April 12, 2019

Exercising Horse Sense Part II: Precautions and protections when hiring exercise riders

April 12, 2019/ Web Master

By Peter J. Sacopulos

This is the second article in a two-part series on managing legal and tax liabilities when hiring exercise riders. Part I examined recent incidents involving riders, how to assure a rider’s status as an independent contractor and hiring basics. This instalment focuses on insurance protection for trainers and riders, equine liability laws and proper safety procedures and equipment.

It Is Not Personal, It Is Business

This article addresses ways in which professional trainers may reduce their risks and limit their liabilities when hiring exercise riders. However, when it comes to discussing insurance to protect your training business, I must first broaden the topic in order to address some popular misconceptions regarding insurance in general. Whether you view insurance as a necessary evil or as a peace-of-mind protection that is worth the cost, the topic cannot be avoided, especially if you are a professional horse trainer.

The first thing a trainer must understand in insuring his or her training business is that there are clearly defined differences between personal insurance coverage and business insurance coverage. Personal insurance policies are designed to cover you and your family’s personal needs, such as your home, its contents, and vehicles that are not typically used for business purposes. Personal policies are not designed to provide insurance for businesses or business activities. Nor do they cover the property, vehicles, tools and equipment that are primarily used in the conduct of business. Those need to be protected by a commercial insurance policy, commonly referred to as business insurance. Unfortunately, many small business owners and other individuals fail to review the full details of their coverage and do not realize this until it is too late. Here are two examples:

The owner of a lawn-mowing business had his commercial-grade lawn mowers stolen from the garage of his home. He had stored the mowers there for years and assumed his personal homeowner’s insurance policy would cover the loss. However, because the mowers were used for business purposes, the insurer refused to pay the claim. Faced with the high cost of replacing the mowers, the man chose to shutter his lawn care business.

A college student decided to earn extra money by signing up to drive for an online-based meal delivery service. He was involved in an automobile accident while using his car to deliver restaurant lunches to an office building. No one was injured, but the student’s car was totaled, and another individual’s vehicle was significantly damaged. The student was found to be at fault. Both he and his parents assumed the family’s personal auto insurance policy would cover the costs. But the insurance company was not obligated to pay because the accident occurred while the vehicle was being used for commercial purposes. The family wound up paying thousands of dollars out-of-pocket to repair the other driver’s vehicle and then had to take out a loan to replace the student’s car.

As Kevin Lavin, a partner in Lavin Equine Insurance Services of Louisville, Ky., explains, equine professionals are not immune to overestimating the scope of their personal insurance coverage. “People may believe that because a horse lives in a barn on their property, their homeowner’s policy covers their equine business activity. That’s just not the case.”

Liability Coverage Matters

When purchasing insurance, it is important to understand the nature of liability coverage. Insurance claims are most often paid to the policyholder. If, for instance, you have business coverage on the saddles and tack that are used in the course of training and those items are stolen, your business insurer would reimburse you for the value of the lost items according to the terms of your policy.

Business liability coverage is designed to pay legitimate claims made against the business by third parties. (The insurance company and the insured being the first two parties.) For example, if you are backing up a truck and trailer at a gas station after a race and accidentally collide with and injure another customer, that gas station customer is a third party who has been injured in the course of your business. A commercial insurance policy on your vehicle and trailer would cover the injured person’s claim—up to the specific limits of the policy, minus any deductibles or shared payments—of paying for any necessary medical care for the person. Should the injured party file or threaten to file a lawsuit demanding more payment, the insurance company would investigate. If the demands are determined to be legitimate, the insurance company would work to settle those claims within the amounts specified by the policy to avoid the costs of going to court. Should the matter go to court, the insurance company would provide legal counsel and pay legal costs and judgments against your business up to the amounts specified by your policy.

Equine Experience Matters

If you are an independent trainer, you should protect your business and its assets with a commercial insurance policy. It is a serious mistake to believe your personal insurance policy(ies) will do so. Consult with a qualified agent to be certain you have proper commercial coverage, including adequate liability protection.

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February 08, 2019

Exercising Horse Sense Part I: Avoiding Grey Areas When Hiring Exercise Riders

February 08, 2019/ Web Master

By Peter J. Sacopulos

This is the first article in a two-part series on managing your legal and tax liabilities when hiring exercise riders. It examines recent accidents involving riders, how to ensure a rider’s status as an independent contractor, and hiring basics. Part II will focus on available insurance protection for trainers and riders, as well as proper safety regulations, procedures and equipment, and equine liability laws.

A Series Of Tragic Events

Shortly before 6:00 a.m. on November 11, 2018, Odanis Acuna, a long-time exercise rider at Churchill Downs, was taking two-year-old New York Harbor through a routine workout. Acuna was breezing the unraced colt when it suddenly broke down, sending both horse and rider crashing to the ground. The track’s EMTs responded quickly, but Acuna had sustained catastrophic head and neck injuries in the fall. He died shortly after their arrival. Odanis “Cuba” Acuna was admired for his horse skills, work ethic, upbeat personality and devotion to his family. He was 42 years old at the time of his death.

