Equine mortality and major medical insurance policies often contain a provision stipulating that any action or proceeding under the policy must be brought within a certain period of time, typically one year. 

Absent a contractual provision to the contrary, the statute of limitations applicable to an action based in contract will apply to an action under an insurance policy (for example, an insurance coverage dispute). 

Are contractual limitations periods in insurance policies enforceable?  Generally, courts will enforce the limitations provisions unless they violate limitations-related statutory law in the state the policy was issued or delivered, or in the state where the law suit is brought.  In rarer instances, courts have refused to enforce insurance policy limitations periods because they were judicially interpreted to be "unreasonable."

Statutory prohibitions.  Some states have statutes voiding limitations periods that are shorter than a given period of time.  Thus, the limitations-related statutes in the state in which you are seeking to enforce your policy must be consulted to determine the applicability of a given provision.  Under Texas law, any contractual limitations period is void if it is shorter than two (2) years.  See Texas Civil Practice & Remedies Code, Section 16.070(a).  In Maryland, an insurance or surety contract cannot set a shorter time to bring an action under the contract than required by the state where the insurance contract is issued or delivered.  See Section 12-104 of the Maryland Insurance Code.  Maryland has a 3 year statue of limitations for contract actions.  Thus, a one-year contractual limitations period in an equine insurance policy would be void in Texas and Maryland.  Absent such statutory prohibitions, however, the contractual limitations period in the insurance contract will be enforced.

Does the limitations period in the policy cover my tort-related claim of "bad faith" denial of coverage or "unreasonable delay"?  Probably.  Many insured litigants argue that their tort claims such as bad faith are not covered under the contractual limitations period because the tort claim is not a "claim under the policy."  Although courts have entertained (and sometimes agreed with) this argument, according to insurance fraud lawyer Rick Hammond, the weight of the cases tend to enforce the statutory limitations period for all claims related to the policy.  Of course, the contractual limitations period will not apply to any claim if it is void under state law, as discussed above.

 

 

 

No.  In states that have adopted the Uniform Commercial Code (UCC), courts will probably hold that the possessory stableman’s lien is superior, even if the bank’s UCC Financing Statement was filed before the stableman took possession.

When Does the Conflicting Lien Situation Arise?  If someone borrows money to buy a horse or horses, the bank will often require the borrower to sign a security agreement pledging the horse(s) as collateral on the note.  When the borrower stops making payments on the loan, the bank normally will repossess the horses and sell them to foreclose on the note.  In some instances, when a borrower stops paying the bank, they also stop paying the boarding facility that is taking care of their horses.  The nonpayment of board gives the boarding facility a statutory stableman’s lien on the horse(s) as long as the boarding facility maintains possession.  Let’s assume the bank’s lien was first in time–i.e. the bank lent the purchase money to the owner and filed a UCC Financing Statement before the boarding facility took possession of the horses. The question becomes, who is entitled to the first lien on the horses…the bank or the stableman?  Also, is the bank entitled to come onto the boarding facility’s property and repossess the horses?

Under Section 9.333 of the UCC, the Possessory Lien Has Priority.  Section 9.333 and its Official Comment under the Texas version of the UCC states that "the possessory lien has priority over a security interest unless the possessory lien is created by a statute that expressly provides otherwise…the possessory lien takes priority, even if the statute has been construed judicially to make the possessory lien subordinate."  This means the bank’s lien, even if prior filed, is subordinate to the stableman’s lien.

WARNING–Courts May Follow Old Cases.  Even though the UCC is clear on this, a trial court in one of my cases found that the stableman’s lien was subordinate to a bank’s security interest.  The court cited Blackford v. Ryan, 61 S.W. 161 (Tex. Civ. App. 1901)(holding that a bank’s pre-existing security interest is superior to an agister’s lien when a horse was placed in a stable without the bank’s knowledge).  This case, as well as several other pre-1930 Texas cases with similar holdings, interpreted the common law agister’s lien and not the statutory lien under Section 70.003 of the then non-existent Property Code.  These cases were also decided before Texas adopted the UCC.  But the cases are still presented in Texas Jurisprudence and other legal treatises as being current law.  There are many cases that have found the possessory lien to be superior when it comes to garagemen keeping automobiles under Section 70.003, but no Texas cases involving stablemen.  Despite the current lack of appellate review on the issue, I think most courts will defer to the UCC and the car cases and hold that the stableman’s lien is superior.

