The ‘Ins and Outs’ of Liability Insurance
What Every Equine Professional Should Know
November 1, 2012
In a world where the unknown and unexpected can happen at any moment, protecting yourself with adequate levels of insurance coverage is a must for everyone; it is especially important for the equine professional. As a professional you are committed to making equestrian activities as safe as possible for all concerned – your staff, your clients, visitors to your facility, even the horses themselves – but, despite every effort extended and every precaution taken, no one can completely eradicate the chances for an accident. With all the other duties and responsibilities on your plate, sometimes one of the last things you concern yourself with is your insurance coverage and at what level, exactly, you are being protected.
USHJA has gathered representatives from our three insurance presenting sponsors – Markel, LEGISequine.com, and Equisure – and asked them to elaborate a bit about specific items within your liability policy and how they affect the coverage you have. We provided a list of questions, and over the course of the next several months in this newsletter, we will provide their detailed feedback from which you can obtain helpful and useful information concerning your own coverage.
Insurance can be a complicated matter and often, having a working knowledge of basic industry definitions goes a long way in helping you understand your coverage and whether or not you are adequately protected. In this initial article, basic definitions surrounding your liability coverage, specifically the topic of Additional Insureds, are discussed.
Q – What exactly is an Additional Insured?
First, we must place a distinction between providing a Certificate of Insurance and providing a Certificate of Insurance naming an Additional Insured. If an equine professional runs his operation out of a leased or rented facility, it is customary that the facility owner will require at least a Certificate of Insurance, and more likely, they will require a certificate naming the facility as an Additional Insured on the equine professional’s liability policy. It is critical you understand the distinction. As Marnye Langer, Managing Director of LEGISequine.com explains, “a Certificate of Insurance is a document that provides proof of insurance. It shows a third party exactly what type of insurance a person or entity holds (general liability, bodily injury, property damage, etc.), and it lists the limits of that coverage (per incident and aggregate).” Diane Lesher, President of Equisure adds, “It is important to remember that a certificate of insurance bestows no legal right upon the certificate holder. It is provided merely for informational purposes.”
Q - What does it mean to add an Additional Insured and how does it affect my liability policy?
Being asked to name an individual or an entity to your liability policy as an Additional Insured, however, is an entirely different matter. Debi DeTurk Peloso, Markel horse insurance specialist, explains it this way, “An Additional Insured is an entity or individual that is added by endorsement to a liability policy. Once added, the Additional Insured is protected by the policy coverages as an Insured on behalf of the operation conducted by the Named Insured (policy holder).”
Adding an Additional Insured to your policy impacts your insurance coverage in a number of ways. “The policy must now defend and pay judgment on behalf of the Named Insured (policy holder) and the Additional insured(s),” says Markel’s DeTurk. How does that impact you if the owners of the training facility you lease ask you to name them as an Additional Insured on your liability policy? “It actually extends one party’s liability coverage to another party,” explains LEGIS’ Langer. If, for instance, an accident occurs at the facility (which has been added to your policy as an Additional Insured), “the costs for legal defense and any judgment awards are potentially borne by your insurance carrier – up to the limits specified by your policy,” Langer continues. This can potentially be the case regardless of whether you, or any other member of the facility staff unrelated to your business, are ultimately found to be at fault for the accident. Equisure’s Lesher cautions, “It is in the best interest of the Insured to know the difference between a certificate holder and an Additional Insured, and not to provide Additional Insured status unless they truly understand when it is warranted.”
Q – What circumstances warrant the addition of an Additional Insured, or multiple Additional Insureds?
“Adding an Additional Insured to a liability policy requires an insurable interest on the part of the entity requesting addition,” says DeTurk. Insurable interest is defined as ‘an interest in property such that loss or destruction of the property could cause financial loss.’ She goes on to clarify that in the case of an equine professional, “those having an insurable interest in the insured’s operation would be the legal owner of the premises on which an insured operates, or an independent instructor working on the insured’s behalf.”
DeTurk goes on to point out that if the property you are utilizing for your operation has multiple owners, or multiple locations, you may need to list multiple Additional Insureds on your policy. This can significantly impact the amount of actual protection you have for yourself because your policy must now defend and potentially pay out on behalf of multiple entities. Because of this, De Turk warns, “Additional Insured status should be conferred only to those with legitimate insurable interest.” Langer concurs, and indicates that in today’s world – from rental companies to independent service providers –almost everyone is asking to be named as Additional Insureds on other entity’s policies. “The real question is do you want to extend liability coverage just because it is requested,” Langer states. “Adding an entity as an Additional Insured is negotiable and should be done only after careful consideration,” she adds. The key is to establish whether or not insurable interest applies on the part of the entity requesting to be named, and your agent can readily assist you with this.
The other critical element is to remember that “the Additional Insured(s) shares in your policy limits,” says Lesher. A liability policy is issued with a Per Occurrence limit and an Aggregate Limit of coverage. A typical example of a policy’s limits would be $1 million occurrence/$2 million aggregate. As its name implies, the Per Occurrence limit is the maximum amount the policy will pay out for any one occurrence (incident or claim) during the policy period. The Aggregate Limit represents the total amount the policy can pay out during any one policy term. “Once the Aggregate Limit of a policy is exhausted, there are no funds left for the remainder of the policy term,” explains DeTurk.
In the next issue, we will look at commercial liability policies and specifically examine how adding an Additional Insured affects the facility owner or event organizer.
In the meantime, now might be the perfect time to revisit your current policy. Sit down and talk it over with your equine insurance specialist. Make sure you fully understand the legal definitions associated with your policy and how they affect your coverage. Make adjustments, if necessary, to ensure you, your professional operation, and your family are maximally protected.
Any one of our trusted presenting sponsors is standing by and ready to answer your questions and assist you in any way to ensure you are maximizing your protection. Their specific contact information can be obtained by clicking on the links below.
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