Does your story pass the “smell test”? Put your emotions aside for a moment and ask yourself whether your demands are reasonable given the applicable customs and conventions as they currently exist in the horse industry. I recommend talking to others who have played the defendant’s role (i.e. horse trader, veterinarian, trainer) about your case. If those who have been in the defendant’s shoes before agree with your position, chances are your story will be credible to a jury.

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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.

Horse Insurance 101: Special Event Liability

Special Event Liability insurance will be the final topic of this week's discussion about the various types of equine liability insurance available for purchase.  If you are hosting an event such as a clinic, a roping, a show or a trail ride, you should consider buying insurance.

Special Event Liability insurance typically extends to the organization putting on the show and its members.  Show officials, committee members, judges, course designers and premises owners can usually be included as additional insureds (and I recommend getting coverage for all of the above, if applicable).

If considering Special Event Liability insurance, ask your agent what types of incidents are covered and what parts of the premises are covered.  Many accidents that occur at a horse event do not involve horses and do not happen in the arena.  I know of one instance where a horse show sponsor was sued in connection with a golf cart wreck in the parking lot.  As such, the Equine Activity Laws will not always provide a defense so you need to make sure you have insurance coverage.

Also, make sure that claims made by spectators and guests (not just participants) are covered under the policy.

In addition to Special Event Liability insurance, I recommend that event sponsors1) post the Equine Activity Law signs at the event; and 2) have each participant sign a liability waiver form that is a separate document from the entry form.

The "downside" for some sponsors (depending on the event) is that the liability carrier may prohibit the sponsor from allowing dogs or alcohol on the premises during the event.  Even if the sponsor is not selling alcohol, that "col'beer" in people's private ice chests in their pickups might be disallowed under the insurance policy.  So add dogs and beer to the list of things to discuss with your agent to make sure you're covered.

Photo credit:  Eric Ashford (Flikr)

Horse Insurance 101: Commercial Equine Liability


If you board, breed, race, train, give riding lessons or conduct any kind of business-related equine activity, I highly recommend that you consider a Commercial Equine Liability policy. 

Homeowner’s and standard Farm & Ranch insurance policies completely exclude your equine business pursuits. 

Commercial liability insurance pays the damages for liability imposed upon you or your business by a liability claim or court judgment.  It also pays the cost of defending you when a lawsuit is brought against you.

This policy kicks in when an accident occurs and someone is hurt, regardless of whether you own the horse involved.

However, the basic Commercial Equine Liability policy does not cover claims for damage to property in your care, custody or control.  If someone claims, for example, that you injured their horse in the course of training it, you would need a Care, Custody & Control policy to cover that damage claim.

The Equine Activity Laws may help you provide a defense in the event of an equine incident, but they will not prevent you from being sued.  Without adequate liability coverage you will have to pay damages and defense costs yourself.  And the Equine Liability Laws only cover “inherent risks” in equine activities.  Some plaintiffs are able to successfully argue that their situation did not involve an “inherent risk”.  In other words, you could lose the case.  It bears repeating that defense costs are generally not recoverable by defendants in Texas lawsuits.

Commercial Equine Liability policies are designed to help protect you if you are sued by a third party who is injured or whose property is damaged.  A third party is generally someone who is not a family member or employee. 

If you have employees, you should consider carrying workman's compensation insurance as they are not covered under the general liability policy.  You should also make sure that any independent contractors that work with you show proof of their own liability insurance and ask that you be named as an Additional Insured on their policy.  This is especially true if you have an independent instructor or trainer working at your facility.

In addition to this policy, I recommend that all equine businesses 1) post the applicable Equine Activity Law in your state in conspicuous areas in your barn and on your property; and 2) have each third party who uses your facility sign a liability waiver that contains a covenant not to sue and specifically waives liability for ordinary negligence.   

 

Photo credit:  Katarina 2353 (Flikr)

Horse Insurance 101: Care, Custody & Control

Care, Custody & Control insurance is meant to cover people who board or train horses or are otherwise responsible for other people’s horses while breeding, showing, or racing them. The policy pays sums you are legally obligated to pay to others for death, injury or theft of horses in your care, custody, or control.

Example: a boarder’s horse dies of colic while it is at your barn, and the owner sues you for negligence.

Almost all general or commercial liability policies exclude coverage for injury or death to any horse in your care, custody or control.

This coverage does not apply to horses you own or lease, which typically are covered by a mortality policy.  Also, a Care, Custody & Control policy also does not cover you if a third-party’s horse in your care injures someone or damages their property. The Care, Custody & Control policy only protects you against claims of damage or loss of the third-party’s horse itself.

The policy typically pays for damages to horses and defense costs for suits brought against you. Premiums are usually based upon the average number of horses in your care or the total number of horses in any one barn, whichever is greater.

