Equine Insurance Part III- Mortality Insurance and Conditions Precedent

 

In my last post, I discussed the basis of Equine Mortality Insurance, a type of life insurance for horses. For those who have not had an opportunity to review Part I, you may want to take a few minutes to review the article here before we dive into this article’s more in depth look at conditions precedent. Most insurance policies put conditions, called “Conditions Precedent,” on the insured before coverage for the loss is established.

When it comes to equine mortality insurance, conditions precedent typically include the following:

  1. Sound Health at Policy’s Inception: This requirement sets the stage for the policy by requiring the insured horse to be healthy and insurable at the inception of the policy. This requirement prevents coverage for a horse that dies or is humanely destroyed by reason of accident, illness, injury, or condition which pre-existed the policy’s inception.
  2. Ownership: This condition requires the insured to be the sole owner of the horse and as soon as the horse is sold, the coverage terminates. This condition can become an issue when the horse is owned by a group or organization but the named insured is only one of those members. Most policies have moved away from completely voiding coverage but will instead reduce the coverage by the percentage of ownership. Therefore, if the policy has an insurable interest of $100,000 but the named insured only owns 50% of the horse, if there is a covered loss, the insured will receive payment of $50,000. However, not all policies are the same and the insured should only seek to insure the ownership interest they actually own.
  3. Geographic limitation: Many insurance policies require the horse to remain in the Continental United States and Canada. If a horse regularly travels outside these locations, it would be best if the insured communicates with the insurance agent before a loss occurs as they  may be denied coverage of the claim.
  4. Immediate Notice: Most policies require immediate notice of illness, disease, lameness, injury, accident, or physical disability of the horse. Generally, in insurance law, the insurance carrier must show that the insured’s lack of prompt notice resulted in prejudice to the carrier. However, with equine mortality insurance, there is an  exception to the rule. The insurer in an equine policy does not need to show they were prejudiced by the insured’s failure to provide immediate notice. The reasoning behind this position is that insuring animal life is unique and the only way a carrier can protect itself is through immediate notice. By requiring immediate notice, the insurer can investigate the cause of illness and determine whether subsequent losses are covered, evaluate whether the horse is receiving adequate treatment or, alternatively, assume control over the treatment, and allows the insurer to have its own veterinarian examine the horse. Consequently, it is important for an insured to notify the carrier of any illness or injury, without regard to the apparent severity of the disease.
  5. Important Notes: Most modern equine mortality policies include language which imputes responsibility onto the individuals who have actual custody of the horse. Often, in the equine industry, the insured does not have possession or custody of the horse and may not have personal knowledge of the horse’s welfare. The policy language of the “Important Notes” section imputes responsibility onto the insured to comply with conditions precedent regardless of whether the insured lacks personal knowledge of the horse.

It is important to read insurance policies to gain a full understanding of all the terms and conditions. In the event you have questions or issues with your equine insurance, you should consult with a qualified professional.

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