Tuesday, February 3, 2009
Why You Need Insurance AND Liability Releases
At Equine Legal Solutions, boarding stables, trainers, riding instructors and other callers often ask us if they still need insurance if they have liability releases, and vice versa. The answer is, "Absolutely!" Insurance and liability releases play very different protective roles.
What Liability Releases Do
A well-drafted, properly executed liability release serves two very important functions. It can discourge potential plaintiffs from suing you, and by providing valid legal defenses, reduce the possibility they'll be successful if they do sue. If the liability release also contains an indemnification clause, as Equine Legal Solutions' forms do, you can also recover attorneys' fees and court costs from the plaintiff if you win the lawsuit.
What Liability Releases Don't Do
While liability releases may discourage potential plaintiffs, they don't guarantee you won't be sued. And, there's no such thing as the "bulletproof" liability release that's often requested. Some types of liability, such as intentional misconduct, can't be successfully disclaimed in a liability release. Furthermore, if the liability release doesn't include an indemnification clause and you are sued, you will likely pay tens of thousands of dollars to defend yourself and not be able to get those costs back from the plaintiff - even if you ultimately win.
What Insurance Does
If your liability insurance provides coverage for a liability situation, your insurer will take over your defense. That means the insurer will hire an attorney for you, defend your lawsuit, and if appropriate, negotiate a settlement on your behalf. If the insurer negotiates a settlement, the insurer pays the settlement amount. If you lose the lawsuit, the insurer pays the judgment. All of these payments, of course, are subject to the limits of your policy.
What Insurance Doesn't Do
Insurance doesn't discourage potential plaintiffs from suing you. In fact, the availaiblity of insurance often serves to encourage potential plaintiffs who think the insurer may just pay them to go away. The presence of insurance often represents a "deep pocket" and therefore an incentive for plaintiffs' attorneys to take cases on contingency.
While insurance may help pay for your defense, it doesn't provide a legal basis for defending the lawsuit. In contrast, when a plaintiff has signed a liability release, it provides the legal basis for assumption of the risk and other legal defenses.
What Liability Releases Do
A well-drafted, properly executed liability release serves two very important functions. It can discourge potential plaintiffs from suing you, and by providing valid legal defenses, reduce the possibility they'll be successful if they do sue. If the liability release also contains an indemnification clause, as Equine Legal Solutions' forms do, you can also recover attorneys' fees and court costs from the plaintiff if you win the lawsuit.
What Liability Releases Don't Do
While liability releases may discourage potential plaintiffs, they don't guarantee you won't be sued. And, there's no such thing as the "bulletproof" liability release that's often requested. Some types of liability, such as intentional misconduct, can't be successfully disclaimed in a liability release. Furthermore, if the liability release doesn't include an indemnification clause and you are sued, you will likely pay tens of thousands of dollars to defend yourself and not be able to get those costs back from the plaintiff - even if you ultimately win.
What Insurance Does
If your liability insurance provides coverage for a liability situation, your insurer will take over your defense. That means the insurer will hire an attorney for you, defend your lawsuit, and if appropriate, negotiate a settlement on your behalf. If the insurer negotiates a settlement, the insurer pays the settlement amount. If you lose the lawsuit, the insurer pays the judgment. All of these payments, of course, are subject to the limits of your policy.
What Insurance Doesn't Do
Insurance doesn't discourage potential plaintiffs from suing you. In fact, the availaiblity of insurance often serves to encourage potential plaintiffs who think the insurer may just pay them to go away. The presence of insurance often represents a "deep pocket" and therefore an incentive for plaintiffs' attorneys to take cases on contingency.
While insurance may help pay for your defense, it doesn't provide a legal basis for defending the lawsuit. In contrast, when a plaintiff has signed a liability release, it provides the legal basis for assumption of the risk and other legal defenses.
Labels: equine insurance, equine liability
Friday, February 22, 2008
What Kind of Insurance Does a Trainer Need?
If you are training horses and receiving compensation for training, you will need insurance. Although Equine Legal Solutions is a law firm and does not sell insurance, we often assist clients in determining their coverage needs and in negotiating coverage issues with their insurers. Here are the types of insurance we recommend, and reasons why they are advisable to have.
