If the law of karma applies to all living things, one would have to infer that lower life forms and animals are endowed with some kind of moral compass. If not, a human being who is evil and is reborn as an animal would get "stuck".
If animals simply act according to instinct, then you can't hold them accountable for any of their actions. Therefore, it would seem that animals need to have a moral compass, for the law of karma to make sense. What could this moral compass possibly look like?