horsesandlaw
Monday, 04 March 2013 10:23

HORSES & THE LAW–HORSE ACCIDENTS & INSURANCE SUBROGATION!

Written by  Kenneth C. Sandoe, Attorney-at-Law
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Disclaimer–This article is intended as general discussion and information on the topic covered, and is not to be construed as rendering legal advice. If legal advice is needed, you should contact an attorney. This article may not be reprinted or reproduced in any manner without prior written permission of the author.

Donald Deardorff is a well-known horseman with over 40 years of experience in training, boarding, hauling and showing horses. Deardorff and his family own a stable and provide services including boarding, transportation and care during horse shows.

Deardorff has clients who board their horses with him so that they can show their horses in major shows across the country with Deardorff doing the transportation and care of the horses at the shows. As part of Deardorff's arrangement with his clients, a release is signed where the clients agree to take on the risk that their horse might become sick, injured or die while in Deardorff's care. Further, Deardorff recommends horse owners to obtain mortality insurance in case of injury or death.

Six clients of Deardorff signed the release of liability and purchased mortality insurance on their horses. It is important to review the relevant portion of the release which provides as follows:

"I also understand that by signing this release from liability for negligence I waive the right to bring an action or lawsuit for damage to my property, and for harm or injury to my horse or pony, whether it is on or off the property of the stables …"

The six horse owners decided to compete in a national horse show and hired Deardorff to transport the horses from his stable to the show and back. Deardorff agreed to transport the horses to the show and provide care for the horses while at the show. The horse owners paid Deardorff a fee for transporting the horses to the show and taking care of the horses while at the show.

Deardorff and his daughter transported the six horses from their stable, in Oregon, to Santa Barbara, California, where the show took place. When the show was over, Deardorff and his daughter loaded the six horses and headed back to their stable in Oregon. Before leaving, Deardorff inspected the horses, the trailer, his truck, and the tires on both the trailer and the truck.

On their way home, Deardorff noticed that there was a problem. He pulled off the highway and saw sparks coming from the trailer. Although Deardorff noticed the sparks, he did not stop, and instead continued driving because the shoulder was narrow and it was dark and he felt he could make it to a better area to pull over. While driving Deardorff pulled over as he noticed a lot of smoke coming from the trailer. When Deardorff stopped and saw the smoke, he began driving again as he was close to a truck stop. However, the sparks got worse and a fire started in the trailer.

Deardorff then exited the interstate and again noticed sparks and smoke and noticed flames coming from the trailer. However, Deardorff did not pull over and kept driving to a truck stop. Deardorff stated that he proceeded to the truck stop because the fire had gotten too large and he would need water and additional help to extinguish the flames. When Deardorff pulled into the truck stop the trailer was on fire. When they reached the truck stop they opened the doors of the trailer and attempted to save some of the horses. However, their attempts were unsuccessful and all six horses died. Deardorff himself sustained second degree burns on his face, arms and hands as a result of attempting to save the horses.

The horse owners submitted claims on the mortality insurance policies and the insurance companies paid approximately $250,000 for the entire loss.

A lawsuit was then started by the insurance companies which issued insurance to the horses' owners. The insurance companies paid the owners for the loss of the horses and then sued Deardorff to recover the amounts paid to the owners. The insurance company exercised its legal right of "subrogation" to recover their loss. Subrogation is a legal doctrine which gives the insurance company the right to recover monies paid to an insured where the loss was the fault of a third party and not the insured. Since the loss in this case was alleged to be Deardorff's fault, the insurance companies had a right of subrogation against Deardorff to recover the amounts paid to the horse owners.

The right of subrogation is not, however, absolute. The right of subrogation is derivative and derives from the right of the insured. In short, an insurance company cannot recover for a loss if its insured had no right to make the claim in the first place. Thus, the insurance company, as subrogee, "stands in the shoes" of the insured horse owner. The insurance company is bound by the actions, inactions, contracts, statements and/or admissions of the insured.

In the insurance companies subrogation lawsuit, the companies argued that the death of the horses was solely the fault of Deardorff for failing to stop, extinguish the fire and unload the horses. The insurance companies argued that Deardorff had sufficient notice and time before the fire got out of control in order to save the horses. Instead, Deardorff negligently continued on increasing the risk of harm and the death of the horses. The lawsuit alleged negligence, conversion, trespass and failure to deliver.

Deardorff opposed the lawsuit for numerous reasons, but the important one for our analysis is the fact that the release/waiver covers any and all negligence no matter where it occurs and thus bars the subrogation lawsuit.

The Court was faced with a contract interpretation of the release Deardorff had the horse owners sign (Diamond State Insurance Company, and Great American Insurance Company, v. Donald Lee Deardorff). The Court did an extensive analysis of the release and noted that since this was a subrogation case, the insurance companies stand in the shoes of its insured and are bound by the contracts they signed.

Here, the horse owners signed releases which prohibited them from bringing a lawsuit against Deardorff in case of death or injury to the horses, even if the death was caused by Deardorff's negligence. There is no question that the horse owners signed the releases and the Court found that the insurance companies are bound by the releases. The Court held that the insurance companies have no cause of action because its insureds waived and released all claims that arose from Deardorff's negligent conduct. The insurance companies are bound by the releases signed by the policy holders and the Court granted Summary Judgment in favor of Deardorff.

This was a very tragic case and there are many lessons to be learned. As I have written previously in The DHJ, it is important to obtain mortality insurance on valuable horses. This is a protection for the horse owner in the event of an accident or illness. For the hauler and caregiver of the horse, the importance of obtaining a valid well-drafted release is obvious. Deardorff's foresight to have the horse owners sign a release saved him from financial exposure. Without the release, the insurance companies would have a right of subrogation to proceed against Deardorff for the quarter of a million dollars paid out for the loss. Preparation and foresight won out in this case. The horse owners were paid the value of their loss and Deardorff was protected against any lawsuit to recover that loss.

I cannot over-emphasize the importance of obtaining mortality insurance on a valuable horse and obtaining a valid and binding contractual release when transporting and/or caring for someone else's horse.

In conclusion, in entering into matters where risk of loss and liability exposure is ever present, prepare accordingly. As Penn State's Joe Paterno said, "The will to win is important, but the will to prepare is vital."

Enough legal talk–it’s time to hitch horses!

Ken is a practicing attorney in Myerstown, Pennsylvania, where a good bit of his practice involves negligence cases. He and his wife, Karen, own Sunny Hill Farm Belgians, and they have been exhibiting their six-horse hitch for several years at most major shows in the East.

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