The main difference between livestock, or equine, mortality insurance and human life insurance is that a livestock owner, subject to certain conditions, may sometimes euthanize the animal and still collect policy proceeds, according to an attorney whose practice includes a specialty in equine insurance.
Life insurance policies, on the other hand, obviously don’t work that way, said Julie Fershtman, a shareholder with the law firm of Foster Swift Collins & Smith PC in Farmington Hills, Mich.
“With life insurance it’s not quite the case where you can euthanize or do away with a family member and collect,” Fershtman said during an insurance law podcast sponsored by A.M. Best.
Another important factor with livestock insurance is that while the policy is in place, the policyholder has the duty to keep the insurance company notified if anything adverse occurs to the animal, such as illness, injury or lameness, she said.
The insurer has the right under the policy “to intervene in the animal’s care … to determine whether the animal insured by that company is receiving proper care and attention,” Fershtman said. “That’s a significant right and I can assure you that insurance companies take that right seriously.”
Courts for decades have upheld the immediate notice requirements contained in equine policies, Fershtman said. They also have determined that prejudice is assumed and does not have to be proven by the insurer in cases where immediate notice was not provided by the policyholder.
Immediate notice is required in these policies “because once the company accepts an animal and insures an animal, the company has a vested interest in that animal’s well-being,” Fershtman said
Even if a policyholder who has given late notice asserts that the insured animal has been under veterinary care, courts have held that the insurer is “entitled to its right to monitor the care and maybe even remove the animal to be attended by another veterinarian of the insurance company’s own choosing. Why? Because the insurance company’s policy gives them that right,” she said.
As to prejudice in the case of late notice, “courts have recognized that prejudice is immaterial. It doesn’t even have to be considered by the court. Because the mere fact that the insurance company wasn’t given timely notice suggests that the company was prejudiced,” Fershtman said.
Fershtman cited a late notice case that was recently decided in the U.S. District Court for the North District of Illinois, Houser vs. Great American Insurance Co., in favor of the insurer.
The owner of insured horse used for jumping competitions leased the animal to another person. During the time it was in the care of the other person, the horse, which was insured for $80,000, became lame.
The insurer was not notified of the lameness for 15 days. The key issue for the court was that “the horse became lame during the course of the policy and the company was deprived of timely notice,” Fershtman said.
The animal was found to be severely lame on June 27, 2011, she said. It was transferred to the owner’s chosen trainer in another state on July 6. On July 11, a veterinarian evaluated the horse and confirmed the seriously lame condition. Finally, on the following day notice was given to the insurer — 15 days after the lameness occurred.
After an investigation, the insurer denied coverage, Fershtman said.
In the lawsuit, the owner argued that he didn’t know about the problem at first because the horse was in another’s care. He also said notice was timely because he contacted the insurer after the veterinarian diagnosed and confirmed the lameness.
The court shot down both arguments.
With this policy, the court noted, “it doesn’t matter if you, the owner, don’t know about the problem that requires notice. If the members of your family [or] agents acting on your behalf … know of the problem it’s imputed to you,” Fershtman said.
As to what constitutes immediate notice, the court defined it as “pretty much as quickly as possible, without delay,” Fershtman said.
In this case, “the vet didn’t see the animal until day 14 of the lameness problem” and the court didn’t see 15 days as being immediate notice.
“For those who insure animals under animal mortality policies … this is just another wake up call to keep the insurance company notified,” Fershtman said.