Care, Custody and Control Insurance
If you have horses in training and are primarily responsible for their care, you need care, custody and control insurance. CCC insurance is very limited in scope and only provides coverage for injuries to or death of clients' horses in your care. The limits of CCC insurance are typically relatively low and therefore are often well below the fair market value of valuable horses. For this reason, you may want to require your clients to purchase mortality insurance on their horses.
Note that even if you keep your clients' horses at a boarding stable that has CCC insurance, you will still want to have your own CCC insurance. If the facility owner's insurer has to pay out on a CCC claim regarding horses in your care, they may look to you to recoup their costs.
Commercial Liability Insurance
Commercial liability insurance is much broader in scope than CCC insurance. It covers most types of liability claims, including negligence. Even if you have a good training contract with a liability release, you can still be sued. In the United States, it seems that almost anyone can sue almost anyone else for anything. Therefore, one of the most valuable roles of commercial liability insurance is to pay for your legal defense in the event that you are sued (not to mention any actual judgment that might be issued against you). The average negligence lawsuit defense runs well into the tens of thousands of dollars in a case that goes to trial, so the cost of commercial liability insurance is money well spent.
If you train out of a facility owned by someone else, the facility owner will typically require all on-site trainers to provide proof of insurance, and to name the facility owner as an additional insured.
As with CCC insurance, even if you train out of a boarding facility that has its own commercial liability insurance, you will still want to have your own liability insurance. Your activities may not be covered by the facility's policy. Even if they are covered, if the facility's commercial liability insurer has to pay out on a claim related to your negligence (or alleged negligence), the insurer may pursue you for reimbursement if you are not listed as an insured party under the policy.
Property Insurance
If you own your own horse property, you will want to have casualty insurance that covers fire, etc. With rural properties, this type of insurance is often called a "farm and ranch policy."
Vehicle Insurance
If you have a truck and trailer, you will want to insure them as well. In many cases, your auto insurance will cover damage to the trailer you are towing (but NOT the contents of the trailer), so check with your insurance agent to clarify what your coverage terms are.
Equine Mortality, Major Medical and Loss of Use Insurance
If you have valuable horses of your own, you may want to consider insuring them, as your CCC insurance will not cover horses that belong to you. Mortality insurance generally makes sense only if you could not afford to replace your horse without undue financial hardship. Likewise, major medical insurance is recommended if you could not afford a several-thousand-dollar vet bill without breaking the bank. Loss of use insurance may be advisable if you have a horse whose value is heavily dependent upon his or her use (e.g., as a breeding stallion). Do be advised that some loss of use policies provide that the insurer may opt to take possession of the horse before they are obligated to pay the claim. If this would be unacceptable to you, loss of use insurance probably does not make sense for your situation.
Care, Custody and Control Insurance
If you have horses in training and are primarily responsible for their care, you need care, custody and control insurance. CCC insurance is very limited in scope and only provides coverage for injuries to or death of clients' horses in your care. The limits of CCC insurance are typically relatively low and therefore are often well below the fair market value of valuable horses. For this reason, you may want to require your clients to purchase mortality insurance on their horses.
Note that even if you keep your clients' horses at a boarding stable that has CCC insurance, you will still want to have your own CCC insurance. If the facility owner's insurer has to pay out on a CCC claim regarding horses in your care, they may look to you to recoup their costs.
Commercial Liability Insurance
Commercial liability insurance is much broader in scope than CCC insurance. It covers most types of liability claims, including negligence. Even if you have a good training contract with a liability release, you can still be sued. In the United States, it seems that almost anyone can sue almost anyone else for anything. Therefore, one of the most valuable roles of commercial liability insurance is to pay for your legal defense in the event that you are sued (not to mention any actual judgment that might be issued against you). The average negligence lawsuit defense runs well into the tens of thousands of dollars in a case that goes to trial, so the cost of commercial liability insurance is money well spent.
If you train out of a facility owned by someone else, the facility owner will typically require all on-site trainers to provide proof of insurance, and to name the facility owner as an additional insured.
