Un­der­stand­ing Your Equine In­surance Pol­icy

With ba­sic knowl­edge and a bit of ef­fort, tak­ing a closer look at your pol­icy can help you avoid sur­prises.

Dressage Today - - Tips From Trainers Who Teach - By El­iz­a­beth Clarke

In­surance po­lices are con­tracts and they are some of the most com­pli­cated con­tracts around. Farm prop­erty and li­a­bil­ity poli­cies, horse mor­tal­ity and ma­jor med­i­cal poli­cies are no ex­cep­tions. It re­quires ef­fort to fully un­der­stand them, but if you know the ba­sics about the key sec­tions, it is pos­si­ble. It is im­por­tant to un­der­stand your cov­er­age when you buy the pol­icy so you don’t dis­cover at the time of a claim that you don’t have the cov­er­age you thought you had.

It helps to have a pen and pa­per to list things that raise your eye­brows as you read through the sec­tions. Some­times a term that doesn’t work for you in one sec­tion is fixed in the next, but not al­ways, and you need to sort through care­fully to make sure you have the cov­er­age you need. The key sec­tions of any in­surance pol­icy in­clude the fol­low­ing: Def­i­ni­tions. Don’t as­sume that you know what key words in your in­surance pol­icy mean be­cause “Def­i­ni­tions” in poli­cies are of­ten used to al­ter the com­mon mean­ing of words. Look for any­thing that changes or lim­its a term in a way that im­pacts the cov­er­age for your op­er­a­tions.

Cov­er­ages. This sec­tion lists what is cov­ered. De­pend­ing on whether it’s a prop­erty or li­a­bil­ity pol­icy, make sure all of your valu­able prop­erty or op­er­a­tions are listed. For in­stance, if your li­a­bil­ity pol­icy says it cov­ers rid­ing and train­ing and show­ing, do you also need it to say sales of horses? Judg­ing horse shows? Clin­ics away from home? These cov­er­ages aren’t al­ways in­cluded with­out an en­dorse­ment.

Ex­clu­sions. This is what is not cov­ered. It clar­i­fies or makes ex­cep­tions to the Cov­er­ages sec­tion. For ex­am­ple, in rid­ing-sta­ble poli­cies, vault­ing, polo and rac­ing are of­ten ex­cluded as cov­ered ac­tiv­i­ties and cov­er­age for them would have to be specif­i­cally added in an en­dorse­ment, usu­ally for an ad­di­tional pre­mium be­cause of the in­creased risk of in­jury. Farm-pack­age li­a­bil­ity poli­cies from three ma­jor equine spe­cialty car­ri­ers in­clude ex­clu­sions for the fol­low­ing things you might not ex­pect: sale of tack and equip­ment if al­tered by the in­sured (for in­stance, a sad­dle you sold that had been re­paired at some point); dam­age or in­jury aris­ing dur­ing con­struc­tion or de­mo­li­tion op­er­a­tions, which may in­clude main­te­nance or re­pairs; and dam­age or in­jury caused by any dog, whether owned by the in­sured or by any­one vis­it­ing the premises. Poli­cies also tend to ex­clude claims be­tween in­sureds named on the pol­icy, so if you’re a trainer and the owner of the farm where you train is an ad­di­tional in­sured on your pol­icy, your in­surance may not cover a claim aris­ing be­tween the two of you.

Prop­erty cov­er­age in poli­cies I have re­viewed ex­cluded trac­tors, hay balers,

four-wheel ATVs, fix­tures within or at­tached to a build­ing (sad­dle and blan­ket racks, tack lock­ers, rub­ber mats, feed bins, etc.), fences, por­ta­ble struc­tures and prop­erty usual to a dwelling (fur­ni­ture in lounges and tack rooms) un­less they are specif­i­cally listed on a list of in­di­vid­ual items called an as­set sched­ule.

The in­surer may also add ex­clu­sions as a re­sult of claims dur­ing the pol­icy pe­riod. For in­stance, a horse who has had colic surgery will likely have an ex­clu­sion for fu­ture colic added to his pol­icy once the claim for the surgery is paid. If your in­surer im­poses ex­clu­sions be­cause of claims and the prob­lem doesn’t re­cur within a year, ask that the ex­clu­sion be re­moved. The in­surer should eval­u­ate the on­go­ing risk and re­move ex­clu­sions for con­di­tions that are likely iso­lated in­ci­dents rather than chronic con­di­tions.

