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Racing's Red Flag Is Up

Workers' compensation crisis forces some to leave the state, say horse trainers and owners.

October 20, 2003|David Wharton | Times Staff Writer

Twenty-eight years Kim Lloyd gave to horse racing. Started as a teenager and worked his way up. He never ranked among the top trainers, but his horses ran well enough to keep him getting out of bed at dawn, seven days a week, heading out to the stables.

"If you had to do that for a regular job, it'd kill you," he said. "With horses, you just don't think of it that way."

His soft Oklahoma drawl does not fully account for the wistfulness of his words. This week, with the Breeders' Cup at Santa Anita Park, Lloyd is resigned to knowing he will be far from the sport that is in his blood.

These days, the 48-year-old sells cars at a Fontana dealership. Count him among a growing number of trainers forced out of the business -- or forced to move to tracks in other states -- by the workers' compensation crisis in California.

They cannot afford the mandatory insurance to cover medical costs if their barn workers are injured on the job.

"We were paying seven cents on the dollar and it went up to nine to 11 to 55," Lloyd said. "Then you have to write the checks to pay bills and you're short of money and baby needs shoes."

Rising premiums have triggered a worrisome chain of events. According to one industry estimate, as many as 20% of the state's trainers have quit or relocated, which makes for fewer horses at a time when the sport is already facing a shortage.

Races that regularly featured eight or 10 entries now have four or five. And that discourages fans.

"People come to the track to watch full fields," said Eric Johnson, a state Assembly consultant who has followed the unfolding crisis. "They aren't ooh-ing and ahh-ing when the exacta comes back at $7.40."

Horse racing isn't alone in feeling the workers' comp crunch. Statewide, employers have seen the overall cost of premiums increase from $9 billion to an estimated $29 billion in the last eight years.

The system's woes began with deregulation in the mid-1990s and have been exacerbated by abuse and fraud. Reform was a hot topic during the recent gubernatorial campaign.

California horse racing, which has 15,000 licensed employees and perhaps tens of thousands more in related jobs, has been hit especially hard.

Jockeys, grooms, hot walkers, exercise riders and others in the business don't sit at desks all day. Their insurance premiums are higher because they work with powerful and unpredictable animals.

"From exercise riders to jockeys to people being kicked by horses, they face the potential for paralysis on a daily basis," said John Patrick Unick, vice president and national sales manager for Maroevich, O'Shea and Coghlan insurance brokers in San Francisco.

And horse owners, unlike other businessmen, don't depend on their industry for a living. Most are in it for thrills.

"There comes a breaking point," said Vladimir Cerin, a veteran Southern California trainer. "They decide they'd rather have a new boat or a diamond ring for the wife than the headaches of the horse industry."

With no investment in fixed sites such as factories and warehouses, they also might load their horses onto trailers and move to tracks in Kentucky, New York and Illinois, where insurance is three to four times cheaper.

Jerry Hollendorfer pays as much as $18,000 a month in workers' comp to keep a 50-horse stable at a Northern California track but sees his expenses drop to $4,000 when he ships his horses to race in Illinois for a portion of each year.

"The guys back there almost don't believe you when you tell them how much you're paying," the trainer said. "They say you're stupid to be training back there in California."

Compare that to years gone by when the West Coast ranked as a racing mecca. Lloyd recalls the days when he arrived in Southern California as a young man.

"We had full fields and you couldn't get in the grandstand," he said. "It was like Disneyland every day."

A fledgling trainer could start with a few horses and build gradually. "If you came up with a nice horse, you carried yourself along for a while," he said.

The situation began to deteriorate near the end of the 1990s. Feed prices rose and tracks in other states began fattening purses with revenue from slot machines, something their California counterparts were not allowed to install on the premises.

At the same time, the workers' comp situation began to spiral out of control, critics say, because state policy allowed for injured workers to see chiropractors and physical therapists more often than in other states. There have been complaints about mandatory career counseling and the way in which California determines when a worker is permanently disabled.

California also became known as a state rampant with fraud and underreported payrolls, said Ed Halpern, executive director of California Thoroughbred Trainers. By last year, some trainers were paying a base rate of more than $43 per $100 of payroll and $93 every time a jockey left the gate.

"I started 1,000 horses in California last year," Hollendorfer said. "There's a pretty big bite right there."

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