IS ONE BITE ENOUGH?
Kit heard the child’s cry and rushed out to help. She ended up getting bit by a dog named Tank. Then she was accidentally tased and finally shot by police officers as they attempted to gain control of the situation. Kit and the child sued Tank’s owner, but his homeowners carrier refused to pay because this was Tank’s second bite.
See how the courts responded to the argument that a “second bite” exclusion was contrary to public policy.
During the afternoon of August 19, 2015, Kathryn Baumann-Mader (Kit) was in her kitchen when she heard yelling and screaming outside. Kit ran out. She saw Sara Hanson (Sara) holding her thigh and heard her screaming, “He bit me!” Kit observed “Junior”, the 12-year-old son of a bulldog owner, holding the dog (Tank) down because Tank had slipped his leash. Kit ran to get a leash for Tank and then struggled with Tank to get the leash on him. Five police cars, a firetruck, and an ambulance responded. Tank was given to an officer. While the officer was taking Tank to the squad car, Tank resisted and eventually slipped out of his collar. The officer yelled, “Get in the house!” Tank knocked Kit to the ground and began biting her. Officers moved to tase Tank but tased Kit instead. Tank then lunged at an officer; police began shooting at Tank but ended up shooting Kit in the foot.
Kit required 29 staples in her thighs and crotch, surgically implanted hardware in her foot, and spent a week in the hospital. Kit and Sara sued Shawn Lievense and Annette Salazar (Lievense) Tank’s owners, who turned to their homeowners insurance provider, Integrity Mutual Insurance Company (Integrity) for coverage. Kit and Sara, the victims, alleged that six months prior to this attack, Tank had caused injury to a different person in an unprovoked attack. They produced a police report as evidence. Lievense had not reported this prior incident to Integrity.
When Integrity learned of the prior loss, it made a motion for summary judgment claiming it had no duty to defend or indemnify based on the following exclusion: “we do not cover” “bodily injury or property damage caused by … any dog with a prior history of causing: (1) Bodily injury to a person,” which is “established through insurance claims records, or through the records of local public safety, law enforcement or other similar regulatory agency.”
The Circuit Court found the exclusion to be unambiguous and granted the summary judgment to Indemnity. Kit and Sara joined Lievense in an appeal.
They requested a reformation of the policy to allow coverage because they argued that the exclusion was against public policy. The appellate court noted that policy wording was not against public policy. After the earlier attack, Lievense had a choice to either remove Tank from the household or self-insure any future attacks.
The lower court’s ruling was affirmed.
Kathryn Baumann-Mader, David Mader, Sara J. Hanson And Cole S. Hanson, Plaintiffs-Appellants, Blue Cross Blue Shield Association, United Healthcare Insurance Company, West Bend Mutual Insurance Company, Involuntary-Plaintiffs, V. Integrity Mutual Insurance Company, Defendant-Respondent, Shawn M. Lievense And Annette S. Salazar, Defendants-Appellants., No. 2017AP1369, 2018 WL 2247197 (Wis. Ct. App. May 16, 2018)
Dog bites and insurance: an important conversation
Insurance coverage for dog-related injuries vary by carrier so it is very important to let clients know how important responsible pet ownership is and how the type of dog and its aggressiveness of the breed can impact homeowners coverage.
Here are two e-marketing articles you may want to send or place in a newsletter.
Dogs make great companions, playmates, and protectors; they also continue to be a problem for insurers. Nearly two million people are bitten by dogs each year with around 800,000 persons requiring professional medical treatment for their wounds. Each of these incidents is a potential lawsuit.
Have Teeth, Will Bite
Nearly 40% of America’s households own dogs and biting incidents keep climbing. A key factor that contributes to these incidents is the failure of dog owners to supervise and train their pets. Another problem is that many persons, especially children, do not know how to behave around dogs. Bites may occur when:
- a person stares at a dog, which the animal perceives as a threat or challenge
- people attempt to handle dogs during sensitive moments (while a dog is trying to eat or while nursing puppies)
- trespassers or house guests invade a dog’s territory
- someone is “rough-housing” with a dog and it escalates beyond playing
Factors on Dog Bite Fatalities
In December, 2013, a study was completed by The Journal of the American Veterinary Medical Association (JAVMA). It shared information on factors found in a large majority of reported fatalities caused by dog attacks. In most fatal incidents, several of the following factors were involved:
- No able-bodied person being present to intervene (87.1%)
- The victim having no familiar relationship with the dog(s) (85.2%)
- The dog(s) owner failing to neuter/spay the dog(s) (84.4%)
- A victim’s compromised ability, whether based on age or physical condition, to manage their interactions with the dog(s) (77.4%)
- The owner keeping dog(s) as resident dog(s), rather than as family pet(s) (76.2%)
- The owner’s prior mismanagement of the dog(s) (37.5%
- The owner’s abuse or neglect of dog(s) (21.1%)
Insurance and Dog Bites – Part 2
Please see part 1 of this article which discusses factors and statistics related to dog attacks.
