Posted 16-Dec-2020 09:39:44
Category: Broadstone Equine

Risky Business Part I - Commercial General Liability Insurance

Working with horses provides an up close understanding of the inherent dangers of dealing with a 1,000-pound-plus animal with an instinct to blindly flee first and ask questions later.  The risk associated with the management of horses increases exponentially for anyone who chooses to be paid for their services, such as boarding, teaching, training, and hosting competitions and clinics.  With those activities now you are responsible for not only your own safety, but also for the safety of your clients and their horses, anyone they happen to bring along with them, and even the safety of uninvolved parties who just happen to be in the vicinity. And no matter how hard you try to keep everyone safe, if the unthinkable happens you may face a lawsuit that could bring an end to your business, as well as drain your personal and business finances and damage your reputation.

Some horse people do not even realize that they are in the professional horse business.  Giving a few lessons each week to local beginners or taking in a boarder as a companion for your horse, which in the end barely brings in a few thousand dollars a year, may not appear to be a commercial operation—but they are.

Or maybe you don’t even own the farm where you work, but instead operate out of one or more locations owned by other people. Even if that is the case, and/or your students work off most of their lesson fees helping out in the barn in a barter system, or the boarder takes primary responsibility for the daily care of their horse, these are still considered business or “commercial” activities.   And if all you have is a standard renters, home, or farm owners’ policy, most likely you do not have coverage for these commercial activities—meaning that if something goes wrong, you could find yourself in a serious bind. 

Common Scenarios

* You’re working with a client. You put her on one of your more solid school horses to give her some valuable experience on how a well trained show hunter does their job.  Unfortunately the horse zigs and your student zags, and she is injured.

* Your young client brings her father along to watch her practice her test for the upcoming dressage show. While her father is helping get the horse ready, it kicks out at an especially irritating fly, but instead hits your student’s father.

* You hold a schooling competition at your farm. A competitor has an unplanned dismount while on cross-country and their horse runs back toward the trailer area, colliding with a spectator, or worse, running into the road and is hit by a car, damaging the car and injuring the driver and passengers.

* A boarder walks into the pasture to catch his horse and is injured when he inadvertently gets in the middle of a minor melee amongst several of the horses.

These are very real possibilities, and in all four cases a lawsuit is a definite concern. An important point to remember is that unfortunately you can be sued for anything, even if it is far fetched or unreasonable.  A boarder can be kicked by his own ornery horse, which has a history of dangerous behavior, and believe it or not he may still sue.  Regardless of how outlandish the claim, it will probably cause you grief, and may involve attorneys, and of course their fees.

In addition, while your client may have no desire to sue you, if their personal health insurance company representative finds out that they were injured while working with you, the health insurance company may “subrogate,” which means that while they client’s insurance company pays their medical bills, the company may then sue you for compensation claiming you were negligent in causing the injuries. Or worse, your client may not have any health insurance at all, in which case they may feel they have no choice but to pursue you legally for the damages.  

So how do you protect yourself?

Commercial General Liability Insurance

Like any other business person, you need to seriously consider buying commercial general liability (CGL) insurance. Simply put, by purchasing general liability coverage you pay a premium in order to transfer your risk to the insurance company.  

Designed for professional horse people, the CGL policy should help protect you if a third party claimant, such as a client or spectator, is injured or their property is damaged in the course of your covered commercial activities such as teaching, boarding, training, or hosting competitions or clinics. It should help pay lawyers’ fees to defend you, even if the suit is groundless, false, or fraudulent, and should also help pay the covered damages to a claimant awarded by a court if a decision is made in favor of the plaintiff, up to the policy’s occurrence limit.

It is important to note that CGL insurance is not the same as Care, Custody and Control (CCC) insurance. CCC is meant to help protect you in the event a non-owned horse in your care, such as a boarded horse, a horse in training, or horse you are trailering for a client, is injured or killed and the owner feels you were responsible and sues you for negligence, wanting compensation for vet bills or the replacement cost of the horse. This coverage can be attached to a CGL policy and will be addressed in our next installment.

A CGL policy is available for multifaceted businesses such as a farm that boards, has horses and riders in training, and/or conducts several clinics and competitions each year. It is also available for independent professionals such as trainers or instructors who do not have a home base and instead go to their clients, possibly operating out of several facilities. 

The premium for a CGL policy depends on the types of equestrian exposures, along with the amount of activity involved in each. The limits you may generally choose for the policy start from $500,000 or $1 million per occurrence with aggregate limits reaching up to $1 million or higher.

So, how do you choose which limit is enough for your situation?  Awards for damages today can easily run into the millions due to the costs of medical care. In cases of permanent injury, millions of dollars of damages is not an unusual, so you should consider purchasing the most coverage you can afford and that will help protect your assets.

Which brings up the question of your personal financial situation and the set up of your business.  First and foremost, you need to protect your personal assets.  One effective way to do this is set your business up as a separate legal entity such as a Limited Liability Corporation (LLC), or Corporation.  What this does is help put your personal assets, such as your farm, car, and cash, possibly out of harms way. It is not a guarantee, but it is a good place to start. The paperwork required to set up these entities varies state to state, but is usually straightforward and relatively inexpensive. Consult an attorney to determine what structure will best protect you and to help you set it up.

Next, find a well qualified insurance agent that specializes in equestrian coverages. The agent should chat with you to get an idea of your business. Then in order to obtain a quote you will need to complete an application detailing all of your commercial equine activities. It is imperative that all of your horse-related activities be included on the application, no matter how limited the exposure, because you will not be covered for those that were not disclosed to and approved by the insurance company. You may only sell one horse a year so you don’t consider yourself to be in the business of selling horses, but in order to have protection for that activity, it must be noted on the application and approved by the insurance company.

Also, there are some activities that the insurance company are more difficult and expensive to cover such as guided trail rides or pony rides, as well as activities that the underwriter will require additional paperwork in order to consider offering coverage, such as therapeutic riding programs.

Within a day or two of receiving the completed application your agent should be able to provide you with a quote. If it is acceptable to you, it may be possible to bind coverage immediately. For most premiums a payment plan should be available. Overall it is a pretty painless, and very important, process.

For more details on Commercial General Liability insurance, visit the Liability page, and the FAQs page on the Broadstone website.

Look for Part 2 of this three-part series soon.

**These blogs are for basic information purposes only, and do not constitute advice from Broadstone Equine Insurance Agency. Contact our office directly at 888-687-8555 or to speak with an agent for complete and current information regarding all coverages.

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