October 2008

Equine mortality and major medical insurance policies often contain a provision stipulating that any action or proceeding under the policy must be brought within a certain period of time, typically one year. 

Absent a contractual provision to the contrary, the statute of limitations applicable to an action based in contract will apply to an action under an insurance policy (for example, an insurance coverage dispute). 

Are contractual limitations periods in insurance policies enforceable?  Generally, courts will enforce the limitations provisions unless they violate limitations-related statutory law in the state the policy was issued or delivered, or in the state where the law suit is brought.  In rarer instances, courts have refused to enforce insurance policy limitations periods because they were judicially interpreted to be "unreasonable."

Statutory prohibitionsSome states have statutes voiding limitations periods that are shorter than a given period of time.  Thus, the limitations-related statutes in the state in which you are seeking to enforce your policy must be consulted to determine the applicability of a given provision.  Under Texas law, any contractual limitations period is void if it is shorter than two (2) years.  See Texas Civil Practice & Remedies Code, Section 16.070(a).  In Maryland, an insurance or surety contract cannot set a shorter time to bring an action under the contract than required by the state where the insurance contract is issued or delivered.  See Section 12-104 of the Maryland Insurance Code.  Maryland has a 3 year statue of limitations for contract actions.  Thus, a one-year contractual limitations period in an equine insurance policy would be void in Texas and Maryland.  Absent such statutory prohibitions, however, the contractual limitations period in the insurance contract will be enforced.

Does the limitations period in the policy cover my tort-related claim of "bad faith" denial of coverage or "unreasonable delay"?  Probably.  Many insured litigants argue that their tort claims such as bad faith are not covered under the contractual limitations period because the tort claim is not a "claim under the policy."  Although courts have entertained (and sometimes agreed with) this argument, according to insurance fraud lawyer Rick Hammond, the weight of the cases tend to enforce the statutory limitations period for all claims related to the policy.  Of course, the contractual limitations period will not apply to any claim if it is void under state law, as discussed above.




No.  In states that have adopted the Uniform Commercial Code (UCC), courts will probably hold that the possessory stableman’s lien is superior, even if the bank’s UCC Financing Statement was filed before the stableman took possession.

When Does the Conflicting Lien Situation Arise?  If someone borrows money to buy a horse or horses, the bank will often require the borrower to sign a security agreement pledging the horse(s) as collateral on the note.  When the borrower stops making payments on the loan, the bank normally will repossess the horses and sell them to foreclose on the note.  In some instances, when a borrower stops paying the bank, they also stop paying the boarding facility that is taking care of their horses.  The nonpayment of board gives the boarding facility a statutory stableman’s lien on the horse(s) as long as the boarding facility maintains possession.  Let’s assume the bank’s lien was first in time–i.e. the bank lent the purchase money to the owner and filed a UCC Financing Statement before the boarding facility took possession of the horses. The question becomes, who is entitled to the first lien on the horses…the bank or the stableman?  Also, is the bank entitled to come onto the boarding facility’s property and repossess the horses?

Under Section 9.333 of the UCC, the Possessory Lien Has Priority.  Section 9.333 and its Official Comment under the Texas version of the UCC states that "the possessory lien has priority over a security interest unless the possessory lien is created by a statute that expressly provides otherwise…the possessory lien takes priority, even if the statute has been construed judicially to make the possessory lien subordinate."  This means the bank’s lien, even if prior filed, is subordinate to the stableman’s lien.

WARNING–Courts May Follow Old Cases.  Even though the UCC is clear on this, a trial court in one of my cases found that the stableman’s lien was subordinate to a bank’s security interest.  The court cited Blackford v. Ryan, 61 S.W. 161 (Tex. Civ. App. 1901)(holding that a bank’s pre-existing security interest is superior to an agister’s lien when a horse was placed in a stable without the bank’s knowledge).  This case, as well as several other pre-1930 Texas cases with similar holdings, interpreted the common law agister’s lien and not the statutory lien under Section 70.003 of the then non-existent Property Code.  These cases were also decided before Texas adopted the UCC.  But the cases are still presented in Texas Jurisprudence and other legal treatises as being current law.  There are many cases that have found the possessory lien to be superior when it comes to garagemen keeping automobiles under Section 70.003, but no Texas cases involving stablemen.  Despite the current lack of appellate review on the issue, I think most courts will defer to the UCC and the car cases and hold that the stableman’s lien is superior.

In most states, trainers do not have an express statutory lien for unpaid training fees and training-related expenses unrelated to the care of horses such as show entry fees and hauling.  This means, unless a trainer has a written security agreement signed by the owner providing a lien on the horses in the event of nonpayment of training fees, the law is unclear as to whether a trainer can hold or sell the owner’s horse when training fees remain unpaid.  You need to check your state’s statutes, however, as some states’ stableman’s liens do expressly provide a lien for training services. Oklahoma’s stableman’s lien statute, for example, expressly includes a lien for training services.  You can find your state’s lien statutes on Equine Law and Horsemanship Safety.

What if My State Has a Stableman’s or Agister’s Lien Statute but No Trainer’s Lien?  Currently, every state except Rhode Island has a stableman’s or agister’s lien statute.  These statutes provide those who care for, board, pasture, or stable the horses of another with a lien on the horse if charges related to the care of the horse are not paid.  Charges related to the "care" typically include the monhtly board rate, supplements, wormer, vaccinations, farrier, and veterinary services paid or advanced by the caregiver on behalf of the owner, and other services related to the care, health, and maintenance of the horses.  See Carney v. Wallen, 665 N.W.2d 439 (Iowa Ct. App. 2003)(holding that a trainer who provided only training and did not also provide board or other services related to the "care" of the horses could not obtain a stableman’s lien because training services do not pertain to actions or services performed in the course of acting as a stable keeper).

Continue Reading Do Horse Trainers Have a Lien on Horses they Train for Unpaid Training Fees?