April 2018 - Fire Up Your Insurance Savvy
Written by CRM
Wednesday, 28 March 2018 18:49
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Common misperceptions come to light in the wake of last year’s fires.

Last year’s fires were a wake-up call for horse owners on many levels. Preparing horses, stables and practices for emergency evacuations were top priorities in the aftermath of the October and December blazes that brought destruction and heartbreak to the California equestrian community.

Reviewing insurance policies is another topic that should be prioritized in the wake of any disaster. Actually, notes Parker Equine Insurance’s Donna Chopp-Parker, policies should be carefully reviewed every year at their renewal. Too often it takes a disaster for horse owners to fully understand what they do or do not have covered. By then it’s too late to make changes that could help them recover their losses.

California Riding Magazine editor Kim F Miller talked to Donna about the fall-out insurance companies see after these natural disasters.

Kim: What are some of the biggest mistakes when it comes to having the right insurance to weather the fires or a similarly destructive event?

Donna: The biggest thing I found was that people were not aware they did not have coverage for their personal property, such as saddles kept at boarding facilities that were destroyed by fire. Boarders have the misconception that the facility’s or trainer’s insurance policy will extend to the items they keep in their lockers or in the tack rooms. It does not.

Kim: Will a homeowner’s policy typically cover tack?

Donna: Amateur riders may have coverage for their saddle and other equipment on their homeowner’s insurance policy. I am an amateur rider and my saddle is covered under the household personal property away from premises section of my policy. Most homeowner’s insurance policies cover up to 10% of the household personal property away from premises. So, if you have $100,000 in household personal property there would be $10,000 for items off premise that you typically do not have to “schedule,” or list separately, from the rest of your personal property.

However, I still recommend people schedule their high value personal belongings. Many policies have a per-item dollar limit on personal property that is lumped together in blanket coverage. $1,500 is a typical amount. For an example, the replacement value of saddles can be a lot more than this sub-limit. I advise clients to schedule their saddles because they are at high risk of loss. Like falling off a cross-tie rail or being stolen at a horse show.

Kim: What about saddle or equipment coverage for professionals?

Donna: Homeowners policies exclude property used for business, so they would not cover a trainer’s saddle or other gear. Unfortunately, a lot of trainers are unaware of this. They have liability for their business and homeowners for their personal property, but no coverage for business property, which would include barn set-ups, tack trunks, office equipment etc.

Kim: What about common mistakes with farm owner’s policies?

Donna: Farm owners not including the fencing on their property is a problem we see pretty frequently. Whether it is the perimeter or interior fencing, it is something that you need to decide to insure or not. If it is not listed on your policy, it is probably not covered. This is a case where you need to weigh the risk of it being destroyed and rebuilding it on your own dime against the cost of having it covered on your policy. If you think it is covered, but do not see it listed on your policy, talk with your agent.

Kim: Do you sense the fires spurred horseowners to re-examine whether they have the right coverage?

Donna: It was a huge a wake-up call. I believe it made all of us aware that California now has a year-round fire season. As the fires erupted our agency was inundated with phone calls from clients and non-clients asking questions about their policies and what was covered and what wasn’t. Even now our call volume is much higher with people wanting to review and make changes on their policies.

These disasters affected everyone. Even if someone was lucky enough to not be directly affected by the fires they know someone who was and are now seeing what their friends and neighbors are going through.

Everyone is more conscious about being prepared.

Kim: What’s the first step in making sure you have the right coverage?

Donna: The first step is to sit down and make an inventory of what you have, put a value on it, then talk to your agent to make sure everything you want coverage for is included on your policy. This way, in an event of a loss, you have the certainty of knowing what exactly is covered on your policy and are not faced with an unwanted surprise by finding out too late there is no coverage after a loss occurs.

Have an earnest  talk with your agent. They are on your side.  It is a calculated risk weighing the risk of loss with the cost of insurance. If something is going to cost a lot to insure year after year, you may want to “self insure.” As an agent, one of the worst things is having to tell a client they do not have coverage for something.  That is very frustrating.

Kim: What’s the best way to document personal property?

Donna: If the worst happens and you have a total loss, pictures and videos will help you make the list of property that was lost or destroyed. This itemized list will be required to submit to your insurance carrier during the claims process.

Make the time to walk your property, through each room of your home and barn while recording with a video camera. This is a great way to document what you have. This ensures that you will not forget something.

Kim: What “maintenance” routine do you suggest for your clients when it comes to insurance?

Donna: When we send out renewal policies each year to our clients, we include a summary listing the value of dwellings, barns, equipment etc. If you do not see it on here, it is probably not included on the policy and therefore not covered and we ask that our clients call us to update their coverage. However, you should be mindful about coverage all the time. If you purchase something – a new tractor for example – please call us and let us know, so we can make sure it has been added onto your policy.

We are all guilty of getting wrapped up in our day-to-day activities and not thinking that something bad could happen to us. But it is really important to review, especially at your policies’ renewal time, that you have the coverage you want to have.

That includes evaluating whether you have the right amount of insurance. If you know it would cost you approximately $1 million to rebuild your stable, but it is only covered for $500,000 on your policy, this is a problem. Unfortunately, this is something people tend to think about only when a fire is headed their way. By then it is too late to make any changes to the policy. The insurance companies have placed a moratorium on the area(s) impacted or could be impacted by the fire, which means no new policies can be issued in these areas nor can changes be made on existing policies. So, please think about your coverage at renewal time.

Kim: Have the fires made it harder to renew or get property coverage?

Donna: Yes. Farms, ranches and stables are usually in areas that are less populated, and often where there is a lot of brush. Usually, insurance companies look at the “brush score,” in which the higher number correlates to higher risk. Some insurance carriers will not renew or offer coverage if the score is over 85 or they will include a surcharge on to the premium when the renewal offer is made. We have had some companies that systematically non renewed all policies located in a high brush area, even though they had written coverage there for many prior years. They are really examining the risk for potential loss, especially if an insured has had a loss or filed multiple fire claims. There are areas where it is really difficult to get insurance.

Underwriting guidelines are becoming stricter all the time. In some cases 100’ plus of brush clearance is required from all buildings. Property owners need to be diligent about keeping their property up, clearing brush and maintaining as much of a firebreak as they can around their home, stable and other structures. Send pictures of this kind of maintenance around your property before your policy renews. This may help your agent in obtaining a competitive rate for insurance coverage that will meet your requirements.

Kim: Anything else?

Donna: It’s not related to fires or disasters, but we have seen more trainers and stable owners get in trouble for not having workers’ compensation insurance, which is mandatory in California.  Unannounced inspections by the state seem to be on the rise. Especially involving trainers who do not own their own facility, they often think paying grooms and other staff as independent contractors absolves them of that requirement. If a person is unsure of who qualifies as an independent contractor and who is an employee, ask your insurance agent, they will be able to help you.

I completely understand that coverage for workers’ compensation is expensive. However, if a worker gets hurt and files for workers’ compensation, the fines an employer can face along with the cost of litigation could be a greater expense.

Kim: Thanks, Donna!

Donna: Thank you!