An Issue Of Control
Insurance is still designed to handle accidents, and companies are at a severe disadvantage when policies are asked to respond to losses that are easily avoided. Dog bite claims are problematic because they involve the insured having control over areas such as:
- choosing to own a dog
- choosing the particular breed of dog
- raising the dog in a certain manner
- housing the dog in a certain manner
- exposing the animal to various social situations
- being knowledgeable about a dog’s temperament and inclination to bite or attack
All of the above elements can contribute to lawsuits and to action from an insurer.
The “Policy” On Dogs
If you have homeowners insurance and you own a pet, the liability portion of your policy provides protection for losses arising from pet ownership. Not only are you and your household protected, but coverage even extends to persons who have custody of your pet. However, your policy won’t cover businesses that may have custody of your pet, such as kennels, obedience schools, groomers and professional sitters or walking services (they should carry their own coverage). Further, coverage could become problematic if dogs are in a home with unreported, in-home business activity. Losses involving persons who are bitten while in a home for business reasons may not be covered.
Minimizing The Problem
Owners have a responsibility to raise and handle their dogs in a manner that reduces the chance for a loss. Steps to take include becoming knowledgeable about their breed of dog and about general principles of ownership and care. They should make certain that family members, social visitors, neighbors and strangers are protected from the owner’s pets. Owners should also take advantage of resources to help them, such as tips from animal shelters, dog ownership clubs, the AKC and Internet sources.
It may not be the fairest set of circumstances, but more insurers are choosing not to give dogs the benefit of the doubt. It is becoming more common for companies to refuse to write coverage for persons who own certain breeds of dogs. Therefore, owners must fight this trend by not taking their pet ownership lightly….because insurers aren’t.
Removing liability coverage for dog bites
ISO and AAIS homeowners policies include coverage for dog bites. However, they also both have dog bite endorsements that eliminate coverage. These endorsements are attached based on underwriting considerations and therefore will vary significantly by carrier. In addition, many carriers, such as the one in this court case, have developed their own wording to exclude coverage.
Review a brief description of the AAIS and ISO dog-related exclusions.
ISO HOMEOWNERS OPTIONAL COVERAGE ENDORSEMENTS
HO 24 77–Canine Liability Exclusion Endorsement
This form is a named dog exclusion. Space is provided to enter a name and description of a dog. When attached, it eliminates BI and PD caused by the described dog. The exclusion applies to that dog whether it is owned as well as in the care, custody or control of an insured.
Note: The form may be problematic to apply to non-owned animal situations. What would be the circumstances that this endorsement would be executed for non-owned dogs? Further, how would enforcement be affected by a dog’s name change or an ambiguous description. A photo or micro chipping requirement may have made sense.
AAIS HOMEOWNERS COVERAGE ENDORSEMENTS
HO 2001–Exclusion – Injury Arising Out of a Canine
This form allows an insurer to write an HO policy that includes what it deems an unacceptable liability exposure to a dog-related loss. The form must be signed by the named insured and it requires a description of the excluded animal. The form applies to the described animal, whether owned or in the custody of the insured household.
Protecting the dog
Turning a difficult conversation about dog-related injuries can turn into a positive sales opportunity if you are interested in selling pet insurance. Pet ownership is expensive and, without pet insurance, owners may be required to make decisions based on available financial resources. The pet protection policies now available could provide attractive alternatives for your dog (and cat) owning clients.
Here is a Rough Notes Article to help guide your discussion.
ISO Emerging Issues Perspective
Meghan Alpert And Jim Weiss
PET PROTECTION: UNLEASHING POTENTIAL IN AN UNDERSERVED MARKET
Burgeoning pet ownership signals opportunity for new insurance category
Proud “parents” of a pet understand the many potential benefits that having an animal companion can provide. Research shows that pets can reduce symptoms of stress, depression, and other mood disorders; lower blood pressure and cholesterol; and increase socialization. Compared with other countries, the United States has the highest dog, cat, and fish populations—and Americans aren’t shy about loving and embracing these pets. About 90% of pet owners say they consider a pet to be part of their family; half admit to talking to pets regularly; 36% give their dogs a birthday gift; and 27% admit to having professional photographs taken of pets. And yet relatively few pet owners think to buy them insurance coverage. Insurers and agents can play a critical role in solving this problem.