Lim­its. Pol­icy lim­its—what the pol­icy will pay for var­i­ous cov­er­ages—are of­ten ex­pressed in two num­bers that look like a ra­tio. The first num­ber is what the in­surer will pay for any sin­gle claim. The sec­ond is the max­i­mum the in­surer will pay dur­ing the term of the pol­icy if there are mul­ti­ple claims. In­surance poli­cies are in­creas­ingly in­clud­ing sub-lim­its, lower amounts the in­surer will pay for a par­tic­u­lar kind of claim. For ex­am­ple, in ma­jor med­i­cal poli­cies on in­di­vid­ual horses, per-in­jury lim­its for treat­ments like IRAP and shock­wave ther­apy are of­ten sig­nif­i­cantly lower than the pol­icy’s ma­jor med­i­cal limit. In prop­erty poli­cies, there is of­ten one limit for a build­ing, an­other limit for the con­tents of the build­ing and a sub-limit for non­sched­uled in­di­vid­ual items of per­sonal (non­real es­tate) prop­erty. Any sin­gle item worth more than the in­di­vid­ual item sub-limit must be in­cluded on a sched­ule (list) of valu­able items with its value stated in or­der for it to be cov­ered above the per-item sub-limit. Unique and par­tic­u­larly valu­able things like orig­i­nal art and an­tiques are com­monly sched­uled in in­surance poli­cies and some­times an ap­praisal is re­quired for the value to be sub­stan­ti­ated, but any horse-farm owner should look at the per-item sub-limit with tack and farm equip­ment in mind. A per-item sub-limit of $2,000 or even $5,000 can eas­ily re­duce the re­cov­ery for sta­ble con­tents to well be­low their ac­tual value. The to­tal con­tents value can also be in­ad­e­quate in a well-equipped sta­ble. In­creas­ingly, horse busi­ness op­er­a­tions in­clude things like com­puter equip­ment, so­phis­ti­cated sound sys­tems and ex­pen­sive ther­apy sys­tems like mag­netic blan­kets and ice ther­apy ma­chines. Any item or group of items worth more than the per-item limit needs to be in­di­vid­u­ally listed on the sched­ule of as­sets to be fully cov­ered and it’s a good idea to do an oc­ca­sional in­ven­tory with re­place­ment val­ues to en­sure the to­tal-con­tents limit is ad­e­quate. While in­surance agents know to ask about valu­able tack and an ag­gre­gate value for tools and uten­sils, blan­kets, etc., Mary Phelps of Markel In­surance notes that, “Clients of­ten for­get to in­clude the value of things like floor mats, ex­pen­sive tack trunks and barn fix­tures that can re­ally add up to ex­ceed pol­icy con­tents lim­its in the event of a to­tal loss such as a fire.”

Prop­erty poli­cies are also start­ing to ap­ply a pay­ment for­mula that lim­its prop­erty claims for a par­tial loss to some­thing less than the full per-oc­cur­rence limit. Some in­sur­ers also im­pose lower sub-lim­its if in­sured prop­erty is away from the premises listed on the pol­icy, such as equip­ment stolen at a horse show. If you see some­thing in your pol­icy that looks like it re­duces the amount of a pay­ment, make sure you un­der­stand the im­pli­ca­tions.

En­dorse­ments. En­dorse­ments are ad­di­tional terms added at the end of the pol­icy doc­u­ment. They may add cov­er­ages or ex­clu­sions or mod­ify the terms of the in­surance pol­icy to re­flect the spe­cific sit­u­a­tion. “Farm pack­age” li­a­bil­ity poli­cies of­ten ex­clude any cov­er­age for dam­age or in­jury re­sult­ing from

sports, but then have an en­dorse­ment say­ing that horse-re­lated sports are, in fact, cov­ered. As the world changes, so do the en­dorse­ments, and you may find some items of con­cern here, so be sure to read the pages of your pol­icy that are at­tached at the end.