The basic policy also covers you if a horse is injured during incidental transit (hauling) of horses. “Incidental transit” is usually defined as 6 trips of 150 miles or less per year. The mileage restriction can usually be eliminated for an additional premium.

This coverage is especially recommended for trainers due to the multiple ways a horse can be injured in the course of a training program.

In addition to a Care, Custody & Control policy, I also recommended that trainers and boarding facilities get a written agreement with clients that includes 1) a “risk of loss” clause where the client assumes all risk of loss or injury to the horse; and 2) a veterinary power of attorney whereby the client agrees that the trainer or boarding facility has the discretion to provide veterinary care if the owner cannot be contacted.

Photo credit:  Markus Shaltrin

Horse Insurance 101: Farm and Ranch

In yesterday’s post, we talked about the Private Horseowner’s Liability policy and discussed the ways it might cover a horse owner for liability claims that are not covered by a basic farm and ranch policy. Does that mean that holders of PHO policies do not need a farm and ranch policy? Not necessarily.

A basic farm and ranch policy can be compared to an extended “homeowner’s policy” for farm or ranch owners. Although many insurance companies allow clients to customize their farm and ranch policies to cover additional perils, the basic farm and ranch policy typically covers the following instances:

  •  Loss of your home or certain types of damage to your home;
  •  Loss of your barn or outbuildings or certain types of damage to your barn or outbuildings;
  •  Accidental death of your horses caused by lightning, fire, predator attack, accidental shooting, or drowning;
  • Liability claims brought by third parties who are on your property with your permission and the incident did not happen in connection with your equine business operations; and
  • Medical bills for third parties who are on your property with your permission are are injured from an occurence that did not arise from your equine business operation.

The basic farm and ranch policy does not typically cover the following instances:

  •  Incidents that do not occur on your property; 
  • Liability claims for medical bills or damages brought by family members or employees;  
  • Horses that die or have to put down due to injury or sickness;
  • Accidents caused by horses that do not belong to you; and
  • Accidents that arise from your equine business operations.

For people who own a farm or ranch, a basic farm and ranch policy is usually a good idea. This type of policy should be considered in lieu of the basic homeowner’s policy due to the additional coverages available.

But there are many ways in which a farm owner can be held personally liable even when covered by a basic farm and ranch policy. Therefore, it is advisable to ask your insurance agent exactly what is covered so that additional insurance can be purchased, if necessary.

The most important thing to remember is that if you are sued, you want to be covered by insurance. No matter how frivolous or unmeritorious the claim, you will still have to hire an attorney to defend you. Legal fees are costly, and usually not recoverable by defendants in law suits.

Horse Insurance 101: Private Horseowner's Liability (PHO)

Many lawsuits involving horses can be avoided altogether if the right insurance policy is in place. Or, if a lawsuit cannot be avoided, a horse owner with the right insurance policy does not have to rack up $75k plus getting their case to trial and face a potential judgment of thousands or millions of dollars.

Remember, posting the Chapter 87 Equine Activity Act sign, setting up an LLC, or getting people to sign a liability waiver does not immunize you from suit.  If you are sued, you will still have to pay a lawyer to defend you even if you eventually win the case.  In Texas, defendants usually cannot recover attorneys' fees in court.

So, the theme this week is equine insurance.  Do you need it and what kind do you need?

In the May 2010 Issue of SuperLooper, insurance specialist Amy J. Daum talks about Private Horseowner's Liability Policies (PHOs).

A PHO is meant to cover you if your horse directly injures someone or damages someone's property, and you are sued.  Some examples of when a PHO might cover you are:

1) One of your horses gets out of your pasture and is hit by a car, and the motorist sues you;

2) Your horse is tied to your horse trailer at a show or roping and kicks someone's child while you are around the corner doing something else; and

3) You allow your friend to ride your best horse and he falls off when your horse stops quickly.  Your friend has no medical insurance so has to sue you to pay his medical bills.

Even if you have a farm & ranch or homeowner's policy, a PHO might cover you under circumstances that your farm & ranch policy would not.  For example, some farm & ranch or homeowner's policies will not cover you if the accident happened off your property.  Also, if an accident happens at an event where money can be won (roping, barrel race, cutting, etc), some policies will consider the event a "commerical activity" and exclude coverage.  

The really cool thing about PHOs is that they are cheap!   By way of example, PHOs with Broadstone Equine Insurance Agency start at about $130 per year for $300,000 in coverage, and $235 per year for $1million in coverage.  

Even the $1 million policy costs less per year than one hour of work for the average trial lawyer!

But PHOs are not available for everyone.  Daum says that an equine professional who teaches lessons, boards, trains, or buys and sells horses cannot get a PHO.  

