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Common Mortality Insurance Disputes

Lessons in Avoiding Legal Clashes with Insurers

Earlier this year, Julie Fershtman of Foster Swift Collins & Smith, PC (www.fosterswift.com) presented “Horse Sense in a Litigious World” for the UPHA webinar series LET’S TALK ABOUT THAT. Sponsored by Equidae Insurance, this now-on-demand presentation shared her legal perspective on the equine industry for horse and farm owners.

Within this blog, we share Ms. Fershtman’s discussion of common mortality insurance disputes. We’ll be presenting more of Ms. Fershtman’s insights in subsequent blogs, so check back monthly and gain a wider legal understanding of the equine industry.

If you are a horse owner or a trainer with an inventory of client horses under your care, custody, and control, most likely you are familiar with equine mortality insurance. Once purchased, little thought is usually given to this type of insurance with the idea that it most likely won’t be needed. However, disputes can arise if attention isn’t properly paid before purchase of the policy and throughout the policy life – and these disputes may not become apparent until a claim is made. Most of them can be avoided.

Clashes with Insurers can be avoided if you heed the lessons from the six most common mortality insurance disputes.

1. Late Notice: If you have a horse insured with equine mortality coverage, notify the insurance company immediately if the horse is injured, lame, or ill -- even in the case of a little ouchy medical colic treated with Banamine. Equine insurance policies often require that the company must receive “immediate” notice of injury, illness, or disease, and policies will provide a telephone number to call 24 hours a day to get this notice. You may be thinking, "Won't that hurt me when it comes time to renew? The insurance company will have a record of medical treatment and will either not renew, or they’ll increase my premium." Not necessarily. Some equine insurance company underwriters will tell you that when it comes time to renewals, if nothing further happens beyond a medical colic, there usually won't be a problem for renewal. By comparison, if the horse has received surgery or if the horse is treated with certain preventatives, you may get an exclusion. But the takeaway for this point and the number one dispute with equine mortality insurance companies is when the company believes you did not give proper notice, contrary to what the policy requires.
   
   Years ago, I litigated a case in federal court involving an accomplished Saddlebred. He had several colic episodes that were not reported to the company, and he ended up being put down after complications from a colic surgery. The owner left a voicemail message with the agent but didn't notify the insurance company. The agent was on vacation and returned days later, only to find the message and file a claim after the horse was already buried. Because notice was given very late, the insurer denied the claim. As a result, the horse owner sued the insurance company. Representing the insurer, we fought the insured in Court and won based on the late notice given to the company in violation of the policy. The lesson? It’s better to give the company notice.
   
   For trainers and boarding stables: is it your business to know that your clients have equine mortality insurance on their horses? In my opinion, yes. Trainers and stables can require horse owners to give this information -- along with the insurance company’s emergency contact number -- in the boarding and training contracts. Trainers and stables, if they know this information, can contact the insurance company if a horse under their care, custody and control becomes injured, lame, ill, or suffers a disability of some kind. Making sure that the company has this notice is a great service for the customer -- especially if that customer is unavailable when an event occurs and cannot make the call himself. Stay a step ahead, keep the company notified, and save a lot of trouble.
    
2. Value Issues: Value issues are not typically hot disputes because most insurance companies these days sell agreed value policies where the policy stipulates a certain value of the horse. Underwriters can do some checking, looking into the horse’s show record and history. Value issues may become a problem if it's later determined that you lied to the company about the horse’s history and accomplishments that justified a certain value. I worked on a case where the application said that the horse had just won a huge national competition, which justified the insurer in approving a high value for the horse; in truth, however, the horse never even competed at the show. That was a big misrepresentation.
   
   With “actual cash value” policies, value issues can arise if the insurance company believes your horse is worth less than the value you placed on it. If you buy an actual cash value policy, make sure that all statements regarding the horses show history or breeding history are truthful and complete. This can help prevent a value dispute.
    
3. “Proper Care and Attention” Clauses: Equine mortality policies sometimes include conditions to coverage, including the “proper care and attention” clause. For example, what happens when you want to euthanize your horse because it's been consistently lame, but -- when you ask for insurer approval so that you can collect on your mortality insurance -- the insurance company believes your horse’s life can be saved with a pastern arthrodesis surgery? The company may raise issue with you and deny coverage if you euthanize your horse and don't undergo procedures that the company deems necessary.
   
