Top Five Foolish
Reasons Not to Get Liability Insurance
If you have
an equine business, no matter how small or unprofitable it is,
you need commercial liability insurance. Period. Here are some
of the common reasons we hear about why trainers, boarding
stables, and other equine businesses do not have liability
insurance, and why those reasons don't make sense.
(1) I Don't Need Insurance Because
All of My Clients Sign Liability Releases
Liability
releases are not a substitute for liability insurance,
because insurance and contracts play very different roles.
Contracts that include liability releases serve a number of
valuable functions. They help set appropriate expectations for
a business relationship so that the parties are less likely to
have disputes. Contracts also provide the parties with legally
enforceable rights. Liability releases discourage injured
parties from suing and also help prevent them from prevailing
in a lawsuit.
In contrast, insurance serves other valuable functions. If you
are sued and the claim is covered by your insurance policy,
your insurer will manage your defense and pay for your legal
fees and court costs. Without insurance, if you are sued, you
will have to pay for your legal defense out of pocket. The
cost of defending an average civil suit easily runs into the
tens of thousands of dollars, and an average retainer for a
civil litigation attorney in a relatively small case is
$10,000 - $20,000. Unless you have a contract providing for an
award of attorneys' fees and costs to the winner of a lawsuit,
you will have no way to recoup the cost of your legal defense,
even if you ultimately prevail in the lawsuit. Representing
yourself as a defendant in a lawsuit is simply not a viable
option, as the other side's attorney will certainly use your
lack of legal expertise to his or her client's advantage, and
many judges are impatient with do-it-yourself litigants.
Your insurance will also cover the cost of any judgment that
is issued against you in a lawsuit (up to your policy limits),
provided that the claim that is the subject of the lawsuit is
covered by your policy. Without such coverage, you will be
forced to pay the judgment out of your own pocket, leading to
potential financial ruin. If you cannot afford to pay the
judgment and default in payment, the judgment holder can
garnish your business' income and seize your business' assets
to pay the judgment. If you do business as a partnership or
sole proprietorship rather than a corporation, your personal
assets will also be subject to seizure and your wages can be
garnished to pay the judgment. Not all legal judgments are
dischargeable in bankruptcy, either.
(2) I Don't Need Insurance Because My
State Has an Equine Activity Statute
Equine
activity statutes are often misinterpreted as "get out of
lawsuit free" laws. In reality, equine activity
statutes are limited in scope and other than serving to
discourage some potential plaintiffs, they do not prevent
lawsuits at all. Rather, much like a liability release, equine
activity statutes provide a potential affirmative defense to
claims in a lawsuit. As described in (1) above, defending a
lawsuit and paying a judgment (functions typically performed
by an insurer) can be financially ruinous.
(3) I Don't Need Insurance Because I Don't Have Very Many
Clients
If you are accepting compensation for boarding, training,
lessons or other horse-related services, you are in business.
It only takes one client to sue you. Horses are very
unpredictable and accidents can happen even in the safest
possible environment. Even if you have only one client and you
feel confident that they would never sue you, their insurance
company or family may sue you if they are injured or killed in
connection with your activities.
(4) I Can't Afford Liability
Insurance
Many horse-related businesses are not particularly lucrative,
and therefore it is often tempting to go without insurance
because it seems cost-ineffective. However, given that the
cost of defending just one lawsuit could be tens of thousands
of dollars and all of your assets (however modest) are at
risk, you really can't afford NOT to have insurance.
(5) I Don't Need Insurance Because I
Don't Have Any Assets
Closely related to (4) above, this excuse also doesn't make
financial sense. If you are not making any money and have very
few assets, your financial situation makes it even less likely
that you can afford the high cost of defending a lawsuit.
Insurance serves to protect the assets that you do have.
