Backed into a corner by workers' compensation insurance rates expected to soar to 70% of trainer payroll, Quarter Horse officials at Los Alamitos Race Course in Southern California are fighting back with a plan that will cut costs by more than half in most cases.
Longtime owner/breeder John Andreini, whose privately held insurance company is one of the largest in the country, has assembled a group of underwriters to begin writing polices when California State Fund Insurance Co. coverage expires June 30. The captive program will be backed with letters of credit from Edward Allred, chief executive officer of Los Alamitos.
"Come July 1, there's going to be a lot of smiling faces around here," said Brad McKenzie, a consultant to Allred and former track vice president who helped put the deal together with Andreini.
The new rate, which is based on a per-stall formula that reduces cost to all trainers rather than assessing individual operations, will be $28 per $100 and $85 per start for jockey protection. That compares to an average of about 60% of payroll and as much as $185 per start under State Fund, McKenzie said.
Training costs for the 60 main trainers based at the Quarter Horse track are considerably smaller than on the California Thoroughbred circuit, but so are purses, McKenzie noted. The minimum overnight race purse was recently increased to $5,000.
"What is a big problem for the Thoroughbred industry here was a possible death sentence for us," McKenzie said. "We examined the situation and determined that the rates were totally out of whack.
"We are talking about the very survival of Los Alamitos," he said. "What we looked at (with the insurance consultants) is what is the lowest rate we can charge and still provide the necessary coverage. We established what the program deserved to be charged, not what they could get away with charging."
McKenzie invited hard-pressed Thoroughbred operations, whose current contracts with State Fund and insurance giant AIG also expire June 30, to consider enrolling in the plan at Los Alamitos, which usually runs one or two Thoroughbred races each night.
"The more trainers we have, the stronger it makes our program," McKenzie said.