No­tice Pro­vi­sions and Time Lim­its. These are most sig­nif­i­cant in mor­tal­ity and ma­jor med­i­cal poli­cies, both of which re­quire that you in­form the in­surer within a cer­tain pe­riod of time of in­jury or ill­ness suf­fered by an in­sured horse. Fail­ure to do so can lead to the de­nial of a fu­ture claim. Read the no­tice re­quire­ments and make sure you fol­low them. You don’t want to pay your pre­mium but “for­get” to in­form the in­surer of an in­ci­dence of colic, only to find out that the surgery re­quired by the next episode of colic is not cov­ered be­cause you failed to com­ply with the pol­icy’s no­tice pro­vi­sion. A mi­nor episode that is treated suc­cess­fully may not lead to an ex­clu­sion for that con­di­tion un­less it re­curs. Fail­ure to com­ply with the terms of the pol­icy can lead to de­nial of a claim for any con­di­tion or even can­cel­la­tion of the en­tire pol­icy. Other poli­cies also of­ten have time lim­its by which you must no­tify the in­surer of a po­ten­tial claim.

What’s New

The use of tech­nol­ogy and the ac­cep­tance of credit cards and elec­tronic pay­ments have gen­er­ated new in­surance terms. Poli­cies will re­place com­puter equip­ment and soft­ware that are un­der the per-item limit or prop­erly listed on the sched­ule of valu­able as­sets, but they will re­place soft­ware only to the ex­tent of new, unused soft­ware. They will strictly limit pay­ment for the cost of re­triev­ing lost data, which, if you’ve had a ma­jor com­puter fail­ure or hack, you know can be quite ex­pen­sive in terms of time and pro­fes­sional ser­vices.

If you store client in­for­ma­tion, be aware that ex­clu­sions are also ap­pear­ing for loss or dam­age re­sult­ing from the dis­clo­sure of pri­vate and/or fi­nan­cial in­for­ma­tion. If a hacker, or even an em­ployee, gets into your clients’ credit card in­for­ma­tion, don’t look to your in­surance com­pany for help mop­ping up the dam­age. In­for­ma­tion se­cu­rity is your re­spon­si­bil­ity and you should take it very se­ri­ously.

Most li­a­bil­ity poli­cies now also specif­i­cally ex­clude li­a­bil­ity cov­er­age for false state­ments, those that dis­par­age some­one’s goods, prod­ucts or ser­vices, or that vi­o­late some­one’s pri­vacy, in­clud­ing com­ments made by oth­ers on a web­site or chat that is con­trolled by the in­sured. In the age of so­cial me­dia, think twice about the temp­ta­tion to vent about un­happy sit­u­a­tions on­line. It’s un­likely that your in­surance will de­fend you against a re­sult­ing li­bel claim. The same sec­tion usu­ally ex­cludes cov­er­age for the fail­ure of goods, prod­ucts or ser­vices to con­form with state­ments re­gard­ing qual­ity or per­for­mance in ad­ver­tis­ing. In other words, watch what you rep­re­sent re­gard­ing horses for sale or the likely re­sults of your train­ing or in­struc­tion pro­gram. The adage that guar­an­tee­ing any­thing about a horse, dog or child is the surest in­vi­ta­tion to have them prove you wrong is pru­dent warn­ing with re­gard to ad­ver­tis­ing li­a­bil­ity. You can al­ways say what a horse has ac­com­plished. Think twice about say­ing what he will do.

Use of com­put­ers and so­cial me­dia aren’t the only tech­nol­ogy driv­ing changes in in­surance poli­cies. “Ad­vance­ments in vet­eri­nary medicine have made di­ag­nos­ing and treat­ing in­juries both more so­phis­ti­cated and more ex­pen­sive,” says Kathy Sed­lak of Great Amer­i­can In­surance Group. “When ma­jor med­i­cal cov­er­age was first added to horse mor­tal­ity poli­cies, it was to help with the cat­a­strophic sit­u­a­tions like colic surgery. These poli­cies weren’t meant to be like hu­man med­i­cal cov­er­age.” Ac­cord­ing to Sed­lak, ad­vanced di­ag­nos-

tics such as nu­clear scans and MRIs as well as re­gen­er­a­tive treat­ments such as IRAP and PRP for sin­gle in­juries can quickly eat up the full limit of a ma­jor med­i­cal pol­icy, leav­ing noth­ing for later treat­ment of a life-threat­en­ing in­jury or ill­ness. The ex­penses of the new tech­nolo­gies were be­com­ing un­sus­tain­able for the in­sur­ers and be­cause they can’t ad­just in­surance rates with­out go­ing through a very com­pli­cated state-by-state rate-change ap­pli­ca­tion process, they worked to limit costs. Sub-lim­its for some treat­ments and sig­nif­i­cant de­ductibles and co-pays are now com­mon.

