Making Sick Horse Well is not a Breach of Horse Mortality Policy

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Is it a Breach of the Covenant of Good Faith to Save the Life of a Sick Horse?

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The parties sued over an insurance dispute concerning a champion show horse named Thomas. Thomas is alive and well, but Thomas’s owner, Julie Greenbank, sued her insurer, Great American Assurance Company, for failing to provide mortality coverage for Thomas.

In Julie Greenbank v. Great American Assurance Company, No. 21-2622, United States Court of Appeals, Seventh Circuit (August 30, 2022) Greenbank alleged that Great American breached the insurance policy and acted in bad faith by unreasonably withholding consent for Thomas’s authorized humane destruction, opting instead to perform a tenotomy that destroyed Thomas’s use as an athletic show horse.

She also alleged that Great American’s continued care and control over Thomas, long after the policy terminated, constitutes conversion and theft. The district court dismissed her claims at summary judgment, and Greenbank appealed.

THE INSURANCE POLICY

In September 2017, Greenbank purchased an American Saddle bred gelding horse named Awesome whose barn name was “Thomas” for $500,000. Greenbank intended to use Thomas as an athletic show horse for competitive purposes.

Shortly after this purchase, Greenbank obtained a mortality insurance policy with Great American for Thomas’s full purchase price. The policy provided coverage in the event of Thomas’s “death” or “authorized humane destruction.”

Under the policy, a horse’s death or authorized humane destruction must result, in part, from an illness, injury, or specific surgery.

To obtain coverage in the event of Thomas’s death or authorized humane destruction, the policy required Greenbank to meet certain conditions precedent. One condition precedent required Greenbank to immediately notify Great American if Thomas becomes ill. The policy notes that failure to provide immediate notice of Thomas’s illness “will invalidate any claim under the policy.” If Thomas became ill, the policy allowed Great American to, with Greenbank’s permission, assume control over Thomas’s treatment.

In addition to mortality coverage, the policy also includes a “Major Medical Endorsement” (MME) and a “Guaranteed Renewal Endorsement” (GRE).

THOMAS’ HEALTH

In December 2017, Greenbank boarded Thomas at Cedarwood Farms in Evansville, Indiana, to begin training with Chuck Herbert. In February 2018, however, Thomas became sick with colic and pneumonia. Thomas lost 50 pounds, and developed cellulites in all four legs and uveitis in his eye. Based on this, Dr. Stone determined that Thomas was “very sick.” On top of this, Thomas later pulled his right stifle, rendering him lame in his right hind; Thomas’s ability to get up and down was compromised.

Greenbank reported Thomas’ pneumonia to Great American. After hearing from a vet that Thomas might need to be euthanized, Great American, pursuant to the policy, retained its own veterinarians to provide treatment for Thomas. Eventually, Thomas was transported to Hagyard Equine Medical Institute, a facility in Lexington, Kentucky, where Dr. Kathy MacGillivray became Thomas’s primary veterinarian.

Dr. MacGillivray evaluated Thomas and determined that Thomas suffered from a deep lung abscess and severe laminitis. Dr. MacGillivray advised that based on Thomas’s declining health, it would not be unreasonable to make a euthanasia recommendation. She wanted to try treatment first, before recommending euthanasia.

Thomas received treatment for his deep lung abscess first, followed by his severe laminitis. For the latter condition, veterinary podiatry specialist Dr. Brian Fraley recommended that Thomas undergo a tenotomy, which involves a one-inch incision and cutting the deep flexor tendon to restore blood flow and relieve pressure on the coffin bone. Greenbank objected to Thomas’s tenotomy on the basis that it would destroy Thomas’s future athleticism as a show horse; she requested more conservative treatments. But Dr. Fraley advised that the tenotomy was Thomas’s only chance of regaining any athletic ability, because, after a tenotomy, the tendon would eventually heal and become functional. Dr. Fraley performed Thomas’s tenotomy, and as he would later testify, Thomas’s tenotomy went well and Thomas had a “remarkable” recovery.

Within a year after his surgery, Thomas gained back his weight and returned to trotting, bucking, running, and galloping around the Pine Ridge Farm, where he now resides.

