Private Horseowner's Policy

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.

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.