Other changes in re­sponse to our chang­ing world are creep­ing in. One pol­icy I re­cently read ex­cludes dam­age or in­jury caused by drones. An­other ex­cluded li­a­bil­ity claims aris­ing from equine influenza virus and an equine mor­tal­ity pol­icy I re­viewed re­cently ex­cluded death re­sult­ing from any in­fec­tious dis­ease. As with most changes to in­surance con­tracts, these ex­clu­sions were likely added in re­ac­tion to some kind of large claim the in­surer doesn’t want to pay again. Watch for oth­ers to ap­pear in the fu­ture.

Since Sept. 11, 2001 ex­clu­sions for dam­age caused by ter­ror­ism have been com­mon. More re­cently the def­i­ni­tion of ter­ror­ism has changed to in­clude acts that in­ter­fere with or dis­rupt an elec­tronic, com­mu­ni­ca­tion, in­for­ma­tion or me­chan­i­cal sys­tem if the ag­gre­gate dam­age caused by the act ex­ceeds $25 mil­lion. If you think this ex­clu­sion won’t im­pact you, imag­ine a hack that shuts down or dam­ages the in­for­ma­tion con­tained in the com­puter sys­tem of any ma­jor bank. Dam­age could eas­ily reach the $25 mil­lion thresh­old. If your pol­icy con­tains this ex­clu­sion, and it prob­a­bly does, you won’t get help from your in­surer with restor­ing your in­for­ma­tion or re­triev­ing lost funds. You may re­cover some­thing from the U.S. gov­ern­ment’s Ter­ror­ism Vic­tim Com­pen­sa­tion Fund, but it’s a limited pool and you’ll be ap­ply­ing for funds with all of the other vic­tims. Pro­cess­ing these claims can be slow. In the mean­time, you need to be able to keep op­er­at­ing. Keep very good fi­nan­cial records and if they’re ex­clu­sively elec­tronic, keep them backed up! The ma­jor in­sur­ers of­fer a ter­ror­ism cov­er­age en­dorse­ment for a small ad­di­tional pre­mium that may be well worth it.

Help is avail­able. If you read your pol­icy and sus­pect some­thing is miss­ing, you’re not sure what to list as “sched­uled as­sets,” or you can’t fully un­der­stand it, con­sult with your agent.

Ask her to ex­plain any terms in your pol­icy that you don’t un­der­stand or that you think might keep you from be­ing fully cov­ered. In­vite your agent to your farm and walk around with her to talk about what fix­tures and equip­ment need to be sched­uled as valu­able in­di­vid­ual as­sets, what ac­tiv­i­ties might not be cov­ered in your listed cov­er­ages and whether you need to make changes to your pol­icy to fully pro­tect your in­ter­ests. If the agent can’t come to you, send pho­to­graphs. They’re good doc­u­men­ta­tion to have any­way in case of a claim.

The bet­ter in­formed your agent is about your ac­tiv­i­ties and prop­erty, the more likely your cov­er­age will be ad­e­quate to cover a sig­nif­i­cant loss. If your agent is un­able or un­will­ing to learn about your op­er­a­tion or your prop­erty, find a new agent. There are many equine spe­cialty agents whose job is to make sure that you are ad­e­quately cov­ered. Sim­ply fill­ing out an ap­pli­ca­tion and pay­ing the bill when it comes may be enough if you’re in­sur­ing a per­sonal horse or you have a very sim­ple board­ing op­er­a­tion. But if you have any­thing more com­plex, the time to find out what may not be ad­e­quately ad­dressed in your pol­icy is be­fore you need to file a claim.

Any horse­farm owner should look at the per-item sub-limit with tack and farm equip­ment in mind.

Prop­erty own­ers of­ten for­get to in­clude the value of things like barn fix­tuReS aNd tack trunks that can add up to ex­ceed POl­icy con­tents lim­its in the event of a to­tal loss Such aS a fiRe.

A horse who has had colic surgery will likely have an ex­clu­sion for fu­ture colic added to his pol­icy once the claim for the surgery is paid.

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