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Liability Insurance – The Whys and Hows

By Julie Fershtman

For years I’ve paid my insurance premiums and never had a claim. Times are tough, and I’m thinking about canceling my policy to save money. What do you think? – A.L. (Iowa)

When finances are tight, people sometimes consider canceling or reducing their liability insurance coverage. This article explains the risks.

What is Liability Insurance?

Liability insurance, as to equine activities, is designed to protect people from certain unintentional situations where someone is injured either on your property, from an act that occurs around your horse (such as a bite or kick), when your horse gets loose, or from acts that occur when someone rides your horse.

Policies exist that protect people who stable horses on their own property, horse owners who board their horses off premises, and equine industry professionals such as riding instructors and boarding stables. Examples of liability insurance policies include: homeowner’s insurance, commercial general liability insurance, farm owner’s insurance, equine professional liability insurance, individual horse owner’s liability insurance and several others.

What Does Insurance Do?
If someone brings a claim against you, and if your liability insurance policy covers that claim, the insurer will defend the matter at its expense and/or pay settlements or judgments (up to limits set forth in the policy). The company’s rights and obligations vary and are explained within the policy.

Risks of Reducing or Eliminating Coverage
Those who cancel or reduce their liability insurance do so at their peril. The risks include:

Legal Expenses: If a claim or suit is brought against you, but you have no insurance, are you ready to pay the legal fees? They could potentially cost tens of thousands of dollars, and there is never a guarantee that you will win.
Liability: People who are sued sometimes have powerful defenses, but what if your state law makes you automatically liable for an equine-related incident? In Michigan for example, Michigan’s Animal Running at Large Act imposes strict liability on horse owners or keepers for certain property damages caused by a horse “running at large.” If your horse becomes loose and damages a large truck, are you ready to pay the repair costs?

Industry Myths
Over the years, people have raised several reasons to justify canceling or reducing their insurance. As explained below, these reasons are largely based on myths.
“My state has an equine liability act so I need no insurance.” As of October 2009, 46 states have some form of an equine activity liability act. Maryland, California, New York and Nevada do not currently have one in place. A careful review of the laws will reveal that none was designed to permanently end all liabilities. People can, and do, file suits. And even if the equine statute justifies dismissal of a lawsuit, the legal expense can still be large. Consequently, liability insurance is still important.
“I have a well-written liability release so I need no insurance.” Nationwide, most states have enforced waivers or releases of liability when they are properly drafted, presented, and signed. However, even a well-drafted release is never a substitute for insurance. People who sign these documents sometimes sue. And even if the state has enforced releases, there is never a guarantee that a release will dismiss the case. Also, releases can be powerless against certain types of legal claims.
“Nobody will sue me if I’m not insured.”Some lawyers rarely sue uninsured people. Others will sue them under the belief that if the lawyer wins, he or she will eventually collect money by seizing and selling off the losing party’s property.
Benefits of Liability Insurance
No valid connection has ever been made between the poor economy and an increased risk of litigation. Nevertheless, in tough financial times, injured people may find greater difficulty securing employment after they recover from an accident. For those who own horses, horse-related businesses, or property with horses, liability insurance is always a worthwhile expense.

This article does not constitute legal advice. When questions arise based on specific situations, direct them to a knowledgeable attorney.

About the Author: A lawyer for 23 years, Julie Fershtman is one of the nation’s most experienced Equine Law practitioners, has successfully tried equine cases before juries in four states, has drafted hundreds of equine industry contracts, and is a Fellow of the American College of Equine Attorneys. To purchase her books Equine Law & Horse Sense and More Equine Law visit the CHA online store at https://www.cha-ahse.org/store/cart.php?target=category&action=view&category_id=250&pageID=3