Dog Owners' Liability Insurance

If a dog hurts someone or damages property, the dog's owner can be on the hook for a very large bill. In many cases, however, insurance may take some of the sting out of paying. In 2010, more than a third of all homeowner's insurance liability claims involved dog bites, and insurers paid an estimated $413 million to cover those claims, according to the Insurance Information Institute's Dog Bite Liability report. The average amount paid was $26,000.

Homeowner's Insurance

Both those who own dogs and those who are bitten by them will be glad to know that if the owner has homeowner's or renter's insurance, it usually covers damage from dog bites. A standard homeowner's policy covers any legal liability the owner incurs as a result of negligence. Usually, a homeowner's policy provides several hundred thousand dollars' worth of liability coverage.

That's the good news. The bad news is that insurance companies typically have their own "one-bite rule." That is, a company will pay for the first occurrence, but will then either cancel the insurance or add a "canine exclusion." The next time the dog bites, the owner must pick up the tab. It follows that if an insurance company knows a homeowner has a dangerous dog—something that may be rudely discovered during a routine pre-insurance inspection of the home—it may refuse to issue a policy in the first place.

Some companies refuse to cover certain breeds—pit bulls, Dobermans, rottweilers, chows—that show up on lists of breeds responsible for a disproportionate number of injuries. A few states, however,including Michigan and Pennsylvania, don't allow insurers to prohibit specific breeds.

The "business pursuits" exclusion. All insurance policies contain exclusions, clauses that say specific kinds of incidents aren't covered. Because homeowner's insurance is supposed to insure homes, not businesses, many homeowner's policies have a "business pursuits" exclusion. Such policies don't cover claims that arise from a homeowner's business activities. The exclusion may apply when an accident happens in the home even if the business conducted there is only a part-time activity.

EXAMPLE: An Oklahoma man found his homeowner's insurance didn't cover him when a potential buyer was bitten while looking at a litter of St. Bernard puppies, which he kept at his home. The business pursuits exclusion applied, a court ruled, even though the man's primary occupation was as a salesman. The business activities in this case went beyond the infrequent sale of a litter of pups: the man had renovated his barn to use it as a kennel, and advertised dogs for sale in the newspaper and on a large sign. (Wiley v. Travelers Ins. Co., 534 P.2d 1293 (Okla. 1974).)

Incidents off the property. Homeowner's policies don't usually restrict coverage to incidents that take place on the policyholder's property. Many homeowner's policies insure against any legal liabilities the policyholder incurs. For example, a homeowner's policy covered the owners of a dog that bit a child on a farm. The dog's owners owned the farm, but didn't live there; the policy insured their residence. (Lititz Mutual Ins. Co. v. Branch, 561 S.W.2d 371 (Mo. App. 1977).)

Some policies, however, do not cover injuries connected with vehicles. So, although the policyholder might be covered if the dog bites someone in the park, the homeowner's policy might not provide coverage if the dog leans out of the car window and bites someone on the way there. Car insurance, however, might provide some coverage.

If circumstances change. Your policy probably requires you to notify the insurance company of significant changes in your circumstances. That means that if your dog bites someone or is declared dangerous under a local law, and you don't tell the company, the policy may not cover subsequent injuries caused by the dog. Of course, if you do notify the company that your dog has bitten someone, it may well cancel your policy or exclude coverage for the dog.

If you're not sure what your homeowner's or renter's insurance policy covers, take a deep breath and read the liability section. Then read it again. If it still doesn't make sense (this is a distinct possibility, and it's not your fault), call your insurance broker. Ask if you're covered for damage your dog causes, and how cooperative the company is about coughing up money in such cases.

Car Insurance

Bites that occur in cars—or more likely, when a dog is in the back of an open pickup truck—may be covered by homeowner's insurance or by vehicle insurance. Often the two insurance companies end up duking it out in court, each trying to escape an obligation to pay.

