Take the Bite Out of Expensive Liability

Millions of Americans have their best friend at home and treat them like a part of the family.

But what happens when man's best friend bites a guest, the mailman or someone else? What is the outcome from a liability stand point?

According to the Insurance Information Institute (I.I.I.), dog bites accounted for more than one-third of all homeowners' insurance liability claims paid out a year ago, costing $412 million and up nearly 6 ½ percent from 2008.

Additional data from the I.I.I. shows that the average cost of dog bite claims was $24,840 in 2009, a slight increase from $24,461 the previous year. In fact, over a six-year period since 2003, the expense for these claims has increased close to 30 percent. Finally, the number of claims went up 4.8 percent to 16,586 in 2009 from 15,823 in 2008.

According to a spokesperson for the I.I.I., the increase in dog bite claims over the last seven years (2003-2009) can be attributed to a hike in medical costs along with the size of settlements, judgments and jury awards given to plaintiffs that have increased far above the rate of inflation in recent years.

If you own a dog, it is important from an insurance stand point to keep in mind that there are three kinds of law that place liability on owners.

First, there is the "Dog-bite statute' whereby the dog owner is automatically liable for any injury or property damage the dog causes, even if there is no provocation.

Secondly there is the "One-bite' rule whereby some states deem the owner not be held liable for the initial bite the dog inflicts. Once an animal has shown vicious behavior, the owner can be deemed liable. Some states have gotten away from the one-bite rule and hold owners responsible regardless of the type of injury, and whether or not the animal has bitten someone in the past.

Finally, there are "Negligence Laws' whereby the dog owner is liable in the event the injury took place because he or she was unreasonably careless in controlling the dog.

In the majority of states, dog owners are not held liable for losses suffered by trespassers who suffer injuries from dogs.

A dog owner who is determined to be legally responsible for an injury to an individual or property could be responsible for reimbursing the injured party for medical bills, lost wages, pain and suffering and property damage.

For those unaware, homeowners' and renter's insurance policies generally cover dog liability. The majority of standard homeowners' policies provide policyholders with liability coverage ranging from $100,000 to $300,000. In cases where a claim tops those limits, the dog owner is then personally responsible for all damages above that amount, including legal expenses.

A liability policy will also offer no-fault medical coverage in case a dog bites a friend or neighbor. The reasoning behind this is the individual can submit their medical bills straight to the homeowners' insurer, with homeowners typically getting anywhere from $1,000 to $5,000 worth of this protection.

When it comes to lawsuits, even a single court issue won by the dog owner who has been sued can lead to costing hundreds of thousands of dollars in legal fees and lost wages. It is important to note that the larger a person's assets, the greater potential there is for risk.

I.I.I. advises homeowners to think about acquiring a personal excess liability policy. Also going by the term of umbrella liability policy, this coverage protects individuals against personal liabilities.

Umbrella liability coverage typically runs from $1 million to $10 million, and covers broad types of liability. Most insurers have required minimum amounts of underlying coverage—in many cases at least $250,000 of protection from your auto policy and $300,000 of protection from your homeowners' policy.

The best way for consumers to protect themselves from major financial issues with a dog is to prevent their dog from biting anyone in the first place.