In most states, trainers do not have an express statutory lien for unpaid training fees and training-related expenses unrelated to the care of horses such as show entry fees and hauling.  This means, unless a trainer has a written security agreement signed by the owner providing a lien on the horses in the event of nonpayment of training fees, the law is unclear as to whether a trainer can hold or sell the owner’s horse when training fees remain unpaid.  You need to check your state’s statutes, however, as some states’ stableman’s liens do expressly provide a lien for training services. Oklahoma’s stableman’s lien statute, for example, expressly includes a lien for training services.  You can find your state’s lien statutes on Equine Law and Horsemanship Safety.

What if My State Has a Stableman’s or Agister’s Lien Statute but No Trainer’s Lien?  Currently, every state except Rhode Island has a stableman’s or agister’s lien statute.  These statutes provide those who care for, board, pasture, or stable the horses of another with a lien on the horse if charges related to the care of the horse are not paid.  Charges related to the "care" typically include the monhtly board rate, supplements, wormer, vaccinations, farrier, and veterinary services paid or advanced by the caregiver on behalf of the owner, and other services related to the care, health, and maintenance of the horses.  See Carney v. Wallen, 665 N.W.2d 439 (Iowa Ct. App. 2003)(holding that a trainer who provided only training and did not also provide board or other services related to the "care" of the horses could not obtain a stableman’s lien because training services do not pertain to actions or services performed in the course of acting as a stable keeper).

Continue Reading Do Horse Trainers Have a Lien on Horses they Train for Unpaid Training Fees?

A gentleman recently told me that his stallion had gotten loose, gone onto his neighbor’s unfenced property, and "worried" the neighbor’s mares.  The neighbor shot at the stallion with a shotgun, and stated that the police told him he was justified in doing so because the stallion was "trespassing on his property."

Is the stallion owner liable for property damage or injury to persons caused by his stallion?  Generally speaking, not unless the stallion owner knowingly let the stallion roam free.

Important to this analysis is that Texas is, generally speaking, still an open range state.  That is–livestock may still roam at large in Texas with two exceptions:

  1. Public highways.  The Texas Agriculture Code states "[a] person who owns or has responsibility for the control of a horse, mule, donkey, cow, bull, steer, hog, sheep, or goat may not knowingly permit the animal to traverse or roam at large, unattended, on the right-of-way of a highway." Tex. Agric. Code § 143.102 (Vernon 2004)(emphasis added). The statute defines a "highway" as "a U.S. highway or a state highway in this state, but does not include a numbered farm-to-market road." Id. at § 143.101. Therefore, U.S. and state highways in Texas are effectively considered closed ranged. Conversely, the 40,000-plus miles of farm-to-market roads in Texas are unaffected by this statute.
  2. Stock Law Counties or Areas.  Chapter 143 of the Agriculture Code permits local elections to adopt a law (a.k.a. "stock law"), where a person may not permit any animal of the class mentioned in the proclamation to run at large in the county or area in which the election was held. A typical stock law will prohibit horses, mules, donkeys, sheep, goats, and cattle from running at large.

    As expressly provided by the Code, some counties in Texas have enacted county wide stock laws, yet others have chosen to elect stock laws only in certain precincts or areas within said county. Unfortunately, there is no statewide index that traces the counties or areas where stock laws have been passed.

Continue Reading Is a Horseowner Liable for Damages if a Horse Gets Loose?

Veterinarians may have several legal defenses to claims of malpractice. One of the most important procedural defenses is that of the statute of limitations. A statute of limitations is a state law that puts a limit on the amount of time a plaintiff has to file a lawsuit, usually from the time the injury occurred or when he or she discovered the injury. If the statute of limitations runs out before the lawsuit is filed, then no legal action may be taken.  Any attempt to do so will result in the judge dismissing the suit without hearing the merits of the claim. In order to "toll" the statute of limitations (i.e. make the limitations period stop running), the plaintiff must actually file suit.  Demand letters sent to the vet or the verbal notification of a future claim do not act to toll the statute of limitations.

With veterinary malpractice cases for injury to or death of a horse, the applicable statute of limitations may be based on claims for injury to personal property in that state, as domestic animals are considered personal property of the owner.  Those cases usually have a statute of limitations of four (4) years.

For states that include veterinarians under the list of professions covered by malpractice statutes, they may be based upon statutes that set time limits for malpractice. These statues of limitations are usually shorter, typically two (2) years.

For instance, Georgia law provides a two (2) year statute of limitations for medical malpractice actions.  However, veterinarians are not included in the definition of malpractice actions, because those involve injuries to people only.  Georgia has a four (4) year statute of limitations for injuries to personal property, which would arguably apply to a veterinary malpractice claim brought in Georgia.