As with CCC insurance, even if you train out of a boarding facility that has its own commercial liability insurance, you will still want to have your own liability insurance. Your activities may not be covered by the facility's policy. Even if they are covered, if the facility's commercial liability insurer has to pay out on a claim related to your negligence (or alleged negligence), the insurer may pursue you for reimbursement if you are not listed as an insured party under the policy.
Property Insurance
If you own your own horse property, you will want to have casualty insurance that covers fire, etc. With rural properties, this type of insurance is often called a "farm and ranch policy."
Vehicle Insurance
If you have a truck and trailer, you will want to insure them as well. In many cases, your auto insurance will cover damage to the trailer you are towing (but NOT the contents of the trailer), so check with your insurance agent to clarify what your coverage terms are.
Equine Mortality, Major Medical and Loss of Use Insurance
If you have valuable horses of your own, you may want to consider insuring them, as your CCC insurance will not cover horses that belong to you. Mortality insurance generally makes sense only if you could not afford to replace your horse without undue financial hardship. Likewise, major medical insurance is recommended if you could not afford a several-thousand-dollar vet bill without breaking the bank. Loss of use insurance may be advisable if you have a horse whose value is heavily dependent upon his or her use (e.g., as a breeding stallion). Do be advised that some loss of use policies provide that the insurer may opt to take possession of the horse before they are obligated to pay the claim. If this would be unacceptable to you, loss of use insurance probably does not make sense for your situation.
Labels: equine insurance, horse training
Wednesday, February 13, 2008
Top Five Foolish Reasons Not to Get Liability Insurance
If you are doing business, no matter how small or unprofitable your business is, you need commercial liability insurance. Period. Here are some of the common reasons we hear about why trainers, boarding stables, etc. do not have liability insurance, and why those reasons don't make sense.
(1) I Don't Need Insurance Because All of My Clients Sign Liability Releases
Liability releases are not a substitute for liability insurance, because insurance and contracts play very different roles. Contracts that include liability releases serve a number of valuable functions. They help set appropriate expectations for a business relationship so that the parties are less likely to have disputes. Contracts also provide the parties with legally enforceable rights. Liability releases discourage injured parties from suing and also help prevent them from prevailing in a lawsuit.
In contrast, insurance serves other valuable functions. If you are sued and the claim is covered by your insurance policy, your insurer will manage your defense and pay for your legal fees and court costs. Without insurance, if you are sued, you will have to pay for your legal defense out of pocket. The cost of defending an average civil suit easily runs into the tens of thousands of dollars, and an average retainer for a civil litigation attorney in a relatively small case is $10,000 - $20,000. Unless you have a contract providing for an award of attorneys' fees and costs to the winner of a lawsuit, you will have no way to recoup the cost of your legal defense, even if you ultimately prevail in the lawsuit. Representing yourself as a defendant in a lawsuit is simply not a viable option, as the other side's attorney will certainly use your lack of legal expertise to his or her client's advantage, and many judges are impatient with do-it-yourself litigants.
Your insurance will also cover the cost of any judgment that is issued against you in a lawsuit (up to your policy limits), provided that the claim that is the subject of the lawsuit is covered by your policy. Without such coverage, you will be forced to pay the judgment out of your own pocket, leading to potential financial ruin. If you cannot afford to pay the judgment and default in payment, the judgment holder can garnish your business' income and seize your business' assets to pay the judgment. If you do business as a partnership or sole proprietorship rather than a corporation, your personal assets will also be subject to seizure and your wages can be garnished to pay the judgment. Not all legal judgments are dischargeable in bankruptcy, either.
(2) I Don't Need Insurance Because My State Has an Equine Activity Statute
Equine activity statutes are often misinterpreted as "get out of lawsuit free" laws. In reality, equine activity statutes are limited in scope and other than serving to discourage some potential plaintiffs, they do not prevent lawsuits at all. Rather, much like a liability release, equine activity statutes provide a potential affirmative defense to claims in a lawsuit. As described in (1) above, defending a lawsuit and paying a judgment (functions typically performed by an insurer) can be financially ruinous.
