06/05/2003 11:00PM

War Emblem's fate in limbo

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LEXINGTON, Ky. - Japan's Shadai Stallion Station in Hokkaido has received breeding-related claims from two of the four companies that insured War Emblem, a farm spokesman confirmed. The winner of the 2002 Kentucky Derby has refused to cover his book of mares since retiring to stud at Shadai.

But the 4-year-old War Emblem's future is not clear. Shadai, which purchased War Emblem from The Thoroughbred Corporation in 2002 for $17 million, will have to relinquish the Our Emblem horse to the insurers upon settlement of all claims. At that point, the insurance companies will control War Emblem and will decide whether to sell or stand the horse.

"It's a complicated issue," said Shadai spokesman Eisuke Tokutake, speaking by phone through an interpreter. "At the moment, we do not know what will happen with War Emblem. He is still at Shadai Stallion Station at the moment. When everything is settled, if everything is settled, we will have to discuss with the insurance companies about what to do with the horse."

Tokutake, who would not disclose the total insurance for War Emblem, said that a third insurance company is close to paying out its claim. "But the last insurance company, we do not know if they will settle," he said.

Insurance agents say that in all probability the four insurers eventually will all pay out. But the process can take time. For example, an insurer might dispute a farm's stallion management practices, in which case most policies provide for a panel of veterinarians to arbitrate. If the panel sides with the insurer, the farm may have to take additional time to try new management techniques in the hope of solving the stallion's problem.

It's not unusual for a variety of companies to be involved in a single insurance policy.

"There are multiple companies because of reinsurance," said Nina Hahn, owner of Nina Hahn Equine Insurance in Paris, Ky. "Every insurance company has a reinsurance contract. They may take the first 40 percent of the risk, for example, but then the balance may be placed under their reinsurance contract."

On a large policy covering a valuable stallion prospect like War Emblem - whose policy is rumored to be between $17 million and $18 million - the initial insurer may only be liable for several million, with a reinsurer carrying another few million, and so on until the horse is covered for the full insurance amount.

"The logic behind reinsurance is that the company doesn't get wiped out with a single catastrophic loss," Hahn said.

There have been several catastrophic losses in the stallion world in recent years, with the loss of such important sires as Shadai's own flagship horse, Sunday Silence, who died last year. His loss and the recent untimely deaths of Unbridled, Danehill, and others young sires has made insurers more cautious than ever, according to Ron Kirk of Kirk Horse Insurance in Lexington.

In the wake of such high-priced losses, the insurance companies that are still in the Thoroughbred business are being more careful about what they will cover and on what terms.

"There are fewer companies willing to cover horses," Kirk said. "It's become a seller's market."

That means policies are more likely to be tailor-made with the insurer's concerns in mind, and therefore somewhat variable.

"Fertility coverage is very gray," Kirk said. "There isn't just one set of terms that is accepted universally by everybody."

War Emblem's situation is unusual in that it doesn't involve physical infertility but a lack of desire to breed. The horse reportedly impregnated seven mares earlier in the season but then refused to continue.

"Policies generally read that the stallion must get a certain percentage of mares in foal," Hahn explained. "If he doesn't cover the mares, they didn't get in foal. The policy doesn't generally specify why the mares didn't get in foal."

If the insurers put War Emblem back on the market, the difference will be critical to potential buyers, because libido problems are considered easier to treat than outright infertility. That bodes well for War Emblem's immediate future, which could include a change of location and a second chance at fatherhood, unless Shadai buys him back from the insurers and tries again. If not, agents in Lexington say they're already fielding calls from farms that are considering making a bid for the horse if he returns to the United States.

In the meantime, Shadai reports that War Emblem remains at the farm and is happy and healthy.