According to the National Pet Owners Survey conducted by the American Pet Products Association (APPA) for 2017–2018, 68% of U.S. households, or about 85 million families, now own a pet. Millennials, currently the largest generation and a key demographic target for insurers, are in the lead. While Millennials have delayed buying homes, cars, and having children, they have passed Baby Boomers when it comes to pet ownership. Millennials now own roughly 35% of all pets, compared with Boomers, who own 32% or so. Even so, this nearly universal love of pets is perhaps nowhere more evident than in expenditures.
Pet ownership accounted for more than $66 billion in domestic economic activity in 2016, rising from $36 billion in 2005. This figure includes costs such as food and supplies, veterinary care, grooming, and boarding services. Baby Boomers spend more on pet supplies and services than any other age group, 15% more than Generation X and Millennials combined. But when it comes to insurance, younger generations are helping drive demand. According to a recent ISO survey of Millennial attitudes toward insurance, pet insurance ranks among the top three coverages desired among the survey participants. Since pets are valued as family members and represent a significant financial commitment, pet insurance should be a “no-brainer” for their owners.
Veterinary cost increases in the United States have outpaced inflation for years, and owners may welcome the peace of mind of knowing they can afford the medical and wellness care provided by insurance. According to an insurance trade group, accident and illness coverage averages $473 per year for dogs and $285 for cats; and accident-only policies averaged $158 for dogs and $132 for cats annually. Pet insurance plans can be economical and can bring greater cost certainty for pet owners.
The pet insurance products mentioned above are also quite comprehensive, depending on the type of insurance purchased. Accident and illness policies often cover those dreaded emergency treatment costs, typically on a reimbursement basis, if a pet has an accident that results in fracture or other trauma, ingests a foreign object, or has certain genetic conditions or cancers (costs for surgery, hospitalization, medication, etc.). Some policies even reimburse for advertising costs and monetary rewards to recover a lost or stolen pet. Wellness plans typically cover routine veterinary visits and other services such as spaying/neutering, dental cleanings, training, and grooming. Costs for those coverages vary, depending on a pet’s age, breed, and the chosen deductible.
Challenge for insurers
Given all the potential benefits of pet insurance, one may wonder why insurers continue chasing their tails on renters and historically stagnant lines—as opposed to testing the pet insurance market—to reach Generation Y and others. Millennials are the most likely generation to rent their homes, and yet two-thirds of those who do decline to purchase renters insurance. Uptake rates for pet insurance make uptake for renters look robust, with adoption languishing in the 1%–2% range (compared with 40%–60% adoption in some European countries), showing clear and significant growth potential. Missed opportunities for education about pet insurance’s benefits may be the largest driver of low adoption rates in this market. Awareness of the potential risks and available solutions can help policyholders take advantage of the peace of mind and monetary benefits that pet insurance coverage can provide.
Consumers aren’t the only ones who struggle to understand the opportunity presented by pet insurance coverage. For insurers, pet policies reside in the gray area between resembling health insurance and being considered a part of property/casualty insurance (for the latter it’s classified as personal inland marine on many insurers’ annual statements)—in terms of the nature of the coverage ranging from preemption to indemnification, and claims being all but certain at some point during the life of a policy. The seeming inevitability of some sort of pet health event may require a rethink by insurers, although an observer could argue that a similar inevitability may exist for equipment breakdown or long-term care coverage.
From an underwriting perspective, relative lack of verification regarding pet ages, breeds, and pre-existing conditions may lead to excess conservatism. Inefficiencies associated with any nascent line bring expense pressure from diseconomies of scale—and such inefficiencies potentially present opportunities for claims fraudsters. The resulting frictional costs are typically passed through to policyholders, potentially contributing to driving up costs. Lack of availability and choice also create inconvenience for interested parties. Yet these problems are solvable through greater experience and scale.
Insurers deterred by fear of dogs (or cats) are missing an opportunity to grow their businesses by solving a problem near to their policyholders’ hearts. Where traditional players may be lagging behind, start-ups are beginning to provide novel solutions. For example, one cloud-based pet insurer offers digital distribution and an app that the policyholder can use to manage pet insurance and other important data such as vaccinations and checkups. Another start-up allows pet owners to connect with each other through broker-group discounts.
Such approaches reflect a larger movement in property/casualty insurance to become “warmer and fuzzier” by providing an experience that better integrates with ordinary aspects of policyholders’ lives. Agents play a unique role in unleashing the potential of pet insurance because they’re one of the few conduits routinely connecting consumers (and, perhaps, even their pets) and insurers seeking to meet critical coverage needs.
Meghan Alpert is product development lead at ISO Solutions, a Verisk Analytics (Nasdaq:VRSK) business. Jim Weiss, FCAS, MAAA, CPCU, is director of analytic solutions at ISO.