The courts, trying to referee these fights, have come down on both sides. Most look for a connection between the vehicle and the injury; if they find one they consider significant enough, they require the car insurer to pay. For example, a New Jersey court found that when a dog, being transported in the open rear deck of a pickup truck, bit a man, the bite "was facilitated by the height and open design of the deck." In the court's opinion, the injury "was a natural and foreseeable consequence of the use of the vehicle," and so the vehicle insurance covered the incident. (Diehl v. Cumberland Mutual Fire Ins. Co., 296 N.J. Super. 231 (1997).)

Other courts, presented with fairly similar facts, have reached different conclusions. A Washington court, for example, ruled that there was no connection between the vehicle and an injury caused when a dog bit a child in the back of a pickup truck, even though the dog was often kept in the truck to protect it. (Heringlake v. State Farm Fire & Casualty Co., 872 P.2d 539 (Wash. Ct. App. 1994).

Separate Liability Insurance for a Dog

If you really need liability insurance for your dog, but your homeowner's or renter's policy doesn't cover you, you may be in for a tough time. The reason is that if you feel a pressing need for insurance, you're probably in one of these predicaments:

  • the dog has bitten someone
  • the dog has been declared "dangerous" by a judge or animal control department, meaning you must furnish proof of liability coverage, or
  • local law requires owners of certain breeds to have insurance.

Any of those circumstances is a red flag to an insurance company, which is in the business of taking as few risks as possible. You'll probably have to go to a specialty insurance company, which will charge you $1,000 to $1,500 a year for a policy that will provide $100,000 of liability coverage.

The Insurance Company's Duty to Pay

It's notoriously hard for a policyholder who has a claim to squeeze money out of some insurance companies. But if a company unreasonably refuses to settle with an injured person suing the policyholder, the company may have to pay the whole amount for which the policyholder is eventually found liable.

EXAMPLE: A California man whose dog caused a serious traffic accident was sued by men permanently injured in the accident. He had $100,000 of liability insurance from his homeowner's policy, but the insurance company refused to settle the lawsuit for that amount. Instead, the lawsuit went to trial, and the dog owner lost big—he was found liable for $2.6 million. But the policy owner charged that the insurance company had not acted in good faith when it refused to pay the policy limit, and the insurance company ended up paying the whole amount.

Multiple and Punitive Damages

Many insurance policies require the company to pay all sums that a policyholder becomes legally obligated to pay because of bodily injury or property damage. Whether or not that includes extra damages, which are imposed to punish the homeowner for misconduct, depends on what state you're in. Courts don't agree.

Multiple damages. A few statutes provide that in certain circumstances, the amount of damages awarded by a court or jury in a dog-bite case is doubled or tripled. The goal is to punish the owners for their conduct. Wisconsin law, for example, triples an award if the dog has bitten someone before and its owner knew about the previous incident. After one couple whose dog bit a child for the second time was sued, the tripled damages came to more than $30,000. The company that insured them tried to argue that it was liable only for the basic award, not the tripled amount. The Wisconsin Supreme Court ruled that "all sums" means all sums, and the company did have to pay. (Cieslewicz v. Mutual Service Casualty Ins. Co., 84 Wis. 2d 91 (1978).)

Punitive damages. Punitive damages are also intended to punish, but they differ from the extra damages mandated by statutes in several ways. First, whether or not to give them, and how much, is left up to the jury. The jury's decision is disturbed only if a judge thinks the jury is being completely outrageous. It's also proper for the jury to take into account the wealth of the person who has to pay the punitive damages, because an amount that might be a severe hardship on one person might barely be noticed by a richer person.

State courts are split over whether or not insurance policies cover punitive damages, but a slight majority seems to say that standard insurance policies do cover punitive damages. There are good arguments that insurance shouldn't cover punitive damages: after all, it's the wrongdoer, not the insurance company, who is supposed to be punished. On the other hand, if the person who bought the policy quite reasonably thinks it covers all such damages, it's not fair to change the rules in the middle of the game. And, obviously, an insurance company is free to put unambiguous language in its policies so that there would be no doubt about what's covered.

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