The Liability of Dog Ownership: Insurance options

By John Cargill, M.A., M.B.A., M.S. and Susan Thorpe-Vargas, Ph.D.


Any dog can bite. One little bite can result in a transfer of all your worldly possessions and your future earnings to the person that was bitten. Liability awards are based on the damage you've caused and not on your ability to pay. Being found liable could wipe out all of your current assets and your current and future income. Don't think it cannot happen to you, for it surely can. Different states have different statutes regarding torts relating to dog bites.1 In a state with statutory "strict liability," such as California, you are responsible for anything your dog does and the burden of proof lies with the defense to demonstrate the comparative fault of the plaintiff. In states where recovery is based solely on common law theory, the burden of proof lies with the plaintiff to show that the dog was dangerous by nature and that the owner or keeper had full awareness of this behavioral tendency. The rules are very different in each state.

Do dogs bite? You bet they do! Do dogs bite frequently? You can bet on that, too! The Insurance Information Institute estimates range as high as one-third of homeowners' liability claims are for dog attacks. 2 Each year, aggressive dogs attack more than 4.4 million Americans - including more than 1.2 million children. Of these attacks, 800,000 dog bite victims require medical attention. During 1995 and 1996, 25 people died after being bitten by a dog. Twenty of those victims were children under 12 years of age. 3 Just how serious is the situation? Serious enough we think for it to be declared of epidemic proportions. State Farm Insurance Companies, reported that nearly 14,000 dog bite claims and more than $80 million dollars were paid out in liability claims in 1997 alone. Dog bites are the number one health problem of children, outnumbering measles and mumps combined. Children make up 60 percent of dog bite victims. According to the Insurance Information Institute, insurance companies paid a record $250 million for dog bite liability claims in 1996 alone. Dog attacks costs society $1 billion annually. Not only do overly aggressive dogs endanger lives; they also threaten a homeowner's ability to acquire affordable insurance.

The essence of the insurance industry is balancing premium rates to risk. In order to be profitable, insurance companies must charge a premium, invest that premium, and have more left over from operations than they pay out. Every time an insurance company writes a policy, they are literally betting the company. With decades of failed tort reform attempts and the United States being home to 70 percent of the world's lawyers, it is neither unexpected nor unusual for juries to make large awards in tort cases. 4 Given the statistics above, it is easy to see why a number of insurance companies, especially those without a large corpus or which have underwritten a large risk, are reluctant to insure any household with a dog. Even companies with great assets may be reluctant to insure households with dogs. On the other hand, some companies recognize the potential of the market for homeowners with dogs. Dan Hattaway, Underwriting Consultant with State Farm, says "We are not dog-shy given that we insure 5-6 million homes with a dog on the premises. We want to insure responsible dog owners." This sentiment was echoed by many of the insurance companies.

Some companies specifically exclude dogs of certain breeds; others just require more underwriting information about the dog, its history, its temperament and the conditions of its confinement. Mixed breeds are also at risk. For instance, much as in times past in the with humans United States when any race other than Caucasian made you that race, no matter how diluted, any "pit bull" makes a dog a pit bull. It matters not that one cannot define pit bull (other than the UKC American Pit Bull).5 Many insurance companies refuse to insure "pit bulls" although we were able to find only one insurance company that could define "pit bull."

Many municipalities have banned a number of dog breeds. It would be fair to say that any dog breed can be banned by a local jurisdiction unless there is overriding legislation at the state level. Breed specific legislation, faulty as it may be, is a reality in the United States. Even when a statewide non-breed-specific "vicious dog" statute is passed overriding local ordinances, insurance companies may decide not to insure certain animals or certain breeds. The insurance companies seek to minimize risk. Some insurance companies believe that certain breeds or categories of dogs are more prone or inherently have more capacity to bite and to cause injury than others. Even if an insurance company believes a particular breed of dog is safe, but there is a public perception of danger which might influence juries, the responsible underwriting action may be to not insure those breeds that fare poorly in the public perception.

In a macro sense, some insurance companies have looked at what they have to pay out versus the size, type, breed and training of various categories of dogs. In short, they anticipate more serious injury to occur with large dogs, and more frequent incidents with certain breeds, especially those from the working group known for their territoriality and propensity to guard. Thus this macro view of noting that "Renter with Rottweilers," for instance, correlates highly with claims payouts, would cause the insurance company to consider either raising the premiums to cover the increased risk, or to deny coverage for renters keeping Rottweilers. Renters with Rottweilers present as a category known for its high risk. "We're looking at our eligibility rules for homeowners insurance in light of certain breeds which exhibit more aggressive tendencies" says Al Hunter, vice president of underwriting services at American Family. "We'll probably have to tighten those rules for such animals."