Also, a PHO only covers you if you are sued by a "third party".  A third party is someone who is not a family member or someone performing services for you (such as a vet, farrier, or employee). 

An equine professional or someone being sued by a service provider could be covered by a general liability policy, a type of insurance that will be discussed in a future post.

For those horseowners who do qualify, I believe getting a PHO is worth the money.  This is especially so if 1) you haul to shows, ropings, or rodeos on a regular basis, 2) other people will frequently be riding your horses, or 2) you have any reason to believe your horses might get out and make their way onto a road.

Compilation of Texas Stock Laws

**List of available counties updated 11-15-10**

I have recently, with the help of my assistant (and soon-to-be law student) Christina Heddesheimer, taken on the monumental task of compiling the local stock laws for all 254 Texas counties. 

Oh, and when I say with the "help" of Christina, I mean that Christina is doing all of heavy lifting and all of the county-by-county research.  Her work has been invaluable.

We are so grateful to the many people who have taken time to assist us in this research project in over 100 Texas counties so far.  Thank you, Texas county officials!

This project takes extraordinary persistence, hours and hours of time, and lots of patience.  And money.  It's probably for these reasons that no other lawyer or organization has ever, in the history of the State of Texas, compiled all the stock laws in one place.  Until now....

So, why is this project so monumental, you ask?  As discussed in an earlier post, the default rule in Texas is that livestock may roam freely in Texas ("open range") .  The only state-wide exception is a prohibition of open range grazing/roaming on interstate and state highway right-of-ways.  Pursuant to the Texas Agriculture Code and its predecessors, counties have the right to hold one or more elections to restrict the free roaming of livestock.  The individual elections can include one or more species (such as cattle, horses, mules, hogs, sheep and goats), and the elections can be held for the whole county or part(s) of each county.

These laws are very difficult to find as they are only located in the commissioner's court minutes of each individual county.  The dates these laws were enacted range from the 1800s to now.

The stock laws are important because they often determine who is liable when, for example, a motorist collides with a horse on a farm-to-market road, or a horse gets loose and destroys someone else's property.

So far, we have obtained the stock law status of 234 Texas counties, and we continue to receive more updates daily.  We will periodically post updates as we gather more information from more counties.  For each of the following counties, we currently either have a copy of the stock law, or we have a confirmation that the county is open range:

 

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Is a Horseowner Liable for Damages if a Horse Gets Loose?

A gentleman recently told me that his stallion had gotten loose, gone onto his neighbor's unfenced property, and "worried" the neighbor's mares.  The neighbor shot at the stallion with a shotgun, and stated that the police told him he was justified in doing so because the stallion was "trespassing on his property."

Is the stallion owner liable for property damage or injury to persons caused by his stallion?  Generally speaking, not unless the stallion owner knowingly let the stallion roam free.

Important to this analysis is that Texas is, generally speaking, still an open range state.  That is--livestock may still roam at large in Texas with two exceptions:

  1. Public highwaysThe Texas Agriculture Code states "[a] person who owns or has responsibility for the control of a horse, mule, donkey, cow, bull, steer, hog, sheep, or goat may not knowingly permit the animal to traverse or roam at large, unattended, on the right-of-way of a highway." Tex. Agric. Code § 143.102 (Vernon 2004)(emphasis added). The statute defines a "highway" as "a U.S. highway or a state highway in this state, but does not include a numbered farm-to-market road." Id. at § 143.101. Therefore, U.S. and state highways in Texas are effectively considered closed ranged. Conversely, the 40,000-plus miles of farm-to-market roads in Texas are unaffected by this statute.
  2. Stock Law Counties or Areas.  Chapter 143 of the Agriculture Code permits local elections to adopt a law (a.k.a. "stock law"), where a person may not permit any animal of the class mentioned in the proclamation to run at large in the county or area in which the election was held. A typical stock law will prohibit horses, mules, donkeys, sheep, goats, and cattle from running at large.

    As expressly provided by the Code, some counties in Texas have enacted county wide stock laws, yet others have chosen to elect stock laws only in certain precincts or areas within said county. Unfortunately, there is no statewide index that traces the counties or areas where stock laws have been passed.
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Race Horse Trainers "Guilty Until Proven Innocent"

"Absolute insurer rules" and "trainer liability rules," common in horse racing and other equine sports, presume that trainers are responsible when their horses test positive for illegal substances.  In effect, the rules make trainers guilty unless proven innocent.

The effect of this presumption is to shift the burden of proof from the governing body to the trainer, who must prove innocence by showing  that he or she did not negligently administer a prohibited substance to the horse or did not negligently allow someone else to interfere with the horse.  These rules can result in the imposition of a penalty against the trainer and/or the horse's owner without actual proof of guilt.

Courts have uniformly upheld the absolute insurer rules, despite the fact that they appear to violate the due process of law.

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