GREAT AMERICAN’S POLICY ACTIONS

Greenbank’s policy expired on September 28, 2018. To renew the policy under the GRE, she submitted a payment of $14,725.000. Great American however, denied the policy renewal based on Greenbank’s failure to meet several conditions precedent, including providing Great American with immediate notice of Thomas’s illness in February 2018.

Though the policy has terminated, Great American continues to care for and maintain control of Thomas.

Greenbank’s Lawsuit Dismissed at Summary Judgment

The district court determined that Great American did not breach the policy because there was no covered cause of loss: Thomas did not die by natural causes nor authorized humane destruction.

Breach of Contract

Greenbank argued that Great American breached the insurance policy but failed to provide evidence to show that Great American breached the insurance.

Mortality Coverage

The mortality insurance policy at issue only provides coverage in the event of Thomas’s “death” or “authorized humane destruction.” There is no dispute that Thomas did not die naturally or by authorized humane destruction. That alone should end the inquiry into whether Great American breached a mortality insurance contract. Thomas saw three veterinarians over a period of five months, and during that time, no veterinarian suggested that Thomas needed to be euthanized, let alone certified that fact to Great American. The possibility of euthanasia is neither certification nor a determination that immediate euthanasia was imperative for humane reasons.

There was no evidence that Great American expressly agreed to euthanize Thomas and nothing in the policy required it to do so. Nothing in the contract said that Great American was expected to protect Thomas’s use as a show horse. To protect against Thomas’s use as a show horse, Greenbank could have sought a loss of use policy. She cannot now attempt to turn a mortality insurance policy into a loss of use policy by claiming that Great American unreasonably withheld authorized humane destruction.

BAD FAITH

In addition to her breach of contract claims, Greenbank argues that Great American acted in bad faith based on several policy actions relating to (1) the mortality coverage and (2) the GRE.
Mortality Coverage

Great American did not wrongly deny mortality coverage, therefore, Greenbank is unable to show bad faith as to this claim. Just because Great American did not choose the medical route Greenbank desired, or otherwise resolve the claim to her liking, does not mean Great American acted in bad faith.

GRE Renewal

Because Greenbank failed to show that Great American breached the contract under the GRE, her bad faith claim fails for this reason as well.
Conversion and Theft

Tortious conversion, or common law conversion, is either “the appropriation of the personal property of another to the party’s own use and benefit.” A plaintiff claiming tortious conversion must establish that he or she owned the property, and that the defendant’s possession was unauthorized or without consent. Where the defendant’s initial possession of plaintiff’s property is lawful, conversion occurs only after an unqualified demand for return, unless such demand would be futile. There is no dispute that Great American’s initial possession and control of Thomas was lawful based on the policy. The district court properly denied the motion.

It is unusual that Great American maintained control of Thomas long after the policy terminated. Greenbank, however, has failed to demonstrate that Great American’s control of Thomas falls within the bounds of common law conversion, because of a very important fact-she never demanded Thomas, and she has failed to show that any demand for Thomas would have been futile.
Statutory Conversion and Theft

Unlike tortious conversion, statutory conversion does not require a plaintiff to demand a return. Although a demand for return is not required, a plaintiff must present evidence to raise a reasonable inference that the defendant was aware that their possession was unauthorized.

Contrary to the allegations no evidence exists for a jury to determine that Great American knowingly or intentionally exercised unauthorized control over Thomas.

This is especially true when Greenbank’s counsel specifically stated during a telephonic court conference that Great American could keep Thomas: When the magistrate judge asked, “Do you want the horse or not?,” Greenbank’s counsel replied, “No, as far as we are concerned, they can keep it.”  With no evidence that Great American knew that their continued control of Thomas was purportedly unauthorized, Greenbank’s statutory conversion and theft claims fail.

The judgment of the District Court was affirmed.

ZALMA OPINION

A horse owner upset because the insurer saved the life of the horse, at its expense, and the horse is now alive and well, is counter-intuitive. Most horse owners want their horse to live and be well. In this case the insured wanted the horse dead because she could recover $500,000. She would recover nothing if veterinarians paid for by the insurer brought the horse back to health. The Seventh Circuit dealt with all of the Plaintiff’s specious arguments especially when she refused possession of her half-million dollar horse who is now well and acting like a healthy horse.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

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