Even those of us, such as the authors who have pushed for non-breed-specific vicious dog legislation, are forced to recognize that larger dogs from the working group, have more potential to commit mayhem than breeds of lesser physical strength and gentler disposition. We recognize that it is not politically correct to suggest some breeds of dogs are better with children, for instance, than are other breeds, but reality seldom follows the dictates of political correctness.
All insurance companies have policy writing guidelines. It is not uncommon for these guidelines to list certain breeds of dogs that must be further investigated. For example, Richard Berstein, Vice President for Public Relations, Metropolitan Property & Casualty, in discussing underwriting philosophy said "We feel some dogs are inherently aggressive. Based on our underwriting and claims experience, there is no price we can command that will match risk and potential seriousness of injury. We will decline to insure households with American Staffordshire Terriers, Bull Mastiff's, Chow's, Doberman Pinschers, German Shepherd Dogs, Siberian Huskies, Malamutes, Rottweilers, "pit bulls" or any home with a dog that has previously bitten. However, we will always listen to reasons why any specific dog should be an exception." Similarly, Prudential requires additional information for homes with Akitas, Doberman Pinschers, German Shepherd Dogs, Rottweilers, "pit bulls" or wolves, and will not insure any home where a dog on the premises has bitten before or is attack-trained. The United Services Automobile Association makes no distinction between breeds, but may choose not to insure a homeowner if a dog has bitten before or if they feel the dog is a high risk. At this time, they do not have any provisions for excluding any one dog from coverage as does Farmers Insurance Group. It is "all or none" with USAA. State Farm, the industry leader, also makes no distinction between breeds, depending more upon the history of the dog in determining the coverage to be offered. Their underwriting guidelines are more in line of not insuring if the dog has "vicious tendencies under normal circumstances." Thus, according to State Farm Vice President Phil Supple, "A well-mannered Schutzhund trained dog, having protected its owner from assault by an aggressive intruder, would more than likely be considered a reasonable insurance risk by State Farm."

We found exclusions from coverage varied from state to state. One of the best examples is that of American Family Insurance, which though the 10th largest homeowners insurance company, operates only in 14 states. See Figure 1 for a breakdown of how their coverage varies from state to state, as Judy Lowell, Media Relations, American Family, says: "based on our company's experience with these dogs, along with industry research and information. American Family was the only insurance company in the top ten, or for that matter among any of the many insurance companies we contacted, that could define what they considered "Pit Bull": American Pit Bull Terrier (UKC), American Staffordshire Terrier, and Staffordshire Terrier, and any dog with any mix of the above init. They also evaluated the risk for various breeds by state. From a professional standpoint, this is going the "extra mile" and may result in lower rates in the states when breed hysteria is not operating. Remember that insurance companies generally do not dislike any given breed, they only respond to the history through the courts and payouts concerning a given breed. By way of contrast, other insurance companies, as a matter of corporate policy adjust their rates to cover all breeds of dogs and pass that increase along to all homeowners. Which is right? Which is fair? There is no clear answer, and the "free hand" of the marketplace has yet to give a definitive answer. An aside is warranted here: In the United Kingdom, Staffordshire Terriers are the second most popular terrier and problems arenot experienced with them. Staffordshire Terriers are by definition good dogs because they are English. Goth, Visigoth, Vandall, Hun, Bosch, and other "goose-stepping" dogs are bad because they are German, developed by the people who brought the U.K. two world wars in rapid succession. In England, Rottweilers have a very "chequered" history. (To those who might edit "chequered", that is the English language spelling and how the word should be spelt (again English--they would never use "spelled"--too crass, too colonial, too "ignernt!")) Ethnic prejudice is very much alive for dogs in the public perception world-wide. Insurance companies only respond to this prejudice as it winds its way through torts and the jury system and influences awards.

Insurance is the last answer
Mike Cleveland, Director of Personal Lines underwriting for Farmers Insurance Group, reminds dog owners to "appropriately restrain and confine their pets" and encourages "proper training for better obedience and control." Thus, the first answer is to prevent incidents is through proper training, handling and kenneling. According to Gary St. Louis, senior staff underwriting specialist for property lines at American Family, remaining alert to potentially dangerous animals may help policyholders, agents and employees---and their children---guard against harmful situations. "These precautions apply to any breed" Gary notes "It's important for pet owners to take responsibility for their dogs through proper training, an effort which will make incidents involving aggressive animals less likely".

So how does a dog owner go about protecting himself against persons injured by his dog? According to Kitty Miller, Corporate Communications Farmers insurance Group, "A sincere 'I'm sorry, it won't happen again. What can I do?' is the first step in avoiding extensive and expensive litigation." As Kitty Miller put it, "this is an effective approach if your dog did get out and were to wreak havoc in Mrs. McGregor's rose garden."