Importantly, the manner in which a plaintiff pleads his or her claim (i.e., whether he or she claims common negligence or malpractice) may dictate the statute of limitations.  If a negligence claim is not barred by limitations and a malpractice action is barred, a court would allow the negligence action to go forward and dismiss the malpractice action.

For more information on vet malpractice actions and the applicable statute of limitations, see Veterinarian Malpractice by Davis S. Favre.

Several people have asked me if I thought there would be  litigation over the death of Eight Belles after her second place finish at the 2008 Kentucky Derby on May 3.  Although animal rights activists staged a protest at the office of the Kentucky Horse Racing Authority after the filly’s death, I don’t think there will be any litigation.  

The filly’s death did not seem to be caused by the negligence or wrongdoing of any person or entity.

What did cause Eight Belles to break both front ankles?  According to the Wall Street Journal, Eight Belles’ breakdown may have arisen from a variety of factors such as genetics, track surface, training methods, or medications.  Interestingly, Eight Belles and 2006 Kentucky Derby winner Barbaro were both descendants of Northern Dancer, a 1950s Thoroughbred whose racing career was cut short by leg injuries.

What is being done in the horse racing industry to prevent future breakdowns?  The Welfare and Safety of the Racehorse Summit, which first convened in 2006 after Barbaro’s breakdown in the Preakness, met again in Lexington March 17-18, 2008.  The Summit promulgated its recommendations to improve racehorse welfare, and those recommendations addressed the following issues:

  1. Track Surfaces–including research and development of synthetic (Polytrack) surfaces
  2. Catastrophic injuries
  3. Racing Medication & Drug Testing Laboratories
  4. Education–focusing on training methods
  5. Regulation–to establish uniform regulation of medication and integrity issues
  6. Solutions for unwanted Thoroughbreds
  7. Promote genetic diversity of the Thoroughbred

If the Summit’s recommendations are implemented, huge positive changes in the Thoroughbred racing industry could be realized.  However, according to Dan Metzger, the President of the Thoroughbred Owners and Breeders Association, "miracles will not happen overnight."

 

Someone recently asked me if he had a case against an equine surgery clinic that told his local vet during a telephone conversation to not send them the mare because they did not have room for her at the clinic.  The mare died 4 hours later of colic complications, and the owner stated that she would have lived if the vet clinic had admitted her and performed colic surgery.  The mare in that case was not a current patient of the clinic.  The owner would not have a valid claim against the clinic in that case.

The decision of whether to accept an animal as a patient is at the sole discretion of a veterinarian.  This rule is set forth in Article II.E. of the the Principles of Veterinary Medical Ethics of the American Veterinary Medical Association, which applies to all veterinarians in the United States.  The Texas Rules of Professional Conduct for veterinarians codifies that rule for vets practicing in Texas.  Therefore, even in emergency situations, vets do not have to take your horse if, for example, you cannot pay for the treatment or they simply do not have time to treat your horse.

For a vet to be potentially liable to a horse owner for injury or death of their horse, a veterinarian-client-patient relationship (VCPR) must first exist.  The VCPR is established when all of the following conditions are met:

Continue Reading Does a Veterinarian Have to Treat Your Horse in an Emergency?

An attorney called me last week to ask what her client, a trainer, should do about a prospective buyer who had picked up a horse from the trainer to "try out" but failed to bring the horse back after the trial period.  The trainer had been hired by the horse’s owner to find a buyer for the horse.  After months of trying to make contact with the prospective buyer, the trainer finally made contact to learn that the horse had allegedly died of colic while in the prospective buyer’s care.  There were no written agreements between the owner and trainer or owner/trainer and prospective buyer.

The first thing I asked was whether they called the police or sheriff when the horse was not returned.  In potential theft situations, it is always advisable to call law enforcement and get a copy of their report.  I also suggested a bit of investigative work to determine if the horse was, in fact, dead.  They had called the vet the prospective buyer usually uses, but the vet had no record of seeing the horse.  I suggested that they send a letter to the prospective buyer asking for proof that the animal was euthanized and asking him to pay the asking price for the horse.  The next step was to file suit if he did not pay (I suggested that she make the trainer and owner joint plaintiffs).

Under Texas law, the trainer and owner in this situation have a colorable claim for conversion and theft under the Texas Theft Liability Act (the "TTLA") against the potential buyer.  People with ownership or possessory rights have standing on both claims. And assuming the trainer spent money to take care of the horse while in her care and was going to get a commission on the sale, the damages element is also satisfied as to the trainer.  Attorneys’ fees and costs are recoverable by the prevailing party under the TTLA.

Is the trainer liable to the owner in this situation?  The trainer would only be liable to the owner under the “principal-agent” theory if the trainer acted without actual authority when she gave the horse to the prospective buyer to try out.