The tragedy was one in a number of recent accidents involving exercise riders. Just 14 months earlier, Darren Fortune was killed when a horse he was exercising bolted after gallop at Woodbine in Toronto. Like Acuna, 43-year-old Darren Fortune was a highly seasoned pro who impressed many with his horse skills, people skills and work ethic. In addition to his morning sessions as an exercise rider, he worked as an outrider at Woodbine. Witnesses have stated that Fortune’s actions during the mishap that took his life very likely prevented other riders from being killed or injured.

Kellie Hedges, another highly experienced exercise rider who had also served an outrider, was severely injured while working at Belterra Park near Cincinnati, Ohio. On the morning of June 26, 2018, the horse Hedges was breezing fell forward, threw Hedges, rolled over her, then rose and sped off down the track. Two outriders eventually intercepted the runaway horse—a filly that, remarkably, was not hurt in the incident. Meanwhile, the severely injured Hedges lay on the track in a daze. The Paulick Report and local news coverage reported no outrider attended to Hedges while she was down. According to Hedges, the “clear the track” alert siren sounded only briefly, and Hedges says other riders and horses returned to the track and continued to work while she lay immobile.

Track-based EMTs appeared slow to respond to Hedges accident, and track security staff demanded Hedges exit the ambulance and be taken to track offices in order to verify her license. Eventually loaded onto another ambulance, Hedges was taken to the local hospital. After she arrived, emergency room physicians had her rushed to Cincinnati Medical Center, where she underwent emergency surgery to save a broken leg. Surgeries for other injuries followed. It is unclear if Kellie Hedges will ever ride again. Belterra has drawn sharp criticism for how the incident was handled.

Questions You Must Ask

As of this writing, none of the incidents mentioned above have resulted in a lawsuit being filed. But others have. All pose a series of questions that you should be asking yourself. As a trainer, do you know what your liability would be if an exercise rider you hired were injured or killed while working one of your horses? If a horse you are training were injured or killed while being exercised? If another horse or rider were injured or killed in an accident involving a horse you are training?

On an even more basic level, do you know how to ensure that a rider who works for you is viewed by the IRS and other government entities as an independent contractor, rather than an employee who adds to your tax and liability burdens? Are you familiar with the requirements for protective gear for riders? Or are you aware of the safety guidelines every exercise rider should be operating under on a daily basis?

The answer to any one of these questions could dramatically impact your ability to earn a living as a trainer, especially if something goes wrong. This article is designed to provide you with broad, general advice about such issues. Remember, regulations vary widely. You should seek professional legal and insurance advice when dealing with the specific needs of your business.

Employee vs. Independent Contractor

Under U.S. labor and tax laws, the IRS and other government entities draw a distinction between employees and independent contractors. State and local laws and tax regulations may also apply. Both an employee and an independent contractor may perform tasks for a company. But legally speaking, each is a distinctly different type of worker.

In North America, an employer is responsible for specific payments toward an employee’s Social Security, unemployment insurance and Medicare funding. Often, employers are also responsible for an employee’s worker compensation insurance funding and certain aspects of offering or providing employee health insurance. The employer is also responsible for payroll reporting to the employee and the IRS. At the end of each calendar year, the employer must provide each employee and the IRS with a completed W-2 form. Employees may work for an employer on a full-time or part-time basis, and the number of hours worked may affect certain aspects of what the government requires the employer to fund or provide on an employee’s behalf.

In short, an employee works for a business or organization. By contrast, an independent contractor performs work for an individual, business or organization but works for himself or herself as an independent business. This means that independent contractors are responsible for their own Social Security and Medicare funding (paid as self-employment taxes) as well as certain other payments. Independent contractors are also responsible for seeking out and paying for their own health insurance, retirement funding, disability insurance, and so forth. Any business that uses an independent contractor must pay the contractor for satisfactory work. The business must also provide a completed Form 1099 to both the independent contractor and the IRS if the business pays the independent contractor more than $600 in a calendar year. (Note: Independent contractors are also commonly referred to as freelancers, contract workers or contract laborers.)

So why doesn’t every business simply declare its employees to be independent contractors and save big on tax payments, perks and paperwork? Because the determination is not strictly up to the employer. Laws, tax regulations and guidelines apply, playing an essential role in determining which workers are employees and which workers are independent contractors. Failing to follow the rules invites major trouble, especially if an employer tries to commit fraud by passing off employees as independent contractors. Doing so can lead to a nightmare of make-up payments and paperwork, as well as severe tax penalties and criminal prosecution.

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