The third answer is insurance for when everything goes wrong. Moreover, insurance may be the only answer when everything goes wrong. The kind of insurance required for a hobby kennel, or for several dogs in your home is "homeowners insurance." With a homeowners insurance policy you also receive a "personal liability insurance" rider for non-business activities that result in either property damage or bodily injury to others. Commonly, a standard homeowner's policy provides coverage for liability up to $100,000 for damages. Greater coverage can usually be obtained for a higher premium. We suggest that anything less than $1,000,000 (that's right, $1 million) in liability insurance is too small for any homeowner. Author Cargill was sued several years ago for $1.2 million ($200,000 for the bite and $200,000 in mental anguish for each of the five members of the family) for a provoked dog bite on a little girl by a dog that had been sold two years previously and which was under control of its new owner at the time of the bite. In our society, we look for the deep pockets, and breeders may be held liable years after they sold the dog and had any control over it. Although author Cargill was released from the suit, it took about a year and many thousands of dollars (fortunately covered by insurance) in legal fees, for this to happen.

Remember how McDonalds was liable for millions of dollars in damages for serving the hot coffee the rest of us wanted? Some woman poured the coffee in her lap while driving and then sued McDonalds because she burned herself with their coffee. Just think what that particular jury might have awarded had a stray dog bitten the woman in the McDonalds parking lot! You cannot always trust juries to do the right thing. There are even several cases on the books where burglars in the wee hours of the morning were chewed up by the homeowner's dog and who successfully sued for the bites they sustained. In our legal system, you cannot anticipate justice, decency, fair play or reason. What the courts guarantee is legality, and that alone. Settlements out of court are common as a means of reducing costs instead of expending the legal resources necessary to prevail against frivolous lawsuits.

Homeowners Insurance
There are two kinds of homeowner's insurance: "Named-Peril Insurance" and "All-Risks Insurance." Named-peril policies pay only for the causes of loss specified in the policy. The broader All-risk insurance covers losses except those specifically excluded in the policy. In either type of policy, you must be very careful and read the fine print closely to determine if law suits resulting from dog bites are specifically covered, or not specifically excluded. In near serious moment, Allen King once joked on the Ed Sullivan Show: The other day my house caught fire. My lawyer said, "Shouldn't be a problem. What kind of coverage do you have?" I said, "Fire and theft." The lawyer frowned. "Uh oh. Wrong kind. Should be fire OR theft." A standard homeowners insurance policy generally provides Personal Liability Insurance to the policy holder and family members who reside in the home. Standard policies usually have a liability limit of $100,000~$200,000 for the amount that they will pay out. We suggest that this amount is woefully inadequate given the mega-awards coming from juries, regardless of whether the dog bite was provoked or not. Should a plaintiff prevail in the suit, any excess amount above the basic liability limit would come out of the homeowner's pocket.

Personal Umbrella Liability Insurance
The way to protect yourself from these mega-awards is to carry "Personal Umbrella Liability Insurance" in addition to your homeowners policy. Umbrella liability insurance is relatively inexpensive for the excellent protection it provides. Again, check the policy and riders for any caveats or exclusions. For example: if your municipality has a leash law, and your dog bites someone while off leash, and off your property, you may find that once you are in violation of local ordinances, you are no longer covered if your policy excludes claims resulting from illegal activities. Most insurance policies contain standard boilerplate for "intentional acts exclusion" which would preclude honoring claims where the insured was guilty of malicious intent or culpable/criminal negligence. Many policies will cover a dog normally confined that has somehow temporarily escaped. Similarly, if your community has a dog license law and you have let your dog's license lapse and it bites someone, you may find that you are not covered. Look at it this way--you are covered as specified in the policy, nothing more and nothing less. Such is contract law.

Dogs may cause injury from other than bites. 6, The overly friendly dog that jumps up and knocks someone down can cost its owner and the insurance company millions of dollars. If your dog gets loose (especially in a municipality that has leash laws) and runs in front of a car that winds up in a ditch with injured passengers, you may be liable for all the costs of setting the situation right. In such a case, especially if your dogs have gotten loose before and have been reported to the police or local animal control officials, you may find that a jury may tack several millions of dollars in punitive damages onto the judgment. Such punitive damages are commonly in multiples of the basic award. Thus, a $1 million award with treble punitive damages equates to $4 million dollars. Pay the Clerk of the Court on your way out.... Just remember that personal liability umbrella policies generally do not cover punitive damages and punitive damages may be in larger multiples.7,8 This is another strong reason to make significant efforts to avoid the situation in the first place.