In California, It's Crunch Time for Trainers on Insurance

by Margaret Ransom
Given the state's mandate that trainers at the racetracks must carry current workmens' compensation policies, horsemen whose policies expire March 1 were scrambling to find alternatives this week. The crisis threatens to force some trainers out of the business.

Legion Insurance, one of the last two companies in the state to offer workmens' compensation policies to trainers, notified policyholders that as of midnight March 1 it will no longer underwrite them. That leaves just one company, California State Fund Insurance, whose premiums are 25% or more than previous rates.

Effective at 12:01 a.m. March 1, some trainers will be forced to pay as much as $40 for every $100 of payroll, and $90 every time they leg a jockey up on one of their horses in the afternoon. The rate increases, and the possibility that many trainers cannot afford to pay, threatens the state's entire racing industry.

"I'm already just scraping by," said one trainer who currently has 25 horses and 14 full-time employees. "I can't raise my rates or my owners will leave the game. But if I pay these premiums, then I won't be able to pay someone else, like the feed man or the blacksmith or the vet. It's a trickle-down effect, and everybody loses except the insurance company."

Some trainers who are unable to come up with the deposits required by State Fund to underwrite a policy are working out other arrangements with fellow trainers who can so their horses can still train and run, just under the other trainer's name. That's just a quick fix to a problem that could eventually put them out of business permanently.

Southern California trainers are, perhaps, in a better position than their counterparts in the northern part of the state, where day rates and purses check in at much lower levels. It is expected many will leave the state entirely for the Northwest, or even Canada. Early reports are that several have already made arrangements to ship their stables out. Meanwhile, an expected entry-box boycott at Golden Gate Fields didn't materialize for the March 1 program.

For the trainers already insured with State Fund, rates will stay at current levels until everyone's policies expire at midnight on June 30. Then, those trainers will also be subject to the 25% minimum increase, though their deposits have already been paid. Even the larger, more prominent trainers who currently charge higher day rates are expecting to feel a financial crunch that may cause them to raise their fees and possibly put some owners out of the game.

"You know what's going to happen, don't you?" trainer Julio Canani said. "Everyone's going to go to other places like Kentucky, where they can actually make a living and not have to pay the big insurance dollars. There won't be any trainers left here, and then there will be no more racing here. The trainers cannot afford this kind of thing and still stay in business in California."

Many of the state's racetracks, as well as the Thoroughbred Owners of California and the California Thoroughbred Trainers, are working on ways to help trainers by looking for other companies to underwrite the policies. Another option being considered by Magna Entertainment, which owns and operates Santa Anita Park and Golden Gate, is to increase the pari-mutuel takeout on exotic wagers to assist in paying the added costs. Those solutions are a long way off.

"It's a major, major problem for the individuals because of the money, but it's also a major, major problem for the industry because of the people who are leaving the state rather than renew policies," said Ed Halpern, executive director of the CTT. "What we're trying to do is get out as much information as possible about what the situation is so that people are informed and understand. But in the short term, there's not much we can do.

"We did ask the (California Horse Racing Board) to get involved and set up a committee, and we did that because of the political clout they have. They've set up that committee, but it won't help by (March 1). Unfortunately, there will be some trainers we can't help before the deadline. As long as we have one insurance provider, we're not going to be able to solve this problem, I'm afraid."

Several trainers have even discussed launching a strike, effectively boycotting the entry box and shutting down racing in the state entirely to force the issue. That idea was ultimately rejected because there wasn't support from enough trainers. Many cited fact that the owners are already facing enough hardship with the probable increases in day rates paid to trainers to help cover the cost of the premiums.

Gary Sherlock, a former trainer who is now an insurance agent with Petersen, McAnally & Tabor, is working with some horsemen to secure new policies with State Fund. He cited several issues, including the Sept. 11, 2001, terrorist attacks, as reasons for the dramatic increases in premiums.

"The main problem is that in 1995, open rating came into California," Sherlock said. "Before then, everybody paid the same price, which was roughly $30 for every $100 of payroll or so. But after 1995, all the companies came in to compete in the market, and the rates were driven down to really low levels. Some people paid as little as $6 for every $100. So, consequently, the rates were hitting the bottom, and the premiums were not large enough to cover the losses."

Other ramifications may affect horsemen who want to ship in for stakes or trainers who run only at short meets, such as the fairs in Northern California, or in the big events such as the Breeders' Cup World Thoroughbred Championships. In the past, insurance companies were able to write 30-day prorated polices, but now, the trainers are faced with paying a full, yearly rate even if they want to run one horse in one race.

Additionally, many trainers are upset that jockeys are covered under the workmens' compensation policies in California despite the fact they're considered independent contractors and are self-employed.

"There are some meetings between the Jockeys' Guild and some other organizations going on to address that issue," Sherlock said. "I think that if they can help the trainers with this situation, and still have adequate coverage for themselves, the jockeys would be more than happy to come to an agreement so they're not covered under these policies."