Cypress Creek Equine, LLC v. N. Am. Specialty Ins. Co.

CourtCourt of Appeals for the Sixth Circuit
DecidedAugust 20, 2025
Docket24-5842
StatusUnpublished

This text of Cypress Creek Equine, LLC v. N. Am. Specialty Ins. Co. (Cypress Creek Equine, LLC v. N. Am. Specialty Ins. Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cypress Creek Equine, LLC v. N. Am. Specialty Ins. Co., (6th Cir. 2025).

Opinion

NOT RECOMMENDED FOR PUBLICATION File Name: 25a0406n.06

No. 24-5842

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED Aug 20, 2025 ) CYPRESS CREEK EQUINE, LLC, KELLY L. STEPHENS, Clerk ) Plaintiff-Appellant, ) ) ON APPEAL FROM THE v. ) UNITED STATES DISTRICT ) COURT FOR THE EASTERN NORTH AMERICAN SPECIALTY ) DISTRICT OF KENTUCKY INSURANCE CO., ) ) Defendant-Appellee. ) OPINION )

Before: THAPAR, NALBANDIAN, and READLER, Circuit Judges

NALBANDIAN, Circuit Judge. Cypress Creek Equine breeds racehorses. Essential to

its business model was Laoban, a stallion who represented the company’s most valuable breeding

stock. Cypress Creek held a fifty-percent ownership stake in Laoban and so made thousands in

stud fees from breeders who wanted to sire foals with his pedigree. But Laoban developed

performance issues. So a veterinarian administered a cocktail containing four chemical

compounds—colloquially known as “the black shot”—to put some pep in his step. It didn’t work.

Minutes after receiving the injection, Laoban was dead. The likely cause of death was an

anaphylactic reaction. But like most valuable studs, Laoban had a mortality insurance policy. And

so Cypress Creek sought a declaratory judgment stating that it had a right to full mortality

coverage. But the district court held that coverage was rightfully denied under the policy. No. 24-5842, Cypress Creek Equine, LLC v. N. Am. Specialty Ins.

Because the circumstances of Laoban’s death fall within the plain language of the policy’s

Unauthorized Medication Exclusion, we affirm.

I.

Laoban was a Thoroughbred racehorse sired by Uncle Mo in 2013. He had a reasonably

successful racing career, winning one of his nine career starts with a cumulative total of $526,250

in earnings. So in 2017, Laoban was put out to stud in New York. And his first-crop foals did

quite well, making Laoban the second-ranked, first-crop sire for 2020. This prompted his owners

to relocate Laoban to the more competitive Kentucky breeding circuit and increase his stud fee to

$25,000 from the $7,500 it had charged in New York.

This move coincided with a change in Laoban’s ownership. Ownership was divided into

fifty fractional interests with each fractional owner being a member of the Laoban syndicate.1 And

each of these fractional interests entitled the owner to a distribution of the proceeds generated by

Laoban’s stud fees. Cypress Creek Equine acquired twenty-five of these fractional interests from

Southern Equine Stables, LLC. And WinStar Farm of Versailles, Kentucky, bought another

eighteen fractional interests. The remaining ownership interests were spread among several

smaller investors. Following the move to Kentucky, WinStar became the syndicate manager,

meaning that it ran most of the day-to-day operations while Laoban stood at stud in Versailles.

And this change in ownership affected Laoban’s insurance coverage. In 2021, NAS issued

two insurance policies that provided Laoban with a cumulative five-million dollars in mortality

coverage. The policies required NAS to pay this amount upon the “death of a horse for any

reason.” R.13-1, Policy No. 100337500, p.18, PageID 256; R.13-2, Policy No. 100337600, p.12,

1 Because owning a racehorse is a capital-intensive venture, it’s common for multiple investors to come together and form a syndicate to buy shares in the horse. 2 No. 24-5842, Cypress Creek Equine, LLC v. N. Am. Specialty Ins.

PageID 276. But the policy was limited by the Unauthorized Medication Exclusion, which

prevented coverage for “loss caused by or resulting from . . . administration of drugs or medication

to the horse, unless done by or under the direction of a veterinarian and certified by him/her to

have been of a preventative nature or necessitated by accident, sickness or disease of the horse.”

R.13-1, Policy No. 100337500, p.19, PageID 257; R.13-2, Policy No. 100337600, p.13, PageID

277.

After the move, everything seemed to be looking up. Laoban was scheduled to breed his

first book of Kentucky mares and was regarded as a top second-crop sire going into the 2021

breeding season. But even before the move to Kentucky, Laoban had been having breeding issues.

WinStar ordered a pre-purchase physical examination by a reproductive specialist, who

recommended certain breeding conditions and medications before noting that further

“pharmaceutical aids” might be necessary “[i]f ejaculatory issues arise.” R.36-4, Pre-Purchase

Report, p.2, PageID 642. Once at WinStar, Laoban intermittently had trouble breeding, often

refusing to mount the mares. Because each refusal put the associated $25,000 stud fee in jeopardy,

WinStar began searching for solutions. The company consulted several fertility and reproductive

specialists who prescribed treatments such as shockwave therapy and regular testosterone

injections. And in February and March 2021, Laoban was diagnosed with degenerative arthritis

of the C5-6 and C6-7 caudal cervical facets in his neck.

Despite these issues, WinStar proceeded to breed Laoban to 126 mares during the first

three months of the 2021 season. This was a dramatic increase from the 67 mares that he was bred

to during the 2020 season. At $25,000 a pop, the economic incentives are obvious.2

2 The economics of Thoroughbred breeding are driven by genetic pedigree. These genetic records are kept by a private entity called the Jockey Club, which runs the breed registry for all American Thoroughbreds. To be in this registry, known as the American Stud Book, a Thoroughbred foal 3 No. 24-5842, Cypress Creek Equine, LLC v. N. Am. Specialty Ins.

But matters came to a head when Laoban refused to breed his mares during consecutive

sessions on May 22 and 23. Unable to find any physical ailment that would cause Laoban’s

reluctance, WinStar’s associate veterinarian, Dr. Heather Wharton, conducted shockwave therapy

on the horse’s neck. But still Laoban refused to breed. And so Wharton consulted David Hanley,

WinStar’s general manager, and Larry McGinnis, the farm’s stallion manager. At that meeting,

Hanley suggested that Wharton give Laoban a “vitamin shot” that contained Vitamin B12, though

he didn’t specify what else that shot should contain. R.33-6, Wharton Examination Under Oath,

pp.66–69, PageID 531.3

With this instruction, Wharton administered an intravenous injection containing not just

Vitamin B12 but also Vitamin C, Vitamin B Complex, and Iron Hydrogenated Dextran. Wharton

developed the injection by drawing on her experience working with racehorses in California where

she had often administered the shot to aid post-race recovery. She referred to this particular

cocktail as “the black shot” because the Iron Hydrogenated Dextran gave the solution a dark black

color. Id. at p.79, PageID 534. Though Wharton later testified that she learned this technique

from the supervising veterinarian she worked for in California, she admitted that she didn’t know

of any other veterinarians who administered this exact vitamin combination intravenously.

must be conceived through live cover breeding (i.e., not through artificial insemination or cloning.) This means that there is a huge economic incentive to breed stallions as often as possible during a season. Though the Jockey Club has attempted to limit the number of mares a stallion can breed in a single season to 140, there is no restriction—besides the stamina of the horse.

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