   Suffice it to say, it's difficult to resolve and prevent all these disputes, but it helps to take the time to review and understand your equine insurance policy. Understand that it may have a proper care and attention clause and keep the lines of communication open between you and your insurance company. If a dispute should occur over you not providing procedures that the insurance company believes are important, for example, your attending veterinarian can speak to the insurance company and discuss the matter. That could potentially help prevent a dispute.
    
4. Euthanasia: Most likely, your equine mortality policy has a clause stating that euthanasia cannot be performed unless the insurance company has approved it in advance. That is another reason to keep the lines of communication going. Exceptions have existed regarding people who don't receive company approval for euthanasia on a horse, but typically those are serious emergencies. Remember that the insurance company's advance approval is important if your horse has mortality insurance and you’re considering euthanasia.
    
5. “Sound Health” Clauses: You will find that every application for mortality coverage asks whether the horse is sound as of the date of application. You may be thinking, “Well, he looks good today. I'm going to check that off.” But what you're not telling the company is that a week ago, your horse required a special veterinarian visit to treat lameness or illness.
   
   You may have a dispute if you tell the insurance company that your horse is in sound condition, but it really isn't because of an underlying issue. Some applications ask if the horse has undergone any joint injections or other types of specialized maintenance. “Sound health” disputes have occurred when the company had reason to believe that the insured horse actually was not sound at the inception of the policy.
   
   I litigated a case involving a Saddlebred that was de-nerved before undergoing a pre-insurance veterinary inspection where the veterinarian signed off on a Veterinary Certificate of Evaluation stating that the horse was sound. Unfortunately, the trainer selected a veterinarian to complete this form who knew nothing about the horse and was not the regular attending veterinarian. The regular attending veterinarian, if asked to fill out this form, would have noted that the horse had been de-nerved. The failure to provide truthful and complete information caused a coverage problem.
    
6. Post-mortem requirements: Chances are good that your mortality insurance policy requires a necropsy (autopsy) be performed if your horse has been euthanized, or even if it is found dead. If you ask your insurance company to waive this necropsy requirement, be sure to receive confirmation of that fact in writing (an email or a text, for example). People who bury their horses or have them disposed of without doing the required post-mortem usually find themselves in a dispute with the insurance company.

After all of this, you’re probably wondering why in the world the insurance company involves itself in decisions made regarding the insured horses care and attention. The reason is, from the moment that company has issued a mortality insurance policy on your horse, that company has a vested financial interest in the horse. By the terms of that policy, that company has the right to learn about major decisions involving your horse, such as necessary veterinary attention and, of course, euthanasia. Keep that in mind. The company cares and your policy allows both of you to keep the communication going.

Julie Fershtman (www.equinelaw.net) is one of the nation’s leading counselors and litigators in Equine Law. Her practice crosses all equine breeds and disciplines, and serves stables, insurers, industry professionals, associations, and businesses across the United States. Her expertise includes contract law as well as business, fraud, and insurance litigation.

Ms. Fershtman’s professional distinctions are numerous and include being listed in The Best Lawyers in America, 2013-2021. She has written more than 400 articles on Equine Law and is published in numerous magazines nationwide. Ms. Fershtman is also the author of four books, including Equine Law and Horse Sense published by the American Bar Association in 2019. This book has received four national book awards and is available for purchase through Amazon.

The one-hour webinar “Horse Sense in a Litigious World. Let’s Talk About That” featuring Julie Fershtman and sponsored by Equidae Insurance, is now available on-demand to UPHA members through their website: https://www.uphaonline.com/. We encourage UPHA members to visit this website and access a library of Equidae-sponsored webinars with topics ranging from retirement planning to taxes to structuring a business to insurance hot topics. For non-UPHA members, stay tuned to this page as we bring some of these topics to you.

The views, information, or opinions expressed in this blog are solely those of Julie Fershtman, and do not necessarily represent those of Equidae Insurance.

For more information about equine or farm insurance, or if you have a topic you’d like to see covered in our blog, please contact us directly at: Equidae Insurance, Inc. 608 Virginia Street East, Suite 302 Charleston, WV 25301 p. (304) 346-1198 f. (304) 345-3535

Stacey Halloran, Agent
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