So you keep your horse at someone else’s farm. Do you know who should be paying the insurance?
**In the article below we will refer the owner of the horses as the “horse owner” and the owner of the farm looking after the horses as the “barn owner”.
Not everyone who owns a horse owns a farm. Many horse owners contract with a farmer who has extra space in their barn to board or look after their horses. Effectively the owner of the horses and the barn owner reach an agreement concerning feed, veterinary services, transport and other considerations to look after the horses over a specific time frame.
One of those considerations in Insurance. In some rare, but potentially devastating situations, it can certainly be the most critical. Two such cases are outlined below to help illustrate how coverage works in each. For each example, we have ten horses in the barn with a value of $10,000 per horse. The total value of the horses is $100,000.
- There is a tornado that blows through, knocking down the barn which collapses onto and kills the horses. In this instance the insurance company for the horse owner pays the loss to the horse owner of $100,000 and the claim is finalized under their Farm Livestock Coverage. The claim is finalized, and the matter is closed because there is no potential liability to the barn owner for a tornado. As there was no legal liability to pay there would be no payment made under the Non-Owned Livestock Liability Coverage for the barn owner.
- There is a fire that destroys the barn and kills the horses. In this instance, the insurance company for the horse owner pays the loss to the horse owner of $100,000 and the claim is finalized for the horse owner under their Farm Livestock Coverage. Then the fire marshal and insurance companies complete their investigation into the fire, and they determine that the cause of the fire was an improperly installed and wired heating unit in the shower room. The heating unit was installed and wired in by the barn owner. In this case, the insurance company for the horse owner, having paid their $100,000 loss to the horse owner, commences a lawsuit against the barn owner for causing the loss to the horses. This is known as subrogation. The barn owner advises his insurance company of the lawsuit and the insurance company for the barn owner defends the barn owner against the lawsuit under the Non-Owned Livestock Liability Coverage and, if needed, pays the lawsuit to the insurance company for the horse owner.
The causes of loss in the above examples may change, but the function of the two types of insurance do not. The reality is, even if the contract between the horse owner and the barn owner has language in it related to the coverage for the horses, the contract barn owner can still be held legally liable for losses to the horses.
For the horse owner, the coverage that they need is Farm Livestock Coverage. We work with the horse owner to discuss the location and details of the other farm location, the length of time of the horses will be there, the number of horses and their value while they are at the farm. We develop a coverage level and discuss the coverages applicable to the horses. There are coverages available for fire, lightning, the collapse of buildings and other standard perils that can cause the death of the horses. In addition to these standard coverages, there is the ability to add optional coverages for entrapment, consequential loss and heat prostration. Consequential loss is a loss caused by an interruption of the heating or ventilation systems, and Heat Prostration coverage is for loss caused by heat exhaustion due to extremes in atmospheric temperature. A full review of all the perils, the number and value of horses allows Excalibur to ensure that the proper coverage is in place.
This brings us to the second side of this situation, what coverage does the barn owner need concerning the fact that the horses belong to the other farmer?
The coverage that the barn owner needs is Non-Owned Livestock Liability. This coverage is an endorsement of the Farm Insurance policy for the barn owner. This coverage means that the insurance company for the barn owner agrees to pay should the barn owner become legally obligated to pay because of the barn owner’s legal liability for physical injury causing death to horses not owned by the barn owner.
Farm livestock Coverage and Non-Owned Livestock Liability Coverage make up an integral part of the insurance program for contract barn situations. In many cases, the Farm Livestock Coverage will pay for the loss to the horses and that will be the end of the situation but the reality is that both the horse owner and the barn owner need their own specific coverage for these horse operations.
Please give one of our Excalibur Farm Insurance specialists and call and we can review your needs and discuss this coverage.