(3) I Don't Need Insurance Because I Don't Have Very Many Clients
If you are accepting compensation for boarding, training, lessons or other horse-related services, you are in business. It only takes one client to sue you. Horses are very unpredictable and accidents can happen even in the safest possible environment. Even if you have only one client and you feel confident that they would never sue you, their insurance company or family may sue you if they are injured or killed in connection with your activities.
(4) I Can't Afford Liability Insurance
Many horse-related businesses are not particularly lucrative, and therefore it is often tempting to go without insurance because it seems cost-ineffective. However, given that the cost of defending just one lawsuit could be tens of thousands of dollars and all of your assets (however modest) are at risk, you really can't afford NOT to have insurance.
(5) I Don't Need Insurance Because I Don't Have Any Assets
Closely related to (4) above, this excuse also doesn't make financial sense. If you are not making any money and have very few assets, your financial situation makes it even less likely that you can afford the high cost of defending a lawsuit. Insurance serves to protect the assets that you do have.
(1) I Don't Need Insurance Because All of My Clients Sign Liability Releases
Liability releases are not a substitute for liability insurance, because insurance and contracts play very different roles. Contracts that include liability releases serve a number of valuable functions. They help set appropriate expectations for a business relationship so that the parties are less likely to have disputes. Contracts also provide the parties with legally enforceable rights. Liability releases discourage injured parties from suing and also help prevent them from prevailing in a lawsuit.
In contrast, insurance serves other valuable functions. If you are sued and the claim is covered by your insurance policy, your insurer will manage your defense and pay for your legal fees and court costs. Without insurance, if you are sued, you will have to pay for your legal defense out of pocket. The cost of defending an average civil suit easily runs into the tens of thousands of dollars, and an average retainer for a civil litigation attorney in a relatively small case is $10,000 - $20,000. Unless you have a contract providing for an award of attorneys' fees and costs to the winner of a lawsuit, you will have no way to recoup the cost of your legal defense, even if you ultimately prevail in the lawsuit. Representing yourself as a defendant in a lawsuit is simply not a viable option, as the other side's attorney will certainly use your lack of legal expertise to his or her client's advantage, and many judges are impatient with do-it-yourself litigants.
Your insurance will also cover the cost of any judgment that is issued against you in a lawsuit (up to your policy limits), provided that the claim that is the subject of the lawsuit is covered by your policy. Without such coverage, you will be forced to pay the judgment out of your own pocket, leading to potential financial ruin. If you cannot afford to pay the judgment and default in payment, the judgment holder can garnish your business' income and seize your business' assets to pay the judgment. If you do business as a partnership or sole proprietorship rather than a corporation, your personal assets will also be subject to seizure and your wages can be garnished to pay the judgment. Not all legal judgments are dischargeable in bankruptcy, either.
(2) I Don't Need Insurance Because My State Has an Equine Activity Statute
Equine activity statutes are often misinterpreted as "get out of lawsuit free" laws. In reality, equine activity statutes are limited in scope and other than serving to discourage some potential plaintiffs, they do not prevent lawsuits at all. Rather, much like a liability release, equine activity statutes provide a potential affirmative defense to claims in a lawsuit. As described in (1) above, defending a lawsuit and paying a judgment (functions typically performed by an insurer) can be financially ruinous.
(3) I Don't Need Insurance Because I Don't Have Very Many Clients
If you are accepting compensation for boarding, training, lessons or other horse-related services, you are in business. It only takes one client to sue you. Horses are very unpredictable and accidents can happen even in the safest possible environment. Even if you have only one client and you feel confident that they would never sue you, their insurance company or family may sue you if they are injured or killed in connection with your activities.
(4) I Can't Afford Liability Insurance
Many horse-related businesses are not particularly lucrative, and therefore it is often tempting to go without insurance because it seems cost-ineffective. However, given that the cost of defending just one lawsuit could be tens of thousands of dollars and all of your assets (however modest) are at risk, you really can't afford NOT to have insurance.
(5) I Don't Need Insurance Because I Don't Have Any Assets
Closely related to (4) above, this excuse also doesn't make financial sense. If you are not making any money and have very few assets, your financial situation makes it even less likely that you can afford the high cost of defending a lawsuit. Insurance serves to protect the assets that you do have.
Labels: equine insurance, equine liability, horse boarding, horse training
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