What’s the lesson here?  The trainer and owner would have been in a better position if they had obtained a written agreement with the prospective buyer containing a "risk of loss" provision, whereby the prospective buyer would agree to pay the owner if the horse died or was injured in the prospective buyer’s care.  The trainer could have also required the prospective buyers to make payment in escrow for the horse, and agreed to return the money if and when the horse was returned.

My brother-in-law, Adam Rowe, recently asked me what I thought about the ASPCA’s and other activist groups’ recent attempts to pass legislation that would ban horse-drawn carriage rides in New York City.  The activists claim that the industry as whole should be banned because the horses are allegedly overworked and deprived of proper food, water, and shelter.  If you go to the Carriage Horses-NYC blog, a site maintained by one such activist group, you see a woman standing next to a horse in harness and holding a heart-shaped sign bearing the slogan, "Give These Horses Their Freedom."

My first reaction to the activists’ cause was, assuming at least some carriage operators treat their horses well, why would they want to ban the trade as a whole? The draft horses have a job and are being put to use, which in my mind is preferable to the dubious fate of the "unwanted horse", which many of these horses might become if they cannot be used for surrey rides.  Due to the recent ban on horse slaughter in the U.S., many in the horse industry predict that unwanted horses will be now be euthanized and disposed of, or shipped to Mexico or Canada for slaughter.  See USA Today article on subject.  The activists (and many other horse lovers, myself included) would probably prefer that the carriage horses be released into vast green pastures to run free for the rest of their lives (which can be 30 years or longer).  However, the activists trying to pass this legislation seem short on ideas on who will take care of the horses once they are "given their freedom."

Another thought is that the mistreatment of carriage horses is already illegal in New York.  According to New York law (McKinney’s Agriculture & Markets Law Sect. 353), a carriage driver is guilty of a Class A misdemeanor if he "overdrives, overloads, tortures or cruelly beats" a horse or allows another to do so. He is also liable if he deprives a horse of "necessary sustenance, food or drink," or neglects or refuses to furnish a horse such "sustenance, food, or drink".  I assume that if a particular carriage driver is charged under this criminal statute, his business will not flourish for long. 

Perhaps the most humane thing the activists can do is involve local law enforcement in the investigation of the carriage drivers whom they suspect are guilty of animal cruelty, and let the carriage operators who properly treat their horses continue to do business in peace.

Every horse business should have a written business plan.  There are a couple of reasons for this.  First, if your business is a start-up, the business plan will help you reduce financial risk by realistically assessing anticipated income and expenses before the business is launched.  Second, a written and regularly-updated business plan will help you in the case of an audit by the IRS, especially if the IRS suspects that your horse business may actually be a "hobby" or that you did not actively participate in the management of the business.  Finally, a written business plan, especially if attractively packaged, can help foster good business relationships with banks, creditors, and others in the horse industry who can either send you business or help you in some other way.

Since there is really no downside to have a written business plan, I suggest that every horse business (including businesses that have been operating for a while without a written business plan) keep an electronic and hard copy of a business plan that addresses the following items:

1)  A summary of the business goals and objectives of the business;

2)  An outline of how you will attain your business goals; 

3)  A list of the types of advisers you will consult (such as horse industry mentors, accountants, and attorneys);

4)  How the business will be owned (i.e. through and entity such as an LLC, who all owns an interest in the business, the percentage interest each owner holds, etc.);

5)  How the business will be financed (i.e. where you will obtain the initial capital needed to start up the business, and the amount needed);

6)  Projected income and expenses for the next 6 months and year (be conservative…most business plans underestimate expenses and necessary capital;  also, you should avoid projecting income and expenses further out than one year as these often become meaningless due to changing conditions and strategies);

7)  The method(s) you will use to find and secure good clients (advertising, networking, shows, etc.).

There really is no "magic formula" for a good business plan, nor should it be set in stone.  Your business is your dream, and your plan needs to set out your unique and individual vision and talents.  Your business plan will act as a "road map" for your business to help you stay on course with your goals and avoid foreseeable hazards.  It should be updated and revised at least once per year, if not more often.

To help you get started, see the attached Sample Equine Business Plan, to which you can add information to fit the needs of your particular horse business.  As you can see, my sample is fairly basic.  There are a lot of sample business plans you can pull up online, and most of those are pretty complex.  One site that provides sample business plans is BPlans.com.  Do not let the complexity of others’ business plans intimidate you into not doing one at all.  While more detail is better in some instances, do not put off doing a business plan just because you don’t know your exact numbers or you see others putting pie graphs in their business plans.  The key here is to have something in writing that you can add to and enhance as your business grows.